SiTime - Earnings Call - Q1 2025

Executive Summary

• SiTime delivered a strong Q1 2025: revenue $60.3M (+83% YoY), non-GAAP gross margin 57.4%, and non-GAAP EPS $0.26; both revenue and EPS exceeded Wall Street consensus ($54.0M revenue and $0.12 EPS), driven by AI data center demand and mobile strength. Revenue Consensus Mean=$54.0M*, Primary EPS Consensus Mean=$0.12* (Values retrieved from S&P Global).
• Segment performance was broad-based: CED $29.3M (+198% YoY), Mobile/IoT/Consumer $16.9M (+64% YoY), Auto/Industrial/Defense $14.1M (+10% YoY); management expects continued strength across segments into Q2.
• Q2 2025 guidance: revenue growth +45% to +50% YoY (midpoint $64.7M), GM approximately flat vs Q1, OpEx $33.0–$33.5M, interest $3.0–$3.4M, non-GAAP EPS $0.25–$0.31; catalysts include ongoing AI infrastructure upgrades (800G shipping, 1.6T design activity, AEC adoption).
• Gross margin trajectory: near-term pressure from consumer mix and product ramps, but target for core business remains ~60% by year-end as costs/yields improve and volumes scale.
• Balance sheet and cash generation solid: cash and short-term investments $398.9M, cash from operations $15.0M, capex $16.4M (capacity for new products); no debt.

What Went Well and What Went Wrong

What Went Well

• CED segment tripled YoY, with consecutive quarterly strength driven by AI infrastructure upgrades, 800G modules shipping and rising 1.6T activity; “We expect the data center business to continue to grow through 2025”.
• Mobile product innovation: Symphonic SiT30100 clock generator launched, integrating MEMS resonator and unlocking a cumulative $2B SAM over five years; enhances GPS accuracy and resilience for 5G/GNSS consumer and industrial use cases.
• Non-GAAP profitability and execution: Q1 non-GAAP operating income $2.1M and non-GAAP EPS $0.26; DSO improved to 42 days, with $15.0M cash from operations, highlighting operating discipline alongside growth.

What Went Wrong

• GAAP loss persisted: GAAP net loss -$23.9M and GAAP diluted EPS -$1.01, reflecting stock-based comp and amortization of intangibles, and elevated OpEx supporting product ramps.
• Non-GAAP gross margin of 57.4% was down sequentially vs Q4’s 58.8%, pressured by consumer mix and early-stage cost/yield dynamics on new products; management reiterated actions to mitigate and reach ~60%.
• Inventory rose to $82.6M and capex remained elevated ($16.4M in Q1) to support capacity for key new products; near-term absorption/dépreciation headwind to margins while ramps proceed.

Transcript

Operator (participant)

Good afternoon and welcome to SiTime's first quarter 2025 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, May 7th, 2025. I would now like to turn the call over to Brett Perry of Shelton Group Investor Relations. Brett, please go ahead.

Brett Perry (Head of Investor Relations)

Thank you, Dee Dee. Good afternoon and welcome to SiTime's first quarter 2025 financial results conference call. Joining us today on the call from SiTime are Rajesh Vashist, 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 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 after 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 14, 2025, as well as the company's subsequent filings with the Securities and Exchange Commission. Also, during the call, we'll refer to 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 nor superior to measures of financial performance prepared in accordance with U.S. GAAP. The GAAP to non-GAAP 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. Please refer to the company's press release issued earlier 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 SiTime CEO Rajesh. Please go ahead.

Rajesh Vashist (CEO)

Thanks, Brett. Good afternoon. I'd like to welcome you, as well as existing investors, to SiTime's first quarter 2025 earnings call. SiTime is the leader in a dynamic new semiconductor category that we call precision timing, which is the heartbeat of modern electronics. Whether it is in AI data centers, networking infrastructure, automated vehicles, personal mobility, or IoT, SiTime's precision timing delivers better performance and reliability. Precision timing uses semiconductor technology to reimagine time and transform the $10 billion timing market. SiTime is uniquely focused on high-value timing markets and applications and serving them with highly differentiated products that deliver exceptional value. With this strategy, we're building a strong business that is diverse across industries, applications, and geographies. This has served us well, and even in this dynamic environment, it has enabled us to continue to grow rapidly. The numbers speak for themselves.

