SITIME Corp [SITM] Filings

10-Q 1 sitm-20240630.htm 10-Q sitm-20240630

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

________________________________________________________

FORM 10-Q

________________________________________________________

(Mark One)


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

For the quarterly period ended June 30, 2024


o			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 x No o

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 x No o

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	x	Accelerated filer	o

Non-accelerated filer	o	Smaller reporting company	o

Emerging growth company	o

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. o

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

As of August 1, 2024, the registrant had 23,132,290 shares of common stock, $0.0001 par value per share, outstanding.

Table o f Contents

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 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	18
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	26
Item 4.	Controls and Procedures	26
PART II.	OTHER INFORMATION
Item 1.	Legal Proceedings	28
Item 1A.	Risk Factors	28
Item 5.	Other Information	50
Item 6.	Exhibits	52
Signatures		53

Table o f Contents

RISK FACTORS SUMMARY

Our business is subject to numerous risks, as more fully described in Part II, Item 1A "Risk Factors” below. 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;

•We have historically depended on a limited number of customers for a significant portion of our revenue; if we are unable to expand or further diversify our customer base, our business, financial condition, and results of operations could suffer, and the loss of, or a significant reduction in orders from our customers, including a large customer or end customer, could significantly reduce our revenue and adversely impact our operating results;

•Because we do not typically have long-term purchase commitments with our customers, orders may be cancelled, reduced, or rescheduled with little or no notice, which in turn exposes us to inventory risk, and may cause our business and results of operations to suffer;

•Our revenue and operating results may fluctuate from period to period due to, among other factors, macroeconomic conditions, cyclical fluctuations in the semiconductor market, 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, the impact of any pandemic, epidemic, or outbreak of disease, including the emergence of new variants of COVID-19, on our business as well as our suppliers and customers, and product warranty claims. This in turn could cause our stock price to decline;

•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 significant 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;

•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;

•Pandemics, epidemics, or other outbreaks of disease have had and may in the future have an adverse impact upon 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;

Table o f Contents

•Our revenue in previous 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 make acquisitions in the future that could disrupt our business, cause dilution to our stockholders, reduce our financial resources, and harm 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;

•We may seek, or be required to seek debt financing;

•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, cyberattacks, or other disruptions to our information technology systems owned or maintained by us or third parties could disrupt our operations, compromise confidentiality of private customer data or our intellectual property, and adversely affect our business, reputation, operations, and financial results;

•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 the concentration of ownership of a significant portion of our stock, and our other shareholders’ ability to influence matters requiring stockholder approval will be limited, 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.

Table o f Contents

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements.

SiTime Corporation

Condensed Consolidated Balance Sheets

(In thousands, except per share amounts)

(Unaudited)


	As of
	June 30, 2024		December 31, 2023
Assets:
Current assets:
Cash and cash equivalents	$	16,637	$	9,468
Short-term investments in held-to-maturity securities	435,881		518,733
Accounts receivable, net	20,986		21,861
Inventories	70,785		65,539
Prepaid expenses and other current assets	9,278		7,641
Total current assets	553,567		623,242
Property and equipment, net	58,689		54,685
Intangible assets, net	171,149		177,079
Right-of-use assets, net	7,056		8,262
Goodwill	87,098		87,098
Other assets	996		1,317
Total assets	$	878,555	$	951,683
Liabilities and Stockholders' Equity:
Current liabilities:
Accounts payable	$	14,489	$	8,690
Accrued expenses and other current liabilities	65,874		112,704
Total current liabilities	80,363		121,394
Other non-current liabilities	105,680		122,237
Total liabilities	186,043		243,631
Commitments and contingencies (Note 9)
Stockholders’ equity:
Common stock, $0.0001 par value - 200,000 shares authorized; 23,132 and 22,692 shares issued and outstanding at June 30, 2024 and December 31, 2023	2		2
Additional paid-in capital	836,383		796,450
Accumulated deficit	(143,873)		(88,400)
Total stockholders’ equity	692,512		708,052
Total liabilities and stockholders’ equity	$	878,555	$	951,683

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

Table o f Contents

SiTime Corporation

Condensed Consolidated Statements Of Operations And Comprehensive Loss

(In thousands, except per share amounts)

(Unaudited)


	Three Months Ended June 30,				Six Months Ended June 30,
	2024		2023		2024		2023
Revenue	$	43,866	$	27,728	$	76,888	$	66,070
Cost of revenue	22,343		12,290		37,705		27,592
Gross profit	21,523		15,438		39,183		38,478
Operating expenses:
Research and development	25,490		26,567		51,034		51,024
Selling, general and administrative	25,190		21,276		49,102		42,009
Acquisition related costs	3,163		—		6,405		—
Total operating expenses	53,843		47,843		106,541		93,033
Loss from operations	(32,320)		(32,405)		(67,358)		(54,555)
Interest income	5,736		6,667		12,296		12,297
Other expense, net	(203)		(161)		(416)		(61)
Loss before income taxes	(26,787)		(25,899)		(55,478)		(42,319)
Income tax benefit (expense)	18		(23)		5		(93)
Net loss	$	(26,769)	$	(25,922)	$	(55,473)	$	(42,412)
Net loss attributable to common stockholders and comprehensive loss	$	(26,769)	$	(25,922)	$	(55,473)	$	(42,412)
Net loss per share attributable to common stockholders, basic	$	(1.16)	$	(1.17)	$	(2.42)	$	(1.93)
Net loss per share attributable to common stockholders, diluted	$	(1.16)	$	(1.17)	$	(2.42)	$	(1.93)
Weighted-average shares used to compute basic net loss per share	22,997		22,074		22,881		21,934
Weighted-average shares used to compute diluted net loss per share	22,997		22,074		22,881		21,934

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

Table o f Contents

SiTime Corporation

Condensed Consolidated Statements Of Stockholders' Equity

(In thousands)

(Unaudited)


	Common Stock			Additional Paid-in Capital		Accumulated Deficit		Total Stockholders' Equity
	Shares	Amount
Balances at March 31, 2024	22,872	$	2	$	813,312	$	(117,104)	$	696,210
Stock-based compensation expense	—	—		22,353		—		22,353
Net loss	—	—		—		(26,769)		(26,769)
Issuance of common stock in connection with At-The-Market offering net of underwriting discounts and commissions and other offering costs	100	—		12,349		—		12,349
Issuance of shares upon vesting of restricted stock units, net of tax withholdings	160	—		(11,631)		—		(11,631)
Balances at June 30, 2024	23,132	$	2	$	836,383	$	(143,873)	$	692,512

Balances at March 31, 2023	21,952	$	2	$	738,013	$	(24,355)	$	713,660
Stock-based compensation expense	—	—		21,042		—		21,042
Net loss	—	—		—		(25,922)		(25,922)
Issuance of common stock in connection with At-The-Market offering net of underwriting discounts and commissions and other offering costs	100	—		8,614		—		8,614
Issuance of shares upon vesting of restricted stock units, net of tax withholdings	158	—		(9,127)		—		(9,127)
Balances at June 30, 2023	22,210	$	2	$	758,542	$	(50,277)	$	708,267

Balances at December 31, 2023	22,692	$	2	$	796,450	$	(88,400)	$	708,052
Stock-based compensation expense	—	—		45,247		—		45,247
Net loss	—	—		—		(55,473)		(55,473)
Issuance of common stock in connection with At-The-Market offering net of underwriting discounts and commissions and other offering costs	133	—		15,054		—		15,054
Issuance of shares upon vesting of restricted stock units, net of tax withholdings	307	—		(20,368)		—		(20,368)
Balances at June 30, 2024	23,132	$	2	$	836,383	$	(143,873)	$	692,512

Balances at December 31, 2022	21,702	$	2	$	716,343	$	(7,865)	$	708,480
Stock-based compensation expense	—	—		40,178		—		40,178
Net loss	—	—		—		(42,412)		(42,412)
Issuance of common stock in connection with At-The-Market offering net of underwriting discounts and commissions and other offering costs	200	—		21,363		—		21,363
Issuance of shares upon vesting of restricted stock units, net of tax withholdings	308	—		(19,342)		—		(19,342)
Balances at June 30, 2023	22,210	$	2	$	758,542	$	(50,277)	$	708,267

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

Table o f Contents

SiTime Corporation

Condensed Consolidated Statements Of Cash Flows

(In thousands)

(Unaudited)


	Six Months Ended June 30,
	2024		2023
Cash flows from operating activities:
Net loss	$	(55,473)	$	(42,412)
Adjustments to reconcile net loss to net cash provided by operating activities
Depreciation and amortization expense	13,526		7,747
Stock-based compensation expense	44,620		39,696
Net change in unrealized interest on held to maturity securities	(1,200)		(2,686)
Change in fair value of sales based earnout liability	3,311		—
Change in fair value of acquisition consideration payable	2,479		—
Inventory write-down	1,986		1,271
Changes in assets and liabilities:
Accounts receivable, net	875		25,460
Inventories	(6,393)		(7,873)
Prepaid expenses and other assets	(1,316)		(2,976)
Accounts payable	(414)		(5,210)
Accrued expenses and other liabilities	(453)		(1,000)
Net cash provided by operating activities	1,548		12,017
Cash flows from investing activities
Purchase of held to maturity securities	(343,951)		(536,558)
Proceeds from maturity of held to maturity securities	428,004		524,439
Purchase of property and equipment	(5,470)		(3,676)
Cash paid for intangibles	(171)		(2,471)
Net cash provided by (used in) investing activities	78,412		(18,266)
Cash flows from financing activities
Tax withholding paid on behalf of employees for net share settlement	(20,368)		(19,342)
Proceeds from At-The-Market offering	15,727		21,976
Payments for At-The-Market offering costs	(608)		(613)
Payment of contingent consideration towards earnouts	(5,618)		—
Payment of deferred consideration towards acquisition consideration payable	(61,924)		—
Net cash (used in) provided by financing activities	(72,791)		2,021
Net increase (decrease) in cash and cash equivalents	7,169		(4,228)
Cash and cash equivalents
Beginning of period	9,468		34,603
End of period	$	16,637	$	30,375
Supplemental disclosure of cash flow information
Income taxes paid	27		137
Supplemental disclosure of noncash investing and financing activities
Unpaid property and equipment	7,079		1,043
Unpaid At-The-Market offering costs	65		—
Right-of-use assets acquired under operating leases	186		—

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

Table o f Contents

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 leading provider of Precision Timing solutions to the global electronics industry, providing the timing functionality that is needed for electronics to operate reliably and correctly. The Company's products have been 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.

The accompanying interim condensed consolidated financial statements have been prepared in conformity with United States (U.S.) generally accepted accounting principles (GAAP) for interim financial information and the instructions to Form 10-Q and Article 10 of Regulation S-X, and should be read in conjunction with the Company's audited consolidated financial statements and related notes thereto filed with the U.S. Securities and Exchange Commission (SEC) on Form 10-K for the fiscal year ended December 31, 2023. The interim financial statements are unaudited, but reflect all adjustments which are, in the opinion of management, of a normal, recurring nature necessary to provide a fair statement of results for the interim periods presented. The results of operations for the interim periods shown in this report are not necessarily indicative of the results that may be expected for the fiscal year ending December 31, 2024, for any future year, or for any other future interim period.

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. The significant areas requiring the use of management estimates and assumptions include revenue recognition, fair value of earnout liabilities, estimate of reserve for excess and obsolete inventories, and sales reserves. Actual results could differ from those estimates.

