Ladies and gentlemen, thank you for standing by, and welcome to the Synaptics to acquire DSP Group accelerates leadership in low power edge AI conference call. At this time, all participant lines are in a listen-only mode. After the speaker's presentation, there'll be a question- and- answer session. To ask a question during the session, you will need to press star, then one on your telephone. Please be advised that today's conference is being recorded. If you require any further assistance, please press star then zero. I would now like to hand the conference over to your host today, Munjal Shah, Head of Investor Relations. Please go ahead. Thank you. Good morning, and thank you for joining us today to discuss Synaptics acquisition of DSP Group. My name is Munjal Shah, and I'm Head of Investor Relations at Synaptics. With me on today's call are Michael Hurlston, our President and CEO, and Dean Butler, our CFO. Following our prepared remarks, we will open up the call for questions. 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. We will be using a supplemental slide presentation during this call, which is posted on our investor relations website. This conference call, the associate press release, and the presentation made available today contain certain forward-looking statements within the meaning of applicable securities law. These forward-looking statements relate to our financial condition, results of operation, plans, objectives, future performance and business, including expectations regarding the proposed transaction between Synaptics and DSP Group, the expected timetable for completing the transaction, and the potential benefits of the transaction. Our estimates and assumptions are subject to a number of risks and uncertainties beyond our control and may prove to be inaccurate, including substantial risks and uncertainties arising from the transaction, the integration of the acquired business into Synaptics, employee and customer retention, substantial competition, and the growth opportunities may not develop as we currently expect. Synaptics cautions that actual results may differ materially from any future performance suggested in the company's forward-looking statement. 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 26, 2021, for important risk factors that could cause actual results to differ materially from those contained in any forward-looking statement. Synaptics expressly disclaims any obligation to update this forward-looking information. The discussion in this conference call will be limited only to the proposed acquisition. In addition, management will also discuss financial metrics on a non-GAAP basis, which excludes share-based compensation, acquisition-related costs, and certain other non-cash or recurring or non-recurring items. We ask you to refrain from asking any questions related to current business environment and near-term outlook for our business. I will now turn the call over to Michael. Great job, Munjal, and thanks, everyone, for joining us on this call this morning. I'm excited to be talking to you again and discussing the strategic rationale for acquiring DSP Group. This is a net $450 million all-cash transaction that accelerates our leadership in low-power edge AI, augments our machine learning capabilities, and increases our total serviceable market by more than $2 billion. This synergistic combination adds additional breadth to our already successful wireless technology portfolio and lays the foundation for a stronger combined roadmap in security applications, ultimately providing access to an additional $800 million addressable market. Further, the two companies operate in many of the same end markets with a shared customer footprint, enabling us to uniquely extract synergies from this acquisition. We expect the acquisition to be immediately accretive to our non-GAAP earnings. This is a financially compelling acquisition that positions us for strong growth in SmartVoice while accelerating our IoT diversification and increasing our cash flow. Dean will discuss the financial aspects of this transaction in greater detail later on the call. Why are we going after the low-power edge AI market and why DSPG? DSP Group has a fast-growing SmartVoice business with differentiated technology that is breaking early ground in artificial intelligence at the edge. The basic idea that many companies are chasing is to build a low-power embedded IC that can make instantaneous decisions on the device itself, rather than having to pass information back and forth to the cloud. DSP Group has already achieved this goal with many voice and audio use cases and has the team and expertise to expand into computer vision and other TinyML applications in the future. We believe AI at the edge is a long-term opportunity for Synaptics and represents the natural evolution for our IoT offerings. The immediate set of use cases is quite clear and revolves around event-driven audio, whether it be human voice or things like breaking glass. DSP Group has best-in-class technology for these applications, and we expect the audio-only market to expand significantly in the coming years. Things get really interesting when you add vision use cases. Applications that come immediately