Q4 2023 SiTime Corp Earnings Call
Operator: Good afternoon, and welcome to SiTime's fourth quarter 2023 financial results conference call. At this time, all participants are in a listen-only mode.
Good afternoon, and welcome to start times with quarter 2020 financial results Conference call. At this time, all participants are in a listen only mode.
Operator: At the conclusion of today's conference, instructions will be given for Q&A. As a reminder, this conference is being recorded today, Tuesday, February 13th, 2024. I would now like to turn the call over to Brett Perry of Shelton Group Investors. Brett, please go ahead.
Conclusion of today's conference instructions will be given for Q&A.
As a reminder, this conference is being recorded today Tuesday February 13th 2024, I would now like to turn the call over to Brett Perry of Shelton Group Investor Relations. Please go ahead.
Brett Perry: Thank you, Norma. Good afternoon, and welcome to SiTime's fourth quarter 2023 Financial Results Conference call. Joining us on the call today from SiTime are Rajesh Biswas, Chief Executive Officer, and Beth Howe, Chief Financial Officer. Before we begin, I'd like to point out that during the course of this call, the company may make forward-looking statements regarding expected future results, including financial position, strategy, and plans, future operations, the timing of market entry, and other areas of development. It's not possible for the company's management to predict all risks, nor can the company assess the impact of all factors on its business or the extent to which any factor or combination of factors may cause actual results In light of these risks, uncertainties, and assumptions, the forward-looking events discussed during this call may not occur, and actual results could differ materially and adversely from those anticipated or implied. Neither the company nor any person assumes responsibility for the accuracy and completeness of forward-looking statements.
Thank you Nova good afternoon, and welcome to <unk> fourth quarter 2023 financial results conference call joining us on the call today from <unk> is just cheap.
Chief Executive Officer, and Beth Howe, Chief Financial Officer, before we begin I'd like to point out that during the course of this call. The company may make forward looking statements regarding expected future results and coming including financial position strategy and plans future operations, the timing market and other areas of discussion.
Not possible for the company's management to predict all risks nor can the company assess the impact of all factors on its business or the extent to which any factor or combination of factors may cause actual results to differ materially from those contained in any forward looking statements.
In light of these risks uncertainties and assumptions the forward looking events discussed during this call may not occur and actual results could differ materially and adversely from those anticipated or implied neither the company nor any person assumes responsibility for the accuracy and completeness of forward looking statements. The company undertakes no obligation to publicly update forward looking statements.
Brett Perry: The company undertakes no obligation to publicly update forward-looking statements for any reason after the date of this call to conform statements to actual results or changes to the company's expectations. For more detailed information on risks associated with the business, we refer you to the risk factors described in the 10-K filed on February 27, 2023, as well as the company's subsequent filings with the SEC. Also, during the call, we refer to certain non-GAAP financial measures, which are considered to be an important measure of the company's performance. These non-GAAP financial measures are provided in addition to, and not as a substitute for, nor superior to, measures of financial performance prepared in accordance with U.S. GAAP.
For any reason after the date of this call to conform statements to actual results or to changes or changes to the company's expectations for more detailed information on risks associated with the business. We refer you to the risk factors described in the 10-K filed on February 27, 2023, as well as the concentrate subsequent filings with the SEC.
Also during the call we refer to certain non-GAAP financial measures, which are considered to be an important measure of the company's performance. These non-GAAP financial measures are provided in addition to not as a substitute for nor superior to measures of financial performance prepared in accordance with U S. GAAP. Please refer to the company's press release issued today for a detailed reconciliation.
Rajesh Vashist: Please refer to the company's press release issued today for a detailed reconciliation between GAAP and non-GAAP financial measures. With that, it's now my pleasure to turn the call over to SiTime CEO Rajesh. Please go ahead. Thanks, Brett. Good afternoon.
Nation between GAAP and non-GAAP financial results with that it's now my pleasure to turn the call over to <unk> CEO Josh. Please go ahead.
Thanks, Brett good afternoon.
Rajesh Vashist: I'd like to welcome you as well as existing investors to SiTime's Q4 2023 earnings call. For those of you that are not as familiar with SiTime, we are the leader in a dynamic new semiconductor category called Precision Time. In electronics, timing is ubiquitous and ensures the reliable functioning of the system. We created Precision Timing to serve the needs of applications like automated driving, data center, 5G, and AI.
I'd like to welcome new as well as existing investors to <unk> Q4, 2023 earnings call.
For those of you that are not as familiar with high time, we are the leader in a dynamic new semiconductor category called precision timing and electronics timing is ubiquitous and ensures reliable functioning of the system.
<unk> created precision timing to serve the needs of applications like automated driving data center <unk> and AI.
Rajesh Vashist: We are early in a growth phase as we transform the $10 billion timing market. Q4 2023 was in line with our outlook. Revenue for the quarter was $42.4 million, non-GAAP gross margins were 58.3%, and non-GAAP EPS was 24 cents per share versus Sixth Sense in Q3. As we forecasted, we continue to see a reduction in weeks of channel inventory in Q4 and an overall uptick in end demand, although we saw variations in demand across segments and customers. Looking back, 2023 truly was a tale of differing hearts.
We are early in our growth as we transform that $10 billion timing market.
Q4, 2023 was in line with our outlook revenue for the quarter was $42 4 million.
non-GAAP gross margins were 58, 3%.
non-GAAP EPS was <unk> 24 per share versus.
<unk> in Q3.
As we forecasted we continue to see a reduction of weeks of channel inventory in Q4, and an overall uptick in end demand, although we saw variations in demand across segments and customers.
Looking back 2023 truly was a tale of different parts. The first half of the year saw a declining revenue because of over ordering at our customers leading to a buildup of inventories and clearly weak demand in.
