SYNAPTICS Inc (SYNA) FY 2025 MD&A

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Forward-Looking Statements and Factors That May Affect Results

You should read the following discussion and analysis in conjunction with our financial statements and related notes contained elsewhere in this report. This discussion contains forward-looking statements that involve risks, uncertainties and assumptions. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of a variety of factors, including those set forth elsewhere in this report and under “Item 1A. Risk Factors.”

Introduction

In this section, we will discuss the results of our operations and changes in financial condition for fiscal 2025 compared to fiscal 2024. Discussions of our fiscal 2023 items and year-to-year comparisons between our fiscal 2024 and 2023 that are not included in this Form 10-K can be found in “Part II – Item 7. Management’s Discussion and Analysis of Financial Conditions and Results of Operations” in our fiscal 2024 Annual Report on Form 10-K for the fiscal year ended June 29, 2024.

Overview

We are a leading worldwide developer and fabless supplier of premium mixed signal semiconductor solutions. We develop solutions that integrate the audio, touch and vision interfaces with embedded processing capabilities that are paired with wireless connectivity. We believe our results to date reflect the combination of our customer focus and the strength of our intellectual property and our engineering know-how, which allow us to develop or engineer products and solutions that meet the demanding design specifications of our OEMs.

In fiscal 2025, we achieved revenue growth with net revenue increasing 12% to $1,074.3 million compared to $959.4 million in fiscal 2024. The growth was primarily driven by strong execution in our Core IoT product category. Net revenue from Core IoT of $272.4 million increased by 53% compared to $177.6 million a year ago. This growth was fueled primarily by strong demand for our wireless connectivity products and the inclusion of sales from our Broadcom transaction. Enterprise and Automotive net revenue of $610.1 million increased by 7% compared to $570.0 million a year ago. The net increase was primarily driven by growth across our enterprise product portfolio, partially offset by a decrease in automotive revenue due to softness in the automotive sector. Mobile net revenue of $191.8 million decreased by 9% compared to $211.8 million a year ago, primarily as a result of the end-of-life shipments to a large U.S. mobile customer.

During the year, we launched multiple products expanding our product portfolios and accelerated our position in Edge AI and wireless connectivity through partnerships and licensing transactions. We are collaborating with Google’s research team to build the next-generation platform for Edge AI devices. We executed an agreement with Broadcom in the third quarter of fiscal 2025 to acquire certain assets and obtain non-exclusive licenses relating to Broadcom’s Wi-Fi technology. We acquired these set of assets in order to solidify our leadership position for end-to-end AI IoT connectivity. Acquiring these assets allows us to expand our portfolio of Wi-Fi 8 combination devices that include advanced Bluetooth features, additional Wi-Fi 7 combination devices, ultrawide band intellectual property (which we can integrate into future IoT devices) and combination front-end modules. This transaction expands our field of use, allowing all our Wi-Fi products to compete in AR/VR, Android smartphones and consumer audio markets and secures our wireless roadmap for the next five years. We introduced the S3930 touch controller, featuring multi-frequency-region parallel sensing and the industry’s smallest high-performance footprint. This innovation enables consistent, low-latency touch performance in ultra-thin, bendable devices. The new solution is more cost-effective for applications such as foldable phones and large screens.

Cash, cash equivalents and short-term investments at the end of fiscal 2025 and fiscal 2024 totaled $391.5 million and $876.9 million, respectively. Our net total debt outstanding at the end of fiscal 2025 was $834.8 million compared to $972.9 million at the end of fiscal 2024. We repaid our $582.0 million Term Loan Facility through a combination of a $450.0 million convertible senior note offering and balance sheet cash. We executed a capped call transaction to mitigate dilution up to a stock price of $150.48.

During fiscal 2025, we returned $128.3 million to shareholders through repurchase of approximately 1.8 million shares. Our share repurchase program expired in July 2025 and a new repurchase program of $150.0 million was authorized thereafter, with no expiration date.

