Q1 2022 Allegro Microsystems Inc Earnings Call
Good day, and thank you for standing by and welcome to the Allegra micro systems.
Q1 fiscal 'twenty 'twenty, 2 financial results conference call.
This time all participants are in a.
[music] only mode. After the speaker's presentation, there will be a question and answer session to ask a question. During the session you will need to press star 1 on your telephone if you require any further assistance. Please press star zero I would now like to hand, the conference over to your speaker today Ms. Katie Bly.
Eliciting your director of Investor Relations. Please go ahead.
Good morning, and thank you for joining us today for <unk> first quarter results for fiscal year 'twenty 'twenty 2.
I'm joined today by <unk>, President and Chief Executive Officer Rafi thick.
Chief Financial Officer, Paul Walsh Laurie.
I'll review, our quarterly financial performance and provide a summary of our outlook.
Our earnings release, and the accompanying financial tables are available on the Investor Relations page of our website. This call is being webcast and a recording will be available on our IR page shortly.
Please note that comments made during this conference call include forward looking statements and then moving.
Our federal Securities laws.
These forward looking statements include projections and other statements about future events that are based on current expectations and assumptions and results are subject to risks and uncertainties that could cause actual results to vary materially from our projections.
Please refer to the earnings press release, we issued today and other documents.
With the SEC, including the risk factors discussed in detail in our most recent 10-K filed on May 19.2021.
Company assumes no obligation to update any forward looking information presented the.
The non-GAAP financial measures that are discussed today are not intended to replace a day a substitute for the presentation of Allegro GAAP financial results.
I hope and maybe calculated differently than similar measures used by other companies.
We're providing this supplemental information because it may enable investors to make meaningful comparisons of core operating results and more clearly highlight the results of our core ongoing operations.
A reconciliation of GAAP to non-GAAP financial measures referenced during today's call can be found in our earnings press.
This isn't a posted to our IR page.
I'll now turn the call over to labor as President and CEO Ravi day Ravi. Thank you Katie and good morning, everyone.
Q1 results were outstanding exceeding our expectations with strong execution, we achieved the highest quarterly revenue level in our history.
For our core end markets and the strongest growth margin result to go with it both on a dollar and percentage basis.
We also saw significant growth in EPS, beating our expectations.
Automotive and industrial both reached record levels record revenue levels demonstrating strength across.
Our increasingly diversified business and.
And we achieved record revenue for both magnetic sensors and power Ics, reflecting increased content in our target applications.
Our demand continues to be strong as a result of accelerating design wins and our near term projections will be supply limited we.
<unk> supply constraints to loosen in the second half of our fiscal year as additional wafer capacity comes online and we anticipate continued growth in the second half.
In addition to the benefit of the near term recovery on our business remarkable design win momentum gives us confidence in our long term growth trajectory.
We believe strongly.
And for our differentiated technology across growing markets puts us in the best position ever to.
To deliver on profitable sustained outsized growth.
Before I go into more detail on the business and our outlook I will turn the call over to Paul for color on the financials.
Thank you Ravi Q1.
<unk> great start to fiscal 'twenty, 2 backlog is at historic levels and ordering patterns continue to be very strong top line growth was up 7.4% sequentially GAAP gross margin hit 50% for the first time non-GAAP gross margin improved to over 52%.
GAAP operating.
<unk> income reached 17% and non-GAAP operating income ended above 22%.
GAAP diluted EPS rose to <unk>, 14, and non-GAAP diluted EPS rose by 24% to 18.
Supply constraints remain at the forefront in terms of addressing near term demand. However.
However, we continue to execute well and expect to see another healthy quarter and Q2.
We expect our supply constraints to gradually ease in the second half as we begin to see the early results of our ramp up wafers from TSMC.
Our Q1 revenue of $188.1 million was up 60.
64% year over year, and well ahead of our guidance growth.
Both was driven by better than expected delivery to automotive demand across end markets.
And continued strength in demand in industrial offset by anticipated declines in our other business.
Automotive represented.
21% of revenue and increased 13% sequentially in Q1 to a record of $133.5 million.
Up 75% year over year.
