Allegro MicroSystems (ALGM) 10 May 222022 Q4 Earnings call transcript

Good day and thank you for standing by. Welcome to the Allegro Microsystems Q4 Fiscal 2022 Financial Results. [Operator Instructions] I will now hand the conference over to your first speaker today, Katie Blye, you may begin.

Good morning and thank you for joining us today for Allegro's fourth quarter and full year results for fiscal year 2022. I'm joined today by Allegro's President and Chief Executive Officer, Ravi Vig; Allegro's Chief Financial Officer, Derek D'Antilio who will review our quarterly and annual financial performance and provide a summary of our outlook.

the page tables or and the available release Relations Investor website. earnings accompanying are financial on Our This call is be available being webcasted and our page a IR shortly. on recording will include securities laws. comments this made Please as note federal conference that call by defined forward-looking during statements on include result based our are could risks uncertainties expectations forward-looking subject that statements about cause events and that to from and to projections. projections These and vary actual statements assumptions other future are current a materially results as and refer by SEC, we in documents risk Please recent earnings yesterday issued XXXX. release discussed XX, most to press us the XX-K and other May filed detail factors including filed in our the on with the assumes company obligation any no forward-looking The update to information presented. discussed or to not by presentation measures are today other may for results the similar The are be Allegro's substitute calculated non-GAAP replace GAAP financial be used companies. of and measures intended a than financial differently that

referenced the information the posted now measures Ravi investors our are results has We highlight earnings A may core which core meaningful of press clearly comparisons reconciliation enable make our to page. to ongoing supplemental results during more been President non-GAAP Ravi? GAAP in Vig. can of operations. over providing operating today's release, found financial be I'll to call turn our CEO, the IR Allegro's and to of because call it and

Thank you, good and Katie, everyone. morning

crisis. 'XX commentary fiscal to our started and quarter Ukraine we Before pause with like on here results, fourth get acknowledge the I'd to

contributing this new including world members as resulting achieving in expansion robust annual revenue non-GAAP non-GAAP of in must well in XX% in year. delivered for of with XXX highest the the and Our Allegro's EPS a profitability, terrible full the the records, people growth several gross outstanding Allegro of support team including basis margin as of XXXX, to growth our history, results and together Ukraine situation. fiscal are hearts resolution of of points in stand Ukraine, record annual revenue XX%

fourth Xx, our we revenue shareholder demonstrates increasing capped over earnings topline in revenue all profitability a and industrial our to high end note growth records model our execution highlighting solid in as of business quarter across automotive incremental on drive in product the year with leverage We model. the Our off growth. strong markets, value growth lines key differentiators Allegro the continue on to and deliver operating and

and markets ADAS, end our Our well applications, high-growth xEV, to diversification alignment like products industrial. and center across customers, as as data

to our ADAS demonstrated for innovation roadmap more 'XX, strong leadership commitment fiscal technology, xMR globally further and to for our applications by win xEV teams and are advancements XX% and R&D technology acceptance We've our our products. through new solutions of collaborating in disruptive product Importantly, important of in center. than customer solutions data activity wins levels design record with market-leading these of solutions our seen

secular giving growth than also key large to off in backlog, With great autonomous us our anchored and SAM, trends, our to and total year, in confidence during wins half strategic electrification, and in infrastructure a design trajectory. control of alignment long-term and start vehicle growth growing we're Our motion efficient levels areas record control these strong fiscal a trends represented and expanding win momentum design XXXX. growth focus the vehicle more on

revenue imbalance, high-teens. to demand and supply growth our the are the through navigate to full-year outlook we raising continue We

over regarding on after call like to the XX years. retirement announcement to my turning Before from I'd Allegro comment Derek, yesterday's

