Financial Performance - Net sales increased to $278.3 million in Q2 2023, up from $217.8 million in Q2 2022, representing a 27.8% year-over-year growth[12] - Gross profit rose to $157.9 million in Q2 2023, compared to $118.4 million in Q2 2022, reflecting a 33.4% increase[12] - Operating income surged to $70.7 million in Q2 2023, a significant jump from $14.7 million in Q2 2022, marking a 380% increase[12] - Net income attributable to Allegro MicroSystems, Inc. reached $60.9 million in Q2 2023, up from $10.2 million in Q2 2022, a 494% increase[12] - Net income for the three months ended June 30, 2023, was $60.889 million, compared to $10.283 million for the same period in 2022[21] - Comprehensive income attributable to Allegro MicroSystems, Inc. reached $60.4 million in Q2 2023, compared to $3.5 million in Q2 2022[15] - Net income attributable to common stockholders for the three months ended June 30, 2023, was $60.889 million, compared to $10.283 million for the same period in 2022[53] - Basic net income per share for the three months ended June 30, 2023, was $0.32, compared to $0.05 for the same period in 2022[53] - Diluted net income per share for the three months ended June 30, 2023, was $0.31, compared to $0.05 for the same period in 2022[53] Cash and Assets - Cash and cash equivalents stood at $353.4 million as of June 30, 2023, slightly up from $351.6 million as of March 31, 2023[9] - Total assets increased to $1.23 billion as of June 30, 2023, compared to $1.18 billion as of March 31, 2023[9] - The company's cash and cash equivalents and restricted cash at the end of the period on June 30, 2023, were $362.321 million[21] - Total equity as of June 30, 2023, was $1,027.765 million, compared to $763.360 million as of June 24, 2022[18] - The company's total assets measured at fair value were $117,796 million as of June 30, 2023, compared to $129,077 million as of March 31, 2023, with a decrease in marketable securities from $19,929 million to $5,222 million[35] Liabilities and Equity - Total liabilities decreased to $206.3 million as of June 30, 2023, down from $214.3 million as of March 31, 2023[9] - Retained earnings increased to $371.2 million as of June 30, 2023, up from $310.3 million as of March 31, 2023[9] - Trade accounts receivable, net, increased to $121,506 million as of June 30, 2023, from $111,290 million as of March 31, 2023, with returns and sales allowances rising to $37,094 million from $26,269 million[37] Research and Development - Research and development expenses grew to $43.0 million in Q2 2023, up from $33.9 million in Q2 2022, reflecting a 26.9% increase[12] Sales Breakdown - Total net sales for the three months ended June 30, 2023, were $278.293 million, with automotive sales contributing $189.698 million and industrial sales contributing $68.184 million[31] - Power integrated circuits sales were $103.988 million, and magnetic sensors sales were $174.305 million for the three months ended June 30, 2023[32] - Net sales in the Americas increased to $57,332 million in Q2 2023, up from $34,878 million in Q2 2022, driven by strong growth in the United States ($48,824 million vs. $28,391 million) and Other Americas ($8,508 million vs. $6,487 million)[33] - EMEA net sales grew to $55,388 million in Q2 2023, compared to $35,333 million in Q2 2022, with Europe being the primary contributor[33] - Asia net sales reached $165,573 million in Q2 2023, up from $147,542 million in Q2 2022, led by Greater China ($62,216 million vs. $55,116 million) and South Korea ($29,513 million vs. $20,979 million)[33] - Total net sales for Q2 2023 were $278,293 million, a significant increase from $217,753 million in Q2 2022[33] Inventory and Property - Inventories grew to $174,170 million as of June 30, 2023, up from $151,301 million as of March 31, 2023, with work in process increasing to $119,630 million from $98,836 million[40] - Property, plant, and equipment, net, increased to $285,200 million as of June 30, 2023, from $263,099 million as of March 31, 2023, with machinery and equipment being the largest component at $641,453 million[41] Goodwill and Intangible Assets - Goodwill increased to $28,048 million as of June 30, 2023, from $27,691 million as of March 31, 2023, due to adjustments and foreign currency translation[44] - Intangible assets, net, were $51,969 million as of June 30, 2023, with patents being the largest component at $22,105 million[45] Credit and Financing - The company entered into a $224 million secured revolving credit facility with a $20 million letter of credit subfacility, maturing on June 21, 2028[47] - Interest on the 2023 Revolving Credit Agreement ranges from Term SOFR plus 1.50% to 1.75% or the highest of Federal funds rate plus 0.50%, prime lending rate, or one-month Term SOFR plus 1.0% plus 0.50% to 0.75%[48] - The company is required to maintain a Total Net Leverage Ratio of no more than 4.00 to 1.00, which can be increased to 4.50 to 1.00 for four fiscal quarters after an acquisition exceeding $500 million[48] Stock-Based Compensation - Stock-based compensation for the three months ended June 30, 2023, was $11.042 million, compared to $34.136 million for the same period in 2022[21] - Total stock-based compensation expense for the three months ended June 30, 2023, was $11.042 million, compared to $34.136 million for the same period in 2022[60] Tax and Shareholder Information - The company's effective tax rate for the three months ended June 30, 2023, was 10.6%, compared to 16.0% for the same period in 2022[61] - Sanken holds approximately 51.2% of the company's outstanding common stock as of June 30, 2023[62] Customer and Supplier Relationships - One customer accounted for 14.8% of the company's outstanding trade accounts receivable as of June 30, 2023[27] - For the three months ended June 30, 2023, one customer accounted for 12.2% of total net sales[27] - Net sales to Sanken dropped to $0 in Q2 2023 from $41,709 in Q2 2022, reflecting the termination of the distribution agreement[63] - The company made a one-time payment of $5,000 to Sanken for the cancellation of exclusive distribution rights in Japan[63] - Purchases from PSL increased to $16,102 in Q2 2023 from $14,671 in Q2 2022[63] - The outstanding balance of the PSL Promissory Notes was $11,250 as of June 30, 2023[64] - PSL made quarterly payments totaling $1,005, including $67 of interest, in Q2 2023[64] - The new Wafer Foundry Agreement with PSL has a three-year term with auto-renewal for subsequent one-year terms[63] - The company will provide a rolling annual forecast for three years, with the first two years being binding under the WFA[63] - Accounts payable to PSL totaled $5,091 as of June 30, 2023, up from $4,682 as of March 31, 2023[63] - The company allowed a one-time sales return from Sanken of resalable inventory worth $4,200[63] Market Risk - No material changes in market risk exposures since March 31, 2023[101]

Financial Data and Key Metrics - Q1 2024 sales reached a record $278 million, up 28% YoY, with trailing 12-month sales hitting $1 billion [6] - Non-GAAP earnings per share were $0.39, a 63% YoY increase [6] - Gross margin was 57.8%, operating expenses were 27% of sales, and operating income was 30.8% [12] - Adjusted EBITDA was 36.3% of sales [12] - Automotive revenue grew 27% YoY, outpacing auto production growth of approximately 6% [7] - Industrial sales increased 70% YoY, driven by Clean Energy and Automation [8] - Magnetic sensor sales were $174 million, up 27% YoY, while power product sales were $104 million, up 29% YoY [13] Business Line Performance - Automotive sales accounted for 68% of total Q1 sales, with e-Mobility applications representing 48% of automotive sales, up from 39% in Q1 2023 [7][12] - Industrial sales reached a record $68 million, driven by Clean Energy and Automation [8][13] - Sales in Consumer and Computer Applications declined 30% sequentially and 27% YoY to $20 million [13] Market Performance - Sales in China declined 13% sequentially or 7% on a comparable 13-week basis, impacted by higher OEM finished goods inventory and emission standard transitions [17][18] - Sales by geography were balanced: 22% in China, 22% in the rest of Asia, 21% in the Americas, 20% in Europe, and 15% in Japan [14] Strategic Direction and Industry Competition - The company is focusing on e-Mobility, Clean Energy, and Automation, with sales in these areas increasing 63% YoY to $159 million, representing 57% of total sales [6] - The launch of the Power-Thru isolated gate driver, with a 50% smaller footprint and 40% efficiency improvement, highlights the company's commitment to innovation [9] - The company released its inaugural ESG report, aligning its corporate strategy with sustainability goals [10] Management Commentary on Business Environment and Outlook - Management expressed confidence in long-term growth targets, citing double-digit market growth projections for strategic areas and strong design win momentum [16] - Near-term caution was noted due to macroeconomic uncertainty, including rising interest rates, inflation, and geopolitical concerns, particularly in China [17][18] - Q2 2024 sales are expected to be between $270 million and $280 million, with gross margins projected between 56% and 57% [19] Other Key Information - The company closed a new $224 million revolving credit facility, enhancing liquidity [15] - Lead times declined by approximately 30% in Q1, with inventory levels expected to stabilize [15][34] - The effective tax rate for Q1 was 12.6%, slightly higher than guidance due to geographical income mix [15] Q&A Session Summary Question: Customer order lead times and backlog status [21] - Lead times have normalized to industry standards, with backlog now at normal levels [22] - Q2 guidance is largely covered by the existing backlog, with auto sales expected to increase marginally and Industrial/Other sales to remain flat or decline slightly [24] Question: Gross margin drivers and FX impact [25] - Q1 gross margin beat was primarily driven by favorable product mix and the transition in Japan's distribution channel, with FX impact expected to normalize in Q2 [26] Question: Industrial and Other segment performance [27] - Industrial segment growth is expected to moderate after strong quarters, with distribution