Jennifer Jarman - The Blueshirt Group Richard Bergman - President and CEO Kathleen Bayless - CFO.

Rob Stone - Cowen and Company Charlie Anderson - Dougherty & Company Osten Bernardez - Cross Research Jaeson Schmidt - Lake Street Capital Markets Jeff Schreiner - Feltl and Company John Vinh - Pacific Crest Securities Vijay Rakesh - Stern Agee Kevin Cassidy - Kevin Cassidy with Stifel Rajvindra Gill - Needham & Company Brett Simpson - Arete Research Anthony Stoss - Craig-Hallum.

Good day and welcome to Synaptics First Quarter 2015 Conference Call. Today's conference is being recorded. At this time, I would like to the conference over to Ms. Jennifer Jarman. Please go ahead. .

Thank you, operator. Good afternoon and thank you for joining us today on Synaptics first quarter fiscal 2015 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 www.synaptics.com.

With me on today's call are Rick Bergman, 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 non-recurring items.

Please refer to the press release issued after the market closed today for a detailed reconciliation of non-GAAP and GAAP results. Additionally, we would like to remind you that during the course of this conference call Synaptics will make forward-looking statements.

Forward-looking statements give our current expectations and projections relating to our financial condition, results of operations, plans, objectives, future performance, and business.

Although, Synaptics believes our estimates and assumptions to be reasonable, they are subject to a number of risks and uncertainties beyond our control and may prove to be inaccurate. Synaptics cautions that actual results may differ materially from any future performance suggested in the company's forward-looking statements.

We refer you to company's current and periodic reports filed with the SEC including the Synaptics Form 10-K for the fiscal year ended June 28, 2014, for important risk factors that cause actual results to differ materially from those contained in any forward-looking statements.

Synaptics expressly disclaims any obligation to update this forward-looking information.

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

Thanks, Jennifer. And I would like to welcome everyone to today's call. Synaptics posted record September quarter revenue of $283 million, which was up a robust 27% year-over-year and was within our projected guidance range.

Industry dynamics for the quarter reflected weaker than expected sell-through trends for certain customers in mobile, somewhat offset by greater than anticipated demand in the PC market.

The resulting overall product mix contributed to gross margin that was below the targeted range, while non-GAAP net income was $40.9 million or $1.04 per diluted share. We were extremely pleased to announce the close of the acquisition of Renesas SP Drivers as of the first day of calendar Q4, which was earlier than anticipated.

This is a transformational development for Synaptics and positions us extremely well to be able to address the full spectrum of needs for the mobile display market. The addition of RSP significantly expands our market and growth opportunities as highly skilled engineering talent and broadens our global customer base.

I will now provide an update on the acquisition, as well as our core markets and Kathy will review our first quarter results and provide our initial thoughts on the combined companies' outlook before opening the call to your questions.

While we are only in the early stages of integrating RSP, we are very excited about what this acquisition means for Synaptics. It not only advances our leadership position in platform level display solutions, but solidifies our position as a number one human interface company.

By incorporating RSP's advanced display driver solutions into our broad portfolio, we expect to increase our addressable market opportunity of approximately $3 billion by more than one and a half times. The integration process is proceeding extremely well. In a few weeks since the close, we have hit the ground running.

With the organizational design complete as of day one, we are able to immediately begin focusing on execution.

This includes integrating approximately 350 employees we have added through the acquisition and integrating our product roadmaps, putting in place necessary infrastructure and systems to support the new business, bolstering underlying G&A support as we migrate from a JV structure and beginning to meet with customers and suppliers as a combined company.

We are quite pleased with the initial customer feedback. Through the alignment of efforts around the two critical portions of the display ecosystems, our customers stand to benefit from more differentiated and high performance products with a faster time-to-market in a more simplified supply chain.

Merging RSP's products, technology and engineering know-how with Synaptics system-level expertise, will enable us to accelerate the adoption of high-performance cost-effective touch and display driver integration for the mobile market, while also extending our leadership position in touch and DDIC products.

In fact, we have already done a tremendous of amount of work in determining the go-forward technical roadmap for both DDI and TDDI. Rather than our initial target of calendar 2016 for achieving mass production with the combined DDI offering, we think that goal can be attainable by the end of calendar 2015.

Now, I will move onto discussion of our core markets. The smartphone display market is rapidly evolving. Synaptics remains at the forefront of TDDI integrated display designs were touch control and display driver are combined and optimized in the system-level solution to create what we call a smart display.

The continued convergence of technologies provides OEMs powerful new options outside of traditional discrete solutions. With the integration of a touch sensor into the display, OEMs can benefit from thinner and brighter displays while also improving touch performance on their devices and simplifying the supply chain.

We are confident in the adoption of display integration solutions. Our design pipeline remains strong and display integration solutions continued to account for over 40% of our smartphone product shipments. We expect our first production phones to ship for the mid-tier market this quarter, with Synaptics ClearPad Series 4 TDDI solutions.

This single solution -- the single chip solution provides the most advanced display noise management and best-in-class capacitive sensing performance. The next Synaptics based TDDI solution is also on schedule to launch within the coming months.

