Synaptics Inc. (NASDAQ:SYNA), a leading developer of human interface solutions, has announced its financial results for the third quarter of the fiscal year 2024. The company reported a revenue of $237.3 million, a decrease of 27% year-over-year but remaining flat compared to the previous quarter. Despite the decline, Synaptics is optimistic about its Core IoT business, forecasting double-digit sequential revenue growth in the next quarter. The company expects revenue ranging from $230 million to $260 million in the following quarter, with a projected GAAP gross margin of 44.5% to 46.5% and a non-GAAP gross margin of 52.5% to 54.5%.
Key Takeaways
- Synaptics Inc. reported Q3 revenue of $237.3 million, down 27% year-over-year.
- Core IoT revenue grew by 26% from the previous quarter, while Enterprise & Automotive sectors remained flat.
- The company anticipates double-digit sequential revenue growth in Core IoT for the next quarter.
- Revenue distribution for the June quarter is expected to be 22% automotive, 57% mobile, and 21% other products.
- GAAP net loss per basic share is expected to be $0.45 to $0.85, with non-GAAP net income per diluted share between $0.35 and $0.75.
Company Outlook
- Synaptics expects a slow recovery in overall revenue, with enterprise spending on hardware products being curtailed.
- The company is tracking IT budgets, new product introductions, and the transition from Wi-Fi5 to Wi-Fi6, which could stimulate demand.
- A Wi-Fi7 chip is planned for release at the end of the year, representing a significant opportunity.
Bearish Highlights
- Mobile products revenue declined due to seasonality and a drop in legacy products.
- The company is facing a demand decline, particularly in wireless revenue within the Core IoT sector.
- Gross margin is affected by the mix, with the slowest part of the business having the highest margin.
Bullish Highlights
- Positive customer interest and feedback were received for the Astra platform at the Embedded World event.
- Inventory levels in the Core IoT sector have normalized.
- The company is confident in reaching $200 million in revenue for the wireless portion of their Core IoT business.
Misses
- The legacy DDIC drag is expected to continue for the next couple of quarters.
- Foundry supplier has been slow to respond to current pricing conditions, impacting gross margins.
Q&A Highlights
- The company does not disclose the revenue split between processors and wireless but notes that Wi-Fi is performing well.
- The docking station business is gradually recovering, with inventory still present in some areas.
- Synaptics is optimistic about its presence in the Chinese market and the mid-tier Android space, despite it being too early to predict overall performance for fiscal year 2025.
Synaptics Inc. remains focused on innovation, particularly with its Astra platform capable of running AI models on-device, which offers security, power, and latency advantages. The company's optimism about the future is based on expected growth in the Core IoT business, new product introductions, and a transition to advanced Wi-Fi technologies. Despite current challenges, Synaptics is positioning itself for a rebound as market conditions improve.
InvestingPro Insights
Synaptics Inc. (SYNA) has navigated a challenging fiscal period, with the latest earnings reflecting a notable year-over-year revenue decline. Yet, the company's strategic focus on its Core IoT business and the anticipation of new product introductions offer a glimpse into potential areas of growth. To provide a more detailed financial perspective, InvestingPro data highlights several key metrics:
- The company's market capitalization stands at approximately $3.38 billion USD, suggesting a significant presence in the human interface solutions market.
- Synaptics is currently trading at a negative P/E ratio of -43.54, reflecting investor concerns over profitability in the last twelve months as of Q2 2024.
- Revenue for the last twelve months as of Q2 2024 is reported at $1.028 billion USD, with a substantial gross profit margin of 47.6%, indicating efficient cost management relative to revenue.
Delving into InvestingPro Tips, we uncover that management's aggressive share buyback strategy could indicate confidence in the company's value proposition. Additionally, the fact that Synaptics operates with a moderate level of debt and liquid assets exceeding short-term obligations provides some financial stability in a volatile market environment.
For those looking to explore further, InvestingPro offers additional insights, including the fact that analysts predict the company will be profitable this year, and Synaptics has achieved a strong return over the last five years. It's worth noting, however, that 9 analysts have revised their earnings expectations downwards for the upcoming period, and the company does not pay dividends to shareholders.
For readers interested in a comprehensive analysis, InvestingPro provides a total of 11 tips for Synaptics Inc., which can be accessed through their platform. To enhance your investment research, use coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription at https://www.investing.com/pro/SYNA.
