SITM - Earnings call 3 2023 | SiTime Corporation

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Operator

Good afternoon, and welcome to SiTime's Third Quarter 2023 Financial Results Conference Call. [Operator Instructions] As a reminder, this conference call is being recorded today, Wednesday, November 1, 2023.

I would now like to turn the call over to Brett Perry with Shelton Group Investor Relations. Brett, please go ahead.

Brett Perry

Thank you. to Quarter welcome Conference Financial and Call. afternoon, SiTime's XXXX Third Results Good

today's are from Executive us call Joining on SiTime Art Chief Officer; Chadwick, Rajesh Financial Officer. and Chief Vashist,

that of I'd risks operations, market to nor results of of all the to factor company's call, begin, company its contained for the impact company predict the cause forward-looking including to management timing combination the can future make all those from discussion. and business possible regarding in assess to actual may or course materially and may financial factors or we Before position, which the point out any on differ strategy It's factors of forward-looking during not the like this extent expected any statements. results, areas statements other the plans, future

risks, those completeness the call could In and statements. for from adversely may light and implied. person the nor assumes accuracy occur, responsibility forward-looking any events this differ and not uncertainties of actual results Neither the anticipated discussed and during company of these assumptions, or materially forward-looking

this company actual to The obligation update of publicly statements conform any company's no reason changes date the statements to for to in to results at or forward-looking the undertakes call expectations.

on with filed filings February subsequent on XX, For business, we well with the XX-K the factors SEC. information associated company's more refer detailed risk the XXXX, risks in you to described the the as as

and substitute superior are provided be the non-GAAP measures performance. important addition company non-GAAP measures measures, to measure These during financial which are Also we'll an to not considered for to refer call, press non-GAAP between certain and a issued and to with financial today or prepared as a company's only The in reconciliation results stock-based Please detailed financial for the refer reported performance results. in is U.S. GAAP GAAP. financial expense. compensation between of release GAAP to non-GAAP accordance difference of

to over please ahead. the now to go it's pleasure my SiTime's With CEO. turn call that, Rajesh,

Rajesh Vashist

Thank QX well welcome like afternoon. you to investors SiTime's earnings you. XXXX I'd as Good to call. as existing

not we ensures with timing. precision semiconductor SiTime's, For of functioning. timing the the driving, needs serve and of applications XXX our timing ubiquitous applications. SiTime category center, timing like billion you in in that market. transform are to dynamic and SiTime We're those created leader as new is customers called reliable precision as In XX,XXX a familiar early electronics, billion chips has the X data XG we shipped automated timing AI. growth to $XX precision are in

our XX.X%. was with for gross $X.XX $XX.X was margins XXXX. loss quarter of QX share $X.XX Non-GAAP versus line in Revenue guidance. was a the in XXXX million. were QX Non-GAAP EPS per

QX consumer As we demand, see forecasted, an uptick of the end inventory segment. and to in a reduction we mobile continue IoT in particularly in

XX% trends QX to these expect to We XX% leading higher continue revenue to sequentially over QX. in

half on of business In addition, in in more and we of as the SAM This detail. to expansion, now X to touch 'XX, ASPs, wins the long-term strength business. envisioned. these I track, our new of In continued the on exceptional source have continues leading through our will second design single and strength continue solid products, increased introduction remain factors all is

communications key beats legacy and We X that OCXOs for to SAM products expand product EPOC revolutionary all need. EPOC high-value is customers our specifications continue like center that with the a data quartz markets. on

built this are we've customers excited opportunities. and funnel Our a product, of about robust

of that our which holding are 'XX the ASPs an lower despite to indication bring to is customers. Our we XXXX value from steady revenues,

Our funnel robust to continues show growth.

the same oscillator source unique is in lastly, was indication period of cumulative in an single XX% Our date which have 'XX multi-sourced And design the SiTime. revenue our in grown wins XX% of the business, to QX value XXXX. of over

the our XXX focus the XXXX, oscillators, grown oscillator past in XX expanding singular years, leader X category to growth. adviser of competitors. customers markets, revenue and highest been we've the IPO price In This from in and tenfold. the unique in us has the on along focus trusted to a our SAM space with in oscillator our value grown unlike the Since strategy makes oscillator our has

