Synaptics Inc (SYNA) 2013 Q4 法說會逐字稿

Good day, ladies and gentlemen. Welcome to the Synaptics fourth quarter and fiscal year 2013 earnings conference call. During today's presentation, all parties will be in a listen-only mode. Follow the presentation, the conference will be opened for questions.

(Operator Instructions)

This conference is being recorded today, August 1, 2013. I would now like to turn the conference over to Mr. Alex Wellins of the Blueshirt Group. Please go ahead, sir.

Good afternoon, and thank you for joining us today on Synaptics' fourth quarter and fiscal 2013 conference call. 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. With me on today's call are Rick Bergman, the Company's President and CEO, and Kathy Bayless, CFO.

In addition to the Company's GAAP results, management will also provide supplementary results on a non-GAAP basis which excludes share-based compensation charges and certain non-cash or nonrecurring items. Please refer to the press release issued after the market close today for a detailed reconciliation of GAAP and non-GAAP results.

Additionally, we'd like to remind you that during the course of this conference call, Synaptics will make forward-looking statements including predictions and estimates that involve a number of risks and uncertainties, including but not limited to -- statements regarding the Company's future financial performance and outlook, including financial guidance for the first quarter of fiscal 2014; and anticipated revenue mix from mobile and PC products; the Company's positioning of the technology leader in touch; the Company's positioning in the smartphone market, as well as the broader touchscreen market to drive sustainable growth; Synaptics' strong position within emerging markets such as China; the Company's expectation in its digital display integrated solutions including on-cell and in-cell implementations will begin to take a more pivotal role in fiscal 2014; the Company's anticipated revenue growth from tablet and large touchscreen products; and the Company's confidence in achieving another year of strong annual top line growth. Actual results may differ materially from any future performance suggested in the Company's forward-looking statements today. We refer you to the Company's SEC filings, including Form 10-K for the fiscal year ended June 30, 2012, for important risk factors that could cause actual results to differ materially from those contained in any forward-looking statement. We expressly disclaim any obligation to update the forward-looking information.

With that said, I'll turn the call over to Rick Bergman. Rick?

Thanks, Alex. I like to welcome everyone to today's call. At this time last year, we laid out our vision for a return to annual revenue growth in fiscal 2013, with the primary goal, among other initiatives, to capture share at key mobile OEM partners. At the time, we characterized our expected growth as modest. As you can see from our results, our execution was nothing short of stellar as we successfully expanded our footprint at leading mobile customers, including many of the world's best-selling phones and tablets.

Revenue for the year was a record $664 million, up 21% from the prior year. The revenue mix from mobile and PC products was 64% and 36%, respectively, reflecting a transition towards faster-growing markets, primarily driven by mobile phone touchscreen applications. This mix shift contributed to a non-GAAP gross margin for the year of 49.2%, up 240 basis points from the prior year, supporting a 27.3% increase in gross margin dollars and providing additional operating leverage to our business model. Non-GAAP net income was a record $106 million, or $3.11 per share, up 35% from the $79 million, or $2.28 per share in the prior year.

Our record results reflect our ongoing investments in our product and technology road map, as well as our unmatched design resources and support on a global scale. The result is the broadest product portfolio in the industry and our ability to deliver innovative features and functionality that continue to lead to design wins within flagship devices at top OEMs. It's quite remarkable that we're able to win a full stable of flagship phones and tablets while simultaneously developing a next-generation solution for this year's most talked about smartphone.

This is an extension of our track record of developing unique capabilities with each customer, expanding user interface possibilities with our growing list of industry firsts, including glove support, proximity, finger hover, and air swipe functionality. Synaptics also answers the growing demand for multiple input options with support for simultaneous pen and finger touch recognition, passive pen tracking, and high performance with a stylus as small as 2 millimeters, all of which deliver seamless multi-touch performance.

The case in point is our growing share within Samsung. As we have shown with their groundbreaking on-cell touchscreen solution featured in the Galaxy S4, Synaptics has expanded its technology leadership with the next generation of display integrated solutions. Our product portfolio continues to exceed the demanding requirements of Samsung, with additional custom designs now shipping in the Galaxy Mega and Galaxy S4 active smartphones, as well as the Note 8 and Tab 2 tablets.