Rajesh Vashist: The first half of the year saw declining revenue because of over-ordering at our customers, leading to a build-up of inventories and clearly weak demand. In the second half of the year, we saw sequential improvement as channel inventories continued to be consumed, and demand in some markets, such as consumer and data center, improved, and we finished the year strong. Most importantly, though, through all these changes, the strength of SiTime's business based on SAM, or Serviced Market, ASP, or Average Selling Price, Design Wins, and Single Sourcing has only become greater, and we are better positioned than ever to accelerate our growth. We continue to expand our SAM through new, differentiated products that solve our customers' toughest timing problems. Our ASPs continue to remain strong.
In the second half of the year, we saw sequential improvement as channel inventories continue to be consumed and demand in some markets such as consumer and data center improved and we finished the year strong.
Most importantly, though through all these changes the strength of <unk> business based on fan our served market ASP or average selling price design wins and single sourcing has only become greater and we are better positioned than ever to accelerated growth.
We continue to expand our Sam through new differentiated products that solve our customers' toughest timing problems. Our asp's continued to remain strong design wins continue to grow and a large majority of our business remains single sourced.
Rajesh Vashist: Design wins continue to grow, and a large majority of our business remains single source. We finished 2023 strong and rounded out our timing story with the acquisition in December of Aura Semiconductor's clocking product. This acquisition was a key milestone in achieving SiTime's vision since our IPO. At the time of our IPO in 2019, our goals were to grow our oscillator business and move into the clocking business. Since then, we've grown our oscillator SAM to 2 billion, and the Aura transaction expands the SAM further. In the last quarter, we sampled these clocking products successfully, and the initial customer response validates our strategy to offer complete precision timing solutions.
We finished 2023 strong and rounded out our timing story with the acquisition in December of RF semiconductors clocking products.
This acquisition was a key milestone in achieving site Ams vision since our IPO.
At the time of our IPO in 2019, our goals were to grow our oscillator business and move into the trucking business. Since then we've grown our oscillators, Sam two 2 billion and the RF class action expand the Sam further.
And the last quarter, we sample these clotting products successfully and the initial customer responses validates our strategy to offer complete precision timing solutions. The early design momentum and is promising and we are well on our way to building a large panel, though as expected revenue will take time.
Rajesh Vashist: The early design momentum is promising, and we are well on our way to building a large funnel, though, as expected, revenue will take time. Now, I'd like to provide a few thoughts on SiTime's growing role in AI. The maximum amount of data processing required for AI requires network infrastructure upgrades, which depend upon precision timing to deliver and process data at high speeds while maintaining uptime.
Jim.
Now I'd like to provide a few thoughts on site times growing role in AI.
Massive amount of data processing required for AI requires network infrastructure upgrades, which depend upon precision timing to deliver and process data at high speeds, while maintaining uptime.
Rajesh Vashist: We have strong engagement with two of the top cloud service providers or CSPs and the top AI server supplier using our new clock and oscillator products together. We're also actively engaged with two of the top AI companies to create new variants of clock products that currently don't exist. These clocks will be used in conjunction with our oscillators like EliteX, EliteRF, and EPIC to deliver the best time accuracy for AI.
We had strong engagement with two of the top cloud service providers are csp's and the top AI server supplier using our new clock and oscillator products together.
We are also actively engaged with two of the top AI companies to create new variants of cloud products that Karen that currently don't exist.
These clocks will be used in conjunction with our auditors like elite ex elite RF and epic to deliver the best time accuracy for AI.
Rajesh Vashist: Our precision timing products are in most of the AI service ships today, and we are also shipping into the top 10 optical module providers, including AEC and AOC, for 400 gigabits and 800 gigabits. Sales into the data center and communication segments were up 64% from Q3 to Q4, 2023. We expect this business to grow by 50% in 2024. In conclusion, we are pleased with the current opportunities in the AI segment and believe additional applications will materialize as the segment is still in its early stages. For the aerospace defense markets, in Q4, we introduced a transformative product, the Endura EPIC OCXL, and we're seeing excellent design interaction with customers. This new product delivers superior operations for radio, data link, navigation, and guidance systems in military environments.
Our precision timing products are in most of the AI service shipped to date.
And we are also shipping into the top 10 optical module providers, including AUC and Aoc for 400 gigabit <unk> and 800 gigabit.
Sales into the data center and communications segments was up 64% from Q3 to Q4 2023.
We expect this business to grow by 50% in 2024.
In conclusion, we are pleased with our current opportunities in the <unk> segment and believe additional applications will materialize as the segment is still in its early stage.
For the aerospace defense markets in Q4, we introduced a transformative product the endura epic <unk> and we're seeing excellent design in traction at customers. This new product deliver superior operations for radio data link navigation and guidance.
<unk> systems and military environments.
Rajesh Vashist: Our ASPs grew from Q3 to Q4 2023, driven by stronger sales in the comms enterprise data center and automotive industrial aero defense markets, where we bring significant value to our customers. Our funnel continues to show robust growth. The number of design wins continued to grow in Q4 over Q3. For the entire year, the number of design wins grew by 75%. And lastly, in contrast to quartz oscillators that are typically multisource.
Our Asps grew from Q3 to Q4 2023, driven by stronger sales in Comms Enterprise data center, and automotive industrial Aero defense markets, where we bring significant value to our customers.
Our funnel continues to show robust growth the number of design wins continued to grow in Q4 over Q3 for the entire year. The number of design wins grew by 75%.
And lastly in contrast to the courts oscillators that are typically multi sourced.
Beth Howe: We continue to be differentiated, as evidenced by 85% of our Q4 revenue being single source, which is another indication of the value of SiTime. For 2024, we expect sequential growth from quarter to quarter, with growth accelerating in the second half of the year. We also expect revenue this year to exceed 2023 as our growth trends back to our model of 30% annual growth. Our strategy and business fundamentals are strong. I'm now delighted to introduce Beth Howe, our new CFO, who joined us in November of last year. I'll turn the call over to Beth to discuss the financial results in more detail. Take it away!
