SiTime Corporation

Good afternoon, and welcome to SciTime's third 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, November 1st, 2023. I would now like to turn the call over to Brett Perry with Shelton Group Investor Relations. Brett, please go ahead.

Thank you. Good afternoon and welcome to CITIME's third quarter 2023 financial results conference call. Joining us on today's call from CITIME are Rajesh Vashist, Chief Executive Officer, and Art Chadwick, 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 positions, 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 forward-looking statements. The company undertakes no obligation to publicly update forward-looking statements for any reason at the date of this call to conform statements to actual results or to changes in 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'll refer to certain non-GAAP financial measures, which are considered to be an important measure of company performance. These non-GAAP financial measures are provided in addition to and not as a substitute for or 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 between GAAP and non-GAAP financials results. With that, it's now my pleasure to turn the call over to Sitem's CEO. Rajesh, please go ahead.

Thank you. Good afternoon. I'd like to welcome you as well as existing investors to Sitem's Q3 2023 earnings call. For those of you that are not as familiar with Sitem, we are the leader in a dynamic new semiconductor category called precision timing. In electronics, timing is ubiquitous, and ensures reliable functioning. SciTime created 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. Q3 2023 was in line with our guidance. Revenue for the quarter was 35.5 million. Non-GAAP gross margins were 58.2%. Non-GAAP EPS was 0.06 per share versus a loss of 21 cents in Q2 2023. As we forecasted, we continued to see a reduction of inventory in Q3 and an uptick in end demand, particularly in the mobile IoT consumer segment. We expect these trends to continue in Q4, leading to 15% to 20% sequentially higher revenue over Q3. In addition, the long-term strength of our business continues as we have envisioned. This is through the introduction of new exceptional products leading to SAM expansion, solid ASPs, increased design wins, and continued strength in our single-source business. In the second half of 23, all four factors continue to remain on track, and I will touch on these now in more detail. We continue to expand our SAM with high-value products like Epoch for the communications and data center markets. Epoch is a revolutionary product that beats legacy Quartz OCXOs on all key nine specifications that customers need. Our customers are excited about this product and we've built a robust funnel of opportunities. Our ASPs are holding steady from 2022 to 23, despite lower revenues, which is an indication of the value that we bring to our customers. Our funnel continues to show robust growth. Our cumulative design wins to date in 23 have grown 75% over the same period in 2022. And lastly, in the multi-sourced oscillator business, 85% of our Q3 revenue was single-sourced, which is an indication of the unique value of CyTime. Since our IPO in 2019, our singular focus has been on expanding SAM in the oscillator category along with revenue growth. In the past four years, We've grown from 60 to 150 unique oscillators, and the price of the highest value oscillator has grown tenfold. This strategy makes us the leader in the oscillator space and a trusted advisor to customers in our focus markets, unlike our competitors. We're now applying the same focus to the clock category of the timing market with exciting results. We are acquiring clock products from Aura Semiconductors. This leverages our strong balance sheet to accelerate our clocking revenue and roadmap by several years. Additionally, we expect to increase our oscillator revenue due to pull-throughs when they are sold with complementary clocks. This proven portfolio of high-performance products includes all the four major categories of clocks, network synchronizers, jitter cleaners, clock generators, and buffers. In fact, our Cascade clock, which was introduced in 2020, includes some Aura clock technology, and we already have 150 designs at 100 customers. With this acquisition, SciTime immediately adds 20 best-in-clock class clocks now and another 20 by the end of 2024. Additionally, by combining our MEMS and oscillators, With these clocks, we believe that a whole new category of precision timing products will be created for our core markets of comms, data center, and AI. This continuous high-times trajectory of building unique timing products that brings us closer to the customer and enhances our trusted advisor status at the top electronics companies. I'm deeply satisfied and convinced that this acquisition significantly advances our vision. I'd also like to give an update on changes to our management team. After four years at Sitem, Art Chadwick, our CFO, has decided to retire. Art's guidance has played a strong role in Sitem's achievements. He's been a tremendous partner and a key strategic advisor to Sitem's investors and our business partners. We thank Art wholeheartedly for his contributions and impact on our business. I'm very excited to appoint a new member to Sitem's executive team. Beth Howe is joining Sitem as our CFO on November 8th. She comes to Sitem with proven financial leadership and deep experience driving performance in scaled multinational organizations. Her wealth of experience will be invaluable as we continue to build market momentum and drive Sitem's future growth and success. In conclusion, these are exciting changes to the company that advance our vision and take us to further success. Thank you.