Additional recent smartphones launches include the Nokia Lumia 925 and 1020, leveraging our newest generation ClearPad 3402, as well as several phones incorporating Synaptics' in-cell solutions. In addition to Huawei's Ascend P2 phone mentioned last quarter, Huawei has released the P6, its second generation in cell phone. Pantech launched Vega Iron phone, while Oppo begin shipping the 9809T all leveraging our ClearPad 3250 in-cell offering. We see increasing activity for both on-cell and in-cell solutions in fiscal '14. By engaging with multiple LCD manufacturers, we are expanding our ability to target top tier, second tier, and emerging market opportunities based on our broad product portfolio.

The China market remains a key area of growth for us and the percentage of mobile revenue from domestic Chinese vendors continues to edge up. With our primary focus and design center investment geared towards working with leading OEMs, we are also very well represented within the second tier of the market. At the same time, our leading edge technology, such as our single layer, on-cell multi-touch offering, is enabling us to address the entry-level markets, most recently with our first design win for this solution in [Ulon] 8908.

On the tablet front, we are building on our success in the Sony Xperia family of phones, with the inclusion of our LTS solution in the Android-driven Sony Xperia Tablet Z. This product features an ultrathin, water- and dust-resistant 10.1-inch display. Tablet devices continue to be a burgeoning market for us across our global customer base, with our solutions shipping in the Samsung devices, the Acer Iconia W3, and the Lenovo Miix 10. Our design pipeline remains very robust and we expect to announce additional flagship design wins across a growing customer base over the coming months.

During the fiscal fourth quarter, we also launched our ClearPad S7500 solution for large touchscreens up to 15.6 inches. While capacitive touch has become the de facto human interface for small form factors like smartphones and tablets, there's been a slower integration into notebooks due to design challenges and high cost within the industry. With the introduction of the single ASIC offering, we are making it simple and cost-effective for OEMs to adopt large touchscreens for a range of new computing devices. The solution also leverages our active stylus technology which provides touchscreen-based products with active pen functionality with no incremental cost beyond that of a standard touchscreen. This feature is an economical alternative to legacy solutions that require a separate sensor and has been of particular interest to OEMs. We expect the first products incorporating ClearPad S7500 to launch in calendar Q4.

Our design pipeline for touchscreens within notebooks is growing nicely. We made our initial foray into this market during fiscal Q4 in the Lenovo IdeaPad D400 touch notebook which features a Synaptics TouchPad, as well as our 14.1-inch ClearPad touchscreen solution. The D400 was named PC Magazine's Editors Choice for entry-level desktop replacement laptops.

As we enter the new fiscal year, Synaptics remains extremely well-positioned as the technology leader in touch. Looking at a current snapshot of our markets, the outlook for notebook PCs remains less than ideal, as the industry continues to anticipate a flat to down trajectory near-term. While Synaptics is now much less dependent on this market for growth, we do believe we are starting to see a pulse in the industry as cost points for touch-based ultrabooks continue to come down. We have maintained our dominant share with our TouchPad oriented solutions, featured in 7 of the top 10 ultrabooks and we continue to engage in a consistent stream of design activity with leading PC OEMs. In addition to our ClickPad solutions, our ability to expand our market opportunity and footprint within notebooks and peripherals continues with the development of our ForcePad and ThinTouch solutions. Despite the downturn in the market, we have continued to invest in innovation leading to a strong level of design activity and continue to expect initial revenue from these offers in conjunction with the next major PC cycle in calendar 2014.

The smartphone market continues to be a huge opportunity with total units of over $1 billion and a unit growth forecast in excess of 20% over the next several years. Synaptics remains extremely well-positioned to capitalize on this segment, as well as the broader touchscreen market with the right technology and the right engine to drive sustainable growth. First, we expect to continue our leadership with a commanding share of the premium smartphone market and to continue to benefit from the expansion of our customer base. Second, we expect to expand our strong position within emerging markets, such as China. We believe our display integrated solutions, such as on-cell and in-cell implementations, will begin to take a more pivotal role in fiscal '14 in targeting the full spectrum of the mobile market from value to high-end smartphones. And third, we expect additional greenfield opportunities to begin contributing to our top line in a meaningful way, including continued traction within tablets and growing revenue within large touchscreens for touch-enabled notebooks.

Our leading share with top tier mobile design wins and the resulting increase in revenue mix from mobile products has made forecasting more difficult. This is especially true given the significant volumes, quick ramp, and relatively short product life cycles of these devices. Given the technology advantages that I described in today's call, we believe we continue to have a very long runway ahead of us in mobile. As we look ahead to fiscal 2014, the declining PC market will continue to impact our overall growth rate, but overall we feel confident we can achieve another year of very strong, annual top line growth at a level that is similar to our growth rate in fiscal 2013.

