10-Q 1 sitm-20220930.htm 10-Q 10-Q
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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

 

FORM 10-Q

 

(Mark One)

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2022

OR

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number: 001-39135

 

SiTime Corporation

(Exact name of registrant as specified in its charter)

 

 

Delaware

02-0713868

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer
Identification No.)

5451 Patrick Henry Drive

Santa Clara, CA

95054

(Address of principal executive offices)

(Zip Code)

Registrant’s telephone number, including area code: (408) 328-4400

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class

 

Trading Symbol(s)

 

Name of each exchange on which registered

Common Stock, $0.0001 par value per share

 

SITM

 

The Nasdaq Stock Market LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer

 

 

Accelerated filer

 

 

 

 

 

Non-accelerated filer

 

 

Smaller reporting company

 

 

 

 

 

 

 

 

Emerging growth company

 

 

 

 

 

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No

 

As of October 28, 2022, the registrant had 21,439,491 shares of common stock, $0.0001 par value per share, outstanding.

 

 


Table of Contents

 

 

 

Page

 

Risk Factor Summary

1

PART I.

FINANCIAL INFORMATION

3

Item 1.

Financial Statements (Unaudited)

3

 

Condensed Consolidated Balance Sheets

3

 

Condensed Consolidated Statements of Operations and Comprehensive Income (Loss)

4

 

Condensed Consolidated Statements of Stockholders’ Equity

5

 

Condensed Consolidated Statements of Cash Flows

6

 

Notes to Unaudited Condensed Consolidated Financial Statements

7

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

17

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

24

Item 4.

Controls and Procedures

24

PART II.

OTHER INFORMATION

 

Item 1.

Legal Proceedings

25

Item 1A.

Risk Factors

25

Item 5

Other Information

45

Item 6.

Exhibits

46

Signatures

47

 

 

i


 

RISK FACTOR SUMMARY

 

Our business is subject to numerous risks, as more fully described in Part II, Item 1A titled “Risk Factors.” You should read these risks before you invest in our common stock. We may be unable, for many reasons, including those that are beyond our control, to implement or execute our business strategy. In particular, risks associated with our business include, among others:

Global macroeconomic conditions have harmed and may continue to harm our business;
We are subject to the cyclical nature of the semiconductor industry;
The third parties we rely upon for our raw materials, engineered materials, wafer fabrication and supply, assembly, packaging and testing may be unable to secure raw materials, reduce their resources available to us and our immediate suppliers, not meet satisfactory yields or quality, or increase pricing, which could harm our ability to ship our solutions to our customers on time and in the quantity required which could cause an unanticipated decline in our sales and loss of customers;
A portion of our operations is located outside of the United States, which subjects us to additional risks, including increased complexity and costs of managing international operations and geopolitical instability;
We currently depend on one end customer for a large portion of our revenue; the loss of, or a significant reduction in orders from our customers, including this end customer, could significantly reduce our revenue and adversely impact our operating results;
If we are unable to expand or further diversify our customer base, our business, financial condition, and results of operations could suffer;
We generally do not have long-term purchase commitments with our customers, and orders may be cancelled, reduced, or rescheduled with little or no notice, which in turn exposes us to inventory risk and may harm our operating results;
Our revenue and operating results may fluctuate from period to period due to, among other factors, the impact of the COVID-19 pandemic on our business as well as our suppliers and customers, customer demand, product life cycles, fluctuations in inventories held by our distributors or end customers, the gain or loss of significant customers, the availability of capacity in our supply chain, research and development costs, and product warranty claims. This in turn could cause our stock price to decline;
Our success and future revenue depend on our ability to achieve design wins and to convince our current and prospective customers to design our products into their product offerings, as well as our customers’ ability to develop products that achieve market acceptance;
Our target customer and product markets may not grow or develop as we currently expect, and if we fail to penetrate new markets and scale successfully within those markets, our revenue and financial condition would be harmed;
If we are not able to successfully introduce and ship in volume new products in a timely manner, our business and revenue will suffer;
The impact and uncertainty related to the ongoing COVID-19 pandemic could adversely impact our business, results of operations and financial condition, as well as the businesses of our suppliers and customers;
Our gross margins may fluctuate due to a variety of factors, which could negatively impact our results of operations and our financial condition;
Our revenue in recent periods may not be indicative of future performance and our revenue may fluctuate over time;
Our customers require our products and our third-party contractors to undergo a lengthy and expensive qualification process, which does not assure product sales. If we are unsuccessful or delayed in qualifying any of our products with a customer, our business and operating results would suffer;
We provide a lifetime warranty on our products and may be subject to warranty or product liability claims, which could harm our reputation, result in unexpected expenses, and cause us to lose market share;
Defects in our products could harm our relationships with our customers and damage our reputation;
If we fail to compete effectively, we may lose or fail to gain market share, which could negatively impact our operating results and our business;
We may not be able to accurately predict our future capital needs, and we may not be able to obtain additional financing to fund our operations;

