SITM - Earnings call transcript Q2 2020

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Operator

Good afternoon and welcome to the SiTime Second Quarter 2020 Financial Results Conference Call. At this time, all participants are in a listen-only mode. At the conclusion of today’s conference call, instructions will be given for the question-and-answer session. [Operator Instructions] As a reminder, this conference is being recorded today, Wednesday, August 5, 2020. I would now like to turn the call over to Leanne Sievers of Shelton Group Investor Relations. ahead. go please Leanne,

Leanne Sievers

welcome second and results XXXX conference call. to afternoon quarter SiTime's financial Good

from Rajesh SiTime Officer; call the On are Chadwick, Financial and Vashist, Chief Officer. Art Executive Chief

can adversely light to or during results actual discussion. to not company contained call, assess forward-looking the to company conform not accuracy may and discussed expectations. after and the responsibility any statements. in could forward-looking of the I'd nor which implied. possible point like financial forward-looking any nor company's Before results, results expected these all timing, It factors company assumes differ the occur other The make forward-looking risks the of statements. business plans, uncertainties cause management position, call we person the any to assumptions, publicly of and no impact Neither of out statements obligation of market the its changes to date strategy statements begin, and in this that the the during the and is update call, from predict statements reason or any this from the may those completeness these and for the forward-looking for anticipated actual company this or events In all of actual combination materially future to factors may the of risks, including undertakes results for to materially the differ to factor regarding areas on or course operations, future extent company's

will not measures with reconciliation a refer provided substitute or on non-GAAP which X, Rajesh. superior to be results risk and for to between for described our refer certain to These in of financial with SEC we release to risks accordance which in performance. GAAP. during between we information our in to measures, non-GAAP refer financial March are with associated more Please U.S. of I'd only compensation non-GAAP now we non-GAAP the company financial filing, consider press our results. factors Also as detailed to call, on like to the difference important you measures we filed Please, today prepared issued an the expense. this stock-based and XX-K measure addition the a and XXXX. to For business, go ahead. GAAP The is call financial turn performance GAAP over detailed

Rajesh Vashist

are year. going I wins design remarkable our so some more do quantify design don't and including don't here Emerald last products. we $XX.X by today evidenced but Normally, that plan and the million quarter Hi, there. second progress you hope in Good product from portfolio, productively the I share this Leanne. and were the quarter had XX and year. forward, which wanted results, over has second our you quarter to and entire We to your healthy. Elite have you across same SiTime as XXX all than in thank home, XX% to you to continued with wins families safe work up at and

which continue On and new first products oscillator the we two is innovate the the introduced and product. differential to product front, clocking Cascade XXXX our

about of solve in pandemic, will of expected. up our want up number we technology and minutes. part for overview One, less more our talk I And down Art our provide was the problems. IoT Two, growth were is a markets our discussed future increased difficult and on timing higher-margin XX%. story Communications as where these enterprise that and call reasons. than these impacted aerospace can few but markets, gross and we was suppliers. business margin. markets well target details are the impact communications, segment his center XX%, aligns down well was consumer, data one less inclined was focus down than expected. mobile, Once which would suited And product have predictability. we to products, but thought sequentially, in still to while Chadwick higher we end designed which we markets financial associated As to The with deliver three, the transpired cycles, last profile these are our was into on the revenue a markets had were that be longer industrial, these the less quarter's XX% life by auto enterprise change to customers

deployment, this for we of SiTXXXX introduced to first the the to part the Cascade offers XX customers more performance Particularly outdoor enables femtoseconds in clock Well, of of is high platform. and integrate is a jitter products: this new and two and oscillator temperature data MEMS offers resilience also our half communications, MEMS the center; and times. such our as thrust As and differential environmental device shock. on SiTXXXX deliver third-generation based products. vibration, It This technology. outstanding in into space existing modules development reduce features, stressors higher optical IC,

a our applications. our and which which chip. and to centers, is capture We're modules meaningful routers, positions in in next first us data share XXX-gig chip addition switches, system for clock outstanding XXX-gig the servers, also through cards, edge well suited graphic these optical bringing storage therefore product, our In on XXXX value is MEMS the clock is Cascade, a of controllers market to

one programmable all can five two be setup and through Now generators, platform cleaner on this clock products, this different network one jitter platform, configured Cascade configurable, platform. into two synchronizers,