Synaptics' forward-looking approach, coupled with these InvestingPro insights, may help investors gauge the company's future in a market that is constantly evolving with new technological trends.
Full transcript - Synaptics InCorp (SYNA) Q3 2024:
Operator: Good day, and thank you for standing by. Welcome to the Synaptics Inc. Third Quarter Fiscal Year 2024 Financial Results Conference Call. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session. [Operator Instructions]. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker today, Munjal Shah, Vice President of Investor Relations. Please go ahead.
Munjal Shah:
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': Additionally, 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.
': Additionally, 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.
': I will now turn the call over to Michael.
': I will now turn the call over to Michael.
Michael Hurlston:
': Running AI models on-device rather than in a data center gives devices security, power and latency advantages. Synaptics differentiates by incorporating AI in every part of the flow from chip development to software to the tool chain. In addition, with a novel gearing approach, we can deliver more inferences at any given system power level than competition. We believe that the totality of our approach will make Synaptics the absolute leader when it comes to delivering AI processing solutions for IoT devices.
': Running AI models on-device rather than in a data center gives devices security, power and latency advantages. Synaptics differentiates by incorporating AI in every part of the flow from chip development to software to the tool chain. In addition, with a novel gearing approach, we can deliver more inferences at any given system power level than competition. We believe that the totality of our approach will make Synaptics the absolute leader when it comes to delivering AI processing solutions for IoT devices.
': The Astra platform includes a family of processors, an open software platform, an AI development toolkit and model framework as well as seamless wireless connectivity. The SL-family of processors are AI enabled MPUs targeted for the edge and are our first products to be released under the Astra umbrella. Two and four core versions are now sampling. The SR-series of processors are AI enabled MCUs and incorporate our pioneering gearing technique which actively manages power as inferencing requirements increase or decrease. A flexible, innovative software platform extends across both product families and supports Linux and Android as well as leading RTOS offerings. In addition, both families leverage the deep institutional knowledge at Synaptics around computer vision and audio machine learning algorithms. The launch of the Astra family of processors at Embedded World was a great success with customer interest from a broad-based set of industries including automotive, consumer, industrial, security and home appliances. Thousands of customers and developers visited our showcase, and the team generated a significant number of qualified customer leads. We hosted multiple technical presentations and a first of its kind hands-on embedded AI workshop for product designers, creating strong demand for the Astra development kit. To top it all off, Synaptics SL-series embedded compute processors received the Best in Show award ahead of solutions from several incumbent suppliers and competitors.
': While Astra grabbed the headlines, our wireless products delivered the news, driving Core IoT revenue 26% higher compared to the prior quarter. Wireless product inventory has been worked down, except for a couple of SKUs. Design wins in wearables, security systems, home automation and action cameras are starting to ramp. We expect these trends to continue, driving sequential revenue growth in Core IoT next quarter. In addition, we remain on track to sample both our first broad market device and Wi-Fi7 device later this year. The Enterprise & Automotive products were roughly flat on quarter. However, next quarter, we expect to see growth in this piece of our business. The volume of our docking station products is beginning to increase again though demand is off historic norms. In addition, our PC touchpad and fingerprint solutions are tracking to normal seasonal patterns, and we have opportunities to take some market share. Our HPD solutions are performing as expected and we continue to see opportunities to increase share as platforms start to refresh. Demand across the rest of the enterprise products is suppressed as IT spending on hardware and accessories continues to be at historically low levels with no signs of an uptick. Further out in the calendar year, we keep hearing talk of a refresh cycle and new AI-PCs driving unit volume higher which would be good for us. However, we have yet to see orders consistent with anything like this. In Automotive, our TDDI products are seeing strong demand and performing better than expected. Our design-wins at several OEMs in North America and Europe including Audi, Chevy, Ford (NYSE:F), Porsche (ETR:P911_p), and Volkswagen (ETR:VOWG_p) are starting to ramp. Additionally, some other OEMs are extending their current models for another 1-2 years, which benefits us given our high market share in these designs. The strength in our TDDI products is somewhat offset by a slowdown in legacy DDICs. Longer term, we would expect to increase content per car with SmartBridges and Wi-FI/BlueTooth combos. Our Mobile products performed largely in line with our expectations and revenue was down from the prior quarter driven both by seasonality on our touch products and by a decline in revenue from our large legacy DDIC customer. As that product finally goes to zero, which we would expect at some point in the next fiscal year, it will present a headwind to fiscal 2025 Mobile revenue. Aside from that, we expect our shipments to track seasonality for high-end Android phones. We see potential opportunities for further growth as the adoption of OLED technology expands into mid-tier phones. To summarize, we continue to be excited about our Core IoT business. For the first time, Synaptics is selling differentiated general purpose products into large potential markets. Meanwhile, our traditional product lines, where we have leadership positions in smaller more defined markets, are beginning to recover as inventory burns off and demand slowly returns. The combination of the two gives us confidence as we enter our next fiscal year. Before I pass the baton, I wanted to update progress on our CFO search. We have had discussions with dozens of highly qualified internal and external candidates. If all goes according to plan, we should have someone in place well before our next earnings call. Now, let me turn the call over to Matt for a review of our third quarter financial results and fourth quarter outlook.