 

1


 

We may seek, or be required to seek debt financing in the immediate or near term;
If significant tariffs or other trade restrictions are placed on our products or third-party suppliers, our revenue and results of operations may be materially harmed;
Failure to comply with the laws associated with our activities outside of the United States could subject us to penalties and other adverse consequences;
We are subject to government regulation, including import, export and economic sanctions laws and regulations that may expose us to liability and increase our costs;
New or future changes to U.S. and non-U.S. tax laws, or tax regulatory authorities disagreeing with our positions and conclusions regarding certain tax positions, could materially adversely affect us;
Breaches or other disruptions of our security systems may damage our reputation and adversely affect our business;
We may fail to adequately protect our intellectual property and have received, and may in the future receive, claims of intellectual property infringement, misappropriation, or other claims, which in turn could result in significant expense, result in the loss of significant rights, and harm our relationship with our end customers and distributors;
We may be impacted by risks associated with MegaChips’ ownership of a significant portion of our stock, for instance as long as MegaChips holds a significant amount of our stock, our other shareholders’ ability to influence matters requiring stockholder approval will be limited, and there could be potential conflicts of interest between us and affiliates of MegaChips, which could impact our business and operating results;
Substantial future sales of our common stock could cause the market price of our common stock to decline; and
Anti-takeover provisions in our charter documents and under Delaware law could make an acquisition of us more difficult, limit attempts by our stockholders to replace or remove our current management and limit the market price of our common stock.

 

2


 

PART I—FINANCIAL INFORMATION

 

Item 1. Financial Statements.

SITIME CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except per share amounts)

(Unaudited)

 

 

 

As of

 

 

 

September 30, 2022

 

 

December 31, 2021

 

Assets:

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

Cash and cash equivalents

 

$

41,608

 

 

$

559,461

 

Short-term investments in held-to-maturity securities

 

 

522,178

 

 

 

 

Accounts receivable, net

 

 

44,896

 

 

 

38,376

 

Inventories

 

 

45,385

 

 

 

23,630

 

Prepaid expenses and other current assets

 

 

8,141

 

 

 

4,476

 

Total current assets

 

 

662,208

 

 

 

625,943

 

Property and equipment, net

 

 

56,114

 

 

 

37,902

 

Intangible assets, net

 

 

4,731

 

 

 

5,977

 

Right-of-use assets, net

 

 

11,122

 

 

 

8,194

 

Other assets

 

 

3,879

 

 

 

193

 

Total assets

 

$

738,054

 

 

$

678,209

 

Liabilities and Stockholders' Equity:

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

Accounts payable

 

$

16,552

 

 

$

13,103

 

Accrued expenses and other current liabilities

 

 

18,452

 

 

 

24,282

 

Total current liabilities

 

 

35,004

 

 

 

37,385

 

Lease liabilities

 

 

8,535

 

 

 

6,398

 

Other non-current liabilities

 

 

73

 

 

 

1,929

 

Total liabilities

 

 

43,612

 

 

 

45,712

 

Commitments and contingencies (Note 9)

 

 

 

 

 

 

Stockholders’ equity:

 

 

 

 

 

 

Common stock, $0.0001 par value - 200,000 shares authorized;
   
21,436 and 20,825 shares issued and outstanding at
   September 30, 2022 and December 31, 2021

 

 

