SiTime (SITM) 3 May 232023 Q1 Earnings call transcript

Good afternoon and welcome to SiTime's First Quarter 2023 Financial Results Conference Call. At this time, all participants are in a listen-only mode. [Operator Instructions] As a reminder, this conference call is being recorded today, Wednesday, May 3rd, 2023.

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

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

during like Before market I forward-looking and the discussion. strategy, statements results, of the to and the future make course expected other financial point company we areas may of would timing out including begin, regarding plans, call, this operations, that position, future

can the is or predict those nor actual It from any contained materially possible all all combination of cause company's for the a to factors of which business assess to management company in factors not the to factor its any impact or differ statements. results may the risks, on extent forward-looking

these discussed uncertainties, forward-looking and occur risks, may not adversely the assumptions, implied. during or actual anticipated call of results differ events and and from In could materially this light those

person completeness obligation statements. for the expectations. Neither responsibility the to company's call nor company date publicly of update and to to company any The any forward-looking or these in statements changes this accuracy reason the actual statements conform for the forward-looking at assumes undertakes the to of results no

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

accordance measures, GAAP. which for, are measures and These to US to, course the performance. superior provided a to consider the non-GAAP call, prepared we financial during as performance substitute addition of financial an refer not in Also, measures in of of to important with we’ll be financial non-GAAP company's or measure certain

for compensation related non-GAAP results. detailed refer The a financial results taxes. and today reconciliation press company's is GAAP Please only release GAAP between non-GAAP expense issued difference and and stock-based to the payroll between

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

afternoon. Good Thank you.

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

dynamic you category SiTime new precision those a timing. to semiconductor new who in leader For called this, of are is a

timing is of driving, applications SiTime reliable functioning. and precision service electronics, automated In ensures data timing ubiquitous center, the IoT. to and XG, needs like created

in and $XX has as transform shipped the are X SiTime we early XXX timing market X,XXXX chips customers timing billion billion growth our precision We applications. in to

was We share. in margins per delivered $XX.X our QX non-GAAP results Non-GAAP with and Revenue $XX.X gross quarter the guidance. for million million. was line EPS were $X.XX

will to We Previously, we than lower higher than QX. had expected be equal be QX to modestly QX expect or revenue revenue QX. now

lower remains the for higher of first all in revenue XXXX half half areas. three in We slowdown conditions based. guidance on previous had macroeconomic data in believe an forecasted that second broad impact the has automotive, XXXX three is drop and center, However, previously areas, these and intact. demand This

have Cloud which Chinese reduced to demand equipment. spending, appear forecast. storage service their XXXX CapEx have In automotive, has EV reduced their providers reduced significantly and for networking makers

has segment, based XXX which applications also customers, broad demand. exhibited and XX,XXX Our diverse lower represents

that rate demand, end to XXXXX. of inventories forecast declined of channel customer the that We has to and decline inventory return continues lower normal previously we not While at because the by a expected. level it now will

magnitude will demand, likely of revenue higher though not previously the half be because believed. Second higher of we that

single ASPs expanding from based to XXXX continued indicators, on source forecast and business, or four XXXX and expansion acceleration wins, new products, in selling prices. average design continue We key an SAM

end our them. billion indicators by In $X I'll XXXX, These it spend SAM minutes we be on now now $X.X to few and XXXX. talking of healthy grow continue are billion about and the to was track a to

problems, our of and aspects benefits, compelling market products trusted to significant all on strategy focused company is tough that advisors. offer bring only the precision solve As timing, make to us

footprint timing bigger a us gives portfolio customers' in systems. the product increasing Our

As an the we the aerospace and markets. past new in example, months, introduced two automotive in defense products few

wins quarter of momentum wins, number the the in every design first segment. market continued of in quarter-on-quarter XXXX We our design and grew in XX%

our of XXXX strength revenue which SiTime designs continued reflects sourced of of sole of sourced QX value in were XX% the sole is products. business, was XX% and XXXX sourced. source Another QX sole

ASPs Average selling from prices ASPs Despite value lower customer. competitors, or remained better reflect to SiTime's and stable. our quartz availability the revenues have

give to like XXXX. I'd Now, on color some

production We to closer a end of real customer year. channel We're and to business levels XXXX. already was expecting solid expect recovery be to get demand is by to XXXX once the that the back inventory consumed in

will momentum design XXXX. in win revenue Additionally, our translate to new continued

forecast example, is enterprise, AI high-speed XXXX expected in revenue production communications we are here. growth significant to well-positioned right and in already are For Ethernet opportunities From we to drive XXXX, XXXX in that of XX% now.

