Jennifer Jarman - IR Rick Bergman - President and CEO Wajid Ali - CFO.

Rob Stone - Cowen and Company Ambrish Srivastava - BMO Capital Markets Charlie Anderson - Dougherty & Company John Vinh - Pacific Crest Securities LLC Anthony Stoss - Craig-Hallum Capital Group LLC Kevin Cassidy - Stifel, Nicolaus & Co., Inc. Rajvindra Gill - Needham & Co. LLC.

Good day and welcome to the Synaptics' First Quarter 2016 Conference Call. Today's conference is being recorded. At this time, I would like to turn the conference over to Ms. Jennifer Jarman. Please go ahead..

Good afternoon and thank you for joining us today on Synaptics' first quarter fiscal 2016 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 Wajid Ali, 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, change in contingent consideration and certain non-cash and non-recurring items.

Please refer to the press release issued after market close today for a detailed reconciliation of GAAP and non-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 conditions, 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 the company's current and periodic reports filed with the SEC, including the Synaptics' Form 10-K for the fiscal year ended June 30, 2015, for important risk factors that could 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 now turn the call over to Rick Bergman.

Rick?.

Thanks, Jennifer, and I'd like to welcome everyone to today's call. Synaptics' delivered record fiscal first quarter revenue, non-GAAP net income and non-GAAP net income per share. We benefitted from healthy contributions from our fingerprint authentication and display driver products, which helped offset set softness from our PC products.

So, notable development since our last earnings call include adding an important fingerprint ID customer in China and a launch of force-sensing in our new series of ClearPad touch offerings and we're seeing strong and growing demand our fingerprint and TDDI solutions as we continue to execute towards those growth levels.

Specifically fiscal first quarter revenue of 470 million was squarely within our guidance range. We consider that to be very favorable result given industry analyst reports regarding pockets of weakness in global electronics demand.

We achieved strong non-GAAP net income of 57 million or $1.49 per diluted share, up 43% year-over-year and gross margins were at the midpoint of our guidance range.

During the period, we took advantage of weakness in the financial markets by turning up the dial on our stock buybacks purchasing 125 million worth of Synaptic stock or roughly 1.7 million shares. This represents approximately 5% of shares outstanding, essentially matching the number of shares repurchased in all of fiscal 2015.

And I'm pleased to report that our board of directors had increased and extended the authorization for stock repurchases by another 200 million for a total current authorization of 1.05 billion available through October 2017.

In addition we've added another $100 million to our debt capacity expanding our arsenal to further support our growth initiatives and efforts to increase shareholder value.

As a company we remain resolutely focused on growth and are working to deliver the most advanced set of solutions that positions Synaptics' for ongoing leadership and success within the markets we serve. I will now provide an update on our core markets.

Then Wajid will review our first quarter results in more detail and provide our current outlook before opening up the call to your questions. Starting with the biometrics phase, we are very pleased to announce that China-based OEM Lenovo has selected our area touch fingerprint sensor for its latest smartphone, the Vibe P1.

The new Vibe P1 enables secure password-free access to unlock the device and provides swift access to applications in the fast growing movement towards secure mobile payment services such as AliPay. It's highly secure fingerprint authentication becomes prevalent on smartphones.

Consumers in the entire ecosystem will benefit from safe and easy password free transactions. Lenovo is a key leader and innovator and an important Synaptics' partner who shares our vision of highly secure and convenient mobile payments.

Other activity in this area includes our fingerprint solutions being selected for the new Samsung Note 5 and S6 Edge Plus smartphones. During the quarter we also certified the latest additions to our fingerprint sensor portfolio with a FIDO Alliance.

By providing FIDO certified solutions our customers can expand their partner network and take full advantage of the market growth opportunity for biometric security.

As a founding board member of the FIDO Alliance, Synaptics' has helped pave the way for adoption of password-free authentication through our industry leading portfolio of biometric solutions. We also announced collaboration with Microsoft on biometric fingerprint authentication and TouchPad technologies on Windows 10.

Microsoft leverages Synaptics' deep expertise in human interface which is the fundamental element to the operating system. Through stringent testing our advanced image sensing technology and drivers are fully certified with Microsoft's precision TouchPad specification and powering OEM's with Windows 10 ready Synaptics' products.