to mind are people counting, shelf monitoring, and asset tracking. We were already attempting to address these functions with our Katana platform that we discussed briefly on our last earnings call. With the additional know-how and resources from DSP Group, we believe we can be an early leader in addressing this emerging $2 billion market opportunity, merging the two roadmaps, and enabling both voice and vision machine learning applications at the edge of the network. By adding ULE, ultra-low energy, to our wireless portfolio, the acquisition allows us to further target the smart home and expand our offering in the security market. ULE-enabled security is expected to grow to about $800 million in the next few years, adding incremental SAM for Synaptics. This wireless technology is being used by leading home security vendors to connect sensors to a central hub. The ULE wireless standard is unique in its ability to securely establish communication protocols between endpoints and operates in a clean, interference-free spectrum. It complements our existing offerings for the smart home market and creates a significant cross-selling opportunity for us across the customer base. An increasing number of devices are being connected by wireless technology in the home. With this acquisition, we now have a complete portfolio that addresses a broad range of devices and applications. With the addition of the DSP Group's wireless engineering team, we obtain yet another set of expertise that can be deployed across our growing portfolio of wireless connectivity solutions. For example, we can add capable people to accelerate our Wi-Fi 7 initiative for the IoT market. DSP Group has built a highly differentiated and sticky business across a diverse customer base of leading OEMs. Over the past year, Synaptics has focused on selling our entire portfolio into any given design, with currently half of our top 20 customers buying three or more distinct technologies from Synaptics. With the addition of the complementary products offered by DSP Group, we have even more technology to sell to the combined customer base. For example, we can sell Wi-Fi and touch technologies into VoIP designs already serviced by DSP Group, while conversely, selling SmartVoice and ULE into service provider gateway sockets already served by Synaptics. With that, let me turn the call over to Dean to discuss the financial aspects of the transaction. Dean? Thank you, Michael, and good morning to everyone. Let me provide you with the financial details and rationale for this acquisition. In the recently completed June quarter, DSP Group generated $35.8 million in revenue with nearly 70% from IoT technologies. This is highly complementary to our existing business and grew at 11% CAGR over the past several years, with the SmartVoice AI products having grown at 59% CAGR. Long- term, we expect this business to have a similar margin and profitability profile to our standalone business. Post-close, DSP Group will become part of our existing IoT business. As we've highlighted, IoT is the largest part of our portfolio, and this acquisition will both enhance and diversify our offerings in that business area. Today, 50% of our revenue is from IoT. When DSP Group is taken into account, our IoT mix will increase to around 55% of revenue on a pro forma basis. DSP Group is a financially compelling acquisition, and we expect it to be immediately accretive to our non-GAAP earnings. As Michael pointed out, we are in a unique position to leverage our capabilities to drive synergies and further improvement on our combined operations. We believe we can extract an additional $30 million in annualized run rate operating expense savings within 12 months post-close, effectively valuing this transaction at an estimated 3x enterprise value to sales or about 9x enterprise value to EBITDA. As we capture these synergies and further optimize operations over the next 12 months, we believe we can achieve a combined adjusted EBITDA of approximately $500 million-$550 million annually, which enables the rapid paydown of our debt and further future financial flexibility. Our expectation is to drive DSP Group to a sustainable 10% or better top-line growth rate, gross margins that meet or exceed our consolidated non-GAAP corporate gross margin of 57%, and non-GAAP operating margins of 35% or better. We will be acquiring this business for a total consideration net of cash on hand of $450 million, which incorporates DSP Group's current cash and equivalents balance of $130 million. This is an all-cash transaction and is expected to be funded with a combination of cash on hand and a fully committed pre-payable debt financing. At the time of closing, we would estimate that the pro forma leverage for the combined company to remain low at approximately 1.1x net leverage, which includes our synergy plan. The acquisition is expected to close by the end of the calendar year 2021 and is subject to the approval of DSP Group shareholders and customary closing conditions. We do not expect there will be any regulatory filings required. In summary, this acquisition is a great fit with our long-term strategy. This is a complementary business which expands our reach into the IoT market and