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, 2023. There have been no changes to these accounting policies through June 30, 2024.

Recent Accounting Pronouncements

There are currently no new accounting pronouncements with a future effective date that are considered material, or could be material, to us.

Note 2. Acquisitions

On December 1, 2023, we completed our acquisition of Aura's timing business and clock products, and an assembled workforce. The acquisition qualified as a business combination in accordance with ASC 805, Business Combinations and, accordingly, total consideration was first allocated to the fair value of assets acquired as of the date of acquisition, with the excess being recorded as goodwill. The acquisition date fair value of the purchase consideration was $259.2 million, which comprised the following:


	Estimated Fair Value
	(in thousands)
Fixed consideration	$	139,946
Fair value of sales based earnout liability	102,278
Settlement of pre-existing arrangement	16,974
Total purchase consideration	$	259,198

The preliminary purchase consideration allocation to the assets acquired based on their respective estimated fair values as of the date of acquisition is as follows:

Table o f Contents


	Estimated Fair Value (Preliminary)		Estimated Useful Life	Financial Statement Line Item
	(in thousands)		(in years)
Developed technology	$	96,700	5 to 8 years	Intangible assets, net
In-process research and development	69,500		N/A	Intangible assets, net
Assumed customer agreements	5,900		4 years	Intangible assets, net
Goodwill	87,098		Indefinite	Goodwill
Total assets acquired	$	259,198

Following are the supplemental consolidated financial results of the Company on an unaudited pro forma basis, as if the acquisition had been consummated on January 1, 2023:


	Three Months Ended June 30,				Six Months Ended June 30,
Unaudited pro forma information	2024		2023		2024		2023
	(in thousands)				(in thousands)
Revenue	$	43,866	$	28,478	$	76,888	$	67,220
Net loss	$	(26,769)	$	(30,360)	$	(55,473)	$	(57,447)

The supplemental pro forma information presents the combined results of operations for the three and six months ended June 30, 2024 and 2023, as if the acquisition was completed on January 1, 2023, the first day of the fiscal year of 2023. The supplemental pro forma financial information presented above is not necessarily indicative of the financial position or results of operations that would have been realized if the acquisition had been completed on the date indicated. The supplemental pro forma financial information does not reflect synergies that might have been achieved, nor is it indicative of future operating results or financial position. The proforma financial information includes a $6.5 million nonrecurring adjustment related to acquisition costs.

Note 3. Fair Value Measurements

Cash equivalents

At June 30, 2024 and December 31, 2023, highly liquid money market funds of $10.4 million and $0.4 million, respectively, were valued using Level 1 of the fair value hierarchy, quoted prices in active markets for identical assets, and are included in cash equivalents.

Short-term investments in held-to-maturity securities

As of June 30, 2024 and December 31, 2023, the Company had purchased Treasury Bills with maturities ranging from 3 to 12 months, which the Company intends to hold until maturity and has classified as held-to-maturity securities. The held-to-maturity securities are recorded at amortized cost totaling $435.9 million including gross accrued interest of $10.1 million as of June 30, 2024. As of June 30, 2024, the fair value and gross unrealized loss on the held-to-maturity securities was $435.5 million and $0.4 million respectively.

As of December 31, 2023, the amortized cost of the held-to-maturity securities totaled $518.7 million including gross accrued interest of $8.9 million. As of December 31, 2023, the fair value and gross unrealized loss on the held-to-maturity securities $519.0 million and $0.3 million respectively.

These treasury bills were valued using Level 1 of the fair value hierarchy, quoted prices in active markets for identical assets, and are included in short-term investments. The carrying value of our investments is reviewed quarterly for changes in circumstances or the occurrence of events that suggests an investment may not be fully recoverable.

Sales based earnout liability

The estimated fair value of the sales based earnout liability is determined using a Monte Carlo simulation model using significant unobservable fair value inputs and is therefore classified as a Level 3 measurement. The assumptions used in the calculation are based on the revenue projections over the term of the contingent earn-out period, expected volatility, and discount rate. The estimates of fair value are uncertain and changes in any of the estimated inputs used will result in significant adjustments to the fair value. As of June 30, 2024, the Company used a volatility rate of 20%, risk free rate ranging from 4.3% to 5.4%, and an expected term ranging from 0.13 years to 4.38 years.

The following table sets forth a summary of the changes in the fair value of the Company’s Level 3 financial liabilities:

Table o f Contents


	Amount
Fair value as of January 1, 2024	$	103,461
Change in the fair value during the year recorded to acquisition related costs	3,311
Payments made during the period	(5,618)
Fair value as of June 30, 2024	$	101,154

There were no transfers between Level 1, Level 2, and Level 3 categories during any of the periods presented.

Note 4. Balance Sheet Components

Accounts Receivable, net

Accounts receivable, net consisted of the following:


	As of
	June 30, 2024		December 31, 2023		December 31, 2022

	(in thousands)
Accounts receivable, gross	$	21,036	$	21,911	$	41,279
Allowance for credit losses	(50)		(50)		(50)
Accounts receivable, net	$	20,986	$	21,861	$	41,229

Inventories

Inventories consisted of the following:


	As of
	June 30, 2024		December 31, 2023

	(in thousands)
Raw materials	$	15,092	$	17,550
Work in progress	39,467		35,193
Finished goods	16,226		12,796
Total inventories	$	70,785	$	65,539

Prepaid Expenses and Other Current Assets

Prepaid expenses and other current assets consisted of the following:


	As of
	June 30, 2024		December 31, 2023

	(in thousands)
Prepaid expenses	$	3,350	$	3,563
Other current assets	5,928		4,078
Total prepaid expenses and other current assets	$	9,278	$	7,641

Table o f Contents

Property and Equipment, net

Property and equipment, net consisted of the following:


	As of
	June 30, 2024		December 31, 2023

	(in thousands)
Lab and manufacturing equipment	$	88,472	$	80,772
Computer equipment	3,716		3,541
Furniture and fixtures	1,169		969
Construction in progress	9,386		5,978
Leasehold improvements	7,640		7,847
	110,383		99,107
Accumulated depreciation	(51,694)		(44,422)
Total property and equipment, net	$	58,689	$	54,685

Depreciation expense related to property and equipment was $3.8 million and $3.3 million for the three months ended June 30, 2024 and 2023, respectively, and $7.4 million and $6.5 million for the six months ended June 30, 2024 and 2023, respectively.

Intangible Assets, net

Intangible assets, net consisted of the following:


	As of
	June 30, 2024						December 31, 2023

	(in thousands)
	Gross Assets		Accumulated Amortization		Net Assets		Gross Assets		Accumulated Amortization		Net Assets
Developed technology	$	96,700	$	(4,167)	$	92,533	$	96,700	$	(159)	$	96,541
Contract based royalty asset	$	5,900	$	(860)	$	5,040	$	5,900	$	(121)	$	5,779
Internal use software	$	9,434	$	(9,434)	$	—	$	9,434	$	(9,234)	$	200
Purchased software	15,276		(11,200)		4,076		15,110		(10,051)		5,059
Total amortizable intangible assets	$	127,310	$	(25,661)	$	101,649	$	127,144	$	(19,565)	$	107,579
In-process research and development	$	69,500	$	—	$	69,500	$	69,500	$	—	$	69,500
Total intangible assets	$	196,810	$	(25,661)	$	171,149	$	196,644	$	(19,565)	$	177,079

Amortization expense for intangible assets was $4.1 million and $0.7 million for the three months ended June 30, 2024 and 2023, respectively, and $6.1 million and $1.3 million for the six months ended June 30, 2024 and 2023, respectively.

The estimated aggregate future amortization expense for intangible assets subject to amortization as of June 30, 2024 is summarized as below:


	(in thousands)
2024 (remainder)	$	7,870
2025	15,343
2026	15,002
2027	14,634
2028	12,912
2029 and beyond	35,888
	$	101,649

Table o f Contents

Accrued Expenses and Other Current Liabilities

Accrued expenses and other current liabilities consisted of the following:


	As of
	June 30, 2024		December 31, 2023

	(in thousands)
Accrued payroll and related benefits	$	7,068	$	6,358
Revenue reserves	3,365		2,954
Sales based earnout liability, current	21,514		19,733
Acquisition consideration payable, current	27,192		75,695
Short term lease liability	2,544		2,601
Other accrued expenses	4,191		5,363
Total accrued expenses and other current liabilities	$	65,874	$	112,704

The Company recorded reductions to research and development expenses related to non-recurring engineering service arrangements in the condensed consolidated statements of operations of $0.3 million and $0.5 million during the three months ended June 30, 2024 and 2023, respectively, and $0.7 million and $1.7 million for the six months ended June 30, 2024 and 2023, respectively.

Other Non-current Liabilities

Other non-current liabilities consisted of the following:


	As of
	June 30, 2024		December 31, 2023

	(in thousands)
Sales based earnout liability, non-current	$	79,640	$	83,728
Acquisition consideration payable, non-current	21,825		33,086
Long term lease liability	4,215		5,423
Total other non-current liabilities	$	105,680	$	122,237

Note 5. Leases

The Company leases office space in California, Michigan, Malaysia, Japan, Taiwan, the Netherlands, Finland, Ukraine, and India, all under non-cancellable operating leases with various expiration dates through May 2029.

The remaining lease terms vary from a few months to 5 years. For certain of its leases the Company has options to extend the lease term for periods varying from one to five years. These renewal options are not considered in the remaining lease term unless it is reasonably certain that the Company will exercise such options. The Company also has variable lease payments that are primarily comprised of common area maintenance and utility charges.

The table below presents the operating lease-related assets and liabilities recorded on the condensed consolidated balance sheets as of June 30, 2024 and December 31, 2023:


	As of
	June 30, 2024			December 31, 2023

	(in thousands)
Right-of-use assets	$	7,056		$	8,262
Lease liabilities included in accrued expenses and other current liabilities	2,544			2,601
Lease liabilities included in other non-current liabilities	4,215			5,423
Total operating lease liabilities	$	6,759		$	8,024
Weighted-average remaining lease term (years)	2.7			3.1
Weighted-average discount rate	4.6		%	4.5		%

Table o f Contents

The table below presents certain information related to the lease costs for operating leases for the three and six months ended June 30, 2024 and 2023:


	Three Months Ended June 30,				Six Months Ended June 30,
	2024		2023		2024		2023

	(in thousands)
Operating lease cost	$	754	$	758	$	1,502	$	1,517
Short-term lease cost	238		135		415		312
Variable lease cost	268		290		679		567
Total lease cost	$	1,260	$	1,183	$	2,596	$	2,396

Cash paid for operating lease liabilities was $0.8 million and $0.8 million for the three months ended June 30, 2024 and 2023, respectively.

Cash paid for operating lease liabilities was $1.5 million and $1.5 million for the six months ended June 30, 2024 and 2023, respectively.