similar of from The come in will expected aerospace situation defense, is in opportunities forecast that today. we revenue XX% XXXX our production

top eight average US an per have Here, we design where out contractors seven XX revenue to applications of driver defense the are and wins customer. of we shipping XX

In automotive, In China, major and is vehicle the their manufacturers are Assistance XXXX in in opportunities Systems. play early ADAS, engaged Automated pure segment, this XX% engaged OEMs. expected with volume. Driving electric customers most we're of that we our already US-based shipping in In come of are segment we're in stages EV all this that with from that which will forecast primarily revenue production,

wins design continue to conclusion, grow as does our In SAM.

any as business, we is as that Our connection sourced with evidenced our as customers stable the lose sole competitors. not and fact business by to well did ASPs meaningful strong,

growth. advantage position As consumed inventory a expect to and to in is we take returns, demand great resume in be

success. We future you. continue in SiTime's to very Thank remain confident

Chadwick. and Thanks quarter. then and second XXXX everyone. some on I'll guidance Art the good discuss results provide Today, This is first afternoon Rajesh, quarter

description well refer I'll to focus on our of my discussion the press reconciliation GAAP results results release GAAP non-GAAP today's as results. and of financial non-GAAP detailed you as for a to

through by of the much Revenue lower they sales sales inventory. excess caused and comps million, work too was was Two-thirds work through the $XX.X in decline customer the largest Most as first of historically lower to decline XX% of to inventory. sequentially. enterprise quarter was our rest customers due our as they to down that

segment Sales into due sales, historically sales QX, and mobile, down where to $X.X XX% in down were from to our largest from $X.X of customer, million, lower million million our QX. were IoT, $XX.X primarily sales or million in $XX.X consumer

that to into sales this historically customer, XX% were or sales million Excluding largest of $X.X sales. segment

$XX.X or were from in QX. down sales, Sales million $XX.X Industrial, Enterprise into of segment down $XX.X sales, $XX.X XX% Automotive, QX. into Aerospace in our and of Sales Comms were segment million million and or our from million XX%

primarily QX non-GAAP $XX.X and operating QX lower slightly revenue. from managed expenses grew discretionary million, certain to the down slightly QX non-GAAP were gross expenses. margins were from XX.X%, down we other QX, as

million were in $XX.X R&D million $XX.X Expenses in SG&A. and

loss was Interest operating non-GAAP earned income $X.X $X.X bill from was interest million on short-term Our million. investments. [ph] T

receivables DSOs QX. Non-GAAP $X.XX $X million per share. down Cost XX net DSOs were with $XX.X and million or from days, days of million XX in $XX.X was income of

up at the was continued $XX.X wafer end as million, $XX Inventory quarter we million from of to the last quarter strategic purchases. make

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

of now XXXX. to quarter guidance I'd like the some provide second financial for

remains the in recently, As Demand the macro most to environment continued Rajesh and a in data soften has number center. markets challenging. mentioned, of

manufacturers historically that at distributors and not are as inventory, both which at is and customers' is expected. channel our inventory high addition, quickly customers inventory In as contract consuming

into Inventory on likely a having well half current and revenue. impact levels this will year high of remain significant the second is this

QX the cycle will revenue the believe quarter like now be will had we be QX but would we now quarter. for than prolonged be year, We result, thought a thought. the likely As it and low more low the deeper looks previously

expected second those inventory. million, QX down Comms and markets to million quarter now is customers continue Enterprise from lower work be sales to between $XX to and auto the as and in due into primarily through Revenue $XX

sales as Sales XX%, historically be well our change their largest are to lower the will as mix. QX. a well Gross below also due to and consumption margins likely than XX% expected continue between to to to though QX be from in down higher rate, in customer

are approximately count be million. income between expenses Operating Interest $XX $X should million. be shares. least Share and to million be $XX.X expected XX will million at

we result, of net between non-GAAP and will income a per QX loss $X.XX be a share. $X.XX expect As

to our clear it's not QX historically will our level. QX work be visibility more Though when and through once So, improve. inventory, will will others sales back end in believe to customers than excess largest in demand than sales be that great, a that sales QX customer do should higher we as higher We pick not be nicely normalized and believe up. is should

our we're long-term story remarks I'd by like saying cycle, tough through going very that my though we intact. a is firmly to even believe conclude that growth

development. We continue and our to in process aggressively product invest

addresses We large and have markets. that unique and growing superior technology

introductions productivity SAM Design strong product win continues be to continued and and new to growth. an with long-term that expanding should and lead coupled

And for on call note, I'd Thank the and to that operator the questions back to hand you. like answers.

