Allegro MicroSystems(ALGM) - 2025 Q2 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Q2 sales were $187 million, representing a 12% sequential increase but a 32% decline year-over-year [22][23] - Non-GAAP EPS was$ 0.08, at the high end of the outlook range [22][8] - Gross margin was 48.8%, operating margin was 11.7%, and adjusted EBITDA was 17.2% of sales [22] - Cash flow from operations was $16 million, with free cash flow of$ 6 million [28] Business Line Data and Key Metrics Changes - Automotive sales were $142 million, an 8% sequential increase but a 28% year-over-year decline, accounting for 76% of total sales [23] - E-mobility sales increased to$ 71 million, up 14% sequentially [23] - Industrial and other sales were $45 million, a 27% sequential increase but a 42% year-over-year decline [24] - Magnetic sensor sales were$ 129 million, increasing 12% sequentially, representing 69% of total sales [24] Market Data and Key Metrics Changes - Sales by geography: 26% in China, 21% in the rest of Asia, 20% in Japan, 18% in the Americas, and 15% in Europe [25] - China saw a 54% increase in shipments in Q2, indicating strong demand recovery [39][15] Company Strategy and Development Direction - The company is focused on executing new product roadmaps and has launched new TMR current sensors [8][9] - There is a strong emphasis on innovation and design wins across various applications, including automotive and industrial markets [9][11] - The company is localizing production in China to better serve local OEMs and is on track to launch parts from a new supply chain by year-end [14][62] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about global demand for magnetic sensing and power semiconductor solutions, particularly in the automotive sector [12][17] - There is a recognition of ongoing inventory rebalancing, especially in North America and Europe, which may lead to near-term challenges [16][92] - The company expects third-quarter sales to range from $170 million to$ 180 million, reflecting continued progress towards vehicle electrification [32][20] Other Important Information - The company repurchased 39 million shares from Sanken Electric, reducing Sanken's ownership from 51% to 33% [29] - A $35 million non-cash GAAP loss was recorded due to a forward repurchase fair value adjustment [30] Q&A Session Summary Question: Can you walk us through the changes in revenue and inventory? - Management noted that the guidance for December is higher than June levels, with significant momentum in China, where shipments were up 54% [39][40] Question: Can you expand on the gate driver win with a China OEM? - The win was related to the GaN isolated gate driver, which offers significant space and cost savings, and is expected to gain traction in the market [42][41] Question: How does the competitive landscape look for magnetic sensors? - Management is confident in maintaining and potentially extending market share due to strong design wins and new product introductions [74] Question: What is the current inventory situation in the distribution channel? - Inventory levels are approaching normal in China and Asia, while North America and Europe still have work to do [71][72] Question: What are the expectations for gross margin moving forward? - Management expects gross margins to improve slightly in Q3, with a range of 49% to 51% [33][56] Question: What is the outlook for end consumption of devices? - Management believes that end market demand remains strong, with pockets of inventory digestion primarily in North America and Europe [92][93]