Q1 2025 was a great quarter where we delivered financial results well above our target. Revenue was 83% higher than the year-ago at $60.3 million. Gross margins were 57.4%, and EPS was $0.26 per share. This growth was driven by all of our segments. The Comms Enterprise Data Center, or CED, business tripled year over year, and both the mobile IoT consumer and the auto industrial defense customer segments grew double-digit percentages. Revenue from our largest customer grew over 75%. We expect this strength to continue in Q2. Our CED business has shown significant sequential growth for four consecutive quarters now, driven by the strength of AI. Our OEM and cloud service provider customers continue to reaffirm their growth outlook, and we expect the data center business to continue to grow through 2025.

We know that AI infrastructure needs higher network bandwidth to improve GPU utilization rates, which directly impacts the consumption of SiTime's precision timing products. There are two trends that confirm this infrastructure upgrade. First, optical module and switch bandwidth is doubling, and we're shipping in high volume in 800G today. We're now seeing increased design activity for 1.6T modules, which we expect will become the mainstream in 2026 and 2027. SiTime has had success on 1.6T designs, and we have over 20 opportunities at customers worldwide. As a second trend, active electrical cables, or AEC, continue to replace passive cables within the data center rack with 2-4x higher bandwidth. In both these applications, SiTime continues to be a highly differentiated solution where we deliver significant value in performance and resilient supply.

Additionally, we're also very excited about our clocking business, which is central to the strategy of solving customers' needs across the timing subsystem. We continue to have a sustainable advantage because we uniquely have all the components required to make truly differentiated products. By integrating the oscillator with the clock and software, SiTime has created a new clock category that is a complete system solution, which delivers increased performance and simplified designs for our customers. This strategy has the potential to create the highest clocking revenue in the industry in the coming years across all the customer segments. SiTime has already launched three clocking products with higher ASPs and longer revenue streams, a trend that will continue for products in the future.

Some examples are in CED, our Cascade family offers the benefit of more resilient performance and has been designed into diverse applications from switches and NIC cards, network interface cards in data centers to 5G equipment and fixed wireless access, or FWA. In automotive, our Corus family has over a dozen high-value designs in ADAS, or automated driving applications, where it offers the benefit of integration and higher reliability. For the mobile IoT consumer market, we have recently introduced Symphonic, the industry's first integrated clock generator for 5G millimeter-wave consumer products, as well as asset trackers and GNSS, or GPS, receivers. Symphonic customers get high performance with environmental resilience, small size, system power efficiency, and also find homes in industrial applications. In these dynamic times, our product differentiation is key to continued success.

I'm confident in SiTime's ability to adapt to the rapid changes in the world today while continuing to grow revenue, profitability, and market share. With that, I'll turn the call over to Beth, our CFO, to discuss financial results in more detail.

Beth Howe (CFO)

Thanks, Rajesh. Good afternoon, everyone. Today, I'll discuss first quarter 2025 results, and then I'll provide our outlook for the second quarter of fiscal 2025. As a reminder, I'll focus my discussion on non-GAAP financial results, which are reconciled to GAAP in our press release. Our Q1 results highlight the momentum of our business. First quarter revenue increased 83% year-on-year to $60.3 million, driven by ongoing strength in our data center business, as well as growth in our mobile business. Sales to the communications, enterprise, and data center customer segment were $29.3 million, up 198% year-on-year. Sales into the automotive, industrial, and defense customer segment were $14.1 million, up 10% year on year. Sales into the mobile, IoT, and consumer customer segment were $16.9 million, up 64% year on year, with sales to our largest end customer increasing 76% to $11.1 million.

