10-Q 1 sitm-20220331.htm 10-Q 10-Q
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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

 

FORM 10-Q

 

(Mark One)

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

For the quarterly period ended March 31, 2022

OR

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

For the transition period from to

Commission File Number: 001-39135

 

SiTime Corporation

(Exact name of registrant as specified in its charter)

 

 

Delaware

02-0713868

(State or other jurisdiction of

incorporation or organization)

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

5451 Patrick Henry Drive

Santa Clara, CA

95054

(Address of principal executive offices)

(Zip Code)

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

 

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

 

Title of each class

 

Trading Symbol(s)

 

Name of each exchange on which registered

Common Stock, $0.0001 par value per share

 

SITM

 

The Nasdaq Stock Market LLC

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

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

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

 

Large accelerated filer

 

 

Accelerated filer

 

 

 

 

 

Non-accelerated filer

 

 

Smaller reporting company

 

 

 

 

 

 

 

 

Emerging growth company

 

 

 

 

 

 

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

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

 

As of April 29, 2022, the registrant had 21,041,857 shares of common stock, $0.0001 par value per share, outstanding.

 

 


Table of Contents

 

 

 

Page

 

Risk Factor Summary

1

PART I.

FINANCIAL INFORMATION

3

Item 1.

Financial Statements (Unaudited)

3

 

Condensed Consolidated Balance Sheets

3

 

Condensed Consolidated Statements of Operations and Comprehensive Income (Loss)

4

 

Condensed Consolidated Statements of Stockholders’ Equity

5

 

Condensed Consolidated Statements of Cash Flows

6

 

Notes to Unaudited Condensed Consolidated Financial Statements

7

Item 2.

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

16

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

22

Item 4.

Controls and Procedures

22

PART II.

OTHER INFORMATION

 

Item 1.

Legal Proceedings

23

Item 1A.

Risk Factors

23

Item 5

Other Information

43

Item 6.

Exhibits

44

Signatures

45

 

 

i


 

RISK FACTOR SUMMARY

 

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

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

 

1


 

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

 

2


 

PART I—FINANCIAL INFORMATION

 

Item 1. Financial Statements.

SITIME CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except per share amounts)

(Unaudited)

 

 

 

As of

 

 

 

March 31, 2022

 

 

December 31, 2021

 

Assets:

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

Cash and cash equivalents

 

$

571,454

 

 

$

559,461

 

Accounts receivable, net

 

 

30,651

 

 

 

38,376

 

Inventories

 

 

30,753

 

 

 

23,630

 

Prepaid expenses and other current assets

 

 

4,890

 

 

 

4,476

 

Total current assets

 

 

637,748

 

 

 

625,943

 

Property and equipment, net

 

 

44,211

 

 

 

37,902

 

Intangible assets, net

 

 

4,393

 

 

 

5,977

 

Right-of-use assets, net

 

 

11,478

 

 

 

8,194

 

Other assets

 

 

218

 

 

 

193

 

Total assets

 

$

698,048

 

 

$

678,209

 

Liabilities and Stockholders' Equity:

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

Accounts payable

 

$

12,508

 

 

$

13,103

 

Accrued expenses and other current liabilities

 

 

21,565

 

 

 

24,282

 

Total current liabilities

 

 

34,073

 

 

 

37,385

 

Lease liabilities

 

 

8,941

 

 

 

6,398

 

Other non-current liabilities

 

 

1,160

 

 

 

1,929

 

Total liabilities

 

 

44,174

 

 

 

45,712

 

Commitments and contingencies (Note 9)

 

 

 

 

 

 

Stockholders’ equity:

 

 

 

 

 

 

Common stock, $0.0001 par value - 200,000 shares authorized;
   
21,042 and 20,825 shares issued and outstanding at
   March 31, 2022 and December 31, 2021

 

 

2

 

 

 

2

 

Additional paid-in capital

 

 

678,851

 

 

 

663,614

 

Accumulated deficit

 

 

(24,979

)

 

 

(31,119

)

Total stockholders’ equity

 

 

653,874

 

 

 

632,497

 

Total liabilities and stockholders’ equity

 

$

698,048

 