and 'XX in turn proud deal market the a in lead succeed into I culminating had opportunity I've performance. Allegro and we've choice track confidence look the to record to the in transformation aligned financials. profitability on company strong now outsized XXXX greater, industries serving and over continue our of lead terrific as the we've of career, growth in a of the me role that have and I'm assisting team advisory experience secular growth. record company extensive never I'll Vineet delivering an transition the ability leadership phase color the have the and company Allegro's my proven to, to created Nargolwala's next to CEO vectors forward Vineet the been of an both company. and course growth I orderly innovative the fiscal here. Derek in multiple people has into we completed, in to transform will today, for him IPO Allegro that the growth. built, trajectory it of team's the opportunity Over is we've successful and the continue the and a makes now profitable on call Derek to to that great

and you, Thank Ravi, good everyone. morning

to I'd congratulate Before to here the his opportunity Ravi career I to move take on at Allegro. the financials, like incredible on

strategic innovation fiscal I fostered tremendous of company of culture record growth. very have growth and has 'XX. transformation revenue you significant profitability, CEO, resulted that we As positioned are IPO well profitable and the a continued led a and a in feel a successfully successful for

to some see on context like what provide in we conditions. market I'd terms Now of

of with served supply, company. as term to products We tightness continues the view in very near our drivers end markets Demand these visibility. firm Our to remains secular alignment and demand the millimeter well across and systems, Customer areas particularly growth xEV, for again focus geographically constrained XXX diverse. features in ADAS are and aligned our exceed to wafer extended and our by areas We strong record backlog in available availability. essential focus ended industrial. March

ramp 'XX our TSMC been our capacity growth expected especially at support fiscal that expanding committed is increased our successful to in with supply, and have We outlook.

financial of turning the Now $XXX to year record year-over-year. was million, an the 'XX a increase fiscal for 'XX fiscal full XX% results. Revenue year

all of to and our across wafer increases and we served capacity geographies. through members are chain markets delivered team continue have and Our to successfully revenue supply pleased navigate challenges,

This compares the the by autonomous from electrified year, full of growth of and the For to semiconductor automotive benefiting indicative towards revenue we growth vehicle content XX%, vehicles. trend per our favorably automotive significant due increased XX%. are to

we believe are we customer levels. early low with very the distributor car a innings of at production recovery component addition, in inventories and In still

Our revenue our year-over-year increased increased by year-over-year by revenue and industrial million $XXX other X% $XXX XX% million. to to

products than was compared distribution no gross Our revenue fiscal again, channel fiscal XXX basis in in to transformation, the points. year, increase to of 'XX. of leverage and to our result of The and of fiscal operational more represented gross higher in customer XX% efficiency channel our of 'XX, scale an to initiative margin in was Non-GAAP improvements our compared market. ASPs distribution continued the represented XX.X% the 'XX gross successful of year. broad in focus our the XX% margin XX.X% margin year and the our improve in volumes. result sales, increased feature-rich Once continue leverage for higher more GAAP XX% single XX% and a on

a year, on a in operating revenue margin was double in the GAAP ended margin increase diluted revenue. For and and share operating with balance was non-GAAP more revenue, increase cash earnings XX.X% increase $X.XX we share in debt. operating and model. $XXX both was leverage non-GAAP OpEx was significant GAAP an 'XX. points margin of the is percentage improvements the in and liquidity operating per of $XX our result gross per of earnings The of improvement XX.X% sheet From margin than our over basis standpoint, business full in non-GAAP million and an $X.XX, million of diluted the and fiscal XXX equivalents year year-over-year, long-term XX%

cash from free in During $XXX operations, cash was flow million fiscal 'XX, were generated $XX capital $XX expenditures million we million. flow and

million, up X% of partners. end QX a sequentially our X% of up sequentially of above X.X% QX in also compared to $XXX turning Revenue increase the to year. of fourth prior Now XX% $XXX.X high was Industrial $XX our range an year-over-year. quarter guidance nearly results. our foundry to million a continued to increased XX% high was ramp million, revenue and increased the by of as Automotive sequentially and revenue result the record

