SYNAPTICS Inc

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Changes to International Trade Policy, Tariffs, and Export Controls Could Materially and Adversely Affect Our Business, Customers, Supply Chain, Stock Price and Financial Results

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In the first quarter of 2025, the United States government announced additional tariffs on goods imported into the U.S. from numerous countries, and multiple countries countered with reciprocal tariffs and other actions in response. Changes in trade policies and a heightened risk of further increased tariffs or other trade restrictions could further reduce international demand, potentially resulting in our customers adjusting purchasing behaviors for our products in response to these regulatory shifts. Furthermore, evolving export controls and the implementation of new tariffs may increase compliance costs and adversely impact our business and operating results.

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It is unclear how or to what extent these changing trade policies and regulations could impact our business at this time. Additional risks and uncertainties - whether currently unknown or considered immaterial - could materially and adversely affect our business, financial condition, or operating results. These may include adverse macroeconomic conditions, such as tariffs, trade disruptions, and inflationary pressures, which may affect demand for our products or increase our product or labor costs, negatively impacting our revenues, gross margins, and overall financial results. If any of these risks occur, our business, financial condition, operating results, and cash flows could be materially adversely affected, and the trading price of our common stock could decline.

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Risks Related to Ownership of Our Convertible Senior Notes

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Servicing our debt may require a significant amount of cash. We may not have sufficient cash flows from our business to pay our indebtedness, and we may not have the ability to raise the funds necessary to settle conversions of the convertible senior notes in cash or to repurchase the convertible senior notes for cash upon a fundamental change, which could adversely affect our business and results of operations.

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In November 2024, we issued $450.0 million in aggregate principal amount of the 2031 Notes in a private offering. The 2031 Notes mature on December 1, 2031, and bear interest at a fixed rate of 0.75% per annum, payable semiannually in arrears on June 1 and December 1 of each year, beginning on June 1, 2025.

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Our ability to make scheduled payments of interest under our 2031 Notes, or to refinance such indebtedness, depends on our future performance, which is subject to economic, financial, competitive and other factors beyond our control, including those described in this report. Our business may not generate cash flows from operations in the future that are sufficient to service our indebtedness and make necessary capital expenditures. If we are unable to generate sufficient cash flows, we may be required to pursue one or more alternatives, such as selling assets, restructuring debt or obtaining additional debt financing or equity capital on terms that may be highly dilutive to existing holders of our common stock. Our ability to obtain additional financing or refinance the 2031 Notes, or any future indebtedness, will depend on conditions in the capital markets and our financial condition at such time, among other factors. We may not be able to engage in any of these activities on favorable terms or at all, which could result in a default on our debt obligations or other material adverse effects on our business and financial condition.

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Subject to certain conditions, holders of the 2031 Notes have the right to require us to repurchase for cash all or any portion of their 2031 Notes upon the occurrence of a fundamental change at a make-whole premium through an increase to the conversion rate (as defined in the indenture governing the 2031 Notes), plus accrued and unpaid interest, if any, to, but excluding, the applicable fundamental change repurchase date.

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Upon conversion of the 2031 Notes in accordance with their terms, unless we elect to solely deliver shares of our common stock to settle such conversion (other than paying cash in lieu of delivering any fractional shares), we will be required to settle a portion or all of our conversion obligation through the payment of cash. We may not have enough available cash or be able to obtain financing at the time we are required to make repurchases in connection with such conversions and our ability to pay may be further limited by law, regulatory authority or agreements governing our future indebtedness. Our failure to repurchase any convertible senior notes at a time when the repurchase is required by the applicable indenture or to pay any cash payable on any future conversions as required by such indenture would constitute a default under such indenture. A default under the applicable indenture would, and the occurrence of the fundamental change itself may, lead to a default under agreements governing our future indebtedness. If the repayment of the related indebtedness were to be accelerated after any applicable notice or grace periods, we may not have sufficient funds to repay the indebtedness or repurchase the convertible senior notes when required, or to make cash payments upon conversions thereof.

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If triggered, the conditional conversion features of the convertible senior notes may adversely affect our financial condition and operating results.

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If and to the extent the conditional conversion features of our 2031 Notes are triggered, holders of such convertible senior notes will be entitled to convert their convertible senior notes at any time during specified periods at their option. The holders of the 2031 Notes are not entitled to convert their convertible senior notes during the third quarter of fiscal 2025. Whether our 2031 Notes will be convertible after the third quarter of fiscal 2025 will depend on the satisfaction of the applicable conversion conditions.

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To the extent that the conditional conversion features of either or both series of our convertible senior notes are triggered in the future, holders of such convertible senior notes will be entitled to convert their convertible senior notes at any time during the specified periods at their option. If one or more holders elect to convert their convertible senior notes during any such specified period, we have the option to pay or deliver, as the case may be, cash, shares of our common stock or a combination of cash and shares of our common stock, at our election. Any election to settle conversions of convertible senior notes with cash could adversely affect our liquidity.

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Transactions relating to the convertible senior notes may dilute the ownership interests of our existing stockholders or adversely affect the market price of our common stock; the trading price of our convertible senior notes may be affected by volatility in the price of our common stock.

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The conversion of some or all of the convertible senior notes would dilute the ownership interests of our existing stockholders to the extent we satisfy our conversion obligation by delivering shares of our common stock. In this regard, if holders of the 2031 Notes elect to convert their notes, we may settle our conversion obligations by delivering to them cash, shares of our common stock or a combination thereof. In addition, we may issue shares of our common stock in connection with repurchases, exchanges or other transactions involving the 2031 Notes. Historically, we have elected to satisfy our convertible senior note conversion obligations through the payment of cash in certain circumstances, the issuance of shares of common stock in other circumstances, or a combination thereof, to such convertible senior note holders.

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In addition, in connection with the issuance of each series of the convertible senior notes, we entered into capped call transactions with certain financial institutions, or the Option Counterparties. The capped call transactions are expected generally to reduce the potential dilution to holders of our common stock upon any conversion or settlement of the convertible notes and/or offset any cash payments we are required to make in excess of the principal amount of such convertible senior notes, as the case may be, with such reduction, offset or a combination thereof subject to a cap under the terms of the capped call transactions. We expect that the Option Counterparties or their respective affiliates may from time to time purchase shares of our common stock, enter into various derivative transactions with respect to our common stock or a combination thereof in connection with their hedging activities relating to the capped call transactions. The Option Counterparties or their respective affiliates also may modify their hedge positions by entering into or unwinding such derivative transactions, purchasing or selling our common stock or other securities of ours in secondary market transactions or a combination thereof prior to the applicable maturity of the convertible senior notes. These activities could negatively affect the market price of our common stock.

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Volatility and declines in the trading price of our common stock may result in decreases in the trading prices of our convertible senior notes. Our convertible senior notes do not trade in a liquid market and are thus subject to increased volatility, particularly when our common stock price is volatile.