SYNAPTICS Inc 10-K

ITEM 9A. CONTROLS AND PROCEDURES Conclusions Regarding Disclosure Controls and Procedures Although many of the restrictions and containment measures implemented by governmental authorities in response to the COVID-19 pandemic have since been lifted or scaled back, some of our employees continue to work from home, or on a hybrid basis. Established business continuity plans were initiated in order to mitigate the impact to our control environment, operating procedures, data, and internal controls. The design of our processes and controls allow for remote execution with accessibility to secure data. 44 Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, we conducted an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act). Based on this evaluation, our Chief Executive Officer and Chief Financial Officer, as of June 25, 2022, concluded that our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) were effective to ensure that information required to be disclosed by us in the reports we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the SEC rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. Management’s Report on Internal Control Over Financial Reporting Our management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) for our company. Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, we conducted an evaluation of the effectiveness of our internal control over financial reporting based on the framework in the Internal Control—Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO 2013 framework). Based on our evaluation under the COSO 2013 framework, our management concluded that our internal control over financial reporting was effective, at the reasonable assurance level, as of June 25, 2022. The effectiveness of our internal control over financial reporting as of June 25, 2022 has been audited by KPMG LLP, an independent registered public accounting firm, as stated in their report included herein on page F-2. Changes in Internal Control Over Financial Reporting Except as noted above, there were no changes in our internal control over financial reporting that occurred during our most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting. Inherent Limitations on Effectiveness of Controls Our management, including our Chief Executive Officer and Chief Financial Officer, does not expect that our disclosure controls and procedures or our internal controls over financial reporting will prevent all error and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues, misstatements, errors, and instances of fraud, if any, within our company have been or will be prevented or detected. Further, internal controls may become inadequate as a result of changes in conditions, or through the deterioration of the degree of compliance with policies or procedures. ITEM 9B. OTHER INFORMATION There were no items requiring reporting on Form 8-K that were not reported on Form 8-K during the fourth quarter of the year covered by this Form 10-K. 45 PART III ITEM 10. DIRECTORS, EXECUTIVE OF FICERS AND CORPORATE GOVERNANCE The information required by this Item relating to directors of our company and corporate governance is incorporated herein by reference to the definitive Proxy Statement to be filed pursuant to Regulation 14A of the Exchange Act for our 2022 Annual Meeting of Stockholders. The information required by this Item relating to our executive officers is included in Item 1. Business – Information about our Executive Officers. We have adopted a code of ethics that applies to our chief executive officer, chief financial officer, chief accounting officer, and other senior accounting personnel. The “Code of Ethics for the CEO and Senior Financial Officers” is located on our website at www.synaptics.com in the Investor Relations section under Corporate Governance. We intend to satisfy the disclosure requirement under Item 5.05(c) of Form 8-K regarding any amendment to, or waiver from, a provision of this code of ethics by posting such information on our website, at the address and location specified above. ITEM 11. EXECUTI VE COMPENSATION The information required by this Item is incorporated herein by reference to the definitive Proxy Statement (particularly under the caption “Executive Compensation”) to be filed pursuant to Regulation 14A of the Exchange Act for our 2022 Annual Meeting of Stockholders. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OW NERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS The information required by this Item is incorporated herein by reference to the definitive Proxy Statement (particularly under the captions “Security Ownership of Principal Stockholders, Directors, and Officers” and “Executive Compensation—Stock-Based Compensation Plan Information”) to be filed pursuant to Regulation 14A of the Exchange Act for our 2022 Annual Meeting of Stockholders. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE The information required by this Item is incorporated herein by reference to the definitive Proxy Statement (particularly under the caption “Certain Relationships and Related Transactions”) to be filed pursuant to Regulation 14A of the Exchange Act for our 2022 Annual Meeting of Stockholders. ITEM 14. PRINCIPAL ACCOU NTANT FEES AND SERVICES The information required by this Item is incorporated herein by reference to the definitive Proxy Statement (particularly under the caption “Ratification of Appointment of Independent Auditor”) to be filed pursuant to Regulation 14A of the Exchange Act for our 2022 Annual Meeting of Stockholders. 46 PART IV ITEM 15. EXHIBITS AND FINA NCIAL STATEMENT SCHEDULES (a) Financial Statements and Financial Statement Schedules (1) Financial Statements are listed in the Index to Financial Statements on page F-1 of this report. (b) Exhibits Incorporated by Reference Exhibit Number Exhibit To Date Filed 2.1(a) # Asset Purchase Agreement, dated December 18, 2019, by and among Synaptics Incorporated and Creative Legend Investments Ltd. Quarterly Report on Form 10-Q February 6, 2020 2.1(b) # First Amendment to Asset Purchase Agreement, dated March 3, 2020, by and among Synaptics Incorporated and Creative Legend Investments Ltd . Quarterly Report on Form 10-Q May 7, 2020 2.1(c) Second Amendment to Asset Purchase Agreement, dated April 15, 2020, by and among Synaptics Incorporated and Beijing OmniVision Technologies Co. Ltd. Annual Report on Form 10-K August 21, 2020 2.2 # Agreement and Plan of Merger, dated July 17, 2020, by and among Synaptics Incorporated, DisplayLink Corp., Falcon Merger Sub, Inc., the sellers who became parties thereto and Shareholder Representative Services LLC Quarterly Report on Form 10-Q November 5, 2020 2.3 Agreement and Plan of Merger by and among DSP Group, Inc., Synaptics Incorporated and Osprey Merger Sub, Inc., dated as of August 30, 2021. Quarterly Report on Form 10-Q November 4, 2021 3.1 Certificate of Incorporation Quarterly Report on Form 10-Q February 21, 2002 3.2 Certificate of Designation of Series A Junior Participating Preferred Stock Registration Statement on Form 8-A August 16, 2002 3.3 Third Amended and Restated Bylaws (amended and restated as of July 27, 2010) Current Report on Form 8-K August 2, 2010 3.4 Certificate of Amendment of Certificate of Incorporation of the registrant Current Report on Form 8-K December 7, 2004 3.5 Certificate of Amendment of Certificate of Incorporation of the registrant Current Report on Form 8-K October 22, 2010 4.1 Form of Common Stock Certificate Annual Report on Form 10-K September 12, 2002 4.2 Indenture, dated as of June 26, 2017, by and between the Company and Wells Fargo, National Association, as trustee Current Report on Form 8-K June 26, 2017 4.3 Form of 0.50% Convertible Senior Note due 2022 Current Report on Form 8-K June 26, 2017 4.2 Description of Registrant’s Securities Annual Report on Form 10-K August 23, 2019 4.3 Indenture, dated as of March 11, 2021, by and among the Company, the guarantors named therein and Wells Fargo Bank, National Association, as trustee Current Report on Form 8-K March 11, 2021 4.6 Form of 4.000% Senior Notes due 2029 (included in Exhibit 4.3). 47 10.1(a) Second Amended and Restated Credit Agreement, dated March 11, 2021, by and among Synaptics Incorporated, as borrower, the lenders from time to time party thereto, Wells Fargo Bank, National Association, as administrative agent, swingline lender and issuing lender, Wells Fargo Securities, LLC, as joint lead arranger and joint bookrunner, MUFG Union Bank, N.A. and BMO Capital Markets Corp., as joint lead arrangers, joint bookrunners and co-syndication agents Current Report on Form 8-K March 11, 2021 10.1(b) First Amendment and Lender Joinder Agreement, dated as of December 2, 2021, by and among Synaptics Incorporated, the Lenders party thereto, and Wells Fargo Bank, National Association, as Administrative Agent Current Report on Form 8-K December 2, 2021 10.2(a)* Synaptics Incorporated 2019 Inducement Equity Plan Registration Statement on Form S-8 August 16, 2019 10.2(b)* Form of Restricted Stock Unit Inducement Award Agreement for 2019 Inducement Equity Plan Registration Statement on Form S-8 August 16, 2019 10.2(c)* Form of Market Stock Unit Inducement Award Agreement for 2019 Inducement Equity Plan Registration Statement on Form S-8 August 16, 2019 10.2(d)* Form of Performance Stock Unit Inducement Award Agreement for 2019 Inducement Equity Plan Registration Statement on Form S-8 August 16, 2019 10.3(a)* 2019 Equity and Incentive Compensation Plan Registration Statement on Form S-8 November 1, 2019 10.3(b)* Amended and Restated 2019 Equity and Incentive Compensation Plan Current Report on Form 8-K October 29, 2020 10.3(c)* Amended and Restated 2019 Equity and Incentive Compensation Plan Current Report on Form 8-K October 28, 2021 10.3(d)* Form of Restricted Stock Unit Award Agreement under the 2019 Equity and Incentive Compensation Plan (for awards granted before July 27, 2021) Registration Statement on Form S-8 November 1, 2019 10.3(e)* Form of Performance Stock Unit Award Agreement under the 2019 Equity and Incentive Compensation Plan (for awards granted before July 27, 2021) Registration Statement on Form S-8 November 1, 2019 10.3(f)* Form of Market Stock Unit Award Agreement under the 2019 Equity and Incentive Compensation Plan Registration Statement on Form S-8 November 1, 2019 10.3(g)* Form of Restricted Stock Unit Award Agreement under the 2019 Equity and Incentive Compensation Plan (for awards granted after July 27, 2021) Annual Report on Form 10-K August 23, 2021 10.3(h)* Form of Performance Stock Unit Award Agreement under the 2019 Equity and Incentive Compensation Plan (for awards granted after July 27, 2021) Annual Report on Form 10-K August 23, 2021 10.3(i)* Form of Market Stock Unit Award Agreement under the 2019 Equity and Incentive Compensation Plan Quarterly Report on Form 10-Q November 5, 2020 10.3(j)* Form of Performance Stock Unit Award Agreement under the 2019 Equity and Incentive Compensation Plan Quarterly Report on Form 10-Q November 5, 2020 48 10.3(k)* Form of Market Stock Unit Award Agreement under the 2019 Equity and Incentive Compensation Plan Filed herewith 10.4* 2019 Employee Stock Purchase Plan Registration Statement on Form S-8 November 1, 2019 10.5(a)* Amended and Restated 2010 Incentive Compensation Plan, as amended effective on October 30, 2018 Current Report on Form 8-K November 1, 2018 10.5(b)* Form of Non-Qualified Stock Option Agreement for 2010 Incentive Compensation Plan Annual Report on Form 10-K August 18, 2017 10.5(c)* Form of Incentive Stock Option Agreement for 2010 Incentive Compensation Plan Current Report on Form 8-K October 22, 2010 10.5(d)* Form of Deferred Stock Award Agreement for 2010 Incentive Compensation Plan Annual Report on Form 10-K August 18, 2017 10.5(e)* Form of Deferred Stock Award Agreement for Market Stock Units for Amended and Restated 2010 Incentive Compensation Plan Quarterly Report on Form 10-Q February 8, 2018 10.5(f)* Form of Deferred Stock Award Agreement for Performance Stock Units for Amended and Restated 2010 Incentive Compensation Plan Quarterly Report on Form 10-Q February 8, 2018 10.6* Change of Control Severance Policy for Principal Executive Officers Annual Report on Form 10-K August 23, 2019 10.7* Severance Policy for Principal Executive Officers Annual Report on Form 10-K August 23, 2019 10.8* Form of Director and Officer Indemnification Agreement Current Report on Form 8-K May 17, 2016 10.9* Employment Offer Letter, dated February 7, 2019 between the registrant and Kermit Nolan Quarterly Report on Form 10-Q May 9, 2019 10.10* Written Description of the Synaptics Incorporated Retention Program Adopted May 6, 2019 Annual Report on Form 10-K August 23, 2019 10.11* Employment Offer Letter, dated August 1, 2019 between the registrant and Michael Hurlston Quarterly Report on Form 10-Q November 17, 2019 10.12* Employment Offer Letter, dated October 7, 2019 between the registrant and Dean Butler Quarterly Report on Form 10-Q February 6, 2020 10.13* Employment Offer Letter, dated February 26, 2020 between the registrant and Phil Kumin Annual Report on Form 10-K August 21, 2020 10.14* Employment Offer Letter, dated December 4, 2018 between the registrant and Saleel Awsare Annual Report on Form 10-K August 21, 2020 10.17(a) Purchase and Sale Agreement with Escrow Instructions, dated November 24, 2021, by and between Synaptics Incorporated and SBC & D Co., Inc. d/b/a South Bay Development Company Current Report on Form 8-K December 1, 2021 10.17(b) First Amendment to Purchase and Sale Agreement with Escrow Instructions, dated December 20, 2021, by and between Synaptics Incorporated and SBC & D Co., Inc. d/b/a South Bay Development Company Quarterly Report on Form 10-Q February 3, 2022 21 List of Subsidiaries Filed herewith 49 23.1 Consent of Independent Registered Public Accounting Firm Filed herewith 31.1 Certification of Chief Executive Officer pursuant to Rule 13a-14(a)/15d-14(a) Filed herewith 31.2 Certification of Chief Financial Officer pursuant to Rule 13a-14(a)/15d-14(a) Filed herewith 32.1## Section 1350 Certification of Chief Executive Officer Furnished herewith 32.2## Section 1350 Certification of Chief Financial Officer Furnished herewith 101.INS Inline XBRL Instance Document Filed herewith 101.SCH Inline XBRL Taxonomy Extension Schema Document Filed herewith 101.CAL Inline XBRL Taxonomy Extension Calculation Linkbase Document Filed herewith 101.DEF Inline XBRL Taxonomy Extension Definition Linkbase Document Filed herewith 101.LAB Inline XBRL Taxonomy Extension Label Linkbase Document Filed herewith 101.PRE Inline XBRL Taxonomy Extension Presentation Linkbase Document Filed herewith 104 Cover Page Interactive Data File – The cover page interactive data file does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document Filed herewith * Indicates a contract with management or compensatory plan or arrangement. # Certain schedules have been omitted pursuant to Item 601(b)(2) of Regulation S-K. A copy of any omitted schedule will be furnished as a supplement to the Securities and Exchange Commission upon request. ## This certification is being furnished solely pursuant to 18 U.S.C. § 1350 and shall not be deemed filed by the Company for purposes of Section 18 of the Exchange Act or incorporated by reference in any registration statement of the Company filed under the Securities Act. ITEM 16. FORM 10-K SUMMARY Not applicable. 50 SIGNA TURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. SYNAPTICS INCORPORATED Date: August 19, 2022 By: /s/ Michael E. Hurlston Michael E. Hurlston President and Chief Executive Officer Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. Signature Title Date /s/ Michael E. Hurlston President and Chief Executive Officer, August 19, 2022 Michael E. Hurlston and Director (Principal Executive Officer) /s/ Dean Butler Senior Vice President and Chief Financial Officer August 19, 2022 Dean Butler (Principal Financial Officer) /s/ Kermit Nolan Corporate Vice President and Chief Accounting August 19, 2022 Kermit Nolan Officer (Principal Accounting Officer) /s/ Nelson C. Chan Chairman of the Board August 19, 2022 Nelson C. Chan /s/ Kiva A. Allgood Director August 19, 2022 Kiva A. Allgood /s/ Jeffrey D. Buchanan Director August 19, 2022 Jeffrey D. Buchanan /s/ Keith B. Geeslin Director August 19, 2022 Keith B. Geeslin /s/ Susan Hardman Director August 19, 2022 Susan Hardman /s/ Patricia Kummrow Director August 19, 2022 Patricia Kummrow /s/ Vivie Lee Director August 19, 2022 Vivie Lee /s/ James L. Whims Director August 19, 2022 James L. Whims 51 INDEX TO FINANC IAL STATEMENTS SYNAPTICS INCORPORATED AND SUBSIDIARIES Report of Independent Registered Public Accounting Firm ( KPMG LLP , Santa Clara, California , PCAOB Audit Firm ID: 185 ) F- 2 Consolidated Balance Sheets F- 5 Consolidated Statements of Operations F- 6 Consolidated Statements of Comprehensive Income F- 7 Consolidated Statements of Stockholders' Equity F- 8 Consolidated Statements of Cash Flows F- 9 Notes to Consolidated Financial Statements F- 10 F- 1 Report of Independent Regist ered Public Accounting Firm To the Stockholders and Board of Directors Synaptics Incorporated: Opinions on the Consolidated Financial Statements and Internal Control Over Financial Reporting We have audited the accompanying consolidated balance sheets of Synaptics Incorporated and subsidiaries (the Company) as of June 25, 2022 and June 26, 2021, the related consolidated statements of operations, comprehensive income, stockholders’ equity, and cash flows for each of the fiscal years in the three fiscal year period ended June 25, 2022, and the related notes (collectively, the consolidated financial statements). We also have audited the Company’s internal control over financial reporting as of June 25, 2022, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of June 25, 2022 and June 26, 2021, and the results of its operations and its cash flows for each of the fiscal years in the three fiscal year period ended June 25, 2022, in conformity with U.S. generally accepted accounting principles. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of June 25, 2022 based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. Basis for Opinions The Company’s management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management's Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Company’s consolidated financial statements and an opinion on the Company’s internal control over financial reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects. Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions. Definition and Limitations of Internal Control Over Financial Reporting A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements. F- 2 Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. Critical Audit Matters The critical audit matters communicated below are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate. Valuation of inventories and losses on inventory purchase obligations As discussed in Note 1 to the consolidated financial statements, the Company held $169.7 million of inventories as of June 25, 2022 which are stated at the lower of cost or net realizable value. The Company records a write-down for excess, obsolete or unmarketable inventories based on forecasts of future demand and market conditions. Additionally, a liability and a charge are recorded to cost of sales for estimated losses on inventory the Company is obligated to purchase from contract manufacturers when a customer delays its delivery schedule, cancels its order, or for other factors. We identified the valuation of inventories associated with excess, obsolete or unmarketable inventories and losses on inventory purchase obligations as a critical audit matter. A higher degree of auditor judgment was required to evaluate the Company’s estimate of net realizable value for these inventories and losses on inventory purchase obligations. Specifically, there is a high degree of subjectivity in evaluating the effect of any unexpected or sudden declines in market demand which may result from changes to or cancellations of customer orders, rapid product improvements or technological advances, due to the nature of the evidence available related to these factors. The following are the primary procedures we performed to address this critical audit matter. We evaluated the design and tested the operating effectiveness of certain internal controls related to the Company’s process to develop the estimated net realizable value of inventory and recognition of losses related to outstanding inventory purchase obligations. For a selection of inventory items, we assessed the Company’s assumptions by comparing them to historical activity and demand forecasts. We also considered customer communications, as well as end user and third-party publications. For a sample of inventory items, we recalculated the required write-downs and losses and compared this to the recorded amounts. We confirmed with the Company’s significant vendors regarding outstanding purchase obligations of the Company. Additionally, we tested a sample of returns which resulted from quality related issues of the Company's products during the year and subsequent to period-end to evaluate if additional write-downs or losses were warranted. Evaluation of certain intangible assets acquired through business combinations As discussed in Note 4 to the consolidated financial statements, during the year ended June 25, 2022, the Company consummated a business combination for total consideration of $543.3 million. In connection with this acquisition, the Company recorded various intangible assets, which included developed technologies and customer relationships with an acquisition-date fair value of $150.0 million and $45.0 million, respectively. We identified the evaluation of the fair values allocated to acquired developed technologies and certain customer relationship intangible assets as a critical audit matter. We performed sensitivity analyses to determine the significant assumptions used to value these acquired intangible assets, individually and in the aggregate. The fair value of these acquired intangible assets were sensitive to possible changes to the following key assumptions, requiring a high degree of auditor judgment and the use of valuation professionals with specialized skills and knowledge: Developed technologies: • Projected revenue • Technology obsolescence F- 3 Customer relationship: • Estimated customer ramp up periods The following are the primary procedures we performed to address this critical audit matter. We evaluated the design and tested the operating effectiveness of certain internal controls over the Company’s acquisition-date valuation processes, including controls related to the development of the key assumptions, as listed above. We evaluated the reasonableness of the Company’s projected revenue, technology obsolescence, and estimated customer ramp up periods by comparing them to historical actual results of the acquired entities and certain peer and market participant data. We involved valuation professionals with specialized skills and knowledge, who assisted in: • evaluating certain peer group and market participant data used in the assessment of projected revenue by assessing the appropriateness of the guideline comparable companies identified by management’s specialist and checking the accuracy of certain peer group and market participant data • assessing the reasonableness of technology obsolescence based on the nature of the technology acquired. /s/ KPMG LLP We have served as the Company’s auditor since 2003. Santa Clara, California August 19, 2022 F- 4 SYNAPTICS INCORPORATED AND SUBSIDIARIES C ONSOLIDATED BALANCE SHEETS (in millions, except par value and share amounts) June June 2022 2021 ASSETS Current Assets: Cash and cash equivalents $ 824.0 $ 836.3 Short-term investments 52.0 - Accounts receivable, net of allowances of $ 6.0 and $ 5.8 at June 2022 and 2021, respectively 322.1 228.3 Inventories 169.7 82.0 Prepaid expenses and other current assets 35.6 33.1 Total current assets 1,403.4 1,179.7 Property and equipment, net 62.9 91.2 Goodwill 806.6 570.0 Acquired intangibles, net 390.0 301.5 Right-of-use assets 61.2 31.7 Non-current other assets 134.0 52.7 $ 2,858.1 $ 2,226.8 LIABILITIES AND STOCKHOLDERS’ EQUITY Current Liabilities: Accounts payable $ 141.8 $ 97.6 Accrued compensation 90.6 76.4 Income taxes payable 79.7 29.4 Other accrued liabilities 145.3 96.2 Current portion of long-term debt 6.0 - Convertible notes, net - 487.1 Total current liabilities 463.4 786.7 Long-term debt 975.7 394.4 Other long-term liabilities 152.6 78.5 Total liabilities 1,591.7 1,259.6 Commitments and contingencies Stockholders' Equity: Preferred stock: $ 0.001 par value; 10,000,000 shares authorized; no shares issued and outstanding — — Common stock: $ 0.001 par value; 120,000,000 shares authorized, 67,745,800 and 66,963,006 shares issued, and 39,621,179 and 35,331,903 shares outstanding, at June 2022 and 2021, respectively 0.1 0.1 Additional paid-in capital 924.1 1,391.5 Treasury stock: 28,124,621 and 31,631,103 common shares at June 2022 and 2021, respectively, at cost ( 694.5 ) ( 1,205.4 ) Accumulated other comprehensive loss ( 1.8 ) - Retained earnings 1,038.5 781.0 Total stockholders' equity 1,266.4 967.2 $ 2,858.1 $ 2,226.8 See accompanying notes to consolidated financial statements. F- 5 SYNAPTICS INCORPORATED AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (in millions, except per share amounts) Fiscal Year 2022 2021 2020 Net revenue $ 1,739.7 $ 1,339.6 $ 1,333.9 Cost of revenue 796.6 728.4 790.8 Gross margin 943.1 611.2 543.1 Operating expenses: Research and development 367.3 313.4 302.5 Selling, general, and administrative 168.4 144.9 127.0 Acquired intangibles amortization 38.7 32.7 11.7 Restructuring costs 18.3 7.4 33.0 Gain on sale of audio technology assets - ( 34.2 ) — Total operating expenses 592.7 464.2 474.2 Operating income 350.4 147.0 68.9 Interest and other income 3.0 2.9 7.9 Interest expense ( 30.2 ) ( 29.5 ) ( 22.5 ) Loss on redemption of convertible notes ( 8.1 ) ( 0.3 ) — Gain from sale and leaseback transaction 5.4 — — Gain on sale of assets — — 105.1 Income before provision for income taxes and equity investment income (loss) 320.5 120.1 159.4 Provision for income taxes 64.6 31.4 38.6 Equity investment gain (loss) 1.6 ( 9.1 ) ( 2.0 ) Net income $ 257.5 $ 79.6 $ 118.8 Net income per share: Basic $ 6.60 $ 2.29 $ 3.54 Diluted $ 6.33 $ 2.08 $ 3.41 Shares used in computing net income per share: Basic 39.0 34.8 33.6 Diluted 40.7 38.3 34.8 See accompanying notes to consolidated financial statements. F- 6 SYNAPTICS INCORPORATED AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (in millions) Fiscal Year 2022 2021 2020 Net income $ 257.5 $ 79.6 $ 118.8 Other comprehensive loss Unrealized loss on available-for-sale securities ( 1.8 ) — — Comprehensive income $ 255.7 $ 79.6 $ 118.8 See accompanying notes to consolidated financial statements. F- 7 SYNAPTICS INCORPORATED AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (in millions, except share amounts) Accumulated Additional Other Total Common Stock Paid-in Treasury Comprehensive Retained Stockholders' Shares Amount Capital Stock Income (loss) Earnings Equity Balance at June 2019 64,283,948 $ 0.1 $ 1,266.1 $ ( 1,192.4 ) $ - $ 582.6 $ 656.4 Net income — — — — — 118.8 118.8 Issuance of common stock for share- based award compensation plans 1,587,700 — 34.5 — — — 34.5 Payroll taxes for deferred stock units — — ( 9.7 ) — — — ( 9.7 ) Purchases of treasury stock — — — ( 30.2 ) — — ( 30.2 ) Share-based compensation — — 49.3 — — — 49.3 Balance at June 2020 65,871,648 0.1 1,340.2 ( 1,222.6 ) — 701.4 819.1 Net income — — — — — 79.6 79.6 Issuance of common stock for share- based award compensation plans 1,091,358 — 27.8 — — — 27.8 Payroll taxes for deferred stock units — — ( 17.5 ) 17.2 — — ( 0.3 ) Purchases of treasury stock — — ( 28.3 ) — — — ( 28.3 ) Share-based compensation — — 69.3 — — — 69.3 Balance at June 2021 66,963,006 0.1 1,391.5 ( 1,205.4 ) — 781.0 967.2 Net income — — — — — 257.5 257.5 Other comprehensive loss — — — — ( 1.8 ) — ( 1.8 ) Issuance of common stock for share- based award compensation plans 782,794 — 15.2 — — — 15.2 Treasury stock issued for redemption of convertible notes — — ( 517.8 ) 510.9 — — ( 6.9 ) Payroll taxes for deferred stock units — — ( 67.3 ) — — — ( 67.3 ) Share-based compensation attributable to acquisition — — 1.7 — — — 1.7 Share-based compensation — — 100.8 — — — 100.8 Balance at June 2022 67,745,800 $ 0.1 $ 924.1 $ ( 694.5 ) $ ( 1.8 ) $ 1,038.5 $ 1,266.4 See accompanying notes to consolidated financial statements. F- 8 SYNAPTICS INCORPORATED AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (in millions) Fiscal Year 2022 2021 2020 Cash flows from operating activities Net income $ 257.5 $ 79.6 $ 118.8 Adjustments to reconcile net income to net cash provided by operating activities: Share-based compensation costs 100.8 66.1 49.3 Depreciation and amortization 24.0 21.6 26.7 Acquired intangibles amortization 123.5 110.1 51.4 Gain on sale of audio technology assets — ( 34.2 ) — Gain on sale of assets — — ( 105.1 ) Gain on sale of property and equipment and sale and leaseback transaction ( 5.4 ) — ( 1.2 ) Loss on redemption of convertible notes 8.1 0.3 — Deferred taxes ( 29.7 ) ( 5.2 ) 2.7 Amortization of convertible debt discount and issuance costs 1.6 19.2 18.3 Amortization of debt issuance costs 1.8 0.6 0.6 Amortization of cost of development services 10.0 9.2 — Acquired in-process research and development — — 2.4 Equity investment (gain) loss ( 1.6 ) 9.1 2.0 Other ( 1.3 ) — 3.7 Foreign currency remeasurement (gain) loss ( 7.6 ) ( 2.8 ) 0.4 Changes in operating assets and liabilities, net of acquisitions: Accounts receivable, net ( 81.1 ) ( 25.9 ) 31.0 Inventories ( 65.1 ) 53.1 43.0 Prepaid expenses and other current assets 6.9 ( 9.4 ) ( 2.9 ) Other assets 25.8 — 3.9 Accounts payable 23.2 32.2 ( 36.2 ) Accrued compensation 5.3 14.9 29.1 Income taxes payable 48.6 ( 2.1 ) 13.8 Other accrued liabilities 17.4 ( 17.2 ) ( 29.9 ) Net cash provided by operating activities 462.7 319.2 221.8 Cash flows from investing activities Proceeds from sale of assets 55.9 — 138.7 Purchase of in-process research and development — — ( 2.5 ) Acquisition of businesses, net of cash and cash equivalents acquired ( 501.1 ) ( 626.5 ) — Advance payment on intangible assets ( 30.0 ) — — Proceeds from sale of audio technology assets — 34.2 — Proceeds from sales of investments 24.4 95.8 — Purchase of short-term securities ( 5.8 ) — — Purchases of property and equipment ( 31.1 ) ( 21.1 ) ( 16.3 ) Proceeds from sale of equity method investment 5.0 — — Cost method investment - ( 5.0 ) — Net cash provided by (used in) investing activities ( 482.7 ) ( 522.6 ) 119.9 Cash flows from financing activities Proceeds from issuance of debt 600.0 400.0 — Proceeds from borrowings under line-of-credit — — 100.0 Payment on line of credit borrowings and debt ( 3.0 ) ( 100.0 ) — Purchases of treasury stock — — ( 30.2 ) Refundable deposit paid to vendor ( 16.6 ) — — Return of deposit received from vendor 2.8 — — Proceeds from issuance of shares 15.2 27.8 34.5 Payment of debt issuance costs ( 11.2 ) ( 6.1 ) ( 0.7 ) Payment for redemption of convertible notes ( 505.6 ) ( 19.4 ) — Payroll taxes for deferred stock and market stock units ( 67.3 ) ( 28.2 ) ( 9.7 ) Net cash provided by financing activities 14.3 274.1 93.9 Effect of exchange rate changes on cash and cash equivalents ( 6.6 ) 2.2 — Net increase in cash and cash equivalents ( 12.3 ) 72.9 435.6 Cash and cash equivalents at beginning of year 836.3 763.4 327.8 Cash and cash equivalents at end of year $ 824.0 $ 836.3 $ 763.4 Supplemental disclosures of cash flow information Cash paid for interest $ 25.0 $ 9.6 $ 3.7 Net cash paid for taxes $ 42.0 $ 39.7 $ 18.9 Cash refund on taxes $ 3.7 $ 0.3 $ 1.3 Non-cash investing and financing activities: Unpaid property, plant and equipment $ 3.6 $ 0.8 $ 1.2 See accompanying notes to consolidated financial statements. F- 9 SYNAPTICS INCORPORATED AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. Organization and Summary of Significant Accounting Policies Organization and Basis of Presentation We are a leading worldwide developer and fabless supplier of premium mixed signal semiconductor solutions changing the way humans engage with connected devices and data, engineering exceptional experiences throughout the home, at work, in the car and on the go. Our current served markets include Internet of Things, or IoT, personal computer, or PC, and Mobile. We deliver complete chip, firmware and software semiconductor solutions that allow our customers to seamlessly integrate advanced functions into their end products. The consolidated financial statements are presented in accordance with U.S. generally accepted accounting principles, or U.S. GAAP, and include our financial statements and those of our wholly owned subsidiaries. All significant intercompany balances and transactions have been eliminated upon consolidation. Certain reclassifications have been made to the amounts for prior years in order to conform to the current year’s presentation Our fiscal year is the 52- or 53-week period ending on the last Saturday in June. The fiscal years presented in this report were 52-week periods ended June 25, 2022, June 26, 2021 and June 27, 2020. Use of Estimates The preparation of consolidated financial statements in conformity with U.S. GAAP requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenue, expenses, and related disclosure of contingent assets and liabilities. On an ongoing basis, we evaluate our estimates, including those related to revenue, allowance for doubtful accounts, cost of revenue, inventories, loss on purchase commitments, product warranty, accrued liabilities, share-based compensation costs, provision for income taxes, deferred income tax asset valuation allowances, uncertain tax positions, goodwill, intangible assets, investments, and loss contingencies. We base our estimates on historical experience, applicable laws and regulations, and various other assumptions that we believe to be reasonable under the circumstances, including our expectations regarding the potential impacts on our business of the COVID-19 pandemic, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. Cash Equivalents and Investments Cash equivalents consist of highly liquid investments with original maturities of three months or less at the time of purchase. Our cash equivalents as of the end of fiscal 2022 and 2021 consisted of bank deposits and money market funds with a fair value of $ 824.0 million and $ 836.3 million, respectively. Short-Term Investments We classify our investments in debt securities as available-for-sale and record these investments at fair value. Investments with an original maturity of three months or less at the date of purchase are considered cash equivalents, while all other investments are classified as short-term based on management’s intent and ability to use the funds in current operations. Unrealized gains and losses are reported as a component of other comprehensive income (loss). Realized gains and losses are determined based on the specific identification method, and are reflected as other income (expense), net in our Consolidated Statements of Operations. We regularly review our investment portfolio to identify and evaluate investments that have indicators of possible impairment. Factors considered in determining whether a loss is other-than-temporary include, but are not limited to: the length of time and extent a security’s fair value has been below its cost, the financial condition and near-term prospects of the investee, the credit quality of the security’s issuer, likelihood of recovery and our intent and ability to hold the security for a period of time sufficient to allow for any anticipated recovery in value. For our debt instruments, we also evaluate whether we have the intent to sell the security or it is more likely than not that we will be required to sell the security before recovery of its cost basis. Fair Value Measurements We apply fair value accounting for all financial assets and liabilities that are required to be recognized or disclosed at fair value in the Consolidated Financial Statements. Fair value is defined as the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. When determining the fair value measurements for assets and liabilities, we consider the principal or most advantageous market in which we would transact, and the market-based risk measurements or assumptions that market participants would use in pricing the asset or liability, such as inherent risk, transfer restrictions and credit risk. The carrying amounts reported in the consolidated SYNAPTICS INCORPORATED AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) financial statements approximate the fair value for cash, accounts receivable, accounts payable and accrued liabilities due to their short-term nature. Intangible assets, property and equipment, and goodwill are measured at fair value on a non-recurring basis if impairment is indicated. The interest rate on our bank debt is variable, which is subject to change from time to time to reflect a market interest rate; accordingly, the carrying value of our bank debt approximates fair value. Concentration of Credit Risk Financial instruments that potentially subject us to concentrations of credit risk consist primarily of cash equivalents, investments, and accounts receivable. Our investment policy, which is predicated on capital preservation and liquidity, limits investments to U.S. government treasuries and agency issues, taxable securities, and municipal issued securities with a minimum rating of investment grade by the rating agencies. We sell our products to contract manufacturers that provide manufacturing services for OEMs, to some OEMs directly, and to distributors. We extend credit based on an evaluation of a customer’s financial condition, and we generally do not require collateral. The following customers accounted for more than 10% of our accounts receivable balance as of the end of fiscal 2022 and 2021: 2022 2021 Customer A 17 % 15 % Customer B 15 % 12 % Other Concentrations Our products include certain components that are currently single sourced. We believe other vendors would be able to provide similar