Q4 2024 SiTime Corp Earnings Call
and many more. Thank you. Thank you.
Good afternoon and welcome to CTIME's fourth quarter, 2024 Financial Results Conference Call.
At this time, all participants are in a listen-only mode. At the conclusion of today's conference call, instructions will be given for the question and answer session.
As a reminder, this conference call is being recorded February 5th, 2025. I would now like to turn the call over to Brett Perry of Shelton Group Investor Relations. Brett, please go ahead.
Brett Perry: Thank you, Lisa. Good afternoon and welcome to SITEME's fourth quarter 2024 financial results conference call. Joining us on today's call from SITEME are Rajesh Vashist, Chief Executive Officer, and Beth Howe, Chief Financial Officer.
Brett Perry: 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 positions, strategy and plans, future operations, the timing market, and other areas of discussion.
Brett Perry: 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 that differ materially from those contained in any forward-looking statements.
Brett Perry: 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 the forward-looking statements.
Brett Perry: The company undertakes no obligation to publicly update forward-looking statements for any reason after the date of this conference call to conform statements to actual results or to changes in the company's expectations.
Brett Perry: 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 26, 2024, as well as the company's subsequent filings with the Securities and Exchange Commission.
prepared in accordance with U.S. GAAP.
Brett Perry: The gap to non-gap reconciliation includes stock-based compensation expense, amortization of acquired intangibles, and acquisition-related expenses, which include transaction and certain other cash costs associated with business acquisition, as well as changes in the estimated fair value of contingent consideration and earn-out liabilities.
Brett Perry: Please refer to the company's press release issued earlier today for a detailed reconciliation between GAAP and non-GAAP results. With that, it's now my pleasure to turn the call over to CyTime's CEO. Rajesh, please go ahead.
Rajesh Vashist: Thanks Brett. Good afternoon. I'd like to welcome you as well as existing investors to CyTEM's fourth quarter 2024 earnings call.
Speaker Change: SciTime is the leader in a dynamic new semiconductor category that we call precision timing, which is the heartbeat of modern electronics.
Rajesh Vashist: Whether it's in AI data centers, networking infrastructure, automated vehicles, personal mobility or IoT, SciTimes' precision timing delivers better performance and reliability.
Rajesh Vashist: Sci-Time's precision timing products use semiconductor technology to reimagine time and transform the $10 billion timing market.
Revenue for Q4 2024 grew 61% year-over-year with strong profitability.
Rajesh Vashist: For all of 2024, we delivered 41% growth, which is well above our target. Our strong fourth quarter results demonstrate the diversity of site times across customer segments and geographies.
Rajesh Vashist: Each of our customer segments and regions delivered double-digit percentage growth with Comms Enterprise Data Center, what we call CED, growing significantly.
Rajesh Vashist: We exited the quarter with strong bookings for 2025, giving us a bright outlook for the year.
Rajesh Vashist: Looking back, FY 2024 was a year of recovery and growth. As forecasted in the previous year, 2023, we started growing sequentially in Q2 2024.
Rajesh Vashist: Every customer segment delivered double-digit percentage year-over-year growth in Q2, Q3, and Q4 of 2024, while CED delivered triple-digit growth.
Rajesh Vashist: We believe that this strength in all of our customer segments is a big positive. Our business model is structured to deliver profitable growth while serving different customer segments with different growth rates at different times.
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Rajesh Vashist: Product innovation plays a key role in fulfilling our strategy of producing high differentiation, high value, timing products.
Rajesh Vashist: Since Q2 2023, we have introduced 10 new platforms that deliver 40 products with ASPs or average selling price ranging from $1 to over $200. These will be critical for growth and revenue and gross margin for the next several years.
Rajesh Vashist: As electronic devices incorporate intelligent features, they will need faster processing, connectivity, reliability, and more.
and Cy Tham is the leader in delivering these benefits.
Speaker Change: Our comms enterprise data center business demonstrates the value of our portfolio. We expect CED to continue to lead our growth in 2025 as newer generations of servers in AI and networking equipment are rolled out.