channel inventory at target levels [28] Question: China market dynamics [29] - China's auto production declined 15% in H1 2023, with near-term choppiness expected due to emission standard transitions and elevated inventory levels [30][31] Question: Lead times and inventory levels [33] - Lead times have improved significantly, with further reductions planned, particularly for Industrial customers [34] - Inventory levels are expected to stabilize, with sufficient die bank to support customer needs [35] Question: Pricing and foundry costs [36] - Pricing in the automotive segment is value-based, with long-term agreements providing stability [37] - Input cost inflation has moderated, but ongoing discussions with suppliers are in place to manage future cost changes [38] Question: China inventory levels and EV market [42] - Dealer inventory in China is elevated due to the transition to stricter emission standards, but EV market growth remains strong [43] Question: Wafer allocation and margin impact [44] - Wafer allocation among suppliers (Polar, UMC, TSMC) is stable, with no significant impact expected on gross margins [45]

Automotive and Industrial Markets - The company's portfolio includes more than 1,000 products, focusing on sensor and power ICs for automotive and industrial markets[10] - The company's devices are critical for ADAS applications, enabling features like collision avoidance and automatic emergency braking[15] - The company's solutions are already used in vehicles with Level 1 ADAS features, with significant annual shipments[15] - The company's products are foundational to automotive and industrial electronic systems, enabling precise measurement of motion, speed, position, and current[10] - The company's innovations in Hall-effect and xMR magnetic sensors and BCD power ICs support increased driving range for EVs and improved energy efficiency[10] - The company's net sales in new areas such as automotive ADAS and data center markets have grown approximately 50% faster than the overall growth of the BLDC motor market over the last five years[21] - The company's content per vehicle increased by over 50% in a popular mid-sized 2022 model sedan as it transitioned from ICE to a battery EV[21] - The company's opportunity for content per vehicle in a standard ICE model is approximately $39, increasing to approximately $100 in an EV[21] - The company's current sensors, motor drivers, and position sensors are uniquely capable of delivering energy efficiency and motion control in clean energy and automation markets[21] - The company's ADAS-related content opportunity is expected to nearly double as systems transition to electromechanical braking and steer-by-wire[21] - Magnetic sensor ICs are used in automotive applications to improve safety and fuel efficiency, with current sensor ICs improving energy efficiency in EV powertrains[34][39] - Position sensor ICs are used in ADAS systems, HEV powertrains, and ICE powertrains for precise position measurement[34] - Speed sensor ICs reduce CO2 emissions and improve fuel economy in combustion engines[35] - Power ICs include motor driver ICs, regulator and LED driver ICs, and isolated gate drivers, used in automotive, industrial, and other markets[36] Electric Vehicle (EV) Market - The company's September 2022 acquisition of Heyday Integrated Circuits provides additional content opportunities in every fully electric vehicle[14] - The company expects its content per vehicle to increase due to research and development innovation in the EV market[14] - The company's 100V BCD wafer process technology and galvanically isolated current sensors are suited for higher voltage operation in solar and EV applications[16] Manufacturing and Operations - The company's strategic transition includes a fabless and asset-lite manufacturing model, reducing fixed costs[12] - The company's proprietary wafer fabrication processes are employed through subcontractor manufacturers, balancing flexibility and scale[12] - The company's gross margins have improved from a 40% range to the 56% range over the last several years due to its fabless strategy[26] - The company's manufacturing footprint has been reduced by approximately half over the last three years, with an additional 45% reduction from the closure of the AMTC Facility[26] - Gross margin improved from a historical range of 40% to 56%[30] - The company targets higher ASPs and gross margins by developing new products for growth markets[30] - The company's AMPI Facility is certified to ISO 45001 for environmental management and occupational health and safety[61] Research and Development - The company had 655 employees dedicated to research and development as of March 31, 2023[44] - The company owned 1,371 patents, including 742 active U.S. patents, as of March 31, 2023[53] - The company's intellectual property portfolio nearly doubled over the last three years[44] Sales and Distribution - Net sales to distributors accounted for 39.3%, 36.8%, and 37.3% of total net sales in fiscal years 2023, 2022, and 2021, respectively[40] - Sales to the largest non-affiliated distributor represented 10.8%, 