Allegro Microsystems Inc Q1 2025 Earnings Call Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Christopher Caso - Wolfe Research, LLC - Analyst : Yes, thank you. Good morning. I guess the first question is with regard to customer inventory levels and sort of the progress in getting both the channels and your automotive customers in line, you expressing intentions last quarter to take down inventory pretty aggressively. We've heard from some others in the space that the targets for those automotive inventories appear to be coming lower, at least for some. Could you give us some sense of what you're seeing and the progress that you've made in the quarter?

Question: Christopher Caso - Wolfe Research, LLC - Analyst : Got it. Just as a follow on to that, given the fact that you expect that there's still some inventory that needs to be worked down in the September quarter. What does that imply for the December quarter with the assumption that you're still burning through inventory, you're still under-shipping demand. What kind of view can you give us on the December quarter on that basis?

Question: Christopher Caso - Wolfe Research, LLC - Analyst : Thank you.

Question: Blayne Curtis - Jefferies Financial Group Inc. - Analyst : Good morning. Thanks for let me ask a question. I'm just curious, I mean we're looking at the recovery here. If you can just help us for the September quarter. I'm just kind of curious between now your two segments where you're seeing the most recovery ?

Question: Blayne Curtis - Jefferies Financial Group Inc. - Analyst : Thanks. And maybe just a follow-up on the prior question. I wanted to ask, just in terms of the automotive market, you've seen outlook kind of for demand, kind of ticked down a bit. So it seems like for others, the inventory corrections taking a bit longer. You had a very extreme correction in June, you were always very confident on some sort of recovery in September. You're seeing a little bit different trends, maybe because of the depth of that correction. But I'm just kind of curious how your kind of outlook for auto has changed over the quarter?

Question: Blayne Curtis - Jefferies Financial Group Inc. - Analyst : Thanks guys.

Question: Quinn Bolton - Needham & Company, LLC - Analyst : Hi, guys. I just wanted to follow up on Glen's question there. One of your peers, [mobilize] this morning talked about to lower volumes in the second half in part due to the recent US tariffs on Chinese vehicle manufacturers. Just wondering if you're seeing that as something that has been a recent change or whether that's incorporated in your sort of outlook for a modest low digit reduction in auto production globally this year?

Question: Quinn Bolton - Needham & Company, LLC - Analyst : Great. And then maybe just a sort of accounting question for you, Derek. You walk, excuse me through the dynamics of the share repurchase, but you mentioned that $35 million I think you called it a facilitation fee and wondering how is that accounted? Is that sort of an intended to help offset ? Some of the higher interest expense from the term loan. Is that accounted for as just a one-time payment ? Just any help from how we should be thinking about accounting for that payment would be helpful ?

Question: Quinn Bolton - Needham & Company, LLC - Analyst : Got it. Okay, thank you.

Question: Vijay Rakesh - Mizuho Securities - Analyst : Yes. Thanks, Vineet, and Derek. Just a quick question. I know you mentioned Grade three magnetic sensor share up and a leading question there. The one question that isn't getting to investors during the debt is down 40% year-on-year. Let's say, if you can give us some clarity on how your market share is standing here, the EV and ADAS and how the design pipeline look, especially in orders and XTV

Question: Vijay Rakesh - Mizuho Securities - Analyst : Yes. And some more confidence around the market share here post the reset here.

Question: Vijay Rakesh - Mizuho Securities - Analyst : Got it. And then on the gross margin slide deck. Obviously, a lot of it has moved the disty side. How do you -- can you talk to how the this T-cell shipments are improving and how do you see the gross margins progressing towards that 50%, 55%, 58% that you've seen historically. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. AUGUST 01, 2024 / 12:30PM, ALGM.OQ - Q1 2025 Allegro Microsystems Inc Earnings Call

Question: Vijay Rakesh - Mizuho Securities - Analyst : Got it. Okay. Thanks a lot.

Question: Thomas O'Malley - Barclays Bank PLC. - Analyst : (multiple speakers) Thank you. So my first question is around some of the numbers you gave. I think you said e-mobility was 48% of auto, which is about $62 million. If you look at kind of how e-mobility and quote-unquote your other auto business have been tracking, e-mobility has been doing a lot better. Just from both to -- just really a year-over-year perspective and now kind of into the June quarter, both are kind of down around 30%

Question: Thomas O'Malley - Barclays Bank PLC. - Analyst : Helpful. And then if I look at the geos you gave as well, I think I caught that China was 19% of revenue. That looks like it's down about 50% sequentially. In terms of your China revenue, is that mostly auto or industrial. And I just wanted to make sure that there wasn't a correlation between the drop in China and potentially the weakening EV side. Any kind of color on where that China weakness came from would be helpful. Thank you.

Question: Joshua Buchalter - TD Cowen - Analyst : Hi guys, thank you for taking my question. I wanted to follow up on the earlier comments about gross margins. So totally I understand that underutilization is sort of driving the headwinds now. But how should we think about that unwinding over the next few quarters? And also is there any lingering impact? And can you remind us on how Crocus's margins should start to layer in over the next several quarters? And do you still feel confident you can get back to that mid-50s level by the end of the fiscal year? Thank you.

Question: Joshua Buchalter - TD Cowen - Analyst : Got it. Thank you for that color, Derek. And then maybe a bigger picture one. I don't think it has the lockup and the Board seats thresholds that are it's still below the 33% levels, but is there any change long term? I mean once we get through this lockup, do you expect bank into continued or you don't want to monetize their position? Or do you think that it's important to them to keep the strategic relationship with Allegro longer and beyond the lockup period. Thank you.

Question: Joshua Buchalter - TD Cowen - Analyst : Understood. Thank you Vineet. I appreciate the color there.

Question: Mark Lipacis - Evercore ISI - Analyst : Great. Thanks for taking my question. Two questions, actually, if I may. The auto business is now pushing about 80% of revenues, I think it historically has been the 70% range. Is this just an artifact of an inventory of what's going on in inventories in the supply chain and we do expect kind of steady state to be in the 70% range or should we think differently about that mix? And then I had a follow up if I may?

Question: Mark Lipacis - Evercore ISI - Analyst : Got you. That makes sense. And then the second question on distribution inventories, how should we think about or how do you think about what the right level should be? I think if I remember correctly, you had taken them down and then you started to restock the channel now you're destocking. How do you think about going forward? Is there like a steady state level that you'd like to have on a day's basis in this channel? Or do you think about different times of the cycle you want to have different levels there? Can you just help us think about longer terminal how you think about the distribution inventories in the right levels? Thank you.

Question: Mark Lipacis - Evercore ISI - Analyst : Very helpful. Thank you.