Speaker Change: Turning to recent news in AI, we forecast that the need for higher bandwidth and lower latency will continue to increase. This is true regardless of traditional or low-cost AI models and regardless of general-purpose or reasoning LLM models.
Speaker Change: Applications such as active cables, AECs, GPU switches, smart NIC cards are solving bandwidth and utilization problems through architectural innovations as well as moving to higher interconnect speeds.
Speaker Change: These trends are driving the demand for more precision timing with higher dollar content per application.
Speaker Change: For example, our oscillators have significant market share in 800G optical modules, and we have a compelling roadmap for future generations of 1.6 terabit and 3.2 terabit modules.
in Switches and NICs or NIC Cards.
Speaker Change: SciTimes recently introduced 5.9.7.7 SuperTCXO solves GPU utilization and reliability problems by delivering up to 3x better synchronization, 4x smaller size, and 20x better reliability.
Speaker Change: But it's not all about data centers in our CED market. It's also about the breadth of other applications.
Speaker Change: We have seen increasing demand in communications where our EPIC product, our OCXO, solves timing problems in 5G base stations.
Speaker Change: We continue to expect success in this sub-segment starting in 2026.
Now, let's talk about growth opportunities for CyTime beyond CD.
Speaker Change: In the broader industrial market, new use cases and the adoption of new technologies is driving the need for more precision timing with higher dollar content.
Speaker Change: For example, autonomous technology that uses our timing products is being adopted in mining and construction equipment, as well as precision agriculture. This is a $50 million market for CyTime, and we expect to get the majority share because of a greater resilience.
Speaker Change: Similarly, the need for more precise and robust positioning is driving adoption of our products in drones, handheld military radios, and assured PNT or precision navigation and timing systems.
Speaker Change: This is the $25 million market for CyTime, and we expect, again, to get a majority share because of a higher performance, smaller size, and lower power.
Speaker Change: To summarize, we expect our growth to continue in 2025. The breadth and diversity of our products, applications, and customers is delivering the growth that we have worked for.
Speaker Change: I'm confident of our success now and in the future, and now I'll turn the call over to Beth, our CFO, to discuss our financial results in more detail.
Thanks, Rajesh, and good afternoon, everyone.
Beth Howe: Today, I'll discuss our fourth quarter and full year 2024 results, and then I'll provide our outlook for the first quarter of 2025.
Speaker Change: As a reminder, I'll focus my discussion on non-GAAP financial results, which are reconciled to our GAAP financials in our press release.
Speaker Change: We are pleased with our performance as we continue to execute our financial model. We delivered remarkable results with strong revenue growth and even greater profit expansion, reflecting the scalability of the business.
Speaker Change: Importantly, this performance was driven by broad-based strength across our customer segments. Our performance this quarter demonstrates our ability to successfully invest in our business while delivering strong financial results.
Speaker Change: For the full year, we delivered revenue of $202.7 million, up 41% from the prior year. Non-GAAP gross margins were 58.2%, and non-GAAP operating expenses were $117.5 million.
Speaker Change: For the fiscal year, we generated non-GAAP net income of $22.2 million, non-GAAP earnings per share of $0.93, and cash flow from operations of $23.3 million.
Speaker Change: Looking at the details of the December quarter, Q4 was a strong finish to the year with revenue increasing 61% year-on-year and 18% sequentially to $68.1 million.
Speaker Change: Revenue by customer segment was sales into communications, enterprise, and data center market of $24.8 million or 37% of sales up 156% year-on-year.
Speaker Change: Sales into the automotive, industrial, and aerospace market were $20.5 million, or 30% of sales, increasing 32% year on year.
Speaker Change: Sales into the mobile, IoT, and consumer market were $22.8 million, or 33% of sales, up 33% year-on-year, with sales to our largest end customer totaling $16.4 million, or 24% of sales.
Speaker Change: Non-GAAP gross margins were 58.8%, up 70 basis points sequentially, and a bit better than expected due to favorable product mix.
