Jennifer Jarman - The Blueshirt Group LLC Rick Bergman - Synaptics, Inc. Wajid Ali - Synaptics, Inc..

Paul Coster - JPMorgan Securities LLC Rob Stone - Cowen & Co. LLC John Donley - Stifel John Vinh - Pacific Crest Securities Charlie Anderson - Dougherty & Co. LLC Vijay Rakesh - Mizuho Securities USA, Inc. Rajvindra Gill - Needham & Co. LLC Jagadish Iyer - Summit Redstone Partners LLC Martin Latif - Arete research..

Good day and welcome to the Synaptics Second Quarter 2017 Conference Call. Today's conference is being recorded. At this time, I'd like to turn the conference over to Ms. Jennifer Jarman. Please go ahead, ma'am..

Thank you, Ann. Good afternoon and thank you for joining us today on Synaptics second quarter fiscal 2017 conference call. This call is also being broadcast live over the Web and can be accessed from the Investor Relations section of the company's website at synaptics.com. With me on today's call are Rick Bergman, 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, acquisition related to cost and certain other non-cash or recurring or 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 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 the company's current and periodic reports filed with the SEC, including the Synaptics Form 10-K for the fiscal year ended June 25, 2016, 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. 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 solid second quarter results with revenue of $461 million in the upper half of our guidance range. We experienced strong year-over-year performance from our TDDI and fingerprint products. On a quarter-over-quarter basis, TDDI revenue increased over 40%.

Our DDIC business came in roughly as anticipated although significantly lower year-over-year. We posted GAAP earnings per diluted share of $0.64 while non-GAAP earnings per diluted share were $1.49 including a tax rate change benefit of $0.11.

We ended the second half of calendar 2016 on a positive note and kicked off calendar 2017 with two big events. Our Analyst and Investor Day in mid December and our recent participation at CES where we highlighted progress across several strategic fronts.

First, Synaptics continues to benefit as the first mover in clear technology leader within the rapidly expanding TDDI market. Second, our momentum in fingerprint authentication continues to grow and we are one step closer to achieving true button free sensing with a recent expansion of our portfolio into optical fingerprint solutions.

Third, in addition to our TDDI and fingerprint key growth pillars, OLED is expected to become a core growth driver as we remain on track with our technology roadmap and ability to serve our customers not only with touch and display driver solutions but also with OLED, TDDI.

Fourth, we continue to emphasize growth and diversification as we cultivate the next wave of opportunities within consumer IoT realm including wearables, smart home access control, automotive, ARVR and healthcare.

We believe Synaptics is uniquely positioned to become the human interface leader in consumer IoT to make these evolving devices easier to use.

Lastly, Synaptics continues to innovate towards the ultimate combination of our technologies, the integration of touch, display and fingerprint within what we call an infinity display enabling customers to maximize every square millimeter of the screen.

Now I'd like to touch on recent development in several of these areas starting with the exciting activity in our natural ID biometric business. After 30 years of focus and leadership with capacitive technology we have now added optical to our portfolio of interface solutions strengthening our competitive advantage.

Optical sensing technology opens a door for broader innovation and continued integration of our products into our target markets including the advancement of our OLED roadmap.

Many of you had the opportunity to see the demonstration of our optical under glass in the bezel solution at CES and also at our Analysts Day where we conducted fingerprint authentication through the four cover glass, a technology capable of reading through one millimeter of glass.

This industry first optical solution is technology leapfrog and the evolution towards removing the front button on smartphones which will drastically improve the user interface experience. Our announced partnership with Shanghai based OXi Technology accelerated this goal and enables a significant time to market advantage.

Teaming with Auxi also quickly expands our China presence in our time critical customer support network.

We also had the opportunity to demonstrate our organically built in display optical fingerprint sensor solution where our innovation eliminates the phone bezel altogether and enables the smartphone holy grail of edge-to-edge, top to bottom infinity displays. This exciting solution is expected for mass production in the second half of calendar 2017.

The initial solution will be in a fixed position in the display. Optical wasn't the only innovation arising from our biometrics team as we also introduced our multifactor fusion engine. Multifactor biometric simultaneously enhances user convenience and increases security.

It allows our customers to have a more secured seamless user experience and our ecosystem partners such as banks to differentiate by enabling multiple biometric mode settings for specific use cases. Our initial build is focused on facial recognition tied to fingerprint as the hardware for face biometric is already present on mobile devices.

