SiTime (SITM) 3 Nov 222022 Q3 Earnings call transcript

Good afternoon, and welcome to SiTime's Third Quarter 2022 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 then be given for the question-and-answer session.

As a reminder, this conference call is being recorded today, Wednesday, November 2, 2022. I would now like to turn the call over to Brett Perry of Shelton Group Investor Relations. ahead. go please Brett,

Chadwick, and results Welcome call conference Vashist, and are Bella, quarter from SiTime's XXXX Rajesh Art Officer Executive financial call. Chief Financial good you Officer. to afternoon. third SiTime Chief Thank On today's

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

press risk provided you which in performance. company's superior Rajesh, performance and during of and subsequent Please with in to call, only financial not a the afternoon payroll non-GAAP is to we refer risks non-GAAP in expense please compensation financial GAAP factors taxes. difference refer on XXXX, substitute with XX-K this important for, or filings measures, GAAP. we ahead. company's as detailed the filed as the accordance more to The to are stock-based company's information on of results. between with as the XX, measures to the These like turn and over certain reconciliation related release financial GAAP non-GAAP US measures results I’d SEC. February associated for go issued Also, measure to described refer and well we’ll consider addition detailed now an CEO. SiTime's For the to, business, call financial non-GAAP this be to between the prepared

Thank afternoon. you, Good Brett.

to First, as well SiTime I'd existing investors like earnings welcome you call. XXXX the as to QX

business, ensures For centers. precision to and like and service electronics, the XG category data our for those chips accelerating more In are need is new timing the you SiTime of precision timing. that SiTime dynamic called a automated higher functioning. lower and reliable applications product power reliable to performance, in driving, smaller, ubiquitous is timing created leader new for timing

the $XX transform timing in We billion we are growth our early market. as trajectory

We units XXX XX,XXX timing our shipped across have applications to precision electronics. three of chips billion customers all in

deep XX others conditions, in events downturn as of As our market difficult a simultaneous a quarter, experiencing or seen semiconductor as industry We Last unusual it multiple, expectations a for which you ever. year. macro current conditions the not forecast heard change making to market and we significant years result many the reduced has have as one. we unprecedented. this see saw more the in this I have industry, are of are experience, In rapid from as of than

now have fourth XXXX. 'XX it in consumer gross and were customer at contract in demand levels quarter then that we see range, markets at guidance our datacenter quarter seen have solidly customers revenue, QX all slowing, comms, to we and and EPS our distributors, inventory normal first appears inventory is our While end for while margin in because built This continue within first their industrial manufacturers.

in to spend our need segments, in the this working story customers intact. long-term precision remains and this quarters We the I'd expect all our ASPs source next quote like Despite future. that selling leadership growth, of timing points: will SiTime's confidence growth all through two our design increasing which higher average increasing single to give discuss activity, and win four key business or us price, in buildup.

funnel gives to continues our commit business. grow. to visibility wins of future products, to growth their of and win thus our design into revenues. First, our it us our the customers When Design are deployment central

As the value last dollar future customers and the is aerospace, programmability of In exact year. number constitutes Not XXXX, to allows number of XXXX, only higher we design wins give same large stated our over we wins. want. have they these of the our period doubled us comms, before, majority design significantly wins design function the SiTime's QX defense, focus in segments, automotive, of than unique

and We in start generating beyond. expect XXXX wins will these that revenue design

the ASPs, our selling of premium average premium our products increase. competitors. increase quarter and a precision eighth matched The price This XXXX legacy performance quartz-based of ASP consecutive by price. cannot indicator our SiTime’s is at second prices. was performance is selling reflected QX average great consistent be offer timing in products

we that XXXX Additionally, XXXX been third of SiTime's are seeing want, of our any have business indicator lower. have note competitors will quarter all single-source across throughout of of customers, year that single business is competitors and value business. buy to that so segment. long-term types and to consumer availability SiTime times is unique will our segments, strength of lead consistently us. independent even now or though position this is XX% that Note in point loss see a has we source, We and of as it's customers design than A this that rising significantly it higher only single the strengthening. trust are that increased, that and only solutions be excuse the exists not exists position of shortened, buy is growth example, A ago. time business QX ASPs of relationship from and the prices in a including, lot a a source spend for me. and of we