Ultimately, Synaptics continues to innovate and lead in our markets based on the depth and breadth of our technology and the scale required to seamlessly deliver differentiated solutions to our growing customer base. While our markets are dynamic, we believe that as a technology leader, we are building a sustainable competitive advantage in touch and that we'll continue to win in the marketplace and deliver strong profitable growth. As we close out the year, I'd like to thank our dedicated employees around the world who have made fiscal 2013 a phenomenal success. We look forward to seeing many of our analyst and investors at are upcoming Analyst and Investor Day on Thursday, August 8, where we'll provide more details regarding human interface trends and our leading position in our markets.

With that, I'll turn it over to Kathy for a review our financial results.

Thanks, Rick. We are extremely pleased with our June quarter results as revenue of $230 million was at high end of our upwardly revised guidance range and represents a second sequential quarter of record revenue. June quarter revenue increased substantially at 67% year-over-year and 41% sequentially. The revenue mix from mobile and PC products was approximately 75% and 25%, respectively, in the June quarter. Revenue for mobile products was better than anticipated, up 186% year-over-year, and up 66% from the March quarter, consisting predominantly of revenue from mobile phone applications with strong demand across a broad base of customers. We achieved strong mobile phone revenue and unit growth over both comparable periods and tablets continue to provide a solid contribution. Revenue from PC applications was down 26% from the prior year and 3% sequentially, below our original expectation. With the continuing soft notebook market, we did not see the historical strong selling volumes in the June quarter ahead of back-to-school. Synaptics continues to lead the market for notebook touchpads and ClickPads and design activity continues to be very strong.

Non-GAAP gross margin was up 60 basis points sequentially at 50.1% and up 390 basis points year-over-year. The gross margin percentage shifted above the high end of our original guidance range as mobile products were a higher portion of the overall product mix than previously anticipated. Non-GAAP operating expenses were $55.1 million, up $6.2 million from the prior quarter. The increase was primarily related to additional headcount to support our expanding product portfolio and customer base, including go-to-market and chip design investments, as well as increased variable compensation related to the better-than-expected financial performance for the fiscal year.

GAAP operating expenses were $61.4 million, including $7.3 million of share-based compensation in the June quarter, a $1.6 million gain on the sale of our former headquarters building, as well as a non-cash charge of approximately $500,000 for intangible amortization and change to contingent consideration. We completed the sale of our former headquarters building in April and received proceeds of approximately $12.6 million. While the gain is included in our GAAP operating income, it has been excluded from our non-GAAP results as a non-recurring item. The strong sequential increase in revenue and gross margin dollars in the June quarter drove an 86% increase in non-GAAP operating profit dollars, and increased operating margin to 26.2%, from 19.8% last quarter. Our non-GAAP tax rate was 19% in the June quarter compared with 17.1% in the March quarter, primarily reflecting our geographic profit mix. Our GAAP tax rate was 16.4%. Fourth quarter non-GAAP net income was $48.9 million, or $1.39 per diluted share, representing both record net income and net income per share.

Turning to the balance sheet, we ended the fiscal year with $355 million of cash. Cash flow from operations for the year was very strong at $102.2 million. We used $46.3 million to repurchase 1.6 million shares of our stock, including roughly 359,000 shares at an average price of approximately $42 during the June quarter. This brings total repurchases for the year to approximately 5% of our shares outstanding. And I'm pleased to report that our Board of Directors has also increased and extended the authorization for stock repurchases by $100 million, for a total current authorization of $160 million through October of 2015. Employee participation in our equity incentive programs provided net cash of $32.7 million for the year. Capital expenditures for the year were $48.5 million including the cost and renovation of our new headquarters campus in San Jose, California, which we moved into in late June. Depreciation was $9.8 million for the year. Receivables at the end of June were $148.5 million, reflecting 58 days of sales outstanding. Inventories at the end of June were $49.9 million and inventory turns remained at 9.

Now, I will make a few comments regarding our quarterly outlook. Looking ahead to the September quarter, we are coming off an exceptional period of outstanding performance for mobile revenue which reflected a steep initial ramp of several new product launches across our mobile customer base. We are also mindful that calendar Q3 tends to be a back-end loaded quarter. Based on our backlog of approximately $96 million entering the quarter, customer forecasts, and expected product mix, we anticipate revenue will be in the range of $210 million to $225 million. We expect the revenue mix from mobile and PC products to be similar to the preceding quarter. Taking into account our overall revenue mix, we expect non-GAAP gross margin for the September quarter to be in the range of 49% to 50%. We expect non-GAAP operating expenses in the September quarter to be similar to June, primarily due to ongoing investment in engineering and infield customer support, as we continue to expand our product portfolio and customer base, partially offset by lower variable compensation accruals.