Operating Lease Cash Flows

The table below reconciles the undiscounted cash flows for each of the first five years and total of the remaining years to the operating lease liabilities recorded on the condensed consolidated balance sheet as of June 30, 2024:


	(in thousands)
Remainder of 2024	$	1,533
2025	2,796
2026	2,195
2027	490
2028	134
2029 and beyond	45
Total minimum lease payments	7,193
Less: amount of lease payments representing interest	(434)
Present value of future minimum lease payments	6,759
Less: current obligations under leases	(2,544)
Long-term lease liabilities	$	4,215

Note 6. Stockholders’ Equity

At-The-Market offering

On February 27, 2024, the Company entered into a Sales Agreement ("Sales Agreement"), with Stifel, Nicolaus & Company, Incorporated ("Stifel"), under which the Company may offer and sell from time to time at its sole discretion, up to an aggregate of 1,200,000 shares of its common stock, par value $0.0001 per share, through Stifel acting as its sales agent. The Company used the net proceeds from the shares of common stock offered and sold to replenish funds expended to satisfy anticipated tax withholding and remittance obligations related to the net settlement upon vesting of restricted stock unit awards (“RSU”) granted to employees under the equity incentive plans. The Company has filed a prospectus supplement pursuant to the Sales Agreement for the offer and sale of up to an aggregate of 1,200,000 shares of its common stock. Subject to the terms and conditions of the Sales Agreement, Stifel will sell the common stock from time to time, based upon instructions from the Company. The Company agreed to pay Stifel a commission of up to 3% of the gross sales proceeds of any common stock sold through Stifel under the Sales Agreement.

During the three months ended June 30, 2024, the Company sold 100,000 shares of its common stock through Stifel under the Sales Agreement at a weighted average price of $127.18 per share resulting in net proceeds to the Company of $12.3 million, after deducting underwriting discounts and commissions of $0.3 million and offering costs of $0.1 million. During the six months ended June 30, 2024, the Company sold 132,500 shares of its common stock through Stifel under the Sales Agreement at a weighted average price of $118.69 per share resulting in net proceeds to the Company of $15.0 million, after deducting underwriting discounts and commissions of $0.3 million and deferred offering costs of $0.4 million.

Table o f Contents

Equity Incentive Plans

The following table summarizes the RSU, performance based restricted stock units ("PRSU"), and multi-year performance restricted stock units ("MYPSU") activity for the three and six months ended June 30, 2024:


	RSU Number of Shares	Grant Date Fair Value per share		PRSU Number of Shares	Grant Date Fair Value per share		MYPSU Number of Shares	Grant Date Fair Value per share

Unvested at December 31, 2023	1,238,417	$	103.8	108,622	$	145.5	285,880	$	88.6
Granted	391,669	110.8		146,116	77.4		—	—
Vested	(229,644)	86.0		—	—		—	—
Forfeited	(13,170)	126.0		(55,532)	123.6		—	—
Unvested at March 31, 2024	1,387,272	$	108.5	199,206	$	101.5	285,880	$	88.6
Granted	80,159	101.2		—	—		—	—
Vested	(248,988)	85.7		—	—		—	—
Forfeited	(26,539)	136.3		—	—		—	—
Unvested at June 30, 2024	1,191,904	$	112.1	199,206	$	101.5	285,880	$	88.6

In March 2024, the Compensation Committee approved target bonus amounts based on the achievement of revenue and individual performance goals for the fiscal year 2024 (the "2024 Goals"). The awards for the actual payouts are granted in the quarter following the end of the performance period. The target bonuses were granted based on a fixed dollar amount to be settled in RSUs on the vesting date and hence the awards have been classified as liability-based awards until settled. Such expense is included in the non-cash adjustment within stock-based compensation expense on the condensed consolidated cash flow statements. The liability of $0.9 million for 2024 Goals was recorded as accrued expenses and other current liabilities in the condensed consolidated balance sheet as of June 30, 2024.

In March 2024, the Compensation Committee of the Company approved PRSUs for the fiscal year 2024 with performance goals based on the achievement of relative total stockholder return with a three year performance period (the "2024 TSR PRSU Goals"). The grant-date fair value of each PRSU was determined using Monte Carlo simulation model. The assumptions used in the Monte Carlo simulation included expected volatility of 74.7%, risk free rate of 4.5%, no expected dividend yield and expected term of 2.8 years. The Company recognizes the expense related to the 2024 TSR PRSU Goals on a graded-vesting method over the requisite performance period. These grants are included in the PRSU awards granted in the table above.

The Company also operates a bonus plan for certain employees which are based on a fixed dollar amount to be settled in RSUs. These awards are categorized as liability-based awards until settled. Once settled, these awards are reflected as RSU granted in the above table. Such expense is included in the non-cash adjustment within stock-based compensation expense on the condensed consolidated cash flow statements. The liability of $1.0 million was recorded as accrued expenses and other current liabilities in the condensed consolidated balance sheet as of June 30, 2024.

Table o f Contents

Stock-Based Compensation

The following table presents the detail of stock-based compensation expense amounts included in the condensed consolidated statement of operations for each of the periods presented:


	Three Months Ended June 30,				Six Months Ended June 30,
	2024		2023		2024		2023

	(in thousands)
Equity based awards
Cost of revenue	$	315	$	696	$	491	$	1,324
Research and development	8,623		9,506		17,236		17,011
Selling, general and administrative	12,213		10,076		24,091		19,556
	$	21,151	$	20,278	$	41,818	$	37,891

Liability based awards - to be settled in equity
Cost of revenue	$	12	$	17	$	16	$	28
Research and development	791		477		1,354		1,003
Selling, general and administrative	963		388		1,432		774
	$	1,766	$	882	$	2,802	$	1,805

Total stock-based compensation expense - equity and liability based	$	22,917	$	21,160	$	44,620	$	39,696

Stock-based compensation expense recorded to additional paid-in capital
Equity based awards	$	21,151	$	20,278	$	41,818	$	37,891
Liability based awards - settled in equity	865		764		2,624		2,287
Stock compensation expense capitalized to inventory	$	337	$	—	$	805	$	—
Total stock-based compensation expense recorded to additional paid-in capital	$	22,353	$	21,042	$	45,247	$	40,178

The following table presents the unrecognized compensation costs and related weighted average period of recognition as of June 30, 2024:


	Unrecognized Compensation Costs (in millions)		Weighted Average Period of Recognition (in years)
RSUs	$	122.6	1.9
PRSUs	$	14.1	1.3
MYPSUs	$	5.2	1.0
Liability-based awards	$	4.1	0.5

Note 7. Income Taxes

The quarterly provision for income taxes is based on applying the estimated annual effective tax rate to the year to date pre-tax income, plus any discrete items. The Company updates its estimate of its annual effective tax rate at the end of each quarterly period. The estimate takes into account annual forecasted income before income taxes, the geographic mix of income before income taxes and any significant permanent tax items.

Table o f Contents

The following table presents the provision for income taxes and the effective tax rates for the three and six months ended June 30, 2024 and 2023:


	Three Months Ended June 30,						Six Months Ended June 30,
	2024			2023			2024			2023

	(in thousands)
Loss before income taxes	$	(26,787)		$	(25,899)		$	(55,478)		$	(42,319)
Income tax benefit (expense)	18			(23)			5			(93)
Effective tax rate	0		%	0		%	0		%	0		%

The Company’s effective tax rate may vary from the U.S. federal statutory tax rate due to the change in the mix of earnings in tax jurisdictions with different statutory rates, benefits related to tax credits and the tax impact of non-deductible expenses, existence of full valuation allowance on its deferred tax assets, and other permanent differences between income before income taxes and taxable income.

A valuation allowance is established or maintained when, based on currently available information and other factors, it is more likely than not that all or a portion of the deferred tax assets will not be realized. The Company regularly assesses its valuation allowance against deferred tax assets on a jurisdiction by jurisdiction basis. The Company considers all available positive and negative evidence, including future reversals of temporary differences, projected future taxable income, tax planning strategies and recent financial results. Based on management’s assessment of the realizability of deferred tax assets, the Company continues to maintain a full valuation reserve on its deferred tax assets as of June 30, 2024.

The income tax provision was less than $0.1 million for both the three and six months ended June 30, 2024 and 2023. The effective tax rate was less than 1% for both the three and six months ended June 30, 2024 and 2023. The provision for income taxes is primarily related to the foreign subsidiaries’ local country obligations. The U.S. effective tax rate is less than 1% and is due to minimum state tax. There is no federal provision for income taxes as the Company has sufficient carryforward of net operating losses to offset any operating income earned since inception and has projected an operating loss in the current year.

As of June 30, 2024 and December 31, 2023, the Company had $2.3 million and $2.3 million, respectively, of total unrecognized tax benefits. If the Company is able to eventually recognize these uncertain tax positions, none of the unrecognized benefits would reduce the Company’s effective tax rate due to the full valuation allowance on the Company’s deferred tax assets.

The Company’s policy is to record interest and penalties related to unrecognized tax benefits as income tax expense. For the three and six months ended June 30, 2024 and 2023, the Company recorded immaterial amounts related to the accrual of interest and penalties.

Note 8. Segment, Geographic and Customer Information

The Company operates in one reportable segment related to the sale of Precision Timing solutions to the global electronics industry.

Revenue by geographic area is presented based upon the ship-to location of the customers who purchased the Company’s products which may be different from the geographic locations of the ultimate end customers. The following table sets forth revenue by country for countries with 10% or more of the Company’s revenue during any of the periods presented:


	Three Months Ended June 30,				Six Months Ended June 30,
	2024		2023		2024		2023

	(in thousands)
Taiwan	$	12,052	$	5,290	$	21,611	$	15,904
Hong Kong	15,082		6,538		25,536		12,846
United States	4,129		4,134		7,623		11,624
Singapore	4,259		3,666		6,468		7,448
Other	8,344		8,100		15,650		18,248
Total	$	43,866	$	27,728	$	76,888	$	66,070

Table o f Contents

The following table sets forth the Company’s total property and equipment attributable to operations by country as of the periods presented:


	As of
	June 30, 2024		December 31, 2023

	(in thousands)
United States	$	27,838	$	22,540
Malaysia	14,254		14,471
Taiwan	6,720		6,520
Other	9,877		11,154
	$	58,689	$	54,685

Note 9. Commitments and Contingencies

Legal Matters

From time to time, the Company may be a party to various litigation claims in the normal course of business. Legal fees and other costs associated with such actions are expensed as incurred. The Company assesses, in conjunction with legal counsel, the need to record a liability for litigation and contingencies. Accrual estimates are recorded when and if it is determined that such a liability for litigation and contingencies are both probable and reasonably estimable. We did not have any amounts accrued towards these matters as of June 30, 2024

Indemnification

The Company is a party to a variety of agreements pursuant to which it may be obligated to indemnify other parties to such agreements with respect to certain matters. Typically, these obligations arise in the context of contracts that the Company has entered into, under which the Company customarily agrees to hold the other party harmless against losses arising from a breach of representations and covenants or terms and conditions related to such matters as the sale and/or delivery of its products, title to assets sold, certain intellectual property claims, defective products, and specified environmental matters. Further, the Company’s obligations under these agreements may be limited in terms of time, amount, or the scope of its responsibility and in some instances, the Company may have recourse against third-parties for certain payments made under these agreements. It is not possible to predict the maximum potential amount of future payments under these agreements due to the conditional nature of the Company’s obligations and the unique facts and circumstances involved in each particular agreement. Historically, the Company has had no material indemnification claims under these agreements.