We continue to be differentiated as evidenced by 85% of our Q4 revenue was single source, which is another indication of the value of <unk>.
For 2024, we expect sequential growth from quarter to quarter with.
With growth accelerating in the second half of the year.
We also expect revenue this year to exceed 2023, as our growth trends back to our model of 30% annual growth.
Our strategy and business fundamentals are strong.
I'm now delighted to introduce Beth Howe, our new CFO, who joined US in November of last year I'll.
I'll turn the call over to Beth to discuss our financial results in more detail.
Beth Howe: Thanks Rajesh. Good afternoon, everyone. It's a pleasure to be here today on my first SiTime earnings call. Today, I'll discuss the fourth quarter and full year 2023 results and then provide our outlook for the first quarter of fiscal 2024. I'll focus my discussion on non-GAAP financial results and refer you to today's press release for our GAAP results, as well as a reconciliation of GAAP to non-GAAP results. In the past, this reconciliation was related to stock-based compensation.
Thanks, <unk> good afternoon, everyone. It's a pleasure to be here today on my first <unk> earnings call.
Today, I'll discuss the fourth quarter and full year 2023 results and then provide our outlook for the first quarter of fiscal 2024, I'll focus my discussion on non-GAAP financial results and refer you to today's press release for our GAAP results as well as a reconciliation of GAAP to non-GAAP results.
In the past this reconciliation was related to stock based compensation with the closing of the Aurora deal. Our non-GAAP results will also include amortization of acquired intangibles and acquisition related expenses that include transaction and certain other cash costs associated with the business acquisition as well.
Beth Howe: With the closing of the ORA deal, our non-GAAP results will also include amortization of acquired intangibles and acquisition-related expenses that include transaction and certain other cash costs associated with the business acquisition, as well as changes in the estimated fair value of contingent consideration and earn-out payment. Now, turning to the details of our results. For the full year, we delivered revenue of $144 million, down 49% from fiscal 22, and non-GAAP gross margins of 59.2%. We reduced non-GAAP operating expenses by $1.5 million to $107.6 million.
As changes in the estimated fair value of contingent consideration and earn out payments.
Now turning to the details of our results.
For the full year, we delivered revenue of $144 million down 49% from fiscal 'twenty, two and non-GAAP gross margins at 59, 2%, we reduced non-GAAP operating expenses $1 5 million to $107 6 million for the fifth.
Beth Howe: For the fiscal year, we generated non-GAAP income of $4.2 million, non-GAAP earnings per share of $0.18, and cash flow from operations of $8.1 million. Looking at the details of the December quarter, revenue was $42.4 million, up 19% sequentially and at the higher end of our outlook range. Drilling into revenue by market segment, sales into our mobile, IoT, and consumer segments were $17.1 million, or 40% of sales, down 4% from Q3, as expected. Sales to our largest customer were $11.7 million, or 28% of revenue. Excluding sales to our largest customer, sales in this segment increased 16% to $5.4 million.
Full year, we generated non-GAAP income of $4 $2 million non-GAAP earnings per share of <unk> 18.
And cash flow from operations of $8 $1 million.
Looking at the details of the December quarter revenue was $42 $4 million up 19% sequentially and at the higher end of our outlook range drilling.
Drilling into revenue by market segment.
Built into our mobile Iot and consumer segment were $17 1 million or 40% of sales down 4% from Q3 as expected.
Sales to our largest customer were $11 $7 million or 28% of revenue.
Excluding sales to our largest customer sales in this segment increased 16% to $5 $4 million.
Beth Howe: Sales into our industrial, automotive, and aerospace segment were $15.6 million, or 37% of sales, up 19% from Q3. And sales into our communications and enterprise segment were up 64% sequentially, to $9.7 million, or 23% of sales. Non-GAAP gross margins were 58.3 percent, up 10 basis points sequentially. Total non-GAAP operating expenses for the quarter were $26.6 million, compared with $26.3 million in Q3.
<unk> into our industrial automotive and aerospace segment were $15 6 million or 37% of sales up 19% from Q3.
And sales into our communications and enterprise segment were up 64% sequentially to $9 7 million or 23% of sales.
non-GAAP gross margins were 58, 3% up 10 basis points sequentially.
Total non-GAAP operating expenses for the quarter were $26 6 million.
Compared with $26 $3 million in Q3.
Beth Howe: R&D expense was $15.9 million, and SG&A expense was $10.8 million. The fourth quarter non-GAAP operating loss was $1.9 million, an improvement of $3.7 million sequentially due to higher revenue. Interest and other income was $7.5 million, up from $7.1 million in Q3 due to higher earned interest on our investment. Fourth quarter non-GAAP net income was $5.5 million, or $0.24 per share, compared with $0.06 per share in Q3. Turning to the balance sheet, accounts receivable were $21.9 million with DSOs of 46 days down from 64 days in Q3 due to improved revenue linearity. Inventory at the end of the quarter was $65.5 million.
R&D expense was $15 $9 million in SG&A expense was $10 $8 million.
First quarter non-GAAP operating loss was $1 9 million, an improvement of $3 $7 million sequentially due to higher revenue.
Interest and other income was $7 5 million up from $7 1 million in Q3 due to higher earned interest on our investments.
Fourth quarter non-GAAP net income was $5 5 million or 24 per share compared with <unk> <unk> per share in Q3.
Turning to the balance sheet accounts receivable were $21 9 million with Dsos of 46 days down from 64 days in Q3 due to improved revenue linearity in.
Inventory at the end of the quarter was $65 5 million.
