Hello, and good afternoon. Welcome everybody to the first day of Needham's 26th Annual Growth Conference. My name is Quinn Bolton. I'm a semiconductor analyst for Needham and Company. It's my pleasure to host this fireside chat with SiTime Corporation. SiTime is a precision timing company. The company's programmable MEMS-based timing solutions offer a rich feature set that enables customers to differentiate their products with higher performance, smaller size, lower power consumption, and higher reliability. With more than 3 billion devices shipped to date, SiTime is the largest supplier of oscillators in the world. Joining me from the company are Rajesh Vashist, Chairman of the Board and CEO, and Beth Howe, Executive Vice President and CFO. Rajesh and Beth, thank you for joining us.
Hey, it's such a pleasure.
Great to be here.
Perfect.
Always, Needham Conference, always a good start to the year.
Well, we like to think so. We like to think so. Before we get into my questions, the company has asked me to remind you that today's discussion does include forward-looking statements that involves risks, uncertainties, and assumptions, which are further described in SiTime's SEC filings, including SiTime's most recent Form 10-Q, and that actual results could differ materially and adversely from those anticipated or implied. SiTime assumes no obligation and does not intend to update any such forward-looking statements. For more information, please visit SiTime's Investor Relations webpage at investor.sitime.com.
With that out of the information out of the way, Rajesh, I wanted to start the conversation talking about the company, and really, I guess, for investors that may be newer to the company, can you spend a minute saying or describing what precision timing is, and what are the advantages of the company's MEMS-based silicon timing devices compared to traditional quartz devices?
Yeah, thanks, Quinn. I think it's always good when we went public four years ago, we told the world that there was no other company that was focused on timing. There was no other company that created this concept of precision timing. So our basic thesis is that the big trends that we see in the industry, whether it's AI or automated driving, electrification, faster communication, faster compute, IoT, all of these things depend upon very precise timing, but with the added issue that the precise timing needs to work under very challenging conditions of shock, vibration, high temperature, low power, small size.
SiTime has invented this and said, "Here is high precision, and here is environmental resilience and robustness." Marrying them together and then providing a full solution to a customer, whether it is resonator, whether it's a clock, whether it's an oscillator, but the full timing solution is the important thing. Nobody else is doing that. SiTime invented this. We went up against some large companies and a few startups in the last decade or 15 years of our existence, and here we are, leaders in the market.
As you said, we've shipped more than 3 billion units. We have a very high percentage market share. We have a stated goal of 65% gross margin, which we had up until recently, and 30% net profit margin, combined with 30% annual growth rate for the coming years. That's the basic thesis. Pretty simple.
Perfect. And, Beth, I just wanted to say, you know, hello, and welcome to SiTime. You joined November eighth, replacing Art Chadwick, who announced his retirement. I guess, you know, can you walk us through your background? And I know you've been on board for just about two months, but what are your initial observations of SiTime, and perhaps more importantly, what are your biggest priorities for the next year?
Sure. Well, it's great to be here. I joined SiTime from HP. Over 25 years in tech, like I said, the most 17 years at HP recently. Been in a range of finance roles from business CFO roles, different GBU roles, as well as corporate roles, including heading up investor relations. So a wide range of experiences in tech and in finance, and really excited to be here at SiTime. I think some of the things that drew me to SiTime, we're really, you know, excited about the prospects. I think it's an innovative technology. It's got a large addressable market that we're just getting started in terms of going after. It's a compelling business model and frankly, a really strong balance sheet. And so I think all of those things were really attractive elements.
As I think about, you know, the last 60 days and really getting to know the company, the management team, really diving in, I think it's really focused on helping the company to scale, and scalability is key, and then driving profitable growth. And that's. I think that's really and then, you know, specific objectives below that, but at the highest level, I think it's really about scaling and profitable growth.