positive fourth the Our customers. final which based the estimated our quotes business indicator rise to and potential. price usage on provide function in of and our future annual is indicator on our quote another our products activity, We is

this in times with Our we larger that than number value reach of and a greater is and differentiated average that consequence highly in customers. We an products of of believe core higher dollar a XXXX. this category-creating is XXXX three period launched

While to and will couple cautious these respect We due we're to we tone are take near-term still the the challenges indeed positive that positive, believe indicators inventory results quarters for seen. at have a normal. to headwinds quite buildup example, of return customers' striking manufacturers, sales a to contract with

stated track SAM As of we tremendous billion $X for set served XXXX -- to timing this. have opportunity or expand market that billion a market, products introduction to the from new we have before, $X and timing on with our XXXX capture target are in the the we in in to

still confidence our have resilient that and introduced product are five introduce in strength win With our and there to continuing products, end for stronger the building turn ensuring at SiTime. conditions, remains our we continued a rollout me comms. SiTime. significant In expand tremendous Art growth, source clocks track. focus. which bright design We're will our SAM spending, quote we Chadwick, our increased least an and it at expect six and our To in products oscillators over same business, of on single in market opportunities automotive the XXXX, funnel We're of ahead while in prudent new commit with the we end CFO. are organization to summarize, us. value new of delivering our to the I market will strong in both and building to will future changes now activity to about By give even be ASP and XXXX, future customers,

afternoon million the of in largest $XX.X down from but $XX.X million, was sales, or up customer, segment, from Sales X% our discussion $XX.X Rajesh today's non-GAAP included and the this in mobile, results description XX% non-GAAP XX% our detailed well third into last of results provide consumer quarter sales. of on a results. and and GAAP to I'll release our Revenue comments GAAP press everyone. to quarter you Today, refer Thanks third to of for down million guidance discuss as from QX. on XX% make or were good third some segment for year, of financial XXXX. my were Great. Sales focus IoT, is which QX and QX. and as I'll reconciliation results I'll a XX% quarter

our at Expenses were automotive, XX%. were sales essentially SG&A. operating $XX.X into $XX.X million operating our Excluding R&D were and enterprise $X.X XX% were Non-GAAP Sales million in XX% and sequentially. QX. in aerospace industrial from XX.X%. the or Sales million, $XX.X sequentially. down XX.X%. more communications into segment Non-GAAP spending our were of of segment $XX.X sales auto were sales flat customer, XX% $XX.X margins to XX% broadband segment, but industrial, segment Within million sequentially held as QX. expenses we and solid million were gross million Non-GAAP XX% sales, were or sales down sales, up with largest flat, in this were this into into down than margins

net in quarter up interest rates Non-GAAP increased. prior In million per quarters $X.X income have $X.XX income share. interest million addition, or recently was $XX.X earned as this from we substantially

impact little wafer QX. paying accounts and a increase source. than give this customers And consciously up XX% with bought inventory spent the QX investments. free in like The receivables US increase and XX customers and end in sheet, million now assets wafer all million Macro we since We any guidance balance environment million million million. some This flow the in news. additional increasing at for geopolitical Cash and equivalents to from as challenges. We quarter call. Energy and issues. on. the were $X.X provide cushion chain and of the a The $XX.X and QX supply last clearly high the accounts $XX.X is on safety We are our decision days. will other economic is additional of a war on negative consumer a in made cash, stock. events was Inflation was million, about we the in the demand the challenging, additional On Inventory rates saw of know in slowly continues. demand. sales financial provide are to ended of are to Interest semiconductor $XXX in of so our continue softening or cash as cash days Europe. markets just and consumed QX conference prices comfort beyond. in $XX.X is last up essentially to we $XX.X Europe and some number our having our event equipment quarter both and operations talked of XX in inventory Ukraine facing with rise. million China generated this single I'd inventory quarter. receivables $XX.X in from before. That's by DSOs more DSOs These that short-term this remains summer first

now are markets. a and broad-based industrial seeing in We slowdown

we see data center. comms and forward, sales Looking in slowing

is semiconductor world leading are from classic inventory gone ago world have immune. We higher-than-normal semiconductor today. when levels, demand These year and over supply-constrained we not inventoried cycle, with coupled to down a a lower a