While we believe TDDI is the future of smartphone display integration, our product portfolio allows us to offer a wide range of solution such as discrete solutions, two-chip in-cell, single-layer on-cell, and on-cell.

We have several exciting examples of discrete solution implementations including the latest phones for Microsoft, the 4.1-inch Nokia Lumia 730 and the 5-inch Lumia 830. Our ClearPad solutions can also be found in the 5.2-inch full HD Sony Xperia Z3 and the companion Sony SmartWatch 3 SWR50.

We continue to leverage our range of solution options to drive design strength with our China OEMs resulting in increasing market share. New phones now shipping in mass production include models from Huawei, ZTE, OPPO, MEIZU, Gionee and Lenovo.

Of the China phones leveraging our display integration solutions, we are seeing attach rates increase across all phone sizes ranging from 4.5 to 6 inches.

While industry projections for large touchscreens are net nearly as high as they once where, our tablet size solutions continue to be in demand and adoption rates of touch enabled notebooks remain on an upward trend.

Recent tablet design wins includes the Huawei U8, Gionee X6 and both the 8-inch and 10-inch Lenovo Yoga Tablets, along with the dual-mode Lenovo ThinkPad Yoga 14 notebook. Our flagship TouchPad family of solutions for notebook PCs continues to dominate the market.

As new features like ACM with TypeGuard and ClickPad 2.0 are helping to drive strong levels of design activity. Recent models that implement these exciting features include the Lenovo ThinkPad E455 and E555 models, as well as Acer Aspire E, V and S series notebooks.

We continue to work with Microsoft as our lead partner for the precision TouchPad for Windows 10 and are also excited to be collaborating with them to enhance our overall two-in-one strategy. In addition, I am pleased to mention that we're working on new OEM TouchPad designs for Google Chromebooks.

We will continue to capitalize on the convergence of our technologies with innovative new solutions such as ForcePad, SecurePad, and TouchBar which will be on display in November 18th Analyst Day.

As a reminder, SecurePad integrates our Finger ID Solution into the TouchPad giving tremendous supply chain flexibility for PC OEM to add modern fingerprint sensing technology into any TouchPad capable platform.

Leveraging our concept prototype team and the industry's most advanced usability research group, our solutions are designed to deliver optimize performance and usability with advanced integration options.

Moving to the biometric authentication space, we're still in early days of adoption across the border mobile landscape and consumer demand is growing exponentially. As a result, we continue to see a lot of excitement among leading OEMs as they work to implement the technology in the next wave of flagship designs.

In the interim, I am pleased to mention that Synaptics swipe based Fingerprint ID Solution has been incorporated into the recently launched Samsung Note 4. We also continue to make strong progress in readying our touch area fingerprint sensor for market.

We expect initial production to occur this quarter and based on the timing of customer launch schedules to see phones in the market in early calendar 2015. Synaptics continue to be a key enabler of the mobile payment ecosystem. As a FIDO Alliance founding member, we see a consistent trend towards broad industry acceptance and deployment of biometrics.

The prospect of securing intuitive mobile payments is a driving force of this movement. With negatives associated with password security being eliminated from the equations through the local device authentication. All of the online service providers must work with the wide range of independent devices to drive widespread adoption.

The FIDO Alliance solves this problem by establishing a standard registration process by which online service providers can register FIDO compliant devices. The influence of FIDO continues to expand as we have seen with the recent addition of industry titans Visa and Alipay to its board of directors.

We look forward to sharing more fingerprint authentication insights with you at our Analyst Day as we welcome FIDO President and Chairman, Michael Barrett as a guest speaker to share his thoughts.

Touching on current trends in our core markets, we benefited from a strong quarter in PC business as we saw continued signs of recovery with strength in both commercial and consumer segments.

As we look at the second fiscal quarter, we are projecting a sequential decline for this business based on normal seasonality and related sell-in versus sell-through patterns. In mobile, we anticipate seasonal impacts in our overall market that is growing, but weighted towards emerging markets where the sweet spot is midrange phones.

We continue to see pockets of weakness in the premium smartphone market reflecting ramp cycles and customer demand levels. After laying on an expected strong quarter from the RSP business, it should not be overlooked that we expect to post revenue of more than double that of our the December quarter last year.

While the first half of the fiscal year has been impacted by slowness at the premium level in mobile, our current outlook for the core business remained strong with the annual growth now expected to be in the low 20s.

We anticipate a positive growth trajectory over the second half of the fiscal year as our fingerprint ID products continue to come online as we continue to make strong progress in the China market and as we expect greater demand for Synaptics' TDDI products.

To conclude my formal remarks, we are confident in our position as the top provider of human interface solution. Synaptics leads the market from our TouchPad products and capacitive touchscreens to our fingerprint sensor solutions for mobile phones, tablets and notebooks to our newly acquired high-performance mobile display driver products.

We have taken a giant leap in the company's evolution by making pivotal acquisitions that have expanded our products set and resulted in a more diversified base of customers and geographies. We expect this to only further elevate our position as a global leader in the key markets we serve.