Beth Howe: During the quarter, we used $1.4 million in cash from operations, invested $3.1 million in capital purchases, and paid $39 million to Aura Semiconductor, of which $36 million was paid at the time of close, and an additional $3 million was paid in the month of December. We ended the fourth quarter with $528 million in cash, cash equivalents, and short-term investments. Let me now review our outlook for the March quarter. As we enter 2024, we are expecting typical Q1 seasonality as well as continued progress toward channel inventory normalization. We are taking a prudent approach to managing our cost structure as we absorb the acquisition and prioritize investments to drive long-term growth. With that in mind, we are providing the following outlook for the first quarter. We expect revenue of approximately $31 to $33 million, gross margin to be in the range of 57 to 58 percent, operating expenses to be roughly flat year on year, and interest income of roughly $5.5 million. As a result, we expect non-GAAP earnings per share to be a loss in the range of $0.12 to $0.17 per share.
During the quarter, we used $1 $4 million in cash from operations invested $3 $1 million in capital purchases and paid $39 million to auris semiconductor of which $36 million was paid at the time of close and an additional $3 million was paid in the month of December.
We ended the fourth quarter with $528 million in cash cash equivalents and short term investments.
Let me now review our outlook for the March quarter.
As we enter 2024, we are expecting typical Q1 seasonality as well as continued progress towards channel inventory normalization.
We are taking a prudent approach to managing our cost structure as we absorb the acquisition and prioritize investments to drive long term growth.
With that in mind, we are providing the following outlook for the first quarter.
We expect revenue of approximately $31 million to $33 million.
Gross margin to be in the range of 57% to 58%.
Operating expenses to be roughly flat year on year.
And interest income of roughly $5 5 million.
As a result, we expect non-GAAP earnings per share to be a loss in the range of 12% to 17 cents per share.
Operator: In closing, we are navigating the current environment. We have unique technology that addresses a large and growing market, and our design wins reinforce the strength of our value proposition with customers. All in all, we are excited about our market position and believe our growth strategy is fully intact. With that, I'd like to hand the call back to the operator for questions and answers. Thank you. If you want to ask your question, you'll need to press star 1, 1 on your.
In closing we are navigating the current environment, we have unique technology that addresses a large and growing market and our design wins reinforced the strength of our value proposition with customers.
All in all we are excited about the market position and believe our growth strategy is fully intact.
With that I'd like to hand, the call back to the operator for questions and answers. Thank.
Thank you.
To ask your question you will need to press star one on your telephone to withdraw your question. Please press star one again, please wait for your name to be announced please standby will be compile the Q&A roster one moment for your first question. Please.
Operator: To withdraw your question, please press star 1 1 again. Please wait for your name to be called. Please stand by while we compile the Q&A roster. Our first question comes from the line of Chris Caso with Wolf Research. Your line is now open.
Our first question comes from the line of Chris Caso with Wolfe Research. Your line is now open.
Chris Caso: Yeah, thank you. Good afternoon. I guess the first question is with respect to the guidance, if you could perhaps give some color about what your expectations are for each market segment. Obviously, you have some seasonality in some businesses, and others, you're working through inventory. How does that work out by a Yeah, I think there's some markets that are positive. Chris, we see consumers growing clearly. We see the data center market growing clearly, as my prepared remarks showed. It's a little bit mixed in the automotive sector.
Yes. Thank you good afternoon I.
I guess the first question is with respect to the guidance. If you could perhaps give some color about what your expectations are for each March market segment, obviously you have some.
Seasonality and some in some businesses and others youre working through the inventory.
How does that work out by us, but by a segment basis.
Yes, I think there are some markets that are positive Chris we see consumer growing clearly we see.
The datacenter market growing clearly as my prepared remarks showed.
It's a little bit mixed in automotive, we see some automotive potential potential growth we.
Rajesh Vashist: We see some potential growth in the automotive sector. We see some industrial growth. The place where we don't see much growth is in communications, so clearly.
We see some industrial growth a place where we don't see much growth is in communications for clearly.
Rajesh Vashist: We also see, yeah, so in those areas, I think we see some growth. Also, in general, we think that we're going to finish the year strong in the second half of the year. I don't know if you wanted to add something.
We also.
M C.
Yeah. So in those areas I think.
We see some growth also.
In general we think that we're going to finish the year strong in the second half of the year.
I don't know if you wanted to add something yes, no I think I think that if we look at Q1 as I said in my remarks, we think its pretty typical seasonality combined with the continued drawdown that we expect in terms of channel inventory.
Beth Howe: Yeah, no. I think that if we look at Q1, as I said in my remarks, we think it's pretty typical seasonality combined with the continued drawdown that we expect in terms of channel inventory. As Rajesh mentioned, we do expect to see sequential growth quarter to quarter as we go through the year, with the second half being stronger than the first half. You know, as Rajesh was talking about, market segments are a bit mixed.
Josh mentioned, we do expect to see a sequential growth quarter to quarter as we go through the year with the second half being stronger than the first half.
As rejection was talking about market segments are.
Beth Howe: Some are a little more cautious, and others are seeing much more positive signs. And so I think we continue to evaluate each market by market. Clearly, data center and enterprise are very strong, where telecom, on the other hand, continues to be softer as well.
Next some are a little more cautious than others are seeing much more positive signs and I think we continue to evaluate market by market clearly data price datacenter and enterprise are very strong where telecom on the other hand continues to be softer.
Chris Caso: So I think overall, we're optimistic about 2024 and excited to be growing this year. I think our business and our strategy and growth model are very much intact. Thank you for that.
As well so I think overall, we are optimistic about 2024 and <unk>.
Excited to be to be growing in the year, I think our business and our strategy and growth model are very much intact.
Thank you for that as a follow up.
Chris Caso: As a follow-up, could you give us a sense of where you think you are with customer inventories? And, uh, you know, I think a quarter ago, the view was, you know, perhaps, uh, your customers had, you know, kind of the order of 30 and 40 million of excess inventory to burn off. Assume that they made some progress on that. Where do you stand with that? And, uh, you know, kind of, how does that play into your view for calendar 24? Sure, Chris.
