SiTime Corporation

Good afternoon, and welcome to Sci Time's fourth quarter 2023 financial results conference call. At this time, all participants are in a listen-only mode. 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 13, 2024. I would now like to turn the call over to Brett Perry of Shelton Group Investor Relations. Brett, please go ahead.

Thank you, Norma. Good afternoon and welcome to CITIME's fourth quarter 2023 financial results conference call. Joining us on the call today from CITIME are Rajesh Bishist, 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 market, and other areas of discussions. 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 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. Please refer to the company's press release issued today for a detailed reconciliation between GAAP and non-GAAP financial results. With that, it's now my pleasure to turn the call over to Sidetime's CEO. Rajesh, please go ahead.

Thanks, Brett. Good afternoon. I'd like to welcome you as well as existing investors to SciTime's Q4 2023 earnings call. For those of you that are not as familiar with SciTime, we are the leader in a dynamic new semiconductor category called precision timing. In electronics, timing is ubiquitous and ensures reliable functioning of the system. SciTime created precision timing to serve the needs of applications like automated driving, data center, 5G, and AI. We are early in our growth 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%. Non-GAAP EPS was $0.24 per share versus $0.06 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 differing paths. The first half of the year saw declining revenue because of over-ordering at our customers, leading to a buildup 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 Sitem's business based on SAM or served market, ASP or average selling price, design wins and single sourcing has only become greater and we are better positioned than ever to accelerate the growth. We continue to expand our SAM through new differentiated products that solve our customers' toughest timing problems. Our ASPs continue to remain strong Design wins continue to grow and a large majority of our business remains single sourced. We finished 2023 strong and rounded out our timing story with the acquisition in December of Aura Semiconductor's clocking products. This acquisition was a key milestone in achieving Sitem'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 two billion, and the Aura transaction expands the SAM further. In the last quarter, we sampled these clocking products successfully, and the initial customer responses validate our strategy to offer complete precision timing solutions. 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 SciTime's growing role in AI. The 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. 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. Our precision timing products are in most of the AI servers shipped to date, 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 was up 64% from Q3 to Q4 2023. We expect this business to grow by 50% in 2024. In conclusion, we're pleased with our current opportunities in the AI 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 OCXO, and we're seeing excellent design interaction at customers. This new product delivers superior operations for radio, data link, navigation, and guidance systems in military environments. 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 quartz oscillators that are typically multi-sourced, we continue to be differentiated as evidenced by 85% of our Q4 revenue was single-sourced, which is another indication of the value of SciTime. 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.