Perfect, Rajesh-
From my point of view, what I really liked is that, for the kind of growth that we're looking forward, for the kind of market cap that we're looking forward, it's very important to have a great background of winning companies. So I really like the fact that Beth was at Silicon Graphics for many years, you know, one of the original winning companies that invented graphics, which is now being used. NVIDIA is a great example of that. And the second one, of course, is HP, you know, one of the, one of the inventors of Silicon Valley. So, I really like that background and the fact that she was highly operational, which is what we really need.
Yeah, the operations background, I'm sure, helps scale the business to much larger sites. And I guess I wanted to sort of, you know, use that as a transition into some of my general environment questions. Obviously, SiTime was on a pretty, you know, fast growth path, was sort of interrupted by the inventory correction that many of your peers have seen. And, you know, one of the questions we get most often from investors right now is, you know, "Geez, where are we still in that inventory digestion process?" And so, you know, as you look at your various end markets, you know, how do you feel that digestion process is going? You know, when do you think we may reach an end of the inventory correction?
Y eah, I think that the ordering, over-ordering by customers was pretty endemic for the whole industry, and I think the other side of the sandwich was lower demand. And we see, like everybody else, I think, the continued improvement of demand and continued improvement, just like you said in your remarks and also in your note that was put out by Needham, that inventory correction is generally on track. It's a good thing to hear that that's what you see, too.
Yeah. No, we definitely saw that at CES, and we think it feels like it's on track to wrap up by middle of the year. So seems like that's a timeframe that you agree with. You know, as you look at your end markets, you know, you've got autos, you've got data center AI, wireless infrastructure. Which of those markets do you expect to be the strongest in 2024 from an end demand perspective?
Yeah, I think that, our stated goal has always been that the company first and foremost sees the $1.3 billion TAM that we now have as a consequence of doing the Aura acquisition in clocking and our native oscillator business, which is $800 million TAM. So together, it's a $1.3 billion TAM in networking, telecommunications, enterprise data center. And that continues to be our big, big thrust. That continues to have the highest ASPs, it's the highest gross margin business, it's the stickiest margin, and it's, as we know, with the recent spurt of things like AI and optical, I think it's been one of the big areas for growth for everybody. And we like that market. We also like automotive, and we think that military aerospace defense, while it's a small business, grows well.
Frankly, our heritage is from the consumer business. So consumer, you know, the gross margin's always lower in consumer, the cycle is always faster, but consumer also makes you a much more nimble company and has good revenue, and we're, we're pretty supportive of consumer and industrial as well. So it's a broad, it's a broad company. It's a broad-based company. As you know, it's a highly diversified company. You know, 15,000 customers, 300 applications.
Got it. You know, last year in 2023, I think you had you know, tried to size the under shipments, somewhere in the range of $30 million-$40 million. Do you think that's still sort of an estimate that you know, accurately, you know, measures how much you may have undershipped last year?
You wanna go?
Sure. Well, I think as we look at it, as we were talking about earlier, we continue to look at the channel inventory digestion and work through it. And as we talked about on our last earnings call in November, some of the customers, frankly, have gotten back to more normalized levels. Others are still working through. I think, as you said earlier in this conversation, you know, like the industry, it looks like it's probably, you know, into the first half of calendar 2024 as some of those customers continue to work through it. So I think we're, you know, continuing to keep a close eye on that and work with customers to make sure they're getting back to healthy levels.
Got it. And then just I think you had noted in your last call that the order environment has started to improve. Just wondering if you had any comments. You know, has that order environment you know, continued to stabilize, become more predictable through the fourth quarter?
I think that's still something we're reviewing. It's sort of early days in the quarter. And, you know, after the flurry of Q4, it's always Q1, a cyclically lower quarter for us. As we grow more of the networking, telecommunications, long-term business, which is not as prone to cyclicality, we expect that Q1 will come more in line with all and take out the cyclicality over time. That's a scale issue. But in general, you know, the conditions still remain what we have talked about so far.
