syna-20240928

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

______________________________________________________________________________________________________

FORM 10-Q

______________________________________________________________________________________________________


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 28, 2024


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to .

Commission file number 000-49602

______________________________________________________________________________________________________

SYNAPTICS INCORPORATED

(Exact name of registrant as specified in its charter)

______________________________________________________________________________________________________


Delaware						77-0118518
(State or other jurisdiction of incorporation or organization)						(I.R.S. Employer Identification No.)

1109 McKay Drive

San Jose, California 95131

(Address of principal executive offices) (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	Trading Symbol	Name of each exchange on which registered
Common Stock, par value $.001 per share	SYNA	The Nasdaq Global Select Market

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, a 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

☒

Accelerated filer

☐

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

If an emerging growth company, indicate by check mark 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 is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of October 31, 2024, the Company had 40,058,435 shares of Common Stock outstanding.

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SYNAPTICS INCORPORATED

QUARTERLY REPORT ON FORM 10-Q

FOR THE QUARTER ENDED SEPTEMBER 28, 2024

TABLE OF CONTENTS

Page

Part I. Financial Information

Item 1.

Condensed Consolidated Financial Statements (Unaudited):

Condensed Consolidated Balance Sheets—September 28, 2024 and June 24, 2023

Condensed Consolidated Statements of Operations—Three Months Ended September 28, 2024 and September 30, 2023

Condensed Consolidated Statements of Comprehensive Loss —Three Months Ended September 28, 2024 and September 30, 2023

Condensed Consolidated Statements of Stockholders’ Equity—Three Months Ended September 28, 2024 and September 30, 2023

Condensed Consolidated Statements of Cash Flows—Three Months Ended September 28, 2024 and September 30, 2023

Notes to Condensed Consolidated Financial Statements

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

Item 4.

Controls and Procedures

Part II. Other Information

Unregistered Sales of Equity Securities and Use of Proceeds

PART I—FINANCIAL INFORMATION

ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

SYNAPTICS INCORPORATED AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(in millions, except par value and share amounts)

(unaudited)


	September		June
	2024		2024
ASSETS
Current Assets:
Cash and cash equivalents	$	853.6	$	876.9
Accounts receivable, net	135.8		142.4
Inventories, net	119.6		114.0
Prepaid expenses and other current assets	30.9		29.0
Total current assets	1,139.9		1,162.3
Property and equipment, net	79.5		75.5
Goodwill	816.4		816.4
Acquired intangibles, net	263.8		288.4
Deferred tax asset	358.4		345.6
Non-current other assets	133.2		136.8
Total assets	$	2,791.2	$	2,825.0
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current Liabilities:
Accounts payable	$	83.3	$	87.5
Accrued compensation	28.2		27.4
Other accrued liabilities	136.4		156.3
Current portion of long-term debt	6.0		6.0
Total current liabilities	253.9		277.2
Long-term debt	965.9		966.9
Other long-term liabilities	104.1		114.1
Total liabilities	1,323.9		1,358.2
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, 70,165,571 and 69,683,991 shares issued, 40,049,132 and 39,567,552 shares outstanding, at September 2024 and June 2024, respectively	0.1		0.1
Additional paid-in capital	1,130.6		1,107.0
Treasury stock: 30,116,439 common shares at September 2024 and June 2024, at cost	(878.0)		(878.0)
Retained earnings	1,214.6		1,237.7
Total stockholders' equity	1,467.3		1,466.8
Total liabilities and stockholders' equity	$	2,791.2	$	2,825.0

See accompanying notes to condensed consolidated financial statements (unaudited)

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SYNAPTICS INCORPORATED AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(in millions, except per share data)

(unaudited)


	Three Months Ended
	September
	2024		2023
Net revenue	$	257.7	$	237.7
Cost of revenue	136.8		130.6
Gross margin	120.9		107.1
Operating expenses:
Research and development	81.3		86.5
Selling, general, and administrative	50.0		42.3
Acquired intangibles amortization	3.8		5.5
Restructuring costs	14.2		8.0
Total operating expenses	149.3		142.3
Operating loss	(28.4)		(35.2)
Interest and other expense, net	(5.9)		(5.4)
Loss before (benefit)/provision for income taxes	(34.3)		(40.6)
(Benefit)/provision for income taxes	(11.2)		15.0
Net loss	$	(23.1)	$	(55.6)
Net loss per share:
Basic	$	(0.58)	$	(1.43)
Diluted	$	(0.58)	$	(1.43)
Shares used in computing net loss:
Basic	39.8		38.8
Diluted	39.8		38.8