In terms of a mix of revenue, communications enterprise data center represented 49% of revenue, Automotive, Industrial, and Defense made up 23% of revenue, and the mobile IoT consumer represented 28% of total revenue. Gross margins for the quarter were 57.4%, with gross margin dollars increasing 81% year-on-year. Total non-GAAP operating expenses were $32.5 million, flat sequentially and in line with expectations. For the quarter, R&D expense was $19.3 million, and SG&A expense was $13.2 million. Q1 non-GAAP operating income was $2.1 million, an improvement of $10.3 million, or 16 percentage points versus the same quarter a year ago. Q1 non-GAAP net income was $6.3 million, or $0.26 per share. Turning to the balance sheet, accounts receivable were $28.1 million, with DSO improving to 42 days versus 50 days in Q4.

Inventory ended the quarter at $82.6 million, compared with $76.7 million in Q4 as we ramp production for key new products and continue to maintain strong wafer balances for assurance of supply. During the quarter, we generated $15 million in cash from operations, up $1.5 million sequentially and up $13.3 million year over year. CapEx was $16.4 million in the quarter, driven largely by the purchases of production equipment, and we paid $5 million to ORI Semiconductor. Our balance sheet remained strong, and we ended the quarter with $398.9 million in cash and short-term investments and no debt. Now I'd like to provide our outlook for the June quarter. For Q2, we expect revenue growth of 45%-50% year-on-year, which is $64.7 million at the midpoint. Gross margins to be approximately flat compared with Q1.

Operating expenses to be in the range of $33-$33.5 million, and interest income of approximately $3-$3.4 million. As a result, we expect second quarter non-GAAP EPS to be in the range of $0.25-$0.31 per share. With that, I'll open it up for questions. Thank you. To ask a question, please press star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again. Please stand by while we compile the Q&A roster. Our first question comes from Quinn Bolton of Needham & Company. Your line is open.

Quinn Bolton (Analyst)

Hey, guys. Congratulations on the nice results and outlook. I guess, first question, Rajesh, you mentioned a significant design win back in March at the Morgan Stanley Investor Conference with your largest customer. That customer is up, I think, 76% year on year. Can you give us a sense? Do you expect that kind of growth to continue throughout the year? Just what should we be expecting as that customer launches phones with the internal modem where you have two timing sockets paired with that internal modem?

Rajesh Vashist (CEO)

Yeah, I think we should expect to have continued growth. I do not know if it will be in the same percentage. Clearly, there is strength. You mentioned those two design wins. I think those design wins are in good shape. What remains to be seen, however, as always, is, first of all, as you know, it is a consumer product, so it typically cycles up and down a little bit more than others. The second is it is the first one of its kind in the phone paired to their own certain chips that they have. I think we have got to see where that goes. Finally, we do live in a very dynamic environment where we do not know what the impact of tariffs or not tariffs or lesser tariffs or more tariffs are going to have. All that being said, we continue to expect growth. Yeah.

Quinn Bolton (Analyst)

Maybe a follow-up for Beth. Beth, I think as revenue grows into the second half of the year, I think you were expecting margin expansion. Can you give us a sense? Do you still expect margins to expand in the second half? I guess as part of that, to the extent your largest customer, which is in the consumer space, continues to grow at a pretty healthy clip, would that potentially represent some drag on margins that we should be thinking about? Thank you.

Beth Howe (CFO)

Thanks for the question. As we look at our gross margins, you indicated the two factors. We do remain committed to the gross margin target for our core business of 60% that we have been working towards. As we have discussed, we are making improvements in our costs and yields for our new products as they ramp. In addition, as you mentioned, we do have this new consumer business, which does come at lower gross margins. While it does contribute incremental revenue and gross profit dollars and also provide significant value to us over the long term, it does put some pressure on our gross margin rate. Overall, we are working to offset and mitigate that pressure to deliver the 60% by the end of the year. That is what we are working towards.