Purchase Commitments

The Company purchases components from a variety of suppliers and uses several contract manufacturers to provide manufacturing services for its products. During the normal course of business, in order to manage manufacturing lead times and to help ensure adequate component supply, the Company enters into agreements with the Company’s contract manufacturers and suppliers that allow them to procure inventory based upon criteria as defined by the Company. In addition, the Company has a multi-year agreement to purchase minimum quantities of MEMS wafers and is responsible for research and development, tooling, and samples cost under the agreement. A portion of the Company’s reported purchase commitments arising from these agreements consists of firm, non-cancelable purchase commitments. In certain instances, these agreements allow the Company the option to cancel, reschedule, and adjust the Company’s requirements based on its business needs prior to when production starts. However, in situations where the Company is unable to cancel, reschedule, or adjust the purchase commitment due to changing customer demand, excess inventories could result in material inventory provisions. Total future non-cancelable purchase commitments as of June 30, 2024 were as follows:


	(in thousands)
Remainder of 2024	$	4,059
2025	8,654
2026	8,239
2027	1,419
2028	525
Total	$	22,896

Table o f Contents

Note 10. Net Loss Per Share

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


	Three Months Ended June 30,				Six Months Ended June 30,
	2024		2023		2024		2023

	(in thousands, except per share data)
Net loss attributable to common stockholders	$	(26,769)	$	(25,922)	$	(55,473)	$	(42,412)
Weighted-average shares outstanding
Weighted average shares used to compute basic net loss per share	22,997		22,074		22,881		21,934
Dilutive effect of employee equity incentive plans	—		—		—		—
Weighted average shares used to compute diluted net loss per share	22,997		22,074		22,881		21,934
Net loss attributable to common stockholders per share, basic	$	(1.16)	$	(1.17)	$	(2.42)	$	(1.93)
Net loss attributable to common stockholders per share, diluted	$	(1.16)	$	(1.17)	$	(2.42)	$	(1.93)

Potential dilutive securities include dilutive common shares from share-based awards attributable to the assumed exercise of restricted stock unit awards using the treasury stock method. Under the treasury stock method, potential common shares outstanding are not included in the computation of diluted net income per share if their effect is anti-dilutive.

Anti-dilutive potential shares from share-based awards are excluded from the calculation of diluted earnings per share if either their exercise price exceeded the average market price during the period, or the share-based awards were determined to be anti-dilutive based on applying the treasury stock method. During the three months ended June 30, 2024 and 2023, the Company had 766,620 and 1,267,359 potential shares from share-based awards that are anti-dilutive, respectively. During the six months ended June 30, 2024 and 2023, the Company had 698,148 and 1,353,845 potential shares from share-based awards that are anti-dilutive, respectively.

Table o f Contents

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

The following discussion should be read in conjunction with the Condensed Consolidated Financial Statements and the related notes that appear elsewhere in this document.

The information in this Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), which are subject to the “safe harbor” created by those sections. We may, in some cases, use words such as “anticipate,” “believe,” “could,” “estimate,” “expect,” “intend,” “may,” “objective,” “plan,” “potential,” “predict,” “project,” “should,” “will,” “would,” or the negative of those terms, and similar expressions that convey uncertainty of future events or outcomes to identify these forward-looking statements. Any statements contained herein that are not statements of historical facts may be deemed to be forward-looking statements. Forward-looking statements in this report include, but are not limited to, statements about:

•our plans to focus on oscillators, clock ICs, resonators and timing synchronization solutions and to aggressively expand our presence in these markets;

•our expectations regarding our ability to address market and customer demands and to timely develop new or enhanced solutions to meet those demands;

•anticipated trends, challenges and growth in our business and the markets in which we operate, including pricing expectations;

•our expectations regarding our revenue, average selling prices, gross margin, and expenses;

•our expectations regarding the effects of macroeconomic events in 2024;

•our expectations regarding dependence on a limited number of customers and end customers;

•our customer relationships and our ability to retain and expand our customer relationships and to achieve design wins;

•our expectations regarding the success, cost, and timing of new products;

•the size and growth potential of the markets for our solutions, and our ability to serve and expand our presence in those markets;

•our plans to expand sales and marketing efforts through increased collaboration with our distributors and contracted sales representatives, and our plans to grow direct online sales through our self-service online store;

•our expectations to identify new customers and deliver differentiated Precision Timing solutions to them through digital marketing strategies;

•our goal to become the leading provider of Precision Timing solutions for advanced and challenging applications;

•our positioning of being designed into current systems as well as future products;

•our belief that our advanced packaging designs can enable the smallest footprints in the industry;

•our expectations regarding competition in our existing and future markets;

•our expectations of the success of our acquisitions and how we integrate and generate revenue;

•the impact a pandemic, epidemic, or other outbreak of disease may in the future have on our business, results of operations and financial condition, as well as the businesses of our suppliers and customers;

•our expectations regarding regulatory developments in the United States and foreign countries;

•our expectations regarding the performance of, and our relationships with, our third-party suppliers and manufacturers;

Table o f Contents

•our expectations regarding our and our customers’ ability to respond successfully to technological or industry developments;

•our expectations regarding our ability to attract and retain key personnel;

•our expectations regarding intellectual property and related litigation;

•our belief as to the sufficiency of our existing cash and cash equivalents and short-term investments funds to meet our cash needs for at least the next 12 months and our future capital requirements over the longer term;

•the adequacy and availability of our leased facilities;

•the accuracy of our estimates regarding capital requirements and needs for additional financing.

These forward-looking statements reflect our management’s beliefs and views with respect to future events and are based on estimates and assumptions as of the date of this report and are subject to risks and uncertainties. We discuss many of these risks in greater detail in Part II, Item 1A "Risk Factors" of this report. Moreover, we operate in a very competitive and rapidly changing environment. New risks emerge from time to time. It is not possible for our management to predict all risks, nor can we assess the impact of all factors on our 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 we may make. Given these uncertainties, you should not place undue reliance on these forward-looking statements. We qualify all of the forward-looking statements in this report by these cautionary statements

You should not rely upon forward-looking statements as predictions of future events. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee that the future results, levels of activity, performance, or events and circumstances reflected in the forward-looking statements will be achieved or occur. Moreover, neither we nor any other person assumes responsibility for the accuracy and completeness of the forward-looking statements. We undertake no obligation to update publicly any forward-looking statements for any reason after the date of this report to conform these statements to actual results or to changes in our expectations, except as required by law.

In addition, statements that “we believe” and similar statements reflect our beliefs and opinions on the relevant subject. These statements are based upon information available to us as of the date of this report, and while we believe such information forms a reasonable basis for such statements, such information may be limited or incomplete, and our statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all potentially available relevant information. These statements are inherently uncertain and investors are cautioned not to unduly rely upon these statements.

Overview

The ability to accurately measure and reference time has been essential to humankind’s greatest inventions and technological advances. Timing technology has continued to evolve over centuries, forming a critical aspect of broader technological evolution. Timing is the heartbeat of digital electronic systems, ensuring that the system runs smoothly and reliably by providing and distributing clock signals to various critical components such as central processing units, communication and interface ICs, and radio frequency components. As electronics evolve to deliver higher performance levels, even in increasingly challenging environments, while also being more complex and size-constrained, we believe they will require more sophisticated semiconductor-based timing solutions that cannot be developed in legacy quartz crystal-based technologies. Precision timing ("Precision Timing"), fills this need with the performance, power, size, and cost that is required by these new applications.

We are a leading provider of Precision Timing solutions to the global electronics industry. Our Precision Timing solutions are the heartbeat of our customers’ electronic systems, providing the timing functionality that is needed for electronics to operate reliably and correctly. We provide Precision Timing solutions that are differentiated by high performance, high resilience, and high reliability, along with programmability, small size, and low power consumption. Our products have been designed into over 300 applications across our target markets, including communications, datacenter and enterprise, automotive, industrial, aerospace, mobile, Internet of Things (“IoT”), and consumer. Our current solutions include various types of oscillators, as well as clock integrated circuits (“ICs”) and resonators.

Our all-silicon solutions are based on three fundamental areas of expertise: micro-electro-mechanical systems (“MEMS”), analog mixed-signal design capabilities, and advanced system-level integration expertise. These areas of expertise enable us to design silicon MEMS resonators, analog circuits, as well as systems and packaging, and put these all together to deliver a system-level solution that solves customers’ complex timing problems. In this aspect, we believe we are different

Table o f Contents

than quartz-based providers, who typically have expertise in designing and manufacturing resonator components, but usually outsource the analog and packaging. We also have a deep understanding of mechanical, electrical, and thermal properties of materials, which is a key requirement for developing our proprietary MEMS processes. To maximize MEMS first-silicon success, we have also developed our own MEMS simulation tools. We are also different in that our MEMS resonators are made using semiconductor technology which has significant benefits in features, performance, manufacturing, and cost, while the quartz suppliers use quartz crystal material. Compared to traditional clock IC suppliers, we are different in that we design the resonator in-house and can integrate it into the clock IC package. Our analog/mixed-signal die are developed using industry-standard processes and deliver high levels of performance using programmable phase-locked loops ("PLLs"), temperature sensors, regulators, data converters, drivers and other building blocks. Unlike most clock IC vendors, we do not rely on quartz vendors to provide the quartz resonator clock reference that is required for their clock ICs to function. Our expertise creates supply chain advantages for us and most importantly, enables us to design and build complete timing systems that result in performance advantages, providing a complete solution to the customer.

Our Precision Timing solutions are designed to be resilient to harsh environmental stressors. For the communications, datacenter and enterprise market, our products provide high performance and resilience in dense, less-controlled environments that experience extreme conditions. The resilience of our products becomes an increasing advantage as equipment is placed in dense, harsh environments and moves closer to the customer with the rollout of 5G, the rapid expansion in cloudification, and deployment of hyperscale datacenters. For the automotive market, our solutions can be utilized in automotive electronics, including advanced driver assistance systems (“ADAS”) for self-driving cars, which require increased timing accuracy. For the industrial market, our products offer programmability and high reliability for the diverse operating conditions of industrial equipment, including high temperatures, mechanical shock, and vibration. For the aerospace market, our solutions provide lower acceleration sensitivity for end products that operate in rugged conditions. For the mobile, IoT and consumer market, our timing solutions have the advantage of offering high performance at optimal power consumption and size, as our customers fit more functionality into smaller devices.

We believe that the total timing market is approximately $10 billion in size. Since our founding, we have focused on transforming this market with compelling solutions that solve difficult timing problems. Historically, our revenue has been substantially delivered from sales of oscillator systems across our target end markets. Since our initial public offering ("IPO") in November 2019, we’ve grown from 60 to 150 unique products and the price of our highest-value oscillator has grown manyfold. In addition to oscillators, we have expanded our product portfolio to include clock IC and timing synchronization solutions.

In December 2023, we closed the acquisition of certain assets and the exclusive license to certain intellectual property from Aura Semiconductor Pvt. Ltd. and certain of its affiliated entities (together, "Aura") relating to Aura's timing business and clock products, subject to certain covenants and restrictions. With this acquisition, we bring our expertise to the category of clocks, adding 20 best-in-class clocks at the close of the acquisition, and approximately an additional 20 products, starting at the second half of 2024 and through 2025. With the addition of all four categories of clock products including network synchronizers, jitter cleaners, clock generators, and buffers, we now offer a comprehensive portfolio of timing solutions. By pairing the new SiTime clocking products with our MEMS oscillators and/or our resonators, we expect to be able to offer a more complete clock tree that is simpler to design with higher performance, and more resilient to environmental stressors with better reliability. SiTime is now a key provider of all differentiated products in timing – oscillators, clocks, and resonators combined with depth in engineering expertise in Precision Timing solutions.