Windows 10 users can benefit from our industry leading precision TouchPad technology and SecurePad, the industry's only solution to integrate secure biometric fingerprint ID technology directly into the TouchPad. Collaborating with us Microsoft in this project is a testament to our comment to improve human interfaces.

During the quarter our industry leading TouchPad solutions were selected by Dell or its Chromebook 13 and the all new Dell XPS 13. HP selected our TouchPad for three new models including the detachable Spectre X2, the Star Wars special edition notebook and [indiscernible] 13 notebook.

MSI also selected our TouchPad for its new powerful gaming notebook the GT80. Moving to our Smart Display Division, Xiaomi one of the world's largest mobile manufacturers has adopted our ClearPad S3708 capacitive touch controller solution to power its latest smartphone the Mi4c.

By featuring this solution, Xiaomi is able to offer customers new SideTouch capabilities which leverages side of the phone for tracking finger taps and slides. SideTouch also enables scrolling without covering the display with hands or fingers, and enables actionable taps to, for example, take photos or change content.

Additionally, the Xiaomi Mi4c incorporates Synaptics'’ DDIC solution, providing industry leading billion color display in Full HD resolution. We're also excited to announce three new generations of ClearPad discreet touch controller solutions.

These new products enable increased functionality and entirely new dimensions of touch including force-sensing for smartphones, tablets and automotive applications. Our broad patent portfolio and years of proven experience in touch technology has enabled us to provide smartphone OEMs and LCMs with cutting-edge user experience solutions.

The new 3600 solution is optimized for mainstream smartphones and features in all new silicon architecture for improved performance. It supports new features without additional cost including gloved touch, two finger tracking with moisture on display, user-defined gesture recognition, and FaceDetect, which eliminates the need for proximity sensor.

The 7800 is optimized for large touch screens up to 17.3 inches including notebooks, tablets and automotive applications. The doubling of processing power enables advanced features and performance needed for larger smart devices.

The 7800 features 1mm passive pen support, excellent palm rejection performance, advanced moisture and glove performance as well as low-power wake-up gestures. Synaptics 3700 is the latest flagship discreet touch controller for smartphones.

It supports new technologies including ClearForce variable force sensing, and SideTouch for edge gesturing such as scroll and tap. The 3700 represents a massive performance upgrade, doubling this in memory over its predecessor to enable these advanced features.

A ClearForce force sensing feature of the 3700 enables OEMs to differentiate smartphones with new dimensions in user interfaces such as speed scrolling, zoom, gaming, and text or photo editing by applying variable force with a finger or stylus.

With force sensing now on the consumer's radar due to recent inclusion in certain high-profile devices, there's no doubt that it's becoming a sought-after feature by our mobile customers as they seek advanced technology that drives an enhanced and more productive user experience.

Synaptic has been working closely with leading global OEMs and LCNs and is well positioned to deliver this new dimension in touch with force enabled smartphones expected to ship in early 2016 with Tablet wearable's and automotive solutions to follow.

As our third generation force-sensing solution, we offer rich history in force technology dating back to 1996 including over 60 granted and pending patents worldwide. This exciting new step in human interface for smartphones will soon become the norm and highlight Synaptics leadership in touch innovation.

Now touching on current trends in the industry, clearly there are some general weakness in the market, as we look at the second fiscal quarter we are projecting moderate sequential growth at the midpoint of our guidance, revenue from our fingerprint ID products is expected to be a bright spot reflecting substantial year-over-year growth, in anticipation of less than stellar market conditions, we are also prudently managing our operating expenses and expect to drive incremental earnings in a quarter relative to the topline.

While the uncertainty in our market makes the rest of fiscal ‘16 more difficult to predict, we continue to expect to achieve an annual revenue growth rate of 20% to 25%.

Based on what we are seeing in the market today, we’re comfortable with the lower end of that range, however we will continue to revisit our forecast as we gain more visibility throughout the year.

Our continued confidence in our long term growth opportunities stems from Synaptics unmatched product portfolio in our strong positioning based on our leadership and innovation.

We are executing on our product milestones with our first combined TDDI offering expected to begin shipping at the end of our calendar year and becoming a meaningful growth contributor in the second half of fiscal ‘16.