Okay. Wanted to ask you, you know, a few sort of end market questions. You know, one of the things we've seen, I think investors have been a little bit worried about is, you know, demand trends, or perhaps some order softness at, at your largest customer. Wondering if you've seen any noticeable change in order patterns from that customer, and I think you had previously expected that customer to get back to sort of normal inventory by the end of 2023. Do you, do you think that they, you know, achieved that objective?
That's probably too specific.
Okay
Q uestion for a time when we are, you know, just in the middle of pre-earnings. So we'll probably defer to that and talk about it in o ur earnings calls.
Okay. Maybe shifting to the 5G market, you know, I think that that's been a market that has seen sort of slower demand conditions. You've had some in that space, Ericcson, Nokia, negatively pre-announce. But, you know, I know that there's a big part of your TAM that goes into radioheads. How are you feeling about just, you know, the sort of wireless infrastructure market looking forward?
See, I think all of these markets, while they have their ups and downs, when I look at the number of design wins possible in the networking, telecommunications, core data center, enterprise markets, we have something like 250 opportunities for design wins. So the radio or networking, the beauty of SiTime is that we still get a lot of diversification in all of this. And what we're finding is that with the Aura acquisition and the 20 products that came along in December, we're already getting good traction with some of that, with the same customers who wanted to use some of these products, but didn't feel like they were able to, you know, without a company like SiTime involved in it.
Also, given that clocking comes from very, very large companies, for whom clocking is like a 1% business or 2% business, the fact that this is SiTime's focus area makes our customers feel very good and come towards us. So we find ourselves getting very good traction in these, all these markets, not just in clocks, but also in oscillators. The design win activity, as we had said last time, in our last earnings call, was up by 65% quarter-over-quarter. So design wins for SiTime have always been a kind of a shining star, and that continues.
Got it. So it sounds really more, it's, it's more of a market penetration design win story within most of your end markets, rather than what's the overall demand environment per sec?
That's right. That's right.
Okay.
Because, you know, these inflections of some of these companies, they keep on coming and going. But SiTime wants to have 50 customers that are in the, you know, call it $1 million-$10 million per year category. And so that way we spread our risk across, and those would be in industrial, those would be in comms, those would be in military, aerospace, automotive, all across, even in consumer.
You know, investors obviously very focused on AI, and I think your business, you know, has a number of products that are tied into the AI theme, servers, optical modules. But maybe spend a minute, you know, just reviewing how you think you're positioned or how you benefit from the demand for AI or the rollout of AI.
Yeah, we think that synchronization of timing across systems, especially across multiple systems, multiple nodes, multiple complex timing groups, is going to be key. And for that, low jitter, high stability, and low latency are very important. All that, back to the precision timing comment, have to work under tough environmental conditions, because these engine conditions are incredibly warm, they are subject to airflow, which generally changes many of the incumbent technology frequencies, and there's a lot of vibration going on in these areas. So SiTime has identified this area as being an important place for us. And I think while the early traction is in the ways that you have described with optical and accelerator cards, we think that there's more to come.
We're in the very, very early innings of large language model adoption and how it's going to transform the industry in AI. I think SiTime will track that very closely, in our growth as we go forward.
And as soon as we move more AI to the edge, that if there are more edge devices that need to be synchronized, that's probably good long-term driver for SiTime's business.
Absolutely. Think of AIs in cars. Think of AI in small medium enterprise, SMEs, right? Because you know that there's an insatiable demand for computation, insatiable demand for high response rates, low latency, high computation. I remember a time 40 years ago when I thought that, you know, 30 MIPS was plenty of processing power. And I had five other smart guys agree with me on this. So you know, SiTime is betting that those drivers continue to drive very high speed precision timing, and we grow in three different ways. We grow with higher ASP, because more functionality, we grow with more density of timing chips per use case, per compute, per communication, et cetera, and we grow with new applications.
For example, five years ago, there was no ADAS, right? So, three things are what keeps our growth going, and we intend to identify those and track those growth cases for our 30% stated growth annually.