To fully capitalize on the opportunities, we are entering another important investment phase as we work towards executing our strategy of delivering sustainable profitable growth over the long-term. We look forward to providing you with updates on our progress over the coming months, including at our upcoming Analyst and Investor Day.

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

Thanks, Rick. We achieved record September quarter revenue of $283 million. This represents an increase of 27% year-over-year, but was down about 10% from our record June revenue -- record June quarter where we benefited from a steep initial ramp of new MobileTouch and Fingerprint ID products designs.

Revenue mix for mobile and PC products was approximately 71% and 29% respectively. Revenue from mobile products was up 23% year-over-year, but down 18% from the June quarter, driven primarily by weaker-than-expected customer demand trends in the premium mobile market.

However, China-based mobile customer revenue was a solid contributor again this quarter. Revenue from PC applications was up 38% from the prior year and up 15% sequentially and was well above our expectations. Synaptics continues to lead the market for notebook, TouchPads and ClickPads and design activity continues to be very strong.

Non-GAAP gross margin was 44.1%, below our guidance range. Impact on gross margin included a higher than anticipated PC product mix, other products mix changes and delay in certain new customer products. Non-GAAP operating expenses were $75.6 million, up slightly from the prior quarter.

The increase was primarily related to increase in headcount, partially offset by a reduction in variable compensation expense. GAAP operating expenses were $84 million, including $9.2 million of share based compensation in the September quarter.

$3.4 million of pre-acquisition, integration and transaction costs related to our recently completed acquisition of RSP, as well as non-cash charges for intangible amortization of approximately $295,000 partially offset by a $4.5 million credit for decrease in contingent consideration.

Our non-GAAP tax rate was 17% in the September quarter, unchanged from the June quarter, primarily reflecting our geographic profit mix, our GAAP tax rate was 27.9%. First quarter non-GAAP net income was $40.9 million or $1.04 per diluted share. Turning to our balance sheet. We ended the first quarter with $450 million of cash.

During the quarter, cash flow from operations was very strong at $60 million, and we continued to repurchase our shares using $50 million to repurchase 629,000 shares of our stock or approximately 2% of our shares outstanding. The remaining share repurchase authorization of 150 million is available through July 2016.

Employee participation in our equity incentive programs provided net cash of $10.8 million for the quarter. Capital expenditures for the quarter were 19.6 million including investment in IT systems and infrastructure related to our acquisition of RSP and renovation cost for the expansion of our headquarters campus in San Jose, California.

Depreciation was $4.2 million for the quarter. Receivables at the end of September were $194.5 million reflecting 62 days of sales outstanding. Inventories at the end of September were 76.4 million and inventory turns were nine.

Before I moved into a discussion about guidance, I would like to take a moment to recap some of details regarding the acquisition of RSP.

The purchase price at the close was approximately $465 million with approximately $67 million held back for a period of 18 months to address post-closing adjustments or claims and approximately $48 million held back for post-closing working capital adjustments.

At the time of the acquisition, RSP had approximately $90 million in cash on their balance sheet which we acquired as part of the acquisition. Initial cash payment for the acquisition of $350 million was funded with $250 million of bank debt and our foreign cash.

Additional acquisition related cash outlays expected to occur later this quarter or early next quarter include the $48 million hold back for working capital adjustments and the purchase of approximately $125 million of inventory currently owned and managed by Renesas or RSP.

This will include -- this will occur post our transition from the Renesas RSP systems -- ERP system to our system. Our preliminary estimate identified intangible assets is approximately $270 million to $320 million consisting of developed technology, customer relationship value, backlog, and inventory purchase commitment and tangible assets.

With lives ranging from three months up to five years, these estimates are preliminary and subject to change.

As we indicated on our June 10th conference call, fee generated revenue of approximately $650 million during its fiscal year ended March 31, 2014, RSP sells directly to LCM manufacturers similar to our business as we typically sell directly to LCMs, ODMs our other OEM members and the OEM supply chain.

As such we report customer contributions that way in our SEC filings. We anticipate modest revenue growth this fiscal year for display driver products. As the current product set addresses the premium portion of the mobile market with growth at certain customers largely offset by weakness in others.

We anticipate the gross margin percentage for RSP will be in the range of 26% to 30% depending on product mix. From an expense standpoint RSP has been steadily increasing its investment to continue to capitalize the market opportunity.

With RSP, we will initially increase our quarterly operating expense run rate by approximately $25 million, of which approximately 80% is engineering-related.

We anticipate investments in infrastructure, systems and personnel, as well as investments to accelerate our touch and display driver integration efforts will further increase that cost with the remainder of the fiscal year.

As a result of our acquisition of RSP, I would also like to update you on near-term changes to our combined target financial model. I will note that it's still very early in the integration process and we expect to develop greater clarity regarding how this translates into longer-term trends as we move forward.

After we passed the transitional period, our overall near-term gross margin target is expected to be in the 37% to 40% range. And we expect variances from quarter-to-quarter based upon the mix of customers and products. Our operating profit percentage is anticipated to remain very strong in the mid-teens.