See accompanying notes to condensed consolidated financial statements (unaudited)

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SYNAPTICS INCORPORATED AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

(in millions)

(unaudited)


	Three Months Ended
	September
	2024		2023
Net loss	$	(23.1)	$	(55.6)
Unrealized income on available-for-sale-securities	—		0.1
Comprehensive loss	$	(23.1)	$	(55.5)

See accompanying notes to condensed consolidated financial statements (unaudited)

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SYNAPTICS INCORPORATED AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(in millions, except share amounts)

(unaudited)


	Common Stock
	Shares	Amount		Additional Paid-In Capital		Treasury Stock		Retained Earnings		Total Stockholders' Equity
Balance at June 2024	69,683,991	$	0.1	$	1,107.0	$	(878.0)	$	1,237.7	$	1,466.8
Net loss	—	—		—		—		(23.1)		(23.1)
Issuance of common stock for share-based award compensation plans	481,580	—		7.7		—		—		7.7
Payroll taxes related to net share settlement of share-based awards	—	—		(11.3)		—		—		(11.3)
Share-based compensation	—	—		27.2		—		—		27.2
Balance at September 2024	70,165,571	$	0.1	$	1,130.6	$	(878.0)	$	1,214.6	$	1,467.3

See accompanying notes to condensed consolidated financial statements (unaudited)

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SYNAPTICS INCORPORATED AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(in millions, except share amounts)

(unaudited)


	Common Stock
	Shares	Amount		Additional Paid-In Capital		Treasury Stock		Accumulated Other Comprehensive Income		Retained Earnings		Total Stockholders' Equity
Balance at June 2023	68,687,511	$	0.1	$	1,009.2	$	(878.0)	$	—	$	1,112.1	$	1,243.4
Net loss	—	—		—		—		—		(55.6)		(55.6)
Other comprehensive income	—	—		—		—		0.1		—		0.1
Issuance of common stock for share-based award compensation plans	612,283	—		8.5		—		—		—		8.5
Payroll taxes related to net share settlement of share-based awards	—	—		(25.3)		—		—		—		(25.3)
Share-based compensation	—	—		33.2		—		—		—		33.2
Balance at September 2023	69,299,794	$	0.1	$	1,025.6	$	(878.0)	$	0.1	$	1,056.5	$	1,204.3

See accompanying notes to condensed consolidated financial statements (unaudited)

SYNAPTICS INCORPORATED AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in millions)

(unaudited)


	Three Months Ended
	September
	2024		2023
Cash flows from operating activities
Net loss	$	(23.1)	$	(55.6)
Adjustments to reconcile net loss to net cash (used in) provided by operating activities:
Share-based compensation costs	27.2		33.2
Depreciation and amortization	7.2		7.2
Acquired intangibles amortization	24.6		23.3
Deferred taxes	(15.0)		(1.1)
Other	3.5		12.6
Changes in operating assets and liabilities, net of acquisitions:
Accounts receivable, net	6.6		53.6
Inventories, net	(4.6)		(6.8)
Prepaid expenses and other current assets	(1.9)		(4.8)
Other assets	3.4		0.9
Accounts payable	(6.3)		16.7
Accrued compensation	0.7		(22.0)
Other accrued liabilities	(33.7)		(11.8)
Net cash (used in) provided by operating activities	(11.4)		45.4
Cash flows from investing activities
Proceeds from maturity of investments	—		3.2
Purchases of short-term investments	—		(16.6)
Purchases of property and equipment	(9.1)		(6.7)
Purchase of intangible assets	—		(13.5)
Advance payment on intangible assets	—		(116.5)
Net cash used in investing activities	(9.1)		(150.1)
Cash flows from financing activities
Proceeds from issuance of shares	7.7		8.5
Payroll taxes related to net share settlement of share-based awards	(11.3)		(25.3)
Repayment of debt	(1.5)		(3.0)
Other	1.6		1.7
Net cash used in financing activities	(3.5)		(18.1)
Effect of exchange rate changes on cash and cash equivalents	0.7		(0.6)
Net decrease in cash and cash equivalents	(23.3)		(123.4)
Cash and cash equivalents, beginning of period	876.9		924.7
Cash and cash equivalents, end of period	$	853.6	$	801.3

See accompanying notes to condensed consolidated financial statements (unaudited)

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SYNAPTICS INCORPORATED AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

1. Basis of Presentation and Principles of Consolidation

The accompanying unaudited condensed consolidated financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission, or the SEC, and United States generally accepted accounting principles, or U.S. GAAP. Certain information or footnote disclosures normally included in financial statements prepared in accordance with U.S. GAAP have been condensed or omitted pursuant to SEC rules and regulations. In our opinion, the financial statements include all adjustments, which are of a normal and recurring nature and necessary for the fair presentation of the results of the interim periods presented. The results of operations for the interim periods are not necessarily indicative of the operating results for the full fiscal year or any future period. These financial statements should be read in conjunction with the audited consolidated financial statements and related notes included in our Annual Report on Form 10-K for the fiscal year ended June 29, 2024.

