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Good morning, and welcome to the Allegro MicroSystems Third Quarter Fiscal 2025 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speakers’ presentation, there will be a question-and-answer session. [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. Please go ahead.

Thank you, Kevin. Good morning and thank you for joining us today to discuss Allegro’s third fiscal quarter 2025 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 fourth 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 in the Investor Relations page of our website at www.allegromicro.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 and other forward-looking statements regarding future events or the 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 to differ 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 third quarter of fiscal 2025 and in our most recent periodic filings and other filings with Securities and Exchange Commission. Our estimates, expectations 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?

Thanks Derek. Before we open the call for Q&A, I want to leave you with three key thoughts. First, we have a strong foundation and a clear strategic focus. We continue to be a market leader in magnetic sensing and possess deep expertise in targeted power ICs. Second, we're encouraged by the progress we made in the third quarter as we delivered on our commitments with results above the midpoint of our guidance. We are laser-focused on executing a product and technology roadmap with a record number of new product introductions and securing important customer wins with our sensing and power solutions. Third, we Believe Allegro is poised for significant value creation. We've been serving the auto and industrial markets for over three decades and we see multiple catalysts for long-term growth in these markets as they are transformed by the megatrends of electrification and automation. We’ve taken advantage of the downcycle to expand our portfolio of innovative solutions and reposition our business. This along with the signs of an improving cycle gives us the confidence in our ability to outgrow our served markets, deliver a very attractive financial profile and create an opportunity for significant shareholder returns. Now, I will turn the call over to Jalene.

Thank you, Vineet. This concludes management's prepared remarks. Before we open the call for your questions, I'd like to share our fourth fiscal quarter conference lineup with you. We will attend Wolf Semiconductor Conference on February 12th at the Kimberly Hotel in New York; Morgan. Stanley's TMT Conference at The Palace Hotel in San Francisco on March 4th and also participate virtually in Luke Capital’s Sixth Annual Investor Conference on March 10th. We will now open the call for your questions. Kevin, please review Q&A instructions.

[Operator Instructions] Our first question comes from Joe Quatrochi with Wells Fargo. Your line is open.

Okay, that's helpful. And then, I guess as we just kind of look forward in demand and you're talking - I can appreciate you are talking about, continue to work down inventory, but I guess like how do you view the shape up for the calendar year and given that you are talking about some of your end-markets growing low double-digits – or double-digits for ADAS and EV production do we start it shift to better than in demand hitters as we look beyond the March quarter?

Hey Joe, this is Vineet. So one step at a time, right? As I said in my prepared remarks, we're really focused on the leading indicators that start to give us some conviction. And, we see an increase within the quarter orders. That's says that there are pockets of inventory gaps that are starting to emerge in the channel. We – our cancellations are at an all-time low and bookings, are the highest they've been in the past eight quarters and they are up 50% year-over-year. So these are the leading indicators that Derek and I look at to say what should we expect over the quarter or two. And then, over the mid to long-term or over the mid-term, really we're looking at, what are the projections for automotive growth? What are the projections for xEV production? And I think across the board, those signs are right now encouraging, right? So we're not guiding for next quarter. But at least the indicators that we look at are all pointing in the right direction.

Thank you.

One moment for our next question. Our next question comes from Thomas O'Malley with Barclays. Your line is open.

Okay. And if I look at your xEV business, you said it was 48% of revenue. This is the first time since kind of really like June of ‘23 I guess, there's been a couple of times along the way, but you see the crossover of the other auto business or more of like the SAR checking auto business get larger? Would - when you look over the next four quarters, would you expect there to be a crossover again when you see more growth on that xEV side, or do you think that the trajectory of this year is really growth fueled by the broad base buckets? Just because it looks as though, the faster growing stuff is actually down a bit, more year-over-year at this point.