Speaker Change: Total non-GAAP operating expenses for the quarter were $32.5 million, with R&D expense of $19.4 million and SG&A expense of $13.1 million.
Speaker Change: As expected, the increase in R&D spend was due to investments in new products that we are bringing to market.
Speaker Change: Fourth quarter non-GAAP operating income was $7.6 million, an improvement of $3.6 million sequentially. Interest and other income was $4.5 million.
Speaker Change: Fourth quarter, non-GAAP net income was $11.8 million, or $0.48 per share, compared with $0.40 per share in Q3.
Speaker Change: Turning to the balance sheet, accounts receivable were $38.1 million with DSOs of 50 days, up three days from Q3 due to revenue linearity.
Speaker Change: Inventory at the end of the quarter was $76.7 million compared with $71.9 million in Q3.
Speaker Change: During the quarter, we generated $13.6 million in cash flow from operations, invested $16 million in capital purchases, and paid $7 million to Aura Semiconductor.
Speaker Change: At the end of the fourth quarter, we had $419 million in cash, cash equivalents, and short-term investments.
Speaker Change: Now I'd like to provide our outlook for the March quarter.
Speaker Change: We expect typical seasonality in Q1 with revenue of $53 to $55 million, an increase of 64% year-over-year at the midpoint, and gross margins of approximately 57%.
Speaker Change: We expect operating expenses to be roughly flat sequentially, even as we absorb the higher beginning-of-the-year payroll taxes. And we expect interest income of roughly $4 to $4.5 million.
Speaker Change: As a result, we expect Q1 non-GAAP EPS to be in the range of $0.09 to $0.13 per share.
Speaker Change: In closing, we are pleased with our strong results and we believe we are well positioned for growth in 2025. Our product portfolio continues to expand with differentiated products that address large and growing markets and our customers are clearly recognizing our value proposition.
Speaker Change: All in all, we are executing our strategy and our strategy is working.
Speaker Change: With that, I'd like to hand the call back to the operator for questions and answers.
Speaker Change: Thank you. As a reminder, if you would like to ask a question, please press star 1-1 on your telephone.
Speaker Change: You will then hear an automated message advising your hand is raised.
To withdraw your question, please press star 1 again.
Speaker Change: We also ask that you wait for your name and contact information before you proceed with your question. One moment while we compile the Q&A roster.
Speaker Change: Our first question today will be coming from the line of Tori Salzberg of Stiefel. Your line is open.
Speaker Change: Yes, thank you and congratulations on the strong results. So Rajesh, you talked about strong bookings momentum going into 2025.
Speaker Change: If you look at your three segments, could you just give us a little bit of a sense for, you know, where those bookings are coming? And then, you know, as we think about growth in 2025, you know, where would the relative strength come from, you know, from the three segments?
Right. Thanks.
It's no surprise that most of the growth in 2025
will also come.
Speaker Change: from the CED portion of the market, the Communications, Enterprise, and Data Center portion of the market. I think we'll see growth in consumer mobile IoT.
And we'll see growth in industrial, automotive, and military aerospace.
Speaker Change: perhaps not to the same extent for these two segments that we see for the first one that I mentioned. So we still expect to be on that one for a while.
Speaker Change: Great, and if I can sort of zoom in to the CED segment, you know, you've talked about
Speaker Change: selling into four different applications for an AI-based server. And I'm just wondering, if we look at calendar 25 again, whether it's switches or NIC cards or AECs, where do you see the biggest strength within those applications in 2025?
In general, we sell more units into AECs, SMIC parts.
Speaker Change: smaller units into GPUs and and some of these other ones.
Speaker Change: Also, the more quantity, more units is also in the optical modules, as we have said before. The pricing for the products in the GPU is probably higher, but the volumes are not as high. So I think...
Speaker Change: It just depends on which one does better, but we expect all of these segments to grow.
Speaker Change: and many more. Thank you. Thank you. Thank you. Thank you.
Thank you. One moment for the next question.
Speaker Change: And our next question will be coming from the line of Quinn Bolton of Needham & Company.