The condensed consolidated financial statements 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.

Our fiscal year is the 52- or 53-week period ending on the last Saturday in June. Our fiscal 2025 is a 52-week period ending June 28, 2025, and our fiscal 2024 was a 53-week period ending on June 29, 2024. The fiscal periods presented in this report are 13-week and 14-week periods for the three months ended September 28, 2024 and September 30, 2023, respectively. For simplicity, the accompanying condensed consolidated financial statements have been shown as ending on calendar quarter end dates as of and for all periods presented, unless otherwise indicated.

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, but not limited to, those estimates related to revenue recognition, allowance for credit losses, cost of revenue, inventories, loss on purchase commitments, product warranty, accrued liabilities, share-based compensation costs, provision for income taxes, deferred tax assets and the associated valuation allowance, uncertain tax positions, goodwill, intangible assets, investments and loss contingencies. We base our estimates on historical experience, current period developments, 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.

Accounting Pronouncements Recently Issued

In November 2023, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2023-07, “Segment Reporting: Improvements to Reportable Segment Disclosures.” This guidance requires disclosure of incremental segment information on an annual and interim basis. This amendment is effective for our fiscal year ending June 2025 and our interim periods within the fiscal year ending June 2026. We are currently assessing the impact of this guidance on our disclosures.

In December 2023, the FASB issued ASU No. 2023-09, “Income Taxes: Improvements to Income Tax Disclosures.” This guidance requires consistent categories and greater disaggregation of information in the rate reconciliation and disclosures of income taxes paid by jurisdiction. This amendment is effective for our fiscal year ending June 2026. We are currently assessing the impact of this guidance on our disclosures.

2. Revenue Recognition

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. Most 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.

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

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SYNAPTICS INCORPORATED AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

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.

Our accounts receivable balance is from contracts with customers and represents our unconditional right to receive consideration from customers. To date, there have been no material credit loss charges recorded on accounts receivable. As of September 2024 and June 2024, contract assets recorded on our condensed consolidated balance sheets were $1.5 million and $1.2 million, respectively. Contract assets are presented as part of prepaid expenses and other current assets.

Contract liabilities and refund liabilities were $4.4 million and $49.6 million, respectively, as of September 2024, and $14.7 million and $43.5 million, respectively, as of June 2024. Both contract liabilities and refund liabilities are presented as customer obligations in Note 10. Balance Sheet Components. During the three months ended September 2024 and September 2023, we recognized $12.6 million and $2.4 million, respectively, in revenue related to contract liabilities, which was outstanding as of the beginning of each fiscal quarter.

Revenue from contracts with customers disaggregated by geographic area based on customer location and product category is presented in Note 15. Segment, Customers, and Geographical Information.

3. Net Loss Per Share

The computation of basic and diluted net loss per share was as follows (in millions, except per share data):


	Three Months Ended
	September
	2024		2023
Numerator:
Net loss	$	(23.1)	$	(55.6)
Denominator:
Shares, basic	39.8		38.8
Effect of dilutive share-based awards	—		—
Shares, diluted	39.8		38.8
Net loss per share:
Basic	$	(0.58)	$	(1.43)
Diluted	$	(0.58)	$	(1.43)

Our basic net loss per share amounts for each period presented have been computed using the weighted average number of shares of common stock, $0.001 par value, or the common stock, outstanding over the period measured. Our diluted net income per share amounts for each period presented include the weighted average effect of potentially dilutive shares. We use the "treasury stock" method to determine the dilutive effect of our stock options, restricted stock units, or RSUs, market stock units, or MSUs, and performance stock units, or PSUs. Potentially dilutive shares whose effect would have been antidilutive are excluded from the computation of diluted net loss per share.