Yeah. Hey Tom, this is Vineet. So, just a correction first. We talk about our e-mobility business, which is a combination of our xEV products, as well as the products that go into ADAS applications and that collectively was down a little bit this quarter. Again, it's a function of some of the inventory management that is happening in North America and a little bit in Europe, okay? When we take a step back and look at what our business looks like from a mid to long-term standpoint, it's really a design win that guide us and I've said this in the past more than 70%, 75% of our design wins in Automotive are in the field of e-mobility. So that gives us a lot of conviction that that we are aligned to the fastest growing areas within Automotive and we certainly expect that trend to continue as we move forward here in the next few quarters. So, I would just regard this crossover as you call it as a blip, just for this quarter and really an artefact of some of the inventory management that's happening.

One moment for our next question. Our next question comes from Gary Mobley with Loop Capital. Your line is open.

Hi everybody and thanks for taking my questions. Want to ask and I guess direct in focused questions. One, do you believe in S&P mobility’s forecast of flat light vehicle production in calendar year ’25? And given where your inventory levels are in the automotive channel, do you think you can grow in line or better than light vehicle production unit growth in 2025?

Hey Gary, this is Vineet. You broke up a little bit. But I think I got the gist of your question. So, I think the first question was do we believe the S&P forecast for 2025? It's a one data point. We have direct conversations with OEMs. We have direct conversations with the Tiers and contract manufacturers that serve them. And so we sort of triangulate into what we think is the right estimate with some guard bands and then we have our own planning scenarios around it. As we’ve said before, we actually don't need auto production to grow for - for us to grow because we see the tailwinds from content growth in xEVs, increased ADAS penetration and frankly, even the other side of our business, which is largely in-cabin, whether it's thermal management, whether it's LED drivers, whether it’s switch and latch for a variety of applications in the in the automobile. All of that content is growing as consumers seek more tech heavy content within the cars. So, we feel really good about our ability to grow and I'll bring you back to the model that we put out. We, we should expect to see inventory digestion put aside, we should expect to see SAR plus or production, plus 7% to 10% in growth. That's our model and we feel really comfortable with that sort of growth going forward.

Okay. Let’s follow-up with and ask about pricing on both sides. So pricing to your customers, when we think that being once a year event or is it more dynamic real time adjustments? And what sort of pricing trends are you seeing from your various foundry partners?

Thank you both.

One moment for our next question. Our next question comes from Chris Caso with Wolfe Research. Your line is open.

Got it. Thank you.

One moment for our next question. Our next question comes from Quinn Bolton with Needham & Company. Your line is open. .

Got it. Okay. Great. And then, maybe just a sort of question what you're seeing from customers. One of your peers Mobileeye on their call this morning talked about given some of the slower growth in EVs, they are seeing some customers re-emphasize ICE vehicles just sort of obviously their ICE vehicles not EVs they also have perhaps lower ADAS content. Wondering if you're seeing any of this kind of shift back to ICE vehicles with lower ADAS and if so does that have a - what kind of impact might that have on your business over the next couple of years? Or are you just not really seeing any major push to reemphasize ICE among your customer base?

Quinn, this is Vineet. I’ll take that. I just came back from meeting customers in North America our customers in Detroit, as well as the one large company in California. And I will tell you that with our legacy customers, nobody is talking about introducing new ICE platforms. Now they might keep an existing ICE platform little bit longer. But really in order to meet their own portfolio requirements and some of the emissions requirements globally, they're introducing more hybrid solutions. And I think it's a good reminder that for Allegro the hybrid content is very similar to that on battery electric vehicles. We gained from really two bites of the apple, which is the ICE powertrain content, as well as the electric content even though the battery size is smaller, you really still need all of the same sensing and power control modalities and products that that you would in a full BEV. So this still feels like people are moving forward with hybrid and battery electric programs. And the tech content regardless is continuing to be really high. So nobody is going backwards in terms of the tech content. So we're not really seeing it.

Thanks, Vineet. Thank you, Derek.

One moment for our next question. Our next question comes from Blayne Curtis with Jefferies. Your line is open.

Perfect. And then I want to ask you on bookings. You mentioned some improvement. You probably don't want to give us book-to-bill, but kind of directionally just kind of I am trying understand between your two segments auto and industrial. Whether they're above one like, I guess, kind of is there any color you can provide as to where it is today?

