Allegro MicroSystems, Inc.

Good morning and welcome to the Allegro Microsystems second quarter fiscal 2024 earnings conference call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, please press star 1 1 on your telephone. To withdraw your question, press star 1 1 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to Delaine 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 Nagarwala, and Allegro's Chief Financial Officer, Derek Dantilio. 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 the Q&A sessions. 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.allegro-micro.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 Nargawalla. Vineet?

Thank you, Jolene, and good morning and thank you for joining our second quarter fiscal year 2024 conference call. I'm pleased to report that we continued a strong performance in fiscal Q2. We delivered sales of $276 million, up 16% year-over-year, driven by continued strength in automotive, and non-GAAP earnings per share established a new record at 40 cents, up 29% year-over-year. We continue to execute our strategy of growing our business in e-mobility and select industrial markets, including clean energy and automation. Sales in these strategic growth areas were $154 million, or 56% of total sales, up 37% year-over-year as we continue to gain share and outpace the competition. Automotive revenues in Q2 grew 31% year over year. Within that segment, e-mobility, which is the electrification of vehicles and increasing adoption of ADAS features, continues to fuel Allegro's growth. Sales into e-mobility applications increased by 60% year over year to 50% of Q2 automotive sales, establishing a new milestone and up from 41% in Q2 of 2023. Last quarter, we highlighted macro concerns related to China, a sentiment that was echoed by many in the semiconductor space as well as other industries. In September, I traveled to China with several members of my executive team, where we met with our customers, channel partners, suppliers, and teams to obtain a comprehensive view of the market dynamics on the ground. While there are clearly challenges in the broader Chinese economy, we came away even more excited about the opportunities for Allegro, specifically related to e-mobility and clean energy. The enthusiasm and respect from our customers and our partners for Allegro's longstanding heritage in automotive, as well as for a track record of delivering innovative, high-quality products, continues to position us as a partner of choice for Chinese OEMs who are increasingly capturing the world's imagination and targeting a more global presence. As a proof point, we saw continued strong second quarter design win activity and shipments in China, which increased both sequentially and year over year. With local incentives for EVs extended until 2027 and increasing consumer enthusiasm for EVs, we have solidified plans for localizing key aspects of our supply chain, which will help us better support our customers in an increasingly competitive landscape. We were also pleased to celebrate the opening of a new Shanghai office, punctuating our commitment to our customers and our growing local team in the strategically important region. Looking to the future, we continue to see strong design wins in our strategic growth areas, including e-mobility, clean energy, and automation. E-mobility alone represented approximately two-thirds of second quarter design wins. This design win momentum and the significant content opportunity associated with those design wins continues to drive our above-market performance and supports future growth. A great example is BMW's selection of Allegro as the sole current sensor IC supplier for traction inverter systems used across the company's entire fleet of battery electric vehicles. Allegro's current sensor integrated circuits deliver market-leading accuracy, enabling precise motor control leading to a superior driving experience and extended driving range by minimizing power losses. Additionally, our current sensors' built-in overcurrent detection and self-diagnostics enable BMW to meet the highest level of safety and reliability while reducing the number of components used in the traction and water. There has been some discussion lately about slowing momentum for EVs and whether hybrids are a better option. The transition to fully electric vehicles is a significant one, and major technology transformations usually don't happen in a straight line or without bumps in the road. BEVs are still projected to grow strong double-digit over the foreseeable future as they remain the best way to meet emissions requirements. And I want to emphasize that Allegro's content in full hybrid vehicles is significantly higher than that in ICE vehicles and similar to that in BEVs. So Allegro wins no matter which platforms OEMs invest in and grow. This reinforces our confidence in the long-term target growth model we set at Analyst Day in the March of 2023. Beyond e-mobility, we're seeing some near-term auto movement in our automotive business, primarily related to the impacts of the UAW strike as OEMs and tiers rebalance their production plans. In Q3, we still expect our automotive business to grow year over year. Let me now comment on the industrial markets. In Q2, growth in industrial automation and clean energy helped offset declines at data center and brought industrials to deliver 6% year-over-year growth in industrial sales. The continuing macro trends are starting to have an impact on overall demand, leading industrial OEMs to become more cautious. Looking into the third quarter, we expect to see a sequential decline in industrial sales as OEMs trim their production schedules and manage their inventory. Our other market, which is less than 10% of our sales and largely serves consumer applications, has seen significant declines on a year-over-year basis due to slowing consumer demand and inventory correction. In response, we will continue to manage channel inventory tightly in both the industrial and consumer markets while still maintaining our market positions. While our backlog remains robust, our Q3 sales forecast reflects normal third quarter seasonality, heightened macroeconomic trends, elevated inventory levels in industrial and consumer markets, and the lingering impacts from the UAW strike in automotive. Over the mid and the long term, continued strong momentum in design wins, especially in our strategic focus areas of e-mobility, clean energy, and automation, and the deepening and expanding collaboration with leading OEMs like BMW reinforces our conviction in the target model of low double-digit sales growth and above 32% operating margin. Finally, I'd like to take a few moments to discuss the Crocus acquisition, which we closed on Tuesday this week. We're delighted to welcome the Crocus team to Allegro and look forward to working together to serve our customers. Crocus's IP and products complement Allegro's portfolio while accelerating our roadmap and plans to deploy TMR to highly demanding applications by several years. Allegro's TMR technology is strong in ADAS, and Crocus will bolster our leadership in XEV applications as well as expand the aperture in industrial and consumer applications. Crocus's industrial presence is complementary. to Allegro's leadership positions in automotive and industrial markets and will benefit from a strong global sales, engineering, and supply chain footprint. Putting this all together, we expect this business combination to strengthen Allegro's leading position in magnetic sensing with world-leading Hall effect and leading-edge TMR solutions, which further enhances our long-term growth. I'll now turn the call over to Derek to review the Q2 financial results and provide guidance for our third quarter. Derek? Thank you, Vinit, and good morning, everyone.