4. Prepayment of Intangible Assets

During the first quarter of fiscal 2024, we paid an aggregate consideration of $130.0 million to Avago Technologies ("Broadcom") to license four developed technology products and to extend the exclusivity period of certain developed technologies that were previously licensed from Broadcom in July 2020. As of September 2024, we have obtained control of three of the four technology products and the three-year extension period to exclusively license previously acquired developed technology intangible assets. The fair value of the remaining technology product of $42.5 million for which we have not yet obtained control is an advance payment on intangible assets and is presented within other long-term assets in our consolidated balance sheets.

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SYNAPTICS INCORPORATED AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

5. Inventories

Inventories are stated at the lower of cost (first-in, first-out method) or net realizable value and consisted of the following (in millions):


	September		June
	2024		2024
Raw materials and work-in-progress	$	68.6	$	69.5
Finished goods	51.0		44.5
	$	119.6	$	114.0

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 such a write-down 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 original equipment manufacturers, or OEM, customers of any product offerings incorporating our product solutions.

6. Cash and Cash Equivalents

The following table summarizes our cash and cash equivalents by category at September 2024 and June 2024 (in millions):


	September 2024						June 2024
	Amortized Cost		Gross unrealized loss		Fair Value		Amortized Cost		Gross unrealized loss		Fair Value
Cash	$	554.9	$	—	$	554.9	$	238.4	$	—	$	238.4
Cash equivalents:
Money market funds	265.7		—		265.7		600.4		—		600.4
Certificates of deposit	33.0		—		33.0		38.1		—		38.1
Total cash and cash equivalents	$	853.6	$	—	$	853.6	$	876.9	$	—	$	876.9

7. 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.

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SYNAPTICS INCORPORATED AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

•Level 3 – Valuation is based upon other unobservable inputs that are significant to the fair value measurements.

Our Level 1 financial instruments are traded in active markets, and the fair value is 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 September 2024 and June 2024, financial assets measured at fair value on a recurring basis are summarized below (in millions):


	September 2024						June 2024
	Level 1		Level 2		Total (1)		Level 1		Level 2		Total (1)
Assets:
Cash equivalents:
Money market funds	$	265.7	$	—	$	265.7	$	600.4	$	—	$	600.4
Certificates of deposit	—		33.0		33.0		—		38.1		38.1
Total assets	$	265.7	$	33.0	$	298.7	$	600.4	$	38.1	$	638.5

(1)Excludes $554.9 million and $238.4 million in cash held in our bank accounts as of September 2024 and June 2024, respectively. We did not have any financial assets requiring Level 3 measurement in the periods presented.

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 Notes and Term Loan Facility, as defined in Note 12. Debt. The estimated fair value of the Senior Notes and Term Loan Facility was determined based on the trading price of the Senior Notes and Term Loan Facility as of the last day of trading for the periods presented. We use Level 2 measurement criteria to determine the fair value of our Senior Notes and Term Loan Facility as they are not actively traded in markets.

The carrying amounts and estimated fair values of the Senior Notes and Term Loan Facility are as follows for the periods presented (in millions):


	September 2024				June 2024
	Carrying Amount		Estimated Fair Value		Carrying Amount		Estimated Fair Value
Senior Notes due 2029	$	396.4	$	375.6	$	396.3	$	359.6
Term Loan Facility due 2028	575.5		575.1		576.6		577.0
	$	971.9	$	950.7	$	972.9	$	936.6

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SYNAPTICS INCORPORATED AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

8. Goodwill and Acquired Intangibles, Net

Goodwill

Goodwill represents the excess of the purchase price over the fair value of the net tangible and identifiable intangible assets acquired in a business combination. For the three months ended September 2024 and June 2024, the carrying value of goodwill was $816.4 million.

Acquired Intangibles, Net

The following table summarizes the net carrying amounts excluding fully amortized intangible assets (in millions, except for weighted-average life in years):


		September 2024						June 2024
	Weighted Average Life in Years	Gross Carrying Value		Accumulated Amortization		Net Carrying Value		Gross Carrying Value		Accumulated Amortization		Net Carrying Value
Audio and video technology	5.6	$	231.9	$	(181.3)	$	50.6	$	231.9	$	(175.5)	$	56.4
Customer relationships	4.1	158.2		(137.8)		20.4		158.2		(134.1)		24.1
Wireless connectivity technology	5.5	245.5		(101.6)		143.9		245.5		(90.1)		155.4
Video interface technology	3.4	133.0		(88.4)		44.6		133.0		(85.2)		47.8
Other	5.1	26.1		(21.9)		4.2		26.1		(21.4)		4.7
Acquired intangibles totals	4.9	$	794.7	$	(530.9)	$	263.8	$	794.7	$	(506.3)	$	288.4

Certain intangible assets from June 2024 have been reclassified to conform to the current period presentation and are presented in the Other line item in the table above.