11.0%, and 11.4% of net sales in fiscal years 2023, 2022, and 2021, respectively[40] - The company sold products to over 10,000 end customers annually in fiscal years 2023, 2022, and 2021[42] - Approximately half of net sales in fiscal years 2023, 2022, and 2021 were derived from the top 20 customers[42] - The company transitioned distribution in Japan from Sanken to third-party distributors and direct sales as of April 1, 2023[40] Environmental, Social, and Governance (ESG) - The company's ESG strategy includes reducing vehicle emissions, improving energy efficiency in EVs, and supporting renewable energy applications[39] - The company is a member of the Responsible Business Alliance (RBA) and requires suppliers to meet ISO 14001 and ISO 45001 standards[39] - The company has implemented energy, water, and waste reduction projects across facilities and participates in the CDP for climate change and water security[39] - The company faces increasing complexity in product design and procurement due to evolving environmental laws, regulations, and standards, such as the EU's RoHS Directive and China's RoHS equivalent[61][62] - Compliance with environmental and occupational health and safety laws could restrict the company's ability to expand or require modifications to processes, potentially incurring substantial expenses[61] Financial Performance and Risk Management - The company maintains a portfolio of cash and cash equivalents primarily in money market funds, with no investments exceeding a one-year maturity, limiting exposure to interest rate risk[166] - A 10% change in market interest rates is not expected to materially impact the company's financial position or results of operations[167] - The company reported foreign exchange gains of $1.0 million in fiscal 2023 and losses of $0.6 million in fiscal 2022[168] - A hypothetical 10% appreciation (decline) in the Euro against the U.S. dollar would have an immaterial impact on operating income[168] - A hypothetical 10% appreciation (decline) in the Philippine peso against the U.S. dollar would negatively (favorably) impact operating income by immaterial amounts[168] - The company has no foreign currency derivative instrument hedges as of March 31, 2023[168] - Inflationary factors, such as increases in overhead costs, may adversely affect the company's operating results, though historical impacts have not been material[169] Human Resources - The company employed 4,687 full-time employees as of March 31, 2023, with 3,578 in manufacturing and 655 in R&D[57] - In fiscal 2023, the company hired approximately 1,103 new employees[57]

Financial Data and Key Metrics Changes - Allegro MicroSystems reported record sales of $269 million in Q4 2023, representing a 35% year-over-year increase [7] - Non-GAAP earnings per share reached $0.37, an increase of over 75% year-over-year [7] - Full fiscal year 2023 sales totaled $974 million, up 27% year-over-year [17] Business Line Data and Key Metrics Changes - Automotive sales were $182 million in Q4, accounting for 68% of total sales, with a 29% year-over-year increase [14] - E-mobility sales within automotive increased to 47% of Q4 automotive sales, up from 36% in 2022 [8] - Industrial sales reached $58 million in Q4, a 67% year-over-year increase [15] Market Data and Key Metrics Changes - Sales in strategic growth areas, including e-mobility, clean energy, and automation, grew 46% year-over-year to $477 million, representing 49% of total sales [7] - Sales by geography were well balanced, with 26% in China, 24% in the rest of Asia, 17% in both Japan and Europe, and 16% in the Americas [18] Company Strategy and Development Direction - The company is focusing R&D investments on strategic growth areas, which now account for nearly half of total sales [10] - Allegro aims to benefit from megatrends in electrification and automation within automotive and industrial markets [12] - The company is committed to innovation, particularly in magnetic sensors, which represented approximately 60% of Q4 sales [10] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the strategy and ability to execute, highlighting strong momentum in e-mobility and clean energy [13] - The company anticipates continued strength in automotive and industrial markets, with auto production growth projected at 4% and EV growth at approximately 30% for fiscal 2024 [19] - Management noted that they have largely overcome wafer capacity constraints and are aligning backend capacity with projected demand [19] Other Important Information - The effective tax rate for Q4 was 11.6%, and diluted share count was 195 million shares [16] - Cash flow from operations for the full year was $193 million, with free cash flow of $113 million [18] Q&A Session Summary Question: Can you provide more details on the increase in e-mobility? - Management noted that e-mobility is a strong focus, with significant design wins and customer investments in electrifying fleets and adding safety features [24] Question: What are the current lead times and delinquent backlog status? - The delinquent backlog peaked at about 30% but has been significantly reduced, with