Q3 2024 Earnings Summary
- SiTime's Communications, Enterprise, and Data Center (CED) segment revenue grew over 200% year-over-year in Q3 and is expected to continue leading growth, potentially growing over 30% in 2025, driven by strong demand in AI data centers and networking infrastructure.
- SiTime has a low penetration in its $3 billion served market with current revenue around $200 million, indicating significant room for growth as they expand into new applications and increase share in the precision timing market.
- SiTime sees significant growth opportunities in the automotive segment, especially in electric vehicles and autonomous driving applications, with a served market of $400 million to $500 million, and adoption of their FailSafe technology increasing safety in vehicles.
- SiTime's growth is heavily reliant on the Communications, Enterprise, and Data Center (CED) market, particularly in AI infrastructure, which is challenging to forecast due to complex system configurations. Rajesh Vashist stated, "The tricky part is forecasting what -- how they're configured." This dependence on a single segment with uncertain forecasting may pose risks to sustained growth.
- The company's penetration into the clocking market is progressing slowly, with revenue from clocking products remaining relatively small this year and next. Rajesh mentioned that design wins take 9-12 months and another similar period to reach volume production, so "our revenue over the coming years -- coming few years, not a long time, we expect to be from clocking to reach about $100 million," but "the revenue from clocking is still relatively small this year and, in fact, next year as well." This delay may postpone anticipated revenue growth from this segment.
- SiTime has not made significant inroads into major hyperscalers, which could limit growth opportunities in the AI and data center markets. Rajesh admitted, "we have not made as many inroads into the hyperscalers. We have in some, but not in all." Since hyperscalers are significant players in the AI infrastructure space, limited penetration may affect future revenue growth.
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CED Growth Outlook
Q: What is the expected growth rate for the CED segment in 2025?
A: SiTime expects the Communications, Enterprise, and Data Center (CED) segment to continue leading growth in 2025, likely exceeding the company's overall target of approximately 30% revenue growth. This strong performance is due to the diversity of revenue streams, with CED growing faster than the corporate average. -
Gross Margin Trajectory
Q: When will gross margins return to 60% or higher?
A: SiTime anticipates gross margins will return to north of 60% by the second half of 2025 as new products ramp up. Despite a typical seasonal revenue decline of about 20% from Q4 to Q1, the company remains on track with its long-term gross margin goals. -
Operating Leverage and OpEx Management
Q: How will OpEx grow relative to revenue, and what operating leverage is expected?
A: SiTime expects revenue to grow much faster than OpEx, creating significant operating leverage in the model. While strategic investments will continue in R&D and go-to-market initiatives, the company anticipates continued strong flow-through of gross profit to the bottom line, demonstrated by a 75% flow-through in the recent quarter. -
Automotive Market Opportunity
Q: How does SiTime view its growth potential in the automotive market?
A: SiTime's Serviceable Available Market (SAM) in automotive has increased to about $400 million to $500 million, primarily driven by automated driving technologies in electric vehicles. The company sees significant opportunities in China and the U.S., supplying components for ADAS systems, sensors, radar, LiDAR, GPS, infotainment, and Ethernet cabling. -
Clock Market Penetration
Q: What is the timeline and expected benefit from penetrating the clock market?
A: With the Aura acquisition and new products like the Chorus, SiTime expects its clocking revenue to reach about $100 million in the coming few years. The pace is determined by design wins, which typically take around 9 to 12 months, followed by about two years to reach volume production. -
Content Growth in Data Centers
Q: How is SiTime's content per data center rack evolving?
A: SiTime's content per fully populated data center rack has increased to the high hundreds of dollars, up from under $100 a couple of years ago. This growth is across GPU trays, NIC cards, storage compute, switches, and top-of-the-rack switches, contributing to a 200% quarter-over-quarter growth in the segment. -
Precision Timing Market vs. Quartz
Q: What is SiTime's penetration rate in the precision timing market compared to quartz?
A: SiTime addresses a $3 billion SAM in precision timing, with current revenue around $200 million, indicating significant room for growth. The company focuses on oscillators and clocks across 300 applications in data centers, consumer mobile IoT, automotive, aerospace, industrial, and medical markets. -
Segment Guidance for Q4
Q: What is the revenue outlook for segments other than CED in Q4?
A: In addition to CED leading growth, SiTime expects the consumer IoT and mobile segment to show good growth due to the holiday season, and the automotive, industrial, and aerospace segments to continue their strong performance. -
OpEx Expectations
Q: Should we expect a greater increase in OpEx given new opportunities?
A: For Q4, SiTime expects OpEx to be around $31 million to $31.5 million, with annualized OpEx for 2025 estimated at $124 million to $125 million. The company plans to invest strategically in areas with good ROI but maintains that revenue will grow much faster than OpEx.