We sell our products primarily through distributors, who in turn sell to our end customers. We also sell products directly to some of our end customers. We leverage our global network of distributors to address the broad set of end markets we serve. For our largest accounts, dedicated sales personnel work with the end customer to ensure that our solutions fully address the end customer’s timing needs. Our smaller customers can select the optimum timing solution for their needs by working directly with our sales personnel or distributors or by shopping on our online store, SiTimeDirect™.

We operate a fabless business model, where we outsource manufacturing to semiconductor industry suppliers, which allows us to focus on, and excel in, the design, marketing, and sales of our products. A fabless infrastructure gives us production flexibility and the ability to scale capacity up and down quickly to meet demand. While this model allows us to operate with lower capital expenditure investment than other semiconductor companies that own fabs, we may be required to make such investments from time to time primarily to strengthen our supply chain and optimize our costs. These investments could put downward pressure on our gross margins if demand for our products does not materialize as expected. Our programmable architecture also plays a key role in ensuring optimal production flexibility, as it allows us to offer shorter lead times and the ability to meet custom requirements more easily.

Since our IPO in November 2019, while our revenue has grown, gross margins have improved, and new opportunities for growth for our business have emerged, adverse macroeconomic events including geopolitical tensions and conflicts have substantially increased. In 2020 and 2021, there were a number of industry-wide supply constraints affecting the supply of

Table o f Contents

analog circuits manufactured by certain foundries, including Taiwan Semiconductor Manufacturing Company ("TSMC"), and affecting outsourced semiconductor assembly and test providers. We believe that the effects of the industry-wide supply constraints on other timing device suppliers contributed in part to our revenue and gross margin growth in 2021 and the first half of 2022. In 2022 and 2023 macroeconomic events such as rising inflation, fear of recession, equity market volatility, geopolitical tensions, war, decreased consumer spending, lower demand for electronic products following a period of strong demand during the COVID-19 pandemic, supply chain disruptions, and the COVID-19 pandemic measures implemented in China, harmed sales of our products and results of operations. We believe that some of our customers built up inventory of our products in 2022 to overcome the industry-wide supply constraints that occurred in the previous periods and that the macroeconomic events in the second half of 2022 and through 2023 led to reduced demand for our customers' products, which led to an inventory buildup at some of our customers and their affiliates, partners and contract manufacturers, which has adversely affected sales of our products. We believe that while this inventory buildup has reduced through the second half of 2023 and in 2024, any further increase could negatively impact the sales of our products and could result in decreases in our sales and margins, and could materially harm our results of operations. The future effects of macroeconomic events on our business and results of operations, including inventory levels at our customer and their affiliates, partners, and contract manufacturers as well as demand for our products, are uncertain and difficult to predict. For additional discussion please see Part II, Item 1A "Risk Factors" of this report, especially the risk factor titled “Global macroeconomic conditions have harmed and may continue to harm our business” and “Our revenue and operating results may fluctuate from period to period, which could cause our stock price to fluctuate.”

We have employees in Finland, France, Germany, Japan, Korea, Malaysia, the Netherlands, Taiwan, Ukraine, India, and the U.S.

Results of Operations

Revenue

We derive revenue primarily from sales of Precision Timing solutions to distributors who in turn sell to our end customers. We also sell products directly to some of our end customers. Our sales are made pursuant to standard purchase orders which may be cancelled, reduced, or rescheduled, with little or no notice. We recognize product revenue upon shipment when we satisfy our performance obligations as evidenced by the transfer of control of our products to customers. We measure revenue based on the amount of consideration we expect to be entitled to in exchange for products.


	Three Months Ended June 30,				Change				Six Months Ended June 30,				Change
	2024		2023		$		%		2024		2023		$		%

	(in thousands except percentage)								(in thousands except percentage)
Revenue	$	43,866	$	27,728	$	16,138	58	%	$	76,888	$	66,070	$	10,818	16	%

Revenue increased by $16.1 million, or 58%, for the three months ended June 30, 2024 compared to the same period in the prior year. The increase was primarily related to an increase in sales volume as well as increase in average selling prices ("ASPs") of our products due to change in mix of the products we shipped. Lower sales volume in the prior year was driven by excess inventory buildup at many of our customers, including our largest end customer, distributors and their affiliates, partners, and contract manufacturers, and lower demand for our products due to macroeconomic conditions.

Revenue increased by $10.8 million, or 16.4%, for the six months ended June 30, 2024 compared to the same period in the prior year. The increase was primarily related to an increase in sales volume, partially offset by a decrease in ASPs. Lower sales volume in the prior year was driven by excess inventory buildup at many of our customers, including our largest end customer, distributors and their affiliates, partners, and contract manufacturers, and lower demand for our products due to macroeconomic conditions. Lower ASPs of our products were related to change in mix of the products we shipped.

Sales attributable to our largest end customer through multiple distributors accounted for 18% and 16% of our revenue for the three months ended June 30, 2024 and 2023, respectively, and 18% and 9% of our revenue for the six months ended June 30, 2024 and 2023, respectively. Our end customers predominantly purchase our products from distributors. Our top three customers by revenue, which are distributors, together accounted for approximately 55% and 45% of our revenue for the three months ended June 30, 2024 and 2023, respectively, and 54% and 44% of our revenues for the six months ended June 30, 2024 and 2023, respectively. Revenue attributable to our largest ten end customers accounted for 59% and 42% for the three months ended June 30, 2024 and 2023, respectively, and 57% and 40% of our revenues for the six months ended June 30, 2024 and 2023, respectively.

Table o f Contents

Cost of Revenue, Gross Profit, and Gross Margin

Cost of revenue consists of wafers acquired from third-party foundries, assembly, packaging, and test cost of our products paid to third-party contract manufacturers, amortization of acquired intangibles and personnel and other costs associated with our manufacturing operations. Cost of revenue also includes depreciation of production equipment, inventory write-downs, amortization of internally developed software, shipping and handling costs, and allocation of overhead and facility costs. We also include credits for rebates received from foundries to cost of revenue.


	Three Months Ended June 30,						Change				Six Months Ended June 30,						Change
	2024			2023			$		%		2024			2023			$		%

	(in thousands except percentage)										(in thousands except percentage)
Cost of Revenue	$	22,343		$	12,290		$	10,053	82	%	$	37,705		$	27,592		$	10,113	37	%
Gross Profit	$	21,523		$	15,438		$	6,085	39	%	$	39,183		$	38,478		$	705	2	%
Gross Margin	49		%	56		%					51		%	58		%

Gross profit increased by $6.1 million in the three months ended June 30, 2024 compared to the same period in the prior year. Gross profit increased $11.6 million mainly from higher revenue. This increase was partially offset by higher stock-based compensation expense of $3.4 million due to new grants, and higher other manufacturing and overhead costs of $2.1 million, which primarily consists of depreciation and amortization, freight outwards and inventory reserves.

Gross profit increased by $0.7 million in the six months ended June 30, 2024 compared to the same period in the prior year. Gross profit increased $7.1 million mainly from higher revenue. This increase was partially offset by higher stock-based compensation expense of $4.6 million and higher other manufacturing and overhead costs of $1.8 million.

Gross margin was lower by 7% in the three months ended June 30, 2024 compared to the same period in the prior year. The decrease was primarily due to an increase in stock-based compensation expense by 8%. This increase was partially offset by the positive impact of higher sales resulting in a favorable absorption of our manufacturing overhead costs by 1%.

Gross margin was lower by 7% in the six months ended June 30, 2024 compared to the same period in the prior year. Of the decrease, 6% was mainly due to higher stock-based compensation expense and the additional 1% decline was due to lower ASP for the six months ended June 30, 2024.

Gross margin may fluctuate from time to time due to a variety of factors. For additional discussion please see Part II, Item 1A "Risk Factors" of this report, especially the risk factor titled “Our gross margins may fluctuate due to a variety of factors, which could negatively impact our results of operations and our financial condition.”

Operating Expenses

Our operating expenses consist of research and development, selling, general and administrative expenses, and acquisition related costs. Personnel costs are the most significant component of our operating expenses and consist of salaries, benefits, bonuses, stock-based compensation, and commissions. Our operating expenses also include consulting costs, allocated costs of facilities, information technology and depreciation.


	Three Months Ended June 30,				Change				Six Months Ended June 30,				Change
	2024		2023		$		%		2024		2023		$		%

	(in thousands except percentage)								(in thousands except percentage)
Operating Expenses:
Research and development	$	25,490	$	26,567	$	(1,077)	(4	%)	$	51,034	$	51,024	$	10	0	%
Selling, general and administrative	25,190		21,276		3,914		18	%	49,102		42,009		7,093		17	%
Acquisition related costs	3,163		—		3,163		n/a		6,405		—		6,405		n/a
Total operating expenses	$	53,843	$	47,843	$	6,000	13	%	$	106,541	$	93,033	$	13,508	15	%

Table o f Contents

Research and Development

Our research and development efforts are focused on the design and development of Precision Timing solutions. Our research and development expense consists primarily of personnel costs, pre-production engineering mask costs, software license expenses, design tools and prototype-related expenses, facility costs, supplies, professional and consulting fees, and allocated overhead costs, which may be offset by non-recurring engineering contra-expenses recorded in certain periods. There is no assurance that we will have non-recurring engineering contra-expense from period to period. We expense research and development costs as incurred. We believe that continued investment in our products and services is important for our future growth and acquisition of new customers and, as a result, we expect our research and development expenses to continue to increase in absolute dollars. However, we expect our research and development expenses to fluctuate as a percentage of revenue from period to period depending on the timing of these expenses.

Research and development expense decreased by $1.1 million, or 4%, for the three months ended June 30, 2024 compared to the same period in the prior year, primarily due to a decrease in stock-based compensation expense of $0.6 million and lower engineering spend towards ongoing new product development of $0.4 million.

Research and development expense increased by an immaterial amount for the six months ended June 30, 2024 compared to the same period in the prior year. The change in the current year was primarily due to an increase in stock-based compensation expense of $0.6 million, a reduction in non-recurring engineering contra-expense recognized of $0.8 million, and an increase in depreciation and amortization of lab equipment and licenses of $0.4 million, and offset by lower engineering spend towards ongoing new product development of $1.0 million and lower personnel costs of $0.7 million.

Sales, General and Administrative

Sales, general and administrative expense consists of personnel costs, professional and consulting fees, accounting and audit fees, legal costs, field application engineering support, travel costs, advertising expenses and allocated overhead costs. We expect sales, general and administrative expenses to continue to increase in absolute dollars as we increase our personnel and grow our operations, although it may fluctuate as a percentage of revenue from period to period depending on the timing of these expenses.

Selling, general and administrative expense increased by $3.9 million, or 18%, for the three months ended June 30, 2024 compared to the same period in the prior year, primarily due to higher stock-based compensation expense of $2.7 million due to new grants, higher other personnel costs of $1.1 million, and higher sales commission payouts due to higher sales of $0.5 million, partially offset by reduction in consulting fees of $0.6 million.

Selling, general and administrative expense increased by $7.1 million, or 17%, for the six months ended June 30, 2024 compared to the same period in the prior year, primarily due to higher stock-based compensation expense of $5.2 million due to new grants, higher other personnel costs of $1.7 million, higher advertising spend of $0.2 million and higher sales commission payouts due to higher sales of $0.2 million, offset by reduction in consulting fees of $0.8 million.

