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Good morning, and welcome to the Allegro MicroSystems Second Quarter Fiscal 2024 Earnings Conference Call. [Operator Instructions]. Please be advised that today’s conference is being recorded. I would now like to hand the conference over to Jalene Hoover, Vice President of Investor Relations and Corporate Communications.

Thank you, Amber. Good morning, and thank you for joining us today to discuss Allegro’s Second Fiscal Quarter 2024 results. I’m joined today by Allegro’s President and Chief Executive Officer, Vineet Nargolwala; and Allegro’s Chief Financial Officer, Derek D’Antilio. They will provide highlights of our business, review our quarterly financial performance and share our third quarter outlook. We will follow our prepared remarks with a Q&A session. Our earnings release and prepared remarks include certain non-GAAP financial measures. The non-GAAP financial measures that are discussed today are not intended to replace or be a substitute for our GAAP financial results. A reconciliation of these non-GAAP financial measures to the most directly comparable GAAP financial measures are included in our earnings release which is available on the Investor Relations page of our website at www.alegramicro.com. This call is also being webcast, and a replay will be available in the Events and Presentations section of our IR page shortly. During the course of this conference call, we will make projections or other forward-looking statements regarding future events or future financial performance of the company. We wish to caution that such statements are based on current expectations and assumptions as of today’s date and as a result, are subject to risks and uncertainties that could cause actual results or events to differ materially from projections. Important factors that can affect our business, including factors that could cause actual results to differ from our forward-looking statements, are described in detail in our earnings release for the second quarter of fiscal 2024 and in our most recent periodic filings with the Securities and Exchange Commission. Our estimates or other forward-looking statements may change, and the company assumes no obligation to update forward-looking statements to reflect actual results, changes to assumptions or other events that may occur except as required by law. It is now my pleasure to turn the call over to Allegro’s President and CEO, Vineet Nargolwala. Vineet?

Thank you, Derek. We believe our core growth engines and target financial model remain intact. We remain focused on executing our strategy that leverages the intersection of our industry-leading technology with the megatrends of electrification and automation in the automotive and industrial markets. We take great pride in our core value to innovate with purpose with the goal of delivering the greatest value to our customers, and we remain as bullish as ever and excited about the journey ahead. I want to thank our teams around the globe for delivering great results in Q2 and for their continued hard work and dedication to serve our customers. Now I’ll turn the call back to Jalene for the Q&A session. Jalene?

Thank you, Vineet. This concludes management’s prepared remarks. Before we open the call for your questions, I’d like to share our third fiscal quarter conference line up with you. We are attending UBS’ Global Technology Conference on November 27 and 28 at The Phoenician in Scottsdale, Arizona. Wells Fargo’s Seventh Annual TMC Summit on November 29 at the Terranea Resort and Rancho Palos Verdes California; and Barclays TMT Conference on December 7 at the Palace Hotel in San Francisco, California. We will now open the call for your questions. Amanda, please review Q&A instructions.

Thank you [Operator Instructions] Our first question comes from Gary Mobley of Wells Fargo. Please go ahead.

Hey guys, thanks for taking my question. I want to start off my questions by focusing on the two largest global automotive markets, the U.S. and China. Last quarter, you called out some bookings weakness in China. But since then, we’ve seen some reacceleration in their light vehicle build rates. So maybe if you can just speak to the bookings trends that you’re seeing in China. And I would have thought that the UAW strike would not be tremendously material for overall global light vehicle production, but maybe if you can just call out or size the impact as you see it here as we go through the third quarter.

Thanks guys.

One moment for our next question. Our next question comes from Blayne Curtis at Barclays. Please go ahead.

Yes, Blayne. What I would add is when you think about the end markets within our Industrial business, this broad industrial, which again is highly fragmented set of different applications. But one of the big markets is solar. As we supply our set of ICs for a variety of applications that make up the solar ecosystem, the solar business is pretty muted at this point. And so when we take a step back and take a look at the inventory positions at our distributors that serve the industrial market, so data center is another one. And we say the inventory positions are well within the comfortable range, maybe at some places, they’re a little bit higher, we’re watching the POS very carefully to make sure that we are not creating or exacerbating the inventory problem. And so that’s why we are intentionally managing our shipments into those industrial distributors. But I would say that the end markets of data center and solar, in particular, are the ones that are muted. And I think it’s anybody’s guess as to how long it’s going to take for those markets to recover and come back, okay? But it’s probably going to be a couple of quarters, at least.

Okay, thanks guys.