Matt Padfield: Thanks Michael, and good afternoon to everyone. I will first review the financial results for our recently completed quarter and then provide an outlook for our current quarter. Revenue for the March quarter was $237.3 million which was slightly above the mid-point of our guidance. Revenue from Core IoT, Enterprise & Automotive, and Mobile were 20%, 57% and 23%, respectively. Year-over-year, consolidated March quarter revenue was down 27%, but flat compared to the prior quarter, which reflects continued stabilization in our business. Core IoT revenue was up 26% sequentially, but down 49% year-over-year. We believe inventories are now at normal levels in this product sector and we expect to continue to see sequential growth in our fiscal fourth quarter. In Enterprise & Automotive, March quarter revenue was down 1% sequentially and down 30% year-over-year. Several enterprise products are stabilizing though there are still pockets of excess inventory, which we expect to work through in the coming quarters. For the March quarter, our Mobile product revenue was up 33% year-over-year, but down 12% from the prior quarter mainly due to seasonality in our touch controller products for the Android ecosystem.
': During the quarter, we had one customer greater than 10% of revenue, at approximately 12%. For the March quarter, our GAAP gross margin was 46.5%, which includes $14.3 million of intangible asset amortization and $1 million of share-based compensation costs. March quarter non-GAAP gross margin was 52.9% in line with the mid-point of our guidance range. GAAP operating expenses in the March quarter were $127.7 million, which includes share-based compensation of $28.9 million and intangible asset amortization of $4 million. March quarter non-GAAP operating expense of $95 million was within our guidance range and up $3 million from the preceding quarter. Our prior quarter had a benefit from a partial reversal in the accrual for our bonus program. We continue to maintain tight discipline around our operating expenses. During the quarter we recorded a GAAP tax benefit of $5.2 million and maintained our expected non-GAAP tax rate of 17%, creating a $4.3 million expense. March quarter GAAP net loss was $18.1 million or a GAAP net loss of $0.46 per basic share. Non-GAAP net income in the March quarter was $21 million, a decrease of 7% from the prior quarter and a 72% decrease from the same quarter a year ago. Non-GAAP earnings per diluted share of $0.53 was above the mid-point of our guidance range. Now turning to the balance sheet. We ended the quarter with $829 million of cash, cash equivalents, and short-term investments, a 2% sequential decrease. Cash flow used in operations was $13.2 million due to approximately $27 million of tax payments associated with prior fiscal years. Capital expenditures were $9 million and depreciation for the quarter was $6.8 million. Receivables at the end of March were $144.7 million and days of sales outstanding were 55 days, an increase of 7 days from the last quarter. Ending inventory balance was $114.1 million, down $11 million as we continue to cautiously manage our inventory purchases. Our calculated days of inventory on our balance sheet also declined to 91 compared to 99 at the end of the prior quarter. Now, let me turn to our June quarter outlook. Our business is seeing stabilization as we have worked down channel inventories across multiple product areas. However, we are seeing a slow recovery due to curtailed spending by enterprises on hardware products. At a consolidated level we anticipate revenue in the June quarter to be in the range of $230 million to $260 million, an increase of approximately 3% from the March quarter at the mid-point. Our Core IoT products are expected to benefit from the normalization of channel inventory levels, improving demand, and ramp of design-wins. We expect double-digit sequential revenue growth to continue in the June quarter. Enterprise & Automotive products in aggregate are expected to improve slightly in the June quarter. Mobile is expected to decline due to seasonality and declines in legacy products. Given these dynamics we expect our revenue mix from Core IoT, Enterprise & Automotive, and Mobile products in the June quarter to be approximately 22%, 57% and 21%, respectively. We expect GAAP gross margin for the June quarter to be in the range of 44.5% to 46.5%. We expect non-GAAP gross margin in the range of 52.5% to 54.5%, a small improvement from the March quarter. We expect GAAP operating expenses in the June quarter to be in the range of $127 million to $132 million, which includes intangibles amortization and share-based compensation. We expect non-GAAP operating expense in the June quarter to be in the range of $97 million to $101 million. GAAP net loss per basic share for our June quarter is expected to be in the range of $0.45 to $0.85. And non-GAAP net income per diluted share is anticipated to be in the range of $0.35 to $0.75 per share, on an estimated 39.9 million fully diluted shares. We expect both GAAP and non-GAAP net interest expense to be approximately $6 million in the June quarter.