And non-GAAP tax rate is expected in the 16% to 18% range. I will now make a few comments regarding our Q2 outlook.

Based on the combined backlog of Synaptics and RSP of approximately $260 million entering the December quarter customer forecast and expected products mix, we anticipate record revenue to be in the range of $450 million to -- $415 million to $450 million, more than double the revenue from the December quarter a year ago.

Taking into account overall revenue mix of the combined Synaptics and RSP business, we expect non-GAAP gross margin for the December quarter to be in the range of 34% to 36%.

December quarter gross margin will be impacted by a steep DDI product ramp in addition to overall customer mix dynamics as well as costs associated with various transition services provided by Renesas, including inventory management, warehousing, and other services provided through the ERP systems cut over date and other service dates.

We expect non-GAAP operating expenses in the December quarter to increase from the September quarter, primarily due to incremental costs associated with RSP as explained earlier, as well as certain investments in engineering and infield customer support as we continue to expand our product portfolio and customer base.

We anticipate the stock composition charge for the second quarter to be in the range of $10 million to $10.4 million. GAAP expenses based on three RSP acquisitions will include non-cash charges of approximately $6 million related primarily to intangible amortization.

GAAP expenses will also include intangible amortization related to the RSP acquisition. Due to certain short lives intangible asset included in our preliminary valuation estimates, we expect incremental amortization in the December quarter to be up to $40 million to $50 million, subject to change based on finalization of our valuation estimates.

We anticipate additional non-recurring cash cost of approximately $5 million for ongoing RSP integration efforts and transaction fees related to the closing of the RSP acquisition.

We expect non-GAAP cash interest expense to be approximately $1.2 million and GAAP interest to be approximately $1.5 million inclusive of $250,000 of debt cost amortization. Our non-GAAP tax rate is expected to be in the range of 16% to 18%.

Our non-GAAP net income per diluted share for the December quarter is anticipated to be in the range of $1 and $1.30 per share. In closing, we look forward to completing the integration of RSP. As we move through the fiscal 2015.

With this business now under Synaptics roof, we believe we're extremely well-positioned to deliver a substantial increase in revenue in the second quarter and to drive record quarterly and fiscal 2015 revenue.

Before we begin the Q&A, we would also like to note that while we understand there is heightened interest around some of RSP's historically largest customers in accordance with our and our customers' policies; we do not discuss specifics about certain business relationships or product engagements.

With that, we will now turn the call over to the operator to start the Q&A.

Operator?.

Thank you. (Operator Instructions) First will be Rob Stone with Cowen and Company..

Hi, Rick and Kathy. I had a couple of questions related to RSP. I think I heard you say, Rick, comment about annual growth for the base business. How do you see fiscal 2015 including RSP and any color you could provide on seasonality for that business? Thanks..

Sure, Rob, we're going to require you to do a little bit of math on your own.

So, in my remarks, I mentioned low 20s on the Synaptics called classic business now for fiscal 2015 over fiscal 2014 and then actually Kathy mentioned that the RSP business was running about 650 million and we expect modest growth year-over-year, which kind of for us modest means called it the mid-single-digit percent. So, I think you can do that.

One thing I just want to point out more generally is we’ve had this RSP business now for just three weeks and for kind of legal reasons we didn’t really get the peer under the hood until three weeks ago.

So, at this point, we're still getting our arms around the entire business, understanding the pluses and minuses because that’s involved and because it is new for us. Certainly, we share a lot of the same customers; the actual dynamics and competitive makeup and so on are quite a bit different.

And so we're going through a process this quarter where we will certainly know a lot more. And then quite honestly in a couple weeks when you are out here November 18th, I expect us to be three times, four times more knowledgeable of the business than we are today..

Okay.

And by when do you expect the transition related drag on gross margins to be over?.

Hi, Rob. The -- it's primarily -- right now, it looks like it's primarily Q2, but it may extend into Q3 for a while. Again, as Rick said, I mean, this is really new, so we're still working on some of those details determining exactly some services may drop off at different points in time over the next couple of quarters..

Okay. Thank you..

Next question comes from Charlie Anderson with Dougherty & Company..

Yeah. So in terms of the -- thanks for taking my questions.

In terms of that low 20s you guys are taking that down in the classics Synaptics business little bit in terms of your outlook, I wonder if you could sort of classify the segments of weakness maybe by geography or product segment?.

Sure, Charles I'll try to illuminate as much as possible. First keep in mind, the mid-20s to mid to low 20s. So, however, you want us to characterize that a few percentage points.

A lot of that is attributable to the first half we miss in our fiscal year, which as you could tell from our remarks, we're seeing in the premium phone segment, the numbers just not being there that we expected a few months back when we gave that guidance. And we wanted to reflect that and give you awareness that it will be a little bit lighter.

That also implies very strong second half of the year for Synaptics classic business and we like where we're positioned for the second half of the year and we're looking forward to seeing that growth. And that's really a reflection -- we're not going to breakdown each of the segments and how that breaks out.

If you remember last call we talked about all three businesses growing, however, the biometrics carrying the load of the growth and I would still characterize in that way..