accelerates our existing low-power edge AI strategy. The addition of DSP Group to Synaptics is complementary to our wireless portfolio roadmap and offers synergy opportunities unique to the combination. We are expanding our serviceable and addressable market reach by almost $3 billion, We will be able to cross-sell a broader portfolio to our customer base. Finally, we expect the acquisition to be immediately accretive to our non-GAAP earnings and EPS, putting Synaptics on even better financial footing. With that, I would now like to turn the call over to the operator for Q&A. Operator? Thank you. As a reminder to ask a question, you will need to press star then one on your telephone. To withdraw your question, please press the pound key. Please stand by while we compile the Q&A roster. Our first question comes from the line of Kevin Cassidy with Rosenblatt Securities. Your line is now open. Good morning. Congratulations on the acquisition. It's going to close pretty quickly. Does that mean there's no approvals are needed around the geography around the world? Yeah, that's right, Kevin. We've completed obviously all the relevant legal diligence around regulatory filings. The only significant is the shareholder vote on the DSP Group side. There aren't any regulatory government filings and approvals required for any jurisdiction around the world. We do expect it to close by the end of this calendar year. Okay, great. Maybe just on the technology side, can their design be integrated in with your Katana designs with the SmartVoice, so you'd have audio in along with it? Or is it two separate chips? Yeah, it can be integrated, Kevin. The way we see it going is that their device will form probably a better base for a future chip that would combine both audio and video. We've talked a lot about video use cases, but we actually think the two need to be combined. Katana had some idea of that, but by acquiring DSP Group, we think we can put those two technologies together a lot quicker and can enable that simultaneous voice and video use case. Okay, great. Thank you. Thanks, Kevin. Thank you. Our next question comes from the line of Raji Gill with Needham & Company. Your line is now open. Yes, thank you, and congrats on the acquisition. I think it makes some strategic sense. Just on the business lines, Michael and Dean, the unified communications, the voice-over IP business at DSP was kind of separate from their SmartVoice or their ULE business. Just wondering how you're thinking about their enterprise VoIP solution as a standalone business and how you intend to incorporate that, because that's somewhat distinct from the smart home ULE and then the SmartVoice products. About 30% or 31% of their business has been coming from cordless phone chipsets, which have been in a steady decline over the last several years. They've been cash cowing that business, but how do you view that business as part of this overall strategy? Hey, Raji. Thanks for the kind words. Let me start with the VoIP business. Basically, that market is a duopoly. I think the only other competitor in it is Broadcom. We see opportunities there to go after market share. We think we can actually improve the overall market share of the product line, but then do some cross-selling, because a lot of the VoIP phones have Wi-Fi, they have touch products in them. They can even have display drivers for the little mini display on the phone. We think that that's a good opportunity. As you look at it going forward, interestingly enough, the most applicable product synergy is around our DisplayLink asset. VoIP is going to be included in video conferencing, and we've talked about recently our expansion of the DisplayLink asset in the video conferencing area. We see a future where we would do some of these video conferencing rooms that are really emerging, combining the VoIP application with DisplayLink to create an easy Zoom room. That's the first thing. With respect to cordless, again, I think we have unique advantages. They probably had some challenges. We have businesses like that, as you likely know, Raji, like fax and printer, where we're selling into an ostensibly declining market. We've been able to hold revenue flat in those markets and actually improve the gross margin, and we see the same thing here. One, we think we're going to be able to get product cost synergies out, and so we think the cost basis of their cordless business will come down. Two, we think that there's opportunity to manage the customer, again, do some cross-selling and, in aggregate, hold that business flat instead of seeing the decline that DSPG has experienced. We don't expect growth, obviously. We don't expect unit growth. We're going to have to do things around ASP and again, around some cross-selling to keep that business in aggregate flat. Yeah, I think that makes sense. I guess to that point, DSP's revenue has been kind of in this $115 million-$117 million range for the past several years. This year, it's on track to do maybe $140 million as we see a recovery in some of their end markets. They have been transitioning from legacy cordless to more of these new products on the VoIP and the smart voice, smart home side. When you're talking about sustaining a 10% long-term