In addition the appetite for our fingerprint authentication solutions continues to intensify and our efforts to expand our penetration within the broader market or paying off, we are seeing increased momentum for a biometric products and expect to layer on multiple new design-wins with a growing number of customers as we enter the next calendar year.

To conclude my formal remarks, we are very pleased with our Q1 performance given the overall market dynamics. We expect the whole steady in Q2 and amiss this continued backdrop followed by strong momentum from our key biometrics from TDDI growth pillars over the second half of the fiscal year.

We look forward to taking a deeper dive into these market opportunities as well as the evolving growth areas such as autos and wearables during our upcoming Analyst and Investor Day. We hope to see all of you there. With that I will now turn it over to Wajid..

Thanks Rick. We are pleased with our topline results as revenue came in at the mid-point of our range and represents record, first quarter revenue. September quarter revenue increased 66% year-over-year and was down 2% sequentially.

During the quarter we had three customers above the 10% threshold, we achieved strong mobile revenue growth year-over-year while the revenue mix from mobile and PC products was approximately 88% and 12% respectively. Revenue from mobile products was up 106% compared with the year ago quarter and was down 3% sequentially.

Revenue from PC products was down 30% year-over-year and up 9% sequentially. Our strong year-over-year mobile revenue growth was driven primarily by display driver solutions. Non-GAAP gross margin of 38% was at the mid-point of our guidance range and primarily reflects overall product mix.

Non-GAAP operating expenses came in according to plan at $109.2 million up to $2 million from the proceeding quarter. Contributing to the increase in non-GAAP operating expense was increased compensation cost and increased legal expenses related to ongoing litigation activity.

GAAP operating expenses in the September quarter were $130 million which include share base compensation of $11.5 million net acquisition related cost of $7.4 million consisting of intangibles amortization and change in contingent consideration and $1.9 million of severance cost related to restructuring of the former RSP operations.

Our non-GAAP tax rate was 17% in the September quarter, while our GAAP tax rate was 27.9%. Non-GAAP net income for the September quarter was also a record for a first quarter at $56.9 million or $1.49 per diluted share, a 43% increase year-over-year as compared with $40.9 million or $1.04 per diluted share in the first quarter of fiscal 2015.

Turning to our balance sheet, we ended the quarter with $275 million of cash, receivables at the end of September were $349 million and DSOs were 67 days reflecting a backend-loaded quarter, while inventories were $146 million, and inventory turns were $8 million, all consistent with our expectations.

Cash flow from operations was $12.3 million for the quarter primarily reflecting the impact of a backend-loaded revenue quarter with the receivables up almost $25 million. Capital expenditures for the quarter were $9.9 million and depreciation was $7.9 million.

As Rick mentioned, during the quarter we used $125 million to repurchase 1.67 million shares. Further, our board of directors had increased and expanded the authorization for stock repurchases to October 2017 bringing our cumulative authorization to $1.05 billion of which we have used $777 million since the inception of our stock repurchase program.

During the quarter we worked with our banks syndicate to increase our revolving credit facility by $100 million, at this time, $150 million remains available under the credit facility for general corporate purposes including our stock repurchase program. Now I will make a few comments regarding our quarterly outlook.

Based on our backlog of approximately $214 million entering the December quarter subsequent bookings, customers forecast, product sell-in and sell-through timing patterns as well as expected product mix, we anticipate revenue for the December quarter to be in the range of $460 million to $500 million.

We expect the revenue mix from mobile and PC products to be roughly similar to the preceding quarter. Taking into account our overall revenue mix, we expect non-GAAP gross margin for the December quarter to be approximately 37% to 39%.

We expect non-GAAP operating expenses in the December quarter to decline by up to 100 basis points from the September quarter. We anticipate the FAS 123R charge in the second quarter to be in the range of $12.2 million to $12.7 million.

GAAP expenses will also include non-cash charges of approximately $19 million related to intangibles amortization, of which approximately $14 million will be reflected in cost of sales. We anticipate our non-GAAP, long-term cash-based tax rate for fiscal 2016 to remain in the range of 16% to 18%.

Non-GAAP net income per diluted share for the December quarter is anticipated to be in the range of $1.45 to $1.75 per share.

