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 March 28, 2020 ☐ 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 (I.R.S. Employer incorporation or organization) Identification No.) 1251 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 ☒ Number of shares of Common Stock outstanding at April 30, 2020: 34,035,706 SYNAPTICS INCORPORATED QUARTERLY REPORT ON FORM 10-Q FOR THE QUARTER ENDED MARCH 28, 2020 TABLE OF CONTENTS Page Part I. Financial Information Item 1. Condensed Consolidated Financial Statements (Unaudited): 3 Condensed Consolidated Balance Sheets—March 31, 2020 and June 30, 2019 3 Condensed Consolidated Statements of Income—Three and Nine Months Ended March 31, 2020 and 2019 4 Condensed Consolidated Statements of Comprehensive Income—Three and Nine Months Ended March 31, 2020 and 2019 5 Condensed Consolidated Statements of Stockholders’ Equity 6 Condensed Consolidated Statements of Cash Flows—Nine Months Ended March 31, 2020 and 2019 8 Notes to Condensed Consolidated Financial Statements 9 Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations 26 Item 3. Quantitative and Qualitative Disclosures About Market Risk 35 Item 4. Controls and Procedures 35 Part II. Other Information Item 1. Legal Proceedings 36 Item 1A. Risk Factors 36 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 37 Item 6. Exhibits 38 Signatures 39 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) March 31, June 30, 2020 2019 ASSETS Current Assets: Cash and cash equivalents $ 472.1 $ 327.8 Accounts receivable, net of allowances of $1.7 at March 31, 2020 and $2.1 at June 30, 2019 238.4 230.0 Inventories 95.5 158.7 Current assets held for sale 12.5 - Prepaid expenses and other current assets 14.4 14.6 Total current assets 832.9 731.1 Property and equipment at cost, net of accumulated depreciation of $139.1 and $133.1 at March 31, 2020 and June 30, 2019, respectively 83.4 103.0 Non-current assets held for sale 17.6 — Goodwill 361.8 372.8 Acquired intangibles, net 104.4 144.8 Non-current other assets 81.0 58.1 $ 1,481.1 $ 1,409.8 LIABILITIES AND STOCKHOLDERS’ EQUITY Current Liabilities: Accounts payable $ 86.9 $ 98.3 Accrued compensation 47.7 30.4 Income taxes payable 11.8 19.1 Other accrued liabilities 92.8 106.1 Total current liabilities 239.2 253.9 Convertible notes, net 482.0 468.3 Other long-term liabilities 47.0 30.3 Total liabilities 768.2 752.5 Stockholders' Equity: Common stock: $0.001 par value; 120,000,000 shares authorized, 65,752,215 and 64,283,948 shares issued, and 34,004,920 and 33,349,735 shares outstanding, at March 31, 2020 and June 30, 2019, respectively 0.1 0.1 Additional paid-in capital 1,323.9 1,266.1 Treasury stock: 31,747,295 and 30,934,213 common treasury shares at March 31, 2020 and June 30, 2019, respectively, at cost (1,222.5) (1,192.4) Retained earnings 611.4 583.5 Total stockholders' equity 712.9 657.3 $ 1,481.1 $ 1,409.8 See accompanying notes to condensed consolidated financial statements (unaudited). 3 SYNAPTICS INCORPORATED AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF INCOME (in millions, except per share data) (unaudited) Three Months Ended Nine Months Ended March 31, March 31, 2020 2019 2020 2019 Net revenue $ 328.1 $ 334.0 $ 1,056.3 $ 1,177.1 Cost of revenue 192.5 218.0 635.2 770.4 Gross margin 135.6 116.0 421.1 406.7 Operating expenses: Research and development 75.8 82.6 238.8 256.9 Selling, general, and administrative 31.6 34.2 90.6 103.6 Acquired intangibles amortization 2.9 3.0 8.8 8.8 Restructuring costs 6.3 - 26.2 10.4 Total operating expenses 116.6 119.8 364.4 379.7 Operating income 19.0 (3.8) 56.7 27.0 Interest and other expense, net (3.2) (4.3) (9.1) (10.5) Income/(loss) before provision/(benefit) for income taxes and equity investment loss 15.8 (8.1) 47.6 16.5 Provision/(benefit) for income taxes 10.2 (15.3) 17.3 (8.1) Equity investment loss (0.6) (0.5) (1.5) (1.3) Net income $ 5.0 $ 6.7 $ 28.8 $ 23.3 Net income per share: Basic $ 0.15 $ 0.19 $ 0.86 $ 0.67 Diluted $ 0.14 $ 0.19 $ 0.83 $ 0.66 Shares used in computing net income per share: Basic 34.0 34.4 33.5 34.7 Diluted 35.0 35.0 34.5 35.5 See accompanying notes to condensed consolidated financial statements (unaudited). 