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Trends and Uncertainties

Current Economic Conditions

As a majority of our sales and manufacturing occurs outside of the U.S., we are exposed to and impacted by global macroeconomic factors, U.S. and foreign government policies and foreign exchange fluctuations. In particular, a substantial portion of our revenue is derived from customers located in international markets, especially in the Asia-Pacific region, including China, Japan, South Korea and Taiwan, where many of our OEM customers and contract manufacturers are based. As a result, fluctuations in foreign exchange rates, especially relative to the U.S. dollar, can materially impact our reported revenue and profitability. We continue to monitor changes in international trade policies, particularly increased tariffs and other barriers or restrictions between the United States and other countries, including China. Our current operations suggest limited tariff exposure given our current import and export practices. However, some of our customers and suppliers may be impacted by evolving tariff regimes depending on their own supply chain strategies and sourcing locations. We continue to monitor for any potential customer and supplier impacts, ranging from supply chain realignments to changes in end demand. While the broader implications of these activities remain uncertain, based on our current lead times and order activity, we are not seeing unusual activity that would suggest any acceleration or delays in orders due to tariffs that would be likely to impact our near-term financial performance. We will continue to assess the short-term and long-term effects of these international trade policies and restrictions on our financial and operational performance.

Results of Operations

The following sets forth certain of our consolidated statements of operations data for fiscal 2025 and 2024 along with comparative information regarding the absolute and percentage changes in these amounts (in millions, except percentages):

Fiscal 2025 Compared with Fiscal 2024

Net Revenue.

Net revenue was $1,074.3 million for fiscal 2025 compared with $959.4 million for fiscal 2024, an increase of $114.9 million, or 12.0%. Of this net revenue, $610.1 million, or 56.8%, was from Enterprise and Automotive product applications, $272.4 million, or 25.4%, was from the Core IoT product applications market and $191.8 million, or 17.8%, was from the Mobile product applications market. Revenue increased in most of our product applications in fiscal 2025. Net revenue from Enterprise and Automotive product applications increased as a result of an increase in units sold (which increased 10.4%) and an increase in average selling prices (which increased 2.4%) due to our product sales mix compared

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to the same period a year ago. The increase in revenue from Enterprise and Automotive product applications was partially offset by a decrease of $30.0 million in revenue from the licensing of certain of our IP. The increase in net revenue from Core IoT product applications was driven by an increase in units sold (which increased 40.8%) and an increase in average selling prices (which increased 8.9%) due to our product sales mix compared to the same period a year ago, inclusive of the contribution from the Broadcom transaction. Net revenue from Mobile product applications decreased due to a decrease in units sold (which decreased 1.8%) and a decrease in average selling prices (which decreased 10.3%) as overall demand decreased for our products in the mobile market compared to the same period a year ago. The decrease in revenue from Mobile product applications was partially offset by an increase of $4.5 million in revenue from the licensing of certain of our IP.

Gross Margin.

Gross margin as a percentage of net revenue was 44.7% in fiscal 2025 compared with 45.8% in fiscal 2024. The decrease in gross margin was driven by an increase in amortization expense primarily related to the intangible assets we acquired from Broadcom and a decrease in revenue from the licensing of certain of our IP. For additional information, see “Item 8. Financial Statements and Supplementary Data – Notes to Consolidated Financial Statements – Note 7. Goodwill and Acquired Intangible Assets.”

Because we sell our technology solutions in designs that are generally unique or specific to an OEM customer’s application, gross margin varies on a product-by-product basis, making our cumulative gross margin a blend of our product specific designs. As a fabless manufacturer, our gross margin percentage is generally not materially impacted by our shipment volume. Under most circumstances, revenue from license-based arrangements is fully accretive to our gross margin.

Operating Expenses.

Research and Development Expenses. Research and development expenses increased $10.5 million, to $346.8 million, for fiscal 2025 compared with $336.3 million in fiscal 2024. The increase in research and development expenses primarily reflected a $19.8 million increase in variable compensation related to bonus accruals and a $7.9 million increase in stock-based compensation charges primarily driven by the charges related to the awards granted to the Broadcom employees we onboarded during the third quarter of fiscal 2025. These increases were partially offset by a $16.3 million decrease in payroll related costs primarily driven by the restructuring action we initiated in the first quarter of fiscal 2025.