Next generation software release is planned to include other modes of biometrics. In regards to new fingerprint design wins in the quarter, we continue to bolster our market position and driver fingerprint solutions further into our product lines.

ASUS selected our fingerprint solutions for its innovative Zen phone AR smartphone with Google tango and also its flagship Zen pad 3S10 tablet. Lenova selected us for its new flagship Vibe P2 smartphone and Huawei is featuring Synaptics fingerprint sensor on its new Changxiang 6S.

The Huawei 6S phone is also an industry first triple play, a fingerprint touch and display from a single provider. The fact that we won all three opportunities in a high profile phone from top OEMs speaks to our unique competitive advantage and our leadership in the market.

Huawei also selected Synaptics touch view TDDI solution for its Mate 9 smartphones underscoring the solid traction of touch and display driver integration we've seen over the past few quarters. Clearly, 2016 mark the emergence in market acceptance of TDDI.

We expect the significant rate of TDDI adoption to continue in smartphones and by 2019 TDDI are expected to be the majority solution for LCD based displays.

Our TDDI roadmap over the next couple of years is broad based encompasses both next generation solutions at the high end to support infinity display phones and virtual reality, as well as cost efficient solutions to serve the expanding lower end of the market which is key to maintaining our significant market share and improving gross margins over time.

We've also begun to architect our first OLED TDDI chip for the market which we expect to debut late in calendar 2018. With around 70% market share today, Synaptics is a number one player in TDDI and we are well poised to maintain that status going forward.

We are also very well pleased during the quarter to announce our first display driver solution for OLED based smartphones. This feature rich solution includes our best in class imaging processing, a new state of the art display technology specifically designed to enhance OLED displays.

This includes flexible digital gamma control for smooth dimming, local area ACL for high contrast text, high accuracy color enhancement and support for high dynamic or HDR. These features combined a superior display in virtual reality experience on OLED smartphones.

We now have engineering samples of this solution and are working with our strategic parter display manufactures to bring up their panels over the coming months. We are planning to be ready for production by the end of this calendar year in time for when we expect the broader industries OLED display capacity to meaningfully ramp starting in 2018.

With regards to touch, one of our major wins during the quarter was with Google where our latest flagship discreet touch controls are featured in a new Google Pixel and Google Pixel Excel smartphone.

As far our notebook PC business, we remain the market cheerleader and achieve strong growth in the quarter as a result of increased attach rate of our secured pad and fingerprint sensor technologies. New this quarter, Toshiba launched its Dynabook featuring our secured pad and HP launched its Elite Slice featuring our fingerprint solution.

We also partnered with two leading peripheral companies Kensington and PQI to add fingerprint sensors to USB dongles. This allows any Windows 10 PC to add one touch biometric security.

In addition, Synaptics unique touch pad feature such as moisture resistant and gloved operation are enabling PC adoption in new vertical market such as medical, military and industrial. We expect continued momentum in our notebook PC business. Lastly, let's touch on auto where our demos at CES have garnered a significant amount of interest.

We expect to see a growing number of opportunities in this area leveraging a touch, display and fingerprint solutions. Today, automotive revenue makes up about 2% to 3% of total revenue involved the design cycles along we have a solid pipeline of design wins for upcoming model years and expect this revenue stream to grow nicely over time.

Ultimately, we believe that auto is an important diversification in growth lever for Synaptics. As we enter the second half of our fiscal year, we are pleased with the way our forecast is tracking and with the revenue range that Wajid will outline for the fiscal third quarter which encompasses the natural seasonality of our display driver business.

Based on this outlook, it is reasonable to project that fiscal 2017 revenue will likely be up slightly as opposed to our prior projections of flat versus the prior year. In summary, the investments we've made in strong growth areas including TDDI and fingerprint are paying off.

And we should continue to gain momentum moving forward, strengthening our market leading position and helping to offset the expected year-over-year decline in DDIC revenue. Our recent design win momentum has broadened our global customer base particularly in China and reduced our dependency on a narrow set of customers.

We are making bold moves as demonstrated by our partnership with OXi to ensure that we stay ahead of industry inflection points while also further strengthening our position in important growth region such as China.