All end-to-end of integration. and environmental offer resilience unsurpassed these

of to is quartz-based that and are are this as Overall and adviser we to integration years robust and activity For dips. our and devices to that than mismatches, we to MEMS kinds customers. products. which value and issues, the enterprise the MEMS in our trusted have position oscillators We typically unique due analog. reliability is and continue comms problems more of next-generation external three The is also role market potential high-performance gain which growth with believe to for to this a clock of only associated producer well that solve a robustness solutions, our and and the MEMS the of resonators, timing increasing other all timing clocks, difficult resiliency hardware. the customers brings are thereby doing revenue so, unreliable XXx SiTime use reliable delivering the come. in share impedance system In oscillator in with believe clocks, our strengthen eliminates resonator, oscillator start-up higher noise chip, problems using and MEMS Since opportunities a quartz incremental clock the to and we are revenue on the IC inherent we SiTime of of positioned example, needed this and

the our give We across I'd second you turn expect the strong With like Art? this of growth quarter to all segments. outlook. over Art in that, results our to year second the discuss to third call half and financial quarter

Art Chadwick

Thanks everyone. and Rajesh good Great. afternoon

we're be very conference to our company. call pleased public So, holding as third results a financial

a of stock-based refer will GAAP XXXX reconciliation results, which description compensation I'm discussion During the non-GAAP my results my to non-GAAP for exclude you financial discuss and expense. and today's payroll to to third related going our release provide results for of well guidance as GAAP tax detailed on press results, today, focus review as quarter. financial and I'll QX a

the end business up markets, impacted but by the pandemic, and for over into business. mobile To QX, Going but as from XX% I a in the Revenue Business by X% down group the knew especially feared. report million, I'll past. we $XX.X sales quarter, ago. IoT year was same color quarter some quarter market on impacted, as the have our provide be as not consumer our was would much

by first the primarily and the products. of IoT consists and wearable consumer, mobile The into most phones, mobile segment global slowdown. sales was is consumer This which devices impacted

we Going much. down be sales, million Sales down as of might in not were XX% sequentially, QX down Sales that XX% expected from into XX% X% much quarter, quarter XX% to the same pandemic. total due year. as and or sequentially down, but the the to $XX.X last were sales

is the and was and This military million year aerospace, up second Sales ago. $X.X sales, were and aerospace, industrial sales. application quarter automotive the over during expected. broad-based up of segment into XX% XX% sequentially auto as The XX% which industrial, quarter a or strong goes includes same

$X.X and were $X.XX $XX.X and $X.X were highest Sales were from XX% of grants. was were were over million. is Non-GAAP non-GAAP XX.X%, $X.X $XX.X our million million, $X.X $XX.X QX, days. just sales XX% comms sequentially in QX. generated with purchase the $X.X was strength essentially QX, center with data on wireless in and The taxes one or up The related which where fully on growth QX DSOs million. was segment We This gross and consists per operating flat compensation assets was SG&A flat Non-GAAP a paid QX enterprise, million, loss million taxes $XX.X Net from loss data sales XXX% for year. infrastructure, in XX XG, quarter million the for with margins generated share at third expenses quarter from last $X.X quarter in expense up used and just million in and that QX. expense net center. and basis. same were in including in up million, of We other the in operations points networking. $X.X million $X.X expense. XX% cash sales, of had a This Inventory Accounts receivable to basis of down with particular this customer essentially slightly XX or sales. million interest $X.X operating of customer QX. from diluted Stock-based exceeded XX% million $XX.X up non-GAAP million, million payroll RSU and comprised of R&D end and

$XX.X quarter follow-on shares stock June, Our big per $XX we million sold was the event during stock expenses. of netting In fees X,XXX,XXX offering. share, at and financial after our

addition, and from shares and sale this public approximately reduced our stock, of MegaChips' sold X.X now. the XX% XX% to into just liquidity our of volume shares daily has ownership SiTime increased In stock. MegaChips those putting percentage their float million trading

may cash paid March with equivalents. third in for pay the COVID of we even some the strong impact million entirely. We headwind, provide the ended that we June. more end reduce million debt this at end debt some But I'd continue to quarter. million have $XX to XXXX. will $XX quarter even growth. believe debt pandemic business and of and to expecting revenue We down now million sequential guidance $XX of QX, are the our like with addition, the In quarter off $XXX.X of it on to our plan In reducing at we from

between at million revenue up expect revenue be IoT sequentially, part demand large our strong which XX% in would QX million by will and in business. XX% $XX $XX We consumer to put mobile and driven

this may the we quarter. addition, there one good begin be revenue phone chance in We a until believe win. would is have we quarter just believe such design shipments a later a from win In for and very not SKU would additional

would just margins gross and regards to However, any are they the within starting such off. of revenue number we to a initiatives be to provided. margins In pay gross I the to company have upside guidance, expand