And then just a follow-up for me on that, I wonder did it feel in the December quarter like it's a macro situation or did it feel like it sort of Android losing market share to some of the new Apple devices in your mind?.

Well, certainly the macro situation is a premium smartphone market in the Android world the growth has certainly slow down.

I think it has been a number of other announcements from some of the OEMs out there that indicate that pattern is obviously the Apple business with the iPhone 6, there's certainly called a big replacement or a lot of pent-up demand for that particular product category.

So, I don't see us really losing share, in fact, we read a lot of bunch of high-end design wins that we had whether it's Sony, Huawei, lot of the fast-growing China OEMs. So, I feel good that our market share is hanging in there as you pointed out; it's just a macro situation on the high-end of the Android smartphone world..

Great. Thanks so much..

Next will be Osten Bernardez with Cross Research..

Yes, good afternoon. Thanks for taking my call.

I guess just to begin, would you be able to sort of piece together what your expectations for RSP for the December quarter? And how we should be thinking about the timing of those sales relative to some of the puts and takes of some of its larger customers?.

For the December quarter, as I said a range 4.15 to 4.50 for the combined business for the December quarter. So, as Rick eluded to, I mean there's puts and takes basically and the core business for several factors.

And also in the RSP business, as I mentioned, they've got -- they do have a pretty steep ramp with certain customers this quarter offset by some of the weakness from some of their other customers. So, net-net I mean it should be a strong quarter for that business and I think the guidance range incorporates that..

And then I just wanted to follow one quick question.

As it pertains your relationship with historically your largest customer, would you be able to sort of walk through what you are expecting for 2015 from a touch screen controller sales standpoint for the year?.

Well, I presume since up to October 1st, we're primarily just in the Android marketplace and obviously, headwind business. So, we don't actually disclose our largest customer. It's fairly obvious once you drill down to the area. We're not going to give you the precise sales or anything like that of any customer. So, again, we feel well-positioned.

Without a doubt we have the broadest product portfolio in the touch industry and now also in the DDI industry, and clearly we're the only supplier in emerging TDDI industry. So, we feel really good about our position and every leading OEM at this juncture now probably has Synaptics technology in their phones..

Thank you..

Our next question comes from Jaeson Schmidt with Lake Street Capital Markets..

Hey guys, thanks for taking my questions. Rick, I'm wondering if you talk a little bit about what you're seeing from a pricing standpoint both in touch and the fingerprint sensors..

Sure. In some way it's the same old, same old it will be my answer. It's a tough market out there. In terms of ASPs in any segment and we expect a quarterly decline across the course of the year. Fingerprints are new; the ASPs tend to be a little higher so you will see a faster decline in ASPs in that particular segment of the marketplace.

Of course, the one phenomenon that's within a segment, so I careful with my words, of course, we're seeing higher growth in the lower to mid range part of the smartphone market, so from an industry ASP that was certainly declining faster than we have historically seen.

But in any one segment it's -- to me it's the same type of pattern that we'd seen..

Okay. And then Kathy, I think last quarter you shared with us how much fingerprint revenue you guys actually did in the quarter. I'm wondering if you would be willing to share that figure for September..

Well, for the September quarter we've talked about the mobile business and basically we're including the touch business and fingerprint at this point in time in that business. So, for both of the business -- for both of those businesses, we saw downward trajectory based upon our comments around the premium side at a market..

Okay. Thanks..

Next will be Jeff Schreiner with Feltl and Company..

Yes, thank you very much. Kathy, I was hoping that you can maybe provide kind of a breakdown of where you think the core revenues for the company are going to be December. I think there is a lot of confusion out there right now with some analysts having Renesas in their numbers and some not having Renesas in their numbers.

And I think there is already a great deal of confusion about what the consensus number might have been for December. I was just hoping that you can maybe give us maybe a breakdown for this quarter since it’s the first quarter of maybe the core revenues expectations in December on a sequential basis.

What are those?.

So, we put it -- since Renesas is very new as for this quarter, but we put together basically a range that we felt was reasonable for the combined business. I think beyond that what we’ve talked about is the trends from the core business. We do expect the core -- each one of the segments or portions of the core business to be down.

And then they have pretty nice quarter for RSP. The other items that we pointed to is basically their revenue base before and 650 you tack on about 5% of that you can take a look at what you would get to from a quarterly basis to give you a reasonable representative amount..

Okay. And then I was just wondering could you talk a little bit about maybe the fingerprint offering that you provide with the Flex unshipped solution versus the silicon sensor implementation that another competitor uses.

Is there a real cost advantage that you guys see and how that can be cost down versus other solutions and could you maybe talk about that a little bit? Is that a competitive differentiator that you guys have in the way that you implement the fingerprint sensor technology?.

Sure, Jeff, I’ll be happy to comment on that. Yes, you have it right. We have the sensor in our case can either be a packaging type like you see in the Samsung S5 or it can also be what we call a chip-on Flex implementation which you see in some of the notebook implementations out there.

The beauty of it is, is our silicon, our processor fingerprint sensor -- excuse me fingerprint processors is actually separate from the sensor itself.