We're now exciting focus applying the of to the market category clock timing results. same with the

from clocking our leverages Semiconductor. are to revenue We by our and several [ This acquiring products road accelerate balance sheet years. clock ] strong map Aura

our increase clocks. they when to sold expect pull-throughs we to are with due oscillator complementary Additionally, revenue

generators synchronizers, of This network buffers. portfolio includes categories cleaners, products clock and high-performance the jitter all of clocks, proven X major

fact, clock Cascade already have XXX some in customers. XXX at designs we was which introduced In XXXX Aura includes clock, our technology, and

With this by the best-in-class end another clocks XX acquisition, XX SiTime XXXX. now and of immediately adds

adviser brings men's Additionally, trusted of our new timing at our top for data closer markets combining that that oscillators these customer companies. the whole with convinced SiTime's that by significantly of believe a precision vision. acquisition deeply us and trajectory our and building clocks, AI. advances timing This electronics and of to be we products continues status and core comms, satisfied will I'm our products this the unique category enhances center created

CFO, to contributions We He's to I'd tremendous partners. achievements. management Art's business guidance strategic key a partner years on wholeheartedly has played strong and Art impact a and decided business. Art adviser thank investors at an to our on SiTime, our also for After Chadwick, a been like SiTime's in and SiTime's his give our update has to team. changes X role our retire.

SiTime and multinational scale, I'm we continue member November comes executive SiTime's SiTime experience experience very be will financial deep as organizations. invaluable market in joining SiTime's future build and and excited How to CFO success. Beth She leadership momentum on to driving new a our proven is of Her wealth performance growth to drive to team. with appoint X. as

In exciting company and further our conclusion, these the us to to you. are success. advance vision take that changes Thank

Arthur Chadwick

a then results Rajesh, non-GAAP provide well and some today's discussion press results reconciliation XXXX guidance description GAAP to Today, as thanks, release for financial our you to of everyone. I'll of and I'll refer on quarter. and results. fourth GAAP quarter non-GAAP Well, for a results detailed discuss good the focus my afternoon, as third

in was quarter XX% were largest million sales, segment million, $XX.X million $XX.X QX, consumer QX. primarily mobile to customer. XX% our up Revenue $XX.X and from due IoT up sales our in of into third or from Sales to higher the

customer to that QX. in were from Sales $XX.X $X.X million up million,

Enterprise XX% million Aerospace up Excluding sales, into XX% into were Automotive $X.X or into sales were in million $X.X $XX.X sales. in to Sales or Industrial, million XX% from were segment & sales QX. of of our and $XX.X segment down Sales slightly million this our largest or just sales, from customer, $X.X million our of segment Communications QX.

$XX.X flat margins XX.X% in R&D and million, $XX.X gross Non-GAAP Non-GAAP SG&A. essentially as closely down were margins about QX continue operating from X% in manage expenses. $XX.X to expenses million in were we QX. Expenses million with were

operating loss $X.X million, quarter in better than non-GAAP and higher the last third QX income loss $X.X The due was our was up substantially to million $X.X $XX.X million Interest from earned million, investments. T-Bill on other quarter. interest

last of to income per loss net share was compared a non-GAAP quarter million or quarter. million $X.X $X.X $X.XX Third

the DSOs of Accounts million compared quarter $XX.X of quarter. at was end days $XX.X million, XX QX. of DSOs receivables Inventory flat million as XX the with $XX.X and essentially were days in with last to

$XXX.X in short-term in the invested $X equivalents cash in with capital $XX.X purchases we consumed from quarter, the operations, and ended quarter cash million cash, investments. million million During and

worked of I'd it than provide like but now is quarter inventory normal, guidance in down. financial the channel for being still is to some fourth XXXX. more There the

take including customers, largest back to some it of will inventory back our this for For But to end is customer, until more levels. into year to or them normal. the other normalized XXXX customers, channel get

we be customer, sales expect other enterprise, up an fourth XX% growth driven Whereas the we by customers quarter demand, QX from customer, largest end to XX% QX driven will especially markets. and growth was by mentioned, aero increased and from to uptick comms now to be in QX sales As in Rajesh largest essentially our and QX than sequentially. are to seeing will industrial our

flat as with operating QX margins We approximately expect expenses. million. will Interest non-GAAP be $X.X will income gross will be essentially

will share count shares. million Our approximately be XX.X

$X.XX non-GAAP be $X.XX As EPS a and share. we expect result, will per between somewhere