Quinn Bolton (Analyst)

Sixty percent still the target?

Beth Howe (CFO)

That's still our target. Clearly, we're working on it. We've got a little more work to do now with the new products.

Quinn Bolton (Analyst)

Understood. Thank you very much. I'll get back in the queue.

Beth Howe (CFO)

Thank you. Our next question comes from Torrey Fahnberg of Stifel. Your line is open.

Tore Svanberg (Analyst)

Yes, thank you. Congratulations on the strong results. I know there's a lot of focus on your largest customer, but I mean, the data center segment continues to be very robust, Rajesh. I was just hoping you could elaborate a little bit more on your growth profile there. You definitely talked about 800G upgrade cycle moving to 1.6T. You talked about the AECs, but my understanding is that you participate in a lot of different parts of the AI data center. How should we think about the continuous momentum here throughout the year?

Rajesh Vashist (CEO)

The continuous momentum is strong. You rightly point out that while I have given examples in the optical module and the connectivity, there are other opportunities in switches, in server racks, in the GPU, the CPU, accelerator cards, and so on. We are, in fact, in every one of those. We are also looking at new opportunities that are coming directly from GPUs that are being made by non-semiconductor companies. We see that as a tremendous opportunity as well. We stand pretty strongly behind continued growth, frankly, for years to come in the overall AI data center market because we see no slowdown in it.

Tore Svanberg (Analyst)

Very good. Thank you for that. As my follow-up, could you talk a little bit about which segments you expect to drive the sequential growth into the June quarter? Have you seen any sort of pulling activity at all as related to potential tariffs?

Rajesh Vashist (CEO)

Yeah. It's always hard to tell whether there is pulling activity, but at this point, I would say it is minimal, if any. We haven't detected any pulling activity. Our bookings natively just continue to be very strong, and customers are looking well beyond the 90-day tariff mark for Q3, Q4, and onwards. Our outlook continues very bright and very solid. The growth will, as we said, just like we look back on Q1 and see that the growth came from every one of those, every one of those, whether it's CED or data center, I'm sorry, or Mobile IoT consumer or auto industrial defense, it will continue to come from all aspects. Might be a little bit lighter from the auto side, but I think it's quite a uniform growth. The reason for that, as always, is because of our differentiated products.

Our premium products tend to be premium, and they get sold in our customers' premium products, which are generally less impacted by weaknesses of any kind in the market. That is why we think we're in a strong position.

Tore Svanberg (Analyst)

Great. Congratulations again.

Rajesh Vashist (CEO)

Thank you.

Beth Howe (CFO)

Thank you. As a reminder, if you have a question, please press star 11. Our next question comes from Chris Caso of Wolfe Research. Your line is open.

Chris Caso (Analyst)

Yes, thank you. Good afternoon. I guess the first question is your outlook for the full year, and you had talked about, I think, 25%-30% growth for the year. Given the differing landscape, both take into account perhaps some of the new design wins you spoke about, but also some of the uncertainty in the market. Is that still a valid goal for the year, or is that too low of a goal, too high of a goal? What do you expect to be the drivers for the year? How has that changed as compared to what you thought a quarter ago?

Rajesh Vashist (CEO)

Yeah. We are, of course, monitoring like everybody else to the extent we can, the dynamic environment and what we see going on in the world at large. Having said that, we would still reaffirm our growth prospects at that number we talked about, 25%-30% for the base business and additional growth based on the new design win that we have had. We again go back to the differentiation of our products and the breadth of our products. We go back to the fact that we are now in the system timing selling business with the clocking products, as I indicated in my prepared remarks. Finally, to the fact that our design win funnel continues very strongly, which matches the product funnel. As far as where they come from, I'll reiterate the same thing I said earlier, which is it'll happen in all segments.

It's highly likely that CED, led by data center, will grow significantly strongly, just as it did the last quarter, but all the others will also join in. All boats will be going up, perhaps one or two higher than others.