Yes, Blayne, this is Vineet. So as I said in my prepared remarks, we're encouraged by what we’ve seen in our set of leading indicators, right? So, increased within the quarter Auto. Cancellations at an all-time low and then bookings have been at the highest level. And up 50% year-over-year. Book-to-bill has stayed about 1, 4, few months now which again, is very encouraging for us. So we continue to build positive momentum. Again, we're not calling, it victory and not hanging up a mission accomplished flag. But certainly it feels like we made a lot of progress in clearing things out. And my conversations with leadership across the OEMs is definitely indicating that we are starting to see now healthy levels and maybe some pinch points from an inventory standpoint and which is why we were on the side of caution and actually built up some additional die bank, some additional finished goods, which I think is going to serve us really well as and when the demand comes back.

Thanks.

One moment for the next question. Our next question comes from Vijay Rakesh with Mizuho. Your line is open.

. Yeah, hi. Just a quick question on the bookings. I saw your December quarter bookings had a pretty nice pick up 50% sequentially. Just wondering how they're spending into March. And also, if you could give some more color on the bookings. Is that more on the Auto side? Is that spread out between Auto and Industrial? Thanks.

Yeah, sorry, Vijay. We're not going to be able to provide more color than that. I will tell you it’s broad based. So that’s encouraging. And if you refer back to my prepared remarks, we are seeing encouraging signs in our Industrial business as I talk to customers feels like automotive inventory is getting to healthy levels. Now, I will tell you that maybe Europe continues to be an area of concern where it's going beyond just inventory digestion. There is enough news around what's happening with OEMs and tiers in Europe. And so we are watching that pretty carefully. Europe is one of our smallest geographic regions, so, we're not super exposed to it. But certainly what happens in Europe is important to us and we continue to win with the winners there in Europe and so we're watching that space pretty carefully.

All right. Thank you.

One moment for our next question. Our next question comes from Josh Buchalter with TD Cowen. Your line is open.

Hey guys. Thanks for squeezing me in. I wanted to follow-up on some of Vineet’s comments just now. So is it correct, it sounds like you think inventory levels in autos at your Tier-1 partners and OEMs is at levels where you want them to be? You're no longer feel like you need to under ship anymore and just waiting on in demand like anything I guess, and in fact risk is more in the other direction, that there's too little than too much right now. I just want to just ask that one pretty directly.

Hey, Josh, Vineet here. So, the second part of your question, I do think the risk is now more on hotspots. And and we're seeing evidence of that with more sort of increased in quarter order activity. I'll provide the analogy as such. We’ve put out the fire, but there are still some embers from an inventory standpoint. So, there are certain parts, certain customers that are still a little too hot and we are watching those very carefully. But I would say on a broad level, we feel good about the progress we've made in helping our customers absorb the inventory. We've been pretty clear in past earnings calls, as well as various investor conferences. We believe that our demand profile is intact. It's just been fulfilled through inventory on hand. We've been watching our design wins. Our secured programs, actual consumption levels and so that gives us pretty good conviction that as the inventory digestion gets completed, we're going to start shipping into normal consumption. I would tell you that in certain regions, we already are, right? As we said last time North America was lagging. We think this quarter it’s gone a long way in getting that right sized. My conversations last week with customers indicated that we are at healthy levels. I would say in most of the places, maybe a couple of hot spots. Europe continues to be area we watch very carefully, because the inventory situation there got compounded with sort of more structural issues in the auto sector there. But Asia continues to hum along really well for us.

Okay, got it. Thank you. And I guess, just apologize for being - here on pricing. But as soon as there's been no material change in the competitive environment that's driving any of the incremental changes in pricing, you described it as back to normal I just want to check in on the competitive front. And also apps within your product portfolio how much is current sensing contributing today? And I would just be helpful to hear an update on - sorry, that's not too in there, bye.

