SiTime (SITM) Beats Q4 Estimates but Stock Sinks
After the close yesterday, SiTime (SITM) reported Q4 results that handily beat expectations. Revenue of $75.7 million was up 88% and beat by $4.7 million while adjusted EPS of $1.32 was up 207% and beat by $0.23. Gross margins increased 2.5% to 69.4%. The company ended the quarter with $559 million in cash (partially thanks to $460 million raised through equity offerings in 2021) and no debt.
Sales into the mobile and IoT consumer segment were up 53% to $41.9 million (55% of sales). The industrial, auto and aerospace segment was up 232% to $22.9 million (30% of sales). The communications and enterprise segment was up 80% to $11 million (15% of sales).
Drilling down a little more, sales to both auto and datacenter customers continue to be very strong and are seen doubling in 2022. Management says market trends are “stronger than ever” in 5G, datacenters, networking, auto, medical, aerospace and other markets SiTime serves.
Management sees revenue growth of at least 35% in 2022. That’s well above the 28% revenue growth analysts were looking for prior to the earnings report.
In terms of cadence throughout the year management sees Q1 revenue of around $65 million (+83%). That compares favorably to consensus of $60.4 million (+70%).
Q1 adjusted EPS is seen around $0.65 to $0.85 (a wide range). That’s likely to be better than consensus ($0.66 currently).
That all sounds great. One potential challenge is rising costs. Management said Taiwan Semiconductor (TSM) is raising prices by 20% for the nodes SiTime uses and that is going to cost 2% to 3% in gross margin beginning in Q2.
On that note management said that the long-term gross margin trajectory is higher as newer products become a bigger part of the pie. But in the short term, gross margins will likely fall in the 60% to 65% range (2021 was a banner year). They are trying to walk a tightrope here, going after revenue that’s still relatively high margin but not push their own pricing up too much so that it costs them. It sounds like this will be fluid as they manage the business throughout 2022.
There was some talk about how the brunt of the margin pressure will be felt in Q2 but that as they get into the second half of the year, when the business typically grows faster, there may be some room to bring margins back up.
In terms of supply, management feels it’s in a good place with supply relationships with both Bosch and TSM.
Stepping back, we see shares of SITM down around -17% midday. I suspect this is partly due to the margin thing, but also because today is another down day for the market and for the semiconductor sector (SOXX -3.3%). We’re seeing, these days, that companies need to crush it to see their stocks rise the day after earnings – no negative news allowed!
I’m keeping SITM at HOLD for now. The bulls and bears are battling it out on multiple fronts out there. Let’s see how this is digested. The critical level for SITM to hold is 180. HOLD