Selling, General and Administrative Expenses. Selling, general and administrative expenses increased by $19.0 million, to $180.3 million, for fiscal 2025 compared with $161.3 million in fiscal 2024. The increase in selling, general and administrative expenses primarily reflected a $11.6 million increase in variable compensation related to bonus accruals, a $8.3 million increase in professional service fees primarily related to the Broadcom transaction we executed in the third quarter of fiscal 2025 and the refinancing of our Term Loan Facility in the second quarter of fiscal 2025 and a $4.5 million unfavorable impact from exchange rates on foreign currencies, partially offset by a $8.1 million decrease in stock-based compensation charges primarily related to an increase in net forfeitures from the departure of certain executive officers from the Company compared to fiscal 2024.

Acquired Intangibles Amortization. Acquired intangibles amortization reflects the amortization of intangibles acquired through recent acquisitions. See “Item 8. Financial Statements and Supplementary Data – Notes to Consolidated Financial Statements – Note 7. Goodwill and Acquired Intangible Assets.”

Intangible asset impairment charge. Intangible asset impairment reflects the impairment of certain indefinite-lived intangible assets. See “Item 8. Financial Statements and Supplementary Data – Notes to Consolidated Financial Statements – Note 7. Goodwill and Acquired Intangible Assets.”

Restructuring Costs. Restructuring costs primarily reflect employee severance costs and facilities consolidation costs related to the restructuring action we initiated in the first quarter of fiscal 2025. These headcount-related costs included personnel in operations, research and development and selling, general and administrative functions. Restructuring costs incurred in fiscal 2025 and fiscal 2024 were $16.9 million and $10.5 million, respectively. See “Item 8. Financial Statements and Supplementary Data – Notes to Consolidated Financial Statements – Note 19. Restructuring Activities.”

Non-Operating Income.

Interest and Other Income. Interest and other income decreased $15.4 million, to $26.9 million in fiscal 2025 compared with $42.3 million in fiscal 2024. The decrease was primarily driven by an overall decrease in our invested cash and cash equivalents of approximately $400.0 million.

Interest Expense. Interest expense primarily includes interest on our debt and amortization of debt discount and issuance costs. Interest expense decreased by $25.5 million to $39.8 million during fiscal 2025 as compared to $65.3 million during

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fiscal 2024. The decrease was primarily driven by the early repayment of the Term Loan Facility in November 2024. During fiscal 2025 and 2024, the interest expense on the Term Loan Facility was $18.7 million and $46.1 million, respectively. The Term Loan Facility was repaid with the net proceeds received from the issuance of the 2031 Notes, which bears a significantly lower interest rate of 0.75%. See “Item 8. Financial Statements and Supplementary Data – Notes to Consolidated Financial Statements – Note 8. Debt and Revolving Credit Facility.”

(Benefit)/Provision for Income Taxes. The (benefit)/provision for income taxes of $(65.7) million and $(250.2) million in fiscal 2025 and 2024, respectively, represented estimated federal, foreign and state income taxes. The effective tax rate for fiscal 2025 diverged from the combined U.S. federal and state statutory tax rate primarily due to a one-time tax benefit related to a U.S. “check-the-box” election made for our Israel subsidiary, favorable tax effects from the U.S. inclusion of foreign income, foreign earnings taxed at lower rates and a tax benefit associated with the fiscal 2018 U.S. transition tax under the Tax Cuts and Jobs Act (“TCJA”) resulting from a recent U.S. Tax Court decision in Varian Medical Systems, Inc. v. Commissioner. These benefits were partially offset by non-deductible share-based compensation and limitation on the deductibility of a certain officer’s compensation. See “Item 8. Financial Statements and Supplementary Data – Notes to Consolidated Financial Statements – Note 16. Income Taxes.”