Could you give us a sense of where you think you are with customer inventories and.
I think a quarter ago the view was.
Haps custom.
Customers had kind of the order of $30 million to $40 million of excess inventory to burn off.
I assume that they made some progress on that where do you stand with that and.
Kind of how does that play into your view for calendar 'twenty four.
Beth Howe: Thanks for the question. We do continue to see improvement in channel inventory drawdown. Some customers have gotten back to normal levels, as we've been talking about, but others still have some more progress to be made in rebalancing and normalizing their inventories. As we see it today, and as I think we've said, we expect that channel inventory normalization probably continues into Q2, kind of through the June quarter, when we expect it to be back to normal in most of our accounts. It's helpful.
Sure Chris Thanks for the question.
We do continue to see improvement in the channel inventory drawdown, some customers have gotten back to normal levels as we've been talking about others still have some more progress to be made in rebalancing and normalizing their inventories as we see it today and as I think we've said we expected that.
That channel inventory normalization, probably continues into Q2 kind of through the June quarter, when we expect to be.
Back to normal in most of our accounts.
Beth Howe: Thank you. Thank you. One moment for our next question, and our next question comes from the line of Tore Svanberg with Stiefel. Your line is now open.
Got it helpful. Thank you.
Mhm. Thank you one moment for our next question. Please.
And our next question comes from the line of Toy Hamburg with Stifel. Your line is now open.
Tore Egil Svanberg: Yes, thank you. And congratulations on the continuous progress here. Rajesh, you talked about the data center or the enterprise and data center business growing more than 50% this year. I was just hoping you could share with us the type of visibility you have there. I mean, you did talk about some of the, you know, major platforms that you're designed into. But yeah, any more color you could share with us on the visibility for that?
Yes, Thank you and congratulations on a continuous progress here rich as you talked about the data center or the enterprise and data center business growing more than 50%. This year I was just hoping you could share with us the type of visibility you have there I mean, you did talk about some of the.
Major platforms that you're designed into but any more color you could share with us on the visibility for that type of growth.
Rajesh Vashist: Well, in general, it is a strong place for us to grow. As I said earlier, we are in talks with a significant number of optical module providers, the active cables, the active optical cables, the processor guys who sell GPUs, you know who those are, the CPU guys as well. So I think there's a lot of interest in what we are coming through. As I've said in the past, the role of synchronization, the role of high speed, the role of high speed under high performance, high data performance under tough environmental conditions.
Well I think.
In general it is a strong place for us to grow.
As I said earlier, we are in a significant number of optical module providers the active cables the active optical cables.
The processor guys, who sell Gpus, you know who those are.
The CPU guys as well so I think there is a lot of interest in what we are coming through as I've said in the past.
The roll off.
Giving synced doing synchronization the role of high speed the roll off.
Of.
Our high speed under high performance high data performance under tough environmental conditions. This continues to grow to be in very important piece.
Rajesh Vashist: This continues to grow to be a very important piece. I think the clocking products that we have are coming into their own. As I described, we are defining new products with some of our customers that don't currently exist.
Think the clocking products that we have are coming into their own as I described we are defining new products with some of our customers that don't currently exist.
Rajesh Vashist: We think we have an enormous opportunity in that space, and I think it's going to be a very big opportunity for SiTime in the coming years, including So not that far away in time, I think all of this is going to start to have a significant influence. The other thing we see is that we're talking about AI and data centers, but I see the role, it's very low right now, but the role of AI in enterprise. In other words, enterprises will want, in many cases, their own dedicated AI networks.
We think we have an enormous opportunity in that space.
And I think it's going to be a very large opportunity for <unk> in the coming years.
Including 25, so not that far away in time I think all of this is going to start to have a significant influence. The other thing. We see is we're talking about AI and data centers, but I see the role.
It's very low right now, but the role of AI in enterprise and.
In other words enterprise will want in many case its own dedicated AI networks and I think it's high time has a role to play in that as well before AI starts to move into other areas.
Rajesh Vashist: And I think SiTime has a role to play in that as well before AI starts to move into other areas. I think those are two great areas. Yeah, that's very helpful.
I think those are two great areas for us.
Yes, that's very helpful and as my follow up now.
Rajesh Vashist: And as a follow-up, you know, now that the Aura deal is closed, I know in the past you've talked about having clocks sort of really improving your reference relationship with other partners and customers. You know, not I realize it's only a few months, but can you talk a little bit about how that is going as far as getting pulled in with, you know, more content into the reference platform? Absolutely not. But let me first put in a plug for the integration of the Aura team. We are thrilled that the team itself, which is based mainly in Bangalore, India, as well as in other parts of the world, has integrated wholly into SiTime and become a very significant part of SiTime's success.
Now that the deal is closed I know in the past you've talked about.
You know, having clocks sort of really improving your reference relationship with other partners and customers.
Now I realize it's only a few months, but can you talk a little bit about how that is going as far as getting pulled in with more content into reference platforms.
Absolutely, but let me first put in a plug for the integration of the <unk> team. We are thrilled that the team itself, which is a significantly in Bangalore, India as well as in other parts of the world has integrated wholly into Si time and become a very significant part of <unk> success.
Rajesh Vashist: Also, the products have been very much brought into the fold, and we continue to get more new products from them. That said, I think we see the opportunity to go upstream, as you pointed out, Tori, where as processor companies think of their architecture for clock trees, SiTime has the ability to show up with the clock. The ability to modify those clocks significantly to deliver what they want and to connect them to our EPIC family, our Elite RF family, and our Elite X family, which are, as you know, three unique products and oscillators that nobody else has and are significantly better than anything out there from legacy technology.
Also the products have been very much brought into the fold and we continue to get more new products from them.
That said I think we see the opportunity to go upstream as you pointed out story.
