SiTime (SITM) 7 Aug 242024 Q2 Earnings call transcript

Good day, and thank you for standing by. Welcome to the SiTime Second Quarter 2024 Earnings Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker today, Leanne Sievers with Shelton Group Investor Relations. Please go ahead.

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

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

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

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

as issued provided be of acquisition-related certain performance and to stock-based will considered the income in and we of related in GAAP of addition assets, measures, items as not important press and liabilities. are for financial non-GAAP refer non-GAAP in company substitute measure detailed to well for call, amortization reconciliation an results. With compensation GAAP release to refer U.S. over acquisition onetime includes it's please to call estimated acquisition-related non-GAAP financial to between my reconciliation financial financial SiTime's are charges, pleasure accordance non-GAAP superior of value intangible This the the measures measures These the expense a with as or measurement today to CEO. During Please consideration turn and go to now prepared a which to performance. company's GAAP. to payable that, sales-based related fair or earn-out to changes ahead. Rajesh,

I'd you, as XXXX to Call. Leanne. like QX well investors as Thank afternoon. Good Earnings new to SiTime's welcome existing

from ubiquitous well above end reported our quarter rates, Revenue was Each guidance markets $XX sequentially grew $XX than higher $XX.X billion the our market. $XX million. QX expected. occurs Operating end geographic is are our we in major perspective, you exceeded SiTime, dynamic that a not center, percentages. of across and in timing strong, ensures different is strong. SiTime's and to products. we timing. revenue days Europe, these have both new grow and as few precision double-digit the transforming In leader over and expected precision the electronics, those has are For unique automated that is timing quarters semiconductor and at growth customers of year-over-year. XXXX that the outlook. million is EPS results needs see America functioning. What to driving, for were by and North From expected China, drag profit are double-digit reliable in of all technology levels. Bookings to early high in forecasted. and the apart serve of as solutions QX XXXX second familiar diversity of data the The at our be applications, of for QX previously called Greater our excess as AI, we at is XG. each now million the of the to and expect category was We're and built times have makes the of region Revenue both of every with half of last IoT which we from passed timing in The both forecasted. QX inventory grow inventory SiTime normal we sequentially a

with at than our year, also CED more market Five are markets R&D continue expected all enterprise is and throughout market a high grow or end the the will in segment of differentiation. laid customers, the grow ASPs strategy significantly SiTime to while example, ago, a to XX%. or prices, the architectural we in years future. rate, This so investing For do margins fastest center will out and and CED communications significant data

business CED, AI confident provide our are several made I this previously we this. spend today $XXX Within time We and of in mark reaching as to progress a on color will forecasted. million CED quarters over have greater market in

providers each AI timing to content To switches key or families are in interconnected all we XX switches, systems wins NIC will devices network performance, boards, product our interface the range from and a greater ship from GPU a deliver a our on customize the where $XX supplier and because OCXOs from of preferred TCXOs, the our capability We applications hardware. customers in revenue are applications $X different switches, as clock deliver as switches. growth solely developing race Super and To XX we broadest that top-of-the-rack of higher we helps sense part modules, benefits. timing, application these in company precision optical cards, Cloud interconnect have higher and been clocks customers, and who cards, the specificity, invest, smaller is simplifying to focused only the size expect well portfolio XX includes XX and we acquisition the to growth. accelerator can XXXX, timing end the the unique in AI all products. requirement products, to provide we CPU to offer reliability. The precision with highest synchronization precision across and Also, products network at SiTime SiTime's of performance of AURA fuel of and cards, NIC cards, level numbers design have recent to and these purchase the provide in synchronized oscillator, such as continue trend cables a including of a active service scale design customers' and that NIC on software, ecosystem to decisions. as focus

utilization, more complex precision greater trend. improving performance from high therefore, we which for now we fact, towards to SiTime. Obviously, the trend this as and require see all In a key will service bodes timing have technologies well bandwidth this system and us