CAGR, I'm curious how you're thinking about the piece parts there in terms of the specific growth drivers. Some of the newer products have been a little bit lumpy in terms of their sales, and then obviously in the past, you've had the decline of the cordless chipset. I know you're attempting to try to stabilize it. With the exception of this year, the revenue has been kind of in this $114 million-$115 million range. Curious how you're thinking about the long-term kind of growth rate of 10%, and specifically, what are you expecting for each of the business lines? Thanks. Yeah. These guys have had sort of a similar trajectory as we had, and you've covered our story for a long time, and we had to dig out of a big hole on our largest customer in the LCD display driver and then build businesses that were offsetting that. Really, just until recently, we were busy digging out of that hole. I think you and others have kind of recognized us for being able to get out of that and transition up. We see DSPG sort of in the same way, right? We see them having to have dug out from that cordless hole and have businesses that grow on top of it. They're not all the way through that transition. We think by coming together, first, as you correctly said a second ago, we stabilize the cordless business and potentially stop some of that decline. We think that we can call that at a rough nadir, as we have with our LCD display driver in mobile. The businesses that we obviously think are growers, UCC is modest. I think there's a decent amount of growth in that business as we take share, as we do things to improve our own portfolio and sort of cross-sell. I would put that as kind of a modest grower. Where we're most excited, you touched on, is ULE, right? We think that business can probably outstrip the growth rate of the combined companies because the security market is still a relatively nascent one. I think that one of the challenges in the security market has been they're almost a unique provider there, and the operators are reticent to go with a relatively small company. I think us coming in will bring a lot to bear, and we think we can actually catalyze the ULE market and perhaps breed some confidence into it and accelerate its growth. The one that we think is the high mark market, Raji, is SmartVoice, right? We think that one will far outgrow the long-term targets, both that Dean put out for DSP Group and our own targets, and we think that'll eventually become the dominant pole. It's going to take a while to play out. I think the near-term audio opportunity has really good growth characteristics, as Dean talked about. Its CAGR has been in the 60% range. We think when we add video on top of that, as Kevin Cassidy asked, we think that that growth rate will be another inflection point. Again, it's going to take some time to play out, and it's a relatively small part of their overall portfolio. You got it. Appreciate it. Thank you. Our next question comes from the line of Karl Ackerman with Cowen & Company. Your line is now open. Yes. Good morning, gentlemen. May you discuss the composition of synergies, and given the merging of the two roadmaps with integrated vision and voice, should we expect you to redeploy all of those savings into these cross-selling opportunities you've discussed today? Yeah. Hey, Karl, it's Dean. On the synergy side, it's $30 million of operating expense synergies. That's combining the roadmaps of the two companies, and redeploying the engineering into the areas that we think is most exciting, primarily around some of these SmartVoice applications and the security applications that we talked about. That redeployment of the roadmap, you will be able to continue to enjoy that $30 million in operating expense synergies on a go-forward basis. There's also some margin-related synergies on the gross margin side. As a much larger company at Synaptics, we think we have some cost advantages and some overhead absorption advantages that will improve gross margins along the way. Of course, what is on top of that, which quite frankly is an upside to even our own model, is the cross-selling opportunities on the revenue side. What we see as a 10% real revenue CAGR for this standalone business going forward does not include some of the cross-selling opportunities, which I think could far and exceed that if we're successful. Yeah. Karl, just to sort of add color, again, we would expect to see the $30 million in synergies irrespective of the redeployment. We're going to have our cake and eat it too. We'll redeploy resources onto the opportunity, but we'll still realize the synergy numbers, because we'll probably reduce some investment elsewhere and then be able to really focus on the two opportunities that we like the best. Very clear. Appreciate that. As you talk about the opportunities to cross-sell your portfolio, could you discuss the customer overlap, and the breadth of customers that DSP adds to your combined IoT business? Thank you. Yeah. The overlap is really high. Almost all of our top customers they sell into and the top customers they have, we sell into. Even in cordless, with their largest customers, we have small footprints with them today. Companies like VTech, which they've done a bang-up