Got it. You had mentioned autos, and we'll get into maybe some of the more specifics in a bit, but just, you know, demand in the EV market. I think you're positioned both with U.S. as well as some of the Chinese EV companies. Can you just talk, you know, broadly? I think the market seems to perhaps be a little bit more cautious on EV adoption because they're influenced by what we may see here in the States, but it sounds like China EV activity, especially over the last three to six months, may have picked up pretty nicely. And so, can you share any thoughts or trends that you're seeing just across the geographies in the automotive and particularly the EV segment?
Yeah, I think that China is absolutely the leader in EVs right now, and the breadth of their cars and the number of car companies that exist in that, because, you know, long ago, four years ago, somebody basically said that cars are just going to be a smartphone on wheels, and it sounded like a very facile thing to say, a very sort of smart alecky thing to say, but in fact, that's what is coming out. It's just a large compute engine on wheels. And what's coming from China is very beautifully styled, high reliability cars. BYD is a great example of that.
that continues to impress and wow, and, you know, while we are very focused on the U.S. market, many of these companies, for example, Lucid, which is not a customer of SiTime, but Lucid is significantly owned by Saudi Arabia's Sovereign Wealth Fund. And I can imagine a time when Lucid cars are making themselves available in the Middle East. So there are lots of markets that are available in the world. I mean, after all, there's 100 million vehicles sold every year, including all kinds of vehicles, and we think that that's a great electrification story, mobility story, automation story, in, for example, farm equipment, for. And we have very successfully penetrated that market as well.
Perfect. I wanted to switch to the Aura Clock IC acquisition that you closed back on December 1st. You know, to us, this looked like a very sort of capital efficient, non-dilutive transaction. You picked up a, you know, pretty extensive product line of clocking products, I think Network Synchronizers, Buffers, Jitter Cleaners. You know, tell us about that transaction, why you structured it the way you did, and, you know, when do you expect it to generate revenue from these products? I think it's a little bit of a longer tail on revenue.
Well, let's look at what makes a successful acquisition. There is the strategic imperative of why one should do a particular acquisition, a particular company, and then there is the operational piece of it. Because we know that, while many acquisitions would make perfect sense, in the doing of the acquisition, everything falls apart. You know, famously, nine out of ten acquisitions fail. So we try to orchestrate both the the strategic part and the operational part from the get-go. So strategically, we've always said clocking a $1.5 billion TAM is something we wanted to do from the time we went IPO.
As you remember, you were there at that time, and we said, when people asked us: "What do you intend to do with the money?" We said: "We want to get into clocking organically and inorganically." We've done that organically, now we did this inorganically. The other part was that they were the only standalone timing clocking company, and that made full strategic sense. On the not so much talked about doing the acquisition part, we had been connected with Aura for four years before the acquisition. We had even had an OEM relationship with them previous to that. So we knew the team, we knew of their abilities, we had used their products, we saw the integrity of the team, we saw the integrity of the people, we saw the smarts of the people.
Now, when we have done this deal, we have been able to start an office in Bangalore, India. In fact, I was there in that office in late December, meeting the team yet one more time and getting it up and going. Very excited with that. The team is very excited. And the products have already come over, so 20 products have already come over. All these 20 products are being sold by SiTime right now. Our customers are seeing it.
We're getting very positive feedback from our customers because what the customers are recognizing are two things. One is, that SiTime is now a full system player with oscillators, resonators on one side and clocking on the other. That makes us very unique. The other part that they're seeing is that, as you know, many of the clocking companies are very large companies.
Companies like Texas Instruments, Renesas, Microchip, Skyworks, with revenues of multiple billions, and the clocking part of the business is typically 1%, or 2%, or 2.5% of their revenue. As you can imagine, that does not make it very strategic for them, and customers see it. So when customers see us approaching them with not just the full group and giving a systems play, but also see the fact that people at the highest level of the company are involved with that, they're very gratified. And the funnel activity that we have seen is very much part of that.