XX% minus which the point. As be We by will down a now will Gross expect plus we and the would have or quarter the impacted We've XX%, come year expectations the sequentially, but fourth for approximately revenue lower and sales between be at has way world it around in down. it, will the our million XX% be changed. called sales result, midpoint. see $XX be margins likely X the

hold of expenses investment maintaining We development process relatively flat. new are in and our operating will level and thus product

the a XX% provide two therefore, approximately XX sales between to in reasons. should, provide QX income. likely few at QX. be be normally share expect to shares count currently million $X We QX out, down and will somewhere primary earn believe XX% don't In and EPS non-GAAP resulting we $X.XX We million we quarters QX have to comments will believe guidance from be Diluted quarter a $X.XX least for per addition, in share. about we two enough visibility interest

however, is higher still expect our the could or than seasonal comms inventory. levels, low decline will sequentially QX normal customer. right we but likely margins now. sales largest next out, how be we through than and the usual and year QX sales each sales customers also do, following be in lower low sales that will more Since we it And as second, see First, will gross in At a quarter these low the the slowdown XXs. believe in that's work enterprise quarter lower see our with than that space and coming We a higher obviously be increased quarter.

Rajesh that, is long-term intact. So mentioned, we believe having growth said of story our as all firmly

through Design product and expect we process than expand will billion from new XXXX. to last will and for introductions win like activity to continues SAM with get been to should expanding This has coupled Session growth introduce semiconductor Our back development about Rajesh planned, downturn. our the I'd and $X to product products. $X mentioned, continued year new company, and turn span call lead SAM platforms Thank operator significant product that, continue as to the more for we long-term year five you, Q&A. strong, this And Question-and-Answer numerous the everyone. next by once to derivative that, as and each billion with about

from comes William question line Alessandra from Blair. first of the Our Instructions] [Operator Vecchi

open. now is line Your

to should the that you takes looking what inventory giving worked the Hi, will that out that can Kind and just the from you are to it for? start grow hearing out guess be the are there. QX you're customers and question what I confidence your is from that puts seeing. we environment candor guys. back. Thanks on you're What of one and for levels circle in be

a we So that thanks, see know right? The lower we exactly comes quite don't Alex. bit, and to happen, the inventory there Obviously, the what's are, demand caveat with course, through. the going demand lesser that of is, inventory correlated

in one is we I which and which the the a been unusual enterprise, the think see We typically place buildup that is larger the not see continuing, the contract declines, that is has case. comms inventory in slower a in what somewhat to inventory at significantly manufacturers, at demand cases, the is the that we they albeit reduced pace. some begin are while in In hear. over the I them and to street. of factor many we think And have through, that demand, what work of

them view of that going to two of likely the for QX Some is that very breadth the the next customers, in street. But all QX given through. to think quarters, are needed broad our over are and the come I definitely

in we've what in also that's that our to looking see learned. CMs cases, be at that So the to talking [ph] We've and to learned many true. -- that the channel, including many, we

quarters on traction legacy function versus Okay. of the in That consumer ASP of on much basis is a function seeing in of the that even of over your how just one was last increases products a newer about gaining decline function I commentary the some eight products? an really a do versus ASP on helpful. apples-to-apples on And growth of follow-up, then can and up QX the the XXXX, ASPs if

Yeah.