Quinn Bolton: Hey guys, let me offer my congratulations as well. I guess maybe just big picture Rajesh and Beth, you've talked about a target of 25 to 30% in 25, 26.
Quinn Bolton: Obviously, very solid foundation in 24, but are you still feeling pretty good about your ability to hit that kind of longer-term growth rate both this year and next?
Speaker Change: Yeah, I think that's a good target for us, Quinn. I think that we see that kind of growth coming from the breadth
of the market that we address.
Speaker Change: and the broad level of activity in these markets with our latest products. So yeah, I would agree that we're probably good for that as a target right now.
Quinn Bolton: Perfect. And then, I guess, Beth, on the gross margin, the step down to 57%, probably a little bit lower than at least I had modeled. I'm wondering if you could just sort of walk us through some of the puts and takes. I know lower revenue probably means absorption is an issue, but you guys spent, I think you said $16 million in CapEx.
Speaker Change: In the quarter, I wonder if there's also some additional depreciation or costs for new products that, you know, you guys may be absorbing in the near term before those have sort of fully ramped. And so how much of it is just
Speaker Change: Revenue stepping down, how much of it is, you know, perhaps the ramp in new products that aren't yet at mature yields or, you know, sort of fully ramped up on the supply chain?
Speaker Change: The slides praise be for the Vashists. Thank you Richard. Speaker 2 We had a śś 6‑day window from April to November on another case.
Speaker Change: If I could just take a quick follow-up, you've talked about hoping to get back to a 60%.
Speaker Change: Gross Margin. Obviously, maybe starting a little bit lower because of the absorption issue in March. Do you think you can get to 60% sometime in the back half of 2025, or should we be thinking 60% might now be pushed out to calendar 26?
Speaker Change: We're still targeting that as something we want and we can address.
Great, okay, I'll go back in queue. Thank you.
Thank you. I appreciate it.
Thank you. One moment for the next question.
Speaker Change: And the next question will be coming from the line of Sujit Dasilva of Roth Capital. Your line is open.
Sujit Dasilva: Hi Rajesh, hi Beth. Congrats on the progress here. Just a quick follow-up on Tori's question about bookings. Are you seeing the improvement? Is that a customer preference or some of your newer products or have the lead times moved at all or customers just acknowledging long lead times? Any color on why the bookings are improving would be helpful.
Sujit Dasilva: Yeah, I think bookings are just strong on the back of demand. We just see a pretty good demand coming from all sectors.
Sujit Dasilva: Our lead times are pretty solid where they were. We just see a lot of, when we look at the end markets, whether it is the industrial military aerospace automotive or it's the mobile IOT.
Sujit Dasilva: consumer, and of course we've talked about CED, we just see demand coming through. I'm not saying that it's some kind of over-the-top demand, I'm just saying it looks solid.
Okay.
Speaker Change: That's helpful. And then, separately on the timing products, the R acquisition, maybe you can give us an update on where the roadmap product, roadmap and synergies are there and where some of the traction is as you kind of put the products together.
Speaker Change: Yeah, so we had taken that product mostly for the higher end of a market, mostly for the CED market, and some portions of the military aerospace and some portions of the industrial market, and that
That is completely playing out.
Speaker Change: So, Aura has done, of course, a fantastic job, I've said this several times, in delivering the products that they were supposed to deliver, and we are really pleased with the level of support that they have given us.
Speaker Change: and the integrity with which they've been dealing with us. So that's an absolute positive. But the second part is that.
Speaker Change: Those products combined, those clocking products, the jitter attenuators, the buffers, the clock generators, combined with a higher-end oscillator products
Speaker Change: have worked according to plan have been 1 plus 1 equals 3 as we go to some of these customers that I mentioned earlier.
Speaker Change: So it's coming exactly according to plan. As we mentioned, these kinds of products take a longer time to design in, but we're still thinking that in the next few years the revenue from clocking could be approaching a hundred million dollars.
Very helpful, Colin, Rajesh. Thanks.
Thank you.
Thank you. One moment for the next question.
Speaker Change: And the next question will be coming from the line of Chris Casso of Wolf Research. Your line is open.