We expect point. plus QX one approximately or will increase in gross XX%, margins minus to

result would are growth. at at from has than they X% lower million recent interest also QX a will pay Non-GAAP will stock We're our rate expenses Net debt. line three expenses. that to of gross count be share decrease be we expenses sequentially, higher QX. than be increased XX.X as top approximately in Share approximately shares. managing $XX.X aggressively $XXX,XXX midpoint down So expense X% at to count in will that midpoint operating offering. and a operating million. than significantly The would increase but less basic points between Operating as increase which QX there expected margins were

additional XX.X EPS In the new shares. two of to approximately will an million stock dilutive addition, shares higher stock share non-GAAP in calculation RSUs count the higher approximately for the compensation Stock-based of taking the million, QX add establishment bonus effect be from executive employee $X.X approximately stock and employee to used million expense price up due performance QX plan. grants will some total QX

given, We guidance business half our Though of the to challenges and poses we on be go a $X.XX and well run expect between pandemic in per will still non-GAAP COVID year Based share. we certain beyond. and just our are will QX QX $X.XX EPS expect profit QX. we a loss believe from non-GAAP the EPS many of for in this to how we to the positioned customers second

that workforce exceptional an is performing home. have extremely We at sheltered well, while

address markets. have that We growing products differentiated large and

products And that, answers. of turn for enviable strong the the pipeline to X We call an I'd sheet. questions the have and list in much. operator balance you new a to customers Tier a back very of number like and Thank with

Operator

[Operator question first line Instructions] And Curtis the Blayne comes with of your from Barclays.

Blayne Curtis

Yeah. long-term one. Maybe Thanks results. in. near-term then a question Great taking for for a one

in just also it's some about mobile? uncertainty Just you in talk gross coming near-term, the back. the see there can consumer But and I was kind coming of know said rebound the you I with COVID margins up. IoT

those So trying understand, the function lower-margin segments? you with are I'm the to margin of better to parts. better, within move sheer or mix a just Is volumes seeing just big it mix the going driving a

Art Chadwick

a some variety QX that We've for that all mean, about been raising news for favorable good very of was hope prices. will of past. continue. The the We've improving mix I these obviously some and Blayne, So, Gross are reasons. of in us talked right? in is we whole margins

mix consumer generally those corporate the lower place, Again, to going are taking than that more sales reductions right direct expected margins the the out cuts cost forward. products within and middleman. improve averages. we're are somewhat margins the even taking are our our space, You're consumer that gross within But

So, gross it's higher place. volume taking improve things we've things margins happening all about but that, are helps, The really also those to of all combined. the talked

take even to next points gross from higher mobile improve yes expected QX. or IoT than So mix QX to we're and three still a expecting consumer give more quarter margins with

Blayne Curtis

Thanks. just clock this. date. term curious just you a primarily And product sold that's – oscillators mentioned of I'm then you first the and to longer kind with

you think – for And to can TAM clocks said much look that that you going When think that of I at it I kind TAM equate to you be I SKUs. could of where next five of clocks think event. in you're of as it's how what I your kind and TAM a just I'm be you kind get more is. perspective year curious to just going of to But to addressable that address. are

Rajesh Vashist

but years absolutely Right. but Nothing this Correct. minimis going amount in It's to it's make next Yes up. year impact. an it really substantial the it's is ramp right. you're future. to year almost over starts coming out that de The revenue the

$X next market $X.X billion the As we – clocks to is far billion $X.X as that growing total as for have about before years. said billion, about the five the in

as We look clocks. the best at for continue to place these market communications the

market player we our on we we timing are aspect that – are so $XX million, with around for going would is that of notable it large. particular say the going And to about are going – what going is I the of particularly in be that as this so timing. with a for during said focusing TAM we we to product to be full-level $XX systems said be and the Cascade to we're IPO fact million nothing product, we But a every

like now and high-end a is think investors Right what in have. we it's or a I Cascade it our that the to – conversation a it we solution. in fulfilling the Elite in we can of sense kind that it product in an be clocking. when as are we go will to does a And with So system able of part our Emerald bring changes promise oscillators

we able into the the as with year process to products customers. to introduce able and clocking those more and As the lead forward after, the where be we products to we'll oscillators year we'll we be go in and next bring the reverse products also

few product that be now could a – market. promising a think we And highly very very indeed. revenue it's move. So think we And this this it's from we for high years of a strategic think

Blayne Curtis

Thanks.