Tore And Stifel, Nicolaus from Certainly. [Operator come first Svanberg question Company. of will Instructions] & our

line Your is open.

midpoint question a digestion. $XX.X $XX.X had I at $XX million And more million. the rate you mean I of almost impacted is peak because My you. Yes, feel obviously consumption you now if the general is thank first you million for a inventory real of have the clearly mean, by had

know of what consumption the is have what the been the you be what the revenues do of just so once So, any inventory sense kind digested? rate will has we for real

to a at So, and again, how the held this that's is subcontract both out I course. will look the there question, being there. easy great in quantify channel, It We is of not manufacturers. at put but now much inventory inventory Tore, that's it, the at distributors

at analysis, we the about inventory by million levels. consider beyond what we to would worth be of there's QX $XX of And normal out think our end above and there

it down ship it So, what do that we year of end for by this and assuming that year, that we'll worked by under million believe that somewhere year. probably the gets means means should, inventory $XX the around the

we the in revenue. way in that's terms channel our inventory that's that's and of the So, it what to the doing current at look

comfortable two And help comfortable you No, inventories, in quarter. decline, you inventory, with that that up mean that's us been you to could revenue mention last shelf-life right? Perhaps a on light million number quarters, feel or they're on at comments question I last of whether with million? with anything share so didn't the great So, $XX they've any can feel $XX color. us strategic

Yes.

year was any to back MEMS for can it So, if example plus you wafers. in nine of take six ago, supply lead-time. the all up months our a with difficult And wafers build stock to constraints, think buffer

a to So, long of time. was hand it mouth kind for

build the to have sufficient shortages wafer conscious Those buffer quite eased we stock. decision and made

analog CMOS wafers our wafers. So, our come for come wafers MEMS and TSMC our from Bosch from they for

of all increase almost in go last wafer stock. quarters few over we've had do And the is the Wafers that not inventory bad.

So, these years could many necessary. sit for if there wafers

question, I But think that. to go well we'll it your consume not bad. they do answer before

for to for number sourced. important customers, as have of sales our It's sufficient also year, us sole A our inventory XX% of our we were mentioned last customers.

large are us. that quite gives a comfort. customers on these of So, rely it bit And them

they've quite to go could In that time support have us to fact, constraints we supply asked them kind kind to to that customers. the still of be with an market comfort and able extended provide in of those buffer,

very mentioned, of We very little a interest absorb buy balance, But those I $XXX this not decision of we've million. wafers. So, cash go to bad. does our was as strong bit will some cash. They it a got because a lose conscious

the So, strategic the made we do. thing for was us that to right this decision have

back Perfect. queue. Thank go in I'll you.

Thanks Great. Tore.

question our Desilva come will from Capital. ROTH And Suji of next

is open. Your line

Art. Rajesh, Hi hi

perspective a can linearity of looks would was be expected? Just just like So, sharp helpful. what from off? help kind the a of recovery quarter it the than shape into it to you just fall lower a us Was understand you that April,

as markets, Yes, last say function Rajesh a few our while had about, now about been a it of for for that It's script. talked talked I few as wouldn't months our I decline. in step a the slow across

So--

through not January, have in bookings and been in they but I not this Yes, low have generally that, been of February perhaps onwards, starting all weak the would I disappointingly middle add that past healthy. very think around low quarter, Suji, and

that customers course, we've a competitors, not and that bigger think lost when so given that given design have not this of forecasting been looking we to we've that what numbers, should their conclude, at any And those lost recover business given our for wins, that any recovers. business we is while we are

information In as this, the of centers. they've companies electric that that of couple well, that that companies put in sort businesses the data to We've called supply in other car semiconductor they meanwhile, They that in a market specific weakness. seen out vehicle declined. significantly declined Chinese I out quite

on the combustion I'll semiconductor to of other companies cars doing what interesting legacy see cars, given to which we have automotive. One systems, call business are automotive new those because, electric are don't seem seeing the in that not we a are okay more on on emerging, things in legacy companies is ship business heavily be focused we that we space. like ADAS course, big vehicles, internal But of that

