Allegro MicroSystems(ALGM) - 2022 Q4 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Allegro achieved record annual revenue of $769 million in fiscal 2022, representing a 30% year-over-year increase [10] - Non-GAAP gross margin expanded by 410 basis points to 54.1%, while GAAP gross margin increased to 53% from 47.2% in fiscal 2021 [12] - Non-GAAP diluted earnings per share grew by 70% year-over-year to $0.78, more than double the revenue growth percentage [13] Business Line Data and Key Metrics Changes - Automotive revenue increased by 34% year-over-year, significantly outpacing the automotive semiconductor growth of 30% [11] - Industrial revenue surged by 40% year-over-year to $133 million, while other revenue grew by 6% to $104 million [11] - Magnetic sensors accounted for 65% of sales, up 29% year-over-year, while power products represented 35% of sales, increasing by 32% [18][19] Market Data and Key Metrics Changes - Automotive market represented 69% of total revenue, up 33% year-over-year, with xEV and ADAS contributing 36% of sales, up from 33% [20] - Industrial market accounted for 17% of revenue, also up 40% year-over-year, driven by automation and EV charging infrastructure [23] - Data center business more than doubled year-over-year and is expected to approach 7% of total sales by the end of the year [24] Company Strategy and Development Direction - Allegro's strategic focus is on vehicle electrification, autonomous vehicle control, and efficient motion control, which are expected to drive long-term growth [7] - The company is expanding its manufacturing capabilities and securing long-term commitments with foundry partners to address supply constraints [25] - The transition to a hybrid working model, Flex@Allegro, aims to enhance the company's culture and attract talent [26] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's growth trajectory, supported by strong design win momentum and alignment with secular growth trends [7][27] - The company anticipates continued revenue growth in the high-teens percentage for fiscal 2023, driven by automotive and industrial sectors [27] - Management acknowledged ongoing supply-demand imbalances, particularly in 200mm wafer availability, impacting short-term operations [10][42] Other Important Information - Ravi Vig announced his retirement after 38 years, with Vineet Nargolwala set to succeed him as CEO [8] - The company ended fiscal 2022 with $290 million in cash and equivalents and $25 million in long-term debt [13] Q&A Session Summary Question: Background on Ravi Vig's retirement - Ravi Vig confirmed that discussions regarding his retirement had been ongoing for months, with the board conducting a disciplined search for a successor [32] Question: Fiscal 2023 revenue outlook and TSMC's role - Management expects revenue to accelerate quarter-over-quarter, particularly in fiscal Q3 and Q4, supported by increased capacity from TSMC [34] Question: Differences in forecast between automotive and industrial segments - Management indicated that industrial is expected to modestly outgrow automotive, driven by strong demand in ADAS and xEV areas [36] Question: Supply chain and inventory normalization - Management does not foresee significant changes in inventory levels in the near future due to ongoing supply constraints [42] Question: Future gross margin expectations - Management expects gross margins to normalize and continue to seek strategic price increases and internal efficiencies [44] Question: Vehicle production and content growth in fiscal 2023 - Management anticipates a 9% year-over-year growth in vehicle production, with a similar growth in capital content [48] Question: Wafer capacity increases from foundry partners - Management confirmed increases in wafer supply from all foundry partners, including TSMC, UMC, and Polar [50]