Semiconductor. a will million of comments strategic Aura. paid $XXX earn-out The in the tied now comprised for generated is an in I'd be SiTime. a total acquired cumulative to million. be from million, based all-cash $XX will few earn-out It's with with XXXX, through will like will a $XX at of from XXXX payments be million and product revenue an expected on and million deal capped XXXX multiples transaction close This to exciting deliveries at about various $XXX XXXX, from very expected Aura deal products which paid $XX all our totaling of make paid be payments fixed and

will clocking revenue. then do our must XXXX. take non-GAAP go business, in This operating to customers, time with for accelerate therefore, not clearly sockets deal it time income We, revenue will win into it any our grow expect to those takes or designs We material production. design but and first

we However, licenses in from would reporting beyond, $XXX non-GAAP results. revenue note these and operating I future intangible exclude growing we business of a assets that and to acquired standpoint, in like plan and to income also increase a should XXXX million of report amortization when to number years.

years outside retire. as decided raising Now and really SiTime, on are spend activities nesters, at management here that today, public, being and wife But capital more helping and and my the I I a personal X have note, now want I this to amazing had company on down we empty part team. amazing we have announced time work. to an step of take CFO of

decided baton. So pass the to it's now I time

to I work Amit, to everyone Sam And work job team who for VP who my our amazing great want do easy. at of and extend our here Finance, to with. so to a and Shier and being special entire I made Rajesh SiTime finance want accounting thank and thanks

Beth like also new CFO. welcome Finally, as our I'd to

and she's I do think great, great. to going think I to do the company going is

call to And I'd Q&A. back on the the for like to operator that note, hand

Operator

from line of first [Operator comes Instructions] Our question Tore Svanberg the of Stifel.

Tore Svanberg

wish the and your I Art, on retirement platform. and best Yes. Congratulations here. welcome the best continuous in all the you to recovery

growth question for My is on that the first are expecting QX. you

some You perhaps of to I customer. there. could What some are growth that's hoping in the subsegments what plagued not are as subsegments of color -- are talked exit And inventories still expected your more are bit by the largest business your to year? related little a we that add grow? that about was the the you in

Arthur Chadwick

great No, question. Sure.

That of and sequentially mentioned XX%, from growth comms a lot strength and in QX. We're aerospace and quarter-to-quarter. seeing in from QX will from significant also QX strength is out, revenue very going few see we're around and that in One segment. industrial expect QX, I defense, in percent some I that will a enterprise. X-X projecting sequential As to call did increase to QX my we're that are and increase to subsegments commentary, I relatively to there's we increase QX substantial somewhere seeing

our I For kind to customer, going be consumer, excluding that is think of flattish that quarter-to-quarter. it. And summarizes largest

Tore Svanberg

Rajesh, question Aura sort And know clocking not higher-margin mention into a did color. a of great for that's Yes, but these businesses. that there's and financial Rajesh. 'XX, penetration -- I accelerating are going with of to impact the in you the market Technology much be

from this perspective does over the margins then a but the for both gross company term, how change growth for sort XX% financial of also time? longer So profile

Rajesh Vashist

Yes.

these gross margins. On clearly, are gross high-end margins, the

The products to that Clocking ASPs. for As the XX% going from we a traits. said around gross in enterprise distinctive clocking I've are the are typically relatively but are margins $X comms are the for. middle-of-the-road before, particularly range, has markets $XX, ASPs AI few anywhere

our design I on positive I -- this think get On impact wins. the having growth, a only to the think don't we it's material extent

we sooner But So that long-term growth. them that. the along general, our XX% maintain can business in help always talked and sooner oscillators, get the annual growth we'll rate start wins the we've design get selling This the only our for the we about.