Suji, I'll a our clearly, And Last few just comments. overbought. add year, customers

need at, much couple there. talked has of less look, thought, top but don't quarters, demand seeing buy anything meantime, our that's out have about than is for I inventory saying, and here right continues. the So, inventory, sitting demand the now. there say, what they're last softened. In we're year, last QX. customers customers, in was over We've my five just And I I it enough our to I five look too And example, top that

customers five little, behind QX. top compared what to to sales Our buying, are and driving in they that's very, decline in at a were least very

is win mentioned, activity ever. QX. than QX our design over Rajesh nicely, stronger up As is It

quote feel is markets strong. long-term the that grow. we addressing, very continue confident will activity they that Our we're to very

are introductions product new on Our track.

through. confident to But need customers short-term, now. longer term, that's as ever. product head shaking I need we're and just are we as right saying, basically So And their any don't work what our

gross the drop What give us the here. second Okay. And XX%, there. Thanks. above drivers get Thanks what that My on factors helpful color -- is the are are the it margin, Rajesh. it here? back question That's very is some just color?

question. great No, Yes.

non-GAAP the between XX%. of I QX, in gross guided margins, So, and gross margins XX%

We've I is And So, two really group, That and One that's on just at -- number sales. factors It's this them many that, overhead. briefly. own manufacturing about a relatively cost down XX.X% that ops back-end revenue. we've fixed that in of other some from our are kind we and got talked our driving of OSAT a of -- QX. equipment some mentioned is topline depreciation our fixed. times, cost

of margins. QX. a between guide percentage sales half goes blended when that So, down, for that becomes probably that the revenue QX drop about of larger for and And drives accounts my down and

half other has to mix. do The with

Comms the in to us. Auto. of much for revenue are mentioned, in high-margin from and those I As QX products is decline And QX and Enterprise

percentage So, be IoT that a lesser our our becomes of revenue. revenue then and percentage our consumer will a of slightly higher

of So terms that gross us mix against margins. moves in

Okay. Thanks.

that. let And add me to

XXXX of better Going continues forward, think and absorption what QX, QX think will that XXXX increase, to be number a we that's than better manufacturing be be as QX, happen, will we better I That mentioned should revenue will improve. than nicely total, QX points. and expect than in to will up pick we overhead

I will think improve. the mix also

markets. IPO higher-performance inventory are because Our year. gross these from expansion Enterprise addressing very our margin substantially back, that right the through that we And develop about, down IPO the when of since last to was is improve whole the where back And Comms situation a that beyond. to nice should products sales that that now, get strategy and should but come talked it mix are and comes even drove back.

XX% to exit the So, closer just we probably margins this at gross point, this think revenue. year, I of because

point get I back our think during That's see by margins at in the right to now. XXXX we gross to it we should how some XXXX, be mid-XXs. able

Art. Thanks Okay.

Suji. Thanks

Company. Quinn question Bolton next will Needham our & from of And come

Your open. line is

the work comment down. I taking that inventory through the to what's it $XX spread $XX to trying by a $XX I to take under-shipped I'm right this, I of million guys. you're back and of to come million if quarters, to just over Hey I wanted guess year-end back consumption. guess three about level probably quarter. come your Art million And

end might $XX be have I feels think like consumption to what only we might discussed than or something million of That XX%. like end closer quarter. you're Kind have lower where seems I XX% a thinking a quarter a consumption telling that to think us been two lot might you're

sense? about $XX to be you So, I any is now the better consumption? can us right million thinking mean give number

Yes.

impacts So, CapEx. the high-performance there hard It switches, That give on servers. whole recent Clearly, give to center change. of difficult want lot I of in optical variety back addressing. markets it's a that number don't -- more Data is to on a pulling that. some the it softness one, a things. we're They're impacts is of

it down. point my We So, back. come will demand think that is is

is think a it hitting hard. cycle I and us is this classic

difficult it's But hard obvious. put on number that's question. to think I your a

looking And or very the you in and sort under-ship line that you guys weak have are longer sort consumption, know Fair think back is? have as to weak consumption. XXXX to potentially you of a XX% of that, how term XX%, Do given level Or CAGR a I Okay. you faster as a going with snap then at talked to that opportunity think back have XXXX you XX%, CAGR? enough. you just you XX% do about XXXX than long-term you're in CAGR you that's an come grow

are year, a to I able a framework if not provide to us a into you like fair just the amount inventory I guiding try late with might still know feels because you're this moving be the but numbers cycle? around wonder out

all, is becoming had first surprised and Yes. by Well, This we expected. we've than cycle. been deeper of longer this

that our this the term, longer, we spent market company. reasonable. segment. going segment we're still We market lot does based there. introduce, XX% of expansion, very new time number there on the to SAM do products we And to in think been some that this question, surprise by on To CAGR a introduced, that that recently is So, has we've answer we that what of your longer the