2

 

 

 

2

 

Additional paid-in capital

 

 

700,777

 

 

 

663,614

 

Accumulated deficit

 

 

(6,337

)

 

 

(31,119

)

Total stockholders’ equity

 

 

694,442

 

 

 

632,497

 

Total liabilities and stockholders’ equity

 

$

738,054

 

 

$

678,209

 

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

 

 

3


 

SITIME CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME

(In thousands, except per share amounts)

(Unaudited)

 

 

 

Three Months Ended September 30,

 

 

Nine Months Ended September 30,

 

 

 

2022

 

 

2021

 

 

2022

 

 

2021

 

Revenue

 

$

73,095

 

 

$

63,029

 

 

$

222,766

 

 

$

143,067

 

Cost of revenue

 

 

25,799

 

 

 

21,334

 

 

 

77,563

 

 

 

55,727

 

Gross profit

 

 

47,296

 

 

 

41,695

 

 

 

145,203

 

 

 

87,340

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

Research and development

 

 

23,878

 

 

 

13,005

 

 

 

66,490

 

 

 

36,252

 

Selling, general and administrative

 

 

19,886

 

 

 

14,616

 

 

 

56,839

 

 

 

38,425

 

Total operating expenses

 

 

43,764

 

 

 

27,621

 

 

 

123,329

 

 

 

74,677

 

Income from operations

 

 

3,532

 

 

 

14,074

 

 

 

21,874

 

 

 

12,663

 

Interest income

 

 

2,492

 

 

 

 

 

 

3,295

 

 

 

 

Other expense

 

 

(238

)

 

 

(110

)

 

 

(264

)

 

 

(178

)

Income before income taxes

 

 

5,786

 

 

 

13,964

 

 

 

24,905

 

 

 

12,485

 

Income tax expense

 

 

(3

)

 

 

(4

)

 

 

(123

)

 

 

(67

)

Net income

 

$

5,783

 

 

$

13,960

 

 

$

24,782

 

 

$

12,418

 

Net income attributable to common stockholders and
   comprehensive income

 

$

5,783

 

 

$

13,960

 

 

$

24,782

 

 

$

12,418

 

Net income per share attributable to common
   stockholders, basic

 

$

0.27

 

 

$

0.73

 

 

$

1.17

 

 

$

0.67

 

Net income per share attributable to common
   stockholders, diluted

 

$

0.26

 

 

$

0.66

 

 

$

1.09

 

 

$

0.60

 

Weighted-average shares used to compute basic
   net income per share

 

 

21,353

 

 

 

19,149

 

 

 

21,143

 

 

 

18,658

 

Weighted-average shares used to compute diluted
   net income per share

 

 

22,614

 

 

 

21,252

 

 

 

22,688

 

 

 

20,770

 

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

 

4


 

SITIME CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

(In thousands)

(Unaudited)

 

 

 

 

 

 

 

 

 

Additional

 

 

 

 

 

Total

 

 

 

Common Stock

 

 

Paid-in

 

 

Accumulated

 

 

Stockholders'

 

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Deficit

 

 

Equity

 

Balances at June 30, 2022

 

 

21,286

 

 

$

2

 

 

$

692,402

 

 

$

(12,120

)

 

$

680,284

 

Stock-based compensation expense

 

 

 

 

 

 

 

 

16,400

 

 

 

 

 

 

16,400

 

Net income

 

 

 

 

 

 

 

 

 

 

 

5,783

 

 

 

5,783

 

Issuance of common stock in connection with At-The-Market offering net of underwriting discounts and commissions and other offering costs

 

 

25

 

 

 

 

 

 

2,919

 

 

 

 

 

 

2,919

 

Issuance of shares upon vesting of restricted stock units, net of tax withholdings

 

 

125

 

 

 

 

 

 

(10,944

)

 

 

 

 

 

(10,944

)

Balances at September 30, 2022

 

 

21,436

 

 

$

2

 

 

$

700,777

 

 

$

(6,337

)

 

$

694,442

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balances at June 30, 2021

 

 

19,061

 

 

 

2

 

 

 

368,862

 

 

 

(64,938

)

 

 

303,926

 