We are on track to become a formidable player within the expanding OLED display market and are well on path to achieving the ultimate integration of our touch, display and fingerprint technologies. With that I'll now handed it over to Wajid..

Thanks Rick. Revenue for the December quarter was $461.3 million, above the midpoint of our guidance range and up 19% sequentially. Year-over-year December quarter revenue declined 2% primarily reflecting lower demand for our display driver solutions, largely offset by increased demand for TDDI products.

During the quarter, we had five customers at or above the 10% revenue threshold ranging from 10% to 21%. Revenue mix from mobile and PC products was approximately 86% and 14% respectively. Revenue from mobile products was up 20% sequentially and down 3% compared with the year ago quarter.

Revenue from PC products was up 16% sequentially and 2% year-over-year. I will now provide a high-level review of certain of our December quarter GAAP results and will follow with the corresponding non-GAAP results.

For the December quarter, our GAAP gross margin was 30.1%, which includes $12 million of intangible asset amortization and $600,000 of share-based compensation costs.

GAAP operating expenses in the December quarter were $109.9 million, which includes share-based compensation of $15 million, restructuring costs of $1.7 million consisting primarily of office based consolidation charges and acquisition-related costs of $2.4 million consisting of intangibles amortization.

This resulted in GAAP operating profit of 6.2% of revenue for the quarter. In the December quarter, we had GAAP net income of $22.8 million or $0.64 per diluted share. Now turning to certain of our December quarter non-GAAP results. Our December quarter non-GAAP gross margin of 32.8% primarily reflects our overall product mix.

December quarter non-GAAP operating expenses came in at $90.8 million, down $3.1 million from the preceding quarter. The decline primarily reflects cost-saving actions initiated in the prior and current quarter and further resulted in non-GAAP operating profit of 13.1% of revenue.

Our non-GAAP tax rate was approximately 10.3% for the quarter and 13% for the first half of the fiscal year. The impact of reducing the year-to-date non-GAAP tax rate resulted in $0.11 improvement in non-GAAP net income per share for the quarter.

Non-GAAP net income for the December quarter was $53.4 million or $1.49 per diluted share representing a 55% sequential increase but down 7% year-over-year. Turning to our balance sheet, we ended the quarter with $347 million of cash, an increase of $46 million from the preceding quarter.

The increase in cash during the quarter was primarily related to cash flow from operations of $52 million.

Receivables at the end of December were $260 million and DSOs were 51 days, reflecting a front end loaded quarter while inventories were $160 million and inventory turns were $7.8 million Capital expenditures for the quarter were $14.6 million, and depreciation was $8 million. Now I will make a few comments regarding our quarterly outlook.

Based on our backlog of approximately $264 million entering the March quarter, subsequent bookings, customer forecasts, product sell-in and sell-through timing patterns, as well as expected product mix, we anticipate revenue for the March quarter to be in the range of $410 million to $450 million.

We expect the revenue mix for mobile and PC products in the March quarter to be approximately 87% and 13%, respectively. I will now provide GAAP outlook data for our March quarter and will follow with non-GAAP outlook data. We anticipate the stock-based compensation charge in the third quarter to be in the range of $15.5 million to $16 million.

GAAP expenses in the March quarter are expected to include additional restructuring costs in the range of $200,000 to $300,000 consisting primarily of severance costs.

In addition, March quarter GAAP expenses are expected to include non-cash charges of approximately $14 million for intangibles amortization, of which approximately $12 million will be reflected in cost of sales. I will now provide non-GAAP outlook data for our March quarter.

Taking into account our overall revenue mix, we expect non-GAAP gross margin in the March quarter to be between 32% to 34%. We expect non-GAAP operating expenses in the March quarter to be in the range of approximately $90 million to $93 million. Using the midpoint of our Q3 guidance, non-GAAP operating profit would be approximately 11.7% of revenue.

We anticipate our non-GAAP long-term liability based tax rate for Q3 to be in the range of 12% to 14%.Non-GAAP net income per diluted share for the March quarter is anticipated to be in the range of $1.05 to $1.35 per share.

In closing, based on our solid first half results and current outlook for the third quarter, we are pleased with the way the first nine months of the year are shaping up. As we continue to capitalize on a positive trends within our business. With that we will now turn the call over to the operator to start the Q&A session.

Operator?.