$XX.X Non-GAAP X% of to margin input costs, last versus another GAAP compared XX all-time in high margin XX% business above an quarter XX.X% XX.X% sequentially and gross sequentially Allegro. compared ASP points down basis leverage range, and other foreign grew margin of facility. gross million, guidance the end Non-GAAP exchange increases for timing gross favorable volume test quarter our Our was benefited the internal rose high to from QX. assembly our the to in for the year. to XX.X% in

the XX% we are very what ASP stated. record expect to to levels XX% normalize, throughout consistent we continued versus margin range, pleased we expect quarter. of had We gross gross fiscal expansion QX the timing 'XX and margin in 'XX, last be leading to non-GAAP In costs with with input to our previously

GAAP on was to gross of 'XX, revenue basis. sustainable revert operating variable expect QX compared tax expenses. and the XX% operating and the targets. to in expense The in XX.X%. COVID-related GAAP some model make timing our the R&D of toward quarter charges was income margin was of XX.X% to and sequential non-GAAP compared GAAP for tax expenses one-time continue rate to certain also in of was rate driven minor do project-related QX. to quarter well the million. Non-GAAP the of million million. Non-GAAP compensation top compensation and a XX% included of increased expect We and R&D expenses in as a quarter $XX.X line, and $XX.X progress decline million expenses was non-GAAP $XX.X million effective SG&A $XX.X SG&A $XX.X stock compensation certain the We $XX.X was million, $XX.X the to operating outperformance non-GAAP fiscal effective the towards $XX.X was our 'XX GAAP million were we compared non-GAAP $XX.X consulting primarily fiscal target non-GAAP million of were new fees to bottom operating and $XX.X higher Total The expenses. R&D QX expenses income XX% GAAP due quarter as increase QX. million in million is revenue sequential with on to reset quarter in in about by $XX.X million variable as operating to expense

rate we to be For non-GAAP XX%. our expect tax approximately QX,

million Non-GAAP XXX.X income share Our we million or was $XX.X shares, or share. be $XX.X GAAP $X.XX million could million. was $X.XX $XXX.X diluted shares net per was net per QX QX share. and income diluted count diluted expect

XX to sheet about flow. XXX XX QX our ended QX, represents days. of Now target to XX We compared XX $X Net days compared of which days with inventory to moving below to DSO the still XXX balance million, cash days by in QX. and days in increased

fiscal 'XX was In sell-through towards to operating highs. QX, historic our quarter. lows cash POS addition, by and progress a generated We meaningful target the summary, continue at growth was channel while at financial in in inventories we record million historic $XX.X model. a strong In flow capped year remain make

record also to and a position. technology entering with growth secular alignment great are We drivers, strong 'XX backlog, products financial fiscal and

back I call turn Ravi. Now over will Ravi? the to

and Thank 'XX couldn't fiscal momentum our team's you, I we of be fiscal have achievements great Derek. in prouder 'XX. entering

on motor adoption high-value magnetic year-over-year. revenue XX% a sensor product magnetic represented motion we in leadership of sockets lines XX% Looking year for up great won our have both sensors back became recently xEV, announced sensors management of that up center momentum fiscal our as in a and sales applications the business We 'XX, highs. We our angle shipped represented we and and product with 'XX, ADAS rapid industrial Power motion new driver perspective, data lines power position. our saw of solutions products applications, and achieving control cement sensors and product achieved power in The record from automotive, our XX% market the a year-over-year, highs. helping our increasingly XX% IC, billionth control in diversified and current solutions. sales industrial of example three fiscal have all

content rose xEV increases this to in 'XX, XX% markets, strong systems, model really XX% our electrification to Allegro content is applications. and on production, expansion, to represented fiscal benefiting to benefit great our Moving in content accelerated battery highs, grows car revenue $XX engine assistance sales in and fiscal in sedan similar advanced driver the from prior countless xEV electric sales of With xEV up convenience combustion the automotive, year-over-year, from Within other comparing automotive of comfort A internal shift to from product fiscal XXXX cars 'XX, the mid-size vehicle. examples where 'XX. XX% of do in vehicle quarter, OEMs with popular year electrified. at favorably which our and XX% XX% the in globally, $XX win The to continues over example xEVs per up XX%. represented ADAS model. we and In the up new

We fiscal year. reached new In also win nearly over business XX% ADAS the prior with highs, 'XX, ADAS adoption. our up