The total amortization expense for the acquired intangible assets was $24.6 million and $23.3 million for the three months ended September 2024 and September 2023, respectively.

During the three months ended September 2024 and September 2023, $20.8 million and $17.8 million, respectively, of amortization expense was included in our condensed consolidated statements of operations in cost of revenue; the remainder was included in acquired intangibles amortization.

The following table presents the estimated future amortization expense of acquired amortizable intangible assets as of September 2024 (in millions):


Fiscal Year
Remainder of 2025	$	73.3
2026	84.8
2027	50.0
2028	33.9
2029	15.5
Thereafter	6.3
Future amortization	$	263.8

9. Leases

Our leases primarily include our worldwide office and research and development facilities which are all classified as operating leases. Certain leases include renewal options at our discretion. The leases expire at various dates through fiscal 2034, some of which include options to extend the lease for up to seven years. For the three months ended September

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SYNAPTICS INCORPORATED AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

2024 and September 2023, we recorded operating lease expense of approximately $3.2 million and $2.9 million, respectively. Our short-term leases are immaterial and we do not have finance leases.

As of September 2024 and June 2024, the components of leases are as follows (in millions):


	September		June
	2024		2024
Operating lease right-of-use assets	$	47.2	$	46.8
Operating lease liabilities	$	11.1	$	11.5
Operating lease liabilities, long-term	38.6		37.9
Total operating lease liabilities	$	49.7	$	49.4

Supplemental cash flow information related to leases, including from acquisitions, is as follows (in millions):


	Three Months Ended
	September
	2024		2023
Cash paid for operating leases included in operating cash flows	$	4.2	$	2.3
Supplemental non-cash information related to lease liabilities arising from obtaining right-of-use assets	$	3.5	$	1.2

As of September 2024, the weighted average remaining lease term is 6.33 years, and the weighted average discount rate is 5.34%.

Future minimum lease payments for the operating lease liabilities are as follows (in millions):


Fiscal Year	Operating Lease Payments
Remainder of 2025	$	10.0
2026	11.4
2027	8.7
2028	7.1
2029	6.1
Thereafter	15.0
Total future minimum operating lease payments	58.3
Less: interest	(8.6)
Total lease liabilities	$	49.7

10. Balance Sheet Components

Accounts receivable, net, consisted of the following (in millions):


	September		June
	2024		2024
Accounts receivable	$	140.0	$	146.6
Less: Allowance for credit losses	(4.2)		(4.2)
	$	135.8	$	142.4

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

Other non-current assets consisted of the following (in millions):


	September		June
	2024		2024
Prepayment of intangible assets	$	42.5	$	42.5
Right-of-use assets	47.2		46.8
Other	43.5		47.5
	$	133.2	$	136.8

Other accrued liabilities consisted of the following (in millions):


	September		June
	2024		2024
Customer obligations	$	54.0	$	58.2
Inventory obligations	7.4		5.6
Operating lease liabilities	11.1		11.5
Income taxes payable	17.3		42.2
Other	46.6		38.8
	$	136.4	$	156.3

Other long-term liabilities consisted of the following (in millions):


	September		June
	2024		2024
Operating lease liabilities	$	38.6	$	37.9
Deferred tax liabilities	25.7		27.9
Income taxes payable	25.0		27.8
Other	14.8		20.5
	$	104.1	$	114.1

11. Indemnifications and Contingencies

Indemnifications

We have entered into indemnification agreements with our officers and directors. In addition, 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. Maximum potential future payments under these agreements cannot be estimated because these agreements generally do not have a maximum stated liability. Historical costs related to these indemnification provisions have not been significant. However, we will accrue for any losses related to these indemnification agreements when it is both probable that we will incur the loss and we can reasonably estimate the amount of the loss or range of loss. During the three months ended September 2024, we recorded an estimated liability of $2.2 million related to our proportionate share of an indemnity obligation to defend a counterparty against a third party claim alleging infringement of certain intellectual property rights.

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.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

Legal Proceedings

From time to time, we are subject to various claims and legal proceedings, either asserted or unasserted, that arise in the ordinary course of business. While we currently believe that resolving claims against us, individually or in the aggregate, will not have a material adverse impact on our business, financial condition, or results of operations, these matters are subject to inherent uncertainties and our 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 we can reasonably estimate the amount of the loss or range of loss.