 

$

678,209

 

 

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

 

 

3


 

SITIME CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)

(In thousands, except per share amounts)

(Unaudited)

 

 

 

Three Months Ended March 31,

 

 

 

2022

 

 

2021

 

Revenue

 

$

70,253

 

 

$

35,542

 

Cost of revenue

 

 

25,020

 

 

 

16,725

 

Gross profit

 

 

45,233

 

 

 

18,817

 

Operating expenses:

 

 

 

 

 

 

Research and development

 

 

20,595

 

 

 

11,180

 

Selling, general and administrative

 

 

18,578

 

 

 

11,123

 

Total operating expenses

 

 

39,173

 

 

 

22,303

 

Income (loss) from operations

 

 

6,060

 

 

 

(3,486

)

Other income (expense), net

 

 

148

 

 

 

(39

)

Income (loss) before income taxes

 

 

6,208

 

 

 

(3,525

)

Income tax expense

 

 

(68

)

 

 

(40

)

Net income (loss)

 

$

6,140

 

 

$

(3,565

)

Net income (loss) attributable to common stockholders and
   comprehensive loss

 

$

6,140

 

 

$

(3,565

)

Net income (loss) per share attributable to common
   stockholders, basic

 

$

0.29

 

 

$

(0.20

)

Net income (loss) per share attributable to common
   stockholders, diluted

 

$

0.27

 

 

$

(0.20

)

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

 

 

20,921

 

 

 

17,868

 

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

 

 

22,703

 

 

 

17,868

 

 

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

 

 

4


 

SITIME CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

(In thousands)

(Unaudited)

 

 

 

 

 

 

 

 

 

Additional

 

 

 

 

 

Total

 

 

 

Common Stock

 

 

Paid-in

 

 

Accumulated

 

 

Stockholders'

 

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Deficit

 

 

Equity

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balances at December 31, 2021

 

 

20,825

 

 

$

2

 

 

$

663,614

 

 

$

(31,119

)

 

$

632,497

 

Stock-based compensation expense

 

 

 

 

 

 

 

 

15,237

 

 

 

 

 

 

15,237

 

Net income

 

 

 

 

 

 

 

 

 

 

 

6,140

 

 

 

6,140

 

Issuance of shares upon vesting of restricted stock units

 

 

217

 

 

 

 

 

 

 

 

 

 

 

 

 

Balances at March 31, 2022

 

 

21,042

 

 

$

2

 

 

$

678,851

 

 

$

(24,979

)

 

$

653,874

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balances at December 31, 2020

 

 

17,150

 

 

 

2

 

 

 

173,274

 

 

 

(63,396

)

 

 

109,880

 

Stock-based compensation expense

 

 

 

 

 

 

 

 

7,366

 

 

 

 

 

 

7,366

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

(3,565

)

 

 

(3,565

)

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

 

 

1,500

 

 

 

 

 

 

181,588

 

 

 

 

 

 

181,588

 

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

 

 

190

 

 

 

 

 

 

 

 

 

 

 

 

 

Balances at March 31, 2021

 

 

18,840

 

 

$

2

 

 

$

362,228

 

 

$

(66,961

)

 

$

295,269

 

 

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

 

 

5


 

SITIME CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)

 

 

 

Three Months Ended March 31,

 

 

 

2022

 

 

2021

 

Cash flows from operating activities:

 

 

 

 

 

 

Net income (loss)

 

$

6,140

 

 

$

(3,565

)

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

 

 

 

 

 

 

Depreciation and amortization expense

 

 

2,544

 

 

 

1,617

 

Stock-based compensation expense

 

 

14,280

 

 

 

6,660

 

Changes in assets and liabilities:

 

 

 

 

 

 

Accounts receivable, net

 

 

7,725

 

 

 

1,706

 

Related party accounts receivable

 

 

 

 

 

(240

)

Inventories

 

 

(7,123

)

 

 

(2,630

)

Prepaid expenses and other assets

 

 

(330

)

 

 

72

 

Accounts payable

 

 

(1,515

)

 

 

1,748

 

Accrued expenses and other liabilities

 

 

(1,693

)

 

 

707

 