We unit to and customers. are continue value depth steering. customer annually, now into innovate in braking of unmatched globally shipping base more to than diversify we relationships knowhow and our applications our The the and these leaders XXX provide continue at gives and us to roadmap breadth to our ADAS ADAS product million applications additional

a Beyond we're braking achieved customers making to it's solution. and LiDAR, for detector prototype the to have by outstanding the QX, as lab our roadmap steering evaluations. of easy-to-use summer. first our applications excitement and is future final first expecting in nanometer serving our XXX in lead This samples end of We're LiDAR roadmap. product progress our important performance about we and Photonics ADAS, in XXXX product foundation technology, we're In our in new the sampled platform, for photo receiver encouraged automotive validate by up-integrated,

technology, to being are recent in we customer was broadcast as it vehicles ADAS and features, a solutions our collaboration. in of the a significant of with class, ADAS magnetic system broadest benefits because example best transmission our which deep that meaningful be market. -- sensing market performance our cross-portfolio synergies As It's competencies; on to our strategic sensing ADAS applications reimagined, Level GMR-based our technology, solutions and ability and collaboration EV in three This becomes magnetic of innovative automotive, and future a gaining the portfolio are Across globally the proof, field on offers lines the in adopted sensors and knowledge, close innovate of shares leaders. silicon xEV applications borne core portion and in product win facilitates showcased and continues winning new regenerative provide braking to xMR braking in complete We're with cam out long-term a today. X+ industry of great

offerings We valued expanding sensing are building to customers aimed where our from success with by high xMR of reliability and industrial initial angular resolution variety is a products by automation. ADAS on TMR our applications our at

our our the would that industrial revenue 'XX, to fiscal we Industrial Coming year-over-year. executed turn next that industrial on me categories Let grow the of in year-over-year major into up market. year, represented XX% and teams expected XX% mission. all

to months. had areas in spot past charging last design adoption is We in our systems contributing Europe energy our and sensing industrial the aligned in sustainability significant infrastructure over wins where rapid to revenue needs like the Allegro. safer. charging with control alone We fiscal well 'XX. long seeing another motion industrial XX than multiple have EV are wins productivity within of XX We're space products help EV bright this products tailwinds doubling automation year-over-year in significant in the more next in design Our for quarter growth factories Enabling products and vectors longevity, fueled -- make goals. automation by productive more efficient, generation believe and more

industrial, at expect continues will our Our the approach to more end also fastest center in we xEV, and and than prior cooling In growing growth market to expand of millimeter the sales will to next of revenue center, over and industry our percentage this CAGR our supply through in solution we're business ADAS remain mid-teens in becoming center data manufacturing QX that believe a continue SAM and we both imbalance continue that the strong, capabilities years, the the grow capacity strategy. of basis. $XXX accelerate year, surpassing estimate over three seeing is million. the we to under-invested and we X% by business will our data year, XXX this demand asset-light that and expected tight year. for we face expect data industry-wide, the by our -- capacity and our With application support The doubled

order partners, to securing back-end expanding our with success on three outlook. innovative winning capacity continues our with commitments culture. team our view current support by to foster our long to long-term our take areas. our and our extended, powered a operations growth expand supply also base our support We're in pursued have global production foundry our We to anchored strategic ongoing business capacity relationships is team in Certainly, partners to and

like an working patents. cornerstone our Our our help talent Flex@Allegro foster Programs our evidenced strong now customers a drives active balance recently planet. launched also culture the portfolio which us exceeds a good striking in of is hybrid for a important model, culture, our XXXX us business, giving competitive and market edge while IP this innovation by a that that's

role winning a and to significant our culture safer vision the results in world a broader Our aligned to technology has sustainable more and future. move driving our displayed to

Now turning outlook. to our QX

million We of $XXX $XXX be million. in expect to range the sales to

and We will digits to other low-single be industrial up expect automotive sequentially, while be flat.