So, that not only gives us potential cost advantages because we can continue to shrink our silicon when we move to new geometries are other boundaries or whatever is appropriate and take advantage of the natural semiconductor trends in the industry. That is advantage number one.

And then advantage number two is there is a tremendous flexibility, ultimately the sensor can be put in multiple shapes, different sizes. And then at some juncture put under a glass screen which is where we and everybody else in the industry wants eventually get..

Thank you..

Our next question comes from John Vinh with Pacific Crest Securities..

Hi. Thanks for taking my question.

Just housekeeping question, Kathy, starting next quarter, Kathy, will you give us a breakout of the RSP revenues or will that be kind of categorized within the mobile segment? What’s your plan there going forward?.

Well, we have basically for -- we will be filling pro forma information, and so we will have some information relative to the RSP revenue..

Okay, great. Thank you. And then my follow-up question is just on the competitive dynamics of your core touch business it seems like there has been some disruption from a competitive point of view in the premium segment of the market.

I think there's been some concerns out there that given kind of the two major acquisitions that you guys have done that you guys are maybe taking your eyes off of the legacy business of the core business a little bit.

How are you guys thinking about investing in the core touch business and where is your confidence level that you'll be able to kind a regain your kind of dominant position and regain share in that premium market going into next year?.

Sure, John, I'll answer that. For one thing, I guess, I would characterize, Synaptics is creating a disruption in the marketplace. And that’s what TDDI. So, we've been investing in this in a long time.

And in my prepared remarks, you probably heard me mention that we're ramping to mass production with multiple phones that you'll see in the marketplace here in a few months tops. It's a huge trend that's occurring in the industry.

So, I just happen to be in Asia last week in meeting with four LCD manufacturers, four major ones and kind of across-the-board, they are telling us to move faster in this direction that there's tremendous demands because of the performance and the supply chain simplification and those types of things.

So, if you're touch controller vendor and you don't have a TDDI strategy, you are signaling to your OEM partners that you are not going to be a major player. And so what I believe we've done is we have upped the game. And if you want to play, you better be ready to play big in the touch business.

And at least the OEM partners I deal with they just don’t want a premium player, they want to have somebody as a complete product line, because they make a substantial investment themselves, and with the touch controller for that matter, also for the display drivers as well. So, are we taking our eye off the ball in our core products? No.

I mean, these are entirely separate teams. They’ve always been separate teams. And we have some fantastic touch controller products coming out basically as we speak. We continue to enhance our roadmap. And when the dust settles after Mobile World Congress, let's see where Synaptics ends up.

We've seen competitive threats come and go over the vast several years that I've been here, and we'll see what happens. We have over 1,700 employees now, nobody has made a commitment like we have to the human interface in touch business.

So, I am pretty darn and confident that we're going to be number one year from now in that both the premium and the overall touch controller business..

Great. Thank you. And then just to clarify your outlook for the traditional Synaptics business of low 20s growth for fiscal 2015.

Are you still assuming some modest growth in the premium core touch business as part of that outlook at this point?.

Well, John, as we've talked about and we've seen some weakness basically in the premium side of the Android market has been -- well, has been discussed. So, part of the outlook, the reason it’s coming down is related to the first half weakness that we've seen in that portion in the market..

Thank you..

Next we’ll be Vijay Rakesh with Stern Agee..

Hi. Just looking at the RSP side, I know you said 650 million trailing, growing 5%, so on a quarterly basis it's about 170 million, 180 million, is that the right term what they use or certainly significantly higher. And on the core Synaptics going forward when bracket should we use in the gross margins, kind of in the 46% range or lower? Thanks..

So, from a revenue standpoint, I mean, that's the math. Right? I mean, the quarters will go up or down depending upon different factors. And could it be higher or lower in any particular quarter for seasonality, customer ramps. It's going to move up and down. So, I think you can -- you've a good basis to work for from there..

Got it.

And then under core Synaptics, what should be the go-forward margins?.

Well, for Synaptics for the go forward margins, we haven't broken it out at this point in time. Some of the factors that we saw in the first quarter we see that some of that continuing into the second quarter because of the customer mix.

And that's where we’re right now and we’ve basically provided what we believe more of a go-forward rate is on a combined business which is once we get through the transition whether RSP more of a 37%, 40% type profile..

Got it. And on the biometric side, I guess you guys did a pretty hefty 100 million last year fiscal. Now, with tough area fingerprint coming out, what's your expectation on fingerprint if you look at fiscal 2015? Thanks..

So the finger I -- as I mentioned a little bit earlier, so fingerprint we see that as Rick said for the year is to be the most significant from a growth driver in the core business. And that's the information that we have at this point.

We’re not breaking fingerprint out, it’s going to be included in either the mobile or the PC side of the business as where the products lie at this point..

Got it. Thanks..

Next will be Kevin Cassidy with Stifel..

Thanks for taking my question.

On your TDDI product strategy, what foundry plans do you have?.

Hey, Kevin, we don't disclose our foundry, our plans. I can talk more generically at this juncture and then maybe when you see these in production, we’ll talk more broadly.