components, however, the qualification of such vendors may require additional lead time. In order to mitigate any potential adverse impact from a supply disruption, we strive to maintain an adequate supply of critical single-sourced components. Revenue Recognition Our revenue is primarily generated from the sale of ASIC chips, either directly to a customer or to a distributor. Revenue is recognized when control of the promised goods or services is transferred to our customers, in an amount that reflects the consideration we expect to receive in exchange for those goods or services. All of our revenue, except an inconsequential amount, is recognized at a point in time, either on shipment or delivery of the product, depending on customer terms and conditions. Non-product revenue is recognized over the same period of time such performance obligations are satisfied. We then select an appropriate method for measuring satisfaction of the performance obligations. Revenue from sales to distributors is recognized upon shipment of the product to the distributors (sell-in basis). Master sales agreements are in place with certain customers, and these agreements typically contain terms and conditions with respect to payment, delivery, warranty and supply. In the absence of a master sales agreement, we consider a customer's purchase order or our standard terms and conditions to be the contract with the customer. Our pricing terms are negotiated independently, on a stand-alone basis. In determining the transaction price, we evaluate whether the price is subject to refund or adjustment to determine the net consideration which we expect to receive for the sale of such products. In limited situations, we make sales to certain customers under arrangements where we grant stock rotation rights, price protection and price allowances; variable consideration associated with these rights is expected to be inconsequential. These adjustments and incentives are accounted for as variable consideration, classified as other current liabilities under the revenue standard and are shown as customer obligations in other accrued liabilities on our consolidated balance sheets. We estimate the amount of variable consideration for such arrangements based on the expected value to be provided to customers, and we do not believe that there will be significant changes to our estimates of variable consideration. When incentives, stock rotation rights, price protection, volume discounts, or price allowances are applicable, they are estimated and recorded in the period the related revenue is recognized. Stock rotation reserves are based on historical return rates applied to distributor inventory subject to stock rotation rights and recorded as a reduction to revenue with a corresponding reduction to cost of goods sold for the estimated cost of inventory that is expected to be returned and recorded as prepaid expenses and other current assets. In limited circumstances, we enter into volume-based tiered pricing arrangements and we estimate total unit volumes under such arrangement to determine the expected transaction price for the units expected to be transferred. Such arrangements are accounted for as contract liabilities within other accrued liabilities. Sales returns liabilities are recorded as refund liabilities within other accrued liabilities. F- 11 SYNAPTICS INCORPORATED AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) Our accounts receivable balance is from contracts with customers and represents our unconditional right to receive consideration from customers. Payments are generally due within three months of completion of the performance obligation and subsequent invoicing and, therefore, do not include significant financing components. In fiscal 2022 , there was no material bad debt charge recorded on accounts receivable. There was $ 1.2 million of contract assets (i.e., unbilled accounts receivable, deferred commissions) recorded on the consolidated balance sheets as of June 25, 2022, and $ 1.9 million as of June 26, 2021. Contract assets are presented as part of prepaid expenses and other current assets. Contract liabilities and refund liabilities were $ 27.3 million and $ 61.3 million, respecti vely, as of June 25, 2022 , and $ 7.0 million and $ 36.1 million, respectively, as of June 26, 2021. Both contract liabilities and refund liabilities are presented as part of customer obligations in other accrued liabilities on our consolidated balance sheets. During fiscal 2022 and 2021, we recognized $ 3.6 million and $ 1.8 million, respectively, in revenue related to contract liabilities outstanding as of the beginning of each such fiscal year. We invoice customers for each delivery upon shipment and recognize revenue in accordance with delivery terms. As of June 25, 2022 , we did no t have any remaining unsatisfied performance obligations with an original duration greater than one year. Accordingly, under the optional exception provided by the ASC, we do not disclose revenues allocated to future performance obligations of partially completed contracts. We have elected to account for shipping and handling costs as fulfillment costs before the customer obtains control of the goods. We continue to classify shipping and handling costs as a cost of revenue. We have elected to continue to account for collection of all taxes on a net basis. We incur commission expense that is incremental to obtaining contracts with customers. Sales commissions (which are recorded in the selling, general and administrative expense line item in the consolidated statements of operations) are expensed when the product is shipped because such commissions are incurred after the product has been shipped. Revenue from contracts with customers disaggregated by geographic area based on customer location and groups of similar products is presented in Note 14 Segment, Customers, and Geographical Information. Advertising Costs Advertising costs, if any, are expensed when incurred. Allowance for Doubtful Accounts We maintain allowances for doubtful accounts for estimated losses resulting from the inability of customers to meet their financial obligations. On an ongoing basis, we evaluate the collectability of accounts receivable based on a combination of factors. In circumstances in which we are aware of a specific customer’s potential inability to meet its financial obligation, we record a specific reserve of the bad debt against amounts due. In addition, we make judgments and estimates on the collectability of accounts receivable based on our historical bad debt experience, customers’ creditworthiness, current economic trends, recent changes in customers’ payment trends, and deterioration in customers’ operating results or financial position. If circumstances change adversely, additional bad debt allowances may be required. For the fiscal year ended June 25, 2022 credit losses on our accounts receivable were $ 0.2 million. There were no credit losses on our accounts receivable for the fiscal year ended June 26, 2021 . We believe that an adequate allowance for doubtful accounts has been provided. Cost of Revenue Our cost of revenue includes the cost of products shipped to our customers, which primarily includes the cost of products built to our specifications by our contract manufacturers, the cost of silicon wafers supplied by independent semiconductor wafer manufacturers, and the related assembly, package, and test costs of our products. Also included in our cost of revenue are personnel and related costs, including share-based compensation for quality assurance and manufacturing support personnel; logistics costs; depreciation of equipment supporting manufacturing; acquired intangibles amortization; fair value adjustments associated with acquired businesses; inventory write-downs and losses on purchase obligations; and warranty costs. Inventories Inventories are stated at the lower of cost (first-in, first-out method) or net realizable value as of the end of fiscal 2022 and 2021, and consisted of the following (in millions): 2022 2021 Raw materials and work-in-progress $ 92.2 $ 49.1 Finished goods 77.5 32.9 $ 169.7 $ 82.0 F- 12 SYNAPTICS INCORPORATED AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) We record a write-down, if necessary, to reduce the carrying value of inventory to its net realizable value. The effect of these write-downs is to establish a new cost basis in the related inventory, which we do not subsequently write-up. We also record a liability and charge to cost of revenue for estimated losses on 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. Property and Equipment We state property and equipment at cost less accumulated depreciation and amortization. We compute depreciation using the straight-line method over the estimated useful lives of the assets. We amortize leasehold improvements over the shorter of the lease term or the useful life of the asset. Other Assets During fiscal 2020, we invested $ 5.0 million in Eta Compute in exchange for preferred stock. This investment provides us with a strategic relationship that enables us to better address expanded industry opportunities for artificial intelligence applications. The investment is accounted for under the cost method. In April 2017, we paid $ 18.4 million for a 14.4 % interest in OXi Technology Ltd., or OXi. In April 2019, our investment ownership was reduced to 13.8 % as a result of new investment in OXi. We determined the equity method of accounting applied to our investment as we had significant influence over OXi’s operating and financial policies. We recorded our portion of OXi’s net income or net loss on a one quarter lag due to the timing of the availability of OXi’s financial records. We did not have any material related party transactions with OXi. During fiscal 2022, we sold our investment in OXi for $ 5.0 million. In connection with the sale of our investment in OXi, we recorded a gain of $ 2.5 million, offset by our share of OXi's net losses of $ 0.9 million. The net gain of $ 1.6 million is included in Equity investment (gain) loss in the consolidated statements of operations. Foreign Currency The U.S. dollar is our functional and reporting currency. We remeasure our monetary assets and liabilities not denominated in our functional currency into U.S. dollar equivalents at the rate of exchange in effect on the balance sheet date. We measure and record non-monetary balance sheet accounts at the historical rate in effect at the date of transaction. We remeasure foreign currency expenses at the weighted average exchange rate in the month that the transaction occurred. These foreign currency transactions and remeasurement gains and losses, resulted in a net gain of $ 5.6 million and $ 0.2 million in fiscal 2022 and 2020, respectively, and a net loss of $ 1.4 million in fiscal 2021 . Gains and losses resulting from foreign currency transactions are included in selling, general, and administrative expenses in the consolidated statements of operations. Goodwill Goodwill represents the excess of the purchase price of an acquired business over the identifiable assets acquired and liabilities assumed. We test for impairment of goodwill on an annual basis in the fourth quarter and at any other time when events occur or circumstances indicate that the carrying amount of goodwill may not be recoverable. We have the option to first assess qualitative factors to determine whether it is necessary to perform the quantitative goodwill impairment test. The qualitative factors we assess include long-term prospects of our performance, share price trends and market capitalization, and Company specific events. Unanticipated events and circumstances may occur that affect the accuracy of our assumptions, estimates and judgments. If we determine that as a result of the qualitative assessment that it is more likely than not (i.e., greater than 50% likelihood) that the fair value of a reporting unit is less than its carrying amount, then the quantitative test is required. Otherwise, no further testing is required. The quantitative goodwill impairment test requires us to estimate the fair value of our reporting units. If the carrying value of a reporting unit exceeds its fair value, the goodwill of that reporting unit is potentially impaired and we record an impairment loss equal to the excess of the carrying value of the reporting unit over its fair value, not to exceed the carrying amount of goodwill. The fair value of each of our goodwill reporting units is generally estimated using discounted cash flow methodologies. Based on the impairment analysis performed in the fourth quarter of each year presented, the fair value of our reporting units exceeded the carrying value; as such, our annual qualitative assessment did not indicate that a more detailed quantitative analysis was necessary and no goodwill impairment was recognized for each period presented. F- 13 SYNAPTICS INCORPORATED AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) Intangible Assets Intangible assets consist primarily of intangible assets purchased through acquisitions. Finite-lived intangible assets are amortized for financial reporting purposes using the straight-line method over the estimated useful lives of the assets ranging from 1 to 6 years. Indefinite-lived intangible assets are not amortized but tested annually for impairment on an annual basis in the fourth quarter, or when events or changes in circumstances indicate that indefinite-lived intangible assets might be impaired. Impairment of Long-Lived Assets We evaluate long-lived assets, such as property and equipment and intangible assets subject to amortization, for impairment whenever events or changes in circumstances indicate that the carrying value of an asset may not be recoverable. We measure recoverability of assets to be held and used by a comparison of the carrying amount of an asset to estimated undiscounted future cash flows expected to be generated by the asset. We review the carrying value of indefinite-lived intangible assets for impairment at least annually during the last quarter of our fiscal year, or more frequently if we believe indicators of impairment exist. If the carrying amount of the asset exceeds its estimated undiscounted future cash flows, we recognize an impairment charge in an amount by which the carrying amount of the asset exceeds the fair value of the asset. Assets to be disposed of would be separately presented in the consolidated balance sheets and reported at the lower of the carrying amount or fair value less costs to sell and would no longer be depreciated. The assets and liabilities of a disposed group classified as held for sale would be presented separately in the appropriate asset and liability sections of the consolidated balance sheets. No impairment of long-lived assets was recognized for fiscal 2022, 2021, and 2020 . Leases We determine if a contract is a lease or contains a lease at the inception of the contract and reassess that conclusion if the contract is modified. All leases are assessed for classification as an operating lease or a finance lease. Operating lease right-of-use, or ROU, assets are included in non-current other assets on our consolidated balance sheet. Operating lease liabilities are separated into a current portion, included within other accrued liabilities on our consolidated balance sheet, and a non-current portion, included within other long-term liabilities on our consolidated balance sheet. We do not have any finance lease ROU assets or liabilities. ROU assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising from the lease. We do not obtain and control the right to use the identified asset until the lease commencement date. Our lease liabilities are recognized at the applicable lease commencement date based on the present value of the lease payments required to be paid over the lease term. Because the interest rate implicit in the lease is not readily determinable, we generally use our incremental borrowing rate to discount the lease payments to present value. The estimated incremental borrowing rate is derived from information available at the lease commencement date. We factor in publicly available data for instruments with similar characteristics when calculating our incremental borrowing rates. Our ROU assets are also recognized at the applicable lease commencement date. The ROU asset equals the carrying amount of the related lease liability, adjusted for any lease payments made prior to lease commencement and lease incentives provided by the lessor. Variable lease payments are expensed as incurred and do not factor into the measurement of the applicable ROU asset or lease liability. The term of our leases equals the non-cancellable period of the lease, including any rent-free periods provided by the lessor, and also include options to renew or extend the lease (including by not terminating the lease) that we are reasonably certain to exercise. We establish the term of each lease at lease commencement and reassess that term in subsequent periods if a triggering event occurs. Operating lease cost for lease payments is recognized on a straight-line basis over the lease term. Our lease contracts often include lease and non-lease components. For our leases, we have elected the practical expedient offered by the standard to not separate lease from non-lease components and account for them as a single lease component. We have elected, for all classes of underlying assets, not to recognize ROU assets and lease liabilities for leases with a term of twelve months or less. Lease cost for short-term leases is recognized on a straight-line basis over the lease term. F- 14 SYNAPTICS INCORPORATED AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) Other Accrued Liabilities and Other Long-Term Liabilities As of the end of fiscal 2022 and 2021, other accrued liabilities consisted of the following (in millions): 2022 2021 Customer obligations $ 88.6 $ 43.1 Inventory obligations 14.1 17.0 Operating lease liabilities 7.6 9.3 Other 35.0 26.8 $ 145.3 $ 96.2 As of the end of fiscal 2022 and 2021, other long-term accrued liabilities consisted of the following (in millions): 2022 2021 Income taxes payable, long-term $ 29.1 $ 15.4 Non-current deferred tax liability 52.6 27.1 Operating lease liabilities, long-term 51.5 24.0 Other 19.4 12.0 $ 152.6 $ 78.5 Segment Information We operate in one segment: the development, marketing, and sale of human experience semiconductor solutions for electronic devices and products. The chief operating decision maker, or CODM, is our CEO, Our CODM evaluates financial performance and allocates resources using financial information reported on a company-wide basis. Share-Based Compensation We charge the estimated fair value less actual forfeitures to earnings on a straight-line basis over the vesting period of the entire underlying award, which is generally three or four years for our restricted stock units, or RSU, awards, three years for our market stock units, or MSU, awards, three years for our performance stock units, or PSU, awards, and up to one year for shares purchased under our 2019 employee stock purchase plan . We estimate the fair value of