Acquisition related costs

Acquisition related costs include legal, regulatory, consulting, and other costs incurred towards the acquisition closed during the year ended December 31, 2023 and changes in the fair value of the sales based earnout liability and acquisition consideration payable. The acquisition related costs incurred for the three and six months ended June 30, 2024 were related to the Aura transaction. We will incur incremental costs in 2024 and beyond related to the Aura transaction arising from changes in the fair value of the sales based earnout liability and acquisition consideration payable.

Interest Income

Interest income consists primarily of interest income on short term investments.


	Three Months Ended June 30,				Change				Six Months Ended June 30,				Change
	2024		2023		$		%		2024		2023		$		%

	(in thousands except percentage)								(in thousands except percentage)
Interest Income	$	5,736	$	6,667	$	(931)	(14	%)	$	12,296	$	12,297	$	(1)	—	%

Interest income decreased by $0.9 million for the three months ended June 30, 2024, compared to the same period in the prior year due to a decrease in investment balances upon payment of acquisition consideration and earnout in the current quarter.

Interest income changed by an immaterial amount for the six months ended June 30, 2024, compared to the same period in the prior year.

Table o f Contents

Other Expense, net

Other expense, net consists primarily of foreign exchange gains and losses.


	Three Months Ended June 30,				Change				Six Months Ended June 30,				Change
	2024		2023		$		%		2024		2023		$		%

	(in thousands except percentage)								(in thousands except percentage)
Other expense, net	$	(203)	$	(161)	$	(42)	26	%	$	(416)	$	(61)	$	(355)	582	%

Other expense, net, increased by an immaterial amount for the three months ended June 30, 2024, compared to the same period in the prior year.

Other expense, net, increased by $0.4 million for the six months ended June 30, 2024, compared to the same period in the prior year, primarily due to an increase in net unrealized loss on foreign exchange rates due to increased activities in our foreign subsidiaries and unfavorable exchange rate fluctuations.

Income Tax Benefit (Expense)

Income tax benefit (expense) consists primarily of state income taxes and income taxes in certain foreign jurisdictions in which we conduct business. We have a full valuation allowance for deferred tax assets as the realization of the full amount of our deferred tax asset is uncertain, including NOL carryforwards, and tax credits related primarily to research and development. We expect to maintain this full valuation allowance until realization of the deferred tax assets becomes more likely than not.


	Three Months Ended June 30,				Change				Six Months Ended June 30,				Change
	2024		2023		$		%		2024		2023		$		%

	(in thousands except percentage)								(in thousands except percentage)
Income tax benefit (expense)	$	18	$	(23)	$	41	(180	%)	$	5	$	(93)	$	98	(105	%)

Liquidity and Capital Resources

As of June 30, 2024 and December 31, 2023, we had cash and cash equivalents of $16.6 million and $9.5 million, respectively. As of June 30, 2024 and December 31, 2023 we also held $435.9 million and $518.7 million of short-term investments, respectively in held-to-maturity securities which consisted of treasury bills. Our principal use of cash is to fund our operations, to support growth through capital investments, and to acquire complementary businesses, products, services or technologies in the future.

In February 2024, we entered into a Sales Agreement ("Sales Agreement") with Stifel, Nicolaus & Company, Incorporated ("Stifel"), under which we may offer and sell from time to time at our sole discretion, up to an aggregate of 1,200,000 shares of our common stock, par value $0.0001 per share, through Stifel as our sales agent. During the six months ended June 30, 2024, we sold 132,500 shares of our common stock under the Sales Agreement at a weighted average price of $118.69 per share resulting in net proceeds to us of $15.0 million, after deducting underwriting discounts and commissions and offering costs. The Company used the net proceeds from the shares of common stock offered and sold to replenish funds expended to satisfy anticipated tax withholding and remittance obligations related to the net settlement upon vesting of restricted stock unit awards (“RSU”) granted to employees under the equity incentive plans.

Our purchase obligations primarily include design and simulation licenses and non-cancelable purchase commitments from agreements with our contract manufacturers as well as a multi-year purchase agreement with commitment to purchase minimum quantities of MEMS wafers and research and development, tooling and sample cost under the agreement. For information about our contractual obligations refer to "Note 5 - Leases" and "Note 9 - Commitments and Contingencies" of the Notes to Condensed Consolidated Financial Statements for the period ending June 30, 2024.

We expect to continue our investing activities to support growth, primarily through the purchase of property and equipment, intellectual property licenses, and capitalized software, to support research and development, sales and marketing, product support, and administrative staff.

We believe that our existing cash and cash equivalents and our short-term investments will be sufficient to meet our cash needs for at least the next 12 months. Over the longer term, our future capital requirements will depend on many factors,

Table o f Contents

including our growth rate, the timing and extent of our sales and marketing and research and development expenditures, costs to acquire or invest in complementary businesses and technologies, payment obligations associated with our completed acquisitions based on achievement of certain milestones, and the continuing market acceptance of our solutions. In the event that we need to borrow funds or issue additional equity, we cannot provide any assurance that any such additional financing will be available on terms acceptable to us, if at all. If we are unable to raise additional capital when we need it, it would harm our business, results of operations and financial condition.

The table below summarizes our cash flows for the periods indicated:


	Six Months Ended June 30,
	2024		2023

	(in thousands)
Net cash provided by operating activities	$	1,548	$	12,017
Net cash provided by (used in) investing activities	78,412		(18,266)
Net cash (used in) provided by financing activities	(72,791)		2,021
Net increase in cash and cash equivalents	$	7,169	$	(4,228)

Operating Activities

In the six months ended June 30, 2024, net cash provided by operating activities of $1.5 million was primarily due to a net loss of $55.5 million, payments towards the Aura transaction of $1.1 million and a change in operating assets and liabilities of $6.6 million, offset by non-cash expenses of $64.7 million. Non-cash expenses were mainly related to stock-based compensation expense, depreciation and amortization, change in fair value of sales based earnout liability and acquisition consideration payable, inventory write-down and net change in unrealized interest on held to maturity investments. The changes in operating assets and liabilities resulted in cash used primarily due to an increase in inventories as we built our wafer inventory levels, and an increase in prepaid expenses and other assets due to timing of payments, lower accounts payable and accrued expenses primarily due to timing of accrued payroll and related benefit payments, partially offset by lower accounts receivable due to timing of payments.

Investing Activities

Our investing activities consist primarily of purchase and maturities of short-term investments and capital expenditures for property and equipment purchases. Our short-term investments were primarily in treasury bills to earn interest. Our capital expenditures for property and equipment have primarily been for general business purposes, including machinery and equipment, leasehold improvements, acquired software, computer equipment used internally, and production masks to manufacture our products.

In the six months ended June 30, 2024, net cash provided by investing activities was $78.4 million. We paid $344.0 million to purchase short-term investments in held-to-maturity securities. We paid $5.6 million largely to purchase test and other manufacturing equipment and intangibles to support the general business operations. All such payments were offset by $428.0 million proceeds from the maturity of held to maturity investments.

Financing Activities

Our financing activities have primarily consisted of proceeds from issuance of shares, payments of withholding taxes on restricted stock units and payment of acquisition related consideration and earnouts. During the six months ended June 30, 2024, we sold 132,500 shares of our common stock under the Sales Agreement resulting in net proceeds to us of $15.0 million, after deducting underwriting discounts and commissions of $0.3 million and offering costs of $0.4 million. The net proceeds from the Sales Agreement were offset by tax withholdings paid on behalf of employees for net share settlement of $20.4 million, payment towards the Aura transaction of $61.9 million and related payment of earnouts of $5.6 million.

Off-Balance Sheet Arrangements

During the periods presented, we did not have any relationships with unconsolidated entities or financial partnerships, such as entities often referred to as structured finance or special purpose entities, which would have been established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes.

Critical Accounting Estimates

Our condensed consolidated financial statements have been prepared in accordance with GAAP. The preparation of these financial statements and accompanying disclosures requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosures of contingent assets and liabilities in the consolidated financial statements and the accompanying notes. The Securities and Exchange Commission (the "SEC"), has

Table o f Contents

defined a company’s critical accounting estimates as estimates that are most important to the portrayal of a company’s financial condition and results of operations, and which require a company to make its most difficult and subjective judgments, often as a result of the need to make estimates of matters that are inherently uncertain. Based on this definition, we have identified our most critical accounting estimates to be as follows: (1) revenue recognition; (2) business combinations; and (3) inventory. Although we believe that our estimates, assumptions, and judgments are reasonable, they are based upon information not presently available. Actual results may differ significantly from these estimates if the assumptions, judgments, and conditions upon which they are based turn out to be inaccurate. Management believes that there have been no significant changes to the items that we disclosed as our critical accounting estimates in Management’s Discussion and Analysis of Financial Condition and Results of Operations, in our Annual Report on Form 10-K for the year ended December 31, 2023 filed with the SEC on February 26, 2024.

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

Foreign Currency Risk

Substantially all of our revenue is denominated in U.S. dollars. Our expenses are generally denominated in the currencies in which our operations are located, which is primarily in the United States and, to a lesser extent, in Finland, France, Japan, Germany, Korea, Malaysia, the Netherlands, Taiwan, Ukraine, and India. Our results of operations and cash flows are, therefore, subject to fluctuations due to changes in foreign currency exchange rates and may be adversely affected in the future due to changes in foreign exchange rates. The effect of a hypothetical 10% change in foreign currency exchanges rates applicable to our business would not have a material impact on our historical consolidated financial statements. We do not currently have a hedging program with respect to foreign currency exchange risk.

Interest Rate Risk

We had cash and cash equivalents of $16.6 million and $9.5 million as of June 30, 2024 and December 31, 2023, respectively, consisting of bank deposits, money market funds and treasury bills. We also had short-term investments in held-to-maturity securities of $435.9 million and $518.7 million consisting of treasury bills as of June 30, 2024 and December 31, 2023. Such interest-earning instruments carry a degree of interest rate risk. During the six months ended June 30, 2024 we have generated $12.3 million in interest income through our investment balance.

We do not enter into investments for trading or speculative purposes and have not used any derivative financial instruments to manage our interest rate risk exposure. As of June 30, 2024, a hypothetical 10% increase or decrease in market interest rates would change the fair value and related interest income on our interest-earning instruments of $435.9 million, by an increase or decrease of approximately $1.2 million for the six months ended June 30, 2024.

Item 4. Controls and Procedures.

Evaluation of Disclosure Controls and Procedures

We maintain “disclosure controls and procedures,” as such term is defined in Rules 13a-15(e) and 15d – 15(e) under the Exchange Act, that are designed to provide reasonable assurance that information required to be disclosed by us in reports we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and that such information is accumulated and communicated to our management, including our Chief Executive Officer (principal executive officer) and Chief Financial Officer (principal financial officer), as appropriate, to allow for timely decisions regarding required disclosure.

Our management, including our principal executive and chief executive officer, does not expect that our disclosure controls and procedures or our internal controls, will prevent all error and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within SiTime have been detected.

Based on their evaluation as of the end of the period covered by this Quarterly Report on Form 10-Q, our Chief Executive Officer and Chief Financial Officer have concluded that, as of such date, our disclosure controls and procedures were effective.

Table o f Contents

Changes in Internal Control Over Financial Reporting

There have been no changes in our internal control over financial reporting during the three months ended June 30, 2024 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Table o f Contents

PART II—OTHER INFORMATION

Item 1. Legal Proceedings.

The information required by this item is included in Note 9 of the Notes to Condensed Consolidated Financial Statements in Part I, Item 1 of this Quarterly Report on Form 10-Q and is incorporated herein by reference.