[Operator Instructions] And we'll take our first question from Paul Coster with JPMorgan. Please go ahead. Your line is open..

Yes, thank you. So I think probably mostly people are focused on the gross margins at least those little bit skeptical here.

And clearly the trajectory is going to be in terms of recovery is going to be slow, if there is a recovery it is also -- perhaps you can just talk us through maybe a little longer term if you like how you see the gross margin shaping up with mix with cost sounds and with volume on the TDDI side. Thank you. .

Hi, Paul. It's Wajid Ali. I'll start off and I'll let Rick add in a couple of comments. So at the Analyst Day we presented our near-term model for gross margins and operating margins.

And I think we were pretty transparent about the fact that given our product mix and the way our product roadmap was looking, that it would take a few quarters for us to move the needle up on both gross margins and on operating margins as our revenue is expected to increase over time.

And so nothing really changed between then and now in terms of our thesis of around how gross margins will improve. It will really be based on product roadmap and things like cost savings and manufacturing savings. The teams are continuously working on those.

And in a business like ours there is a number of pluses and minuses that happen that will kind of get you to the range, the target range that we've talked about. .

Paul, I think Wajid kind of hit on the key points and as we said we are committed to be a full range supplier. That might be little different than what we did with the discreet touch where we are willing to exit certain parts of low end of the market but with the phone market specifically, there is so much to the volume now is in low to mid range.

So we are detecting solutions for that particular market getting the volume and driving that top line as we go further for several reasons that you can imagine ultimately its margin dollars or operating profit and EPS that should drive the company. And in second, we don't want to give up a lot of room for our competitors to operate.

And so in this fashion it's whether TDDI or fingerprint, as I said we are committed to be in a full line supplier. .

All right. Good and then on TDDI front, you are now basically committing to be in the game for OLED as well.

Can you kind of give us some sense and timeline there and also what the margin outlook would be for that business? Would it be much different from the incumbency TDDI business?.

Sure, great question, Paul. I think if you look back and ask me that question a year ago, I'd have answered it well we are not quite sure how we'll add value with TDDI on OLED but we'll find a way. And over the last 12 months our researchers and architects have found way that we think can make TDDI compelling.

And so now we are out there beginning the architecture and development of those parts and working with our panel partners to realize that vision. And as we said in prepared remarks, our where we see that more towards being in mass production towards the end of calendar 2018.

In terms of the gross margin profile, of course one affects specifically on display driver is today 2017 we are not going to be a mass production with OLED drivers until the end of the year. That effectively means we are not planning a big chunk of the high end market.

Now whether with us our RSV previously in terms of DDIC business that's where the high margin business tends to reside. So as we look forward certainly it is our hope with OLED and TDDI OLED that we will be by definition the higher end of the market and that should enable the opportunity to enjoy little higher margins there. .

Thank you. And we'll take our next question from Rob Stone with Cowen & Co. Please go ahead. Your line is open..

Hi. You mentioned in the prepared remarks you are now thinking the full fiscal year up slightly versus flattish in your prior guidance. I think at the Analyst Day you also suggested that you thought although the March quarter would be down with the normal seasonality that the June quarter directionally is likely to be up from there.

Is that still the case on sort of direction for the June quarter?.

Well, thanks for the question, Rob. If you remember beginning of fiscal year we were quite reluctant to get a whole lot of forward looking guidance and the scars from a year ago haven't totally healed because of the nature, we can do our best job at the end of the day it ultimately comes down to the sell through of some of our customers.

Now we continue to diversify that customer base in very SKUs where and so on but there is still some big hitters that we have.

So in terms of getting a lot of clarity for the quarter plus one or beyond, we aren't really going to provide a lot of that other than to make you just go with the remarks and what other pattern that we made either today or in the past. .

Okay. I wanted to drill into the TDDI a little bit more in my follow up question. You have a range of chips already released that stand different resolutions and in general higher resolution DDIC or TDDI should command a higher SP and presumably maybe little bit better margin.

Can you say of the chips you've announced sort of how many are in chipping design win by now or what proportionally is much or all of the volumes still coming from the lowest end of resolution on TDDI?.

Well, I guess I don't want to breakdown our percent for device but still the majority of our shipments today are in HD segment which is lower end 4100 to the part I think I mentioned that maybe at one of the meetings we had in the past.