to be the gross to We to the $X.XX. non-GAAP share in margin range be $X.XX of expect range XX%. of anticipate non-GAAP per in will earnings We XX%

enter we to positioned continue EPS energy a win customers targeted our full value secular efficiency increase your OpEx take and deliver growth. market to the our questions. year of as to new world ahead and will resulting in growth to leverage, growth that seize growth serve We and Katie? revenue in momentum we revenue happy to fiscal the value. and provide innovations for I us now advance shareholder to Xx We'll unique of offer we're to well opportunities believe extraordinarily safety be model continued to to our high-teens. strong operating drivers, anticipate contributing design continued year, to the As towards our expansion alignment expect outlook strong trends an

our prepared call and the questions, participants? now with Ravi. please for open answer question will Peter, you That review the Thanks, and concludes we'll instructions remarks our

Mobley from first Fargo Securities. Wells will question Gary with come Instructions] Your [Operator

Your line is open.

there I different Good at strong to morning, to changes us a your reading wind months in were everybody. right? approaching am finish you background retirement, a the for for Allegro can changes, been we my you extend I on congratulations maybe of reasons, give can since you replacement, start the with making, in has and guess, the a presume Micro little are if respect And have on me name let Ravi, many this how if and that that year. I you

search for in date objectives candidate. candidate, flexible My successor alternatives. and and They my available disciplined in the on have drive next while search think us extraordinarily the a used the when look the I see methodology was best Board and they looking the a of Board the will someone I to found a Yes, to take on they retirement discussing for Vineet, been quite and company based who level. appropriate conducted found to worthy parallel,

I maybe increments that that of the foundry that. support of at fiscal respect year And expecting high-teens you appreciate percent, quarter, presume acceleration maybe the in I $XX once that with revenue a to ramp you're 'XX TSMC on the get in topline would little outlook your and beyond of the partner million revenue sequentially seeing you're acceleration? as could a you give background and first

grow been with as have we TSMC And to path capacity. on discussed, our so previously long-term a

with expecting accelerate QX occurring the revenue As as -- to discussed, impactful fiscal previously fiscal and QX. quarter-over-quarter most our acceleration in QX again our we're constantly

continue as them three the as on there the into come growth and our and all to we will products xEV, is in demand as into vectors; anchored us turn will our secular So growth see guided The continue areas driving growth capacity and to for shipments. specialty as ADAS, industrial, demand. certainly with wafers see quarter-over-quarter comes have we you are out

with question Barclays. from come next Your Curtis will Blayne

line open. Your is

to demand up of think you you I for I'll congrats fiscal all. if are understand I supply think or and get guess feeling out, it just my auto as raise, Thanks just was profile? follow better difference always you as you just just have mean, in question, and echo the the on the want if I to guess, that between I segments? confident more about the 'XX, this ability any there's did question between maybe that taking about and in your your industrial forecast those pointed you to kind delta

demand from had supply our Yes, are so pretty our customers receive that aligned we deliberate to our foundry a and company along commitments we commitments partners. with the we

aligned with to pretty align we well supply customers their So availability. appropriately are and adjusted have ramps

led outgrow continuing but growth levels. our We automotive expect increase xEV secular xEV industrial ADAS, anemic they're also see of really and being automotive --the great where our area dramatic the to see level trends. adoption rate has will the being systems, you despite car growth that ADAS by quite X production modestly It's year-over-year business you business, -- them is really

I It's actually more about my into little wanted xEV a question. lead second a ask pipeline. great to that bit

from to a your seen getting biggest XX% as content of the adoption least of beyond xEV, xEV, couple years? and it's then to I shift just at, you what the think clearly perspective, obviously driver is either for of projections vehicles I'm business share been You've your or over that. next do at have you think curious, further look