Whether it's in buffers or it's in clock generators, or it's in network synchronizers, all of that conversation has become very close and very gratifying that we have absolutely done the right thing with this acquisition, not only in getting it at a very fair price, very fair to them, very fair to SiTime, but also accelerating us in this market. Very, very pleased with it. Couldn't be more happier with this.
Just competitively, you'd mentioned the Renesas, the TIs, Skyworks. You know, I guess first, how do you, how do you think the Aura products compare, you know, kinda spec to spec? Do you think they have superior performance? And second, you know, as you move into the clock product with this acquisition, do you expect any kind of significant response from TI, Renesas, or Skyworks?
Yeah. So the second first, I do believe that, this brings us, elevates us to a higher level because we used to have, before this acquisition, we had one product, one clock generator product, and they saw us in some places, they didn't see us in others. Now, we have one plus 20 immediately. By the middle of the year, we'll have another 20. By the end of the year, we'll have another 10. So we'll be done with 50 products, which cover everything from the low end for $1 parts all the way to $15 parts in the network synchronizer category. I think that they will see us, and we, of course, don't know how they'll respond, 'cause they have not been exactly focused on developing big product lines in this.
But I'm sure there'll be some response, and the typical response is around price. But I think that SiTime has a value-based solution. We're not about price, we're sending value-based message to our customers, and that is supported by the first question that you asked, which is the performance of the product. If you put up the performance of all of our products against the three competitors, Skyworks, TI, Microchip, and Renesas, four, I guess, you will see that 80% of the time we beat them on things like latency and jitter and performance overall. And then, of course, the fact that we have a full solution, we have the oscillators, which typically most of them don't have, or to the extent they have them, they're not differentiated because they're like crystal-based, old technology-based oscillators.
They have nothing more to offer, so the customer might as well go directly to an Epson or a Rakon or a TXC and get it. There's no reason to get it from a Skyworks. There's no reason to get it from a Renesas. So we're very pleased with that. We're very pleased with the individual performance. We're very pleased with the system place, and as I said, the, the operationally, this has gone very well for us. Very happy with it.
Just one clarification, like, in terms of the products they're delivering between now and the end of 2025, I think just, w e've got some now and then some more that are coming, not only through the end of this calendar year, but the end of 2025, is, is that delivery schedule?
Yeah.
Got it. Thank you. Wanted to talk new products, and obviously, Aura is an inorganic way of expanding your product line, but you've been very focused the last couple of years on organically expanding your product line. I think you had five or six products introduced in each of the last two fiscal or calendar years, you know, Epoch, Endura Epoch, the Endura Super TCXOs, and so you've been very active on that front. Can you talk about your plans for new product introductions in 2024? And, you know, what TAM expansion would be enabled by, you know, those new products this year?
Yeah. So I think, what we did in the last three years is we were very heavily focused on increasing the SAM and putting out platform-based products in the market, and those platform-based products increased SAM by $hundreds of millions in most cases. I think the time in 2024, and to some extent 2025, but certainly in 2024, is to consolidate our gains. Because many of these platform products, each of them yields something like 15-25 derivative products that are very specific to a particular application, a particular customer use case.
Our focus now is more revenue-based in connecting closely with an AWS, in connecting closely with a chip company, in connecting closely with our largest customer, and delivering derivative products that are very specific to their use case, and thereby accelerating revenue. So that's what we've been looking for. We're looking at accelerating revenue.
Now we're done with expanding TAM and SAM. This is a time for us to expand revenue at a gated pace. I think we're already at around $3, $3.5, $4 billion, depending on how you count it. That's a large amount of SAM. And given that we are only $200 million in revenue, according to most analysts, for 2024, we would like to accelerate the growth of this revenue at a faster pace. Starting the end of this year and next year, we'll go back to SAM expansion and adding more products at a platform level.
How much of that, you know, as you, as you look to perhaps tailor the solutions to a customer application, is that, you know, spinning new die or just taking advantage of the programmability of your solutions to sort of pre-program, if you will, certain aspects that are more applicable to one customer, to one application?