Now if we look at the market trends clearly full HD is coming on very quickly as well and would certainly have expectation lot of that volume will shift.

From a broader context, it is one of the things that we haven't really seen as lot of the high resolution LCD panels end up I think it's partly due to the OLED trend that I was mentioning so if we compare to a maybe a year ago or year and half ago when we defined these parts particularly the 4302 is WQHD volume in that particular part have been disappointing and of course that would be the higher resolution for the higher end LCD market.

.

Thank you. And we will take our next question from Kevin Cassidy with Stifel. Please go ahead. Your line is open..

Hi. This is John Donley on for Kevin. Thanks for taking question.

I was wondering could you give us a update on what you are seeing in China and what kind of revenue contribution you are getting from there?.

Sorry, could you just repeat the question?.

So the trends in China kind of more broadly from a market perspective. The market pretty much played out in [Technical Difficulty] and our fiscal Q2 is as expected the PC market might have been a little stronger, I think the China smartphone market might have been a hair stronger than we initially thought when all things rolled out.

But the great news is couple of the OEMs there is doing really well and we had long term historic relationships with them when they are much smaller companies. So in some ways we are pleased with those trends. There is a bit of consolidation going on.

Synaptics is tended to pay for the larger OEM just in terms of our support structure and strategic relationships. And with those consolidations some of the white box phones are clearly losing share so that trend is certainly positive for us. And now let's Wajid talk about the percent of revenue in China for this past quarter. .

Yes. I mean it has been growing over the quarters; last year this time we were doing just a little north of 20% of revenue being in China. Last quarter we were over 35% of our revenue was based in China and that had actually trended up nicely from our fiscal Q1..

Okay. Great.

Do you guys expect any change in the fingerprint sensor margin as those ramps up in the second half of the year? And do the optical sensors impact that?.

Sure, John. Just a couple of kind broad comments on that. So as I had mentioned to Paul, we do plan to play in the full spectrum of that marketplace now, up to now for the most part we've been in Samsung phones and there has been high end Samsung phones the Galaxy and then prior to that note series of phones and a few other high end phones.

As an example the Huawei phone that I mentioned the 6S that's more of a mainstream phone at the selling price is roughly US $200, that's a very high volume, it's call, I don't know if you call low ended more mid range type of phone but the price points and some of the gross margin pressure comes with that volume there.

So there is call that pressure and as we look into optical we see that more the higher end solution and that could help us the other direction in terms of gross margin percentage. But for the latter case the optical solutions think of that more second half in the calendar year..

Thank you. And we will take our next question from John Vinh with Pacific Crest. Please go ahead. Your line is open..

Hi. Thanks for taking my question.

My first question is can you talk a little bit more about your go-to-market strategy with the optical and display fingerprint sensor? Are you anticipating that you'll bring the product to market with multiple customers or similar to how you brought fingerprint sensor in market? Are you planning on coming in market with one of your key flagship customers first? And if that's the case, are you anticipating that you could have any sort of exclusivity arrangements with any of your customers?.

Well, John, this is Rick. We have a range of optical solutions now and call it each of them have their own path market.

Now historically independent what products we done whether it's touch, TDDI or whatever we just naturally I think we and any supplier you'll tend to zero in a smaller setup customers because invariably you are working out kings out of the product and your support organization is only so big and then you bring out to a broader set.

That's what we do kind of across all of our products. We kind of have an alpha customer and then what we do is what we call our platform release which means we have the supports tools and infrastructure in place for a broader set of customers. That will be our plan on the optical.

In terms of any special arrangements with any customers, I can't comment at this time. .

Great. And then my follow up is for Wajid, you at the Analyst Day had talked about that you are considering taking on maybe some lower margin fingerprint sensing business in China that you felt was accretive to your earnings and operating profit.

Can you talk about whether that's reflected in your March quarter guidance or not?.

John, it was more of a longer term statement and longer than actually Q3. So, no, none of that business that we were talking about is actually reflected in our Q3 guidance. .

Thank you. And we'll take our next question from Charlie Anderson with Dougherty & Co. Please go ahead. Your line is open..

Yes, thanks for taking my question and I guess just considering you are talking Rick how you burn last year I think there was sort of over buy situation, just snapshot in time how are you feeling about things right now in terms of inventories out of the customers and how things looks, are they healthy in your perspective, in your mind?.