We anticipate the FAS 123R charge in the first quarter will be in the range of $7.6 million to $7.9 million. GAAP expenses will also include a non-cash charge of approximately $500,000, related to intangible amortization and change to contingent consideration. We anticipate the non-GAAP cash based tax rate for the September quarter and for the year to be in the range of 17% to 19%. Non-GAAP net income per diluted share for the September quarter is anticipated to be in the range of $1.15 to $1.30 per share.

In closing, we are extremely pleased with our record financial performance in fiscal 2013 and our outlook for continued strong revenue growth and financial performance in fiscal '14. We believe we are very well-positioned to continue to capitalize on the opportunities in front of us as the number one human interface Company. With that, we will turn the call over to the operator to start the Q&A. Operator?

(Operator Instructions)

Anthony Stoss with Craig-Hallum Capital Group.

Hello, guys. Nice job. Rick, if you could give us a sense on where your splits are between high-end smart phones, mid-range and low-end, and where you think that might be a year from now? Also, anything change in the competitive landscape? Thanks.

Okay, so I think the first part of the question is a segmentation question. Are you asking how much of the market we believe is high-end smartphone and how much mid-range?

No, just your revenue, where you're exposed right now, where you think it's going to be a year from now?

I'm a little nervous to venture a guess because it's not actually well-defined on what the segments are in the industry. There's some phones that can fit into either one. We don't really look at it as a three-segment market, by the way. We look at as a two segment, the high-end and the low-end. There used to be mid-segment but seemingly it moved away. But we're predominately in the higher end of the market. So, think way over majority of our revenue. And a year from now we hope to expand at the lower end. So we would expect that mix to change. It's the sales which they have started to grow already in China and elsewhere, really start to pick up speed, especially in a second half of the fiscal year.

Okay. Then, anything new on the competitive front?

We gave an update a quarter ago where Synaptics started to pull away from the competitors out there. I think that trend continued in this quarter. We'll talk about our share in the marketplace for smartphones specifically next week at the Analyst Day. You'll see there's a big gap between ourselves and any of the other players in the industry. In fact, you probably can combine several of the next players just to get to our share level.

To me, that's the biggest dynamic, is that a clear number one has now emerged, which thankfully is Synaptics. I think to further that is with the strength and the breadth of our product portfolio, that trend is going to continue forward.

Okay, thanks. Great job.

John Vinh with Pacific Crest Securities.

Hello. Congratulations on the nice quarter. First question I had was, I was wondering if you talk about the different puts and takes that went into your September guidance? Clearly, there's been a pretty significant inventory caught at Samsung on the Galaxy S4. Yet taking the mid-point of your guidance, you're down only 5.5% into the September quarter. What's offsetting that?

Hello, John. Looking at September quarter, that's our best view at this point in time. What we've talked about during the call was, if you go back and look at the June quarter, we had very, very steep ramps. When you look at the blend of the mix of the entire business in the September quarter, that's still a very, very strong mix overall. We're very pleased with that mix and the guidance we're able to give at this point.

John, as we said in the three growth elements I talked about, one was we're going to continue to expand our customer opportunities and some of that will come into play this quarter.

Got it. Then my follow-up is, I was wondering if you could talk a little bit about the China smartphone market? Can you update us on where your position in China smartphones? There's been a lot of concerns that, that market has started to slow down a little bit. Can you talk to us about what sort of demand trends you're seeing over there?

Sure, John. I'll start and then if Kathy wants to add anything. What we saw on the last fiscal quarter, calendar Q2, was it really went -- it was booming. There was no doubt about it. In fact, we had some challenges catching up with supply a couple times, just to meet some of the demand of the customers, unexpected demand that popped up through the course of the quarter. Very strong marketplace over there.

Obviously, there's a lot of consumers. As we look forward into this quarter, it still looks like a good opportunity for us. Certainly, there's some nervousness that they'll get a little bit overheated. We tried to anticipate that in the guidance that we gave and based on the feedback that we have from the OEMs.