Art Chadwick

Blayne Thanks,

Operator

from And your the next of question Stifel. with comes line Tore Svanberg

Tore Svanberg

Yes. Thank you.

guide the to First question but sort only phone win. this design on quarter it quarter is a you going event. sounds I know like one of be out late

to perhaps would that quarter? material be the again infer in we sequentially that should enough So December growth

Art Chadwick

So – yes.

thread is But and on X, said not at that we've bake there's business. It win our we're confident a have believe getting that And had today, for believe very needle SKU. we parts an design but that August production as we're want obviously good we've numbers enough we win. will sustained. to also as this of we've such chance one it right, we real the of we been anybody's don't that into working that design one do point will be that a to expansion just until So towards because shipped that we

not later mentioned. we're begin And I would our quarter. as shipments Our guidance including in it this

our course to guidance QX of this for be yet. given haven't positive incrementally So any in And guidance would QX. we

Tore Svanberg

clock profitability Okay. higher then platform That's bit I the product or than assume be corporate on should that? is of the just of content fair. main your with we And assume of all product can from clock this And your you get quite given partner. this foundry Rajesh Cascade, amount like fabbed average a first the to a

Rajesh Vashist

Yes.

this where going products that forward. won't foot-in-the-water So we or product a But we key line I'll comment comment is customers. generally what for our going particularly don't – so basically say can of strategic corporate our guidelines more that so it product view with with that. fabbed, first as is start a We conversation on I the on are in

architectures We different more of versions have coming. a coming and lot of different these

get just to which customers connected have. we wins get Yes. wanted our design to start to So and we

Tore Svanberg

Congratulations, again. good. Very

Art Chadwick

Tore. Thanks, Great.

Operator

Raymond the line your next of question comes And with from Caso Chris James.

Chris Caso

you. Thank Yes.

some that's revenue in know Because still a in socket, question to but in would you've the the have comes question in by the cases the quarter. or affected guess secured another that much that some can chose Is how compared of in actually the perhaps COVID much comes September timing we of why the revenue put I these launches the not I to of question you phone just or of affect And how maybe not win. you some that and as – clarify on guidance. Just it second suppose half quarter December quarter. been whether within

Art Chadwick

Yes.

thorough solid Chris shipping to how -- very be where we level is it a certain but that's comfortable are parts a will not question, numbers to include least design ago. chosen continue I win minute the to it, is to my So our until at start in and answer production answered we that We and similar going we're where today. very we've

three have we may count that QX, that. So months But happen. going start not very this I today, parts, a now production good think when to that we from about we as report But a believe, we to more say yet. good it's fact until very possibility, in we're of it shipping there's will probability, news

Chris Caso

Got it.

design And Okay. of go second what suggested you That's of you're regard effects. those other the growth The see follow-up half, for markets out the other the clear. Thank through you're other the effects segments, the some some as against across COVID is you -- segments. And all in segments. color question perhaps you Maybe you what some of, could strong through of just general. you. that win just to separate you could of the expecting And some second half. give thinking

Art Chadwick

Yeah.

So obviously the…

Rajesh Vashist

Well…

Art Chadwick

ahead, go Rajesh. …

Rajesh Vashist

ahead. Go

Art Chadwick

we bookings, the what historically know So IOT. And to just that. season. stronger looks We QX QX in And will strengthen obviously segment even would most the than significant on expect would that, have mobile so the it's be much that QX growth, pretty we be a QX, holiday because more, to from like.

expect of half that other second And are first to they segments we sales than a wins, to year, we've higher, number Our of ramp. be the for in those the design continue in the segments, would quarter. got

be are guidance, a will provided into because think know the that with we I the that rollouts, of impact, delaying of there of that we some But of our our their a QX. for few numbers have pandemic. result an We factored pandemic. customers as

Chris Caso

great. That's Thank you.

Operator

the from of question Capital. next ROTH line comes your Desilva Suji And with

Suji Desilva

Hi, on here momentum. Art. Congratulations Rajesh, Hi, progress and the

about do the to the with programs? just and to mobile lead in leadership? the third quarter timeframe the the that industrial ramp-up you percent continue expect is segment way to -- growth think non-consumer communications additional the the here growth of So communications Is

Art Chadwick

from again, slowing for because So think couple other the rate, that pandemic. some I QX QX mentioned, growth got in I that QX. QX, growth the factored that a be guidance. I they have QX, overall But than programs the specific will in customers less going likely are of of again sequential rate in down we've those into segments, to the And were

Suji Desilva

… Okay.