So, a baseline. It a longer that's reasonable could I growth it's term, could number. It rate be that, yet, hasn't defensible. be but is very good think that, I than I think but XX% it that think lower happened than higher

happened. get For next back we One, at customers' year, things our I two think level. shipping consumption to

be with that whatever million there's than to end million I think shipping consumption inventory we're the under-ship somewhere this normal. on up the around about $XX and fact we in beyond probably what believe $XX year, would So, we going based above less

a us So, that to would get baseline.

And then also down. XX%, to maybe talking going are slowing recession, like I rate people things would be in are about what's there's think XXXX. but it's the growth to a

So, I or don't know if to not. happen that's going

think only it XX%, revenue sense I make something to better might more on because know. a growth, have conservative we don't slightly than less expectation

But with that's look rate come point a shipment that think And look assume my is folks adding up owner at that's number I I from XXXX. And it. the by a how on it. way for we've and baseline can year think the at back growth right base we then a revenue this to to

reiterate add at on, poke multisource of so don't To we we that see of disappointment win see going there. to prices issues the and I the bookings things, source Quinn, in we And the design to the usual because element demand. declining would that, single loss and

perhaps certainly it's disappointment. in so in mirrored I decline important a definitely We demand us to we the cite markets, and see think that are the which issues key and macroeconomic couple of in and conditions,

new that we taking wins, design business mentioned design and in new the and On increase, ASPs. us into funnel visible a hand, that single-source four I Those in way SAM, our are for XX% it the still those to products, business finding in there undiminished through new everything new expanding the wins. are other all things,

the for color. you additional Thank it. Got

Thanks Quinn.

Okay. [Operator Instructions]

Svanberg a Tore & of follow-up Company. And Stifel, we question from have Nicolaus

open. is line Your

customer your had Thank sequentially Yes. follow-up up largest it as customer. did like on low I expect quarter. to projected. very in Obviously, was that you. But this sound the had be it quarter question June a you you

it sort of behind do that I I inventory like that overhang their effect quarter mean safe it but bulk feel that lingering say to is now the still is there, directionally played overhang June of does you? So, now recognize of is bulk some the is out.

Yes, I playing it's would it out yet, not played is say out.

from I they -- As million QX. we in in only That purchased was mentioned, only million QX. $XX.X down $X.X

burn QX. they through clearly, So, inventory in

take. QX, to few I a give not do up will in lot, be a expect sales that them million be could some dollars, or

my substantially in and that what think I mentioned consider I they'll be by back think in be QX we to to rate. normalized a I as QX, improved would comments, run

we overbought that. that is quarters, severely over there all has are news to subcontract the designed that and essentially not were They good few we the -- changed. their last the into, are through manufacturers in still Look, we have get products

quarters rate. but a back it's normalized it's to a couple to of to going back, of to So, take going come get run kind full

my some And high-precision devices good. question, timing Very out Rajesh, there. the trends new trying term introduced to I know of a longer of for last about you thinking connectivity. range in-car

Just elaborate see could revenue could when that, that family? to we a hoping bit from start you on more contribution little product especially material

seeing is take year then out what Yes, design think and are wins we nine in about for months roll fruition. that these another I to products

into see of So, already the some is reasons metrics today. XXXX XX% one I gave revenue we in of the Automotive, example, on automotive continuing from shipping for the how of

it. have of level a is that words, other on insight we or outlook In

one So, on well the of lot we that's stuff it's not revenue impact step already design significant expect actually win, out the have mass don't production, product win that because design which a kind in design wins. is even of and that's of to

year half So, when put to generally a a we production from a product production and production, and it's but volume low announcement, high-volume another about probably say I new away matter, high a half. think it's safe a that volume year out

you. good. Thank Very

showing now back would call remarks. closing turn I questions. to like further And the to for I'm no management

very you operator. want for the Well, on everybody hope much. joining have we to All today. thank us We you great and a right. call thank Thank you, afternoon,

bye. Thank you. Bye,

And this you concludes participation. your Thank today's for conference.

disconnect. now may You