SiTime Corporation

Good afternoon and welcome to Sightime's second quarter 2023 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 today, Wednesday, August 2nd, 2023. I would now like to turn the call over to Brett Perry of Sheldon Group Investor Relations. Brett, please go ahead.

Thank you, Chris. Good afternoon, and welcome to Sidetime's second quarter 2023 financial results conference call. On today's call from Sidetime are Rajesh Vishis, CEO, and Art Chadwick, CFO. 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 market, and other areas of discussion. 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 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 the forward-looking statements. The company undertakes no obligation to publicly update forward-looking statements for any reason after the date of this conference call to conform the statements to actual results or to change 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 will 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. The only difference between reported GAAP and non-GAAP results is stock-based compensation expense. Please refer to the company's press release issued today for a detailed reconciliation of GAAP and non-GAAP financial results. With that, I'd now like to turn the call over to Rajesh. Please go ahead.

Thank you, Bharat. Good afternoon. I'd like to welcome new as well as existing investors to SciTimes Q2 2023 earnings call. Q2 was in line with our guidance. Revenue for the quarter was $27.7 million. non-GAAP gross margins were 58.2% and non-GAAP net loss was 0.22 cents per share. As forecasted, we see a turnaround in our business, so we expect Q3 revenue to be higher than Q2. For those of you that are not familiar with side time, we are the leader in a dynamic new semiconductor category called precision timing. In electronics, Timing is ubiquitous and ensures reliable functioning. SciTime created the category of precision timing to serve the needs of applications like automated driving, data center, 5G, and AI. We're early in our growth as we transform the $10 billion timing market. SciTime has shipped 3 billion precision timing chips to 15,000 customers in 300 applications. In past calls, we noted the negative impact of higher than normal inventories at our customers' contract manufacturers, or CMs, on our revenue. For the past few quarters, these inventories have continued to decline. Though the decline is at a slightly slower rate than previously anticipated, we have factored into this into our guidance for now. So looking towards Q4, we expect the quarter over quarter growth trend over Q3 to continue. Previously, we forecasted that our revenue should accelerate in 2024 and beyond based on four factors. These are SAM expansion from additional products, single source business, design win momentum, and expanding ASPs or average selling prices. The fact that these trends continues into Q2 2023 is a good indicator of the fundamental health of our business, even though Q2 2023 was our lowest revenue quarter in recent history. More on these trends now. First, we continue to grow our SAM from $1 billion in 2020 to $2.5 billion by the end of this year. Our product strategy is consistent. We solve our customers' toughest timing problems by delivering compelling precision timing products, which are defined as products that deliver high performance in tough conditions. Much of the SAM growth is our focus area of enterprise and communications, automotive, and aerospace defense, which gives us a bigger footprint at focused customers. In Q2, we introduced a compelling new product, the SIT162X, that we believe enables greater safety in automotive applications such as ADAS automated driving. As you may know, the incumbent timing technology, Quartz, is provided by around 40 companies worldwide. Customers have a pattern of typically buying from multiple servers as they've been previously been impacted by variable levels of quality, reliability, performance, and delivery in these quartz-based timing products. One can imagine that sole source positions are uncommon in the quartz timing business, and that is in fact the case. In contrast, SciTime is focused on building a timing business that is largely sole source. Because we make timing easy, and our customers value that. A useful metric is that 83% of our Q2 revenue is sole sourced, which is an increase from 79% in Q1 2023. On the third factor, on number of design wins, our momentum continues from previous quarters. In Q2, we set a record for the total number of design wins closed in any quarter which grew by 55% from the same quarter a year ago. In addition, the number of design wins in each of these end markets, communications enterprise, industrial automotive aerospace, and mobile IoT consumer also grew by more than 50% from a year ago. Our ASP depends on our end market mix and product mix. In Q2, 2023, ASP declined from Q1 due to a higher business for mobile IoT consumer and a decline in our comms enterprise revenues. An insight is that despite the normal supply in the market today, our Q2 2023 ASP was higher than Q1 2022, which you may recall was at the height of an industry-wide shortage. We believe that the higher ASP products that we introduced since Q1 2022 and the increase in business from aerospace defense contributed to this. Our strategies of SAM expansion with higher ASP products and focus on end markets where customers recognize a value are playing out well, and we expect our ASPs to remain stable for the rest of the year. SciTime has maintained that ongoing macro trends driving the electronics industry, automated driving, electric vehicles, cloudification, Internet of Things, and AI depend upon precision timing. Most have seen the recent developments on the increasing role of AI. We believe that AI processors from chip companies and the top cloud service providers are prime users of our timing solutions that deliver low jitter and high stability. We've been working with these key players who are leading the charge in AI and expect to benefit from the AI macro trend for many years to come. In conclusion, our SAM and design wins continue to grow. Our sole source business is a strong indicator of a strong connection with customers and the value we deliver to them. As inventory is consumed and demand returns, we expect to be in a great position to take advantage and resume growth. We remain very confident in Sitem's future success. And I'll now turn it over to Art.