Stock-based compensation expense

 

 

 

 

 

 

 

 

8,111

 

 

 

 

 

 

8,111

 

Net income

 

 

 

 

 

 

 

 

 

 

 

13,960

 

 

 

13,960

 

Issuance of shares upon vesting of restricted stock units, net of tax withholdings

 

 

193

 

 

 

 

 

 

 

 

 

 

 

 

 

Balances at September 30, 2021

 

 

19,254

 

 

$

2

 

 

$

376,973

 

 

$

(50,978

)

 

$

325,997

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balances at December 31, 2021

 

 

20,825

 

 

$

2

 

 

$

663,614

 

 

$

(31,119

)

 

$

632,497

 

Stock-based compensation expense

 

 

 

 

 

 

 

 

42,051

 

 

 

 

 

 

42,051

 

Net income

 

 

 

 

 

 

 

 

 

 

 

24,782

 

 

 

24,782

 

Issuance of common stock in connection with At-The-Market offering net of underwriting discounts and commissions and other offering costs

 

 

125

 

 

 

 

 

 

22,998

 

 

 

 

 

 

22,998

 

Issuance of shares upon vesting of restricted stock units, net of tax withholdings

 

 

486

 

 

 

 

 

 

(27,886

)

 

 

 

 

 

(27,886

)

Balances at September 30, 2022

 

 

21,436

 

 

$

2

 

 

$

700,777

 

 

$

(6,337

)

 

$

694,442

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balances at December 31, 2020

 

 

17,150

 

 

$

2

 

 

$

173,274

 

 

$

(63,396

)

 

$

109,880

 

Stock-based compensation expense

 

 

 

 

 

 

 

 

22,111

 

 

 

 

 

 

22,111

 

Net income

 

 

 

 

 

 

 

 

 

 

 

12,418

 

 

 

12,418

 

Issuance of common stock upon follow-on public offering net of underwriting discounts and commissions and other offering costs

 

 

1,500

 

 

 

 

 

 

181,588

 

 

 

 

 

 

181,588

 

Issuance of shares upon vesting of restricted stock units, net of tax withholdings

 

 

604

 

 

 

 

 

 

 

 

 

 

 

 

 

Balances at September 30, 2021

 

 

19,254

 

 

$

2

 

 

$

376,973

 

 

$

(50,978

)

 

$

325,997

 

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

 

5


 

SITIME CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)

 

 

 

Nine Months Ended September 30,

 

 

 

2022

 

 

2021

 

Cash flows from operating activities:

 

 

 

 

 

 

Net income

 

$

24,782

 

 

$

12,418

 

Adjustments to reconcile net income to net cash provided by
   operating activities

 

 

 

 

 

 

Depreciation and amortization expense

 

 

8,497

 

 

 

5,554

 

Stock-based compensation expense

 

 

41,795

 

 

 

21,537

 

Non-cash interest

 

 

(2,241

)

 

 

 

Changes in assets and liabilities:

 

 

 

 

 

 

Accounts receivable, net

 

 

(6,520

)

 

 

(8,546

)

Related party accounts receivable

 

 

 

 

 

731

 

Inventories

 

 

(21,755

)

 

 

(7,284

)

Prepaid expenses and other assets

 

 

(949

)

 

 

(1,257

)

Accounts payable

 

 

(2,729

)

 

 

3,204

 

Accrued expenses and other liabilities

 

 

(5,935

)

 

 

8,056

 

Net cash provided by operating activities

 

 

34,945

 

 

 

34,413

 

Cash flows from investing activities

 

 

 

 

 

 

Purchase of held to maturity securities

 

 

(519,937

)

 

 

 

Purchase of property and equipment

 

 

(25,004

)

 

 

(20,067

)

Cash paid for intangibles

 

 

(2,969

)

 

 

(2,417

)

Net cash used in investing activities

 

 

(547,910

)

 

 

(22,484

)

Cash flows from financing activities

 

 

 

 

 

 

Tax withholding paid on behalf of employees for net share settlement

 

 

(27,886

)

 

 

 

Proceeds from public offering

 

 

23,685

 

 

 

181,928

 

Payments for offering costs

 