So, kind of generically our approach is going to be – we'll have a -- called a leading edge fab that we’ll do the our initial or high -- very high performance products and then we’ll follow it up with a lower cost or second or third-tier foundry that has much more cost-effective wafers.

We recognize that it's a pretty darn competitive market and we need to employ that strategy which we haven't historically done with our touch controller business which is one of the reasons, of course, you heard some of the success that I just mentioned to John with our internally developed TDDI chips, but we didn’t have that scale, unfortunately, with Synaptics to be able to do lower-cost solutions.

Now with the RSP acquisition, we can do high-end cost-effective solutions, mid-range solution and a whole breadth of products..

Okay, great. Interesting.

And on the swipe fingerprint recognition versus area fingerprint recognition, when do you think you'll have a crossover in the revenues from each one of those products?.

Yeah, it’s -- you’re asking for a pretty tough prediction there, Kevin. I was asked that same question last quarterly call and I kind of simplified in the middle of next year, if I was a guessing man I would still say it's in the area.

Interestingly, we're seeing kind of a surge of interest in swipe because there are just some things you can do in terms of form factor with the swipe sensors and you just can’t do with the area sensors. So, but I would still obviously the area sensor has higher volumes, excuse me higher ASP's. And so I would stick with that answer.

To me the bigger picture here though is just a huge surge of interest in the position that Synaptics is going to take advantage. Year ago when we had to pull the trigger for the Validity acquisition it was far from clear whether fingerprint was going to be almost a must-have feature for mid and high-end phones.

As we look forward now with the announcements with Apple with their payment solution and what we are seeing with FIDO and the interest in Alibaba in China, I don't think there's any doubt now that fingerprint are going to not just be a convenience security feature but also a major factor in mobile e-commerce.

So we are just thrilled with our position and our ability to continue grow Synaptics due to our investments a year ago..

Okay. Thank you..

Next will be Rajvindra Gill with Needham & Company..

Thanks for taking my question. Just a question on the gross margins for Q4. For the core business it does imply margins coming down, again as well as continue to decline in March, if you kind of strip out the Renaissance. So I wanted to get a sense again of what's going on in the gross margin. Obviously, you have your mix shift with China customers.

But is PC also affecting that in Q4 or can you talk a little bit about the margins going forward? And just to reiterate you said your target your long-term target is 37% to 40% for gross margins? Just want to make sure that's correct..

That's basically the near-term combined model post some of the transition activity that we're going to see over next quarter and maybe into the following quarter. So I mean for the core business what we saw last – in the September quarter, again as we saw some weakness in the premium side of the business.

As we’ve talked about before, the midrange is kind of sweet spot, the emerging markets are coming up. So from the premium side to the sweet spot, midrange and emerging, as we said, we do give up a little bit a gross margin there.

But some of the issues are just – there is delays in the first half of the year on some customer program ramp, so as far as the overall product mix we still have some older products basically that are continuing for a longer period than we had originally anticipated..

Okay. So if the Renesas business -- this is my follow up, is going to grow maybe 4%, 5% if you're looking like something like 680 million and if the gross margin is around 28%, you talked about some of the OpEx going up a little bit adding about 25 million which was obviously a little bit unusual related to more the initial upfront costs.

But I wanted to get a better sense of kind of what the operating margins would be for Renesas post some of these initial acquisition cost, because if you look at the you’ve done historically it's been in the 20% range gross margin -- operating margin..

So we've -- I mean, we've indicated -- yeah, what we indicated before at the time of the acquisition was -- I mean, as far as that business it was a joint venture. We don't know whether it had fully loaded cost in that or not and also whatever the profile was of the customers.

If you look at the profile of customers today, the range that I gave from a gross margin standpoint 26 to 30% depending upon customer mixes, is what it is.

Also from a cost standpoint, I mean, the 25 million that I talked about is the amount they have increased their operating expenses to support more products than the marketplace and so that’s what we are picking up into our balance sheet. So, net-net, again, they were -- a portion of the business, carve out financial statements.

We are investing in the business basically to accelerate TDDI also putting in infrastructure for that business. Net-net as I've portrayed is for the combined business it will still have a very healthy operating profit model in the mid-teens, again, for the near-term and we're still working through all of the modeling and the integration.

So it's still very early overall, but that's kind of our view for near-term operating model post some transition. .

Okay. .

And so Raj, just to add a little bit to that as well. This is called about longer-term opportunity as well and Kathy alluded to it. But if you look at RSP that we're oriented heavily to called a small customer base, and even with their LCD manufacturer strategy intended to be sharp JDI and LGD.

We see huge opportunity with China and Taiwanese LCM manufacturers well. And that means we have to invest both in silicon solutions where they have some different requirements as well as a pretty substantial support infrastructure and that payoff isn’t immediately.

So that certainly going to impact the operating structure and we're going to ship some these sources from traditional DDDI solutions to TDDI, which, again, requires a higher visit because you have to do firmware and other things that want to otherwise do.

So -- but I'm excited about those investments, because I think it lays the path for much longer term success. .

Great. Thank very much. .