Our automotive growth again, compared favorably to global car production, which declined during the same fiscal period.
<unk> and our content per vehicle in the favorable trend toward feature rich vehicles.
We have broad demand visibility across a diverse set of blue chip customers and believe there is very little inventory at customers or in the <unk> channel.
Industrial represented 16% of revenue reaching 30.
Collecting 3 million another record industrial revenue increased 4% sequentially and 49% year over year.
Other represented 13% of revenue and declined 13% sequentially to $23.8 million.
Despite meaningful growth across our top customers.
<unk> 30 per non exceeded 10% in Q1.
Gross margin performance was strong with GAAP gross margin of 50.0% up 36 basis points sequentially.
Non-GAAP gross margin was 52, 2% also up sequentially by 129 basis points.
<unk> net of our guidance as a result of stronger revenue and continued improvements from our manufacturing transformation.
Non-GAAP adjustments include.
<unk> 5 million of stock compensation expense zero point $5 million of Covid related expense and onetime wind down costs in Thailand.
And are heavily $3 million of acquired intangible asset amortization and a $2.8 million charge for a reserve from Boxtel legacy module inventory the decision to terminate the legacy block cell business allows us to focus exclusively on the strategic benefits of this acquisition and removes.
Zero distractions associated with the legacy portion of that business.
GAAP operating expenses were $61.9 million down from $67.6 million in fiscal Q4.
GAAP R&D expense was $29.6 million and GAAP SG&A expenses were $32.2 million.
<unk>.
Total non-GAAP operating expenses for fiscal Q1 were $56.4 million or 30% of revenue an improvement of 131 basis points sequentially and at our target level.
Stock compensation expense was $4.3 million for R&D and SG&A.
<unk> a day.
Other non-GAAP adjustments were $1.2 million related to the closure of our Thai entity, COVID-19 contingent consideration adjustments and severance.
Non-GAAP R&D expense was $28.8 million and non-GAAP SG&A expense was 27.
<unk> 6 million the sequential.
<unk> increase was due primarily to higher variable compensation driven by outperformance on the top and bottom lines.
We expect non-GAAP operating expenses to be about flat in Q2.
GAAP operating income for the quarter increased to $32.
<unk> dollars or 17, 1% of sales.
Non-GAAP operating income increased to $41.9 million or 22, 3 percentage of sales rising by an impressive 21, 6% sequentially significantly outpacing this solid top line growth of 7.4%.
This highlights the strength and profitability of our underlying business model as we continue to scale the top line.
First quarter GAAP net income was $27.7 million with an effective tax rate of 13, 3%.
GAAP earnings per diluted share increased by <unk> <unk>.
Over fiscal Q4 to 14 in Q1.
Non-GAAP net income increased to $35.2 million or 18, 7% of revenue.
Non-GAAP earnings per diluted share increased 24% to 18 exceeding our guidance.
The Q1 non.
Non-GAAP effective tax rate was 15, 3% and is expected to be in the 16% to 17% range for the upcoming quarter and throughout fiscal 'twenty 2.
Q1 diluted share count was up $191.2 million and is expected to increase to $191.9 million by the end of fiscal.
What a year.
Our balance sheet reflects strong execution and business fundamentals cash and equivalents in Q1 were up by $26 million sequentially to end at $230 million a.
Historic high.
We generated $38.5 million in operating cash flow in the quarter.
Accounts receivable balances were $103 million and we ended the quarter with DSO of 49 days consistent with prior quarters.
Net inventory ended the quarter at $82 million, which was.
Decrease of $5 million sequentially.
Our shipments into the channel continued to.
To be strong at 36% of sales for the quarter.
Channel inventories continue to hover at historic lows, while Pos sell through was at historic highs.
I am very pleased with the progress we've made towards our target model balancing short term demand dynamics with longer term strategic objectives to deliver.
Liver on both our growth and profitability goals I will now turn the call back to Ravi.
Thank you Paul.
Revenue upside in FQ, 1 was anchored in strength across our strategic product lines and end markets, particularly due to content expansion in automotive the industry provides favorable tailwind and we believe.
