Allegro MicroSystems(ALGM) - 2023 Q1 - Earnings Call Transcript

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]