Yes, I would just add to that we talked about China for several quarters now and that we started really at the top tier. We're making great progress in the second tier and in the emerging areas within China. Every quarter this year, as our revenue has increased, our percentage of domestic China business has grown nicely with our revenue increase, and has actually even picked up some in the fourth quarter, in the June quarter. We're really pleased with our participation and expect to do really well there as we continue to go forward.

Great. Thank you.

Philip Lee with Lazard Capital Markets.

Great, thanks for taking my question, and congrats on the quarter. So it seems like tablet is becoming a bigger part of your mobile business. What percentage of the revenue from mobile is from tablets? Do you see this growing faster than your smartphone sales?

Good question, Philip. We've talked about the tablet business now for a few quarters and what I've always said is, the question's been, is it material, is it material? And I've said, no, it's not material yet. But it is growing very nicely. As we exited the last fiscal year, I would say that tablet's grown nicely. It's probably getting close or somewhere around 5% of the revenue and we expect it to continue to grow nicely next year.

To answer the last part of your question there, our smartphone business is now a big business. Growth obviously is going to slow to certain degree. The tablet growth is absolutely at a faster pace than our smartphone growth.

Great, thanks, Rick. Kathy, as a follow-up, given the similar mobile and PC mix for next quarter, can you walk us through what's driving your gross margin guidance?

Well, as Rick mentioned a little bit earlier on one of the questions, if we look at the mix of the smartphone business, with all the wins and the flagships, I would say we've had a very, very high, rich gross margin profile. Again, similar mix next quarter. Great gross margins, maybe just slightly softer, depending upon the particular mix of the SKUs within that quarter.

Got it. Thanks.

Kevin Cassidy with Stifel Nicolaus.

Thanks for taking my question and congratulations on a great quarter. Can you say what the ASP trends are in mobile, even if you look at last quarter and then compare it to your outlook for the first quarter?

Kevin, I guess when I look at the ASP trends, because of the fact that we're, again as I mentioned on the last question, we're very high, overweight premium right now. The way I look at ASP is it's on an average basis. It's going to continue to drop some over the year.

Okay, but you're expecting those volumes would make up for it in the lower end?

Absolutely. We're expecting to see very, very strong unit volume. But again, on an average basis, I would just look at it to be down a little bit as we go through the year.

Would there be any other dynamic like that in PCs as you get more touch in PCs, as ultrabooks become a larger percentage of overall revenue?

As we've talked about it before, the touchscreens from notebooks PCs, basically we've included that in what we call the mobile section. All the touchscreens in and of themselves, we've included that in the mobile portion of the business. The PC portion of the business, in and of itself, would be the TouchPads and the ClickPads. We continue to see nice adoption of our ClickPad business which continues to give us fairly stable to a little uptrend, from an ASP standpoint.

Okay. If I can ask one other question, what's driving to the change in the tax rate?

In the tax rates? Our tax rate's based upon the global tax structure. As the mix of the business between foreign operations, US operations. One of the things we see is some of the taxes we pay on a global basis are more fixed. As your profit increases, your tax rate becomes a little more favorable.

I see. Thank you.

Rob Stone with Cowen and Company.

Hello, Rick, Kathy. Thanks for taken my question. First, Rick, on PCs you mentioned that you're starting to see signs of a pulse there. Will you be giving us some help going forward since you're putting PC touchscreens in with mobile and breaking that out a little bit more, so it's not mixed in with the smartphones? And do you get a sense of how much that might contribute in the December quarter, for example? Just roughly.

In terms of financially breaking it out, no. Part of that is, keep in mind, we're getting these convertibles, tablets and notebooks and so on, that they get very mixed in our actual product solutions. Sometimes they get used in what's classically a tablet in that same solution. Like a 7500 that we announced is also used in a notebook. So, tracking those type of trends could be a little bit of a challenge, which eventual platforms that they end up in. As Kathy elaborated, in the general LTS category, tablets and touch notebooks, you'll continue to see a nice growth rate from Synaptics. Stay tuned to this channel, in terms of announcements in the coming quarters.

Okay. My follow-up is on your sensor integration. You mentioned working with a greater number of LCD OEMs to supply more customers? Can you say how many display OEMs you're working with now?

At this juncture, we pretty much work with all of them. You haven't seen products from all of them come out in the marketplace. But all the major LCD manufacturers, we have some form of engagement. Some are On-Cell. Some our In-Cell. Some are TDDI. As you can imagine, as we move through the display integration technologies, we really have to have a close relationship with them because there are certain timing parameters and so on, and of course, the optical quality and so forth. It's essential that we work very closely with them. They leverage our tool suite that we have as well.