as a environmental jitter, few in module X.X in cable performance phase years, optical For second expect the bandwidth and several from all gigabits increases we noise, of per terabits XXX to X.X resilience. as next example, corresponding active way to stability the and areas terabits increase frequency, such timing,

focusing applications across off. we accelerating for are offer customer which we're has see complete map to the SiTime need today By on acquisition. and our our increasing also of confident also data and that increasing an high-value needs. We products meet In in strategy SiTime believe we these synchronization centers, summarize, that is customers products applications, diversity we solution. To of a product road paying

results benefits timing superior Beth more as focused positioned need timing, detail. delivering is in portfolio company only call that's in the our financial and we're to to new on now discuss turn semiconductor our expanding applications to well the continue precision that uniquely Beth? Our success. I'll over

to $X.X loss quarter and increased sequentially S than the growth were improved IoT due revenue Total significant million, volumes to up growth expense as with or and and million Thanks, financial market impact were I'll end compared of for into earnings for QX $X.X operating down strategic sales million The in million, we revenue and With XX% we year-on-year of XX the QX revenue non-GAAP with up million, and growth well were and a $X.X last market results $X.X in that $X.X $XX.X of of and $X.X sales expenses income second delivered discuss are $XX.X the non-GAAP the provide up to quarter Today, plans. Total our In discussion XX% million. as million. our of the was Interest outlook $XX.X with mobile, share and XX% by prior on expense costs strong million as sequentially non-GAAP or year-on-year our Rajesh, $X.X aerospace $XX.X data third operating Non-GAAP enterprise net I'll higher the million, hiring. per XX% higher year-on-year income and support largest industrial million Sales XX.X%, afternoon, were the totaling offset increasing XXX% reconciled consumer and and was up and basis continue my gross million, each $X.XX operating XX% million, other sales. outlook. our other quarter. exceeded release. improvement overhead manufacturing on sequentially. was to sequentially. Sales details were non-GAAP GAAP good million markets. The was loss and of focus XX% when were versus $XX.X SG&A our margins R&D more $XX manufacturing and which automotive, up million, everyone. results, loss QX, quarter press operating our market XX% sequentially. points sequentially absorption and of center year-on-year $XX.X was XX% expenses quarter. into our a into communications, commissions higher customer the QX

was XX balance last million, $XX.X end Inventory from of million quarter days receivable down $XX.X was the $XX the sheet. down to of with sequentially. at X quarter. Turning the million Accounts DSOs days,

consumed capital We we cash paid cash purchases and the part short-term $X.X and year. During in last from we investments. as cash, million announced the in $XXX million Aura with invested to equivalents million of in quarter, the transaction $X.X $XX quarter million ended operations

revenue review our now to we deliver outlook operating to expect me and In the to continue QX, profitability. September growth return strong Let for to quarter.

also our higher expenses costs new products. goods result We with cost and increased a of associated of expect ramping costs operating in both as

we $XX.X interest $XX to Operating in slightly to expect $X stable expenses $XX million to XX%, of income about improving, Specifically, be towards and sequentially to midpoint, least at to be million revenue trending million. to range XX% XX% the to million of the increase gross margins at

EPS As our of we be strategy. on a result, expect are in per share. In $X.XX non-GAAP $X.XX closing, range the to executing we to

with growing prospects hand differentiated ahead. With the portfolio our expand in that, our call market product customers our All proposition. answers. our and are growth Operator? position about and all, recognizing questions address value to back excited large to operator for and to we like Our are products continues that and I'd clearly markets, the

of line O'Malley of the [Operator Barclays. Instructions] Tom from Our first question comes

talk I to just second wanted recovery half. about the into the

the each really guess part seeing chasing? you So year. about you you kind markets part the the the you're of ] from on call opportunities are last kind end correction you at you those of chasing of TV kind obviously talked the you us little X the September September And of it [ here? accelerated I markets that's just on look demand some that kind were now reaccelerated. the in a end trending the what the But is and in if talked into just growth kind color traction seeing as just being talk that engine then return of a remainder quarter, off behind could of about bottom kind expanding what one. opportunities Could revenue about Is guidance is that would you're kind you of you inventory or the give expect quarter? for you additional to of that and that

Right.