Again, great question, Charlie. And yes our radar is high as they can be in terms of monitoring our customers' inventory in terms of what they have in our part and what we here in the channel. Now that being said, we don't have great visibility on what phone inventory may or may not be out there.

But I think kind of across the board is I talked to our OEM customers, they feel reasonably good that it call its normal channel inventory. They are certainly things that maybe a little lean at some point towards its tail end in the last year due to some component shortages from various folks.

And then of course last year was the other way as you stated but right now it feels that there is ever such a thing in a phone market normal. .

Great.

And then for my follow up, you mentioned having the OLED display driver kind of very late this year and then OLED TDDI maybe kind of late 2018 so I wondered if you just kind of walk us through the progression there? Are these both for the flagship line or they targeted different portions of the market? How do you see that playing up for you guys?.

Well, in general OLED tend to be a more expensive solution. Even if we when you look through 2018 just due to the inherent costs and yields involved with OLED screen. So we see our OLED solutions being mid range to high end especially initially and of course as we look into 2019 where the supply becomes much more plentiful for many players.

We'll adopt our architectures to be competitive that's for mid range devices. .

Thank you. And we'll take our next question from Vijay Rakesh with Mizuho. Please go ahead. Your line is open..

Hi, guys. Thanks. Good quarter and guidance. Just I was wondering if you look at your margins and sort of beat on that, is it fair to assume that this trough and as you look at second half the fingerprint sensing and some of the other ramps margin should start to improve. .

So, Vijay it's Wajid. Even out of margin model for the near term and the mid term we think that the next couple of quarters are going to fall into the near term margin model of 31% to 35%. Everything we see in front of us from a product mix standpoint and from a customer engagement standpoint point to that. They continue to point to that.

So that's kind of where we are seeing it right now..

All right.

And then on the OLED driver, IC and TDDI side, can you give us some directionality of how the SP of OLED driver, DDIC trend versus OLED driver IC trend versus your DDIC today and how is it the TDDI looked that to end and how do the margins compare and when do you see revenues in OLED -- is that for the September quarter kind of timeframe? Thanks. .

Okay. I'll give a shot and please let me know if I didn't miss or I miss part to your question. I'll now start at the end first so in terms of revenue, we said think of more towards the end of the calendar year as opposed to the September quarter.

And as we talk about previously where some outdated by the display manufactures as well, our devices are now sampling in and we feel highly confident that we can meet that schedule. But that means they have to be able to be ramp up there OLED lines and incorporate our solutions and test them out and that can be a longer process.

In terms of margin, is one of the prior questions, I mentioned that we do have expectation that our OLED driver should be able to on the higher side for display drivers because this is naturally over the next couple of years there will be higher end or lowest to mid range solutions. And margin is naturally kind of gone that way with the DDIC family.

In terms of TDDI or you are asking our gross margin there, it is a little bit below corporate averages at this juncture but again as a factor of-- as I mentioned lot of our shipments now are in HD resolution segment which is clearly in a lower part of the market.

And margins just as I mentioned on OLED side it is kind of the flip side of that, that will be little tougher there..

Thank you. And we will take our next question from Rajvindra Gill with Needham & Co. Please go ahead. Your line is open..

Thank you and congrats on good results.

Rick just a technical question, so that the product roadmap for your OLED TDDI solution, I wanted to get a sense if are there going to be any difficulty doing OLED TDDI versus the LCD TDDI? It does seem like OLED has the same T&T transistor back lane, so not necessarily would lend itself to some problem but maybe you could talk a little about that some of the technical challenges of doing maybe on sale OLED TDDI versus an out sale OLED solution..

Raj, it kind of goes back to my earlier comments on, we would find a way to have a compelling architecture for TDDI because there are really smart guys here figured it out.

So obviously don't want to explain what that is on the phone now because it's taken us a year and I just leave it that there is certain parts of the market and segment and technology where we think our unique knowledge of touch and display drivers will enable us to deliver a very performance as well as cost effective solution, kind of more generally one of the challenges is we had with LCDs was the changing of the manufacturing process that was required to support in sell.

The industry is much more open to our idea this time around with touch. So assuming we can get a few of the manufacturers onboard I would expect adoption rate to actually be pretty good although we are still two or three years away from that kind of turning point that we just saw last year in LCD..