As we passed the one year mark of consolidated operations with RSP, we expect our business to reflect moderate year-over-year growth on a quarterly basis, accelerating over the latter half of the fiscal year based on the momentum for our fingerprint ID and TDDI product solutions.

In closing, we are extremely pleased with our record first quarter financial results and believe we are well positioned to achieve record revenue and record non-GAAP net income per share in fiscal 2016. We believe we continue to be very well poised to capitalize on the opportunities in front of us.

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

Operator?.

Thank you. [Operator Instructions] First question comes from Rob Stone. Please go ahead..

Rick, I wanted to start with how you're thinking about the full year guide, so previously 20 to 25 now I think you said you're comfortable with 20.

Is that mainly an assessment of end market demand or are you seeing changes in what you thought would be uptake of a various few product initiatives -- fingerprint, TDDI et cetera? And any color would be great..

Sure Rob, just to clarify we said the lower end of our range, not exactly 20% on our comments in the script there. And what's driving that clearly as we look forward you heard me during the prepared remarks talk about a lot of products we're working on. So, in some way, to use the metaphor, we're loading up the gun with a lot of bullets.

It just takes a while to get in and get designed into the products and then those products rolling out into the marketplace, so for example I talked about TDDI, talked about some fingerprint solutions, I talked about three different touch controller solutions.

So this March is kind of my fourth anniversary here at Synaptics' and it's almost kind of amazing the amount of different products and opportunities now that that we have as we look forward and so I continue to be excited about what we're seeing with the fingerprint solutions with the TDDI.

Again we're at -- on TDDI we are just at the beginning of that ramp and we'll have multiple solutions over the course of the middle of next year that will be in volume production and their strong customer interest and demand and those are at higher ASPs and we've enjoyed it in our past.

So, it’s a lot of these things coming together and I think you followed us I know for a long time.

You've seen we have this back half uptick for a variety of different reasons over the years but again we're seeing that trend based on what we've seen in the marketplace -- I mean it gives us a little bit of pause as you've heard us talk about is, it's been a lot of churn in the marketplace, a little more slowness in China, PC market isn't what people expected this year but overall we still feel really good about the growth prospects we have as a company..

Great, and one follow-up question then is with respect to ClearForce and Force Touch display, just to be clear you're expecting to see more than one OEM launching solutions with that and in early count of '16, so the second half of your fiscal year? And you mentioned strong patent position and years of research, did you see any competing alternatives in the market at this time? So, any color on timing and competition would be great..

Okay, so we've been working on these solutions with some OEMs for the entire calendar year. So the short answer is yes, you will see multiple OEM launches in the first half of calendar year ‘16. And what we’re leveraging is certainly we had a strong IP portfolio given our work in this area.

It has always been a natural extension as what we though, of course adding a third dimension to a touch-pad or clear touch solution seems quite obvious and intuitive for a human interface.

We just kind of needed something to get the market to move and so there is obviously one other competing solution out there that we’ve seen in recent phone launch, but they don't supply the general marketplace and there is a couple of smaller players that are out there talking about fore solutions, but when it comes to IP the manufacturing experience, the user experience that we have, the technology, the algorithms, nobody else really can compares to us that can offer the product to the rest of the OEMs..

The next question comes from Ambrish Srivastava. Please go ahead..

Hi thank you.

My question just getting back to the full year guide, it is a pretty aggressive fiscal Q3 and fiscal Q4, and among the many drivers that you listed, which ones do you think is going to be the primary driver for you to make the low end of the range as you pointed out?.

Sure, Ambrish thanks for the question. And maybe Wajid canjump in here as well, if I miss the mark on the answers there, really it comes down to three different elements, one is, it's probably clearly from a percentage perspective as TDDI.

As I mentioned we do have a couple of products in production today, they are relatively low volumes and its given us good experience learning a lot from them, as we committed way back and I get at the beginning of the calendar year that we would have the first joint developed solution from the former RSP team our Japan design team, along with our leadership touch technology from our primarily US based team out in volume production by the end of the calendar year certainly beginning at ramp and we'd have a family of products.

By the middle of next year, we are right on track with that schedule, the first one is always the toughest one and we got that out, the team out in great shape and now we are working on multiple follow-up chips, so long answer, that's the TDDI solution and it certainly can be a nice pop force by our Q4 fiscal.