Operator

from of Needham comes the question line Bolton Company. Quinn next & of Our

Quinn Bolton

you, It's been just Cavium. best your want retirement. but working and with and to not X also to last great years, say only wife for the you Art, wishes your at

So just time. Beth, really enjoyed the And welcome.

product first question, of Aura comes up R&D to or my just any without the sounds guess company. I a Semiconductor. following on sort just that substantial it's It acquisition line like OpEx

Or X questions. you can a continue these confirm continues point, that Two, will generate Aura take generations products R&D these at to be clock to have And so clock entity guess over to you? separate for some will products? or that? for of derivatives some these I of One, future you

Arthur Chadwick

Yes.

their of side, but in few folks are expense a other hire it's the to significant So on Quinn, going we India few not and locations, OpEx. a

and cover that gross do we revenue will margins, OpEx. the drive, whatever So

is next ramp non-GAAP over expectations year. time from models and folks income or So get because wins I suggesting And essentially standpoint basically their that will their we're take really operating these to XXXX time. a design it guided those then changed to not neutral for for

absolutely. Aura will company, continue as a

next For the with will few of of have the that develop the will they and to part associated we this deal, years, technology those continue products complete ownership products. are

absorb We into we control of them those management will technology going forward. take of our products and complete

clocks get into technology is we MEMS our as the current this we to virtually like So have to in Cascade, I we technology. we don't add were even -- believe are greater of to to of -- things in get start something is, the as we third going And think selling a to to then or the as as clocks X-step, and And literally totally shipping go product build Aura Then I to with that that's be just We it future, our get cease exist, forward. if that's self-sufficient one case, use either X-step to maybe that, add the is. oscillator it. technology

to map. come spooling road So all X going of these bear are to on our

Quinn Bolton

you of sounds a Got better to are it. your customer, see like order sort outside it just And then largest environment. starting

the through quarter? in the have at couple and industrial rates third over Have seen and comms given talking segments? they confidence you of into improved? wondering, you've that Is been this the you're for levels. pretty pretty low you order know what's substantial quarter past quarters, sort fourth trends of Just I growth the sort about the but choppy could that enterprise, A&D orders describe of the generally

Arthur Chadwick

Yes.

seen seen we've demand. an we've in mentioned uptick. an end our We clearly, commentary, user So uptick in

still It So little that is is of it. a a piece choppy.

our order Some by our great days, are rates standards.

as And great. some days, not they're

that out still the confident guidance. what's there. our That's is little segments has increase driving choppy described. we those order And I bit it in in very a increased. So But this are sequential rate QX market clearly,

something market So seeing how in that we're here. says changes the about

seeing we've also. And improve this, more that that of had that and part year. sales, add and of I'll it, their inventory to work customers back And normalized to inventory get is helps this as issue through levels, all we're some order

Operator

MKM. line Suji Our of next question comes from the Roth Desilva of

Sujeeva De Silva

welcome Rajesh, and your to team. luck here Art on transition best the and Beth, of

good So shipping about million in works off an digestion of? of if next growth to Art, going this you Just prior calls 'XX Is model talked baseline about year. as still year year. kind this under $XX think to that a number understanding in inventory of a that back number into about

Arthur Chadwick

year think, that Again, in get is with under-commitment, inventory" subcontractors Yes. million because are it's it not do and much those has we "excess have. this in of hard But to I $XX how information from million the ballpark, to numbers the $XX they ballpark.

Sujeeva De Silva

my on acquisition. question the And then Okay. Aura Great. other

a company of Why earlier? center accelerate it's like intended. with and now? and about it no Why kind of oscillators going in of the pun And it You to seem clocks this timing to do adoption doing have while, along data for not guys transaction this known comms. the seems

Rajesh Vashist

a Well, question. good it's

very space. As the in you be our know, have acquisition, consistent first would one the been clocking that we

we part business. And over that networking living and highest the we're are the enterprise, that promise gratified So area the deeply exactly last is exactly AI clocking few of the in which years. I'm the space, up it value comms, to doing

been case, for planets dealing the in The with a them just And aligned. is timing Sometimes we've while. high this XG.