ongoing efforts to manage scheduling and cancellations [26] Question: Can you clarify the revenue guidance for Q1 and the factors driving it? - The sequential increase in Q1 is driven by strength in automotive and industrial markets, with inventory replenishment not being a primary driver [30] Question: How is the company performing in the China market? - The China market remains important, with consistent ordering patterns and strong design win performance, particularly in the EV segment [32] Question: What is the outlook for EV market share and design pipeline? - The company is pivoting R&D investments towards e-mobility, with over two-thirds of investment focused in this area, indicating strong growth potential [35] Question: Are there any indications of changing order patterns in China? - Management indicated that while normalization of order patterns is expected, high demand for products continues, particularly in the EV sector [48]

Financial Data and Key Metrics Changes - Allegro reported record sales of $249 million, a 5% sequential increase and a 33% year-over-year increase, near the high end of guidance [7][8] - Gross margin expanded to 58%, an increase of 180 basis points compared to Q2, driven by favorable product mix and foreign exchange [15][19] - Operating income reached 30.3%, up from 27.9% in Q2 and 23.1% a year ago, with earnings per share increasing 84% year-over-year to $0.35 [19][21] Business Line Data and Key Metrics Changes - Automotive sales increased 8% sequentially to $170 million, representing 68% of total sales, with e-Mobility sales growing 15% sequentially and 54% year-over-year [15][16] - Industrial sales grew 6% sequentially and 60% year-over-year to $51 million, driven by Clean Energy and Industrial Automation markets [11][15] - Magnetic sensor sales increased 10% sequentially and 25% year-over-year to $154 million, while power product sales declined 3% sequentially but increased 50% year-over-year [16] Market Data and Key Metrics Changes - Global auto production is projected to increase by 8% in fiscal 2023 and by another 4% in fiscal 2024, with EV production expected to rise by 50% in fiscal 2023 [14] - Sales by geography were well-balanced, with 26% in China, 24% in the rest of Asia, 18% in Japan, and 16% in both Europe and North America [17] Company Strategy and Development Direction - Allegro is focusing on e-Mobility and industrial markets, with a strategic emphasis on innovation and R&D investments to support growth [10][21] - The company plans to open a new R&D center in Richardson, Texas, to enhance its research and development efforts [11] - Allegro aims to improve lead times and reduce past due backlog by increasing wafer and die bank capacity [15][19] Management's Comments on Operating Environment and Future Outlook - Management acknowledged macroeconomic uncertainties but noted robust demand and order patterns across focus areas [13][14] - The company expects sales in Q4 to be in the range of $260 million to $270 million, projecting a full-year sales increase of 26% [20] - Management expressed confidence in the company's ability to outperform market growth due to strong secular trends and innovative product offerings [21] Other Important Information - Allegro's backlog remains strong, with over a year of backlog and a decline in past due backlog as product shipments increase [9][26] - The company received recognition as the Best Cooperation Supplier of 2022 by Wodeer and Geely, highlighting its commitment to customer engagement [22] Q&A Session Summary Question: Update on backlog stress testing - Management confirmed that backlog stress testing continues, with cancellations slightly higher in Q3, but backlog remains above normalized levels [26] Question: Insights on gross margin performance - Management indicated that foreign exchange continued to be a tailwind in Q3, contributing to gross margin performance [27][28] Question: Timeline for Polar investment impact - Management expects the Polar investment to contribute meaningfully in two to three years, while working with other foundry partners for increased allocation in the short term [30][32] Question: Inventory targets and lead times - Management acknowledged the need to build wafer and die banks and indicated that a 100 to 110-day inventory target may be too low in the near term [33][34] Question: Data center business outlook - Management noted a pause in data center inventory digestion but remains optimistic about design wins and the 48-volt trajectory [36][37] Question: EV market growth expectations - Management is using third-party data for EV growth projections, indicating potential for faster expansion due to price cuts [48] Question: Foundry capacity allocation improvements - Management confirmed that foundry capacity allocation is incrementally improving, with a positive long-term outlook [51]

UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 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 December 23, 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: 001-39675 _________________ ALLEGRO MICROSYSTEMS, INC. (Exact name of registrant as specifie ...