Art Chadwick

guidance QX, I But comms and expect IOT, knowledge without going outside specific where mobile both QX on, space. with to are industrial different of customers again programs. and segments that the comment from I'm grow very -- expect the into nicely so I for QX also to of specific Again, those they the, basing the

slow QX think QX. to the they to from I those down QX for growth accelerate So QX. segments rates two I from again, think But

Suji Desilva

if Okay. have I you that's to an new that's existing customer? SiTime And also question say, That's customer or a win. helpful. the here a Can on follow-up quick smartphone

Art Chadwick

not We're It's leave phone win we're so to that's going Yeah. to have how a going design to it. say.

Suji Desilva

the enough progress. Congrats on Fair again Art.

Art Chadwick

Great. Thanks Suji. a lot

Operator

Needham comes And with Quinn the of your next line question & from Bolton Company.

Quinn Bolton

results. the on Congratulations

something that bring you any that wave what about you try just your than Is talk competitors -- there -- you where could that win socket? here that to allows – to think value or socket? millimeter couldn't technically I'll a you you say competitive performed do alternatives, perhaps secure -- is one that better there this So allowed brought guys solutions

Rajesh Vashist

reliability quality mean into I choosing have the performance, reasons performance like mix. two power speaking in people things put in is Yes. size One us. for broadly we area and that categories we and

of The value. over chain bigger it is which impact the think having now time is we portion a supply other

have always to SiTime or are fabless are either fabs the And them. world ports it's a famine know build factories is competitors our you in and as -- build feast for company. always So in to fact we have

in in open goes. that so put COVID production fact the today's comes we few by in yet with today's had the that and world plants significant companies the so not issues business there plants supply of constraint being crystal it's the either comes are down portion basically supply. in have it constraint or think but world And to able shutting us a in and on that not goes, has that think quantifiable and I

I think significantly why whole some abundance of using why that's So us just getting mix a the us through rather and supply into an this our the of caution customers -- to. smaller I chain reason SKU reasons for are phone the and is attribute of putting the than getting part

it get always impact always greater performance to having we the case chain in buy But a of from There's So reasons. a is than supply because performance reason previously. this SiTime.

Quinn Bolton

Got quarter? then reiterate you you for the could guidance could Art you margin missed for -- gross I just it, but third the it. And

Art Chadwick

Yes.

margins or gross are point. percentage QX, XX QX to plus QX improving nicely I one So very minus from in be guided at points them to

from a improvement be a would QX. over X-point that XX% little at So

Quinn Bolton

Got it.

three QX you're then the not will the auto guidance it think shift. all enterprise It issue. the trajectory -- And the Q&A look said in quarter. but to December like Okay. Art for know answering you sounds again giving they an like I sounds grow December But like like segments mix quarter fourth and in I quarter, doesn't mix gross continue and in reaccelerate to should some real there's sound industrial increase becomes unless the margin significant that into comms

trend the be into we margin continues higher fourth quarter? that thinking should So gross to

Art Chadwick

gross ourselves ahead we're up time. I margin setting think too of getting Without Yes. for expansion far over ourselves good

at QX I and going QX QX a to it think will at levels bit least likely from higher. be little

Quinn Bolton

you. Thank

Rajesh Vashist

on carefully and just portion at the little it. and Cascade I wanted $XX it's looked just the I Blayne, I just that thing for one say Blayne -- communications a to And it TAM million of

Operator

the And Vecchi question Blair. with your William Alessandra last of line comes from

Alessandra Vecchi

excellent Hi, the results. everyone. Congratulations on

defense the that's believe aerospace you with -- QX, I bit as win on the could if platform launched of traction for potentially in and was been well wondering I on to pushed little sort Endura due design out if Just which COVID? update there and us a was

Rajesh Vashist

in activity. stopping no see we win Actually design the

in total sharing why a been design Emerald. XXX fact wins In that's of XX cases very strong point and including numbers it's and made Elite I in of some the

the were Endura of Some line. the in and Elite Emeralds

have for So in I demand Endura-grade push-outs and been we broad-based strong that market. products a no think very there's

apparent that In fact traction said products as go the we we value becomes as as even of more bring. the I it of and we're gaining

Alessandra Vecchi

That’s me. Great. Its very helpful. it for

Rajesh Vashist

thanks Ales. Great,

Operator

further at no Art for to I'll closing any questions remarks. it are time. There turn this now Chadwick over back

Art Chadwick

the has a just to want everyone of I call. Great. to listening We you the you of thank appreciate it. We for hope rest all spending Thank our really very time great afternoon. much.

Operator

Ladies and you participating you conference for disconnect. concludes gentlemen and today's call. this Thank may now

SiTime (SITM) 8 Aug 202020 Q2 Earnings call transcript