market-based MSUs at the date of grant using a Monte Carlo simulation model and amortize those fair values over the requisite service period, which is generally three years . The Monte Carlo simulation model that we use to estimate the fair value of market-based MSUs at the date of grant incorporates into the valuation the possibility that the market condition may not be satisfied. Provided that the requisite service is rendered, the total fair value of the market-based MSUs at the date of grant must be recognized as compensation expense even if the market condition is not achieved. However, the number of shares that ultimately vest can vary significantly with the performance of the specified market criteria. We value PSUs using the aggregate intrinsic value on the grant date and amortize the compensation expense over the three-year service period on a ratable basis, dependent upon the probability of meeting the performance measures. We recognize compensation expense for phantom stock units on a straight-line basis for each tranche of each award based on the average closing price of our common stock over the thirty calendar days ended prior to each balance sheet date. As our phantom stock is a cash-settled award, it is recorded as a liability and remeasured each reporting period. Income Taxes We account for income taxes under the asset and liability method. We recognize deferred tax assets and liabilities for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases, and operating loss and tax credit carryforwards. We measure deferred tax assets and liabilities using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. We recognize the effect of a change in tax rates in income on deferred tax assets and liabilities in the period that includes the enactment date. We establish valuation allowances when necessary to reduce deferred tax assets to the amounts that are more likely than not to be realized. We use a two-step approach to recognizing and measuring uncertain tax positions. The first step is to determine whether it is more-likely-than-not that a tax position will be sustained upon examination, including resolution of any related appeals or litigation processes. The second step is to measure the tax benefit as the largest amount that is more than 50% likely of being F- 15 SYNAPTICS INCORPORATED AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) realized upon ultimate settlement with a taxing authority. The calculation of tax liabilities involves significant judgment in estimating the impact of uncertainties in the application of highly complex tax laws. Resolution of these uncertainties in a manner inconsistent with our expectations could have a material impact on our consolidated financial position, results of operations, and cash flows. We believe we have adequately provided for reasonably foreseeable outcomes in connection with the resolution of income tax uncertainties. However, our results have in the past, and could in the future, include favorable and unfavorable adjustments to our estimated tax liabilities in the period a determination of such estimated tax liability is made or resolved, upon the filing of an amended return, upon a change in facts, circumstances, or interpretation, or upon the expiration of a statute of limitation. Accordingly, our effective tax rate could fluctuate materially from period to period. Product Warranty We generally provide warranties to cover defects in workmanship, materials and manufacturing for a period of twelve months to meet the stated functionality as agreed to in each sales arrangement. Products are tested against specified functionality requirements prior to delivery, but we nevertheless from time to time experience claims under our warranty guarantees. These standard warranties are assurance type warranties and do not offer any services in addition to the assurance that the product will continue working as specified. Therefore, warranties are not considered separate performance obligations in the arrangement. We accrue for estimated warranty costs under those guarantees based upon historical experience, and for specific items, at the time their existence is known and the amounts are determinable. Business Combinations In accordance with the guidance for business combinations, we determine whether a transaction or other event is a business combination, which requires that the assets acquired and liabilities assumed constitute a business. Each business combination is then accounted for by applying the acquisition method. If the assets acquired are not a business, we account for the transaction or other event as an asset acquisition. Under both methods, we recognize the identifiable assets acquired, the liabilities assumed, and any noncontrolling interest in the acquired entity. We capitalize acquisition-related costs and fees associated with asset acquisitions and immediately expense acquisition-related costs and fees associated with business combinations. We allocate the fair value of purchase consideration to the tangible assets acquired, liabilities assumed and intangible assets acquired based on their estimated fair values. The excess of the fair value of purchase consideration over the fair values of these identifiable assets and liabilities is recorded as goodwill. When determining the fair values of assets acquired and liabilities assumed, we make significant estimates and assumptions, especially with respect to intangible assets. Critical estimates in valuing certain intangible assets include, but are not limited to, future expected cash flows from customer relationships and acquired developed technology and discount rates. Our estimates of fair value are based upon assumptions believed to be reasonable, but which are inherently uncertain and unpredictable and, as a result, actual results may differ materially from estimates. Other estimates associated with the accounting for acquisitions may change as additional information becomes available regarding the assets acquired and liabilities assumed. Any change in facts and circumstances that existed as of the acquisition date and impacts our preliminary estimates is recorded to goodwill if identified within the measurement period. Any adjustments subsequent to the measurement period or our final determination of fair value of assets and liabilities, will be charged to earnings. Research and Development Research and development costs are expensed as incurred. F- 16 SYNAPTICS INCORPORATED AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) 2. Net Income Per Share The computation of basic and diluted net income per share for fiscal 2022, 2021, and 2020 was as follows (in millions, except per share amounts): 2022 2021 2020 Numerator: Net income $ 257.5 $ 79.6 $ 118.8 Denominator: Shares, basic 39.0 34.8 33.6 Effect of dilutive share-based awards and convertible notes 1.7 3.5 1.2 Shares, diluted 40.7 38.3 34.8 Net income per share: Basic $ 6.60 $ 2.29 $ 3.54 Diluted $ 6.33 $ 2.08 $ 3.41 Diluted net income per share does not include the effect of potential common shares related to certain share-based awards for fiscal 2022, 2021, and 2020 as follows (in millions): 2022 2021 2020 Share-based awards 0.1 - 0.7 These share-based awards were not included in the computation of diluted net income per share because the proceeds received, if any, from such share-based awards combined with the average unamortized compensation costs, were greater than the average market price of our common stock, and therefore, their effect would have been antidilutive. Our basic net income per share amounts for each period presented have been computed using the weighted average number of shares of common stock outstanding. Our diluted net income per share amounts for each period presented include the weighted average effect of potentially dilutive shares. We used the “treasury stock” method to determine the dilutive effect of outstanding stock options, RSUs, MSUs, PSUs and convertible notes. 3. Property and Equipment Property and equipment as of the end of fiscal 2022 and 2021 consisted of the following (in millions): Life 2022 2021 Land — $ - $ 13.3 Building and building improvements Up to 35 years - 52.7 Computer equipment 3 - 5 years 19.3 22.9 Manufacturing equipment 1 - 5 years 93.3 71.9 Furniture, fixtures, and leasehold improvements 3 - 10 years 39.6 27.2 Capitalized software 3 - 7 years 24.3 28.1 Construction in progress 9.2 6.1 185.7 222.2 Accumulated depreciation and amortization ( 122.8 ) ( 131.0 ) Property and equipment, net $ 62.9 $ 91.2 Our construction in progress primarily includes machinery and equipment that we expect to place in service in the next 12 months. 4. Acquisitions, Divestiture and Investment Acquisitions DSP Group, Inc. On August 30, 2021 , we entered into an agreement and plan of merger with DSP Group, Inc., or DSPG, to acquire all of the equity of DSPG, a leading global provider of voice and wireless chipset solutions for converged communications, for $ 22.00 per share in an all-cash transaction, referred to as the DSPG acquisition. The DSPG acquisition closed on F- 17 SYNAPTICS INCORPORATED AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) December 2, 2021 , or the DSPG Closing Date, whereupon we obtained voice and wireless technology and product solutions for converged communications. In addition, under the terms of the agreement and plan of merger, we provided replacement equity awards to the transferred employees and allocated $ 1.7 million of the replacement equity awards value to consideration transferred. The DSPG acquisition has been accounted for using the purchase method of accounting in accordance with the business acquisition guidance. Under the purchase accounting method, the total estimated purchase consideration of the acquisition was allocated to the tangible and identifiable intangible assets acquired and liabilities assumed based on their relative fair values. The excess of the purchase consideration over the net tangible and identifiable intangible assets acquired and liabilities has been recorded as goodwill. Our estimate of the fair values of the acquired intangible assets at June 25, 2022, was based on established and accepted valuation techniques performed with the assistance of our third-party valuation specialists. The adjusted purchase price paid for DSPG was $ 543.3 million. The final purchase price allocation is as follows (in millions): Final As Adjusted June 25, 2022 Cash and cash equivalents $ 40.5 Short-term investments 71.9 Accounts receivable, net 12.9 Inventory 22.6 Prepaid expenses and other current assets 4.0 Property and equipment 5.9 Intangible assets 212.0 Right-of-use lease asset 9.8 Severance pay fund 16.2 Deferred tax asset 6.7 Non-current other assets 2.3 Total identifiable assets acquired 404.8 Accounts payable ( 6.7 ) Other accrued expenses ( 19.8 ) Short-term lease liabilities ( 1.5 ) Long-term lease liabilities ( 8.2 ) Accrued severance ( 16.4 ) Deferred tax liability ( 39.4 ) Other long-term liabilities ( 6.1 ) Total liabilities ( 98.1 ) Net identifiable assets acquired 306.7 Goodwill 236.6 Net assets acquired $ 543.3 The following table summarizes the final amounts of the fair values recognized for the assets acquired and liabilities assumed for these two acquisitions as of the acquisition date as well as adjustments made during the measurement period: Previously Reported December 25, 2021 Measurement Period Adjustments (1) As Adjusted Other current assets $ 151.9 $ - $ 151.9 Goodwill 256.6 ( 20.0 ) 236.6 Developed technology and other intangible assets 200.5 11.5 212.0 Deferred tax asset 0.3 6.4 6.7 Other long-term assets 35.6 ( 1.4 ) 34.2 Current liabilities ( 26.8 ) ( 1.2 ) ( 28.0 ) Deferred tax liability ( 38.1 ) ( 1.3 ) ( 39.4 ) Other long-term liabilities ( 29.1 ) ( 1.6 ) ( 30.7 ) Consideration adjustment - 7.6 - Net assets acquired $ 550.9 $ - $ 543.3 F- 18 SYNAPTICS INCORPORATED AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) (1) The measurement period adjustments were based upon information obtained about facts and circumstances that existed at the acquisition date that, if known, would have affected the measurement of the amounts recognized at that date. The following table summarizes the estimated fair value of the intangible assets as of the DSPG Closing Date (in millions): Estimated Weighted Average Useful Lives in Years Estimated Fair Value Developed technology 5.2 $ 150.0 Customer contracts and related relationships 4.0 45.0 In process research and development N/A 16.0 Trade names 1.0 1.0 Estimated fair value of acquired intangibles $ 212.0 We estimated the fair value of the identified intangible assets using a discounted cash flow model for each of the underlying identified intangible assets. These fair value measurements were based on significant inputs not observable in the market and thus represent a Level 3 measurement. Key assumptions include the level and timing of expected future cash flows, conditions and demands specific to each intangible asset over its remaining useful life, and discount rates we believe to be consistent with the inherent risks associated with each type of asset, which range from 4 % to 18 %. The fair value of these intangible assets is primarily affected by the projected revenue, gross margins, operating expenses, the technology migration curve, customer ramp up period and the anticipated timing of the projected income associated with each intangible asset coupled with the discount rates used to derive their estimated present values. We believe the level and timing of expected future cash flows appropriately reflects market participant assumptions. In-process research and development consists of advanced semiconductor telecommunications products for the Internet of Things, or IoT, market. We expect to complete the in-process research and development project in calendar year 2023. The value of goodwill reflects the anticipated synergies of the combined operations and workforce of DSPG as of the DSPG Closing Date. None of the goodwill is expected to be deductible for income tax purposes. Prior to the DSPG acquisition, we did not have an existing relationship or transactions with DSPG. The consolidated financial statements include approximately $ 83.8 million of revenue from the DSPG Closing Date through June 25, 2022. It is impracticable to determine the effect on net income attributable to DSPG as we initiated the integration of a substantial portion of DSPG into our ongoing operations during the second quarter of fiscal 2022, which was completed in the subsequent quarter. Supplemental Pro Forma Information (Unaudited) The supplemental pro forma financial information presented below is for illustrative purposes only and is not necessarily indicative of the financial position or results of operations that would have been realized if the acquisition had been completed on the date indicated, does not reflect synergies that might have been achieved, nor is it indicative of future operating results or financial position. The pro forma adjustments are based upon currently available information and certain assumptions we believe are reasonable under the circumstances. The following supplemental pro forma information presents the combined results of operations for the year ended June 25, 2022 and June 26, 2021, as if DSPG had been acquired as of the beginning of fiscal 2021. Pro forma adjustments used to arrive at pro forma net income included adjustments for the addition of intangible amortization expense for the value of intangibles under the purchase price allocation, adjustments to record acquired inventories at fair value, transaction and restructuring costs. The total pro forma adjustments for fiscal 2022 was an increase to net income of $ 5.9 million and a decrease in net income of $ 86.3 million in fiscal 2021 . The unaudited supplemental pro forma financial information for the periods presented is as follows (in millions): 2022 2021 Revenue $ 1,802.6 $ 1,466.0 Net income (loss) $ 263.4 $ ( 6.7 ) F- 19 SYNAPTICS INCORPORATED AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) DisplayLink On July 17, 2020 , we entered into a definitive agreement to acquire 100 % of equity interest in DisplayLink Corporation, or DisplayLink, a leader in high-performance video compression technology, for $ 305 million in cash adjusted for (i) estimated cash and cash equivalents and short-term investments at the closing (ii) estimated indebtedness outstanding immediately prior to the closing, (iii) unpaid portion as of the closing of certain transaction expenses incurred by DisplayLink, and (iv) the amount that the estimated working capital of DisplayLink exceeds or falls short, respectively, of a certain specified target working capital set forth in an Agreement and Plan of Merger, or the Merger Agreement, with $ 3.1 million of the purchase price held in escrow accounts for adjustments after closing and to secure the Seller Parties’ indemnification obligations under the Merger Agreement. The acquisition closed on July 31, 2020 , or the DisplayLink Closing Date, whereupon we obtained high-performance video compression technology which will further enhance our current IoT business. This acquisition has been accounted for using the purchase method of accounting in accordance with the business acquisition guidance. Under the purchase accounting method, the total estimated purchase consideration of the acquisition was allocated to the tangible and identifiable intangible assets acquired and liabilities assumed based on their relative fair values. The excess of the purchase consideration over the net tangible and identifiable intangible assets acquired and liabilities has been recorded as goodwill. Our estimate of the fair values of the acquired intangible assets at June 26, 2021, was based on established and accepted valuation techniques performed with the assistance of our third-party valuation specialists. The adjusted purchase price paid for DisplayLink was $ 444.0 million. The following table summarizes the amounts recorded for the estimated fair values of the assets acquired and liabilities assumed as of the DisplayLink Closing Date (in millions): Cash and cash equivalents $ 40.9 Short-term investments 94.0 Accounts receivable, net 7.1 Inventory 33.1 Prepaid expenses and other current assets 9.1 Property and equipment 6.8 Intangible assets 193.0 Right-of-use lease asset 20.0 Non-current other assets 0.6 Total identifiable assets acquired 404.6 Accounts payable ( 5.2 ) Other accrued liabilities ( 9.1 ) Short-term lease liabilities ( 1.7 ) Long-term lease liabilities ( 18.2 ) Other long-term liabilities ( 32.8 ) Total liabilities ( 67.0 ) Net identifiable assets acquired 337.6 Goodwill 106.4 Net assets acquired $ 444.0 There were no measurement period adjustments during fiscal year ended June 25, 2022. During the fiscal year ended June 26, 2021 we recorded measurement period adjustments of $ 0.9 million to goodwill comprising of increases of $ 2.3 million in prepaid expenses and decreases of $ 0.8 million to other accrued liabilities and increases of $ 1.4 million in other long-term liabilities for a net increase of $ 1.7 million to the fair value of other acquired net tangible assets. F- 