Financial Data and Key Metrics Changes - Revenue reached a record $237.7 million, reflecting a 9% sequential increase and a 23% year-over-year growth [9][23] - Gross margin was 56.2%, with operating income increasing to 27.9% of sales, demonstrating strong operating leverage [22][25] - Net income was $59.8 million, or $0.31 per share, marking a 27% sequential increase [25][26] Business Line Data and Key Metrics Changes - Automotive sales increased by 5% sequentially and 25% year-over-year, with e-mobility representing 41% of automotive sales, up from 35% a year ago [23][17] - Industrial sales grew by 20% sequentially and 33% year-over-year, driven by Industry 4.0, clean energy, and data centers [23][18] - Power IC business saw a 21% sequential growth and nearly 50% year-over-year growth [18] Market Data and Key Metrics Changes - Sales by geography were balanced: 26% in China, 19% in Japan, 24% in the rest of Asia, 17% in Europe, and 14% in North America [24] - Demand in China remains strong, particularly in automotive and industrial markets, despite potential headwinds from export restrictions [38][37] Company Strategy and Development Direction - The company is focusing on enhancing customer intimacy by creating OEM-focused business development teams for automotive and industrial markets [12] - A new Chief Technology Officer has been appointed to accelerate innovation and enhance product roadmaps [13] - The acquisition of Heyday Integrated Circuits aims to expand the company's market presence in high voltage applications [14] Management's Comments on Operating Environment and Future Outlook - Management acknowledges increasing uncertainty in the macroeconomic environment but remains positive about growth expectations [19][30] - The company expects sales in Q3 to range from $240 million to $250 million, with an increased sales growth expectation for FY '23 to approximately 24% [27][30] Other Important Information - The company ended Q2 with cash and equivalents of $303 million, and free cash flow was $35 million [26] - The effective tax rate for the quarter was 10%, with an expectation of 12% for the full year [25][28] Q&A Session Summary Question: Growth projection for fiscal year '24 - Management indicated that the increase in growth projection is primarily due to additional supply from TSMC and other partners, with constrained supply expected to continue [34] Question: Exposure to China - Sales in China were robust, accounting for 26% of total sales, with strong demand in automotive and industrial sectors [37][38] Question: Gross margins improvement - The improvement in gross margins was largely attributed to favorable foreign exchange, with average selling price and product mix also playing a role [40][41] Question: Banking distribution agreement - The change in Japan aims to enhance customer intimacy and direct engagement with OEMs, allowing engineers to work closely with customers [42][43] Question: Automotive product demand changes - Demand remains strong across all automotive product segments, with backlog for automotive actually increasing [60] Question: Foreign exchange benefits - The foreign exchange benefit is expected to continue into Q3, with a potential impact on gross margins if the current rates stabilize [61] Question: Design win pipeline for xEV - The e-mobility design wins increased by 68% quarter-over-quarter, indicating strong engagement with major OEMs [71]

[PART I. FINANCIAL INFORMATION](index=5&type=section&id=PART%20I.%20FINANCIAL%20INFORMATION) This section provides the unaudited condensed consolidated financial statements and management's discussion and analysis for the company's first fiscal quarter [Item 1. Condensed Consolidated Financial Statements](index=5&type=section&id=Item%201.%20Condensed%20Consolidated%20Financial%20Statements) This section presents Allegro MicroSystems' unaudited condensed consolidated financial statements for Q1 FY2023, including balance sheets, income statements, cash flows, and accompanying notes [Condensed Consolidated Balance Sheets](index=5&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) As of June 24, 2022, total assets increased to $926.1 million, driven by cash, receivables, and inventories, with liabilities and equity also growing Key Balance Sheet Items (in thousands) | Account | June 24, 2022 | March 25, 2022 | | :--- | :--- | :--- | | **Total Current Assets** | $529,034 | $511,692 | | **Total Assets** | **$926,113** | **$892,620** | | **Total Current Liabilities** | $111,804 | $104,223 | | **Total Liabilities** | **$162,753** | **$157,257** | | **Total Stockholders' Equity** | **$763,360** | **$735,363** | [Condensed Consolidated Statements of Operations](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) For Q1 FY2023, total net sales increased to $217.8 million, but net income significantly decreased to $10.3 million due to a substantial rise in Selling, General and Administrative expenses Quarterly Performance Comparison (in thousands, except per share data) | Metric | Q1 FY2023 (ended June 24, 2022) | Q1 FY2022 (ended June 25, 2021) | | :--- | :--- | :--- | | **Total Net Sales** | $217,753 | $188,142 | | **Gross Profit** | $118,374 | $94,160 | | **Operating Income** | $14,737 | $32,242 | | **Net Income** | $10,283 | $27,707 | | **Diluted EPS** | $0.05 | $0.14 | [Condensed Consolidated Statements of Cash Flows](index=10&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Net cash provided by operating activities for Q1 FY2023 was $36.6 million, with $14.4 million used in investing and $9.1 million in financing activities, primarily for