Great and just a quick one for Kathy. You made several references to the percentage of business from China. Can you say what that was in Q4?

The term that I've used over the last year is, it's been around 10%, plus a little bit more than that. It's picked up a few points in the fourth quarter.

So 10%-plus? Thanks.

Rajvindra Gill with Needham and Company.

Thanks and congrats as well. Just a follow-up from a previous question. You've had two very, very good quarters in which you guided up significantly. In which, the June quarter you positively pre-announced and moved the numbers up even further. In September, you're guiding essentially in line with the Street, in which you see other semiconductor companies who are exposed to Samsung, the S4 actually, guiding down, saying more of a steeper inventory correction. I'm just wondering if you're gaining share in any new OEMs? Or one specific OEM that you think is helping you offset, which is already now well known, Samsung S4 inventory corrections?

Well, I'll go back to the answer I gave earlier as well. We pointed to three growth levers and they all play a role in Q3. Obviously, there is the potential for the overall market to slow down a little bit from our fiscal Q4 to our fiscal Q1. But there's other elements that come into play to offset that, and that's our leadership is allowing us to expand our footprint with the customer base out there and potentially add new customers, the emerging markets. We talked about China. We have reasonable presence there, but there's a lot of opportunity for us still, and then the greenfield opportunities that we've been talking about.

If I step back and say, Synaptics is very interestingly poised in the same position that we were a little over year ago with smartphones, where the tablets and large touchscreens, we have a great technology. We have great tools. We have the right relationship with customers. Now, we've just got go out and secure those design wins. To me, it feels very similar and I'm hoping for results that we had in the smartphones to move up to those larger touchscreens.

Kathy, the strategy as Rick mentioned is clearly to go after the China market, potentially the tier two and below. What would be the impact of pricing, and what would be the impact to gross margins? Your gross margins peaked -- not peaked, but done very well at 50% last quarter. Where you are showing more higher-margin units to high-end smartphones, but clearly that's going to shift. I just wanted to ask you, how should we think about the margin profile as you go off to the lower end of the market?

Good question, Raji. As we've said, we're a little heavy weighted on the premium side, so the margins have been very rich for the last couple of quarters. There's lots of growth opportunity mid-range and entry-level. So from an margin -- from an ASP standpoint, I think as I already mentioned, as you look at the average ASPs throughout the year on the mobile side of the business, one of the reasons for the tick down a little bit in the ASP as we continue to go through the year is, that we do see a lot of growth in the emerging markets. From the gross margin percentage standpoint, I said the September quarter, it's going to be 49% to 50%. That's just down slightly. If I would look at the year a little further out, I would say that, that would be -- it could go down maybe another 1 point or so. But we do expect to see very, very strong continuing margins and growth throughout the year.

Okay, thank you.

Paul Coster of JPMorgan.

Thanks very much for taking my question. The guidance for the year -- well, it's not really guidance for the year, of course, it's the outlook for the year. It calls for 20% perhaps a little bit more growth, Rick. We've got excellent visibility into the start of the year. Of course, December quarter is generally a seasonally strong quarter as well. You can basically account for almost all of that growth from these two quarters, meaning of course, that the second half of the fiscal year, there may be no growth at all. Do agree with that? Is that a realistic outlook?

Paul, as you know, we're in pretty dynamic market. We have to put the best that we can on the guidance based on those dynamics. At this juncture, that's what we're planning for, from our fiscal year plan, and that's our expectation. Obviously, we're certainly going to have to look what we can do for the second half. A lot of the design wins are still to be won or lost.

Okay, you're not suggesting through that growth is finished there, even if the second half of the year the comps are very tough? Looking longer-term, you still believe there's growth? And if so, can you give us some sense of longer-term growth drivers?

The longer-term growth drivers, that's a simple question. In some ways it's, A, our technology and innovation lead that we have over our competition, and the breadth that we have in our product portfolio. If you think small-screen, large-screen, discrete solutions, display integrated solutions, some of the key innovations that occurred over the last 18 months. If you just think about it, who was the first guy with In-Cell, us with Sony Xperia; who showed the glove mode, with Nokia Lumia in September, of course the Samsung Galaxy S4. In my prepared remarks, I mentioned single layer On-Cell solution from ULON.