product launched and the XXXX, the Cascade saw earlier, we in line guys that have said I work high-quality we Semiconductor did. Aura the at already As

just the our bringing that, saw done seemed technology years we us see And new We several time market. connecting the these with to think be And the we're EPOC of right launch with we these would this oscillator a level in, lot by to also the that of bringing they guys were do while bear. revenue. by brought could time. take products we And accelerating because it to products, and

it and team perfect built of And the one with with very relationship this. what And So planets done. almost great open we've time. with have they this in like Aura Bangalore, aligned to the a seemed just when were themselves is a them times more India, we're and those pleased

Operator

[Operator Instructions] Our next line the question comes Knowledge. of O'Laughlin of Douglas Fabricated from

Unknown Attendee

the had question the segment. just to welcome and on Congrats I a team, Beth. comms

You X-X quarter guess quarter-over-quarter. a you And follow-up comms that I segment. Aura. I margin historically, that is is troughing said given gross Does then on said imply highest margin your that have gross this

Arthur Chadwick

Yes.

say X-X rest which us, large are still some enterprise relatively comms but revenue percent business, did margin not also other we is gross margins throughout of gross for that sequentially. dollars I generally offsets QX the QX. XX%, I approximately from to had guide higher that to will So have flat increase the is the why These

Unknown Attendee

this one for walk Okay. an is an customer with clock oscillator. Perfect. of get I product through And would Rajesh. attach like you guess a something more for kind then Could how Aura rate an us Semiconductor

guys. long of going a know take are much but why reason just is And deal of kind walk better I the us logic together, these this a deals the and to through for time, you

even I be the understand big and how it accelerate you oscillator us your think for of Just could be for maybe Aura would to impact business. helpful and understand quantify and

Rajesh Vashist

Exactly.

$XX of believe And and one a this that. $XXX comms clock-based front the It into of SiTime. additional in that from to takes important an is one enterprise million. products million us offering SAM our center comes is So we for business a very

is So really tenfold. at increase

goes supply or radio RRHs. we in that look unit, into that the today oscillators you RRUs if So both a remote at

did use network possess. new which that, are Now which that box, had go we buffers clocks, clock generators typically either synchronizers alongside we heretofore, the or into or -- same not

building been we've a internally, some takes it these of just while And longer. lot

we So with right have product would X ready away, slots go. the this to RRU, in

relatively on in very another router oscillators. the on and business, light core In clocking that's example, heavy

cleaners, So that. router. that opportunity X chips are we we have an clocks distribute in have network would which we to synchronizers needed an X opportunity but one core are that and supply, to in there's jitter now one for that up for And sell oscillator, that do opportunity the more buffers

And finally, couple to opportunity for but of of we a up opportunity clocks market. we a in kinds oscillators, to in have the sell those, data now that center, server, for have already example, would X an in different

So these are X key markets.

The first one in access networks. was the radio

networks The access third was in second in the edge is one data center. and and one core the the

we to able clocking decades that build other with a other its not companies allows compete the products. So because, superior We're but that it attributes. SiTime clocking full to us clocking our do to and technology products course, of partially none It taken MEMS-based all of have with overnight. us and these opportunities unique have those words, really them gives possess opportunity the companies fulfilled wholly. In front center

place our gives think very timing a we important needs, customers needs. a entire us this clocking their very, So very come to that to unique be. entire that's way solve to to And

Unknown Attendee

unit maybe it's like versus some silicon and Perfect. like integrated be of Would integrated would be one an piece another that that vendor, pieces contains as of this solution? these all kind sold package

Rajesh Vashist

Right.

sell said, products these I is. it's as for us as first first, step be the to So would

So quickly wins design we and in the to get market.

a creation. would one value second be The virtual to do

in RF our ELiTEXproducts. So separate with are our chips in ship, X connection Elite that with EPIC chips, in X product sold, X and connection particularly not

to around But we've CASCADE. then what time is done the already do third with

that the that's our products integrated and synchronizers. do cleaners, very for of the do has SiTime We oscillator and from family gitter that we valuable the been into to customers. we it, would Cascade for an generators, for Our plot would that do network

more and physical integration, throughout. to make has either significantly actual going product, the to it our our or through the products So do and valuable, significantly opportunity ASP the integration higher virtual we're take both