 

(687

)

 

 

(340

)

Net cash provided by (used in) financing activities

 

 

(4,888

)

 

 

181,588

 

Net increase (decrease) in cash and cash equivalents

 

 

(517,853

)

 

 

193,517

 

Cash and cash equivalents

 

 

 

 

 

 

Beginning of period

 

 

559,461

 

 

 

73,525

 

End of period

 

$

41,608

 

 

$

267,042

 

Supplemental disclosure of cash flow information

 

 

 

 

 

 

Income taxes paid

 

 

40

 

 

 

1

 

Supplemental disclosure of noncash flow information

 

 

 

 

 

 

Unpaid property and equipment

 

 

1,830

 

 

 

3,928

 

Unpaid intangibles, net

 

 

443

 

 

 

1,615

 

Right-of-use assets acquired under operating leases

 

 

4,599

 

 

 

529

 

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

 

6


 

SITIME CORPORATION

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Note 1. The Company and Basis of Presentation

SiTime Corporation (the “Company”) was incorporated in the State of Delaware in December 2003. The Company is a provider of precision timing solutions. The Company primarily supplies oscillator products that comprise a MEMS resonator and clock IC that is integrated into a package, as well as standalone resonators. The Company has also started to sample clock ICs. The Company’s products are designed to address a wide range of applications across a broad array of end markets. The Company operates a fabless business model and leverages its global network of distributors to address the broad set of end markets that it serves.

In the opinion of management, the accompanying unaudited condensed consolidated financial statements contain all adjustments of a normal, recurring nature, which are necessary to state fairly the financial information included therein. These financial statements should be read in conjunction with the audited consolidated financial statements and related notes thereto included in SiTime Corporation's Annual Report on Form 10-K for the fiscal year ended December 31, 2021. The year-end condensed balance sheet data was derived from audited financial statements, but does not include all disclosures required by GAAP.

Certain prior year amounts have been reclassified to conform to the current year presentation.

Coronavirus Disease (“the COVID-19 pandemic”)

The COVID-19 pandemic has continued to impact the Company's workforce and the operations of its customers and suppliers during 2022. In response to the ongoing COVID-19 pandemic and related government measures, the Company implemented safety measures to protect its employees and contractors at its locations around the world.

As the COVID-19 pandemic continues, the timing and overall demand of the Company's products and availability of supply chain may negatively and materially impact the Company's business operations and financial results. To date, the Company has experienced minimal impact from any supplier disruption resulting from the COVID-19 pandemic, however, due to the changing nature and continuing uncertainty around the COVID-19 pandemic, the Company's ability to predict the impact of the COVID-19 pandemic on its business and financial results in future periods remains limited.

The Company continues to actively monitor the effects and potential impacts of the COVID-19 pandemic on its business and may take further actions altering its business operations that it determines to be in the best interests of its employees, customers, partners, suppliers, and stakeholders, or as required by federal, state, or local authorities. It is not clear what the potential effects any such alterations or modifications may have on the Company's business, including the effects on its customers, employees, operations, and prospects, or on the financial results for 2022 and beyond.

Principles of Consolidation

The condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All intercompany transactions and balances have been eliminated in consolidation.

Significant Accounting Policies

The Company’s significant accounting policies are disclosed in the Company’s audited consolidated financial statements and related notes thereto included in the Annual Report on Form 10-K for the year ended December 31, 2021. There has been no changes to these accounting policies through September 30, 2022.

Recent Accounting Pronouncements

There are no new accounting pronouncements that are pending to be adopted by the Company.

 

 

7


 

Note 2. Net Income Per Share

The following table summarizes the computation of basic and diluted net income per share attributable to common stockholders of the Company:

 

 

 

Three Months Ended September 30,

 

 

Nine Months Ended September 30,

 

 

 

2022

 

 

2021

 

 

2022

 

 

2021

 

 

 

(in thousands, except per share data)

 

Net income attributable to common stockholders

 

$

5,783

 

 

$

13,960

 

 

$

24,782

 

 

$

12,418

 

Weighted-average shares outstanding

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average shares used to compute basic net income per share

 

 

21,353

 

 

 

19,149