Item 1A. Risk Factors.

Risks Related to Our Business and Our Industry

Global macroeconomic conditions have harmed and may continue to harm our business.

We are a global company and therefore our business, results of operations, and financial condition are impacted by global macroeconomic conditions. Macroeconomic events such as rising inflation, recession, equity market volatility, geopolitical tensions, war, declines in income or asset values, decreased spending, changes to fuel and other energy costs, public health crises, supply chain disruptions, trade restrictions and sanctions, and global banking concerns have caused economic volatility, which has and may continue to harm our business, financial condition, and results of operations, and may cause an extended downturn in the worldwide economy, which would further harm our business, financial condition and results of operations. Economic volatility and adverse economic conditions have affected and may continue to affect the demand for our products and our customers’ products. Reduced demand for our customers’ products has led to a buildup of inventory at many of our customers, including distributors, and their affiliates, partners, and contract manufacturers, which has and may continue to adversely affect demand for our products. Reduced demand for our products could result in significant decreases in our sales and margins, and could materially harm our results of operations. The future effects of macroeconomic events on our business and results of operations, including inventory levels at our customers and their affiliates, partners, and contract manufacturers as well as demand for our products, are uncertain and difficult to predict.

A deterioration in credit markets as a result of macroeconomic events could also limit our ability to obtain external financing to fund our operations and capital expenditures. We may experience losses on our holdings of cash and investments due to failures of financial institutions and other parties. Further, adverse economic conditions may also result in a higher rate of losses on our accounts receivable due to credit defaults. As a result, global macroeconomic conditions have had and may continue to have a material adverse effect on our business, results of operations, and financial condition.

We are subject to the cyclical nature of the semiconductor industry.

The semiconductor industry is highly cyclical and is characterized by constant and rapid technological change, rapid product obsolescence, price erosion, evolving standards, short product life cycles, and wide fluctuations in product supply and demand. From time to time, these factors, together with changes in macroeconomic conditions, can cause significant upturns and downturns in the semiconductor industry, and in our business. Downturns in the semiconductor industry have been characterized by diminished product demand, production overcapacity, high inventory levels for us and our customers, and erosion of average selling prices. For example, in 2023 we experienced, and we may in the future experience, customer inventory adjustments that may adversely affect our results of operations. Any downturns in the semiconductor industry could harm our business, financial condition, and results of operations. Any significant upturn in the semiconductor industry could result in increased competition for access to third-party foundry and assembly capacity. We are dependent on the availability of this capacity to manufacture and assemble our products and we can provide no assurance that adequate capacity will be available to us in the future. We cannot predict the duration or timing of any downturn or upturn in the semiconductor industry.

We have historically depended on a limited number of customers for a significant portion of our revenue. If we are unable to expand or further diversify our customer base, our business, financial condition, and results of operations could suffer, and the loss of, or a significant reduction in orders from our customers, including a large customer or end customer, could significantly reduce our revenue and adversely impact our operating results.

Historically we have derived a significant portion of our revenue from a limited number of customers. We sell our products primarily through distributors, who in turn sell to our end customers. We also sell directly to our end customers. Our top three distributors by revenue together accounted for approximately 55% and 45% of our revenue for the three months ended June 30, 2024 and 2023, respectively, and 54% and 44% of our revenue six months ended June 30, 2024 and 2023 respectively. Based on our shipment information, we believe that revenue attributable to our ten largest end customers accounted for 59% and 42% of our revenue for the three months ended June 30, 2024 and 2023, respectively, and 57% and 40% of our revenue for the six months ended June 30, 2024 and 2023 respectively. Sales attributable to Apple Inc., our largest end customer accounted for approximately 18% and 16% of our revenue for the three months ended June 30, 2024 and 2023 respectively, and 18% and 9% of our revenue for the six months ended June 30, 2024 and 2023 respectively. We

Table o f Contents

anticipate revenue attributable to this customer will fluctuate from period to period. Although we sell our products to this customer through distributors on a purchase order basis, including Pernas Electronics Co., Ltd. (“Pernas”), Arrow Electronics, Inc. (“Arrow”), and Quantek Technology Corporation (“Quantek”), we have a development and supply agreement, which provides a general framework for certain transactions with Apple. This agreement continues until either party terminates for material breach. Under this agreement, we have agreed to develop and deliver new products to this end customer at its request, provided it also meets our business purposes, and have agreed to indemnify it for intellectual property infringement or any injury or damages caused by our products. This end customer does not have any minimum or binding purchase obligations to us under this agreement and could elect to discontinue making purchases from us with little or no notice. We expect the composition of our largest end customers to vary from period to period, and that revenue attributable to our largest ten end customers in any given period may decline over time. Our relationships with existing customers may deter potential customers who compete with these customers from buying our Precision Timing solutions.

We believe our operating results for the foreseeable future will continue to depend to a significant extent on sales attributable to a limited number of customers and end customers. If we are unable to expand or further diversify our customer base, it could harm our business, financial condition, and results of operations.

If our end customers were to choose to work with other manufacturers or our relationships with our customers are disrupted for any reason, it could have a significant negative impact on our business. Any reduction in sales attributable to our larger customers and end customers, including our largest end customer, would have a significant and disproportionate impact on our business, financial condition, and results of operations. Geopolitical tensions are leading to an increasing trend of customers seeking domestically produced products or reducing the dependence upon or use of products from certain countries, which could limit our ability to make sales to these customers.

Our end customers, or the distributors through which we sell to these customers, may choose to use products in addition to ours, use a different product altogether, or develop an in-house solution. In addition, the inability of our customers or their contract manufacturers to obtain sufficient supplies of third-party components used with our products could result in a decline in the demand of our products and a loss of sales. Any of these events could significantly harm our business, financial condition, and results of operations. Further, if our distributors’ relationships with our end customers, including our larger end customers, are disrupted for inability to deliver sufficient products or for any other reason, it could have a significant negative impact on our business, financial condition, and results of operations.

Because we do not typically have long-term purchase commitments with our customers, orders may be cancelled, reduced, or rescheduled with little or no notice, which in turn exposes us to inventory risk, and may cause our business and results of operations to suffer.

We sell our products primarily through distributors, usually with no long-term or minimum purchase commitments from them or their end customers. Substantially all of our sales to date have been made on a purchase order basis, which orders may be cancelled, changed, or rescheduled with little or no notice or penalty. As a result, our revenue and operating results could fluctuate materially and could be materially and disproportionately impacted by purchasing decisions of our customers, including our larger customers. In the future, our distributors or their end customers may decide to purchase fewer units than they have in the past, may alter their purchasing patterns at any time with limited or no notice, or may decide not to continue to purchase our Precision Timing solutions at all, any of which could cause our revenue to decline materially and materially harm our business, financial condition, and results of operations. Cancellations of, reductions in, or rescheduling of customer orders could also result in the loss of anticipated sales without allowing us sufficient time to reduce our inventory and operating expenses, as a substantial portion of our expenses are fixed at least in the short term. In addition, forecasts provided by customers, end customers, or their affiliates or contract manufacturers may change or may later prove to have been inaccurate which could make demand for our products difficult for us to predict and could expose us to the risks of inventory shortages or excess inventory and materially harm our results of operations. As we no longer intend to acquire inventory to pre-build custom products, we may not be able to fulfill increased demand in the short term. Any of the foregoing events could materially and adversely affect our business, financial condition, and results of operations.

Our revenue and operating results may fluctuate from period to period, which could cause our stock price to fluctuate.

Our revenue and operating results have fluctuated in the past and may fluctuate from period to period in the future due to a variety of factors, many of which are beyond our control. We expect our revenue to fluctuate in the future primarily based on the volume of shipments of our products and average selling price ("ASP") changes. Factors relating to our business that may contribute to fluctuations in our operating results include the following factors, as well as other factors described elsewhere in this report:

•macroeconomic conditions;

•cyclical fluctuations in the semiconductor market;

Table o f Contents

•customer demand and product life cycles;

•the receipt, reduction, or cancellation of, or changes in the forecasts or timing of, orders by customers;

•fluctuations in the levels of inventories held by our distributors or end customers;

•the gain or loss of significant customers;

•changes in our pricing, product cost, and product mix;

•supply chain disruptions, delays, shortages, and capacity limitations;

•market acceptance of our products and our customers’ products;

•our ability to develop, introduce, and market new products and technologies on a timely basis;

•the timing and extent of product development costs;

•new product announcements and introductions by us or our competitors;

•our research and development costs and related new product expenditures and our ability to achieve cost reductions in a timely or predictable manner;

•seasonality and fluctuations in sales by product manufacturers that incorporate our Precision Timing solutions into their products;

•end-market demand into which we have limited insight, including cyclicality, seasonality, and the competitive landscape;

•socioeconomic or political conditions in the countries where we operate or where our products are sold or used;

•the impact of any pandemic, epidemic, or outbreak of disease, including the emergence of new variants of the COVID-19 pandemic, on our business, suppliers, and customers;

•fluctuations in our manufacturing yields;

•significant warranty claims, including those not covered by our suppliers;

•new accounting pronouncements or changes in existing accounting standards; and

•loss of one or more of our executive officers or other key employees;

As a result of these and other factors, you should not rely on the results of any prior quarterly or annual periods, or any historical trends reflected in such results, as indications of our future revenue or operating performance. Fluctuations in our revenue and operating results could cause our stock price to decline and, as a result, you may lose some or all of your investment.

We depend on third parties for our wafer fabrication, assembly, packaging, and testing operations, which exposes us to certain risks that may harm our business.

We operate an outsourced manufacturing business model. As a result, we rely on third parties for all of our manufacturing operations, including wafer fabrication, assembly, packaging, and testing. Although we use multiple third-party supplier sources, we depend on these third parties to supply us with material of a requested quantity in a timely manner that meets our standards for yield, cost, and manufacturing quality. The manufacturing processes of our third-party suppliers for our products require specialized technology that requires certain raw and engineered materials. Many major components, product equipment items, engineered materials, and raw materials, that are procured or subcontracted by our third-party suppliers for manufacturing of our products are procured or subcontracted on a single or sole-source basis. Except for our agreement with Bosch for MEMS wafers, we do not have any long-term supply agreements with any of our other manufacturing suppliers. These third-party manufacturers often serve customers that are larger than us or require a greater portion of their services, which may decrease our relative importance and negotiating leverage with these third parties.

If market demand for wafers or production and assembly materials increases, if a supplier of our wafers fails to procure materials needed for manufacture of our products, or if a supplier of our wafers ceases or suspends operations, our supply of wafers and other materials could become limited. We currently have a ten-year supply agreement with Bosch for the fabrication of our MEMS wafers. The initial term of this supply agreement is through February 2027 and automatically renews. We currently rely on Bosch for our MEMS fabrication, and primarily on TSMC for our analog circuits fabrication,

Table o f Contents

and any disruption in the supply of wafers or any increases in the wafer or materials prices could adversely affect our gross margins and our ability to meet customer demands in a timely manner, or at all, and lead to reduced revenue. In 2021 and the first half of 2022 there were a number of industry-wide supply constraints affecting the supply of analog circuits manufactured by certain foundries, including TSMC, and affecting outsourced semiconductor assembly and test providers (“OSATs”), which limited our ability to fully satisfy an increase in demand for some of our products. Moreover, wafers constitute a large portion of our product cost. If we are unable to negotiate volume discounts or otherwise purchase wafers at favorable prices and in sufficient quantities in a timely manner, our ability to ship our solutions to our customers on time and in the quantity required could be adversely affected, which in turn could cause an unanticipated decline in our sales, harm to our customer relationships, and our gross margins to be adversely affected.