equity award tax settlements Cash Flow Summary (in thousands) | Activity | Three Months Ended June 24, 2022 | Three Months Ended June 25, 2021 | | :--- | :--- | :--- | | **Net cash provided by operating activities** | $36,553 | $38,495 | | **Net cash used in investing activities** | $(14,389) | $(15,346) | | **Net cash used in financing activities** | $(9,137) | $0 | | **Net increase in cash** | $6,473 | $25,757 | [Notes to Unaudited Condensed Consolidated Financial Statements](index=11&type=section&id=Notes%20to%20Unaudited%20Condensed%20Consolidated%20Financial%20Statements) These notes detail significant accounting policies, revenue recognition, and fair value measurements, highlighting Sanken Electric as a key customer and automotive as the largest revenue sector - Sanken Electric Co., Ltd. accounted for **19.2%** of total net sales for the three months ended June 24, 2022, and **18.8%** for the same period in 2021[28](index=28&type=chunk) - Sales to customers outside the United States accounted for **87.0%** of total net sales for the three months ended June 24, 2022, with Greater China (**25.3%**) and Japan (**19.2%**) being the largest regions[29](index=29&type=chunk) Net Sales by Application (in thousands) | Application | Q1 FY2023 | Q1 FY2022 | | :--- | :--- | :--- | | Automotive | $149,649 | $133,523 | | Industrial | $40,140 | $30,309 | | Other | $27,964 | $24,310 | | **Total** | **$217,753** | **$188,142** | - Stock-based compensation expense totaled **$34.1 million** for the quarter, a significant increase from **$4.8 million** in the prior-year quarter. This was largely due to modifications to the former CEO's equity awards upon his retirement, which accounted for **$26.3 million** of the expense[79](index=79&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=28&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses Q1 FY2023 results, highlighting a 15.7% net sales increase and improved gross margin, but notes operating income declined due to one-time SG&A expenses [Results of Operations](index=32&type=section&id=Results%20of%20Operations) Q1 FY2023 net sales grew 15.7% to $217.8 million, with gross margin improving, but operating and net income declined due to a significant SG&A expense surge from a one-time CEO retirement charge Total Net Sales Growth (YoY, in thousands) | Metric | Q1 FY2023 (ended June 24, 2022) | Q1 FY2022 (ended June 25, 2021) | Change (%) | | :--- | :--- | :--- | :--- | | **Total Net Sales** | $217,753 | $188,142 | 15.7% | Net Sales by Market (in thousands) | Market | Q1 FY2023 | Q1 FY2022 | Change (%) | | :--- | :--- | :--- | :--- | | Automotive | $149,649 | $133,523 | 12.1% | | Industrial | $40,140 | $30,309 | 32.4% | | Other | $27,964 | $24,310 | 15.0% | - Gross margin improved to **54.4%** in Q1 FY2023 from **50.0%** in Q1 FY2022, attributed to operational transformation, improved product mix with higher ASPs, and manufacturing efficiencies[90](index=90&type=chunk)[111](index=111&type=chunk) - SG&A expenses increased by **$38.0 million** (**118.3%**), primarily due to a **$28.6 million** increase in stock-based compensation, which included approximately **$26.3 million** in accelerated expense from the retirement of the former CEO[119](index=119&type=chunk) [Non-GAAP Financial Measures](index=35&type=section&id=Non-GAAP%20Financial%20Measures) The company presents non-GAAP financial measures, with Q1 FY2023 non-GAAP Net Income at $47.1 million and Adjusted EBITDA at $66.7 million, providing a supplemental view of core operating performance GAAP vs. Non-GAAP Reconciliation (Q1 FY2023, in thousands) | Metric | GAAP | Adjustments | Non-GAAP | | :--- | :--- | :--- | :--- | | **Gross Profit** | $118,374 | $1,105 | $119,479 | | **Operating Income** | $14,737 | $40,312 | $55,049 | | **Net Income** | $10,283 | $36,835 | $47,118 | Adjusted EBITDA Reconciliation (Q1 FY2023, in thousands) | Metric | Amount | | :--- | :--- | | **GAAP Net Income** | $10,283 | | Interest expense, net | $120 | | Income tax provision | $1,965 | | Depreciation & amortization | $11,918 | | **EBITDA** | **$24,286** | | Other Adjustments* | $42,440 | | **Adjusted EBITDA** | **$66,726** | | **Adjusted EBITDA Margin** | **30.6%** | *Other Adjustments include stock-based compensation ($34.1M), severance ($4.2M), unrealized investment loss ($3.5M), and other items. [Liquidity and Capital Resources](index=42&type=section&id=Liquidity%20and%20Capital%20Resources) As of June 24, 2022, the company maintained $286.6 million in cash and $417.2 million in working capital, with $36.6 million in operating cash flow, sufficient to fund future operations and capital expenditures - Cash and cash equivalents stood at **$286.6 million** as of June 24, 2022[142](index=142&type=chunk) - Net cash provided by operating activities was **$36.6 million** for the three months ended June 24, 2022[146](index=146&type=chunk) - As of June 24, 2022, the company had **$25.0 million** in aggregate principal amount of debt outstanding under its Senior Secured Credit Facilities[150](index=150&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=44&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company reports no material changes in its market risk exposures, including interest rate, foreign currency, and inflation risks, since its last Annual Report - There have been no material changes in the company's exposures to market risk since March 25, 2022[154](index=154&type=chunk) [Item 4. Controls and Procedures](index=45&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that disclosure controls and procedures were effective as of June 24, 2022, with no material changes to internal control over financial reporting during the quarter - The CEO and CFO concluded that as of June 24, 2022, the company's disclosure controls and procedures were effective at the reasonable assurance level[156](index=156&type=chunk) - No changes occurred during the quarter that have materially affected, or are reasonably likely to materially affect, the company's internal control over financial reporting[157](index=157&type=chunk) [PART II. OTHER INFORMATION](index=46&type=section&id=PART%20II.