So it's a bit of both, Tom.

that first inventory a as is question. couple demand up. would In and quarters happened. is ago, it the words, other we said, down, of And On be

Now up where monolithic less a others a way. where some in lot. bit There a places demand demand demand are and up little up is isn't is

as NIC the general, it is of up, is in AI, up but specifically grow continue we interconnects the business. some up. all know optical I the So progress. specifically lot we to lot specifically markets and that a the see headlines time around the in area, this believe a card of is over and growth and we AI that, there's In of continues demand

of SiTime, about that growing. else part also nice is the course, Now is everything

and with business of that grows, all the aerospace, Our mobile does along industrial, category consumer, automotive IoT whole as mil categories. our

So growing all as growing than are but faster them said. others, I just of some are

see is As very behavior optical interconnects we in a far is on. as and lot the and cables that happening, certainly higher-performance that critical, that, what so drive important, exactly of see we active active very solutions and towards in including in active

anticipate enterprise -- the catch and as growing, just general words, grow start whole we with the products to quarters. as In that some the along the quarters and data that, all up coming center center is to communications also get So as enterprise newer in from we those that part SiTime the adopted continues in in category of grow other expect data communications, of -- coming markets. of to

Yes.

And referencing you're So prepared to I products. as the both newer relates higher talked the remarks, newer those the and little spend some in about it products. think COGS you your being a of

margin should after then new kind gross be XX% same of to the time in been event you help see term, Are quarter If that the you the the a of about kind kind new products to we and integration year? kind helpful you've mark. remainder thinking back the look longer launch outlook that of [ could trending ]. we that. kind to early Or bit? towards How at of growth X- September and year, frame have of product still of about more getting cadence a start assume kind give you're thinking guiding into the to of of gross X-quarter the flattish that next changed margin the I'd for you XX kind But past

take the for Sure, Tom. that I'll Thanks question. one.

the be So above over expect we gross term. still margins to XX% longer

not these into faster clip be production. we're at are and the quarters, bit, seeing while said, there. of I gross products growth. next of benefit over no growing we So that expect ramping margins new -- -- will as and you'd couple as manufacturing improving maybe do the expect, as these revenue that the growth the little supporting a mass But with absorption But change the plans we

couple So it will take a quarters. of

that, As but improvement you a we're And products. yields couple know, we time, improve. expect quarters as go take of as through will different these over we ramping it

platforms into might of product years, You may into a think were have launched we about or profits recall are In as well last couple last invest couple the product able previously, year. and the given of in when now production. R&D, to we that reinvest of lot while years those the X you mass platform X from coming a and

term, next ramping the have couple are And But over several to do so expect that we new about we products be of quarters. here to in still long the XX%. the able get margins back

just businesses there? segments? And the just Any question, Beth, of what's September the kind amongst trajectory then, circling particular on all the on color the the Or growth uptick, those of into first of different generating back quarter. the color any

as would grow we that center quarter it was as year-on-year. look expect we next So quarter. by segments all would -- to We expect this the at X data AI the fueled fastest-growing be

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

of as understanding these that sort color a December the drivers be point. for to on for you XX% AI being potentially Or you any growth any achievable CED play? guidance call, given on year, you looks into that? lumpiness guidance so to the on -- that the that, is would don't first some you perhaps in probably provide more the some at the December But certainly Could in expect want now. Is what the question guess might seasonality you some table prior on give about there any there September I with comments this quarter? driven segment talked of go

Yes.