One moment for our next question. Our next question comes from Blake Friedman of Bank of America. Your line is open.

Great. Very helpful. And then also just maybe within your December guidance as well. Just specifically in terms of your autos outlook, I know you mentioned it should grow year-on-year. But is there any way you can kind of talk about the buckets in terms of e-Mobility and non-e-Mobility as we kind of look in the next quarter that would be great. Thanks.

Yes, Blake, this is Vineet. I’ll answer that. So we continue to be very pleased with our momentum in e-Mobility, and we expect e-Mobility to stay strong as we look to the next quarter sequentially. We are seeing some order movement in our ICE shipments or product set. And so we expect that to be down but as we said before, on a year-over-year basis, we are still expecting overall order to have good growth.

Thank you.

One moment for our next question. Our next question comes from Joshua Buchalter at TD Cowen. Please go ahead.

And then, Josh, within that, obviously, e-Mobility is what is really driving overall growth for us in auto. And as I said in my prepared remarks, we are really agnostic in terms of the content between full hybrids and BEVs. And so the content is very similar for us right now. And so we are agnostic and actually supporting both platforms and growth in both platforms for our customers. It’s correlated to that pure ICE vehicles would see some decline. And I think that’s pretty well understood broadly by third-party estimates as well and our safety confident convenience business is really agnostic to the powertrain. So that continues to be really stable and starts to see a little bit of content lift with more electrified content.

Got it. Thank you.

[Operator Instructions] Our next question comes from Christopher Caso at Wolfe Research. Chris, your line is open.

Yes, thank you. Good morning. I guess the first question is regarding the backlog and visibility going forward. Obviously, lead times have been long, product has been short. As things get a little bit more normal, how does that affect your visibility in the backlog as we look into the December quarter and does that have any implications for the March quarter? What do you consider to be kind of normal seasonal behavior for the March quarter? And what sort of visibility do you have for that now?

Chris, this is Vineet. So I want to start answering that question by saying that the visibility that we really get is first based on our design wins. So our design wins and the customer forecast that comes with those design wins is really what we use for our call it, our mid to long-term planning purposes. And that sets the table for our R&D investments, our capital investments, our factory planning and so on. And then in the near term, that forecast gets turned into orders, which then become part of the backlog. And you’re right that as lead times have come back more into the normal range, the backlog has moderated to what we would call the normal range, right? Typically, it’s two quarters with what we would consider normal. We are back within that range. So we have good visibility for the next couple of quarters and the forecast continues to evolve based on the design wins. So hopefully, that gives you a sense for how we think about visibility and how we think about the next couple of quarters.

Got it. If I could ask a follow-up on the Crocus acquisition. If you could speak to the rationale for that because obviously, you guys were ready doing internal work on TMR sensors. What was the decision to go out and buy as opposed to continue that development internally?

Yes, Chris, great question, and really appreciate the opportunity to come back to this topic because it’s really important. So as I said in my prepared remarks, Allegro has traditionally been really strong in developing TMR for ADAS and our business in auto. And when we looked at the Crocus technology and how that has evolved in the last couple of years, we found that to be a really good fit for xEV applications as these applications started to become more demanding in terms of accuracy and robustness over temperature and over life. And so we felt at some level, yes, it’s a build versus buy decision. But by bringing Crocus into the portfolio, we’ve accelerated our road map by several years and we can now bring this TMR technology today with a little bit of work from our engineers, make it automotive grid and bring it to our automotive customers pretty much instantaneously. And that’s the work that’s going to happen over the next few days and weeks where our sales team, along with the Crocus team is going to go to all of the automotive customers. And I’ll remind you that Crocus today doesn’t really have any automotive business, largely industrial. And so we’re going to bring this technology to our automotive customers and some of our more demanding industrial customers. And we’ll be able to really grow this -- grow TMR within the overall space and certainly within the Allegro portfolio. So we’re really excited about the prospect of bringing a much more comprehensive magnetic sensing portfolio to our customers. And we believe that this would help us differentiate even further in the applications we serve as well as open up new applications for us to go after.

If I could just follow up quickly on that, too. And given the need for qualification, the auto customers, the need to bring those up to automotive grade, can you give us a sense of what the qualification time would be and when we’d start to see an impact at those auto customers?

Yes, it’s a great question. So auto calls typically are long cycle, right? It takes at least a year to get auto call if you’re starting from scratch. The good news is that the Crocus team was already in process of qualifying their technology at several key OEMs. We can now come in and help accelerate that. And so we believe that we’ll be able to see some impact from automotive customers much sooner than what a traditional call cycle would call for.