On July 4, 2025, subsequent to the end of our fiscal 2025, the One Big Beautiful Bill Act (“OBBBA”) was signed into law. This legislation includes a permanent extension and modification of certain provisions under the TCJA. We are in the process of evaluating the potential impact of the OBBBA on our financial statements for future periods.

Liquidity and Capital Resources

Our cash and cash equivalents were $391.5 million as of the end of fiscal 2025 compared with $876.9 million as of the end of fiscal 2024, a decrease of $485.4 million. The decrease in cash and cash equivalents was driven by cash used in financing activities of $331.4 million related to full repayment of our Term Loan Facility and repurchases of our common stock, partially offset by net proceeds from the issuance of the 2031 Notes (as defined below) and cash used in investing activities of $297.9 million primarily related to our asset purchase agreement with Broadcom.

We consider almost all earnings of our foreign subsidiaries as not indefinitely reinvested overseas and have made appropriate provisions for income or withholding taxes that may result from a future repatriation of those earnings. As of the end of fiscal 2025, $341.3 million of cash and cash equivalents was held by our foreign subsidiaries. If these funds are needed for our operations in the United States, we will be able to repatriate these funds without a material impact on our provision for income taxes.

Cash Flows from Operating Activities. Operating activities during fiscal 2025 generated $142.0 million compared with $135.9 million net cash generated in fiscal 2024. In fiscal 2025, net cash provided by operating activities was the primarily driven by our results of operations, adjusted for non-cash charges of $219.0 million, and net cash outflows of $29.2 million from changes in our operating assets and liabilities. The primary drivers of the change in operating assets and liabilities relate to a decrease in income taxes payable primarily related to net tax payments of approximately $43.3 million made to various tax jurisdictions and an increase in net inventory of $25.1 million, related to the availability of supply and the impact of variations between forecasted and actual demand, offset by a decrease in accounts receivable of $12.3 million, primarily related to the timing of collections and billings, and an increase of $31.5 million in accrued compensation primarily related to the accrual of our annual bonus.

Cash Flows from Investing Activities. Net cash used in investing activities for fiscal 2025 was $297.9 million compared with cash used in investing activities of $157.7 million during fiscal 2024. Net cash used in investing activities for fiscal 2025 primarily consisted of $200.3 million we paid to acquire certain assets and obtain non-exclusive licenses relating to Broadcom’s Wi-Fi technology and the purchase of $61.0 million in short-term investments.

Cash Flows from Financing Activities. Net cash used in financing activities for fiscal 2025 was $331.4 million compared with $25.1 million used in financing activities for fiscal 2024. Net cash used by financing activities for fiscal 2025 consisted of $583.5 million used to repay the remaining outstanding balance of our Term Loan Facility, $128.3 million used to repurchase our common stock, exclusive of excise taxes, and $49.9 million used for the payment of capped call transactions associated with our 2031 Notes, partially offset by $439.5 million in net proceeds from issuance of our 2031 Notes.

Liquidity

We have $350.0 million available under our revolving credit facility with a maturity date to be the earlier of November 2029 or three months prior to any maturity of our Senior Notes. No funds were drawn from this credit facility during fiscal 2025.

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Our aggregate principal debt obligations were $850.0 million as of June 2025 and mature at various dates through December 2031. In connection with our issuance of the 2031 Notes, we used a portion of the net proceeds from the 2031 Notes, along with our cash on hand, to repay the outstanding balance of our Term Loan Facility.

See “Item 8. Financial Statements and Supplementary Data – Notes to Consolidated Financial Statements – Note 8. Debt and Revolving Credit Facility.”

Contractual Obligations and Commercial Commitments. For our operating lease obligations, see “Item 8. Financial Statements and Supplementary Data – Notes to Consolidated Financial Statements – Note 9. Leases.” For our purchase obligations, see “Item 8. Financial Statements and Supplementary Data – Notes to Consolidated Financial Statements – Note 12. Commitments and Contingencies.”