The underlying diversity of our business and continued design win momentum in alignment to multiple growth vectors supports the potential to continue to outperform the market.
We have been working hard on our R&D pipeline as part of the strategic transformation and new product revenue is augmenting growth in our existing portfolio.
Sensor Ics and power Ics reached an all time revenue highs in Q1.
<unk> sensor Ic's represented 64 percentage of revenue in the quarter and increased 64% compared to the same period last year.
Expansion of our speed and position sensor IC portfolios and penetration into new application.
And Thats supporting growth in this market leading product line.
<unk> were up 60% year over year, representing 36% of our revenue in the quarter. We continued to gain share in key applications, such as cooling fans for both <unk> and data centers.
With our differentiated brushless DC plan driving.
<unk> and we continue to leverage our market, leading sensor portfolio to expand our power IC content in automotive.
Strength in automotive reflects across portfolio content opportunity in automotive systems, particularly in Adas applications, such as sharing and braking.
Revenue increased sequentially across all.
In our automotive end markets with both <unk> and <unk> revenue up nearly 80% year over year.
Customers are wanting a Lego design wins in these 2 high growth areas at a faster rate than ever before.
Providing us with a strong foundation for continued growth.
As a result of the transformative shift underway in our automotive.
5 of tenants, we are well ahead of our design win targets in both established and new applications across customers and geographies.
For example, we locked ensuring business for more than 25, new vehicle models across multiple global Oems in Q1.
These advanced systems include expanded opportunities for both our sensor.
<unk> <unk> products.
We launched a new <unk> product for <unk> for EV transmissions.
We won new businesses.
<unk> breaking and we secured the next generation of crank sensors at a major Korean OEM with a GMO technology, expanding our market share.
We have also.
Continued also secured a number of new wins in automotive exterior lighting with our power products. These advanced lighting features have high adoption rates in today's vehicles and are 1 of the fastest growing applications in our safety comfort and convenience revenue.
During the quarter, we also launched strategic new products or Adas.
Including <unk> position sensors.
Combining planar and vertical hall effect technologies to enable true 3 D sensing capabilities.
High precision and accuracy.
These innovations are opening doors to new opportunities and cementing our leadership in Adas in the Adas market.
On the Lidar.
Our front, we achieved a key milestone of sampling or I say photo detector and readout Ics to a well known leader in front facing Lidar systems.
Additionally, 1 of our early customers built a 1 day scan led our system based on a solution that is mechanically simpler than anything on the market.
Photonics continues.
Used to be a long term play for us and we're encouraged by the progress on our roadmap.
While auto production continues to be limited by industry wide component shortages.
Shortages, we benefit from a shift to more feature rich vehicles, and we believe our strong position across key systems provides a path to a significant increase in <unk>.
Per vehicle for the upcoming years.
Our industrial business exceeded our expectations in Q1 as a result of good growth in industry for no Green energy and broad based industrial applications, where our products are enabling improved energy efficiency to increase sustainability.
Like our automotive.
Content per <unk>.
New product development has been a focus for expanded.
Industrial and design win.
And design win activity is accelerating.
These wins were diverse.
Securing meaningful multiyear growth in data centers.
New wins with increased content EV home charging systems and wins.
This naturally automation for advanced manufacturing, including modern EV battery manufacturing lines in fact, with our increasing <unk> vehicle content ramping ex EV charging station content and content in the EV battery manufacturing lines, we are positioned to benefit from growth across the full <unk>.
In fact chain.
Demand remains strong across the industrial business with supply constraints and low channel inventories the limiting factor on growth.
However, we believe the continued applications diversification combined with the content gains from new products, increasing our served market and long term growth potential and industrial.
Our other business declined sequentially to $23.8 million as a result of some supply challenges.
We expect other will be flat to down sequentially in Q2.
Looking ahead I am very enthusiastic about the prospects for the business, we are delivering differentiated products to the market, we have an exciting R&D pipeline.
Value of our design wins are accelerating in our key markets and we're executing well on our financial objectives near term, we continue to see record backlog and we are working hard to deliver to demand at record revenue levels.
