Allegro MicroSystems(ALGM)2023-11-03 21:36Financial Data and Key Metrics Changes - Sales for Q2 2024 were 0.40, up 29% year-over-year [7][17] - Gross margin was 58.3%, operating income was 31.3%, and adjusted EBITDA was 37.1% of sales [17][19] - Automotive sales accounted for 51 million, declining 25% sequentially but increasing 6% year-over-year [12][17] - Other sales, including consumer applications, were down 42% year-over-year, reflecting inventory destocking [17] Market Data and Key Metrics Changes - Sales by geography were balanced, with 25% in China, 21% in the Americas, 20% in the rest of Asia, and 17% each in Europe and Japan [18] - Japan saw a 14% sequential growth, while China experienced a 12% sequential growth [18] Company Strategy and Development Direction - The company continues to focus on growth in e-mobility and select industrial markets, including clean energy and automation [7][10] - The recent acquisition of Crocus is expected to enhance Allegro's magnetic sensing capabilities and accelerate the deployment of TMR technology [15][21] - The company aims for low double-digit sales growth and above 32% operating margin in the long term [14] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about opportunities in e-mobility and clean energy despite macroeconomic challenges in China [9][10] - The company anticipates a sequential decline in industrial sales due to cautious behavior from OEMs and inventory management [12][13] - Management remains confident in the long-term growth model established in March 2023 [12][14] Other Important Information - The company expects Q3 sales to be in the range of 260 million, reflecting normal seasonality and impacts from the UAW strike [22][23] - Gross margin for Q3 is projected to be approximately 54%, with operating expenses expected to decline by 4% sequentially [23] Q&A Session Summary Question: Trends in bookings in China and impact of UAW strike - Management noted a strong return in bookings in China and acknowledged some order movement due to the UAW strike, but the overall impact is not material [28][30] Question: Distribution inventory levels - Current distribution inventory is at the higher end of the target range of 10 to 12 weeks, with stabilization observed [33][34] Question: Industrial inventory correction - Management indicated that industrial sales are expected to be muted in Q3 due to inventory levels and cautious demand [36][37] Question: Gross margin guidance - Gross margin is expected to be around 54% in Q3, with impacts from product mix and channel inventory management [42][43] Question: Auto segment outlook - Management expects e-Mobility to remain strong, while ICE shipments may see a decline, but overall auto sales are projected to grow year-over-year [46][50] Question: Crocus acquisition rationale - The acquisition is aimed at accelerating the roadmap for TMR technology and enhancing the product portfolio for automotive applications [60][62]