%20OTHER%20INFORMATION) This section provides additional information including legal proceedings, updated risk factors, equity sales, and a list of exhibits filed with the report [Item 1. Legal Proceedings](index=46&type=section&id=Item%201.%20Legal%20Proceedings) The company is not currently involved in any material legal proceedings and is unaware of any pending actions that could significantly impact its business or financial condition - The company is not currently party to any material legal proceedings[159](index=159&type=chunk) [Item 1A. Risk Factors](index=46&type=section&id=Item%201A.%20Risk%20Factors) This section updates risk factors from the 2022 Annual Report, specifically adding the potential adverse effects of sustained inflation on the company's business and financial health - A new risk factor was added highlighting that sustained inflation could lead to higher labor, material, and transportation costs, which may not be fully passed on to customers, potentially harming gross margins and profitability[160](index=160&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=46&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The company reported no unregistered sales of equity securities during the period - None[161](index=161&type=chunk) [Item 6. Exhibits](index=47&type=section&id=Item%206.%20Exhibits) This section lists exhibits filed with the Form 10-Q, including executive severance and employment agreements, an amended stockholders agreement, and officer certifications - Key exhibits filed include the Second Amended and Restated Severance Agreement with former CEO Ravi Vig and the Employment Agreement with new CEO Vineet Nargolwala[163](index=163&type=chunk)

Financial Data and Key Metrics Changes - The company achieved record revenue of $217.8 million, reflecting an 8.7% sequential increase and exceeding guidance [23][24] - Gross margins were reported at 54.9%, nearing the target of 55%, with operating income growing 18.3% sequentially [23][27] - Earnings per share (EPS) was $0.24, representing a 17.3% sequential increase [27] Business Line Data and Key Metrics Changes - Automotive sales increased by 6% sequentially to $149.6 million, with xEV and ADAS applications representing 38% of automotive revenue, up from 35% a year ago [24][25] - Industrial sales grew 16% sequentially to $40 million, with data center sales increasing 40% sequentially and over 250% year-over-year [24][25][26] - Magnetic sensor and power IC solutions both contributed to record growth, with significant design wins in automotive and industrial applications [17][24] Market Data and Key Metrics Changes - Sales by geography were well-balanced, with 25% in China, 19% in Japan, 23% in the rest of Asia, 16% in North America, and 16% in Europe [25] - The company noted robust demand in automotive and industrial markets, with a strategic focus on xEV and ADAS in automotive and data center, clean energy, and Industry 4.0 in industrial [21][22] Company Strategy and Development Direction - The company aims to enhance focus on electrification and autonomous functionality, with plans for selective M&A to accelerate growth initiatives [13][19] - There is a commitment to innovation and expanding applications in existing and new markets, particularly in industrial sectors [12][19] - The company plans to align R&D investments towards growth in electrification and autonomous capabilities [13][30] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the alignment with megatrends in electrification and autonomous functionality, which represent nearly 90% of total sales [21][22] - The company anticipates continued robust demand in automotive and industrial markets, despite some softening in consumer markets [20][21] - The outlook for Q2 includes expected sales in the range of $220 million to $230 million, with gross margins projected to remain between 54% and 55% [28][29] Other Important Information - The company is in the process of acquiring Heyday Integrated Circuits, which is expected to close in the fall and will not impact Q2 guidance [34][35] - The company introduced new magnetic position sensor ICs for ADAS applications, enhancing its product portfolio [18] Q&A Session Summary Question: Update on the pending Heyday acquisition - The acquisition is not included in Q2 guidance, expected to close in the fall, with material revenue anticipated about 2.5 years out [34][35] Question: Update on TSMC ramp-up - The upside in Q1 was due to incremental wafers from other suppliers, with TSMC ramp still on track for Q3 and Q4 [38] Question: Strength in data center growth - Data center sales increased significantly, driven primarily by three-phase fans, with strong demand expected to continue [39][41] Question: Changes in customer order patterns - No significant changes in order patterns were observed, with record backlog and robust bookings [72] Question: Long-term operating margin targets - Operating expenses are expected to remain stable, with continued investment in R&D, and TSMC ramp is anticipated to be gross margin accretive [75][76]