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Operator: [Operator Instructions] Our first question comes from Christopher Rolland of Susquehanna.
Christopher Rolland: I guess my question is inventory, I guess, for Core, you described it as more normal level. Would love to know kind of what you see as the overhang going forward and then where inventory has most challenges and least challenges. That would be great to start.
Michael Hurlston: Generally speaking, I would say that as we said on the last call, inventory has been worked down. We feel that the challenge that we're largely facing, particularly enterprise is more demand related. As we were working through the inventory, I think demand fell and we have this challenge that we highlighted in the prepared remarks around enterprise spending for accessories and kind of small hardware, which is largely where we play. There are still pockets of inventory. A couple of notable examples is in our audio headset business, our enterprise headsets, a little bit in our docking station area, particularly around our DisplayLink product line. But generally, I would say we're kind of out of inventory jail and we feel good and as demand returns, we should see a pull up in the numbers.
Christopher Rolland: And then just so we can kind of understand the legacy DDIC drag. Roughly how big was it in '24 and how big would you expect it in '25?
Michael Hurlston: I mean, I think we called, Matt said in his remarks sort of a mid to low percentage of revenue. I think that we'll see a good part of that continue for the next couple of quarters. But probably by the second half of the year that will go down to a de minimis level, Chris. I mean it probably hits zero by the some part in the fourth quarter. So it's a drag, not a big one, but it's something that we thought we should call out. I think everybody's been aware of it for some time and it hasn't gone into our thinking around the numbers because we knew it was eventually going to go to zero. But I thought the time was right to highlight that it's coming off the table.
Operator: Our next question comes from Quinn Bolton of Needham & Company.
Quinn Bolton: Just thinking about the puts and takes between inventory kind of normalizing and soft demand. I mean, several quarters ago, I think you guys thought you might be under shipping end consumption by $100 million or more. Now that you're at the tail end of the inventory correction and guiding revenue up a smidge. It feels like consumption must be down meaningfully and I'm wondering if you had any updated thoughts on consumption. Should we be thinking something the $245 million is indicative of where consumption is across a good part of the enterprise IoT base? Or do you think consumption is higher than that given there are still some pockets of inventory out there that you just mentioned?
Michael Hurlston: No, look, I think that the natural demand is something significantly higher than where we are. I mean, we stated that a bunch of times. I think what sort of surprised us is we had 2 pieces moving in parallel. We had inventory and as we were working through the inventory, we also hit a low point in demand. And so right now we think we're at a very low point in the natural demand and as enterprise spending returns, as automotive returns, we would expect to see a pull up in the numbers. So we don't believe by any stretch that sort of 245, 250, 255 is where we should be. We think that when demand normalizes and we think demand is still quite a bit lower than it would naturally be, we're going to see a pull up in our numbers. So I think the surprise again is as we work through the inventory situation, we hit a point where the current demand is far lower than we'd expect natural demand to be.
Quinn Bolton: And then I guess just thinking about signs of a recovery, what things are you sort of tracking that might point to a recovery? Is it kind of things like bookings backlog? Are the customers particularly interest rate sensitive and you think the demand might not turn until we get a rate cut hopefully later this year? What do you think the biggest factors might be, to kick start the demand in especially the enterprise segment, which seems to be softest?