Yeah, so that's like three questions, Josh. So, we'll - you got to put a penny in the jar next time. So, I think the - in terms of new products, we don't split out Current Sensing specifically. But I would tell you that we've got a lot of momentum. Lot of - we've really built out the Current Sensing portfolio everything from your standard haul to very high speed haul. We've got 5 MHz and a 10 MHz current sensor. Different packages. Different form factors and all with a view of serving every niche and every need from a customer standpoint. Our TMR business continues to grow really well. We talked about the success in medical. That's expanding. We've qualified in automotive. We've got a lot of our leading customers now, starting to test and sample TMR in their most demanding applications, including battery management systems, which is new a new Sam for us. So we feel really good about it. What is the first part of the question? Pricing on…

Any change in competitive environment in the legacy…

All right. Thanks guys. As you noted on the penny, we’ll bring it next time. Bye, bye.

One moment for our next question. The next question comes from Greg Johnson with UBS. Your line is open.

Hey, good morning guys. In the presentation, you called out Industrial being led higher by medical and datacentre, but I was wondering if you could talk about what you are seeing in your other industrial end-markets like clean energy and broad markets? Are we seeing policy uncertainty or macro overhanging on clean energy and how would you characterize broad markets generally? Thanks.

Yes. So we are seeing good strength in medical, in our datacenter business and remember datacenter it's coming off historical lows, right? So, really the only way it can go is up. We're also seeing strength in the broad industrial base. And again, when I say strength, it's all relative, we're seeing increasing activity. We're seeing encouraging signs, more in quarter orders. Our clean energy business, which is largely solar it’s still soft and I don't want to put - put it on policy uncertainty just yet. I think we're still dealing with over inventory in certain pockets. That's an area that continues to be a sort of a frustrating area, not just for us, for a lot of the players in this arena where through the pandemic just a lot of inventory was built up. I would say on the whole, I think Industrial segment will benefit from easing regulatory - easing monitory environment and I’d say that globally, right? It's not just the US commentary. I'll remind you that close to 80% of our sales are outside the US. So we are highly dependent on what happens in every part of the world when it comes to our Industrial business.

Thanks.

One moment for our next question. Our next question comes from Mark Lipacis with Evercore ISI. Your line is open.

Great. Thanks for taking my question. When you talk about the doubling of the product introductions over the past two years, or six quarters, can you help us understand where are you in the revenue realization part of that? Maybe if you just step us through the design win process to when you start to - when you start to recognize revenues from the new products and then when you really hit your stride with those and when did they start to really have a nice impact on the top-line? Thank you.

Mark, thank you. Great question and I'll split it down by behavior in the automotive market versus the industrial markets. Automotive as everybody knows has tended to be long cycle. Those cycles are compressing. But from the time we introduce a new product, we're still looking at minimum of two years, sometimes three years to start a production with customers, because once we introduce a product there is some concurrent sampling that happens. But really it starts happening in earnest and typically we are shipping to a tier or a contract manufacturer who does their own validation and then the OEM does their own validation and typically in automotive you have to go through a summer cycle and a winter testing cycle. As I’ve said before, cycles are compressing, but that's still is holding true across legacy OEMs and some of the newer OEMs. So typically in Automotive, you're looking at two to three years from the time you introduce your product to start a production and then you really hit stride probably 4 to 5 Years from the time you introduce the product to see peak revenue. In the Industrial side, it's much shorter. Typically, it's 12 months from the time we introduce a product to start a production, sometimes less, but typically it tends to be in that realm. What's really important for us here is that as Derek pointed out, we have maintained our investment and research and development and engineering. We've continued to expand our global design centers and we've really doubled down on the velocity of new products we're bringing out really trying to address every need that our customers have expressed within Automotive and now we are creating more derivative spins for our Industrial customers. So, how we think about technology investment is we build a platform for Automotive and then we take derivatives from that platform into our Industrial sectors and sometimes our consumer sectors, as well. So hopefully that gives you a sense for how we think about our engineering.

That’s very helpful. Thank you.

I'm not showing any further questions at this time. I’d like turn the call back over to Jalene for any closing remarks.

Thank you, Kevin. We appreciate you taking the time to join us this morning. This concludes this morning's conference call.