4 SYNAPTICS INCORPORATED AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (in millions) (unaudited) Three Months Ended Nine Months Ended March 31, March 31, 2020 2019 2020 2019 Net income $ 5.0 $ 6.7 $ 28.8 $ 23.3 Other comprehensive income: Change in unrealized net gain on investment — — — (1.5) Comprehensive income $ 5.0 $ 6.7 $ 28.8 $ 21.8 See accompanying notes to condensed consolidated financial statements (unaudited). 5 SYNAPTICS INCORPORATED AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (in millions, except share amounts) (unaudited) Additional Total Common Stock Paid-in Treasury Retained Stockholders' Shares Amount Capital Stock Earnings Equity Balance at June 30, 2019, as reported 64,283,948 $ 0.1 $ 1,266.1 $ (1,192.4) $ 583.5 $ 657.3 Cumulative effect of changes in accounting principles — — — — (0.9) $ (0.9) Balance at June 30, 2019, as adjusted 64,283,948 0.1 1,266.1 (1,192.4) 582.6 656.4 Net income — — — — 4.0 4.0 Issuance of common stock for share- based award compensation plans 209,110 — 1.7 — — 1.7 Payroll taxes for deferred stock units — — (1.5) — — (1.5) Purchases of treasury stock — — — (17.0) — (17.0) Share-based compensation — — 11.2 — — 11.2 Balance at September 30, 2019 64,493,058 0.1 1,277.5 (1,209.4) 586.6 654.8 Net income — — — — 19.8 19.8 Issuance of common stock for share- based award compensation plans 895,755 — 11.8 — — 11.8 Payroll taxes for deferred stock units — — (7.2) — — (7.2) Share-based compensation — — 12.1 — — 12.1 Balance at December 31, 2019 65,388,813 0.1 1,294.2 (1,209.4) 606.4 691.3 Net income — — — — 5.0 5.0 Issuance of common stock for share- based award compensation plans 363,402 — 16.5 — — 16.5 Payroll taxes for deferred stock units — — (0.6) — — (0.6) Purchases of treasury stock — — — (13.1) — (13.1) Share-based compensation — — 13.8 — — 13.8 Balance at March 31, 2020 65,752,215 $ 0.1 $ 1,323.9 $ (1,222.5) $ 611.4 $ 712.9 See accompanying notes to condensed consolidated financial statements (unaudited) 6 SYNAPTICS INCORPORATED AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (in millions, except share amounts) (unaudited) Accumulated Additional Other Total Common Stock Paid-in Treasury Comprehensive Retained Stockholders' Shares Amount Capital Stock Income Earnings Equity Balance at June 30, 2018 62,889,679 $ 0.1 $ 1,195.2 $ (1,073.9) $ 1.5 $ 606.4 $ 729.3 Net income — — — — — 3.8 3.8 Other comprehensive income — — — — (1.5) — (1.5) Issuance of common stock for share- based award compensation plans 140,379 — 2.1 — — — 2.1 Payroll taxes for deferred stock units — — (0.9) — — — (0.9) Purchases of treasury stock — — — (39.4) — — (39.4) Share-based compensation — — 16.7 — — — 16.7 Balance at September 30, 2018 63,030,058 0.1 1,213.1 (1,113.3) — 610.2 710.1 Net income — — — — — 12.8 12.8 Issuance of common stock for share- based award compensation plans 773,486 — 9.3 — — — 9.3 Payroll taxes for deferred stock units — — (6.3) — — — (6.3) Purchases of treasury stock — — — (37.9) — — (37.9) Share-based compensation — — 16.2 — — — 16.2 Balance at December 31, 2018 63,803,544 $ 0.1 $ 1,232.3 $ (1,151.2) $ — $ 623.0 $ 704.2 Net income — — — — — 6.7 6.7 Issuance of common stock for share- based award compensation plans 138,622 — 1.7 — — — 1.7 Payroll taxes for deferred stock units — — (1.8) — — — (1.8) Share-based compensation — — 15.9 — — — 15.9 Balance at March 31, 2019 63,942,166 $ 0.1 $ 1,248.1 $ (1,151.2) $ — $ 629.7 $ 726.7 See accompanying notes to condensed consolidated financial statements (unaudited).