Net cash provided by operating activities

 

 

20,028

 

 

 

6,075

 

Cash flows from investing activities

 

 

 

 

 

 

Purchase of property and equipment

 

 

(7,452

)

 

 

(3,866

)

Cash paid for intangibles

 

 

(583

)

 

 

(370

)

Net cash used in investing activities

 

 

(8,035

)

 

 

(4,236

)

Cash flows from financing activities

 

 

 

 

 

 

Proceeds from public offering, net of underwriting
discounts and commissions

 

 

 

 

 

181,928

 

Payments for offering costs

 

 

 

 

 

(340

)

Net cash provided by financing activities

 

 

 

 

 

181,588

 

Net increase in cash and cash equivalents

 

 

11,993

 

 

 

183,427

 

Cash and cash equivalents

 

 

 

 

 

 

Beginning of period

 

 

559,461

 

 

 

73,525

 

End of period

 

$

571,454

 

 

$

256,952

 

Supplemental disclosure of cash flow information

 

 

 

 

 

 

Income taxes paid

 

 

14

 

 

 

1

 

Supplemental disclosure of noncash flow information

 

 

 

 

 

 

Unpaid property and equipment

 

 

2,356

 

 

 

1,436

 

Right-of-use assets acquired under operating leases

 

 

3,659

 

 

 

322

 

 

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

 

 

6


 

SITIME CORPORATION

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Note 1. The Company and Basis of Presentation

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

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

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

Outbreak of Coronavirus Disease 2019 (“the COVID-19 pandemic”)

On March 11, 2020, the World Health Organization characterized the outbreak of the coronavirus disease known as COVID-19 as a global pandemic and recommended containment and mitigation measures. On March 13, 2020, the United States declared a national emergency concerning the outbreak, and several states and municipalities have declared public health emergencies. To combat the spread of the COVID-19 pandemic, the United States and other foreign countries in which the Company operates have imposed measures such as quarantines and “shelter-in-place” orders that are restricting business operations and travel and requiring individuals to work from home (“WFH”), which has impacted all aspects of the Company’s business as well as those of the third-parties the Company relies upon for manufacturing, assembly, testing, shipping and other operations.

Since 2021, the Company experienced a growth in demand for some of its products, however, there are a number of industry-wide supply constraints affecting the supply of analog circuits manufactured by certain foundries, and affecting outsourced semiconductor assembly and test providers, which has limited and may continue to limit the Company's ability to fully satisfy the increase in demand. If the Company cannot ship its products to its customers on time and in the quantity required as a result of this supply constraint the Company's sales could decline and the Company could lose customers. As a result of the COVID-19 pandemic the Company has also experienced some delay and disruption in the manufacture, shipment, and sales of its products. In addition, the production capabilities of the Company's suppliers have been, and will likely continue to be, impacted as a result of quarantines, closures of production facilities, lack of supplies, or delays caused by restrictions on travel or WFH orders.

The COVID-19 pandemic has negatively impacted business activity across the globe and has impacted the Company's employees and operations. The inputs into the Company’s judgments and estimates consider the economic implications of the COVID-19 pandemic, as the Company knows them, on the Company’s critical and significant accounting estimates. The extent to which the COVID-19 pandemic may impact the Company’s business will depend on future developments, which are highly uncertain, including the future effects of the COVID-19 pandemic on its employees, customers, suppliers, results of operations, financial condition, or liquidity for 2022 and beyond. To date, the Company has experienced minimal impact from any supplier disruption resulting from COVID-19.

Principles of Consolidation

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

Significant Accounting Policies

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

Recent Accounting Pronouncements

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

 

 

7


 

Note 2. Net Income (Loss) Per Share

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

 

 

 

Three Months Ended March 31,

 

 

 

2022

 

 

2021

 

 

 

(in thousands, except per share data)

 

Net income (loss) attributable to common stockholders

 

$

6,140

 

 

$

(3,565

)

Weighted-average shares outstanding

 

 

 

 

 

 

Weighted average shares used to compute basic net income (loss) per share

 

 

20,921

 

 

 

17,868

 

Dilutive effect of employee equity incentive plans

 

 