Operator

Tore Svanberg comes Our line the of from question of Stifel. next

Tore Svanberg

of Stifel. Tore,

quick Just had follow-ups. X

went DSO for starting First of this mix? all, are a Is bit. Or extended because that a point? of Art, up I quite noticed the ask terms revenue to customers at

Arthur Chadwick

for extended has reasons, fact customers with it nothing to to back-end a this some No, has It more manufacturing loaded. for was do that particular quarter asking terms. with particular a the do -- little

same when DSOs quarter, of levels quarter. back the more back the and DSOs expect because QX. normal your drop to more in can't ship you the ship So it near you it quarter collect you of it the end would I raises within

Tore Svanberg

follow-up, other my coming to And Aura. back Understood.

total $XXX as earnout, like it could be the sounds cost as million. So the with much

mentioned You a $XXX potential million business.

the just little was of I through math a more bit So share a the determine management team this that went on price? hoping could you to type

Arthur Chadwick

I numbers think your correct. Yes. Well, first of are all,

of You payment being the have payment both payment to over we're the that the and making paid remember earn-out are years. number fixed that a

obviously million beyond multiple So that we can -- kind a a them earnout. deal. to more business out this if up $XXX grow operating of our and on to a a impacts that value end put we the That this should $XXX lot a full than of drives pay the present that But number paying be revenue multiple years the at margin we'll we of million value reasonable the and target run XX%. in that, a grow of if year able

Operator

comes from question of Research. Chris Wolfe of the next Caso Our line

Christopher Caso

are on back? normalized And steps? going I as the come What starts margins how the question next visibility levels the guess, at to just a on to into and back gross getting them margins year. more look gross what's the market we should

Arthur Chadwick

percentage lower before. Well, improves sales, about the talked fixed that level, this we've and overhead our increases, a revenue so becomes At manufacturing of very of cost as Sure. high a points margins points example about running we revenue from that because XX can percentage by the overhead X simple improves our run rate, double if is, about My margins. current margin. of our is

were margins where margins And other mix. they the our It's are year is will one reason down improve one So a why that that our is again. ago. way from also

more year, than recall, way this our customers The inventory and if enterprise middle needed. had comms they of you

down mix sales Our time. And that in improve over segment were that should dramatically.

If recall X/X that business, ago, you was blended segment helps substantially. almost to it get we X/X back a if our change year our over And margins business. up of that of time, and

into So XXs XXs probably year. think through in up margins increased year, right back next now, low earlier year the the we that the the will of move and sequentially course

So see that's right I now. how it

Christopher Caso

That's it's now And at the within going maybe men's because sources the no then talk to opportunities about timing broadly you product. Okay. I geopolitical what situation impact in that incremental term conditions of forward? there. China, and in-source longer also, geopolitical guess both a term seeing right extent China your is, To helpful. China is question my next now. on there's right to been economic in shorter and opportunity more more desire about of weakness kind could here? tension contributing Obviously, the obviously does in lot least because of But China, what you're talk that there's China

Rajesh Vashist

our part Much general, and In our business robust, from meaningful is of China industrial automotive. a of revenue. from comes it

we we So same in not nor in see way. some segment that the consumer China the meaningful in in of the are with subject any bigger guys are we comms restrictions to

as we be headlines. So the grow, that choppy continue though business will in somewhat macro even continue China think conditions the to some we see the to of

the at and our design think grows year China win over our look next design this the China I win if I year. rate. business business Simply,

don't do in some -- any China. production is There we

comes any to the so-called it China So restrictions have when free don't we requirements.

So good we're there.

people Taiwan the talking are Some free. of about

with to success and we of some revenue we to attention important think continues part of pay So it to business extent, our we in source that. to that and general, But have lot be source China support a an

Operator

I'm back showing questions. no now time, closing this further turn it would to like management At for I to remarks.

Arthur Chadwick

Great.

comments all, say you all of thank folks I questions. ask the of to kind want you that from all for first So

We end. have nothing else on our

to call joining guys. want So have you everybody evening. thank us and for Thank a for Thank you very much. great we today, the

Operator

conference. participation does in today's This Thank program. you your conclude the for

You may now disconnect.

SiTime (SITM) 1 Nov 232023 Q3 Earnings call transcript