Looking at the outlook for fiscal Q2, given current supply constraints.
We expect revenue to be in the range of $185 million to $191 million. We expect automotive revenue will be about flat in Q2. After a record high levels in Q1, as we continue to manage a constrained supply chain.
We expect the industrial business will also be flat to modestly up in Q2, we expect our other business to.
To down we expect non-GAAP gross margin to be about flat, we expect non-GAAP earnings per diluted share will be in the range of <unk> 18.
With that I'll turn the call back over to Katie.
On Friday.
That concludes our prepared remarks, we'll now open the call for questions.
Operator.
Please repeat the question.
Okay.
As a reminder to ask a question you will need to press star 1 on your telephone to withdraw your question press the pound key please standby, while we compile the Q&A roster.
And your first question comes from.
Be flat of Quinn Bolton with Needham.
Hi, guys congratulations on the nice results.
In particular, we saw on the margin performance.
Rob I wanted to ask on the supply constraints, you, obviously have multiple wafer manufacturing partners I know your Taiwanese foundries have been considered.
From the line and Youre trying to ramp TSMC, but wondering if you're also starting to see some constraints constraints from your relationship with <unk>.
Polar as well.
And we actually have been benefiting from our relationship with polar <unk>.
<unk> more wafers, which have allowed us to service that market upside and we.
Constraining to see invest in.
Support the investments at polar is making.
To expand its capacity. So we will continue to see more wafers out from a polar wafer source, but we also are continuing to.
Progress on our Taiwanese foundries, especially TSMC.
This has been on plan we've discussed it in prior calls and we stay on plan on our on our projected ramp.
And then on the sort of just outlook for the automotive market I know there are supply constraints.
Can you talk about what youre seeing in terms of demand, we're just sort.
<unk> growth for the EV and Adas portion of the business cannot continue to grow share within the near term, where do you see supply constraints affecting that business and that business may be flattish in line with the overall segment.
In the upcoming quarter.
While we see that car.
And your knees are are are focusing more on feature rich vehicles and these feature rich vehicles tend to be tend to have high adas content or tend to be <unk> based so we continue to see strength in our ex EV and Adas business. We also continue to see tremendous.
Tremendous growth in our design wins in these in these segments I think more than half of our design wins.
Last quarter were in the <unk>.
And our emerging industrial businesses so.
So we see greater alignment with our investments as well as we see that the market is.
Comfort is aligning to them.
Great. Thank you very much.
And your next question comes from the line of Blayne Curtis with Barclays.
Hey, good morning, Thanks for taking my question, maybe just to follow up on last question on supply.
If I heard you right I guess.
The outside in June was that you were able to kind of get some supplier. So maybe you can use.
Trying to understand is that internal or sorry, polar or your tonys supply and then I'm just kind of curious I think you said that the back half should grow.
I guess, you can see coming in should be new products.
I.
I wouldn't expect that to be that much revenue, but maybe if you could just highlight.
What what the upside could be if you got supply and what I guess is adjusted TSMC coming on are you getting more supply from their existing foundries.
Tobacco.
So we are continuing to ramp our existing foundries.
So they will help us with supply as we move forward I think as Paul has mentioned our inventory levels are at historic lows and so the supply in part will help stabilize our own internal change.
But in addition to that TSMC is ramping and we are ramping on.
On our strategy, which is our lead growth wafer processes that are run at multiple foundries. So the TSMC ramp is on our existing products that we are transferring into TSMC.
Got you and then I guess as you look at growth margin as you ramp these external I know polar was a bit.
Have a drag when you had to use more of that I'm just kind of curious as you think about growth margin for the rest of the fiscal year.
Okay.
Sure so.
In Q2.
<unk> seen some of the benefits.
All of the manufacturing transformation that we've been discussing for a while.
It has tended to overshadow or outperform any any cost increase from polar.
And.
Anticipating as we've guided for this quarter.
Continued continued strength in gross margin of 52, we have been discussing guidance or.
Okay.
During the year and that 52% range. So I think we're well on well on our way on that path.
Okay. Thanks, guys.
And your next question comes from the line of Gary Mobley with Wells Fargo Security.