Working Capital Needs. We believe our existing cash and cash equivalents, anticipated cash flows from operating activities and available credit under our revolving credit facility will be sufficient to meet our working capital and other cash requirements, including small tuck-in acquisitions, and our debt service obligations for at least the next 12 months. Our future capital requirements will depend on many factors, including our revenue, the timing and extent of spending to support product development efforts, costs associated with restructuring activities net of projected savings from those activities, costs related to protecting our intellectual property, the expansion of sales and marketing activities, the timing of introduction of new products and enhancements to existing products, costs to ensure access to adequate manufacturing, costs of maintaining sufficient space for our workforce, the continuing market acceptance of our product solutions, our common stock repurchase program and the amount and timing of our investments in, or acquisitions of, other technologies or companies. Further equity or debt financing may not be available to us on acceptable terms. If sufficient funds are not available or are not available on acceptable terms, our ability to fund our future long-term working capital needs, take advantage of business opportunities or to respond to competitive pressures could be limited or severely constrained.

The undistributed earnings of our foreign subsidiaries are not currently required to meet our U.S. working capital and other cash requirements, but should we repatriate a portion of these earnings, we may be required to pay certain previously accrued state and foreign taxes, which would impact our cash flows.

Critical Accounting Estimates

Our discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements, which have been prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”). The preparation of our consolidated financial statements requires us to make estimates and judgments in applying our most critical accounting policies that can have a significant impact on the results we report in our consolidated financial statements.

The SEC has defined critical accounting estimates as those that are both most important to the portrayal of our financial condition and results and which require our most difficult, complex or subjective judgments or estimates. We evaluate our estimates on an on-going basis, including those related to our revenue, inventory valuation, business combinations, goodwill and income taxes. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances, the results of which form the bases for making judgments about the carrying values of assets and liabilities. Although actual results have historically been reasonably consistent with our expectations, the actual results may differ from these estimates or our estimates may be affected by different assumptions or conditions.

We believe the following critical accounting estimates are the most significant to the presentation of our financial statements and require the most difficult, subjective and complex judgments.

Revenue recognition

We recognize revenue upon the transfer of control of goods to our customers in an amount that reflects the consideration we expect to receive. Our pricing terms are negotiated independently with each customer on a stand-alone basis. In evaluating the transaction price, we assess whether it is subject to adjustment or refund, such as stock rotation rights, price protection or volume-based incentives, and we estimate the resulting variable consideration accordingly. Although such arrangements occur in limited circumstances, they require judgment to determine the net consideration to which we expect to be entitled. We estimate variable consideration based on the historical data and experience with returns, rebates and credits. We believe these amounts to be immaterial to total revenue and do not anticipate significant changes to our estimates. This estimate qualifies as a critical accounting estimate due to the subjective judgments required to assess

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variable consideration and the potential impact on revenue recognition timing and amount, even if the current magnitude of such estimates is limited.

Inventory Valuation

We value inventory at standard cost, adjusted to approximate the lower of actual cost and estimated net realizable value using assumptions about future demand and market conditions. In determining excess or obsolescence reserves for our products, we consider assumptions such as changes in business and economic conditions, other-than-temporary decreases in demand for our products and changes in customer requirements. In determining the lower of cost and net realizable value of our inventories, we consider assumptions such as recent historical sales activity and selling prices, as well as estimates of future selling prices.

We fully reserve for inventories and non-cancellable purchase orders for inventory deemed obsolete. We perform periodic reviews of inventory items to identify excess inventories on hand by comparing on-hand balances and non-cancellable purchase orders to anticipated usage using recent historical activity as well as anticipated or forecasted demand. We also record a charge to cost of revenue for estimated losses for inventory we are obligated to purchase from our contract manufacturers when such losses become probable from customer delays, order cancellations or other factors.