So, just to size it for you in dollars and time, a platform may take us three years to develop, and picking a number, $10 million to develop. A derivative product, of which there are 20 on average per, per platform, might take us anywhere from one month to six months and may take us $50K-$300K. So you can see there's a huge difference. So this allows us to churn derivative products at a much faster pace, and derivative products, by definition, are aligned to a particular application, for example, optical, a server, or they're aligned to a particular large use customer that we expect to become a $10, $20, $30 million customer in the coming years.
So it increases the system play from SiTime, because now we're able to use the programmability of the product to deliver faster revenue. And you've touched on something very important, which is that not only does SiTime have the ability to get to high growth margins like we have in the past, but it also is a very OpEx-efficient system of getting quickly so that a lot of the top line comes straight down to the bottom line. It's not to do a full tape out. It's do a new package, it's do a new call, it's do a new test, it's do a new characterization, which are in the tens of K's of dollars rather than the hundreds or even the millions of dollars.
Got it. So, yeah, I was gonna say, it doesn't sound like it's, you're spending a lot of new die at high, you know, high expenses. It's pretty capital efficient.
And we're an analog company, right? We're an analog MEMS company, which means typically there's no software that needs to be changed, which is typical of our SOC company and ASSP company that has a lot of software churn. We are an analog semiconductor company, and we deliver solutions mostly without significant software in it, which I think is a feature, not a bug. It's a very positive thing that we don't have that extra added expense.
I wanted to shift back to the automotive opportunity. I think you, you've said previously that as cars electrify, the number of oscillators or timing devices increases from approximately 60 units per vehicle to about 100. Can you just talk about that opportunity? Are there sockets that are particularly well-suited for SiTime, or are you going after that entire, you know, opportunity? And in the past, you've said you think this can become a $100 million annual business. You know, any updated thoughts on when you might be able to hit that target of a $100 million per year?
Yeah, I think where we are is we have identified, you know, what a difference four year makes. Like, when we went public, I remember being asked what, how big is automotive for you? And I said, de minimis, because what happened in the COVID time was an explosion of EV, but even more important, of automated driving. So what we have identified is that we don't have much of a play in an old-style ICE car, because that's not a smartphone on wheels. An electrified car, electric car, an ADAS car has two opportunities. The biggest opportunity is in the ADAS processor and the sensing equipment around it and the communication. So whether it is a GPS connection or any other kind of connection with vehicle-to-vehicle, vehicle-to-X, vehicle-to, whatever else, V2X piece, that's important. That's part of it.
The sensing elements are very much part of it, whether they're cameras, there's about 12 cameras now, whether it's Lidar, whether it's Radar, all of those sensing elements are important coming back to the processor, the domain controllers, the connectivity, the ECUs, the Ethernet, all of that is part of this ADAS system. Combine that with electric vehicles and smart voltage meters and delivering equivalent voltage all across the car, and charging, and put together with displays, smart displays. We think it's about, in by 2027, give or take, there's about $50 per car. It doesn't have to be a high-end car, it doesn't have to be a low-end car, sort of a mid-range car, $50 of timing solutions for SiTime per car. I think that's an enormous number per car to be in that.
You can see that if there are 10 million such cars coming out, very quickly it becomes a very large business potential for SiTime.
Yeah. No, it sounds like it, i f at $50 a vehicle and, you know, watching the EV penetration rates increase at a pretty healthy clip, it sounds like it's a good opportunity. Last question, just kind of on the business before we get to some financial questions, just any updates you want to share on the resonator strategy? I know these historically haven't been as high value-added, but where do you see opportunity for SiTime in the resonator segment?