Good morning, everybody.
Thanks for taking my question.
I wanted to double click on the.
The production mix questions.
And that is specifically.
Gross margin profiles for each.
Presumably be 3 suppliers. So polar I think we can all agrees.
Generally lower.
Your margin.
Sourcing for you from a gross margin perspective.
And so I'm wondering to what extent that impeded the gross margin in the just reported quarter with the revenue upside being net from polar supply.
And.
UMC I think it is higher margin revenue for you.
Is TSMC going to further enhance your gross margin profile when that ramps and then related to that.
You've got some minimum purchase requirements with polar as part of that divestiture.
Are you chewing into those minimum requirements or is the timeframe of the minimum purchase unaffected by.
Claims that you're seeing on the upside.
Hi, Gary This is Paul I'll take that from a mix perspective.
Yes.
As.
We've mentioned in the past Poland does have an increase.
Or is a higher <unk>.
Cost wafer than UMC.
TSMC, but we've also had a number of internal initiatives to help offset that so.
So we get the benefit of having additional supply from polar to service this demand.
We've been able to maintain.
52% margin.
As we look into TSMC and UMC.
By the <unk>.
Those are you hit those on the head exactly.
When we looked at minimum purchase requirements for polar where that's not an issue I mean, we're it's.
In this environment even in it.
Normalized environment, where.
We are well that won't be any.
The issue for us and the way this is Ravi and the way to think about our business is that we've got great design win momentum and the design wins are and great backlog. The design wins are driving topline topline growth for us and what we need to focus.
Is that these wafer supplies of sources as they come on we are we are allocating them to service our topline growth in <unk>.
The blend of new wafer sources comes on or into our overall cost basis will also appropriately adjust.
But.
We remain bullish on.
On the.
The business both from a gross margin perspective, as well as from a top line perspective.
I appreciate all the color guys.
Wanted to get a staff from you guys in the past.
If I missed it.
As a percentage of your automotive sales that are driven by <unk> and <unk>.
Implications I believe thats been running at about a third of your revenue, whereas it say in what.
What extent is that mixing increasing for you guys.
Well as we said that our <unk> business grew at 80% for the quarter year over year.
<unk>.
Overall business was at 74% of cells for the quarter for all of our automotive business about 74% year over year. So so clearly the <unk> business has outperformed the rest of the auto business.
Okay I appreciate that Gary This is Paul just to add to add to that a little bit I mean.
Andy.
We continue to see sequential improvements as a percentage of auto ex EV and Adas.
We anticipate that.
For the balance for the foreseeable future.
Thanks.
Okay.
And your next question comes from the line of John Pitzer with Credit Suisse.
Yes. Good morning, guys. Thanks for let me ask the question Rami clearly.
Key concern investors have right now is in times, where things are at this time.
Inevitably inventory build that's going on.
Will we ever see.
So I understand that you've got.
Distribution.
Distributions.
Alright.
How do you kind of look at or what.
Maybe some commentary that inventory.
The right now.
In addition to that when do you think.
Hi.
The balance I guess.
Next year.
Do you think it's still going to be a plus content growth.
Or do you think well ended this year with some inventory that will dampen growth.
We have.
Fairly reasonable.
Inventory inventory.
We use into our customers from a perspective that.
We're speaking with them on delivery issues on supply alignment et cetera, and to the best of our knowledge. What we what we believe is that the products that we are shipping to our customers.
Predominantly going right through to service and demand.
And we.
We don't have we do not have any indication at all debt our customers today are Oems today are.
Building up any.
Any sort of inventory.
We look at the outlook for the rest.
Of the year and weaker.
We keep believing that at this point the supply constraint.
The supply demand imbalance will continue.
We have no indication at this point given the feature rich vehicles, given our design win.
Mentum and what that's doing.
To drive market share gains et cetera, and the growth in Adas applications, we see that for a leg grow we will continue to outperform the Saar.
The <unk> math that you just referenced.
That's helpful and then just kind of walk.
Our.
Great.
Great growth year over year.
Yes.
Pipeline there.
Our strong if not stronger than the magnetics.
Curious if you can give us.