Next will be Brett Simpson with Arete Research..

Yeah. Thanks very much. I just wanted to dig in on the December revenue guidance. Just on the classic Synaptics business is this growing year-on-year in December quarter? And can you help us maybe just give us a sense for the fingerprint revenues. What run rates -- quarterly run rate did you have in the September quarter? Thanks very much. .

So in the December quarter from a core business standpoint year-over-year, yes, it will be up. And basically as I've mentioned for fingerprint, fingerprint is now incorporated with the mobile business, so we don't plan on breaking that out in the future. .

Okay. Thanks, Kathy. And you talked about fingerprint touch area sensing being something you'd expect to ship in the December quarter.

Can you give us an update where you are with -- for shipments here?.

Well, just more broadly on a touch sensors, we actually have two solutions. One which should be called large touch fingerprint solution which is actually ready for mass production at this juncture and then there's a small touch sensor as well.

Which would be used more in buttons for an example, we expect both of those to be ready for MP this quarter and then showing up in phones or other form factors in early calendar 2015.

So again, we feel well-positioned that we have the broadest array of solution in fingerprint and but it's not just about who’s got the best sensor is about, who has the best software stack, who has the right intellectual property position and then who can consistently deliver very high quality manufacturing.

So to me there's nobody even close to us when you add all those three things up. .

Okay. Thanks, Rick, and just maybe one final follow-up on RSP. I think you mentioned in fiscal 2015 modest revenue growth. But can you give a sense of the long-term growth outlook for RSP? And if I understand that there's one big customer in your revenue mix here and so when you did due-diligence prior to completing acquisition.

How comfortable are you – you can sustain this business with this large customer over the next couple years?.

Yeah, as you can imagine and actually future out there, we can’t comment about any specific large customers whether it's our touch business or TDDI business.

Again generically, any major OEM we're going to have to go in there and earn the socket every time and they are going to look at multiple other solutions, different solutions type, in some cases they’ll look at vertical integration because they have that capability.

So its -- we go in there with the battle in mind and when we do our due-diligence, we weren't really focused on any particular customer -- we are more focused on the technology, and the position in the marketplace and the ability as I mentioned in my prepared remarks to do something that we call smart display.

This isn’t about slapping two chips together and going out there with the TDDI solution.

It's about really building an entire platform solution over time that we will continue to add more value , more features, more performance, and really build that going forward and that's where a lot of the value came to and that’s where -- I mean, RSP was the clear target from us the very beginning.

They had absolutely the best engineering talent when it comes to displays in the industry. And so that's been the big positive surprise after the acquisition was -- the dedication and the capabilities of this team and what the two teams can do working together I think we're just going to light this thing on fire. .

Interesting. Thanks. Maybe just one final thing, can you just give us a sense, OLED displays, how does TDDI play out with OLED display.

Is it something that you feel that you can target or because it's more on cell is that’s the relevant?.

No, it's absolutely still relevant to think about TDDI for OLED. Now I will say if you look at RSP's existing product line as well as our own, there aren't OLED TDDI solutions in that product suite. So with the exception a one LCD manufacturer out there, there is not a whole lot of OLED capacity going nor will that change for a couple of years.

A number of them have announced plans to increase OLED productions. So I think by 2017 or 2018 the makeup of the LCD manufacturer landscape will change quite substantially. But that also gives us that amount of time to also work on the appropriate IP and technology as well.

But it’s definitely applicable, the value proposition is there just as strong as it is on LTPS or morphsilicon. .

And our next question will come from Anthony Stoss with Craig-Hallum..

Hi, Kathleen and Rick. I also wanted to drill a little bit more on RSP. RSP's biggest customer clearly the expected units are going to be up substantially more than 5%.

Kathleen, you are up five kind of year-over-year guide, do you anticipate all other RSP customers being down materially? Secondly, if you could talk about average ASPs and RSPs are they up or flat or down year-over-year? Thanks. .

Yeah. So Tony, I mean the main thing that’s we've wanted that we've talked about RSP is if you look at the product set today, I mean it is very targeted what they've been shipping to the premium side of the market. And so the premium side of the market is there are only so many units out there.

So what we're seeing is yes, they have got – there are certain customers that could be up others down. Just in general we feel like the overall growth rate that we’ve talked about is the one that makes sense.

As far as ASP's go what we've seen there's a really wide range for DDI and for RSP I think what we have seen is -- again, it's pretty wide range but you know, $1, $2 range depending upon screen resolutions and other factors. .

Okay.

But on an average basis is it down year-over-year, is that what you're seeing after looking in the hood?.

I don't think it's necessarily down year-over-year. .

Okay. Thanks, Kathy. .

And that does conclude the question-and-answer session. I will now turn the conference back over to management for any additional or closing remarks. .

Okay. Thank you everyone for joining us on the call today. We got lots of great questions and I appreciate that. Obviously, our business has changed quite a bit over the past year.

And hence I really look forward to seeing many of you at our Analyst Day on November 18th where we will have a lot more time to get into the new businesses and the markets and where we're going. So thank you very much and I look forward to seeing everyone out..