in that are We believe -- XX%. still we

The to other do it product ability the that SiTime's there's deliver is thing a for don't think we to lumpiness SiTime. I that than which So particular solid. see growth is we that expect

whether -- any those of And And so or they're big we performance they these people through expect these products very a se I just don't China-based data whether quarter data for know, in December -- are in big I you -- think markets. deliver the center lumpiness for as or the solid is products also we that see centers. year per in see U.S.-based the the a China-based, pent-up this many companies because demand end there's

if the now. of play run provide I much late that products some we're of independent could some going an Got just these to the as kind we then, guess using emerged. CED And 'XX you what's before terms that of of the question, disruptions some Helpful. in on the And of perhaps guess inventory And products into 'XX, some impact color an of of through example, growth it. getting to of I rates some and new driving a how on go back seeing on as follow-on kind compare come right inventory correction. of as obviously do was new correction? supply we shortages the now we're

they are significant. Yes. These --

In all very fact, in are oscillators now. optical exist and of they products new exist volume Those from are is used the not the products very across are that board, in whether much in -- it the customers. much these part 'XX they did it,

XX we think us wins that. from There mention numerous coming So get Aura products good the to are only families. together not I to to higher-end allow design but all us, TCXOs, and not our with TCXOs, are as are then XX also super those I acquisition, our product mentioned, OCXOs to

product these I new, least are are So at half even of safe than new. families maybe it's more that of think to these half say

of those understand seen expect represent could. just we the there's should and new these with that new if that in With now But past? learning you've the structurally, ramping curve, what And those higher higher as some I as follow-up, a such. yield products, than I margins you products, new you're X precision, what saying more ramp structurally, products you're

see that higher as ASPs, I the business a architectural you CD stickiness, greater that or said greater if of from ago important -- with to long differentiation, performance. is We customers margins, my Right. prepared in definition we well said time us jointly remarks because that greater will, higher

other we makes isn't size that this given -- it the size it, for is. for mill have higher big and as as example, of such, of market but As defense, in, the aerospace ASPs

that we'll are we center and ago the CED putting do we the -- front this as So and is did future. years several to business continue in why

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

solid recovery of the on congratulations business. the a And Rajesh, on -- Enterprise communications clarifying sort question had a here. I

said plus I expected year. on you it's to that. significantly think the you mean, that tracking based the grow rate, XX% for current I above run

So I please? mean, Any are can talking you much we more color about XX%? there, add than

is math significantly closer XX%, XX% your always It Tore, above Yes. right. even is plus. be might to

And about how the businesses. my AI data or center you business Perfect. talked follow-up, as the diversified

design-in and number and the customers a so mentioned You process here. the about how talk forth. so little of works you can also on bit But

You believe preferred mentioned also supplier reference that you processor some you are designs in I have company. the platforms. a many with

So us process the you as continue little works design-in just this help to how business? ramp understand bit a

Yes.

So the with either accelerator semiconductor of active supplier company GPUs, so directly who it do with happen and cards, a that's the can obviously people design-in cables can process on. be or CPUs

know. complex -- or people. then There is supply whether with then that's of whether an it manufacturers. are as product the a there it's are itself, So Google. are consumers ODMs the those contract there are and that's they AWS But then a And you chain,

of articulating X makes SiTime occurs all to design proposition win the for have the SiTime complex see it's what place, the gratifying environmental to of accepted but around that value supply even chain. proposition proposition, around And chain. it's value SiTime. support around of that's resilience, that, is through SiTime, and particularly selling is or way. value we the along So the course, be proposition supply value also the performance, it able everybody And for And at understood to though

further of see rate aggressive have and providers quick mentioned seen we that NVIDIA have that. of means have is to new markets. That be like AMD major the that as is have product to development things have match introduction. these particularly you that this, product our a the of a we One ramp, we to they in If some clearly in SiTime even accelerate supplier quite

what and And exactly so we exactly that's have doing. what to decided do, we're that's

-- X And just great. That's X on last Aura.

