Q1 2024 Earnings Summary
- Strong Revenue Growth Across All Market Segments: SiTime expects revenue to grow sequentially across all three product segments in Q2 2024, with significant growth in the Communications, Enterprise, and Data Center (CED) and Automotive markets. The company reiterates its target growth rate of 25% to 30% for 2024 and expects to achieve 30% growth in 2025.
- Completion of Inventory Correction and Return to Normalized Demand: SiTime reports that customer inventory digestion is largely complete, with most customers returning to normal buying patterns by the end of Q2 2024. This normalization suggests that sales will reflect actual consumption levels, supporting growth in the second half of the year.
- Significant Exposure to AI Infrastructure Growth and Strategic Product Expansion: The company has substantial exposure to the AI infrastructure build-out, which is a key driver of data center growth. SiTime is capitalizing on this opportunity through its products used in optical modules, NIC cards, and switches, among others. Additionally, the Aura Semiconductor acquisition allows SiTime to offer complete timing solutions, integrating both oscillators and clocks, and providing higher gross margins of 65% to 70% in the clocking business. This strategic expansion enhances their competitive position and is expected to contribute to revenue growth starting in late 2024 or early 2025.
- Gross margin improvement in the second half may be limited due to increased revenue from the lower-margin consumer segment, which is expected to be seasonally stronger in Q3 and may mitigate some of the enterprise data center strength.
- Pricing pressure in the automotive segment due to EV market conditions may impact margins, as there is pressure on EV pricing that is rolling down to SiTime, particularly in the automotive market.
- Delay in revenue contribution from the Aura Semiconductor products, with revenue from new clock products expected to be small and beginning possibly by late this year or early next year, indicating potential delays in growth from the acquisition.
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Growth Outlook
Q: Is 30% long-term growth rate reasonable for this year or next?
A: We continue to see between 25% and 30% growth for this year, possibly towards the higher end. For next year 2025, we certainly see 30% in line of sight. -
Inventory Normalization
Q: Is the inventory reduction process almost complete?
A: We've seen significant progress in inventory digestion, and it should be pretty much behind us by the end of this quarter. Many customers are back to normal buying patterns, and we expect the remainder to be resolved this quarter. -
Shift in Revenue Mix
Q: Will consumer remain the largest revenue segment as you grow?
A: While consumer will grow, most new products target industrial, automotive, and CED markets, leading to a shift towards higher-gross-margin, higher-ASP products in these areas. We expect our mix to significantly grow in the CED, industrial, and automotive markets. -
Pricing Pressure in Automotive
Q: Can you expand on pricing pressure in automotive?
A: Overall pricing remains stable, but we're seeing some pricing pressure in automotive due to pressure on EV pricing, which is impacting us marginally. However, our changing mix is helping us work around the pricing pressure. -
Aura Acquisition and New Clock Products
Q: Can you elaborate on the Aura clock business and selling clocks with oscillators?
A: We're focusing on the CED market, selling clocks and oscillators as a bundle to simplify customer design processes. We're launching 40 new clock products by the end of the year and gaining significant traction, especially in the data center and NIC card businesses. The clocking business has high gross margins (65%-70%), with ASPs of $5-$10, while oscillators can be up to $30. -
Second Half Seasonality
Q: Do you expect normal seasonal strength in the second half?
A: We expect a seasonally stronger second half than the first half. Q2 is already stronger than expected, but we still anticipate the second half to outperform the first as customers emerge from the inventory correction.
Research analysts covering SITIME.