Michael Hurlston: Yes, I think the first thing is obviously IT budgets going away from sort of AI and to big compute, these large language models that are running in the data center and back toward PCs, monitors, docking stations, places where we have a presence. I mean, I think we talked about it with you in the last call. It seems a little bit counter because IT spending is flat or even slightly up if you look at the numbers. But the underlying detail is that the spending on gadgets, on PCs, on docking stations, on headsets, on enterprise telephony is clearly way down and the balance of the budget is going towards IoT. I'd say that's one thing. I think the second thing for us too is we've got a bunch of new product introductions that are beginning to kick in. We used as we talked to you about, we used the downturn to invest in the business to start running on our wireless platform. Some new docking station products are beginning to kick in. So we've got different parts of the portfolio that are going to start to ramp and that should even if demand remains soft, our NPI introduction should help us pull those numbers up.
Quinn Bolton: Maybe last clarification for me. The core IoT growing double-digits in June, I know it's still fairly low base. Do you think that double-digit growth rate continues in the back half of the calendar year?
Michael Hurlston: Yes, certainly it's going to grow. I mean, we've been growing obviously very hot. We talked about double-digit growth in that business over an extended period of time. We're kind of outgrowing that right now. So I would say it will grow. It certainly is going to grow. The growth rate is TBD and we haven't provided that guidance.
Operator: Our next question comes from Kevin Cassidy of Rosenblatt Securities.
Kevin Cassidy: As long as we're on the topic of wireless connectivity, the Wi-Fi standards, can you say what your revenue split is right now? And how quickly is Wi-Fi growing? And then my follow-up question will be around Wi-Fi7 and what are the forecasts for that as far as the adoption rate?
Michael Hurlston: Number 1, we don't break it out. I think that now we've tried to give you and the rest of the folks that follow the stock a better look into the business by breaking out Core IoT. But within Core IoT, we certainly don't break out what's processors and what's wireless. I will say it's mostly wireless. I mean, today our processor line is there and we talked about some wins in that space in the prepared remarks. But generally, Wi-Fi is the story. Wi-Fi is doing well. We're getting that business back on track. It was plagued by quite a bit of inventory. And now we're starting to see that business come back in a fairly appreciable way. So we feel pretty good about that. For us, you touched on it, you might have a different question around it when we get there. But Wi-Fi7 is we haven't launched Wi-Fi7. Wi-Fi7 generally still isn't available from an infrastructure standpoint. Our biggest issue right now is actually transitioning the customer base from Wi-Fi5 to Wi-Fi6. And we've got a full suite of Wi-Fi6 products. Our mix is still less than 50% on Wi-Fi6. So we see a pretty significant opportunity to transition the customer base from Wi-Fi4 and 5 to 6. We will, as I said in the prepared remarks, be introducing a Wi-Fi7 chip at the end of the year. And look, we think we're going to be first for an IoT class product that incorporates the Wi-Fi7 standard. But I think that's going to be a while before it really grabs any sort of meaningful foothold.
Kevin Cassidy: And on the docking station, is enterprise is slow, but is there inventory on top of that? Does the inventory still have to be depleted? And we're just waiting for enterprise to come back and then it might still be a quarter or so before we see that business growing again?
Michael Hurlston: Yes. So I mean, first, Kevin, it did grow. So I think we're coming off the bottom on dock. There still are pockets of inventory. I think I may have said to a previous question that we have kind of 2 halves of the business, as you know well, the DisplayLink and DisplayPort sides of the business. The DisplayLink, which is the Dock Anywhere, has a bit more inventory that I think we need to work through. And that's a big piece of our gross margin profile. So that's been particularly slow. The DisplayPort side of the business, I think we're probably at equilibrium now. That's the piece that kind of grew on quarter. And that's facing more of this demand challenge that I highlighted in Quinn's question, where we see pretty suppressed demand across the enterprise and automotive portfolio. As demand normalizes, we'd expect that docking business universally to pull back up.
Operator: Our next question is from Krish Sankar of TD Cowen.
Krish Sankar: Michael, I had 2 of them too. First one on gross margins, you keep hearing about lagging as foundry vapor prices have come down, but you're not seeing any gross margin benefit for you. So I'm just kind of curious, is your gross margin really tied to volume or in the Enterprise Auto segment or, is there something else going on?