Fingerprint just continues to grow and grow we see growth in this current quarter and we think we'll be able to see sequential growth over each of the next couple of quarters as well.

Tremendous amount of activity, we've done real well with Samsung, and we’ve added multiple Samsung phones as part of solutions that use our technology and we kind of [indiscernible] to the dance so to speak with the Lenovo design-win in the last fiscal quarter and there will be a number of other phones joining that parade in the first half of calendar ‘16.

And then finally we did see some additional opportunities as we mentioned in the DDIC area, relatively speaking there are some new -- we mentioned this again in the past there is some new LCMs that we can engage with that help drive some growth as we move into the first part of calendar ‘16 as well. So these are elements..

Okay that's helpful Rick.

Thanks for that and my second question is actually on the technology front, if you look at the ADI solution and they talk about the converse technology that pulls from the industrial piece of business, what are some of the key differentiating pieces in your solution into your force that will enable you to let’s assume that you are the second largest suppliers assuming that they keep apple for multiple generations.

So what are the key underlying technology elements and I understand IP and algorithms and what not but from the chip side, chip perspective, what do you bring that will be harder for others to -- others in Asia for example to emulate there properly. Thank you..

Okay. I'll gladly give you a very detailed answer on that Ambrish, but I also don't want to show my competitive hand here either, as you can imagine we’re Synaptics and when we deliver touch solution, we deliver a whole family and multiple generational family as well.

So we have some solutions that you will see in the first half of calendar ‘16, you will see different solutions frankly later in the year. As you can imagine we have a roadmap on force touch and some of those capabilities are matching, what we’ve seen from analog devices and other cases will be entirely different.

One area I think that probably will stand out is the cost effectiveness of our solution.

As we mentioned before we don't require an additional device, we can leverage our existing touch controllers, we built in the capability into those touch controllers, at least for the first wave of solutions, to me given the competitiveness of the smartphone market that's clearly a requirement and the fact that we want to see force, not just deployed as a very high-end solution but the cost of mid-range phones as well.

So key technologies that clearly, the user experience that we bring, the manufacturing I mentioned that we bring, once you are starting to talk about variable force across the screen, it's something you have to measure everywhere in that screen and have that consistency in manufacturing that's a non-trivial problem to attack and you really want to go with an experienced vendor.

And then of course stating obvious again as the IP and background that we bring to the table that nobody else out in the marketplace really has that..

The next question comes from Austin [Bernades]. Please go ahead..

Yes, hi, good afternoon thanks for taking my question.

The first question I have, Rick if you could, could you share just some details in terms of what kind of traction you are getting with vendors and supply chain partners selling into India, Indonesia, and other emerging markets outside of China, and I understand that it's some of the same -- if it is the same supply chain that you worked with to get into some of the domestic vendors there as well?.

Okay. Another great question, and you are right, it is a lot of the same vendors that you see participating in the marketplace in India or Indonesia and some of the same vendors have recognized that's where the growth is as we move to kind of single, high single-digits growth in the smartphone market, those areas are double-digit growth.

One example I can point to for example is the Samsung A8 devices uses our fingerprint solution. Its targeted, one of target market was India, another one of course was China as well, and that has done very well from what I understand.

We also worked with Google and actually the name escape me on that particular initiative they have that they want to set a baseline of Android features and we’re on the approved vendor list for touch, as an example on how we’re penetrating India and Indonesia markets.

The other nice advantage that we have is more and more touch solutions move to display integration, if it's a white box type of phone that sometimes the smaller vendors use, our displays get integrated with our solution and now we setup a distribution sales force to participate in that market and we work with the display vendors and they kind of just end up there and we don't have to do a lot of hand holding it's the great part about being in -- by far the leader on display integration.

We continue to keep our eye on India, one advantage is we have a pretty sizable engineering team now in India and so ever need we can supply or provide local support there as well..

Thank you.

And then secondly I was just wondering with respect to the share repurchase and your raised revolver, how should we be thinking about your thoughts on allocating capital towards be it acquisitions versus share repurchase and is there any sort of given the longer term trajectory that you’ve set out historically in the past for Synaptics to paying a double-digit sales grower and where you are today with the share repurchase pay standpoints, it is there, are you thinking towards any sort of preference here in terms of moving away from being a major acquirer of other assets, how should we be thinking about that? Thank you..

