Allegro Microsystems Inc Q4 2025 Earnings Call Transcript

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

Question: Tim Arcuri - UBS - Analyst : You did talk about your China for China strategy. I know you are working with SMIC. I think you are taping new products in that fab. Can you talk about that? I think you are supposed to get some chips from them by the end of last year. So can you just update us on that and sort of how that's going to progress and what the key milestones there are?

Question: Tim Arcuri - UBS - Analyst : And then they're just on the gross margin, it's a little less than what I had anyway. Can you talk about, I know that there's these, pricing, issues and you had to negotiate price down and then costs take a while to catch up with that. Can you -- is that still sort of weighing on March and when do you see? The cost catching up to the, price decline and sort of how maybe like how to think about gross margin. I'm not asking you to guide for the following quarter but sort of what are some of the puts and takes? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. MAY 08, 2025 / 12:30PM, ALGM.OQ - Q4 2025 Allegro Microsystems Inc Earnings Call

Question: Joe Quatrochi - Wells Fargo - Analyst : I was curious you are talking about seeing some pretty good growth in your backlog or return to growth in the backlog and starting to see that pull from customers. Can you talk about just the specific areas, and how we think about that relative to the increased design wins and opportunities there versus just kind of seeing an improvement in the cycle?

Question: Joe Quatrochi - Wells Fargo - Analyst : And then as a follow-up, on the tariffs, I think some of the tariffs are based on the location of where the wafer origin is. So can you remind us, how to think about what's coming from the US and going into China given that the SMIC relationship is still kind of ramping?

Question: Gary Mobley - Loop Capital - Analyst : I wanted to ask about inventory in the channel in particular, in the distribution channel. Did I hear correctly that point of sale was greater than point of purchase in the fourth quarter? And does your first quarter revenue outlook contemplate a continuation of under-shipping into the distribution channel? And then maybe you can also comment on where your inventories direct the customer set.

Question: Gary Mobley - Loop Capital - Analyst : My follow-up, I want to circle back onto gross margin. We have already talked about a lot of the different variables to the improvement, but do you think given the Axiom and the contribution, variable contribution margin, that assuming revenue continues to improve on a sequential basis, do you think a 50% gross margin is possible as we move through the balance of fiscal year '26?

Question: Chris Caso - Wolf Research - Analyst : Mike, first one for you, I know you have been with the company for a while. But kind of as you enter the seat here with CEO, just interested in, any kind of strategic changes, or kind of different direction, anything you might do differently, now that you have taken the seat. And obviously, you have been with the company a long time. So whatever strategy has been in place, I am sure you have had a hand on it, but just any kind of thoughts about the things that might be different going forward?

Question: Chris Caso - Wolf Research - Analyst : And I guess as a follow-up, and I will ask this because, I know you are going to get asked and we are certainly asked quite a bit from investors. But if you could revisit the Arno offer, and kind of what the thought process was around that. Is it safe to say that, simply the offer wasn't high enough value for what you thought the company was worth? And you said in your opening remarks, the Board and you folks are open to things. But maybe just kind of now that it appears to be over, just kind of some hindsight of what you're thinking was with regard to that.

Question: Joshua Buchalter - TD Cowen - Analyst : Mike, congratulations on the CEO role. In your prepared remarks and in response to some earlier questions, you mentioned leaning in on new products, in particular TMR, Heyday, and high-precision power and sensing parts on both sides of your house. It sounds like inventory is pretty much close to cleaned up. But are we at the point where you think those new products are hitting the model yet and you can hit that? Growth profile, you laid out your last Analyst Day, you have I think 7% to 10% above SAR and 5% to 10% above GDP and industrial. Thank you.

Question: Joshua Buchalter - TD Cowen - Analyst : Okay. Thank you. And Derek, I appreciate the color you gave on the restructuring. I think it was $15 million split between COGS and OpEx. Is that sort of immediate from where you just guided the June quarter and we should expect OpEx to be flattened down through the year, or how should we be thinking about that layering in? Thank you.

Question: Vijay Rakesh - Mizuho Securities - Analyst : Yeah, Hey, Mike and Derek, just a quick housekeeping one. What does the e-mobility mix for the quarter, I guess, and I have a follow up?

Question: Vijay Rakesh - Mizuho Securities - Analyst : Got it. And then I think as you look at China for China, given all the geopolitical tensions, are you seeing more increased competition in China from the domestic suppliers or are you seeing them in-source more? What are you seeing in terms of those trends? And especially you have a good position there with BYD and others, but BYD is also a big in-sourcer, I guess. But any colors there? Thanks.

Question: Quinn Bolton - Needham and Company - Analyst : I just wanted to ask, obviously, gross margin has been under pressure, and you have kind of gone through some of the factors there. I guess I am just kind of wondering if pricing is continuing to be aggressive. You haven't seen that 65% sort of fall through over the last two quarters, three quarters as revenue has increased by about $30 million. And so I am just trying to reconcile why gross margin remains under such pressure as revenue has recovered over the past three quarters. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. MAY 08, 2025 / 12:30PM, ALGM.OQ - Q4 2025 Allegro Microsystems Inc Earnings Call

Question: Quinn Bolton - Needham and Company - Analyst : Got it. And then I guess there has been some concern by investors that with all of the auto tariff uncertainty and the potential for higher costs that auto guys may be coming back at a faster than annual cadence, asking for additional price declines, sort of outside of that normal annual cadence. Have you guys seen any evidence of auto customers coming back asking for further price declines, or do you sort of see a normal annual cadence in those negotiations? Thanks so much.

Question: Quinn Bolton - Needham and Company - Analyst : Perfect. Okay, thank you.

Question: Joseph Moore - Morgan Stanley - Analyst : Great. Thank you. You mentioned in your prepared remarks that you are seeing some early signs of potential shortages. Can you elaborate on that, what are the signs and what -- any particular products or markets?

Question: Joseph Moore - Morgan Stanley - Analyst : Okay. Thank you. And then with regards to automotive and the potential pull-ins, I mean you have answered to this. But I guess just if you could characterize what those conversations are like, because I can't imagine running a business when the tariffs are kind of on again, off again in Canada and Mexico and then globally. And then you don't know where they are going to be. And now they are temporarily suspended and that's going to get more expensive in a few weeks. And that all comes after over a year of inventory reductions, like, aren't inventories just too lean to deal with all this? And shouldn't there be some indication that those inventories are going to have to start to come up?

Question: Joseph Moore - Morgan Stanley - Analyst : Yeah, I appreciate that. Thank you very much.