All those have happening roughly the past 18 months and Synaptics has been well out in front of the industry. I continue to believe with the folks that we have working on products here, we're going to maintain that type of lead and continue to be the partner of choice with the leading smartphone OEMs.

Okay. Then, Kathy, can you share with us customer concentration stats, if there are any that you can at the moment?

Last quarter, we said we had one customer over 10% and we have one customer over 10% this quarter. As far as the large customer, last quarter that was 12%. This quarter it's 25%.

Right. Which then raises this question of, is it getting more difficult for you to forecast, given such heavy customer concentration?

We have to look at all of the customers. We do expect that we're going to continue to have very strong growth within a broadening customer base and number of products. The good news is that we do have a very strong breadth within the industry, with strong growth rates in the industry for smartphones, with high growth rates in the tablet market, and just starting now to adopt large touchscreens. We have lots of opportunity and we want to continue to cover the markets broadly.

Paul, as we get more mobile-oriented, we've talked about the decision cycle in the industry. Typically, it's Mobile World Congress launch, volume shipments -- a month or two after that. Then they go into the decision phase for the next cycle in the summer-ish timeframe and make the decisions, starting now through the early part of the fall. Unfortunately, with those dynamics and us giving projections today, makes it a little more dicey, in terms of how we see the entire year. Certainly, we'll provide more visibility as we get a little better visibility.

All right. Thank you very much.

Liwen Zhang with Blaylock Robert Van.

Thank you for taking my questions and congratulations as well. Would you please provide us some updates on the products from the recent acquisitions? When should we expect the material revenue from these products?

Sure. We made basically two acquisitions a year ago that we announced that the last call. One was from IDT which was the video display operation. We were really thrilled with that team. That was mostly around technology and people, bringing in a really world-class team into our organization to work on high-speed serial buses and timing controllers. We've started to actually get some interesting design wins in the interface category. There will be some decent revenue in this current fiscal year from that group. However, the real benefit is utilizing that team on our current touch products and some stuff that we have in our road map that'll be really exciting, that we'll unveil over the coming months and years. We're real happy with how that one turned out.

On the ThinTouch as well, we brought in technology. Again, it was technology and just a small handful of people about a year ago. Over this past 12 months, we've been working real hard from a technology idea into a product. It's a tough business, keyboards, in terms of the quality levels and usability and everything else. We continue to bring that to a level of manufacturing. You'll expect to see in really calendar '14, when we expect to see some real results from the ThinTouch product line.

Thank you. And next one is for Kathy. Your margin profile right now is, I believe, above your target range. Are you ready to revise your long-term margin profiles?

The way that we're looking at it now, the mix of the business for touchscreens is higher than when we had set those longer-term target range profiles. For the near-term, at least in the fiscal '14 time horizon, we think the gross margin range, instead of 45% to 47%, would be in the 47% to 49% range. Again, it's going to be dependent upon the mix and the mix of premium solutions versus our TouchPad, ClickPad type solutions. We still do expect over the long-term upper teens from an op profit standpoint. We're outperforming that right now, and obviously we want to continue to try and outperform those models.

Okay. Thank you.

Charlie Anderson with Dougherty and Company.

Good afternoon. Thanks for taking my questions. You alluded, Rick, to the fact of a lot is to be determined on the flagship smartphone decisions. It feels like both you and your competitors are both seeming very bullish about their market share prospects for the 2014 flagship models. You know why you're bullish, but I wonder why you think others might be as well? It's strikes me that someone's going to lose here.

Charlie, I can't comment on why the others are bullish. Back to my earlier answer in the question, I can point to the innovation and how we lead in the marketplace and our position and the amount of resources and every indication that Synaptics has a pretty big lead in the touch marketplace right now. Our results over the past six months really speak for themselves for winning high-end smartphone flagship models. I have that same confidence that we're going to sustain growth as we move forward. We'll win the majority of the ones in the next round as well.

I can talk to you about how our proximity is unique. That's last year's generation. Obviously, we're not sitting still, so we'll be bringing forward our next generation as well to help win some of these flagship models. We're pretty excited, not only about what we've won, but what we have in the pipeline, in terms of technology.

I think more importantly, and I talked a little bit about this in the last earnings call, is specs and products and everything are great, but it's also how you work with your customers and how you support them. I think our team out there just does a stellar job in terms of their commitment. Our customers know that, so when it comes down to a tie, Synaptics is going to win that business.

Then, just to tack onto that to the extent that you can, are there some features that you guys have maybe talked to us already about, but haven't been utilized much in the market that you think are going to allow you to win in this next cycle?