Not to deliver any hints, I think over the last number of years we've actually consistently have purchased our own shares and when the market [due to call] numerous forces out there moved into the mid-70s and even upper 60s, we re-jumped into action, because it was in our view based on what we can see in the markets, in our opportunities there is no better investment out there than Synaptics’ stock.

So we were very aggressive last quarter and that's not an indication and so I should be very clear, we are a growth company, and that is our first priority is to make sure that we continue to grow that topline [Technical difficulty] your acquisitions kind of won over the last, one each over the last couple of fiscal years, we are continuing to be actively engaged to look for other opportunities that can help us to fulfill our vision and mission of being a human interface leader, but it has to make sense as well.

We are not going to grow just for the sake of growing it has to be for profitable growth and again has to be very strategic in nature. So we’re not giving up that mission, but we’ll continue to provide returns to our shareholders. As necessary by acquiring our own stock. Wajid. Okay. I think I covered it..

The next question comes from Charlie Anderson. Please go ahead..

Yes, thank you for taking my question, I wonder if we think about the context of the lower end of guidance for revenue, how we should think about margins for the rest of the year both gross and operating?.

So Charlie we’ve -- hi its Wajid. We’ve talked about our operating model a number of times and we expect the full year to fall within our operating model.

And just as a reminder our gross margin model is 37% to 40% over the last couple of quarters, we’ve trended in the 37% to 39% range, Q1 was no different, Q2 our guide is pointing to that range as well, we expect Q3 and Q4, based on what we see and what Rick talked about earlier in terms of our product mix, we continue to expect to see that our gross margins will fall into that range.

Now as far as operating margins are concerned we’ve talked about operating margins of 15% or better, we’ve had a few quarters with the RSP acquisition, where we’ve demonstrated that level of operating profit, Q1 was close to 15% and we expect Q2 based on the midpoint of our guidance to also be there.

And we expect to drive Q3 and Q4 with that type of operating profit model as well. So, we're going to operate within those parameters for the remainder of the year..

Perfect. And I had a question on ClearForce. I wonder how we should think about ASPs for that product. Are there scenarios where you'll sell it as a module and will have a higher ASP lower gross margin? Just generally speaking how we should think about ASPs? So, that would be great..

To address kind of the middle part of your question there, we have no intention of reentering the module business for the ClearForce, so obviously we had some history there about five years ago but there's plenty of folks out there, that do a fine job of doing that so, it doesn't mean we don't have to roll up our sleeves and get into some mechanical aspects and in other aspects of ClearForce that we didn't have to but again that's how we add value at that system level knowledge that our customers really appreciate.

And in terms of ASPs there should be some opportunities there.

As we've discussed in the past, at this point our solutions don't require an additional device but it does drive a device that has more compute power, more memory, more channels to support the force function, so that will tend to slant the product mix to the higher end, typically our higher end products have higher ASPs and higher margins..

The next question comes from John Vinh. Please go ahead..

Just a follow-up on the force sensing, one, you mentioned analogue devices are you seeing them in the marketplace at all or they just captive right now? And then just a follow-up question on just the opportunity as we think about 2016 -- is this going to be a meaningful revenue contributor for you in terms of higher ASPs translates to more meaningful higher revenue growth or is there also are a share regain opportunity for you into 2016?.

Okay, so, let's start up with the analogue devices, I frankly John I just leveraged off the question, it's a convenient way to talk about it without mentioning the customer's name.

That being said no, we don't see any [call spreads] interaction in the marketplace with the EDI solution with other vendors at this point and maybe at some point though, so, jumping in the market but in general I don't believe they compete in the mobile space so, we're not really anticipating it.

So, and your second half of your question is, as I have mentioned yes, we do expect higher ASPs in the marketplace, and generally we did pretty well in the high end so it's just solidifies our position out there in the higher end of the marketplace. Whether we have share gains or not it's a little early to make those calls..

Great, and then my follow-up question, one of your peers is reporting to indicating that one year larger customers which typically launches a flagship in the first half of the calendar year is point their launch slightly, so they've got obviously better visibility and confidence that Q1 could be better than seasonal into the March quarter? Are you seeing the same thing and is that also driving some increased confidence in your end that you're going to see potentially sequential revenue growth into the March quarter?.