20 SYNAPTICS INCORPORATED AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) The following table summarizes the estimated fair value of the intangible assets as of the DisplayLink Closing Date (in millions): Estimated Weighted Average Useful Lives in Years Estimated Fair Value Developed technology 3.0 $ 82.0 Customer contracts and related relationships 3.0 54.0 In process research and development N/A 51.0 Trade names 4.0 3.0 Licensed technology 2.5 3.0 Estimated fair value of acquired intangibles $ 193.0 We estimated the fair value of the identified intangible assets using a discounted cash flow model for each of the underlying identified intangible assets. These fair value measurements were based on significant inputs not observable in the market and thus represent a Level 3 measurement. Key assumptions include the level and timing of expected future cash flows, conditions and demands specific to each intangible asset over its remaining useful life, and discount rates we believe to be consistent with the inherent risks associated with each type of asset, which range from 11.0 % to 11.5 %. The fair value of these intangible assets is primarily affected by the projected revenue, gross margins, operating expenses, the technology migration curve, customer ramp up period and the anticipated timing of the projected income associated with each intangible asset coupled with the discount rates used to derive their estimated present values. We believe the level and timing of expected future cash flows appropriately reflects market participant assumptions. In-process research and development consists of a next generation docking and video interface products for the IoT market. We expect to complete the in-process research and development project in fiscal 2023. The value of goodwill reflects the anticipated synergies of the combined operations and workforce of DisplayLink as of the DisplayLink Closing Date. No ne of the goodwill is expected to be deductible for income tax purposes. Prior to the DisplayLink acquisition, we did not have an existing relationship or transactions with DisplayLink. The consolidated financial statements include approximately $ 115.3 million and $ 110.0 million of revenue during fiscal 2022 and 2021, respectively. It is impracticable to determine the effect on net income attributable to DisplayLink as we integrated a substantial portion of DisplayLink into our ongoing operations during the first quarter of fiscal 2021 . The following unaudited pro forma financial information (in millions, except per share data) presents the combined results of operations for us and DisplayLink as if the DisplayLink acquisition had occurred at the beginning of fiscal 2020. The unaudited pro forma financial information has been prepared for comparative purposes only and does not purport to be indicative of the actual operating results that would have been recorded had the DisplayLink acquisition actually taken place at the beginning of fiscal 2020 and should not be taken as indicative of future consolidated operating results. Additionally, the unaudited pro forma financial results do not include any anticipated synergies or other expected benefits from the DisplayLink acquisition. 2021 (1) Revenue $ 1,346.9 Net income $ 72.1 (1) Includes results of Broadcom Wireless Connectivity Business Pro forma adjustments used to arrive at pro forma net income included adjustments for historical amortization expense, the addition of intangible amortization expense for the value of intangibles under the purchase price allocation, transaction costs and restructuring costs. The total pro forma adjustments for fiscal 2021 was a decrease to net income of $ 1.1 million. Broadcom Wireless Connectivity Business On July 2, 2020 , we entered into definitive agreements with Broadcom to acquire certain assets and assume certain liabilities of, and obtain non-exclusive licenses relating to, Broadcom’s existing Wi-Fi, Bluetooth and GPS/GNSS products and business in the IoT market, or Broadcom Business Acquisition, for an aggregate consideration of $ 250 million in cash which closed on July 23, 2020 , or the Broadcom Business Acquisition Closing Date. We also entered into certain transition F- 21 SYNAPTICS INCORPORATED AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) agreements with Broadcom for a period of three years . We acquired these assets and assumed certain liabilities from Broadcom in order to obtain wireless connectivity technology which will enhance our current IoT business. The acquisition has been accounted for using the purchase method of accounting in accordance with the business acquisition guidance. Under the purchase accounting method, the total estimated purchase consideration of the acquisition was allocated to the tangible and identifiable intangible assets acquired and liabilities assumed based on their relative fair values. The excess of the purchase consideration over the net tangible and identifiable intangible assets acquired and liabilities has been recorded as goodwill. Our estimate of the fair values of the acquired intangible assets at the Broadcom Business Acquisition Closing Date was based on established and accepted valuation techniques performed with the assistance of our third-party valuation specialists. The following table summarizes the adjusted purchase price paid for the Broadcom Business Acquisition (in millions): Cash $ 250.1 Adjustments to consideration transferred, net 1.5 Roadmap products - estimated cost of development ( 25.0 ) $ 226.6 We entered into a derivative and roadmap product agreement and an asset purchase agreement with Broadcom. The derivative and roadmap product agreement includes the purchase of derivative and roadmap product development services to be performed by Broadcom. We estimated the value of the development services to be approximately $ 25.0 million, and accounted for it separate from the business combination. At June 25, 2022 and June 26, 2021, the net book value of the development services is $ 5.8 million and $ 15.8 million, respectively. The estimated value of the development services is amortizing over the period of time estimated to complete the development or approximately thirty months. The amortization of the estimated cost of development is included in research and development in our consolidated statements of operations. In addition, under the terms of the asset purchase agreement we provided replacement equity compensation awards to the transferred employees and Broadcom agreed to make cash payments to transferred employees as incentive to accept employment offers from our company. We determined $ 3.5 million of value related to these arrangements should be included as consideration transferred, which was partially offset by $ 2.0 million of cash payments to transferred employees as a reduction of consideration transferred. The following table summarizes the amounts recorded for the estimated fair values of the assets acquired and liabilities assumed as of the Broadcom Business Acquisition Closing Date (in millions): Property and equipment $ 1.0 Acquired intangible assets 123.0 Total identifiable assets acquired 124.0 Liabilities assumed ( 0.2 ) Goodwill 102.8 Net assets acquired $ 226.6 We estimated the fair value of the identified intangible assets using a discounted cash flow model for each of the underlying identified intangible assets. These fair value measurements were based on significant inputs not observable in the market and thus represent a Level 3 measurement. Key assumptions include the level and timing of expected future cash flows, conditions and demands specific to each intangible asset over its remaining useful life, and discount rates we believe to be consistent with the inherent risks associated with each type of asset, which is 2.2 % for order backlog and 13.0 % for the rest of the intangible assets. The fair value of these intangible assets is primarily affected by the projected revenue, gross margins, operating expenses, the technology migration curve, customer ramp up period and the anticipated timing of the projected income associated with each intangible asset coupled with the discount rates used to derive their estimated present values. We believe the level and timing of expected future cash flows appropriately reflects market participant assumptions. The following table summarizes the estimate of the intangible assets as of the Broadcom Business Acquisition Closing Date (in millions): F- 22 SYNAPTICS INCORPORATED AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) Estimated Weighted Average Useful Lives in Years Estimated Fair Value Developed technology 6.0 $ 93.0 Customer contracts and related relationships 6.0 18.0 Order backlog 0.5 12.0 Estimated fair value of acquired intangibles $ 123.0 The value of goodwill reflects the anticipated synergies of the combined operations and workforce of the transferred Broadcom Business assets as of the Broadcom Business Acquisition Closing Date. A ll of the goodwill is expected to be deductible for income tax purposes. Prior to the Broadcom Business Acquisition, we did not have an existing relationship or transactions with Broadcom. The consolidated financial statements include approximately $ 228.8 million and $ 100.4 million of revenue during fiscal 2022 and 2021, respectively. It is impracticable to determine the effect on net income attributable to the Broadcom Business Acquisition as we had integrated a substantial portion of the Broadcom Business Acquisition into our ongoing operations at the close. Divestiture In December 2020, we completed the sale of limited audio technology intangible assets, received a fully-paid up perpetual license back from the buyer and, as an element of the transaction licensed other audio technology intangible assets to the buyer under a fully-paid up perpetual license arrangement. Under the asset purchase agreement and the intellectual property license agreement, we received $ 35.0 million in cash. The gain on the sale of the audio technology assets was $ 34.2 million. In April 2020, we completed the sale of the assets of our LCD Touch Controller and Display Driver Integration product line, or TDDI, for LCD mobile displays. We retained our automotive TDDI product line and our discrete touch and discrete display driver product lines supporting LCD and OLED for the mobile market. The assets sold under the asset purchase agreement had a carrying value of approximately $ 33.6 million as of the closing date of the transaction for cash consideration of $ 138.7 million. The gain on sale of the assets was $ 105.1 million. 5. Cash, Cash Equivalents and Short-Term Investments The following table summarizes our cash, cash equivalents and short-term investments by category at June 25, 2022 (in millions): Amortized Cost Gross unrealized gain (loss) Fair Value Cash $ 811.9 $ - $ 811.9 Cash equivalents: Money market funds 12.1 - 12.1 Total cash and cash equivalents $ 824.0 $ - $ 824.0 Short-term investments: Certificates of deposit $ 2.4 $ - $ 2.4 Corporate debt securities 43.7 ( 1.9 ) 41.8 Municipal bonds 7.9 ( 0.1 ) 7.8 Total short-term investments $ 54.0 $ ( 2.0 ) $ 52.0 We did not hold any short-term investments at the end of fiscal 2021. We use the specific-identification method to determine any realized gains or losses from the sale of our short-term investments classified as available-for-sale. During fiscal 2022, we did not realize significant gains or losses on a gross level from the sale of our short-term investments classified as available-for-sale. The following table classifies our short-term investments by contractual maturities ( in millions ): F- 23 SYNAPTICS INCORPORATED AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) Amortized Cost Due within 1 year $ 20.4 Due between 1 year to 5 years 31.6 $ 52.0 All available-for-sale securities have been classified as current, based on management's intent and ability to use the funds in current operations. 6. Fair Value Measurements We determine fair value based on the fair value hierarchy, which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value assumes that the transaction to sell the asset or transfer the liability occurs in the principal or most advantageous market for the asset or liability and establishes that the fair value of an asset or liability shall be determined based on the assumptions that market participants would use in pricing the asset or liability. The classification of a financial asset or liability within the hierarchy is based upon the lowest level input that is significant to the fair value measurement. The fair value hierarchy prioritizes the inputs into three levels that may be used to measure fair value : • Level 1 – Valuation is based upon unadjusted quoted prices for identical assets or liabilities in active markets. • Level 2 – Valuation is based upon quoted prices for similar assets and liabilities in active markets, or other inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instruments. • Level 3 – Valuation is based upon other unobservable inputs that are significant to the fair value measurements. The fair value of our Level 1 financial instruments are traded in active markets and are based on quoted market prices for identical instruments. The fair value of our Level 2 fixed income securities is obtained from an independent pricing service, which may use quoted market prices for identical or comparable instruments or model driven valuations using observable market data or inputs corroborated by observable market data. Our marketable securities are held by custodians who obtain investment prices from a third-party pricing provider that incorporates standard inputs in various asset price models. At June 25, 2022, financial assets measured at fair value on a recurring basis are summarized below (in millions): Level 1 Level 2 Level 3 Total Assets: Cash equivalents: Money market funds $ 12.1 $ - $ - $ 12.1 Short-term investments: Certificates of deposit - 2.4 - 2.4 Corporate debt securities - 41.8 - 41.8 Municipal bonds - 7.8 - 7.8 $ 12.1 $ 52.0 $ - $ 64.1 The above table excludes $ 811.9 million of cash held in our bank accounts. There were no transfers in or out of our Level 1, 2 or 3 assets during fiscal 2022 or 2021. We did not hold any financial assets measured at fair value during fiscal 2021. Financial Instruments Not Recorded at Fair Value on a Recurring Basis We report our financial instruments at fair value with the exception of the Senior Debt and Term Loan (“Note 8. Debt”). The estimated fair value of the notes was determined based on the trading price of the notes as of the last day of trading for the period. We consider the fair value of the notes to be a Level 2 measurement as they are not actively traded in markets. The carrying amounts and estimated fair values of the Senior Notes and Term Debt are as follows for the periods presented (in millions): F- 24 SYNAPTICS INCORPORATED AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) June 25, 2022 June 26, 2021 Carrying Amount Estimated Fair Value Carrying Amount Estimated Fair Value Senior Notes due 2029 $ 395.0 $ 326.9 $ 400.0 $ 401.5 Term Loan due 2028 586.7 $ 575.0 - - Convertible notes due 2022 - - $ 505.6 $ 1,013.3 $ 981.7 $ 901.9 $ 905.6 $ 1,414.8 7. Goodwill and Acquired Intangible Assets The following table presents our goodwill balance as of June 25, 2022 and June 26, 2021 (in millions): 2022 2021 Beginning balance $ 570.0 $ 360.8 Acquisition activity 236.6 209.2 Ending balance $ 806.6 $ 570.0 The following table summarizes the life, the gross carrying value of our acquired intangible assets, and the related accumulated amortization as of the end of fiscal 2022 and 2021 (in millions): 2022 2021 Weighted Average Life in Years Gross Carrying Value Accumulated Amortization Net Carrying Value Gross Carrying Value Accumulated Amortization Net Carrying Value Audio and video technology 5.6 $ 232.1 $ ( 109.3 ) $ 122.8 $ 138.6 $ ( 97.6 ) $ 41.0 Customer relationships 4.1 170.5 ( 99.7 ) 70.8 125.5 ( 63.8 ) 61.7 Wireless connectivity technology 5.7 128.0 ( 33.8 ) 94.2 93.0 ( 14.2 ) 78.8 Video interface technology 3.0 82.0 ( 52.4 ) 29.6 82.0 ( 25.1 ) 56.9 Display driver technology 7.0 20.4 ( 20.4 ) — 20.4 ( 17.5 ) 2.9 Backlog Not applicable — — — 12.0 ( 12.0 ) — Licensed technology and other 4.5 9.9 ( 7.5 ) 2.4 13.0 ( 8.1 ) 4.9 Patents 8.0 4.4 ( 3.7 ) 0.7 4.4 ( 3.2 ) 1.2 Tradename 4.4 5.8 ( 3.3 ) 2.5 4.8 ( 1.7 ) 3.1 In process research and development Not applicable 67.0 — 67.0 51.0 — 51.0 Acquired intangibles, gross 5.0 $ 720.1 $ ( 330.1 ) $ 390.0 $ 544.7 $ ( 243.2 ) $ 301.5 During fiscal 2022, we retired fully amortized intangible assets of $ 21.5 million of audio and video developed technology, $ 12.0 million in backlog and $ 3.1 million in licensed technology and other. During fiscal 2021, we retired fully amortized intangible assets of $ 143.6 million of display driver developed technology and $ 28.3 million of customer relationships. Amortization expense is calculated using the straight-line method over the estimated useful lives of the acquired intangibles. The total amortization expense for the acquired intangible assets was $ 123.5 million in fiscal 2022 , $ 110.1 million in fiscal 2021 , and $ 51.4 million in fiscal 2020. This amortization expense was included in our consolidated statements of operations as acquired intangibles amortization and cost of revenue. The following table presents expected annual aggregate amortization expense in future fiscal years (in millions): 2023 $ 127.5 2024 66.9 2025 60.0 2026 47.0 2027 16.6 Thereafter 5.0 To be determined 67.0 Future amortization $ 390.0 F- 25 SYNAPTICS INCORPORATED AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) 8. Debt Senior Debt On March 11, 2021, we completed an offering of $ 400.0 million aggregate principal amount of 4.0% senior notes due 2029, or the Senior Notes, in a private offering. The Senior Notes were issued pursuant to an Indenture, dated as of March 11, 2021, or the Senior Notes Indenture, by and among our company, the guarantors named therein and Wells Fargo Bank, National Association, as trustee. The Senior Notes Indenture provides that the Senior Notes will bear interest at a rate of 4.0 % per annum, payable in cash semi-annually in arrears on December 15 and June 15 of each year, commencing on June 15, 2021. The Senior Notes will mature on June 15, 2029 and are fully and unconditionally guaranteed, jointly and severally, on a senior unsecured basis by each of our current and future domestic restricted subsidiaries that guarantee our obligations under our senior secured credit facilities. Prior to June 15, 2024, we may redeem the Senior Notes, in whole or in part, at a redemption price of 100 % of the principal amount thereof, plus a make-whole premium set forth in the Senior Notes Indenture, plus accrued and unpaid interest, if any, up to, but excluding, the redemption date . We may redeem some or all of the Senior Notes on or after June 15, 2024 at the redemption prices specified below, plus accrued and unpaid interest, if any, up to, but excluding, the redemption date: Year Price 2024 102 % 2025 101 % 2026 and thereafter 100 % In addition, at any time prior to June 15, 2024 , we may redeem up to 40% of the aggregate principal amount of the Senior Notes at a redemption price equal to 104 % of the principal amount thereof, plus accrued and unpaid interest, if any, up to, but excluding, the applicable redemption date with the net cash proceeds from one or more equity offerings by us. The Senior Notes are the general unsecured obligations of our company. The Senior Note guarantees are the senior unsecured obligations of each guarantor. Under certain circumstances, the guarantors may be released from their Senior Note guarantees without consent of the holders of Senior Notes. Under the terms of the Senior Notes Indenture, the Senior Notes rank equally in right of payment with all of our and the guarantors’ existing and future senior indebtedness, and rank contractually senior in right of payment to our and the guarantors’ future indebtedness and other obligations that are, by their terms, expressly subordinated in right of payment to the Senior Notes. The Senior Notes are effectively subordinated to our and the guarantors’ existing and future secured indebtedness, including secured indebtedness under our senior secured credit facilities, to the extent of the value of the assets securing such indebtedness. The Senior Notes and guarantees are structurally subordinated to all existing and future indebtedness and liabilities (including trade payables) of our subsidiaries that do not guarantee the Senior Notes. The Senior Notes Indenture contains covenants that, subject to exceptions and qualifications, among other things, limit our ability and the ability of our Restricted Subsidiaries (as defined in the Senior Notes Indenture) to (i) incur additional indebtedness and guarantee indebtedness; (ii) pay dividends or make other distributions or repurchase or redeem our company’s or any parent’s capital stock; (iii) prepay, redeem or repurchase certain indebtedness; (iv) issue certain preferred stock or similar equity securities; (v) make loans and investments; (vi) dispose of assets; (vii) incur liens; (viii) enter into transactions with affiliates; (ix) enter into agreements restricting its subsidiaries’ ability to pay dividends; and (x) consolidate, merge or sell all or substantially all of its assets. The Senior Notes Indenture contains customary events of default including, without limitation, failure to make required payments, failure to comply with certain agreements or covenants, cross-acceleration to certain other indebtedness in excess of specified amounts, certain events of bankruptcy and insolvency, and failure to pay certain judgments. An event of default under the Senior Notes Indenture will allow either the trustee or the holders of at least 25% in aggregate principal amount of the then outstanding Senior Notes to accelerate, or in certain cases, will automatically cause the acceleration of, the maturity of the principal, and accrued and unpaid interest, if any, on all outstanding Notes. Debt issuance costs relating to the Senior Notes of $ 5.7 million, netted against the debt amount on the consolidated balance sheet, are amortized as interest expense using the effective interest method over 99 months. The total interest expense recorded on the Senior Notes during the fiscal year ended June 25, 2022 was $ 16.6 million. F- 26 SYNAPTICS INCORPORATED AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) Revolving Credit Facility On March 11, 2021, we amended and restated our Amended and Restated Credit Agreement, with the lenders and Wells Fargo Bank, National Association, as administrative agent, or the Credit Agreement, to, among other changes, extend the maturity date of our senior secured revolving credit facility, to five years from the closing date of the amendment, increase the facility size from $ 200.0 million to $ 250.0 million, and replace the requirement to maintain a total debt to Consolidated EBITDA (as defined in the Credit Agreement) ratio of not more than 4.75 to 1.00 with a requirement to maintain a net total debt to Consolidated EBITDA ratio of not more than 3.75 to 1.00 provided that for the four fiscal quarters ending after the date of a material acquisition, such maximum leverage ratio shall be adjusted to 4.25 to 1.00, and thereafter 3.75 to 1.00, provided further, that such deemed increase pursuant to the foregoing shall not apply to more than two material acquisitions consummated during the term of the Credit Agreement. The Credit Agreement provides for a revolving credit facility in a principal amount of up to $ 250 million, which includes a $ 20 million sublimit for letters of credit and a $ 25 million sublimit for swingline loans. Under the terms of the Credit Agreement, we may, subject to the satisfaction of certain conditions, request increases in the revolving credit facility commitments in an aggregate principal amount of up to $ 150 million to the extent existing or new lenders agree to provide such increased or additional commitments, as applicable. Future proceeds under the revolving credit facility are available for working capital and general corporate purposes. In March 2021, we used a portion of the proceeds from the Senior Notes described above to repay the $ 100.0 million outstanding borrowings on this revolving credit facility. As of June 25, 2022 , there was no balance outstanding under the revolving credit facility. Borrowings under the revolving credit facility are required to be repaid in full by March 11, 2026. Debt issuance costs relating to the revolving credit facility of $ 1.6 million, included in non-current other assets on our consolidated balance sheet, are being amortized over 60 months. Our obligations under the Credit Agreement are guaranteed by the material domestic subsidiaries of our company, subject to certain exceptions (such material subsidiaries, together with our company, collectively, the Credit Parties). The obligations of the Credit Parties under the Credit Agreement and the other loan documents delivered in connection therewith are secured by a first priority security interest in substantially all of the existing and future personal property of the Credit Parties, including, without limitation, 65 % of the voting capital stock and 100 % of the non-voting capital stock of certain of the Credit Parties’ direct foreign subsidiaries, subject to certain exceptions. The revolving credit facility bears interest at our election of a Base Rate plus an Applicable Margin or LIBOR plus an Applicable Margin. Swingline loans bear interest at a Base Rate plus an Applicable Margin. The Base Rate is a floating rate that is the greater of the Prime Rate, the Federal Funds Rate plus 50 basis points, or LIBOR plus 100 basis points. The Applicable Margin is based on a sliding scale which ranges from 0.25 to 100 basis points for Base Rate loans and 100 basis points to 175 basis points for LIBOR loans. We are required to pay a commitment fee on any unused commitments under the Credit Agreement which is determined on a leverage-based sliding scale ranging from 0.175 % to 0.25 % per annum. Interest and fees are payable on a quarterly basis. The LIBOR index is expected to be discontinued at the end of June 2023. Under our credit facility, when the LIBOR index is discontinued, we will switch to a comparable or successor rate as selected by us and the administrative agent, which may include the Secured Overnight Financing Rate, or SOFR. Under the Credit Agreement, there are various restrictive covenants, including two financial covenants which limit the consolidated total leverage ratio, or leverage ratio, the consolidated interest coverage ratio, or interest coverage ratio, a restriction that permits accounts receivable financings provided that the aggregate unpaid amount of permitted accounts receivable financings are no more than the greater of $ 100 million and 50% of the amount of all accounts receivable of our company and specified subsidiaries and other specific items. The leverage ratio is the ratio of debt as of the measurement date to Consolidated EBITDA, for the four consecutive quarters ending with the quarter of measurement. The current leverage ratio shall not exceed 3.75 to 1.00 provided that for the four fiscal quarters ending after the date of a material acquisition, such maximum leverage ratio shall be adjusted to 4.25 to 1.00, and thereafter 3.75 to 1.0. The interest coverage ratio is Consolidated EBITDA to interest expense for the four consecutive quarters ending with the quarter of measurement. The interest coverage ratio must not be less than 3.50 to 1.0 during the term of the Credit Agreement. As of the end of fiscal 2022, we remain in compliance with the restrictive covenants. Term Loan Facility On December 2, 2021, we entered into that certain First Amendment and Lender Joinder Agreement to the Credit Agreement, to, among other things, establish a new $ 600.0 million incremental term loan facility, or the Term Loan Facility. The Term Loan Facility was advanced by certain existing and new lenders under the Credit Agreement to finance the DSPG F- 27 SYNAPTICS INCORPORATED AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) acquisition. The Term Loan Facility matures on December 2, 2028 . Principal on the Term Loan Facility is payable in equal quarterly installments on the last day of each March, June, September and December of each year, beginning December 31, 2021, at a rate of 1.00 % per annum. Borrowings under the Term Loan Facility will accrue interest at the London Interbank Offered Rate, or LIBOR, plus 2.25 % or at the base rate plus 1.50 %, subject to a 25 basis point step-down based on total gross leverage, and subject to a LIBOR floor of 50 basis points. The base rate is the highest of (i) the Federal Funds Rate plus 0.50%, (ii) the Wells Fargo Bank, National Association prime rate and (iii) the one-month LIBOR plus 1.00%. The Term Loan Facility contains customary representations and warranties, affirmative and negative covenants and events of default, in each case consistent with the Credit Agreement. The Term Loan Facility does not contain any financial covenant. The Term Loan Facility is subject to a 1.00% prepayment premium in the event all or any portion of the Term Loan Facility is prepaid within the first 6 months in connection with a repricing transaction only. The Term Loan Facility is subject to customary mandatory prepayments, including, commencing June 30, 2023, an excess cash flow sweep, subject to customary step-downs and thresholds. Debt issuance costs relating to the Term Loan Facility of $ 11.2 million, netted against the debt amount on the consolidated balance sheet, are amortized as interest expense over 96 months. The total interest expense recorded on the Term Loan during fiscal 2022 was $ 10.4 million . Convertible Debt On June 1, 2021, pursuant to the Indenture, dated as of June 26, 2017 between us and Wells Fargo Bank, National Association, as trustee, or the Convertible Notes Indenture, we provided an irrevocable notice of redemption, for all $ 525,000,000 aggregate principal amount of our outstanding 0.50% convertible senior notes due in 2022, or the Convertible Notes. The Convertible Notes were redeemable at a cash redemption price of 100.0 % of the principal amount, plus accrued and unpaid interest, if any, to, but excluding, the redemption date of August 4, 2021. Holders of the Convertible Notes had the right to convert the Convertible Notes called for redemption no later than August 3, 2021, or the Conversion Deadline. The conversion rate was equal to 13.7267 shares per $ 1,000 principal amount of the Convertible Notes, which was the initial conversion rate of 13.6947 shares per $1,000 principal amount of the Convertible Notes plus a number of additional shares equal to 0.0320 shares per $1,000 principal amount of the Convertible Notes. We elected to settle any conversions by Combination Settlement (as defined in the Convertible Notes Indenture) with a Specified Dollar Amount (as defined in the Convertible Notes Indenture) per $1,000 principal amount of Convertible Notes equal to $1,000, plus a number of shares of the our common stock, to be determined pursuant to the Convertible Notes Indenture, together with additional cash, if applicable, in lieu of delivering any fractional shares of common stock. As a result of this election, on August 4, 2021, we settled or redeemed the remaining outstanding Convertible Notes for $ 505.6 million in cash representing the principal amount outstanding and delivered approximately 3.5 million shares in common stock from our treasury stock for additional amounts, resulting in a loss of approximately $ 8.1 million which is included in Interest and other expense, net on our condensed consolidated statements of income included elsewhere in this report. 9. Leases, Commitments and Contingencies Leases In fiscal 2020, we adopted Accounting Standards Codification Topic 842, or ASC 842, Leases, which requires recognition of ROU assets and lease liabilities for most leases on our consolidated balance sheet. We adopted ASC 842 using a modified retrospective transition approach as of the effective date as permitted. As a result, we were not required to adjust our comparative period financial information for effects of the standard or make the new required lease disclosures for the periods before the date of adoption. We elected the package of practical expedients which allows us not to reassess (1) whether existing or expired contracts, as of the adoption date, contain leases, (2) the lease classification for existing leases, and (3) whether existing initial direct costs meet the new definition. We also elected the practical expedient to not separate lease and non-lease components for our leases, and to not recognize ROU assets and liabilities for short-term leases. The most significant impact of the adoption of the standard was the recognition of ROU assets and lease liabilities for operating leases on our consolidated balance sheet. Adoption of the standard did not have a material impact on our consolidated statements of operations or cash flows. Our leases primarily include our headquarters office and worldwide office and research and development facilities which are all classified as operating leases. Certain leases include renewal options that are under our discretion. The leases expire at various dates through fiscal year 2034 , some of which include options to extend the lease for up to seven years. During fiscal F- 28 SYNAPTICS INCORPORATED AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) 2022, we recorded approximately $ 12.7 million of operating leases expense. Our short-term leases are immaterial and we do not have finance leases. As of the end of fiscal 2022 and 2021, the components of leases are as follows (in millions): 2022 2021 Operating lease right-of-use assets $ 61.2 $ 31.7 Operating lease liabilities $ 7.6 $ 9.3 Operating lease liabilities, long-term 51.5 24.0 Total operating lease liabilities $ 59.1 $ 33.3 Supplemental cash flow information related to leases is as follows (in millions): 2022 2021 Cash paid for operating leases included in operating cash flows $ 12.5 $ 10.0 Supplemental non-cash information related to lease liabilities arising from obtaining right-of-use assets 42.5 21.8 As of the end of fiscal 2022, the weighted average remaining lease term was 8.02 years, and the weighted average discount rate was 4.14 %. Future minimum lease payments for the operating lease liabilities are as follows (in millions): Operating Lease Fiscal Year Payments 2023 $ 6.3 2024 10.3 2025 9.2 2026 9.0 2027 8.3 Thereafter 28.5 Total future minimum operating lease payments 71.6 Less: interest ( 12.5 ) Total lease liabilities $ 59.1 We recognized rent expense on a straight-line basis of $ 12.7 million, and $ 10.1 million for fiscal 2022 and 2021, respectively. Sale and Leaseback Transaction On February 8, 2022, we executed a sale and leaseback transaction of our properties located at 1109-1251 McKay Drive and 1140-1150 Ringwood Court, San Jose, California, for a purchase price, net of closing and other expenses payable by us, of $ 55.9 million. Concurrent with the sale, we entered into a lease agreement with the buyer to lease back the land and properties located at 1109 and 1151 McKay Drive, San Jose, California, for an initial term of 12 years and a renewal option for an additional seven years . The transaction qualified for sale and leaseback and operating lease accounting classification, and we recorded a gain of $ 5.4 million which is recorded in the gain on sale and leaseback transaction line in the consolidated statements of operations. F- 29 SYNAPTICS INCORPORATED AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) Legal proceedings We are subject to a variety of claims and suits that arise from time to time in the ordinary course of our business. While management currently believes that resolving claims against us, individually or in the aggregate, will not have a material adverse impact on our financial position, results of operations or statements of cash flows, these matters are subject to inherent uncertainties and management’s view of these matters may change in the future. We accrue for loss contingencies when it is both probable that we will incur the loss and when we can reasonably estimate the amount of the loss or range of loss. Contingencies We have in the past and may in the future receive notices from third parties that claim our products infringe their intellectual property rights. We cannot be certain that our technologies and products do not and will not infringe issued patents or other proprietary rights of third parties. Any infringement claims, with or without merit, could result in significant litigation costs and diversion of management and financial resources, including the payment of damages, which could have a material adverse effect on our business, financial condition, and results of operations. Indemnifications In connection with certain agreements, we are obligated to indemnify the counterparty against third-party claims alleging infringement of certain intellectual property rights by us. We have also entered into indemnification agreements with our officers and directors. Maximum potential future payments under these agreements cannot be estimated because these agreements do not have a maximum stated liability. However, historical costs related to these indemnification provisions have not been significant. We have not recorded any liability in our consolidated financial statements for such indemnification obligations. 