Anecdotal as to where youre doing it well.
Goodbye.
Are you growing units.
Thank you.
Power and Magnum.
Net.
Yeah. So.
Extraordinarily excited that we have 2 great businesses.
As part of the transformation of the company, we were predominantly a magnetic sensor company and our investments over the last 5 to 7 years in power has really created a vibrant business 1 of the ways.
Ways, we succeeded as aligning our power business.
In many of the applications that we're we've got had strength in our sensor business. So for example, our Adas business is really focused on motion control, where we provide sensors for angle sensing torque sensing.
Speed sensing current sensor.
Sensing, but we also provide our gate drivers disconnect switches and and regulators so.
This is an example of a motion control systems system play that we have and thats been very successful in being part of our <unk> story.
Power.
<unk> is focused and aligned itself into and many of the segments at the sensor business was focused on which is under the hood power, but but our power business also leverages some very unique way.
For technologies, we have 100 volt BCD, which.
We think is state of the art in that.
The operating down to 175 degrees centigrade and.
We believe that that's been 1 of the Differentiators for Allegro in some of the power applications power is also growing in our led lighting for.
Handle, but we don't really particularly speak much about the interior lighting, what we speak more about is the headlights taillights that are really aligned with safety critical systems.
So in industrial we.
As previously discussed.
<unk>.
Great take through.
For example in data centers on a 3 phase VLCC drivers. These these are really system on chip solutions, which.
Control the fan Commutate the fan.
They include all of the IP associated with it.
And this has had great take rate both product.
Predominantly initially and in data centers, but now also in secondary applications in automotive.
So we continue to remain bullish on power.
Thank you very much.
And again, if you would like to ask a question simply press.
Star then the number 1 on your telephone keypad. Your next question comes from the line of Vijay Rakesh with Mizuho.
Yes, hi.
Great start to fiscal 'twenty 2.
On the volume growth I know you talked about autos.
30% sequentially.
Was this pretty strong view on it.
Saad was down 8 per cent.
Underlying EBIT leadership, so I was thinking on the on the design win pipeline on Evs, if you could give us some color on how debt.
<unk> expanded into in the June quarter.
Also.
<unk>.
That would give us some more color on design wins there.
Yes, so what we look at from a design win perspective debt.
We continue to win at Inverters, we had spoken about.
In the last couple of quarters that we've seen.
Great pickup on our inverter products.
In EV, but also in our in our onboard onboard Chargers.
Et cetera and.
So in <unk>, we see the core systems that we focus on.
Basically inverters.
And and onboard charges as growing nicely.
Also see the entire industrial ecosystem on EV debt.
That is debt is that we are participating in both and in an.
In infrastructure associated with EV and factory battery factory.
Technology in an EV so easy for us.
Pretty.
Holistic story.
Got it and just.
Going on the backlog a little bit I know you mentioned backlog.
Now if you'd give some color on how that's increased sequentially.
And I guess some split on how it just putting out between auto industrial exited is it pretty much track your revenue split or are you seeing on or skewed automotive pick up there. Thanks.
Jay This is Paul.
While we haven't provided specific details in the past or today about <unk>.
The level of backlog continues to grow at a.
A very healthy rate.
It also provides a lot of visibility into.
The near term or medium term demand.
And we're seeing growth.
In the backlog and all of these end markets and in the Submarkets like FCB in Adas within auto and.
And then within the markets of <unk>.
The Austrian <unk> as well.
So.
Great.
We're very excited about that it's great visibility.
And we continue to look at ways on how to address that.
Okay awesome, Thanks, a lot.
And your next question comes from the line of shiny Passionary with SMB <unk> Nikko.
Thank you good morning, Ravi and Paul.
A couple of questions maybe 1 for Paul first on the gross margin Paul.
The sequential flow through is roughly 70% in the last couple of quarters, I know youre guiding kind of flattish gross margin, but you're 70% of the right way.
To think about.
And as you model growth gross margin for the next few quarters or if you can talk about some of the puts and takes.
So I think what you've seen.
In the past few quarters <unk> is.
As the.
Our ability to absorb the.