1,782

 

 

 

 

Weighted average shares used to compute diluted net income (loss) per share

 

 

22,703

 

 

 

17,868

 

Net income (loss) attributable to common stockholders per share, basic

 

$

0.29

 

 

$

(0.20

)

Net income (loss) attributable to common stockholders per share, diluted

 

$

0.27

 

 

$

(0.20

)

 

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 March 31, 2022 and 2021, the Company had 3,211 potential shares and 2,201,903 potential shares from share-based awards that are anti-dilutive, respectively. Anti-dilutive potential shares from share-based awards are excluded from the calculation of diluted loss per share for the three months ended March 31, 2021 due to the net loss reported in this period.

Note 3. Fair Value Measurements

The carrying amounts of the Company’s financial instruments, which include cash equivalents, accounts receivable, accounts payable, accrued liabilities, and other current liabilities, approximate their fair values due to their short maturities.

On March 31, 2022 and December 31, 2021, cash balances in bank checking and savings accounts of $201.2 million and $339.3 million, respectively, were valued using Level 1 of the fair value hierarchy. On March 31, 2022 and December 31, 2021, highly liquid money market funds and treasury bills of $370.3 million and $220.2 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.

Note 4. Balance Sheet Components

Accounts Receivable, net

Accounts receivable, net consisted of the following:

 

 

 

As of

 

 

 

March 31, 2022

 

 

December 31, 2021

 

 

 

(in thousands)

 

Accounts receivable, gross

 

$

30,701

 

 

$

38,426

 

Allowance for credit losses

 

 

(50

)

 

 

(50

)

Accounts receivable, net

 

$

30,651

 

 

$

38,376

 

 

Inventories

Inventories consisted of the following:

 

 

 

As of

 

 

 

March 31, 2022

 

 

December 31, 2021

 

 

 

(in thousands)

 

Raw materials

 

$

3,848

 

 

$

1,841

 

Work in progress

 

 

19,945

 

 

 

16,963

 

Finished goods

 

 

6,960

 

 

 

4,826

 

Total inventories

 

$

30,753

 

 

$

23,630

 

 

 

8


 

 

Prepaid Expenses and Other Current Assets

Prepaid expenses and other current assets consisted of the following:

 

 

 

As of

 

 

 

March 31, 2022

 

 

December 31, 2021

 

 

 

(in thousands)

 

Prepaid expenses

 

$

3,078

 

 

$

2,398

 

Other current assets

 

 

1,812

 

 

 

2,078

 

Total prepaid expenses and other current assets

 

$

4,890

 

 

$

4,476

 

 

Property and Equipment, Net

Property and equipment, net consisted of the following:

 

 

 

As of

 

 

 

March 31, 2022

 

 

December 31, 2021

 

 

 

(in thousands)

 

Lab and manufacturing equipment

 

$

51,527

 

 

$

44,283

 

Computer Equipment

 

 

2,095

 

 

 

1,977

 

Furniture and fixtures

 

 

433

 

 

 

433

 

Construction in progress

 

 

7,883

 

 

 

7,100

 

Leasehold improvements

 

 

5,438

 

 

 

5,211

 

 

 

 

67,376

 

 

 

59,004

 

Accumulated depreciation

 

 

(23,165

)

 

 

(21,102

)

Total property and equipment, net

 

$

44,211

 

 

$

37,902

 

 

Depreciation expense related to property and equipment was $2.1 million and $1.1 million for the three months ended March 31, 2022 and 2021, respectively.

Intangible Assets, Net

Intangible assets, net consisted of the following:

 

 

 

As of

 

 

 

March 31, 2022

 

 

December 31, 2021

 

 

 

(in thousands)

 

 

 

Gross Assets

 

 

Accumulated Amortization

 

 

Net Assets

 

 

Gross Assets

 

 

Accumulated Amortization

 

 

Net Assets

 

Internal use software

 

$

9,434

 

 

$

(8,633

)

 

$

801

 

 

$

9,434

 

 

$

(8,633

)

 

$

801

 

Purchased intangibles

 

 

10,438

 

 

 

(6,846

)

 

 

3,592

 

 

 

11,703

 

 

 

(6,527

)

 

 

5,176

 

Intangible assets

 

$

19,872

 

 

$

(15,479

)

 

$

4,393

 

 

$

21,137

 

 

$

(15,160

)

 

$

5,977

 

 

Amortization expense for intangible assets was $0.3 million and $0.5 million for the three months ended March 31, 2022 and 2021, respectively.