I'm not going to jump into the party if one of our peers has talked about one of our OEM launches, I can't comment on their timing or the magnitude of those launches. At this point really I'm only going to only talk about Q2 and we gave as much color as we could on the second half of the year.

So can we take advantage if we get there is pull-ins and all that, we have the world's best operations organization and we don't talk about it a lot, they accomplish miracles all the time, so we love customer challenges whether it's two weeks from now or two months from now. We love when our customers pull-in launches that increase volume..

Thank you. And the next question comes from Anthony Stoss. Please go ahead..

Hey, Rick, the last several quarters you've been talking about robust design actively in the TDDI side, I'm curious if you can give us a sense of the ramp heading into next calendar year and also is there any limiting factors on the production side that's prevented you from bringing that TDDI solutions quicker? Thanks..

Okay, so first you asked about the timing of the -- the steepness of the ramp, the timing is again what I think I've been saying for at least a couple of quarters now as we had our first unified TDDI device ramping at volume production at the end of this calendar year. We're right on target.

In terms of limitations, the biggest limitation is it tends to be a longer design in cycle than may historically you've seen from us with our touch controller, our discreet touch controller solutions as an example.

We have to work with the LCD manufacturers very early on, they actually cut glass specifically for our solution because we have a specific pin out, the other kind of limitation there is in some cases it's a first time there doing [in-cell] touch solutions that we got to have to go to that learning cycle with them.

All that's good, because it obviously [indiscernible] the incumbent supplier, but it does take a while.

Now we've built that into the discussion that we’ve had in terms of the available solutions from our side and TDDI as well as the expected ramp that we have from our customer base, that's why we -- guided that well, we’ll start this year will be fairly [indiscernible] as we go through that learning cycle, but once we get that first device out there, get the first solutions on the LCM manufactures understand how to build with our TDDIs and do embedded an in cell touch, you will see a very nice ramp as we move through the balance of the fiscal year and then of course calendar ‘16 will be very exciting..

Then second question, we have been talking about force-touch on smartphones, on the notebook side, do you think that could breathe life into your PC business, what are you seeing there?.

Well, we have multiple plays in the PC businesses, it's always tough as you can imagine, Anthony when there is the market strength is 10% year-over-year to develop a great way to grow your business and for us specifically it's of course its client notebooks.

And is force an opportunity, yes, keep in mind that force for notebooks tend to be a little more expensive solution because you tend to want to use glass on a touchpad as well as the actual implementation if you have haptics.

It can tend to be a little more expensive, so there are obviously a few force pad solutions in the market place, but they all tend to be higher end, which then of course tend to be limited volume given the competitive nature of the notebook market.

But where you see some really opportunities in the PC market is a couple of areas, one is secure pad, you will see solutions launched in the first half of calendar ‘16 with the secure pad, which for those who don't know that's where you have the fingerprint actually built right into the touchpad, lot of interest in that solution and then, we’ve talked previously not so much in the prepared remarks this time, but about some of the solutions that we're bringing for the desktop marketplace, again a fingerprint solution in a mouse or a keyboard or something we call smartboard to help in gaming, which is a strong part of the PC marketplace, but all those are in the desktop area..

The next question comes from Kevin Cassidy. Please go ahead..

Thanks for taking my question.

I’ll ask maybe the question that I think a lot of people are thinking about the -- lot of consolidation in the semiconductor industry and offers for acquisitions, how does Synaptics feel about acquisitions being acquired or actually put it that way?.

Yes, thanks Kevin, first I should just talk more, somewhat similar to the question I had earlier about, where Synaptic is going in terms of capital allocation and so on, as you can see from the last few years, since I have been on board here at Synaptics, our plan has been growth, so we’ve done a number of acquisitions, during that time period including very sizable ones for at the time the size of our company.

So we continue to aggressively look at that half and really that's the priority, when I’m thinking about where this company wants to go -- we’re going to continue to drive the company on a growth path, continue to be aggressive out there, look for opportunity, but they really, really have to be the right opportunities.

I think we’ve demonstrated that we’ve been particular while aggressive, to land the right opportunity that can turn accretive pretty quickly, be strategic to the company and ultimately to hit our first priority allow that growth that we seek on a both short term and a long term basis..

