SAN JOSE, Calif. - Synaptics (NASDAQ:SYNA) Incorporated (NASDAQ:SYNA), a company specializing in AI at the Edge technology, announced today its plan to offer $400 million in convertible senior notes due in 2031 to qualified institutional buyers. The private offering is contingent on market conditions and other factors.
The unsecured senior notes will accrue interest payable semi-annually and are set to mature on December 1, 2031, unless repurchased, redeemed, or converted earlier. Noteholders will have the right to convert their notes under certain conditions and during specified periods. Synaptics will settle conversions in cash and possibly shares of its common stock.
Synaptics also intends to grant the initial purchasers an option to buy up to an additional $50 million aggregate principal amount of notes within 13 days of issuance. If the last reported sale price of Synaptics' common stock exceeds 130% of the conversion price for a specified time and other conditions are met, the notes will be redeemable at Synaptics' discretion.
The company plans to use part of the net proceeds from the offering to enter into capped call transactions, which are designed to reduce potential dilution upon conversion of the notes or to offset potential cash payments above the principal amount. The exact terms of the notes and capped call transactions will be determined at the time of pricing.
Synaptics also aims to use up to $100 million of the proceeds to repurchase shares of its common stock concurrently with the notes offering. The remainder will go towards repaying the outstanding balance under its term loan facility.
The offering and any common stock issued upon conversion of the notes will not be registered under the Securities Act of 1933, as amended, and will be offered only through an exemption from registration requirements.
This move comes as part of Synaptics' broader strategy to leverage its position in AI-driven connectivity and sensing solutions. The company's focus on AI at the Edge aims to enhance digital experiences in a variety of settings, from home and work to mobile environments.
The information for this report is based on a press release statement from Synaptics Incorporated.
In other recent news, Synaptics Incorporated announced plans to expand its credit facility from $250 million to $350 million, a strategic financial move aimed at enhancing its financial flexibility. The amendment is expected to offer more flexibility than its predecessor, with the company planning to use the proceeds for general corporate purposes, including funding working capital needs.
In terms of earnings and revenue, Synaptics reported a significant 8% revenue increase to $257.7 million in Q1 FY2025, primarily driven by a 55% surge in Core Internet of Things (IoT) product sales. The company's non-GAAP earnings per share (EPS) also experienced a substantial 56% rise to $0.81.
In addition, Synaptics announced plans to introduce a Wi-Fi 7 device tailored for IoT and a capital allocation strategy focusing on organic growth, disciplined mergers and acquisitions, and a $150 million share repurchase plan. The company's Q2 FY2025 revenue is projected at approximately $265 million with non-GAAP gross margins expected at 53.5%.
These are recent developments, and investors are cautioned that the terms of the amended credit agreement may change based on market conditions. Despite a slight dip in the company's cash balance and a decline in automotive product revenue, Synaptics remains optimistic about its positioning and future growth opportunities, particularly in the Core IoT and enterprise markets.
InvestingPro Insights
Synaptics' decision to offer $400 million in convertible senior notes comes at a time when the company is navigating a challenging financial landscape. According to InvestingPro data, Synaptics has a market capitalization of $3 billion and is currently trading at a P/E ratio of 23.31. While this valuation might seem high, it's important to note that the company's adjusted P/E ratio for the last twelve months is a more modest 16.52, suggesting potential value for investors.
InvestingPro Tips reveal that Synaptics operates with a moderate level of debt, which aligns with the company's strategy to issue these convertible notes. This move could provide the company with additional financial flexibility without significantly compromising its balance sheet strength. Another relevant InvestingPro Tip indicates that Synaptics' liquid assets exceed its short-term obligations, which could reassure potential note buyers about the company's ability to meet its financial commitments.
Despite a revenue decline of 14.44% over the last twelve months, Synaptics has shown recent signs of recovery with a quarterly revenue growth of 8.41%. This positive trend, coupled with the InvestingPro Tip that analysts predict the company will be profitable this year, suggests that Synaptics may be positioning itself for future growth through this capital raise.
For investors seeking a more comprehensive analysis, InvestingPro offers 6 additional tips that could provide deeper insights into Synaptics' financial health and market position.
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