Yeah. So first of all, I've been very attached to getting a standalone MEMS resonator out. We're not live here face-to-face with each other, but you've seen a 0.5 by 0.5 millimeter resonator from SiTime in comparison to a quartz base, which is 20 times bigger than this, right? So we know that in IoT, we know in consumer, we know in many, many applications that that resonator needs and has a great market case for it. There's about 30 billion of these sold in a year. The total market for resonator is about $3-$3.5 billion, and to your point, we haven't really quite cracked the market because it's a low ASP business, $0.20 or below, and even the gross margins are reasonably good, but you have to sell a lot of them.
So what we've been doing is, we've been putting our clocking business first, our oscillator business first, and now we're getting to it. So I think that 2024 is going to be the year when we put out some of these products, and you'll hear more from us in the coming quarters around that, around that strategy.
Perfect. Switching to a couple of the financial questions, input pricing, including wafer pricing, you know, went up at a pretty healthy clip from 2021 to 2023. What's your outlook for 2024 on the input pricing front and particularly wafer pricing? Do you think that input prices and wafer prices stabilize? Do you have the opportunity, especially on the wafer front, to start to see, you know, wafer pricing begin to go down at some point?
I think, on the CMOS pricing, as you know, we are single source with TSMC. We think that they have stabilized. We are not at the 25 nanometers and lower. We are at the 25 nanometers and higher technology levels. So I think we are holding steady. They're neither going to go up, nor are they coming down, so we're kind of holding steady. On the MEMS side, as you know, the prices per wafer are pretty high. On the other hand, the ameliorating condition is we get a lot of yield per wafer. We get up to 100,000 die per wafer.
But to some extent, that's not going to. I think there, too, the wafer prices will remain steady, but we also have a large inventory of MEMS wafers that have been built up over the last two-three years in response to the fact that we are 80%, 70% single source with some very, very important customers. So it's fair to say that our cost base is probably flat, and we're looking to leverage our business by increasing ASP or increasing the mix. So selling more products at higher ASPs and by increasing ASPs with products that otherwise would not, by changing the mix.
Got it. That was my next question, kind of, looking at margins. You're, you're currently around the 58% level, with, I think, expectations to get back towards the mid-60s, potentially as soon as the end of this year. You know, what are the biggest drivers of that margin expansion? You talked about mix, you know, maybe better ASPs. I know revenue is a big contributor, so maybe just walk through, you know, kind of the bigger drivers to get you back to the mid-60s.
Well, maybe I can chip in there. I, Quinn, you just hit them. So I think the, if you think about our trajectory, one of the biggest drivers is that revenue and scale, right? So, we do have we, while we try to keep it as variable as possible, that manufacturing fixed cost structure overhead, I think that's really the place where as we scale revenue, you see a benefit there. And then beyond that, just as you said, pricing and mix are gonna be the other drivers, and we look to, you know, improve that mix, and that should be a positive contributor as well, but those are really the drivers.
Got it. And it looks like we're coming up on the session end, but I'll ask my final question. Just, you know, now that you've completed the Aura IC, Clock IC acquisition, what's your appetite for additional M&A, you know, going forward?
Yeah.
I won't ask you to say what segment or what company, but you know, any thoughts on M&A?
I think that right now our job is to consolidate the company. We have just acquired a very solid company, lots of great products. I think our job is to consolidate. Our job is to build revenue in that business, in our core business. I think our job is to demonstrate to the world at large, to our customers, how the value proposition of having one plus one equals three coming out to our customers. I think I'm very focused on that. It's good to have a healthy amount of cash sitting while things, while macro conditions increase.
We know that there are two wars going on, we know that COVID rears its head from time to time, we know that supply chains are still problematic, and we know that there is a certain amount of friction between China and the West and still going on. So it's probably prudent to have a decent store of cash, in the bank, and I, I'm very happy with that right now.
Yeah, that rationale certainly makes sense to me, given all of those dynamics. So, well, we're at the end of the time. So Rajesh and Beth, thank you so much for joining us at the Needham Growth Conference. Really appreciate your participation and look forward to catching up after earnings.
That's right. We'll catch up soon.
Thanks, Quinn.
Thank you, Quinn.
Thanks, everyone.
Have a good day.
Bye-bye.