Yes, XX had were stat, six in so Allegro our we to anywhere one which products have two prior an using sensors and inverters of current you between simple calls, out could pretty inverter, in a them. was provided every of in

positioned not we We're globally. anchored. extraordinarily well regionally So are

see Our applications cooling the charges, area products, then we fans, see being for battery see on-board and the secondary as xEV like et an customers power we are also area, converters our charges see we global, cetera. wall DC-to-DC in but we

car this up XX% major our the growth total on production fiscal on the fiscal year is only rate a a So up a basis is production year xEV and year-over-year, X%. area basis is when

perspective, and really tailwinds. giving adoption our see of from can that's acceleration you us xEV So secular the what's an

will Your Securities. with SMBC Srini Nikko come from Pajjuri question next

is open. line Your

congrats. let Good echo Ravi, me morning, Ravi and Derek my and

normalizing inventory the inventory? does guess, and when from in you contemplate you your foundry what own question online sheet your do terms more of so channel high-teens partners, sheet inventory supply channel balance and side, guidance supply when see as comes normalizing? on inventory also So, Ravi, see do your I your balance own

see those We don't either in material one any change areas. of

to to that vectors wins ship and we we be XXX demand products earlier, the supply continues these as by the said So millimeter growth design imbalance to continue continues, constraint. our are supported

significant won't at the near future So in our or change least material see in we inventory. any

the then gross of terms so I'm you curious talked the about cost what look next Okay, beyond margins, as the and increases. in time price between Derek, And you the got it. just increases lag out the the are and the we quarter, price is increase as pretty the and some of opportunities year? takes, more behind much potential tailwinds are the puts then or us? you go Or there see are do what through headwinds

Yes, Srini, Derek. hi this is

So that, other and was of half the QX between was exchange. margin between half ahead that, from input half really split QX, costs the pricing gross and some foreign going of improvement about to

of that's for don't So baked going the our normalize predict the the inputs into the and and terms ASP year. cost forward. to going forecast course, foreign exchange, now, and But we we of rest QX of in the forward, right expect for

will to margin look internal will continue at to to We look gross that at with efficiencies. price improve increases, ways continue we also strategic

the I want input to when that, continue pricing. with we'll a for be QX, any And but happy efficiencies offsetting there basis. and on So sustainable XX.X% that say cost to look in we we got about we're

Quinn from come will question next Your Company. Instructions] Needham and with Bolton [Operator

auto between start looking the some think just versus -- Let my 'XX? for fiscal wanted to or at growth you, me I in high-teens mix 'XX vehicle congratulations the fiscal on Ravi 'XX side, mid sorry, can production on what -- now fiscal particularly the versus is offer sense, you do your lift gains content to you us give and congratulations retirement,

about and we 'XX X% expect of believe be year-over-year growth, to production I it's on growth capital model that car that. question. our content fiscal X% Good says our a top

also will any And -- will So business to good you continue are this we and expect business the we to Level acceleration. continue is expecting xEV outperform. a remain soft not that that but -- as internal expect X we know, do and ADAS as our pretty combustion

also Great. we from time. ask give And sense, over increasing seeing you about us a I just to TSMC increases talked lot and UMC capacity wanted Polar? you some wafer and TSMC are Can from

and increases not from it's it's all Yes, we partners with fab incremental. wafer see lumpy, you as capacity, know

supply of we've UMC, our and continue the to wafers and chain going two. -- we've further increased from So TSMC we increases we've increased next received Polar, received or expect year amount increase from into an from we from

Great. question, quarter a clarification. And primarily limited really 'XX? in the then growth past sort slower that a least last you're is capacity sounds next for December quarters, of years you've so like that's fiscal what revenue wafer my seasonality at the expecting just It in wafer seen few availability, or over by maybe seasonally, not

we New slowdown break, we impactful fiscal QX fiscal our not get of expect period particular from we Yes, wafers factory from the Year will the expect but do the that the particularly effect that so seasonality mild for early Christmas availability that a basically outsize Christmas is the period. of shutdowns, far and or QX material TSM will

hand further this to questions I'm at time, [Operator now no And remarks. Ravi closing for it Instructions] showing back will over I

The of Thank of have Allegro. have This you and with for again time conclude joined who Thank today. I'd you been highlight customers employees, to all today's you. being at and of of have our as our call. take thank like covering my developed will Thank Board for last their years. us call, you and earnings thoughtful shareholders you, and to each time analysts a the this rewarding relationships one my operator. well support With the this all throughout as

This Thank concludes participating. today's you call. conference for

now You may disconnect.