Great. Understood. My follow up question is around your OLED display driver contraction; obviously you are tied to the hip with the other OLED panel makers or the other panel makers who are ramping OLED capacity outside of Samsung display. I wanted to get a sense of how are they tracking in terms of building out OLED panels.

You talked about kind of an inflection heading into calendar 2018, any thoughts around the whole OLED ecosystem developing and how do you see the competitive landscape in OLED driver going forward? Thank you. .

Okay.

The first part of that question I guess I would urge you to go look at our slides from December 13, I think we outlined the trends there in terms of adoption of OLED in the industry from a number of panels perspective probably better than I can do verbally over the phone here, since at that time things are tracking ahead, I am sure everybody noticed just tremendous investment in R&D and capital into making the OLED transition hard so that's counter balance but it's just something very difficult to manufacture.

So I am confident there will be a number of suppliers out there ramping in the 2018 timeframe.

In terms of the competitive landscape, we are seeing call the usual suspects out there in terms of who we would expect to see and we'll bring the same value that we brought to the LCD market innovation and some key technology advantage that we think we can uniquely provide and to a certain degree that's why we are able to be embraced by the display manufacturers as we go out there with our OLED TDDI and DDIC plans..

Thank you. We will take our next question from Jagadish Iyer with Summit Redstone Partners. Please go ahead. Your line is open..

Yes. Thanks so much for taking my question. Two questions for Rick. First, you talked about being a single supplier to Huawei. I was just wondering I wanted to get your thoughts on how some of the other Chinese handset makers are thinking about conversing to a single supplier solution here? Then I have a follow up..

I presume you are talking about fingerprint sensors just to be clear. I didn't say we are the only supplier at Huawei. .

No. I mean being providing all the three products to the -- just like the Huawei..

Okay. Sorry. I misunderstood your question. So certainly we bring that value proposition to all of our customers based out there. And fortunately we are seeing more and more TDDI adoption. That being said it typically is different decisions at this point.

You will have a decision made around the display which of course is touch and DDIC or TDDI and then in other decision around what fingerprint solution to be made.

Now, of course we strategically get more aligned with the customer base and over time as we keep hitting in our prepared remarks, we see opportunities whether be architectural benefit as well but we are not prepared to talk about that at this time..

And as a follow up, you talked about the strength in TDDI in terms of how you are able to ramp sequentially, I was just wondering is there any as we look out over the next four to eight quarters. Do you think is there any seasonality with regard to TDDI? Thank you. .

Well, right now we are enjoying the ramp in adoption or call it attach rate curve on TDDI that somewhat washes out the natural seasonality but in a few quarters from now TDDI will have a very significant chunk of the overall LCD display market and at that point of course seasonality will begin to kick-in just like with any display technology. .

Thank you. And we will take our next question from Martin Latif with Arete Research. Please go ahead. Your line is open..

Good afternoon.

My first question is can you give us an indication of RSV revenues in the quarter excluding TDDI and how do you expect this trend over next few quarters?.

Yes. Martin, that's something that we don't breakout any more. .

Okay. And my second question is on TDDI gross margin, you just mentioned that they are little bit below corporate average.

I was just wondering if there is any scope for cost reductions and what geometry are you using for TDDI manufacturing process?.

I'd just add here in a little bit on your additional, now your first comment or question. The one thing we did mention in our prepared remarks is that our TDDI revenue was down quite a bit year-over-year.

So just I guess reinforce that for a minute because fortunately other parts of our business such as the TDDI and fingerprint have filled that lower revenue. In terms of nodes and so on that we are using for our TDDI, our highest volume is in the 90 nanometer geometry.

We also have solutions in 55 nanometer and then some older product in 130 nanometer as well. As we look forward I guess I don't want to kind of show our hands but we'll move into more advanced geometry as going forward. We'll continue to leverage some of the older geometries due to just lower system cost. .

Thank you. And we have no further questions. I'd like to turn the conference back over to the management team for any additional or closing remarks. .

Okay. Thank you everybody for participating. We tended to have a shorter call. I guess because we saw lot of you over couple of times over the last two months. And hopefully things were straightforward. Thank you very much and we look forward to talking to everybody in the April timeframe. .

Thank you. And this does conclude today's program. Thank you for your participation. And you may disconnect your line at any time and having wonderful day..