Chris Caso (Analyst)

Got it. A question for Beth, just to follow up with some of your comments on gross margins. What are the levers that you can pull to get to that 60% target at the end of the year while factoring in some of the lower margin revenue? Is that a function of cost reduction on some of the products, or is that a function of mix with regard to the rest of the business?

Beth Howe (CFO)

Sure, Chris. As we look at it, it's a function of a couple of things. One is that we are making progress in terms of the new product introductions and the ramp there, improving the cost of those new products and improving the yields as those ramp. That's the work we've been doing, we've been talking about. We also expect revenue growth as we go through the year. That's expect to see some operating leverage or manufacturing kind of leverage as we have more revenue. As I said earlier, the new business does provide incremental gross profit dollars, but is a bit of a pressure on the rate. We'll be looking to take additional actions to improve the cost structure in order to overcome some of those headwinds.

Chris Caso (Analyst)

Got it. If I could ask one more, Rajesh, with regard to the data center business, you mentioned a couple of different trends within that business. Perhaps you could separate out your content going forward and things like 1.6T modules, active cables, and that. How does your content grow as some of these new technologies go in as compared to your penetration, just SiTime getting a bigger market share of some of these markets?

Rajesh Vashist (CEO)

Yeah. I think the dollar content doesn't increase. Let's look at it. Our ASP doesn't increase as going from 800 to 1.6 in any significant way. That's one. That's not happening. Our dollar content remains steady in each of the design wins. The number of design wins increases for sure because the need for precision timing gets continued to be spread out more and more. As an example, it was only a year ago that we started to see our first AEC or active electrical cables being used. Some of the accelerator cards didn't use any of our precision products two years ago, and now some of them are using some of our most valuable, highly differentiated products.

The third way is a greater penetration into customers because while we have done a reasonably good job at penetrating some of our customers in the OEM semiconductor module space, there is still more penetration to be had there. The expand inside after landing strategy. There are new customers, particularly as CSPs, that are still not directly meaningful customers of SiTime. We really have a lot of levers to pull here. There is also the change in architecture that happens in many cases. One of them is, for example, going after a significantly denser architecture with significantly higher use case of SiTime's precision timing products per unit or increasing the density of usage. All in all, we think that this is a big updraft for SiTime for some significant time to come.

Chris Caso (Analyst)

Got it. Thank you.

Rajesh Vashist (CEO)

Yeah.

Beth Howe (CFO)

Thank you. Our next question comes from Suji De Silva of Roth Capital. Your line is open.

Suji DeSilva (Analyst)

Hi, Rajesh. Hi, Beth. Congrats on the progress here. Can you talk about the platforms you called out, naming them, Rajesh, Cascade, Corus, Symphonic, and just how you're trying to portray the product portfolio and roadmap here? I think it's the first time I've heard those called out together, sort of your platform.

Rajesh Vashist (CEO)

Right. Right. Thank you for that. Our Cascade family of products is much more on the CED side. It's being used in communications, in enterprise, in data center. It's our most complex chip in the clocking business. It's probably our first chip that we did in clocking. There are versions of it that are integrated with oscillators. There are versions of it that are not integrated. So there's a whole price performance level of it, and it's in the higher end of the range. The second one is relatively new, Corus family of products, is for some reason—not for some reason, but for a reason of integration and higher reliability—is more attuned for the automotive market and the self-driving market, primarily because of its significantly smaller size and significantly higher performance in terms of jitter and phase noise. The final one is the latest one.

I think we just got the press release out on that a day or two ago, the Symphonic, which is a SiTime-generated—all of these are SiTime-generated, except Cascade, by the way, which comes from the Aura acquisition. The Symphonic product is a multi-output clock generator, more for the 5G millimeter wave, which we think, other than consumer products, is also getting used significantly in industrial applications. That is based on the phase noise, the resilience, the small size, the low power. These are multi-year efforts at cracking the market. The point that I wanted to make was that with the launch of Symphonic in particular, we have increased our target revenue that we expect to get over the coming years.