job with, we actually have a product selling into that customer. I would say, particularly in SmartVoice, where there are opportunities with PC companies, consumer companies, where we have focused, we really, really think that that cross-selling opportunity is going to be very, very high, where the combined companies now will be much more meaningful to those PC or those consumer class companies that already are an important part of our customer makeup. Thank you. We'll go to the next. Thank you. Our next question comes from the line of Vijay Rakesh with Mizuho. Your line is now open. Yeah. Thanks, guys. Dean and Mike, looks like a great acquisition here. You're pushing on your IoT strategy. Just a couple of questions on the DSPG acquisition here. How does this position you competitively? Who are the other guys that are doing voice and audio-video platform? If you can talk to that, if you're bringing a whole new different value proposition, and that puts you in a much better position? Yeah, Vijay. It's an early market, but there are a whole host of people trying to get into it. There's a series of start-up companies that are trying to prosecute that market, but we definitely see entrants like NXP and Qualcomm, bigger players that are beginning to compete, particularly as you go into these vision use cases. Getting the acceleration of being first mover in the market is really important. We will have a difficult time competing with larger companies if we don't get that first-mover advantage, and that's why we felt like the timing was pretty critical here. Hopefully, that gives you some perspective. Got it. In terms of cross-sell, I know you mentioned with the cross-sell opportunities, you should be able to grow faster than the 10% top-line growth that they were doing. Are you seeing more of the opportunities with the low-power edge AI more on the consumer side, or is this pretty much something that you can push into all the other different markets as well? Thanks. Low-power edge AI, particularly now just kind of focusing on their existing business, which has great growth characteristics in and of itself, is there's consumer, but there's also industrial. We've seen enterprise use cases for it. There's a pretty broad set of use cases that they're just beginning to tap into. One of the problems has been that there's no wireless that they have associated with it, so they've had to, in each of the designs that they've gone after, they have to marry up to a different wireless technology and spend time on that integration. We obviously simplify that path. Vijay, we have thoughts of actually modularizing it. If you remember, we've talked to you about our wireless business. We've been able to really accelerate our growth by putting the wireless into a module. We think we can do that here again by putting their low-power edge AI device together with wireless in a module. We think we really do reduce customer friction and accelerate our time to market. Great. Thanks a lot. Good question, Vijay. Thank you. Thank you. Our last question comes from the line of Derek Soderberg with Colliers Securities. Your line is now open. Hey, guys. Congrats on the acquisition. Seems like a great fit. I guess I was just curious, back to the cost savings, $30 million or so annually. I think DSPG runs at about $65 million or so annually in OpEx, so a decent chunk of that business. Should we think about that as you guys have sort of identified pieces of that company that you want to take investments from, and sort of reallocate towards maybe IoT? Is that how we should think about it? Maybe you guys are taking away maybe some investment from cordless. How should we think about that? Derek, you got it right. I think there's a good chunk that we're probably going to deprioritize within their investment profile. Cordless is a good example of things that we probably will slow that roadmap from here and really focus on the things that we're excited about owning this business in the two areas that Michael talked about earlier. There's also a big component on the overall footprint of the two businesses. We operate in similar geographies. There's public costs as a public company. There's functions that are duplicate across corporate functions, the two companies that are just sort of easy fits to bring under the Synaptics fold. Obviously, as we run a consolidated supply chain, that should be more efficient as well. If that gives you a sense, Derek. Perfect. That was the only one for me. Thanks. Perfect. Thank you, Derek. Thanks, Derek. Thank you. There are no further questions. I will now turn the call over to Michael Hurlston for closing remarks. I'd like to thank all of you for joining us today. This is another exciting addition to our portfolio, and I'm confident that this will make Synaptics a stronger company long- term. We're in a unique position here, and our ability to combine these two industry-leading portfolios will enable us to serve our customers better with a more complete portfolio and accelerated roadmap. We look forward to speaking to you again when we release our first quarter results. Thank you. Ladies and gentlemen, this concludes today's conference call. Thank you for your participation. You may now disconnect.