The key one there that I can point to of course -- I'll point to two of them that we've talked to. One of them is the proximity feature. Right now, robust hover or proximity is only implemented by Samsung, on the Galaxy S4 of course. It's a great feature. You can imagine everybody else in the marketplace wants that as well. We worked closely with Samsung, starting a year ago. They brought forward that feature and it really is a key -- one of the top five features that they have on the phone. As you can imagine, that's one area where it was a really, really hard feature to do. Unless you planned your architecture early, you're not going to be able to have a robust implementation for the hover feature.

That would be one. Then obviously, the display integration, you heard Huawei. I mentioned a couple high-end P2, P6 phones that use In-Cell technology. With all the benefits we've talked about In-Cell technology, you can bet you'll see other OEMs also bring forward some of those phones and very, very soon. We think we have some pretty interesting announcements over the course of the next few months.

Great. Thanks so much. Look forward to the Analyst Day.

Great. Happy to see you there.

Anthony Stoss.

You almost answered my question in regards to In-Cell. If you give us a sense or help frame the designs you're seeing now going forward, what percent might be In-Cell versus On-Cell?

There's percentage and what kind of phones and so on. We are seeing a pretty heavy surge towards On-Cell. That's one way to address the lower-end part of the marketplace in China, as an example. On-Cell has the benefit in that you don't have to change the manufacturing process in the LCD manufacturers, as much as you do with In-Cell. Because In-Cell is a little further from the screen, and display noise and other things come into play there. It's a much more close relationship with the LCD manufacturers.

Initially, depending on where you count Samsung and so on, and Apple, if you take the Galaxy S4 and the iPhone out of the equation, the In-Cell volumes are little bit higher than the On-Cell volumes. So, I would expect On-Cell to quickly move to higher volumes because of its applicability to the lower end of the marketplaces. Then over time though, in the longer-term -- longer horizon, In-Cell could be the ultimate solution.

Okay. Thank you.

Brett Simpson with Arete Research.

Thanks very much. Rick, I have a question for you on fingerprint sensors. It seems a lot of fingerprint sensors are now moving from swipe buttons to being integrated into a touchscreen environment for smartphones. Can you talk a bit about what this means for Synaptics? And what role are you playing in the fingerprint sensor value chain for smartphones going forward? Thanks.

Right now, we don't participate in that marketplace. What I know about the solutions out there, they haven't migrated to the screen -- the actual active display screen. In the rumor that you see out, it'll be on the buttons whether it is a swipe or area or maybe on the back of the phones. It's obviously an adjacent type of market -- it's touch, no doubt about it. So, it is on our radar to investigate. When we look at the active display part though, one of the real challenges there is you have to image through the glass at very, very fine detail. That is a non-trivial engineering issue to try to resolve, that you'll probably not see, for multiple years from now.

Okay. Then maybe just a quick follow-up around Samsung. So you've had fantastic ramp up these last couple of quarters. You mentioned earlier, you benefited from features like hover that a lot of your competition couldn't address in time. But when you look beyond this next few quarters, into 2014, Samsung's well known for churning suppliers. So, how do you think of your position here? And what are the features or requirements that's coming next year that you might sustain your differentiation when it comes to Samsung? Thanks.

Yes, obviously, I'm not going to expose what our next generation feature is. I think it works better, like we did with the Galaxy S4 -- both for our Samsung, our partner, as well as from a competitive perspective, to let them read about it in a press release, and then react rather than signaling what we're doing now and letting our competitors react to the industry leader. The only thing I can do to answer the Samsung question -- I was expecting that type of question today is -- I mentioned, our belief is we have close partnerships with our OEM customers. We diligently staff up our support resources, our tools to support them, and our relationship there, really understanding what their core requirements are. Then we've got to go up and do a heck of a lot of hard work, and innovate, and provide interesting technology. Ultimately, they're going to make a call and I believe we are better positioned than anybody else in the industry to support them, operationally, technically, feature-wise, innovation-wise, and so on and to me the gap is pretty substantial versus competition.

All right. Thanks very much.

There are no further questions at this time. I'd now like to turn the call back over to Mr. Bergman for closing remarks.

Certainly, thank you, everyone, for joining us for the call today. I also look forward to seeing everybody hopefully in one week, when we have for Analyst Day here in our brand-new facility, and with that again, thank you very much.

Ladies and gentlemen, that does conclude our conference call for today. Thank you for your participation. You may now disconnect.