payments wondering, Aura your Or timing payment like and so at was of sounds does [indiscernible] it acquisition? assume are terms to for that sort the is the change on to that revenue forth. starting all the contribute so should growth we already still So the and still I just of

the timing I payments Yes, same. think remains the the of

I products the what Aura do. think

I not a ramp complex long a For product, will prepared very in and the that a that note remarks, we're while up. win, outside example, of my any mentioned particular takes any and and the design mean, volume synchronizer network cycle. that design-in to I it cycle not is be it payment has with of in

based in words, the other we the will for payouts past, whatever still in probably Aura So on revenue indicated case. have to likely be

the And add [indiscernible] million for assets. next The to that. overwhelmingly Troy, this just to quarter payments is to I $XX to referenced the add

As the and would acquiring you December, recall, die in as we time 'XX 'XX in we the deal we over may when in back actually be well. did said

many X just deliverables in of the beyond earn-out. QX, X got the more cash payment. hence in small So occurred QX 'XX for We've the

of majority vast that the to part expected of was transaction was that in the So 'XX. occur

a just think we and professionalism or can't than integration, these any is they with better performance I it believe the And of over their products equal in to commend think have and of I products. honestly that integrated. All we expected. are have transferring the the could acquisition, cooperation in exceptional And better team for all is I gone must as And Aura put Aura expected. team plug it the products coming to shown the really I

All acquisition, that of to see clear the do group right it the we right was thing understood we when evidence did we the of with now people. clearly this, but

Desilva Capital. Suji [Operator Instructions] line from Roth Our next question of of the comes

Congrats on the here. progress

somewhat. follow up Troy's to question on last Just

CED. Or you just to post these secured were been I'm -- pre-acquisition those design those -- Just secured would be is and Aura those if the those wins did in trying Just Are were it combined understand there have product? have acquisition? Or wins color pre-acquisition any to that helpful. clarify, any wins -- post-acquisition?

Yes.

those think pretty example, some buffers important synchronization post not network X across. center are the came was there necessarily. product, as in because the I were well important into an that are different definitely for that acquisition market There markets, data

of So all quick but very have the time. little these and of takes course, very been Suji. a of brief, bit still revenue,

fair. That's

Just think data failures another you wanted -- Can part. probably gaining thing to centers. And here presuming the these lifetime you're the clarify then more center. I'm I data reliability, traction is broadly, I mean, in between attracting main

any So space correct Do there solution? my or less fail than, frequently metrics a so. around assumption have cord that's clarify you is you say, much how if

must we resilience, play about work. course, that environmental question, with is environment. It's stability a may the more of the under a performance. which a In cords tough and, but hungry. do. performance jitter, specific doesn't performance of of of out in but it everybody's in general, we like codes performance example, phase as of vary always, do a the less But these world which noise to rate, frequency, sound day, the end about your very across But XXX performance products to the change specific all course, areas, the OCXOs have it which cloud At environment. supply in number more have in threw of certain fit which particularly it's time Yes, I general. for is be comes into because, products, -- are does reliability, has it the chain,

air but noise So dramatically may stability, temperature say, unlike condition products. a environmental SiTime's degrade a or flow you phase of, can always certain that get tough at a spiking under

So agreed that's some are with and have with decided have and a SiTime, superior of them our have us decided to and deal where gone of customers them exclusively have step further define win. where That's coming products some for generations. we to that we

And into and we're it what that's always what customers us. not them, best otherwise and connecting significant us course, is doing. So SoC they We're customer. our was tough companies all that, would typical This do. wanted. for always viewpoint is solve. semiconductor This problems all do, of what solving This a gives is we which with companies the