To ensure continued wafer supply, we may be required to establish alternative wafer supply sources, which could require significant expenditures and limit our negotiating leverage. We currently rely on Bosch and TSMC as our primary foundries and suppliers for our MEMS timing devices and analog circuits, respectively, and only a few foundry vendors have the capability to manufacture our most advanced solutions, in particular with respect to our MEMS solution. If we engage alternative supply sources, we may incur additional costs and encounter difficulties and/or delays in qualifying the supply sources. For example, we have a license agreement with Bosch under which Bosch granted us a license to use certain patents. Under this agreement, we are required to pay a royalty fee to Bosch if we engage third parties to manufacture, or if we decide to manufacture ourselves, certain generations of our MEMS wafers through March 31, 2024. In addition, shipments could be significantly delayed while these sources are qualified for volume production. If we are unable to maintain our relationship with Bosch or TSMC, our ability to produce high-quality products could suffer, which in turn could harm our business, financial condition, and results of operations.

We currently primarily rely on Advanced Semiconductor Engineering, Inc. (“ASE”), Carsem (M) Sdn. Bhd. (“Carsem”), and United Test and Assembly Center Ltd. (“UTAC”) for assembly and testing, as well as Daishinku Corp. (“Daishinku”), UTAC, Hana Semiconductor (Ayutthaya) Co., Ltd, and ASE for ceramic packaging for some of our products. We enter into capacity agreements with certain of our OSATs from time to time which may adversely impact our gross margins and results of operations if we do not purchase required minimum quantities.

Certain of our manufacturing, packaging, assembly, and testing facilities are located outside of the United States, including Malaysia, Taiwan, and Thailand, where we are subject to increased risk of political and economic instability, difficulties in managing operations, difficulties in enforcing contracts and our intellectual property, severe weather, and employment and labor difficulties. Additionally, public health crises, such as an outbreak of contagious diseases like the COVID-19 pandemic, may affect the production capabilities of our suppliers, including as a result of quarantines, closures of production facilities, lack of supplies, or delays caused by restrictions on travel or work-from-home orders. Restrictions like these could limit our suppliers’ ability to operate their manufacturing facilities.

Any of these factors could result in manufacturing and supply problems, and delays in our ability to provide our solutions to our customers on a timely basis, or at all. If we experience manufacturing problems at a particular location, we may be required to transfer manufacturing to a new location or supplier. Converting or transferring manufacturing from a primary location or supplier to a backup facility could be expensive and could take several quarters or more. During such a transition, we would be required to meet customer demand from our then-existing inventory, as well as any partially finished goods that could be modified to the required product specifications. In addition, our end customers may require requalification with a new wafer manufacturer. We typically maintain at least a three-month supply of our MEMS wafers for which Bosch is our primary supplier. We do not otherwise maintain sufficient inventory to address a lengthy transition period. As a result, we may not be able to meet customer needs during such a transition, which could damage our customer relationships. Although we maintain business disruption insurance, this insurance may not be adequate to cover any losses we may experience as a result of such difficulties.

If one or more of the third parties we rely on for our manufacturing operations terminates its relationship with us, or if we encounter any problems with our manufacturing supply chain, our ability to ship our solutions to our customers on time and in the quantity required would be adversely affected, which in turn could cause an unanticipated decline in our sales, harm to our customer relationships and loss of customers.

A significant 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 outsource the fabrication and assembly of all of our products to third parties that are primarily located in Germany and Asia. In addition, we conduct research and development activities in locations including the United States, Japan, the Netherlands, Taiwan, Ukraine, Finland, and India. We also conduct marketing and administrative functions in the United States, Japan, the Netherlands, China, Taiwan, Malaysia, Ukraine, and India. Members of our sales force are located in various locations outside of the United States. Certain of the critical functions for our business are performed in locations outside of the United States. In addition, approximately 91% and 85% of our revenue for the three months ended June 30,

Table o f Contents

2024 and 2023, respectively, and approximately 90% and 82% of our revenue for the six months ended June 30, 2024 and 2023 respectively, was from distributors with ship-to locations outside the United States, although we believe the majority of our end customers are based in the U.S. based on sell-through information provided by these distributors. As a result of our international focus, we face numerous challenges and risks, including:

•complexity and costs of managing international operations, including manufacturing, assembly, and testing of our products and associated costs;

•geopolitical and military conflicts, including the effects of Russia’s invasion of Ukraine;

•economic instability, including the effects of rising inflation and increased interest rates;

•limited protection for, and vulnerability to theft of, our intellectual property rights, including our trade secrets;

•compliance with local laws and regulations and unanticipated changes in local laws and regulations, including tax laws and regulations;

•trade and foreign exchange restrictions and higher tariffs, including the ongoing trade tensions between the U.S. and China that has resulted in higher tariffs on certain semiconductor products and increased trade restrictions;

•timing and availability of import and export licenses and other governmental approvals, permits, and licenses, including export classification requirements;

•foreign currency fluctuations and exchange losses relating to our international operating activities;

•restrictions imposed by the U.S. government or foreign governments on our ability to do business with certain companies or in certain countries as a result of international political conflicts and the complexity of complying with those restrictions;

•transportation delays and other consequences of limited local infrastructure, and disruptions, such as large scale outages or interruptions of service from utilities or telecommunications providers;

•difficulties in staffing international operations;

•changes in immigration policies which may impact our ability to hire personnel;

•local business and cultural factors that differ from our normal standards and practices;

•differing employment practices and labor relations;

•requirements in foreign countries which may impact availability of personnel, such as mandatory military service in countries such as Ukraine, Taiwan, and Finland;

•heightened risk of terrorist acts;

•regional health issues and the impact of public health epidemics on employees and the global economy, such as the worldwide COVID-19 pandemic;

•power outages and natural disasters; and

•travel, work-from-home or other restrictions or stoppages, like those imposed by governments around the world as a result of pandemics.

These risks could harm our international operations, delay new product releases, increase our operating costs, and hinder our ability to grow our operations and business and, consequently, our business, financial condition, and results of operations could suffer. For example, we rely on TSMC in Taiwan for the fabrication of our analog circuits and have engineering personnel in Taiwan and sales force personnel in China. If political tensions between China and Taiwan were to increase further, it could disrupt our business and adversely affect our financial condition and results of operations. In addition, given the current political and military situation in Russia and Ukraine, if the relationship between Russia and the United States worsens further, or we are restricted or precluded from continuing our operations in Ukraine, it could disrupt our business, our costs could increase, and our product development efforts, business, financial condition, and results of operations could be significantly harmed. Further, the COVID-19 pandemic led to travel, work-from-home, and other restrictions, which significantly impacted our domestic and international operations and the operations of our suppliers, distributors, partners, and customers.

Table o f Contents

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. If we do not continue to win designs or our products are not designed into our customers’ product offerings, our results of operations and business will be harmed.

We sell our Precision Timing solutions to customers who select our solutions for inclusion in their product offerings. This selection process is typically lengthy and may require us to incur significant design and development expenditures and dedicate scarce engineering resources in pursuit of a single design win with no assurance that our solutions will be selected. If we fail to convince our current or prospective customers to include our products in their product offerings or to achieve a consistent number of design wins, our business, financial condition, and results of operations will be harmed.

Because of our extended sales cycle, our revenue in future years is highly dependent on design wins we are awarded in prior years. It is typical that a design win will not result in meaningful revenue for a year or more, if at all. If we do not continue to achieve design wins in the short term, our revenue in the following years may deteriorate.

Further, a significant portion of our revenue in any period may depend on a single product design win with a large customer. As a result, the loss of any key design win or any significant delay in the ramp of volume production of the customer’s products into which our product is designed could adversely affect our business, financial condition, and results of operations. We may not be able to maintain sales to our key customers or continue to secure key design wins for a variety of reasons, and our customers can stop incorporating our products into their product offerings with limited notice to us and suffer little or no penalty.

If we fail to anticipate or respond to technological shifts or market demands, or to develop new or enhanced products or technologies in response to the same in a timely manner, it could result in decreased revenue and the loss of our design wins to our competitors. Due to the interdependence of various components in the systems within which our products and the products of our competitors operate, customers are unlikely to change to another design, once adopted, until the next generation of a technology. As a result, if we fail to introduce new or enhanced products that meet the needs of our customers or penetrate new markets in a timely manner, and our designs do not gain acceptance, we will lose market share and our competitive position.

The loss of a key customer or design win, a reduction in sales to any key customer, a significant delay or negative development in our customers’ product development plans, or our inability to attract new significant customers or secure new key design wins could seriously impact our revenue and materially and adversely affect our business, financial condition, and results of operations.

We may experience difficulties demonstrating the value to customers of newer solutions if they believe existing solutions are adequate to meet end customer expectations. If we are unable to sell new generations of our product, our business would be harmed.

As we develop and introduce new solutions, we face the risk that customers may not value or be willing to bear the cost of incorporating these newer solutions into their product offerings, particularly if they believe their customers are satisfied with prior offerings. Regardless of the improved features or superior performance of the newer solutions, customers may be unwilling to adopt our new solutions due to design or pricing constraints. Because of the extensive time and resources that we invest in developing new solutions, if we are unable to sell new generations of our solutions, our revenue could decline and our business, financial condition, and results of operations would be negatively affected.

Some of our customer and other third-party agreements provide for joint and/or custom product development, which subject us to a number of risks, and any failure to execute on any of these arrangements could have a material adverse effect on our business, results of operations, and financial condition.

We have entered into development, product collaboration and technology licensing arrangements with some of our customers and other third parties, and we expect to enter into new arrangements of these kinds from time to time in the future. These agreements may increase risks for us, such as the risks related to timely delivery of new products, risks associated with the ownership of the intellectual property developed, risks that such activities may not result in products that are commercially successful or available in a timely fashion, and risks that third parties involved may abandon or fail to perform their obligations related to such agreements. In addition, such arrangements may provide for exclusivity periods during which we may only sell specified products or technologies to that particular customer. Any failure to develop commercially successful products under such arrangements in a timely manner as a result of any of these and other challenges could have a material adverse effect on our business, results of operations, and financial condition.

The success of our products is dependent on our customers’ ability to develop products that achieve market acceptance, and our customers’ failure to do so could negatively affect our business.

The success of our Precision Timing solutions is heavily dependent on the timely introduction, quality, and market acceptance of our customers’ products incorporating our solutions, which are impacted by factors beyond our control. Our

SITIME Corp [SITM] Filings
10-Q	[2024-08-08]
10-Q	[2024-05-09]
10-K	[2024-02-26]
10-Q	[2023-11-02]
10-Q	[2023-08-03]
10-Q	[2023-05-04]
10-K	[2023-02-27]
10-Q	[2022-11-04]
10-Q	[2022-08-04]
10-Q	[2022-05-05]
10-K	[2022-02-25]
10-Q	[2021-11-04]
10-Q	[2021-08-05]
10-Q	[2021-05-05]
10-K	[2021-02-16]
10-Q	[2020-11-05]
10-Q	[2020-08-06]
S-1	[2020-06-09]
10-Q	[2020-05-07]
10-K	[2020-03-02]
S-1	[2019-10-23]