10. Stockholders’ Equity Preferred Stock We are authorized, subject to limitations imposed by Delaware law, to issue up to a total of 10,000,000 shares of preferred stock in one or more series without stockholder approval. Our Board of Directors has the power to establish, from time to time, the number of shares to be included in each series and to fix the rights, preferences, and privileges of the shares of each wholly unissued series and any of its qualifications, limitations, or restrictions. Our Board of Directors can also increase or decrease the number of shares of a series, but not below the number of shares of that series then outstanding, without any further vote or action by the stockholders. Our Board of Directors may authorize the issuance of preferred stock with voting or conversion rights that could harm the voting power or other rights of the holders of our common stock. The issuance of preferred stock, while providing flexibility in connection with possible acquisitions and other corporate purposes, could, among other things, have the effect of delaying, deferring, or preventing a change in control of our company and might harm the market price of our common stock and the voting power and other rights of the holders of our common stock. As of the end of fiscal 2022 , there were no shares of preferred stock outstanding. Shares Reserved for Future Issuance Shares of common stock reserved for future issuance as of the end of fiscal 2022 were as follows: Stock options outstanding 31,185 Restricted stock units outstanding 1,220,573 Market stock units outstanding 251,974 Performance stock units outstanding 441,375 Awards available for grant under all share-based compensation plans 4,449,604 Reserved for future issuance 6,394,711 F- 30 SYNAPTICS INCORPORATED AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) Treasury Stock Our cumulative authorization of repurchases under our common stock repurchase program as of the end of fiscal 2022 was $ 1.8 billion expiring July 2025 . The program authorizes us to repurchase our common stock in the open market or in privately negotiated transactions depending upon market conditions and other factors. The number of shares repurchased and the timing of repurchases is based on the level of our cash balances, general business and market conditions, and other factors, including alternative investment opportunities. Common stock repurchased under this program is held as treasury stock. As of the end of fiscal 2022, we had $ 577.4 million of common stock remaining to be repurchased under our common stock repurchase program. During fiscal 2022 and 2021, we issued 3.5 million and 0.1 million shares, respectively, from treasury stock for settlement of redemptions of our convertible notes. 11. Share-Based Compensation The purpose of our various share-based compensation plans is to attract, motivate, retain, and reward high-quality employees, directors, and consultants by enabling such persons to acquire or increase their proprietary interest in our common stock in order to strengthen the mutuality of interests between such persons and our stockholders and to provide such persons with annual and long-term performance incentives to focus their best efforts on the creation of stockholder value. Consequently, we determine whether to grant share-based compensatory awards subsequent to the initial award for our employees and consultants primarily on individual performance. Share-Based Compensation Plans On October 29, 2019, our stockholders approved: (i) our 2019 Equity and Incentive Compensation Plan, or the 2019 Incentive Plan, to replace our Amended and Restated 2010 Incentive Compensation Plan, or the 2010 Incentive Plan, and (ii) our 2019 Employee Stock Purchase Plan, or the 2019 ESPP, to replace our Amended and Restated 2010 Employee Stock Purchase Plan, or our 2010 ESPP. Upon approval of the 2019 Incentive Plan, new awards are no longer issued under the 2010 Incentive Plan. Awards outstanding at October 29, 2019 under our prior share-based compensation plans were not impacted by the approval of the 2019 Incentive Plan and continue to remain outstanding and vest by their terms under the applicable share-based compensation plan. Shares underlying certain share-based awards forfeited under the 2010 Incentive Plan subsequent to the approval of the 2019 Incentive Plan automatically transfer to and become available for award issuance from the 2019 Incentive Plan. F- 31 SYNAPTICS INCORPORATED AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) The 2019 Incentive Plan authorizes our Board of Directors to provide equity-based compensation in the form of stock options, stock appreciation rights, restricted stock units, cash incentive awards, performance shares, performance stock units, and other stock-based awards. The cumulative number of shares approved under the 2019 Incentive Plan was 4,590,000 . The 2019 ESPP authorizes us to provide eligible employees with an opportunity to acquire an equity interest in our company through the purchase of stock at a discount, with an initial authorization of 1,500,000 shares. Effective August 19, 2019, we adopted the 2019 Inducement Equity Plan. 650,000 shares of our common stock have been reserved for issuance under the 2019 Inducement Equity Plan, subject to adjustment for stock dividends, stock splits, or other changes in our common stock or capital structure. The 2019 Inducement Equity Plan is intended to comply with Rule 5635(c)(4) of the Nasdaq Stock Market Listing Rules, which provide an exception to the Nasdaq Stock Market Listing Rules’ on the shareholder approval requirement for the issuance of securities with regards to grants to employees of the company or its subsidiaries as an inducement material to such individuals entering into employment with the company or its subsidiaries. An individual was eligible to receive an award under the 2019 Inducement Equity Plan only if he or she was not previously an employee or director of our company (or is returning to work after a bona-fide period of non-employment), and an award under the 2019 Inducement Equity Plan is a material inducement for him or her to accept employment with our company. As a result of approval by our stockholders of our amended and restated 2019 Incentive Plan on October 27, 2020, no new awards will be granted under the 2019 Inducement Equity Plan. Our share-based compensation plans with outstanding awards consist of our 2010 Incentive Plan, our 2019 Incentive Plan, our 2019 Inducement Equity Plan, and our 2019 ESPP. Share-based compensation awards available for grant or issuance for each plan as of the beginning of the fiscal year, including changes in the balance of awards available for grant for fiscal 2022, were as follows: Awards 2019 2019 Available 2019 Employee Employee 2010 Under All Incentive Inducement Stock Incentive DSPG Share-Based Compensation Equity Purchase Compensation Replacement Award Award Plans Plan Plan Plan Plan Plan Balance at June 2021 3,381,840 2,114,407 — 1,208,582 — 58,851 Additional shares authorized 2,000,000 2,000,000 — — — — Transferred between plans - 14,625 — — ( 14,625 ) — Restricted stock units granted ( 641,690 ) ( 582,839 ) — — — ( 58,851 ) Market stock units granted ( 65,000 ) ( 65,000 ) — — — — Performance stock units granted ( 96,914 ) ( 96,914 ) — — — — Performance stock units performance adjustment ( 133,627 ) ( 133,627 ) — — — — Market stock units performance adjustment ( 69,728 ) ( 33,675 ) — — ( 36,053 ) — Purchases under employee stock purchase plan ( 138,502 ) — — ( 138,502 ) — Forfeited 337,171 162,547 27,768 — 146,856 — Plan shares no longer available for new grants ( 123,946 ) — ( 27,768 ) — ( 96,178 ) — Balance at June 2022 4,449,604 3,379,524 — 1,070,080 — — Share-based compensation and the related tax benefit recognized in our consolidated statements of income for fiscal 2022, 2021, and 2020 were as follows (in millions): 2022 2021 2020 Cost of revenue $ 4.0 $ 3.4 $ 2.1 Research and development 42.5 45.4 32.3 Selling, general, and administrative 54.4 44.3 26.0 Total $ 100.9 $ 93.1 $ 60.4 Income tax benefit on share-based compensation $ 23.1 $ 15.2 $ 6.3 F- 32 SYNAPTICS INCORPORATED AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) Included in the preceding table is share-based compensation for our cash-settled phantom stock units, which we granted in October 2019 (see Phantom Stock Units below) (in millions): 2022 2021 2020 Cost of revenue $ 0.2 $ 0.4 $ 0.2 Research and development 27.2 21.9 9.1 Selling, general, and administrative 4.7 4.7 1.8 Total $ 32.1 $ 27.0 $ 11.1 We recognize a tax benefit upon expensing certain share-based awards associated with our share-based compensation plans, including RSUs, market stock units, or MSUs, PSUs, and phantom stock units. We do not recognize a tax benefit upon expensing all or a portion of share-based awards granted to certain executive officers and certain foreign-based employees. We compare the actual tax benefit associated with the tax deduction from share-based award activity to the hypothetical tax benefit based on the grant date fair values of the corresponding share-based awards. Tax benefit associated with excess tax deduction creditable to income tax provision is recognized when incurred. Tax deficiency associated with a tax shortfall is debited to income tax provision when incurred. Historically, we have issued new shares in connection with our share-based compensation plans, however, treasury shares are also available for issuance. Any additional shares repurchased under our common stock repurchase program will be available for issuance under our share-based compensation plans. Stock Options Our share-based compensation plans with outstanding stock option awards include our 2010 Incentive Plan. Under our 2010 Incentive Plan, we were able to grant incentive stock options or nonqualified stock options to purchase shares of our common stock at not less than 100 % of the fair market value, or FMV, on the date of grant. We ceased granting stock options in fiscal 2018. Options granted under our 2010 Incentive Plan generally vest three to four years from the vesting commencement date and expire seven years after the date of grant if not exercised. Certain stock option activity for fiscal 2022 and balances as of the end of fiscal 2022 were as follows: Stock Weighted Option Average Intrinsic Awards Exercise Value Outstanding Price (In millions) Balance at June 2021 55,061 $ 66.68 Exercised ( 23,876 ) 73.44 Balance at June 2022 31,185 61.50 $ 2.1 Exercisable at June 2022 31,185 61.50 $ 2.1 The aggregate intrinsic value was determined using the closing price of our common stock on the last trading day of fiscal 2022, or June 24, 2022 , of $ 128.78 . All of the stock options outstanding were vested and in-the-money as of the end of fiscal 2022. Cash received and the aggregate intrinsic value of stock options exercised for fiscal 2022, 2021, and 2020 were as follows (in millions): 2022 2021 2020 Cash received $ 5.3 $ 23.9 $ 23.9 Aggregate intrinsic value $ 3.6 $ 8.6 $ 10.8 There have been no stock options granted since fiscal 2018. There was no unrecognized share-based compensation costs for stock options granted under our various plans. F- 33 SYNAPTICS INCORPORATED AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) Restricted Stock Units Our 2019 Incentive Plan provides for the grant of RSUs to our employees, consultants, and directors, and previously our 2019 Inducement Equity Plan and our 2010 Incentive Plan provided for the grant of deferred stock units, or DSUs, to our employees, consultants, and directors. An RSU and a DSU are each a promise to deliver shares of our common stock at a future date in accordance with the terms of the grant agreement and the words can be used interchangeably. We began granting DSUs in January 2006 and RSUs in 2019. The use of RSUs will cover the meaning of both RSUs and DSUs. RSUs granted generally vest ratably over three to four years from the vesting commencement date. Delivery of shares under the plans take place on the quarterly vesting dates. At the delivery date, we withhold shares to cover applicable statutory minimum tax withholding for grantees subject to withholding and deliver a net quantity of shares to the grantee after such withholding. Until delivery of shares, the grantee has no rights as a stockholder with respect to any shares underlying the RSU award. RSU activity, including RSUs granted, delivered, and forfeited in fiscal 2022, and the balance and aggregate intrinsic value of RSUs as of the end of fiscal 2022 were as follows: Aggregate Weighted Intrinsic Average RSU Awards Value Grant Date Outstanding (in millions) Fair Value Balance at June 2021 1,323,286 $ 64.13 Granted 641,690 183.97 Delivered ( 578,400 ) 63.23 Forfeited ( 166,003 ) 120.72 Balance at June 2022 1,220,573 $ 157.2 119.83 Of the shares delivered, 169,529 shares valued at $ 31.4 million were withheld to meet statutory tax withholding requirements. The aggregate intrinsic value was determined using the closing price of our common stock on the last trading day of fiscal 2022, or June 24, 2022 , of $ 128.78 . The unrecognized share-based compensation cost for RSUs granted under our 2019 Incentive Plan, our 2019 Inducement Equity Plan and our 2010 Incentive Plan was approximately $ 107.1 million as of the end of fiscal 2022 , which will be recognized over a weighted average period of approximately 1.9 years. The aggregate market value of RSUs delivered in fiscal 2022, 2021, and 2020 was $ 106.4 million, $ 48.2 million, and $ 36.0 million, respectively. Market Stock Units Our 2019 Incentive Plan, and previously our 2019 Inducement Equity Plan, provide for the grant of MSU awards, to our employees, consultants, and directors. An MSU is a promise to deliver shares of our common stock at a future date based on the achievement of market-based performance requirements in accordance with the terms of the MSU grant agreement. We have granted MSU awards to our executive officers and other management members under our 2010 Incentive Plan, our 2019 Incentive Plan and our 2019 Inducement Equity Plan, which are designed to vest in three or four tranches with the target quantity for each tranche equal to one-third or one-fourth of the total MSU grant. The first tranche vests based on a one-year performance period; the second tranche vests based on a two-year performance period; the third tranche vests based on a three-year performance period; and the fourth tranche (in the case of four-year vesting) vests based on a four-year performance period. For MSU awards granted in fiscal 2022 and 2021, performance is measured based on our achievement of a specified level of total stockholder return, or TSR, relative to the TSRs of each company in the Russell 2000 Index. The potential payout ranges from 0 % to 200 % of the target grant quantity based on our TSR performance relative to the TSRs of each company in the Russell 2000 Index. No payout will occur if our TSR performance falls below the 25 th percentile of the TSRs of each company in the Russell 2000 Index, and a 200 % payout will occur if our TSR performance exceeds the 75 th percentile of the TSRs of each company in the Russell 2000 Index. Performance payouts between the 25 th and 75 th percentiles will be determined on a linear basis with performance at the 50 th percentile equal to 100 % of target. F- 34 SYNAPTICS INCORPORATED AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) For MSU awards granted in fiscal 2022 and 2021, the first tranche and the second tranche can payout up to 200 %, and the payout for the third tranche will be calculated based on the total target quantity for the entire grant multiplied by the payout factor, based on performance for the three-year performance period, less shares issued for the first tranche and the second tranche. For outstanding MSU awards granted prior to fiscal 2021, performance is measured based on our achievement of a specified level of TSR relative to the TSR of the S&P Semiconductor Select Industry Index, or SPSISC Index. The potential payout ranges from 0 % to 200 % of the target grant quantity and is adjusted on a two-to-one ratio based on our TSR performance relative to SPSISC Index TSR. For MSU awards granted prior to fiscal 2021 and vesting over three years, the payout for the first tranche and the second tranche will not exceed 100 % and the payout for the third tranche will be calculated based on the total target quantity for the entire grant multiplied by the payout factor, based on performance for the three-year performance period, less shares issued for the first tranche and the second tranche. For MSUs vesting over four years, the payout for the first tranche, the second tranche and the third tranche will not exceed 100 % and the payout for the fourth tranche will be calculated based on the total target quantity for the entire grant multiplied by the payout factor, based on performance for the four-year performance period, less shares issued for the first tranche, the second tranche and the third tranche. Delivery of shares earned, if any, will take place on the dates provided in the applicable MSU grant agreement, assuming the grantee is still an employee, consultant, or director of our company at the end of the applicable performance period. On the delivery date, we withhold shares to cover statutory tax withholding requirements and deliver a net quantity of shares to the recipient after such withholding. Until delivery of shares, the grantee has no rights as a stockholder with respect to any shares underlying the MSU award. MSU activity, including MSUs granted, delivered, and forfeited in fiscal 2022, and the balance and aggregate intrinsic value of MSUs as of the end of fiscal 2022 were as follows: Aggregate Weighted Intrinsic Average MSU Awards Value Grant Date Outstanding (in millions) Fair Value Balance at June 2021 347,027 $ 82.18 Granted 65,000 191.68 Performance adjustment 69,728 — Delivered ( 203,883 ) 78.05 Forfeited ( 25,898 ) 136.26 Balance at June 2022 251,974 $ 32.4 As a result of the Synaptics TSR outperforming the Index TSR by 185.21 percentage points for the tranche three payout period ended in fiscal 2022, we delivered 200 % of the targeted shares underlying the fiscal 2019 MSU grants. As a result of the Synaptics TSR outperforming the Index TSR by 226.12 percentage points for the tranche two payout period ended in fiscal 2022, we delivered 100 % of the targeted shares underlying the fiscal 2020 MSU grants as the tranche two payout is capped at a 100% payout. As a result of the Synaptics TSR performing at the 76 th percentile relative to the constituents of the Russell 2000 Index for the tranche one payout period ended in fiscal 2022, we delivered 200 % of the targeted shares underlying the fiscal 2021 MSU grants. Of the shares delivered, 105,719 shares valued at $ 18.3 million were withheld to meet statutory minimum tax withholding requirements. The aggregate intrinsic value assumes a 100 % payout factor and was determined using the closing price of our common stock on the last trading day of fiscal 2022, or June 24, 2022 , of $ 128.78 . F- 35 SYNAPTICS INCORPORATED AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) The fair value of each MSU granted from our plans for fiscal 2022, 2021, and 2020 was estimated at the date of grant using the Monte Carlo simulation model, assuming no expected dividends and the following assumptions: 2022 2021 2020 Expected volatility of company 52.61 % 53.62 % 45.46 % - 52.55 % Expected volatility of Index 17.4 % - 581.6 % 19.6 % - 197.6 % 24.64 % - 33.44 % Correlation coefficient 0.53 0.51 0.53 - 0.58 Expected life in years 2.87 2.87 2.50 - 4.00 Risk-free interest rate 0.40 % 0.17 % 0.26 % - 1.52 % Fair value per award $ 284.43 - $ 342.89 $ 131.34 - $ 175.15 $ 55.52 - $ 100.38 We amortize the compensation