The following factors influence our estimates: changes to, or cancellations of, customer orders, unexpected or sudden decline in demand, rapid product improvements, technological advances and termination or changes by our OEM customers of any product offerings incorporating our product solutions. Our reserves contain uncertainties because the calculation requires us to make assumptions and to apply judgment regarding historical experience, market conditions and technological obsolescence. Overall, our estimates of inventory carrying value adjustments have been materially consistent with actual results. Due to the subjective inputs and forward-looking assumptions, this estimate qualifies as a critical accounting estimate with potential impact on gross margin and inventory-related balances.

Business Combinations

Accounting for a business combination requires us to estimate the fair value of consideration paid and the individual assets acquired and liabilities assumed, which involves a number of judgments, assumptions and estimates that could materially affect the amount and timing of costs recognized in subsequent periods. We typically obtain independent third-party valuation studies to assist us in determining fair values, including assistance in estimating future cash flows, discount rates and comparable market values. Items involving significant assumptions, estimates and judgments include the following:

•Fair value of consideration paid or transferred and

•Intangible assets, including valuation methodology such as the income approach that includes the use of a discounted cash flow model, estimates of future revenues and costs, discount and royalty rates.

We estimate the fair value of assets acquired and liabilities assumed based upon assumptions we believe to be reasonable, but which are inherently uncertain and unpredictable and, as a result, actual results may differ from estimates. Estimates associated with the accounting for acquisitions may change as additional information becomes available regarding the assets acquired and liabilities assumed. Due to the subjectivity and reliance on forward-looking inputs, these acquisition-related estimates qualify as critical accounting estimates.

Income Taxes

We estimate our income taxes in each of the jurisdictions in which we operate. This process involves estimating our actual tax exposure together with assessing temporary differences resulting from the differing treatment of certain items for tax return and financial statement purposes. We recognize income taxes using an asset and liability approach. This approach requires the recognition of taxes payable or refundable for the current year and deferred tax liabilities and assets for the future tax consequences of events that have been recognized in our consolidated financial statements or tax returns. The measurement of current and deferred taxes is based on the provisions of enacted tax law and the effects of future changes in tax laws or rates are not anticipated.

Evaluating the need for a valuation allowance for deferred tax assets requires judgment and analysis of all positive and negative evidence available, including recent earnings history and taxable income in recent years, reversals of deferred tax liabilities, projected future taxable income and tax planning strategies to determine whether all or some portion of the deferred tax assets will not be realized. Using available evidence and judgment, we establish a valuation allowance for deferred tax assets when it is determined that it is more likely than not that they will not be realized. Valuation allowances have been provided primarily against state research and development credits and certain capital losses of foreign subsidiaries. A change in the assessment of the realizability of deferred tax assets may materially impact our tax provision in the period in which a change of assessment occurs.

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As a multinational corporation, we conduct our business in many countries and are subject to taxation in many jurisdictions. The taxation of our business is subject to the application of various and sometimes conflicting tax laws and regulations as well as multinational tax conventions. Our effective tax rate is highly dependent upon the geographic distribution of our worldwide earnings or losses, tax laws and regulations in various jurisdictions, tax incentives, the availability of tax credits and loss carryforwards and the effectiveness of our tax planning strategies, which includes our estimates of the fair value of our intellectual property. The application of tax laws and regulations is subject to legal and factual interpretation, judgment and uncertainty. Tax laws themselves are subject to change as a result of changes in fiscal policy, changes in legislation and the evolution of regulations, court rulings and tax audits. The material jurisdictions in which we are subject to potential examination by tax authorities throughout the world include Japan, Hong Kong, United Kingdom, Israel and the United States.

Due to the complexity of international tax laws, reliance on future projections and the significant level of judgment involved, income tax-related estimates qualify as critical accounting estimates and may impact our results of operations and financial position.

Recent Accounting Pronouncements

See “Item 8. Financial Statements and Supplementary Data – Notes to Consolidated Financial Statements – Note 2. Basis of Presentation and Significant Accounting Policies – Accounting Pronouncements Adopted.” and “Item 8. Financial Statements and Supplementary Data – Notes to Consolidated Financial Statements – Note 2. Basis of Presentation and Significant Accounting Policies – Accounting Pronouncements Issued But Not Yet Adopted.”

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