least more more probably of say where product it. influential would increases probably finally, the impact. the I the in is in piece comps, having And legacy So high-end most is component is in products mix think industrial. the that ASP new I introduction our the automotive, of are we the an selling more on

revenue from there which little product of the the significantly significant new design particular, for to through product to and has in I come this you As has cases, But new many contributed product line Elite a a introduction think while in Aetna products, case, takes know, line, the in growth wins. been it.

on QX long-term And has XXXX. how QX I a ASPs of I that grown flattish. ASP our be would time, to year-on-year, commented is SiTime. XXXX anticipated this XX% So transition Last

continues ASP year what my over to it because high I will think has but bit mix And in come exceeded the I think that. may used QX down It expectations. growth a it higher than to current be little lesser on it be be of now. side, still before numbers a

just comments. here. products. seeing higher I'll few that's ASP strategy our add And We've you're performance, talked Alex, a being developing always higher what And much about

generally higher again, products, seeing performance, higher that's we're newer gross margins, here. exactly what and Our ASPs, higher

was very I'll back into helpful. Perfect. With you. Okay. that, go That Thank queue.

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

line is open. Your

win hi, than Can given sense design different the Rajesh, the was some automotive, us like going what you that XQ? look ramp? up segments give in Art. And curious, the it I Hi, particularly better hold about of said might flat. Is was to others, you one

automotive, automotive for we hold our growth when into us. think going definitely QX I Yeah, is at a up to from well year, forecast segment that's nicely look for to pretty next and QX

Our flat with starting QX, to QX largest consumer customer. from sales our will be relatively

the is be are QX. going largest for to We're probably sales my of XX% most pretty But was a new to enterprise on part, decline that And and and in similar Our it's see lull our in in and customers Again, because really to shipments to it's customer in comms going see in comms that they are a we to going QX. comment over-inventoried. also QX, enterprise. QX.

that until growth they back So a will through work we get some inventory, we on continue of trend think that path. then

sharp industrials given at not? follow-up aren't And or the bottoming

yes. out It should flatten

Okay. sheet. the had with the Good. inventories is on other question balance And the I

you built positive feel buffer return and you've working capital stock can to you've in inventory? up stock like sufficient buffer that and Now more built do there

pretty QX good I mean, from to we Yes. QX. a step-up had

very As my conscious in I was mentioned decision. commentary, a that

source. of from hand MEMS CMOS for last to mouth our and and for course, on TSMC All wafers both And sole of kind Bosch wafers wafers our our of those year, wafers. of people procure were are both we

of our I this inventory of for to levels kind at level couple some we cushion stock. buffer expect increased our the provide next remain quarters. just So there, in

right. Thanks. Okay. All

stock, and fact, that, chips, buffer as that's who, seeing uncertain and I us mentioned, significantly it's and rightly SiTime. I MEMS how customers in think have site support are chips to as think inventory of it to we in to increasingly Suji, single a continuing of are CMOS significant you And, supply we because our analog world, both for prudent source identified

We're So some aerospace, I to to even it think it's becomes and moving also where customers have more automotive these. very critical areas like our into important.

Thanks. it. Got

Suji. Thanks,

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

now open. Your line is

between look about some sense, sort if us might QX split of how precision maybe you Hi, Rajesh QX question, how the be timing. guide much for could I'm timing competitive. half first parts? the second your into And last and you non-precision more much the timing Art. guess, year, give where as from the I the of timing legacy either just would still of and talked quarter, or ports you -- in And precision the of the business portfolio, more non-precision higher-end be much would for wondering, be

Yes.

