Allegro MicroSystems(US:ALGM)2022-10-30 13:20Financial 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]