12. Debt

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 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.

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	Price
2024	102	%
2025	101	%
2026 and thereafter	100	%

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 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.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

Debt issuance costs relating to the Senior Notes of $5.7 million, netted against the debt amount on the condensed consolidated balance sheet, are amortized as interest expense through the maturity date. The total interest expense and amortization of the debt issuance costs recorded on the Senior Notes during the three months ended September 2024 and September 2023 was $4.1 million in each period.

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, or 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 September 2024, 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.

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 September 2024, 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

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

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 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 condensed consolidated balance sheet, are amortized as interest expense through the maturity date. The total interest expense and amortization of the debt issuance costs recorded on the Term Loan Facility was $11.7 million and $11.8 million during the three months ended September 2024 and 2023, respectively.

13. Share-Based Compensation

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. 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.

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, RSUs, cash incentive awards, performance shares, PSUs, and other stock-based awards. The 2019 Incentive Plan has been amended and restated, and the cumulative number of shares approved by stockholders is 7,588,000 as of October 29, 2024. The 2019 ESPP authorizes the Company to provide eligible employees with an opportunity to acquire an equity interest in the 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, and 650,000 shares of our common stock were 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 was 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. No new awards may be granted under the 2019 Inducement Equity Plan.

Share-Based Compensation

Share-based compensation recognized in our condensed consolidated statements of operations were as follows (in millions):

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)


	Three Months Ended
	September
	2024		2023
Cost of revenue	$	(2.7)	$	1.1
Research and development	14.5		15.2
Selling, general, and administrative	15.4		16.9
Total	$	27.2	$	33.2

Historically, we have issued new shares in connection with our equity-settled 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.

Share-Based Compensation Plan Activity

Restricted Stock Units

RSUs granted generally vest ratably over three to four years from the vesting commencement date. RSU activity was as follows:


	RSU Awards Outstanding	Aggregate Intrinsic Value (in millions)
Balance as of June 2024	1,620,006
Granted	1,118,536
Vested	(436,766)
Forfeited	(117,592)
Balance as of September 2024	2,184,184	$	171.8

The aggregate intrinsic value was determined using the closing price of our common stock on September 27, 2024, of $78.48.

The unrecognized share-based compensation cost of our outstanding RSUs was approximately $180.7 million as of September 2024, which will be recognized over a weighted average period of approximately 2.34 years.

Market Stock Units

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.

MSU activity was as follows:


	MSU Awards Outstanding	Aggregate Intrinsic Value (in millions)
Balance as of June 2024	200,513
Granted	120,765
Delivered	(55,603)
Forfeited	(37,473)
Balance as of September 2024	228,202	$	18.0

The aggregate intrinsic value was determined using the closing price of our common stock on September 27, 2024, of $78.48.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

We value MSUs using the Monte Carlo simulation model on the date of grant and amortize the compensation expense over the three-year performance and service period on a ratable basis by tranche. The unrecognized share-based compensation cost of our outstanding MSUs was approximately $26.7 million as of September 2024, which will be recognized over a weighted average period of approximately 1.78 years .

Performance Stock Units

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.

PSU activity was as follows:


	PSU Awards Outstanding	Aggregate Intrinsic Value (in millions)
Balance as of June 2024	265,362
Granted	201,675
Delivered	(14,452)
Forfeited	(87,208)
Balance as of September 2024	365,377	$	28.7

The aggregate intrinsic value was determined using the closing price of our common stock on September 27, 2024, of $78.48

We value PSUs using the aggregate intrinsic value on the date of grant adjusted for estimated performance achievement during the performance period and amortize the compensation expense over the three-year service period on a ratable basis. The amount of stock-based compensation expense recognized in any period related to PSUs can vary based on the achievement or anticipated achievement of the performance conditions. If the performance conditions are not met, or not expected to be met, no compensation cost would be recognized on the underlying PSUs, and any previously recognized compensation expense related to those PSUs would be reversed. The unrecognized share-based compensation cost of our outstanding PSUs was approximately $19.3 million as of September 2024, which will be recognized over a weighted average period of approximately 1.30 years.

Employee Stock Purchase Plan

Shares purchased, weighted average purchase price, cash received, and the aggregate intrinsic value for employee stock purchase plan purchases during the three months ended September 2024, were as follows (in millions, except for shares purchased and weighted average price):


Shares purchased

SEC Form 10-Q filed by Synaptics Incorporated