more and which supply found performance or don't So, readily. because ours, where more what the the the as customers quality chain is where want we substitute and in benefits there's don't most be is or so-called either that, can very substituted can easily we have little their put of multi-source; business of words, SiTime -- other they benefits

portion I think has the be we we when our this significantly And exit single a that that through source that XX% talk large business declined year. portion of it about. will of year,

quartz-based customer Most our And and source It the of not And to comms So of crystal is in our portion automobiles. industrial. goes be source, that's goes in easily. have enterprise. a we idea can course, also business. that where single a goes of it segment significant a in in also it's consumer single an substituting interesting going

also markets we in Our wins New out about. the level as a than we design Year all look also, are wins lower other at that spoken into these in have design consumers are

we're that see of that high new also be forget five next continuing will be source of and new source introducing which introduce single we significantly single single trend I which products are band source year. going a six to this So customers. products will year, where next year, don't also And products likely

essentially functionality So five of reliability. times, long-term a that of and/or trend quality is because a trend

go sorry, And Quinn, I'll to ahead. try -- I'm

Oh, ahead, no, Art. go

this I little quantify was just going just a to bit.

timing call If but was recall declined to XX% conference you recall the ago, our about timing that remaining a precision, ago, on in not bulk largest business of quarter you QX. our business business. of we business XX% was a the consumer customer, of moments estimated and XX% non-precision our space, a QX if my piece consumer from that And the our remarks, few non-precision

is market quickly here. getting So pretty that piece of out the squeezed

Yeah.

say, products single north sort going expect sourced So or XX% as it and its timing higher and into is precision would that or I sounds sole-sourced sounds percentage you of like XX% of like XXXX? was XX% to introducing you goes

Yes, absolutely.

would just flat flat largest it. And you then or flat dollar meant on Perfect. a if or wasn't you basis. I Got the comment on on be a your sure basis clarification a quarter-to-quarter. about said percentage customer,

Yeah. be to It's flattish basis. Excellent going question. on a dollar

Perfect. you. Thank

kind is what expect with of them. …which we

Yeah. No, sense. makes

line Your question with from the Tore comes next Instructions] [Operator Stifel. of Svanberg

Your now open. line is

I guess any -- is anything the thank center within weakness Good Yes. afternoon. data any particularly. center call for there is enterprise have, or you like Yes, versus calling Tore. question whether insight doing Is Jeremy here. of, data first segment out the the on subsegments, you. comms comms a kind to This

think areas, Hi, particular be it, at the the you Yes, center and data would enterprise. I if Yes. probably in to Jeremy. were look

forward I muting in on the we go have think are general, about. as have situation those the ones over think the based slightly those and we hot I markets inventory been been talked that

can been color you -- you Got the any talk have the And seems that's XX this can guys any so how well and you you see the the pretty consistent, times? it. or anything -- days compared, forward? maybe in relative like how changes industry. on Thank It lead rest And about to your on pretty you. of last going give us

Yes. see… don't We

Yes.

two quarters last conference in during prior in recall or number we times have of from definitely you the months. come going so. times if talked So that calls, about out Lead lead

your absolutely in lead coming without are quantifying answer to down. -- coming question times it, So

one question. just Thank maybe it. you. Got And last

Looking us? growth? at drive Like you happens, out rank Thank near-term the your in as segments Can the that focus XXXX you of the how expect return to -- some for do playing it you which order you. of segments. kind of these see recovery to

any think segments So have is really segment, I the that enterprise the what's always our I'm but today. out to declining sure that call we talked somewhat being not particular I is and over want that strategically area in inventory. about we important comms as mentioned, soft But to us, fact that they're

work we've got So in that to through the area. inventory

at new product introductions, and going If generally you higher margins, comms, again, us, ASPs, be higher that's most higher and auto look to in gross our strong. aerospace enterprise, for is performance, definitely,

key the really are long-term. that drivers those we see So growth

And will extra -- don't leading going be don't I consumers I it's largest be it We customer, extra consumer. be largest Right. think that will don't customer, think to it.

So side that's on the of other story. that

Thank much, very guys. Understood. you

Thanks, Jeremy.

Yes.

End welcome. of Q&A You’re

will to the back for management the no at further call turn now And I queue. remarks. we the questions closing have

to want for In on us and a has you. afternoon. we everybody that hope case, joining everybody I thank great Thank today's call,

Thank you, all.

for Thank call. participation. conference today's concludes This your you

may now disconnect. You