expense over the three- or four-year performance and service period on a ratable basis. The unrecognized share-based compensation cost of our outstanding MSUs was approximately $ 14.9 million as of the end of fiscal 2022 , which will be recognized over a weighted average period of approximately 0.72 years. Performance Stock Units Our 2019 Incentive Plan and our 2010 Incentive Plan provide for the grant of PSU awards to our employees, consultants, and directors. A PSU is a promise to deliver shares of our common stock at a future date based on the achievement of performance-based requirements in accordance with the terms of the PSU grant agreement. We have granted PSU awards to our executive officers and other key management team members under our 2010 Incentive Plan, our 2019 Incentive Plan and our 2019 Inducement Equity Plan, which, generally, are designed to vest in three tranches with the target quantity for each tranche equal to one-third of the total PSU award. Generally, PSU awards have a specific one-year performance period and vesting occurs over three service periods with the final service period ending approximately three years from the grant date. Performance is measured based on the achievement of a specified level of performance relative to predefined performance criteria (for PSU awards granted in fiscal 2022 and prior to fiscal 2021 the performance criteria is based on non-GAAP earnings per share, for PSU awards granted in fiscal 2021 the performance criteria is based on a combination of our design win revenue, non-GAAP gross margin percentage and non-GAAP operating expenses). For our fiscal 2022 PSU awards, the potential payout ranges from 0 % to 200 % of the target grant quantity and is adjusted on a linear basis with a payout triggering if our measurement results equals greater than 75 % of the target with a maximum payout achieved at 125 % of target. Delivery of shares earned, if any, will take place on the dates provided in the applicable PSU grant agreement, assuming the grantee is still an employee, consultant, or director of our company at the end of the applicable service period. On the delivery date, we withhold shares to cover statutory tax withholding requirements and deliver a net quantity of shares to the recipient after such withholding. Until delivery of shares, the grantee has no rights as a stockholder with respect to any shares underlying the PSU award. PSU activity, including PSUs granted, delivered, and forfeited in fiscal 2022, and the balance and aggregate intrinsic value of PSUs as of the end of fiscal 2022 were as follows: Aggregate Weighted Intrinsic Average PSU Awards Value Grant Date Outstanding (in millions) Fair Value Balance at June 2021 317,392 $ 62.41 Granted 96,914 111.90 Performance adjustment 88,762 — Delivered ( 208,023 ) 55.01 Forfeited ( 37,142 ) 79.79 Balance at June 2022 257,903 $ 33.2 We value PSUs using the aggregate intrinsic value on the grant date and amortize the compensation expense over the three-year service period on a ratable basis, dependent upon the probability of meeting the performance measures. Of the shares delivered, 94,642 shares valued at $ 17.6 million were withheld to meet statutory minimum tax withholding requirements. The PSU awards outstanding balance at June 2022 is based on the target grant quantity and does not include the performance adjustment of 183,472 shares for completed performance periods. The unrecognized share-based compensation cost of our F- 36 SYNAPTICS INCORPORATED AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) outstanding PSUs was approximately $ 31.7 million as of June 25, 2022 , which will be recognized over a weighted average period of approximately 0.72 years. Phantom Stock Units The 2019 Incentive Plan authorizes the grant of phantom stock units to non-employee directors, officers and employees. We initially granted phantom stock units in October 2019. Phantom stock units are cash-settled and entitle the recipient to receive a cash payment equal to the value of a single share for each unit based on the average closing share price of our stock over the thirty calendar days prior to the vesting date. Grants of phantom stock units vest over three years , with an annual vesting date of October 31 each year subsequent to the grant date. We recognize compensation expense for phantom stock units on a straight-line basis for each tranche of each award based on the average closing price of our common stock over the thirty calendar days ended prior to each balance sheet date. The outstanding phantom stock units had a fair value of $ 135.07 per unit at June 25, 2022 and our accrued liability for such units was $ 15.4 million. The outstanding phantom stock units had a fair value of $ 140.17 per unit at June 26, 2021 and our accrued liability for such units was $ 18.4 million. Phantom stock activity was as follows: Aggregate Phantom Intrinsic Stock Units Value Outstanding (in millions) Balance as of June 2021 402,458 Paid ( 196,420 ) Forfeited ( 29,941 ) Balance as of June 2022 176,097 $ 22.7 Employee Stock Purchase Plan Our 2019 ESPP became effective October 29, 2019 and replaced our 2010 ESPP. The 2019 ESPP, and previously the 2010 ESPP, allows employees to designate up to 15 % of their base compensation, subject to legal restrictions and limitations, to purchase shares of common stock at 85 % of the lesser of the FMV at the beginning of the offering period or the exercise date. Under the 2019 ESPP, the offering period extends for up to one year and includes two exercise dates occurring at six-month intervals. Under the 2010 ESPP, the offering period extended for up to two years and included four exercise dates occurring at six-month intervals. Under the terms of our 2019 ESPP, and previously under our 2010 ESPP, if the FMV at an exercise date is less than the FMV at the beginning of the offering period, the current offering period will terminate and a new offering period will commence. Shares purchased, weighted average purchase price, cash received, and the aggregate intrinsic value for employee stock purchase plan purchases in fiscal 2022, 2021, and 2020 were as follows (in millions, except shares purchased and weighted average purchase price): 2022 2021 2020 Shares purchased 138,502 220,389 346,502 Weighted average purchase price $ 97.90 $ 57.00 $ 30.50 Cash received $ 13.6 $ 12.6 $ 10.6 Aggregate intrinsic value $ 12.5 $ 10.3 $ 10.1 The fair value of each award granted under our 2019 ESPP and our 2010 ESPP for fiscal 2022, 2021, and 2020 was based on the Black-Scholes option pricing model. The fair value per award for fiscal 2022, 2021 and 2020 was $ 38.93 , $ 20.82 and $ 15.48 , respectively. Unrecognized share-based compensation costs for awards granted under our 2019 ESPP at the end of fiscal 2022 were approximately $ 1.4 million that will be amortized over the next 2 months. 12. Employee Benefit Plans 401(k) Plan We have a 401(k) Retirement Savings Plan for full-time employees in the U.S. Under the plan, eligible employees may contribute a portion of their net compensation up to the annual limit of $ 20,500 , or $ 27,000 for employees who are 50 years or older. In fiscal 2022 , we provided matching funds of 25 % of our employees’ contributions, excluding catch-up contributions. F- 37 SYNAPTICS INCORPORATED AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) The employer matching funds vest immediately. We made matching contributions of $ 1.7 million, $ 1.8 million and $ 2.1 million in fiscal 2022, 2021, and 2020 , respectively. 13. Income Taxes Income/(loss) before provision for income taxes for fiscal 2022, 2021, and 2020 consisted of the following (in millions): 2022 2021 2020 United States $ ( 44.8 ) $ ( 21.0 ) $ ( 13.5 ) Foreign 365.3 141.1 172.9 Income before provision for income taxes $ 320.5 $ 120.1 $ 159.4 The provision for income taxes for fiscal 2022, 2021, and 2020 consisted of the following (in millions): 2022 2021 2020 Current tax expense/(benefit) Federal $ ( 0.6 ) $ 4.1 $ 0.8 State — 0.1 — Foreign 94.9 36.1 35.4 94.3 40.3 36.2 Deferred tax expense/(benefit) Federal ( 21.8 ) ( 0.5 ) ( 5.8 ) State - - 0.1 Foreign ( 7.9 ) ( 8.4 ) 8.1 ( 29.7 ) ( 8.9 ) 2.4 Provision for income taxes $ 64.6 $ 31.4 $ 38.6 The provision for income taxes differs from the federal statutory rate for fiscal 2022, 2021, and 2020 as follows (in millions): 2022 2021 2020 Provision at U.S. federal statutory tax rate $ 67.3 $ 25.1 $ 33.5 State income taxes — 0.1 — Non-deductible share-based compensation 7.9 5.2 3.0 (Windfall)/shortfall related to share-based compensation ( 18.1 ) ( 3.8 ) 2.1 Non-deductible officer compensation 6.4 6.4 1.9 Business credits ( 10.0 ) ( 3.8 ) ( 6.1 ) Foreign tax differential 6.4 ( 6.7 ) 4.9 Foreign income inclusion 3.6 5.2 0.7 Deferred taxes on unremitted foreign earnings 0.7 3.5 — Other differences 0.4 0.2 ( 1.4 ) Provision for income taxes $ 64.6 $ 31.4 $ 38.6 F- 38 SYNAPTICS INCORPORATED AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) Non-current deferred tax assets and non-current deferred tax liabilities are included in “Non-current other assets” and “Other long-term liabilities”, respectively, on our consolidated balance sheets. Significant components of our deferred tax assets (liabilities) as of the end of fiscal 2022 and 2021 consisted of the following (in millions): 2022 2021 Deferred tax assets: Capital loss carryforward $ 17.8 $ 0.2 Inventory write downs 2.6 3.9 Property and equipment and intangible assets 11.7 6.0 Share-based compensation 12.0 8.8 Nondeductible interest 5.4 — Business credit carryforward 62.0 39.1 Lease liabilities 11.2 6.5 Net operating loss carryforward 16.3 7.2 Other accruals 5.6 5.1 144.6 76.8 Valuation allowance ( 59.0 ) ( 32.6 ) 85.6 44.2 Deferred tax liabilities: Property and equipment ( 2.0 ) ( 0.9 ) Interest — ( 3.4 ) Right-of-use assets ( 11.5 ) ( 6.2 ) Unremitted foreign earnings ( 22.1 ) ( 3.5 ) Acquisition intangibles ( 45.8 ) ( 29.0 ) ( 81.4 ) ( 43.0 ) Net deferred tax assets $ 4.2 $ 1.2 Realization of deferred tax assets depends on our generating sufficient U.S. and certain foreign taxable income in future years to obtain a benefit from the utilization of those deferred tax assets on our tax returns. Accordingly, the amount of deferred tax assets considered realizable may increase or decrease when we reevaluate the underlying basis for our estimates of future U.S. and foreign taxable income. As of the end of fiscal 2022, a valuation allowance of $ 59.0 million was maintained to reduce deferred tax assets primarily related to state tax credits and capital losses carryforwards that are not more likely than not to be realized through future taxable income. The net change in the valuation allowance during fiscal 2022 was an increase of $ 26.4 million, primarily due to an increase of unrealized deferred tax assets associated with the capital loss carryforwards from our DSPG acquisition.. We consider most of the 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. Further, we determined not to indefinitely reinvest earnings of certain subsidiaries acquired as part of our DSPG acquisition and established a $ 17.9 million deferred tax liability on the acquisition date balance sheet. As a result, $ 22.1 million of our deferred tax liability is associated with unremitted foreign earnings, which if remitted would not result in a further provision for income taxes. We continue to indefinitely reinvest $ 200 million on certain accumulated earnings and outside basis differences primarily related to our DSPG acquisition. If the undistributed earnings and other outside basis differences were recognized in a taxable transaction, the associated foreign tax credits would be expected to reduce the U.S. income tax liability associated with the foreign distribution or the otherwise taxable transaction. As of our fiscal 2022, assuming full utilization of the associated foreign tax credits, the potential net deferred tax liability associated with these undistributed earnings and outside basis differences would be approximately $ 46 million. F- 39 SYNAPTICS INCORPORATED AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) As of the end of fiscal 2022, we had federal, California, and foreign net operating loss carryforwards of approximately $ 37.7 million, $1 4.8 million, and $ 58.2 million, respectively. The federal and California net operating loss will begin to expire in fiscal 2034 and 2029 , respectively, if not utilized. Most of our foreign net operating losses have no expiration date. Under current tax law, net operating loss and tax credit carryforwards available to offset future income or income taxes may be limited by statute or upon the occurrence of certain events, including significant changes in ownership. We had $ 25.4 million and $ 50.4 million of federal and state research tax credit carryforwards, respectively, as of the end of fiscal 2022. The federal research tax credit carryforward will begin to expire in 2029 and the state research tax credit can be carried forward indefinitely. The total liability for gross unrecognized tax benefits related to uncertain tax positions, included in other liabilities in our consolidated balance sheets, increased by $ 7.2 million from $ 22.6 million in fiscal 2021 to $ 29.8 million in fiscal 2022. Of this amount, $ 19.6 million will reduce the effective tax rate on income from continuing operations, if recognized. A reconciliation of the beginning and ending balance of gross unrecognized tax benefits for fiscal 2022, 2021, and 2020 consisted of the following (in millions): 2022 2021 2020 Beginning balance $ 22.6 $ 20.1 $ 18.9 Increase in unrecognized tax benefits related to current year tax positions 7.1 5.5 3.2 Increase in unrecognized tax benefits related to prior year tax positions 5.5 — 0.1 Remeasurement of unrecognized tax benefits ( 0.5 ) — — Decrease due to statute expiration ( 4.9 ) ( 3.0 ) ( 2.1 ) Ending Balance $ 29.8 $ 22.6 $ 20.1 Accrued interest and penalties increased by $ 0.8 million in fiscal 2022 as compared to fiscal 2021 and decreased by $ 0.2 million in fiscal 2021 as compared to fiscal 2020. Accrued interest and penalties were $ 2.5 million and $ 1.7 million as of the end of fiscal 2022 and 2021, respectively. Our policy is to classify interest and penalties, if any, as components of income tax expense. It is reasonably possible that the amount of liability for unrecognized tax benefits may change within the next 12 months; an estimate of the range of possible changes could result in a decrease of $ 0.9 million to an increase of $ 6.9 million. Any prospective adjustments to our unrecognized tax benefits will be recorded as an increase or decrease to inc ome tax expense and cause a corresponding change to our effective tax rate. Accordingly, our effective tax rate could fluctuate materially from period to period. Our major tax jurisdictions are the U.S., Hong Kong SAR, Japan, Israel and the U.K. From fiscal 2016 onward, we remain subject to examination by one or more of these jurisdictions. In January 2022, final foreign tax credit regulations, final regulations, were issued by the U.S. Treasury modifying long established rules, including rules used in the determination of whether foreign taxes paid or accrued are creditable against U.S. income taxes. Subsequently, in July 2022, technical corrections and amendments to the final regulations were issued by the U.S. Treasury. These technical corrections and amendments do not change our initial view that certain foreign taxes we incur may not be creditable under the final regulations. We are currently assessing the impact of the final regulations, together with certain research and development capitalization rules, all effective beginning with our fiscal 2023, but anticipate the impact will have a material adverse effect on our fiscal 2023 and future provision for income taxes. 14. Segment, Customers, and Geographic Information We operate in one segment: the development, marketing, and sale of semiconductor products used in electronic devices and products. We generate our revenue from three broad product categories: the IoT product applications market, the personal computing, or PC, product applications market, and the mobile, product applications market. F- 40 SYNAPTICS INCORPORATED AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) Net revenue within geographic areas based on our customers’ locations for fiscal 2022, 2021, and 2020, consisted of the following (in millions): 2022 2021 2020 China $ 609.1 $ 524.0 $ 540.6 Taiwan 539.4 382.6 204.5 Japan 453.1 330.7 446.5 Other 83.9 69.5 77.3 South Korea 39.1 28.5 58.3 United States 15.1 4.3 6.7 $ 1,739.7 $ 1,339.6 $ 1,333.9 Net revenue from external customers for each group of similar products for fiscal 2022, 2021, and 2020 consisted of the following (in millions): 2022 2021 2020 IoT product applications $ 1,100.9 $ 612.9 $ 329.8 PC product applications 343.0 354.7 317.4 Mobile product applications 295.8 372.0 686.7 $ 1,739.7 $ 1,339.6 $ 1,333.9 A reclassification has been made to the prior periods revenue presentation in the above table in order to conform to the current period revenue presentation. The reclassification o f $ 32.0 million and $ 12.2 million during the fiscal years ended 2021 and 2020, respectively, moved virtual reality product revenue from Mobile product applications to IoT product applications. Long-lived assets within geographic areas as of the end of fiscal 2022 and 2021 consisted of the following (in millions): 2022 2021 United States $ 118.2 $ 168.5 Asia/Pacific 624.7 191.9 Europe 516.6 602.3 $ 1,259.5 $ 962.7 Our goodwill of $ 806.6 million has been allocated to two reporting units which include IoT and Mobile/PC. Major customers’ revenue as a percentage of total net revenue for fiscal 2022, 2021, and 2020 were as follows: 2022 2021 2020 Customer A * 14 % 18 % Customer B 13 % 13 % * Customer C 12 % 10 % 12 % * Less than 10 % 15. Restructuring Activities We have initiated various strategic restructuring actions primarily intended to reduce costs, gain synergies from our recent acquisitions and align our business in response to market conditions. The following table summarizes the restructuring activity and related charges during the periods presented (in millions): Years Ended 2022 2021 2020 Balance, beginning of period $ 0.2 $ 6.1 $ 5.2 Charges 18.3 7.4 33.0 Payments ( 17.1 ) ( 13.3 ) ( 32.1 ) Balance, end of period $ 1.4 $ 0.2 $ 6.1 F- 41 SYNAPTICS INCORPORATED AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) During fiscal 2022, we recorded restructuring and related charges of $ 18.3 million in our consolidated statements of operations. The charges were for activities intended to further improve efficiencies in our operational activities and gain synergies from the DSPG acquisition. These activities from the restructuring actions taken during fiscal 2022 are complete as of the end of fiscal 2022. During fiscal 2021, we recorded restructuring and related charges of $ 7.4 million in our consolidated statements of operations. The charges were for activities to gain synergies from our DisplayLink acquisition. The activities from the restructuring actions taken during fiscal 2021 were complete as of the end of fiscal 2021. F- 42