Where as processor companies think of their architecture for clock trees side time has the ability to show up with the clocks.
The ability to modify those clock significantly to deliver what they want and to connect them to our <unk> family, our elite RF family, our elite X family, which are as you know three unique products and oscillators that nobody else has and a significantly better than anything out there from <unk>.
The legacy technologies.
Rajesh Vashist: So I think this is just, as you said, the early start of it. I think a year from now, we'll have a significant amount of information to share with you on design wins and how all of that has gone. But I think we're in a very good place. Very helpful.
I think this is just as you said the earliest the startup at I think a year from now will have a significant amount of information to share with you on design wins and how all of that has gone well.
We are in very good position.
Tore Egil Svanberg: Thank you, Rajesh. Thank you. Thank you. As a reminder, ladies and gentlemen, to ask a question, you'll need to press star 1.
Very helpful. Thank you Josh.
Thanks, Thank you.
As a reminder, ladies and gentlemen to ask a question you will need to press star one one.
Quinn Bolton: And our next question comes from the line of Quinn Bolton with Needham & Company. Alright, thanks for taking my question. I just wanted to see if I could parse your comments about 2024 in a little bit more detail. You sort of said you're going to grow every quarter of the year from the March level, but then you also said something about growing for the year with growth, turning towards 30%. So I wasn't sure if we should be interpreting that.
And our next question comes from the line of Quinn Bolton with Needham <unk> Company. Your line is now open.
Hi, Thanks for taking my question, Richard So I guess I wanted to see if I can parse your comments about 2024.
And a little bit more detail you sort of said youre going to grow every quarter of the year from the March level.
But then you also said something about growing for the year with growth returning towards 30%. So I wasn't sure. If we should be interpreting that was that a full year comment that you think you grew 30% year on year or should we be thinking more the second half of the year maybe.
Beth Howe: Was that a full year comment that you think you grew at 30% year on year? Or should we be thinking more about the second half of the year, maybe the third quarter or the fourth quarter, you're getting back to that 30% year on year growth rate, but perhaps that's not true. We're just wondering if you could provide a little bit more clarity on what you... Thank you. Right. So I wanted to underline, first and foremost, the sequential growth year on year. That has generally been a trend, except for last year.
Maybe the third quarter or the fourth quarter youre getting back to that 30% year on year growth rate, but but perhaps that's not true of the full year. Just wondering if you could provide a little bit more clarity on what you intended.
Comment in the script.
Alright, so I wanted to underlying first and foremost the sequential growth year on year.
That has generally been the trend except for last year. So I wanted to underline that we're getting back to that so that's very helpful.
Beth Howe: So I wanted to underline that we're getting back to that. So that's very helpful for us to see that, and it's very heartening for us to see. The second thing is that clearly, by the time the second half rolls around, we expect to be in good shape for strong growth, and we think that whether we get to exactly at this time is still early for the whole year to comment on whether we get exactly to 30% growth or not for the year, but I think you know it's it's where we are right now. It's sort of where we're in that general zip code, Got it. Very. Richard, she gave us some great color on your AI and data center exposure. Your report, sort of comms and enterprise together, I think it was 9.7.
For us to see that.
Very heartening for us to see the second thing is that clearly by the time the second half rolls around we expect to be in good shape for strong growth.
And we think that whether we get to exactly at this time, it's still early for the whole year to comment on whether we get exactly the 30% growth or not for the year, but I think.
No it's.
It's where we are right now at sort of where in that general <unk>.
ZIP code.
Got it very helpful. And then Richard you gave us some great color on your AI and data center exposure, but.
You report.
Sort of Comms and enterprise together I think it was $9 seven.
In the December quarter could you give us a rough sense how much of that nine seven is the faster growth AI data center bucket and how much is more five G or telco.
Quinn Bolton: Give us a rough sense of how much of that 9.7 is FasterGrowthAI, DatacenterBucket, and how much is more the other five. Comments, you know, certainly. Weak to Man.
Related which.
As you said in your comments certainly has a slower growth outlook in the near term I think because of inventory digestion and continued weak demand or deployments of <unk>. Thank you.
Quinn Bolton: Thank you. Yeah, yeah. So Quinn, you put your finger on it.
Yeah. So when you put your finger on it the bulk of that.
Rajesh Vashist: The bulk of that growth is coming from data centers. Data centers, optical modules, cabling, NIC cards, acceleration cards, all of that for 2024. It's, but just to put in a plug that the telco guys are not going anywhere and that SiTime's products like Epic and EliteX and EliteRF are starting to make inroads into their new design wings, into the new designs. So when they come up with new RRUs, remote radio units, new digital units, new DUs, I think SiTime will be a solid player in that because they're not going anywhere.
That growth is coming.
From data centers data centers optical modules cabling, Nick barge exploration cards all of that for 2024.
But just to put in a plug that the telco guys are not going anywhere and that site times products like <unk> and elite RF are starting to make inroads into the new design wins into the new designs. So when they come up with new argues remote radio units new.
Digital units new use.
I think <unk> will be a solid player in that.
They're not going anywhere they may slow down the deployment, but the deployment will keep on going in 'twenty five and onwards. So we think we're going to be part of that always also it's just it's the beauty of the size of that business that we have so many horses to ride that if one is lagging a bit like we just identified or we can keep on writing some other horses.
Rajesh Vashist: They may slow down the deployment, but the deployment will keep on going in 25 and onwards. So we think we're going to be part of that also. It's just, it's the beauty of the SiTime business that we have so many horses to ride that if one is flagging a bit, like we just identified, we can keep on riding some other horses till everybody starts to play.
Everybody starts to play.
Sorry.
Certification for each of the bulk of the growth is coming from data center is that the.
The data center as more than half of that business at a 50% year on year growth is what's going to drive that that total I wish. They had 24, okay. Perfect. Thank you I would say that.
