Release Date: August 07, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Q2 revenue of $43.9 million exceeded the high end of guidance, showing strong financial performance.
- Each reported end market grew at double-digit rates both sequentially and year over year.
- Bookings for the second half of 2024 are strong, with expectations for sequential growth in Q3 and Q4.
- Revenue from major regions like Greater China, North America, and Europe is expected to grow by double-digit percentages.
- SiTime's strategy of increasing diversity across applications, customers, and products is paying off, leading to accelerated customer acquisition.
Negative Points
- Non-GAAP gross margins were 57.7%, down 20 basis points sequentially due to higher overhead and manufacturing costs.
- Total non-GAAP operating expenses for the quarter were $28.1 million, reflecting higher commissions and strategic hiring.
- Q2 non-GAAP operating loss was $2.8 million, although improved from the prior quarter's loss of $8.3 million.
- Higher costs associated with ramping new products are expected to continue, impacting gross margins in the near term.
- Despite strong revenue growth, the company consumed $0.2 million in cash from operations during the quarter.
Q & A Highlights
SiTime Corp (SITM, Financial) Q2 2024 Earnings Call Highlights
Q: Could you talk about the recovery into the second half and the opportunities you're chasing? Is it just a return to accelerated demand in some end markets now that the inventory correction is behind you?
A: Elizabeth Howe, CFO: It's a bit of both. Inventory is down as expected, and demand is up, particularly in AI, optical markets, interconnects, and NIC Card business. All our segments, including automotive, industrial, aerospace, consumer, IoT, and mobile, are growing, with some growing faster than others.
Q: How should we be thinking about the gross margin long-term, especially with new product integration and launch?
A: Rajesh Vashist, CEO: We still expect gross margins to be above 60% over the longer term. While we see benefits from manufacturing absorption with revenue growth, the ramping of new products into mass production will take a couple of quarters. Over time, as yields improve, we expect margins to increase.
Q: Could you give some comments on what you might expect in the December quarter? Is there any seasonality or lumpiness in AI drivers in the CED segment?
A: Rajesh Vashist, CEO: We still believe in the 30% growth target for the year. We don't expect any lumpiness in the December quarter or through the year. There's a significant demand for our products in data centers, both in the US and China.
Q: How significant are the new products in driving growth, independent of supply disruptions and inventory correction?
A: Rajesh Vashist, CEO: New products are very significant. Products like isolators in optical products, higher-end TCXOs, Super TCXOs, OCXOs, and products from our Aura acquisition are all contributing to numerous design wins and revenue growth.
Q: Can you provide more detail on the impact of new products on gross margins? Are there new package types or changes in pricing?
A: Elizabeth Howe, CFO: It's a mix of new MEMS, CMOS, and packaging. We evaluate the mix of equipment purchases and the cost of bring-up on a product-by-product basis. The ramping of new products into mass production is driving the current gross margin dynamics.
Q: Can you provide more specificity on timing content in high-volume applications like AI servers, switches, and NIC cards?
A: Rajesh Vashist, CEO: Optical products tend to be lower in pricing, closer to $1. Ethernet switches can range from $5 to $25. NIC cards may have a total content of $5 to $10. The breadth of our design wins across various applications is driving our growth.
Q: How does the design-in process work for AI data center business, and what makes SiTime a preferred supplier?
A: Rajesh Vashist, CEO: The design-in process can happen with semiconductor companies or directly with customers. SiTime's value proposition is understood and accepted across the supply chain, focusing on performance, environmental resilience, and supply chain reliability.
Q: Does the Aura acquisition change the payment terms or timing of the acquisition?
A: Rajesh Vashist, CEO: The timing of the payments remains the same. The Aura products, such as network synchronizers, have a long design-in cycle and will ramp up over time. The integration has gone exceptionally well, and the performance of their products is as expected.
Q: What is driving the uptick in the September quarter across different segments?
A: Elizabeth Howe, CFO: We expect all three segments to grow year on year, with the data center fueled by AI being the fastest growing next quarter, as it was this quarter.
Q: Are there any changes in pricing or mix shift to mobile IoT affecting gross margins in the second half of the year?
A: Elizabeth Howe, CFO: There are no significant changes in pricing or mix shift. The current gross margin dynamics are primarily driven by the ramping of new products into mass production and the associated costs.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