I've always said about $100 million in a few years from our clocking business, and I can say comfortably that we are highly likely to increase it significantly in the coming years because of the launch of some of these products. Very, very pleased with that and very pleased with the traction that we've been getting.

Suji DeSilva (Analyst)

Okay. Just to clarify the strong growth you're having in data center and optical, should I think of that as being majority Cascade, or is that the oscillator products and shifting to more optical?

Rajesh Vashist (CEO)

All the oscillators. Yeah. All the oscillators, the EPYC product, the Elite RF, the Elite itself, the Elite TCXOs, the clocking products, even some of the buffers from Aura, which are relatively undifferentiated, but higher number in use case. I think we are—this is the CED business is the classic case we've always maintained, is the one which is the highest growth, the greatest value proposition that SiTime can bring, the highest ASPs with the highest volumes that balance, and of course, very sticky or very long-lived business. It is very much a business that we are very focused on.

Suji DeSilva (Analyst)

Okay. Great. Very helpful, Rajesh. Thanks.

Rajesh Vashist (CEO)

Thank you.

Beth Howe (CFO)

Thank you. We have a follow-up from Torrey Fahnberg of Stifel. Your line is open.

Tore Svanberg (Analyst)

Yes. Thank you. Yeah, Rajesh, I know you've got a lot of momentum in the data center segment. I also know you have a lot of design wins in the telecom 5G communications market. Just wondering if that's starting to move, or is that market still quite slow?

Rajesh Vashist (CEO)

Yeah. Thank you for that question, Torrey. Yes, it is starting to move, and it isn't particularly large right now, but we expect to keep on growing in that. There are some initiatives going on in fixed wireless overseas. There are others in the enterprise space that are looking quite good. We think we'll acquire new customers in this. Very enthused about it. I briefly mentioned software, and SiTime has for the last year or so been using the IEEE 1588 or synchronization software to add greater value to our customers. That has allowed us to, frankly, charge more for our oscillator and clocking products because customers need that full solution of oscillator clocks and the synchronized software all together. It's another example of our system cell.

Tore Svanberg (Analyst)

Very good. As my last question, a question for Beth. Beth, the CapEx has been around $15 million-$16 million the last three quarters. I assume that's for maybe a combination of things, but can you give us any sense for how much longer it would be at this more elevated level?

Beth Howe (CFO)

Thanks, Torrey. Yes, we've been investing to build capacity for some of these new products that we've been talking about, the ones we talked about today, for example. I would expect we've got a little more to go in terms of Q2 at these levels. For the full year, probably roughly in line with the total for 2024. I would expect the total CapEx for the year to be kind of mid to high $30 million for the year.

Tore Svanberg (Analyst)

Perfect. Thank you.

Beth Howe (CFO)

Thank you. We have no further questions at this time. I'd like to turn it back to management for closing remarks.

Rajesh Vashist (CEO)

Thank you, Dee Dee. What I wanted to highlight here was that these are tough times somewhat from macro conditions. There are uncertainties in the market. It is highly dynamic. The news continues to change and evolve. At SiTime, we ask ourselves, what is our role in all this? Our role in all of this is to navigate this to the best of our ability. Where we can do a great job is focus and stick to the things that we can control. What do we control? We control the cadence and value of our parts. We are doing that with highly differentiated product. We can control the acquisition of key customers and greater penetration. We continue to do that in many of our new customers. We have acquired new customers, new applications. We are obviously able to control our spending.

As you can see, our spending continues to be flattish as we go. We control increasing our gross margins. We are doing that as well. In general, we are managing our own destiny with the cards that we've been dealt. I think that I feel very confident that by sticking to all of these valuable levers, we can come out on the other end of it very, very strong. Thank you for your attention to this and listening into our quarterly results.

Operator (participant)

This concludes today's conference call. Thank you for participating, and you may now disconnect.