Michael Hurlston: I mean, I think there's 2 factors for us. One and the dominant factor is mix and we've you and I have talked about this a couple of times. And our mix for our gross margin profile, the enterprise and automotive is our strongest driver. And again, there's mixed issues within enterprise and automotive. But the slowest part right now of our E&A business is also our highest margin. That's comment one. Comment two, I would agree with you that the foundry pricing seems to move a lot. We are partnered with one particular foundry guy. As you know, we kind of moved our strategy to be very, very heavily weighted toward one supplier. That one supplier has been the slowest to move on pricing. So I would say that we are hearing the same things that you are that there are price, there's price relief across the semiconductor supply chain. I think that's less true with some of the bigger suppliers. And we are certainly partnered with one of the biggest and that particular supplier has been less apt to move and respond to kind of current pricing conditions.
Krish Sankar: And then a follow-up, thanks for some of the color you gave on the Astra platform. It seems like you've seen some Edge IoT devices for AI come out lately, but the issue seems to be around latency. From Astra's standpoint, do you require a smaller and more optimized AI model to run full inference on devices or you think the model sizes today, you can actually run full inference with no latency with your actual platform?
Michael Hurlston: Look, I think on Astra, well the technology, we can't run large language models or gene sequencing or things like that. But within the 2 and 4 core portfolio, we can run a whole gamut of AI models. And those AI models are large in size. They come from a traditional AI source, such as an NVIDIA (NASDAQ:NVDA) being trained in the data center, our trick is we have a compiler that takes those models and compiles them into our code size. And at least as far as I understand it, and we've spent a lot of time on this with our division head, those models run without latency problems. I mean, that's one of the advantages that we highlight in this business that we have very little latency, high security and high power efficiency across this product line. And that's one of the advantages we bring. Rather than having to go back and forth to the data center, you can run these AI models on chip. And obviously that has significant latency advantages.
Operator: Our final question comes from Peter Peng of JP Morgan.
Peter Peng: Just for the wireless portion in your Core IoT, it was kind of at that $200 million revenue run rate. I think where are we and are you still confident in getting back to those levels?
Michael Hurlston: Yes, Peter. No, I mean, we are obviously very confident in being able to get back to those levels. I think like we've been talking about with enterprise and automotive, there is a demand issue in the wireless. It's some of it's consumer facing. We actually have quite a bit of it that's enterprise facing. Our inventory as we said in the prepared remarks is largely worked through. So now it's a little bit of a suppressed demand environment. We'd expect that we continue to work through that demand will return and when it does we'd expect that to go to $200 million and beyond. And then in addition as we talked about, we have a lot of new products, our new products that are coming online and we also have new design wins that are coming online. So the sum total of those obviously gives us a lot of confidence in that wireless business. We would expect we haven't seen that snap back to $200 million, but we'd expect to get there and beyond as time goes forward.
Peter Peng: And then my thoughts on your mobile. So, that low-single-digit, that's like almost a $9 million to $10 million revenue drop off per quarter. And so you have and you talked about, potentially winning some in the mid-tier Android space and then you combine that with the Android recovery. So, like, as we kind of think about fiscal '25 for your mobile, is this going to be flat, down, up? Any indication would be helpful.
Michael Hurlston: Yes, I mean, probably I would say too early to call. You got the puts and takes right. I mean, I think that in general, we'll be sort of a low-double-digits type of hole that we have to fill due to the DDIC socket. I think the numbers are about right and we've talked about that on lots of different calls. So I think that you have the framing of it roughly correct. We are winning, we did really well last year with flipping one of the large Android customers over. We seem to be holding up really well in China. So our China handset business is very, very strong and we have high market share. We do as you called out, we expect to win now in the mid-tier. So kind of the sum total of that, I would expect that on balance, flattish is probably where we end up in that business, but again, too early to sort of call.
Operator: Thank you. I'm showing no further questions at this time. I would now like to turn it back to Michael Hurlston, CEO for closing remarks.
Michael Hurlston: I'd just like to thank all of you for joining us today. We look forward to speaking to you at our upcoming investor conferences during the quarter. Thanks a lot.
Operator: Thank you for your participation in today's conference. This does conclude the program. You may now disconnect.
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