Okay.

And then I guess I interpret it that, you think you can grow faster as an independent company than being acquired by somebody and being vertically integrated?.

Well, as I said, I think about every day on how we can grow as an independent company, obviously we are a public and some level you always have to be open to other ideas out there, but again my mission is to grow..

The next question comes from Rajvindra Gill. Please go ahead..

Yes, thanks for taking my question, just a follow-up on previous one, with respect to your OpEx guidance, so the OpEx is coming down sequentially to hit the earnings target, in December quarters so the OpEx is around 22.6% of sales down from 23.2% of sales in the September quarter.

As the revenue ramps in the second half, in order to achieve the annual guidance, the percentage of sales by OpEx is going to start to drop, even if you increase the OpEx sequentially and so I just want to get a sense is there opportunities to go above the 15% in the margins June quarter as the revenue ramps, or is that going to be put back into the business in terms of OpEx because you clearly manage the OpEx in December guidance to bring it down on a percentage of sales basis?.

Okay. Hi its Wajid. So just as a back drop, we are continuously looking at opportunities to manage our global footprint as best we can. Rick talked earlier about the fact that we've got a large and growing operation in India, we've also got a large and growing operation in China as well. So, as far as we're concerned we're continuing to invest.

If you take a look at our headcount sequentially even coming into this quarter it's grown, we’ve grown as a company and sequentially into next quarter we expect to grow as well.

The guide down into December, part of that had to do with the restructuring that took place related to our RSP acquisition, so we called out the restructuring that we had completed and we're going to start to see benefits of that restructuring right away.

We're going to continue to invest where we feel it's necessary and we're also going to follow our operating model.

So, we're going to continue to do both, obviously we're taking a look at all types of discretionary expenses as Rick talked about earlier the market has softened a little bit and so our entire global work force is looking at discretionary expenses as well and seeing where we can save.

And so we'll continue to tweak that and to take a look at that and if we can find a few basis points to add to the bottom line we will. But we continue to be focused on investing in the right places and actually continue to increase our headcount but with our global footprint in mind rather than just our domestic footprint..

And just the last question is around the revenue guidance in the commentary that Rick you talked about, can you elaborate a little bit further in terms of -- when you say market conditions, they're a little bit uncertain? Is it -- is it [trying] to handsets, obviously we know PCs have been weak, if you can just maybe elaborate further.

And are those risks built into the annual guidance?.

Well if you did look at the quarter we just completed, to put up mildly there was a little bit of churn in the marketplace and whether it's China or some of the other aspects out there and then at the end of the day not to bang on right exactly on our midpoint on almost everything gross margin, OpEx and revenue and so one, despite all of the churn out there, and the one thing it's really hard to control as a company of course is what's the market do.

And that's kind of why we had disclaimer out there is well we've got a plan, we feel really good about our roadmap, as I said I feel much better about our roadmap than any time in the history of the company given the just the number of cool solutions that we have ready to roll out there.

But we can be surprised, China is an example, I think it's [indiscernible] that you brought up, it's softer than we expected back in July when we initially gave the annual guidance.

We were expecting the China smartphone market to continue to grow, obviously at much moderate pace than in the past, but that's clearly now as we look forward over the course of the fiscal year it's probably flat in terms of growth.

So, smartphone market overall is -- the expectations are somewhere in the high-single digits as we look calendar '16, over calendar '15, obviously the PC or notebook market share numbers have come down.

So, we've compiled all those things over the last couple of weeks just like we did back in July and stared into our crystal ball and listen to our customers.

The one thing we -- advantage we have now, that we didn't have in July we're three months smarter, we understand due designs that we now have, but there's still a lot of work to be done here at the company.

So, fairly long answer there just to say, yes we're doing our best jobs looking at a fairly turbulent market and making a call based on the best information we have today..

There are no further questions at this time. Please continue..

Thanks for all the great questions. It's always good to hear what's on everyone's mind. One thing I just want to again remind you that we do have our analyst day here in a few weeks and at time we typically give a competitive update on market shares, all those different additional color on the number of the questions that we got today.

So, I hope everybody can make it and I look forward to spending the day with you. Thank you very much..

Ladies and gentlemen, this concludes the conference call for today, we thank you for your participation. You may now disconnect your line and have a great day..