Chris Casso: Yes, thank you. Good evening. I guess the first question is on OPEX.
Speaker Change: And, you know, as you deliver on, hopefully deliver on, some of the growth that you're expecting.
Chris Casso: you know, this year and next year, you know, what should we expect with regard to OPEX and getting some leverage on that growth? You know, where is your expense level relative to where you need to be to get to the growth that you're targeting?
Chris Casso: So if we look at operating expenses, I think, as we've been saying, I expect that we can grow revenue much faster than OPEX.
Chris Casso: range for Q1, with some puts and takes. For example, in Q1, we've got to absorb the higher payroll taxes that we have at the beginning of the year, so there'll be some offsets in there sequentially. And as we look forward, we're gonna continue to make strategic investments in R&D, in go-to-market, as we continue to grow the revenue. But again, I think you can think about it growing.
Certainly, probably not more than half as fast as revenue.
Speaker Change: That is helpful. If I can ask another question with regard to the auto business.
Speaker Change: You know, there's a trend that's becoming clearer where the center of gravity of auto is kind of moving a bit more to China.
Speaker Change: Certainly, there's some share shift going on. Can you speak to side times?
Speaker Change: Your position in China auto as compared to, you know, Western auto, you know, is the share similar, the opportunity similar, your ability to penetrate those customers similar if, you know, we continue to see this trend?
So, it's always helpful to think of site and customers.
using us in their most innovative products.
So that's kind of the heuristic.
Speaker Change: Sightime's products are more innovative than other timing products, and therefore they get used in our customers' more innovative products.
Speaker Change: In the case of automotive, it turns out that while there are a few innovative American companies, Tesla comes to mind, and some of the others.
Speaker Change: The more automotive innovative companies that have been changing the world of cars is, of course, coming from China.
Speaker Change: United States companies and European companies and for that matter Japanese companies
Speaker Change: start adopting some of the same technologies, we expect to get more and more of that penetration. So at this point, in our automotive business, I'd say about 30 to 40% of our business is coming from China.
Helpful, thank you.
Thank you.
Thank you. One moment, please.
Speaker Change: And we do have a follow-up question coming from the line of Tori Salberg of Stifle. Your line is open.
Speaker Change: Yeah, thank you. The first one is on your largest customer. As we look at 2025, is there something going on there that is...
Speaker Change: unusual whether it's new products from them that you might be in or whether you're expecting any new content growth and any other existing devices just a sort of better read on you know what what could potentially be going on with your largest customer 25
Speaker Change: Yeah, as you know, we haven't seen any press releases out there, just like I guess you haven't seen any press releases.
Speaker Change: So, we get our information the same way on new products from them that the world does. So let's just wait and see what happens with all of that.
Speaker Change: That's fair, Rajesh. And then my other follow-up was on Aura. So you talked about, you know, that $100 million business target, but I noticed you did pay them some money this year.
Speaker Change: Well, you had to pay out this quarter. So I'm just wondering, should we assume that those clocks are now already starting to generate revenue? And I assume that the margin profile for that $100 million would be higher than the corporate average.
Speaker Change: Thanks, Tori. So, yes, we are starting to see some revenue from the ORA products. As we've talked about,
We
Speaker Change: got the assets but have been having to get the design wins. And some have come through maybe a little faster and so are starting to see some revenue in 2024, expect that to continue to build in 25 and beyond. So that's good news in terms of our products and the trajectory for those clocks. And yes, the gross margins are generally accretive to the corporate average. And so as we continue to build that business, it's both good revenue as well as good margin.
Excellent. Thank you so much.
Speaker Change: Thank you, and there are no more questions in the queue. I would like to turn the call back over to management for closed remarks. Please go ahead.
Speaker Change: Thank you very much. We said goodbye to 2024. It was a wonderful year in growth and settling down the company. We look forward to a very good 2025 and hope to see you next year.
across all the earnings quarters. So thank you again.
Speaker Change: Thank you all for participating in today's conference call. You may now disconnect.
Well, there you have it. Not many, not many.