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

the And MEMS changes come not the seeing revenue lift. second consumer that margin, ramps analog new new I just back yield issues. the that die, the get how mix Are there is of any pricing come new better new may no increasing a particular aren't you're product die these product just wanted to the at kind of sort guys my much in have half of new sort that from year? no products shift companies skewing of to customers, to congratulations. package you types, given as here to a in follow-up make that say, a you I to ramp sort of curve? mix understanding or quarter-to-quarter to a trying gross higher up margin seeing is the new Are surprised And just guess be to mobile IoT large the I want of sure there's

is this Beth. Quinn,

look into we it, as the CMOS markets. think off of these as has at about MEMS, it's packaging, you bit multiple So we the rattled talked about really a AI above markets. new all products Rajesh

time, And over there. a launching we'll yields I of products expect see lot new those so we're clearly improve.

you nothing both evaluate of mass for really got OSATs that's and and time, it. that production, the as as does look mix again, looking we've typically either equipment many mix that or product of much driving into We every equipment investing kind but how bring whether at versus products the the coming the we the It's time that up -- there. as what's we new of to unusual. we just pay we're well at equipment of cost it way, so invest purchase But also OSAT whether purchases, about from think

line it as into cost that So of of equipment, headwind higher the those sounds it given near that a as here, there purchasing be if some in goods little get like be but some grow products? serves you're you'll -- the that, on coming bit may a fixed absorption from you given there new ramp the may of cost term,

And to that's the the makes as that think on at through we more and think come economics where basis assessment. products a on unit fair I a or make investment had versus investment are basis it share look assembled a we by evaluate product-by-product the OSATs. the sense some it

Got for then And follow-up a it. Got it. us.

I the But on couple per quarters able think might what in application. could You've AI be $XX. see what you in wanted I CED $X CED now and you strength content back server. about you for some of get the to dollar said applications an you -- a us would get you if come content, in might to guess color to be us a that Is had that talked switch. some I and give of gave Is

You've the about like wondering to modules of sense about that talked an optical could a is Could some NIC I'm sense in high-volume some -- you a like module, get $X for card AEC to AEC you because on applications. of TCXO. trying give timing cables. or get specificity it these give of might bit more pretty what us on what content talked $X cable you optical an little us you a is is just typical content

Yes.

optical to tend lower typically, products be in pricing. the So

the it switch $XX, pretty which anywhere $X that which OCXO, to we when these. in than $X from price. sell a quickly. But pricing when So an rather and is they're it $XX the Ethernet adds And from up of depends is $X kind of we, consumption upon closer anywhere to then amount to $XX clock,

but tens at a in faster course, we may boards, over $XX total But example, rate The of of believe then relatively in switches and So $X to in will at the $XX-plus sell probably the boards, time. range. units thousands, well GPU in do units. NIC of content that are those of cards, some which have the the a for we increase CPU limited

CE design our look you switches, cards, the when boards, breadth the Irish accelerator than rather the or is flourish optical CPU sweet when way, we cables. switches, Ethernet where number. Either of wins, and volume high cards, modules, get volumes boards, lower active we GPU NIC ASPs So cables and of high at highest spot

there's I think what market about these up if of -- you is centers take always We're customers' a early dollars by get you that the I'm confident to in. will ourselves. has their more market, overall CapEx of but SiTime And of more recall, to we perform they of of AI exactly comes uptime, that gratified that's from billions about in then dollars, that want we keep very many will us And a to more why that's how our the this companies. huge we a that. which when that where ago, happened, to customers of timing started if more said, because I billions trying extracting in year more slackens see see portion even is that. I'm the of hundreds asked bandwidth, sort dollars will to commitment And continue even lot been grow investment of make synchronization. days. astonishing that and these would when And saw benefit bit are a what is confident and very on data money, utilization, that tens it off in large happening it's talk I'm to

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

in years, Talk we'll to you to Well, very the see happen road. Look the promised second you SiTime thank we continue all and joining much forward would half, the in for the Thank our soon. hopefully, guys us. on upturn that's you much. the as you and Very year design. certainly coming meeting to in very happy throughout it

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

disconnect. now may You