That’s helpful. Thank you.

Thanks for the question, Chris.

One moment for our next question. Our next question comes from Quinn Bolton at Needham & Company. Please go ahead.

Just I guess trying to think about the puts and takes around the auto outlook. You’re guiding it down in December. Some of that seasonality, some of it’s the UAW strike. But all of those things feel like they’re shorter term in nature. And so I guess I’m struggling to think why you wouldn’t return to kind of normal seasonality or strength again in March. I mean are you guys seeing a broader slowdown in auto that’s calculated into the current outlook? Or do you -- I guess, why wouldn’t you return to normal seasonality in March?

Quinn, this is Vineet. So we’re not explicitly guiding for next quarter. Having said that, we are not seeing a slowdown overall in auto, right? So a while back, we had talked about auto production still being muted, coming off of the supply chain crisis and still needing to get to somewhere in the range of 90 million units globally in order to achieve overall balance in the industry. And I think we’re still -- the industry is still on the way there. Whether -- and we can debate what the mix is going to be. And as I said in my prepared remarks, we have become very agnostic to the mix between hybrids and BEVs. And that’s largely the two primary flavors that we believe the OEMs are really working on. So we’ve also said earlier today that we see continued strength in e-mobility and it’s really some near-term movement around orders between quarters plus the seasonality that is calculated into our Q3 guidance here.

Got it. But -- I mean it sounds like you guys agreed that the strike and seasonality are kind of shorter-term events. And so it doesn’t sound like you see anything longer term, that’s causing to become more cautious on the outlook. You’re just giving December quarter guidance, you’re not commenting beyond, but we should be reading into these comments that this is an extended slowdown.

Understood. Thank you.

One moment for our next question. Our next question comes from Vijay Rakesh at Mizuho. Please go ahead. Vijay Rajesh, your line is open. Please go ahead. One moment for our next question. Our next question comes from Natalia Winkler at Jefferies. Please go ahead.

Hi, thanks for taking my question. So on the BMW announcement, you guys highlighted that it’s a sole source kind of win for you. And I was just curious, like, is this a normal approach for some of those e-Mobility design wins you guys are seeing? And also, have you seen any shift between kind of the sole source and dual-source approach coming out of the shortages? Are you seeing kind of incrementally OEMs using one model sourcing versus the other?

Hi Natalia, this is Vineet. Thanks for the question. And the short answer is that it depends on the OEM. I would say that, yes, there is certainly efforts on the part of some OEMs to make sure that they have at least a dual source for some of the key components. But there is also our case where we have redundant sources of manufacturing. So we are able to bring supply chain resiliency to bear. And so when we present to our OEMs it’s the most comprehensive portfolio of products, especially when it comes to magnetic sensing and some of the power applications we serve. And then we talk about the supply chain resiliency that’s in-built into our supply chain with multiple sources for wafers, multiple packaging and assembly and test locations. And so that allows us to get to a sole source position. I would tell you that the complexity of designing the xEV powertrains and systems as well as the demanding nature of some of these applications where we certainly presented the best option that can meet those needs across life, across a wide range of operating conditions lends us to be sole sourced in most of these cases.

That’s very helpful. And as a follow-up, Vineet, would you speak a little bit more to the data center dynamics? It sounds like over the last few quarters, you guys have highlighted somewhat the weakness in there. Has there been any structural kind of change to what’s pulling the demand? And are you seeing any sort of near-term or midterm tailwinds that might kind of shift that dynamic?

Yes. Natalia, it’s a really good question. So first of all, data center is a very small part of our business. It’s less than 5% of our total sales. In the near term, we don’t really see any change in the data center dynamic. We’re in constant communication with our data center partners, tiers and distributors and they’re not indicating any sense of a change in direction or the market starting to recover. The positive, if I can call out, one, is that we continue to have new design wins with our data center customers. So we’ve, in the past, talked about the shift towards 48-volt architecture. That results in new platforms, new product requirements and for us, new design wins. And as the industry moves to 3-phase fans or 3-phase motors there’s more content for us. We’re seeing design win activity associated with that. But for the next couple of quarters, we don’t really see any potential recovery in the data center space.

Thank you.

One moment for our next question. Our next question comes from Vijay Rakesh at Mizuho. Please go ahead Vijay. Vijay Rakesh your line is now open. One moment for our next question. At this time, I am showing no further questions in the queue. I would now like to hand it back to Jalene for closing remarks.