As of March 31, 2022, the Company had $0.8 million of intangibles that were still in development stage and were not being amortized, with the amortization beginning in May 2022. The estimated aggregate future amortization expense for intangible assets in development stage and subject to amortization as of March 31, 2022 is summarized as below:

 

 

 

(in thousands)

 

2022 (remainder)

 

$

1,359

 

2023

 

 

1,786

 

2024

 

 

1,025

 

2025

 

 

195

 

2026 and beyond

 

 

28

 

 

 

$

4,393

 

 

 

9


 

 

Accrued Expenses and Other Current Liabilities

Accrued expenses and other current liabilities consisted of the following:

 

 

 

 

 

 

 

 

 

 

As of

 

 

 

March 31, 2022

 

 

December 31, 2021

 

 

 

(in thousands)

 

Accrued payroll and related benefits

 

$

3,711

 

 

$

7,237

 

Revenue reserves

 

 

5,424

 

 

 

4,517

 

Deferred non-recurring engineering services

 

 

4,739

 

 

 

5,666

 

Short term lease liability

 

 

2,109

 

 

 

1,336

 

Accrued customer rebates

 

 

 

 

 

784

 

Other accrued expenses

 

 

5,582

 

 

 

4,742

 

Total accrued expenses and other current liabilities

 

$

21,565

 

 

$

24,282

 

 

For the three months ended March 31, 2022, the Company recorded $2.0 million as a reduction of research and development expenses related to non-recurring engineering service arrangements in the condensed consolidated statement of operations. There was no reduction of research and development expenses recorded during the three months ended March 31, 2021.

Note 5. Leases

The Company leases real estate property under operating leases. The Company leases office space in California, Michigan, Malaysia, Japan, Taiwan, the Netherlands, and Ukraine all under non-cancellable operating leases with various expiration dates through April 2027. In January 2021, the Company signed an amendment to its Santa Clara, California office space lease where the lessor provided the Company lease incentives of $0.4 million and extended the term of the lease by three months. The amendment was accounted as a single modified lease and the remaining payments were remeasured using an updated discount rate. During the three months ended March 31, 2022, the Company commenced three operating leases with 2 to 5.3 year lease terms, and recorded right-of-use assets of $3.7 million, current lease liabilities of $0.7 million, and long-term lease liabilities of $2.9 million upon the commencement of these leases.

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 lease-related assets and liabilities recorded on the consolidated balance sheet as of March 31, 2022:

 

 

 

As of

 

 

 

March 31, 2022

 

 

December 31, 2021

 

 

 

(in thousands)

 

Right-of-use assets

 

$

11,478

 

 

$

8,194

 

Lease liabilities included in accrued expenses and other current liabilities

 

 

2,109

 

 

 

1,336

 

Lease liabilities - non-current

 

 

8,941

 

 

 

6,398

 

Total operating lease liabilities

 

$

11,050

 

 

$

7,734

 

Weighted-average remaining lease term (years)

 

 

4.7

 

 

 

5.0

 

Weighted-average discount rate

 

 

4.4

%

 

 

4.5

%

 

The table below presents certain information related to the lease costs for operating leases for the three months ended March 31, 2022 and 2021:

 

 

 

Three Months Ended March 31,

 

 

 

2022

 

 

2021

 

 

 

(in thousands)

 

Operating lease cost

 

$

558

 

 

$

315

 

Short-term lease cost

 

 

534

 

 

 

78

 

Variable lease cost

 

 

94

 

 

 

83

 

Total lease cost

 

$

1,186

 

 

$

476

 

 

 

10


 

 

Cash paid for operating lease liabilities was $0.5 million and $0.4 million for the three months ended March 31, 2022 and 2021, 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 consolidated balance sheet as of March 31, 2022:

 

 

 

(in thousands)