Quinn Bolton: The Data Center is more than half of that, you're on your own. I would say that. Thank you. One moment for our next question. Our next question comes from the line of Thomas O'Malley with Barclays. Your line is now: Hi, this is Scott on behalf of Tom.
Thank you one moment for our next question. Please.
Our next question comes from the line of Thomas O'malley with Barclays. Your line is now open.
Hi, This is Scott on for Tom I wanted to ask about your order visibility into the second half.
Scott: I wanted to ask about your order visibility into the second half. Obviously, you guys made those comments about seeing acceleration into the back half, but to what extent is that just normal inventory clearance? Um, you know, to the extent you have a good idea, thanks for the question. As we look at it, we do take orders over multiple quarters and so are clearly building our backlog for the second half, even now as we move into the year. As I think we both talked about, we do expect that we continue to see improvement in the second half versus the first half, both in terms of the demand picture but also as those inventories continue to get drawn down so we get to a more normalized back half. I think those are things that are contributing in terms of what we see in terms of our second half versus our first half. Great, thank you. And then just one more, if I can, so you mentioned that you thought the auto would be mixed, you know, looking out a bit. Could you just give us some of the potential?
Obviously, you guys made those comments on seeing acceleration into the back half.
To what extent is that just normal inventory clearance versus.
The extent you have good visibility into that.
Thanks for the question.
Look at it.
We are we do take out orders over multiple quarters, and so are clearly building our backlog for the second half even now as we move into the year I think we both talked about.
We do expect that we continue to see improvement in the second half versus the first half both in terms of the demand picture, but also as those inventories continue to get drawn down until we get to a more normalized back half and I think those are things that are contributing in terms of what we see in terms of our second half versus our first half.
Yes.
Great. Thank you and then just one more if I can so you mentioned that you thought auto would be mixed looking out a bit could you just give us some of the puts and takes there.
Rajesh Vashist: Yeah, I think the US companies are a little bit taking a breather, as you can read from the headlines. I think the Chinese automakers are also taking a breather, but our share is growing. I think in the U.S. and at Tier 1 OEMs, our shares are growing. So I think it's a little bit of a mixed outcome, but in general, our strength continues because of a superior product, our better supply chain, our quality, and our reliability. We think, as we've said before, that automotive will become a $100 million business for SiTime in the coming years. Got it, thanks.
Yes, I think the U S companies are a little bit taking a breather as you read from the headlines.
I think.
The Chinese.
<unk>.
Automakers are also taking a breather, but our share is growing I think in the U S and in the tier one Oems.
Our shares are growing so I think it's a little bit of a mixed outcome, but in general our strength continues because of our superior product our better supply chain our quality our reliability. We think as we've said before that automotive becomes a $100 million business for some time in the coming years.
<unk>.
Got it thanks, so much.
Scott: Thank you. One moment for our next question, and our next question comes from the line of Douglas O'Loughlin on Fabricated Knowledge.
Yes. Thank you.
One moment for our next question please.
And our next question comes from the line of Douglas Tsao Laughlin with fabricated now what's your line is now open.
Douglas O'Loughlin: Your line is now, Uh, hey Rajesh, uh, did I hear correctly that the Q1 guide was 31 to 33 million, right? I just wanted to rephrase that. Correct, $31 to $33 million in Q1. Okay, um, wait. I have a question about the inventory aspect, because you guys, um, you know, at one point in time, you're doing like Corder, and it seems like. It seems like the run rate revenue, even when you get back to the 30% revenue growth, you're not going to see. It's going to take some time to get back to the previous cycle high. My question is just kind of once again on sustainability, like what's the run rate here, X, you know, some amount of channel burn.
Hey, Josh Thanks, you correctly that the Q1 guide was 31% to $33 million.
Seasonality I just wanted to.
Free from them.
Correct, 31% to $33 million in Q1.
Okay.
I have a question on the inventory aspect because you guys.
Once upon a time youre doing like $70 million, a quarter and it seems like it.
It seems like the run rate revenue when you get back to the 30% revenue growth youre not going to see.
It's going to take some time to get back to let's say previous cycle highs.
My question is like just kind of once again on sustainability like what what.
Looks like the.
The run rate here.
Some amount of channel Bernie just seems very hard to believe that this business was doing $70 million a quarter and now we're back at $30 million should grow sequentially exit the year at 30% revenue growth, but that seems like it's going to take multiple years to get that quite to that level is that the right way to think about it or.
Douglas O'Loughlin: It just seems very hard to believe that this business was doing 70 million a quarter and now we're back at 30 million, should grow sequentially, and you know, exit the year at 30% revenue growth. That seems like it's gonna take multiple years to get back quite to that. Is that the right way to think about it? Or, you know, is there just some continued drastic given? Hey, Doug, maybe I can start and then I'm sure Rajesh has some comments as well.
Is there just some continued drastic inventory.
Problem there.
Thank you Hey, Doug maybe maybe I can start and then <unk> has some comments as well. So I. Appreciate the question again as we sit today and look at our business.
Beth Howe: So, I appreciate the question. Again, as we sit today and look at our business, I think the growth story is intact. We clearly had a tough 2023, and I make no bones about that.
The growth story is intact, we clearly had a tough 2023 and no bones about that but as we look forward. We look at the first half continuing to clear out that excess inventory in the channel and get back to normalization as we've talked about we expect that as we get into the second half we can.
Beth Howe: But as we look forward, we look at the first half continuing to clear out that excess inventory in the channel and get back to normalization. As we've talked about, we expect that as we get into the second half, we can re-accelerate the business more toward that target growth rate. Again, part of this is going to depend on the economic environment and where overall demand is. If things are a little bit better, then we expect to be able to grow more. But we're really going to be kind of candid about the way we see the business today. As Rajesh also talked about, we do have opportunities to grow our share of wallet, and we're seeing that not only in Tier 1 and auto but in other customers as well, where our unique solutions are well-positioned for those customers. So, even in some of these markets that may be mixed overall, we do see more opportunities to grow our share and to have more design wins and revenue growth in them. I'm not quite sure exactly why.
Reaccelerate the business more toward that that targeted growth rate again part of this is going to depend on the economic environment and where the overall demand is if things are a little bit better than we expect to be able to grow better.
We really want to be kind of candid about the way we see the business today as <unk> also talked about we do have opportunities to grow our share of wallet and we're seeing that not only in tier one and auto but in other customers as well, where our unique solutions are well positioned for those customers. So even in some of these markets.
May be mixed overall, we do see more opportunities to grow our share and to have more design wins and revenue growth in them.
I'm not quite sure exactly I think if you do the math you will find that at the implied run rate exiting Q4.
Rajesh Vashist: I think if you do the math, you will find that at the implied run rate exiting Q4, it doesn't take that long for us to get back to some pretty big numbers pretty quickly. As we've said before, we see one thing unique that may be being missed is that we are indicating several years of growth at 30%. That is kind of an astonishing number considering that most people would be happy to guide to a 10, 15, 20% growth rate.
It doesn't take that long for us to get back to.
To some pretty big numbers.
Pretty quickly.
As we have said before we see one thing unique maybe that maybe being missed is that we are indicating several years. After this year of growth at 30% that is kind of an astonishing number.
Considering that most people would be happy to guide to a 10%, 15% 20% growth rate.
Rajesh Vashist: And I think it comes back to the strength of our design wins and the product and the unique technology and relationship that we have built with the customer. So I'm actually feeling pretty good about it. Perfect. No further questions. Let's go, guys.
And I think it comes back to the strength of our design wins and the product and and the unique technology and relationship that we have built with our customers. So I'm actually feeling pretty good about it.
Okay.
Perfect No further questions.
Douglas O'Loughlin: Thank you. One moment for our next question, and I have a follow-up from Tore Svanberg.
Thank you one moment for our next question.
And I have a follow up from toys Sandberg with Stifel. Your line is now open.
Tore Egil Svanberg: Thank you for your time. Thank you. Thank you. Yeah, thank you. I had two quick follow-ups.
Yes. Thank you I had two quick follow ups first of all so back to a previous question about the segments for Q1, I think you said consumer was doing okay, but obviously for Q1, we should expect that segment to be down sequentially or are you, saying that your largest customer would be down in <unk>.
Rajesh Vashist: First of all, back to the previous question about the segments for Q1, Rajesh, I think you said the consumer was doing okay, but obviously for Q1, to be down sequentially? Or are you saying that your largest customer would be down, and then the, you know, X, the largest customer, it would not be? Yeah, no, I think the consumer is doing okay, but the consumer is also lower as well, if that makes any sense. What I mean by that is there's the largest customer, they're down as expected, and maybe even a little bit more. And then some of the other consumer businesses that we have are also still not fully recovered. On the other hand, for the year, I see consumer business continuing to grow. So that's why it's a little bit mixed.
The largest customer it would be marked down.
Yes, no I think consumer is doing okay, but consumers also lower as well if that makes any sense. What I mean by that is there is the largest customer they are down.
As expected and maybe even a little bit more.
And then some of the other consumer business that we have is also sort of.
It's still not fully recovered on the other hand for the year IC consumer business continuing to grow. So that's why it's a little bit mixed we feel pretty good about the way we are.
Rajesh Vashist: We feel pretty good about the way we are in the second half of the year, and it's only, as referenced by Beth earlier, that the inventory is taking probably a little bit longer than we thought previously in Q1 and Q2. But by the end of Q2, we should be in good shape, and that's not that different, frankly, that much from what we've said in the past. And that's why we generally think we're in pretty good shape. But Tore, we're not thinking that there's Q1 is typically seasonally down in consumer.
In the second half of the year and it's only as referenced by Beth earlier that the inventory is taking probably a little bit longer.
We talked previously in Q1 and Q2, but by the end of Q2, we should we should be in good shape and that's not that different.
Frankly that much from what we have said in the past.
And that's why we.
Generally we think we are in.
Pretty good shape.
But we're not thinking that Q1 is typically seasonally down in consumer.
Tore Egil Svanberg: So I think that's the starting point in terms of the conversation. And as my follow-up, and I know obviously you're not going to pre-announce your largest customers, you know, roadmap and so on and so forth, but as we think about 2024 as the whole year, would there be any material changes to your content, or is this going to be sort of like a very normal year? I think it's going to be a pretty normal year, you know.
So I think that's a starting point in terms of the conversation.
Understood and as my follow up and I know I know, obviously, you are not going to pre announce your largest customers.
Roadmap and so on and so forth, but as we think about the <unk> 23 for the whole year.
Would there be any material changes to your content or is this going to be sort of like a very normal year compared to what you had last year.
I think it's going to be a pretty normal year.
You know.
Rajesh Vashist: Okay, just making sure. Thank you. Thank you. And I'm asking no further questions at this time.
Okay.
Just making sure okay. Thank you.
Yep Yep.
And Im showing no further questions at this time I'd like to hand, the conference back over to management for closing remarks.
Operator: I'd like to hand the conference back over to management for closing remarks. Well, thank you all so much for joining us. And thank you for taking the time to listen to all our questions and answers. And I welcome Beth on her first call as item CFO. I am very delighted to have her here. Thank you. Thanks, Adarsh. This concludes today's conference call. Thank you for your participation. You may now disconnect. Everyone have a wonderful day.
Well. Thank you all so much for joining us.
And.
For taking the time to listen to all our questions and answers and I welcome Beth.
Her first.
Call as <unk> CFO very delighted to have her here. Thank you thanks for that.
This concludes today's conference call. Thank you for your participation you may now disconnect everyone have a wonderful day.
Yeah.
Okay.
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