The closure of the Thai facility into the Manila facility.
What we had always talked about is this being a major phase of a major milestone in the gross margin transformation of the company to get it to 52% and then as the company grows it mix.
Other.
Favorable growth trends within.
Within product mix will help benefit.
So.
<unk>.
We're very pleased with what we saw in Q1 and what we continue to see right now I think that growth trend, though.
It was more.
Absorption.
The 2 factories into 1.
Got it.
And then if you can talk about some of the puts and takes outside of the mix.
Do you still have any of the absorption left as far as the facility consolidation is concerned and Michigan talk about any other factors that might impact gross margin.
So.
The facility in Thailand is close.
Because we have certain wind down costs, but thats more on the SG&A side from a legal perspective from a from a.
A gross margin perspective, none of that's been impacted and now some of the efficiencies that we anticipated to see in our Manila factory once everything has been installed and up and running we're starting to see those.
We're just plus we have a number of initiatives internally to address things.
For example, test time reduction and things like that that can help.
Significantly on the on the cost front and so.
It's an ongoing activity and we've seen some.
Benefits of that.
It's been about it and then next 1 is from Ravi Ravi.
Yes, you know some of your peers.
Talking about.
You know the visibility is still being very strong and supply is still being very tight at the same time. It looks like you know things aren't getting worse from here things seem to.
To be stabilizing a bit on the supply side. So I just wanted to hear your thoughts about your lead times and what you're seeing on the supply side in terms of wafer availability.
In General and then I guess, it's a little difficult to forecast when we might get back to normal but as soon as we get back to normal given.
Given the disruption.
<unk> how are you thinking about what your customers are telling you about how their inventory practices might or might not change going forward. Thank you.
Yeah.
Yeah.
As per.
Paul has stated.
We have.
The record level backlogs, we have visibility.
Visibility at.
At unprecedented levels for the company.
No.
The backlog is that the visibility is there that's coupled with our design win momentum that's driving top line growth that keeps adding on new projects onto our onto our existing business. It also.
Coupled with the clear trend towards feature rich vehicles, that's really beneficial to the company, which is 8 assets CV.
In automotive so from.
From a leg growth perspective, we continue to see that as supply comes on it's being dedicated to service.
<unk> real applications real growth market share expansion.
And we do not see that.
Debt in the near term debt debt or increase capacity as the supply continues to come off that it's really servicing inventory at this point. So we have no visibility at this point.
When inventories will stabilize.
Just given from an allegro perspective, given the.
The momentum debt design wins provide us.
Got it thank you.
And your next question comes from the line of Mark <unk> with Jefferies.
Hi, Thanks for taking my question.
Paul maybe for you.
You were you've worked at a number of different semiconductor companies and I was wondering if you can share with us.
Your thoughts on how.
Appreciate all the secular.
You're spot on your business, but it's like what are the leading indicators that you you look for or you look at.
Debt to tell you that maybe you or your customers got ahead of themselves.
And are about to kind of reverse course on on the order trends.
<unk>.
On your on the order bookings are placing on you guys and.
To what extent do you think that this.
This kind of.
Peaks out driven by capacity come on coming online versus some kind of a demand shock appreciate.
Thank you sure. Thank you Mark.
So I'll break it into 2 categories.
On the <unk> side, we have.
Excellent visibility into what that is.
As do many semiconductor companies.
As to what the <unk> have for inventory we.
Your profit their Pos is.
Their inventory levels are really.
Historic lows I mean, essentially there when product is shipped to distribution they ship it right out to the end customer so.
So we have that visibility.
And we're very careful of course.
To make sure that that doesn't.
The situation that you described.
<unk> happen, but.
We don't see any issue there.
Foresee anything there.
Immediate near or medium term on the non <unk> side Ravi alluded to earlier.
And.
Discussions with many customers on the non <unk> side large.
<unk> customers or industrial customers that these types of Congress. This is more anecdotal but.
These types of conversations are such that.
They wouldn't be happening if the inventory was.
If they had the inventory and they were in a smooth production ramp.
And we also we do look at our.
A lot of these non <unk> customers do use BMI.
And that's it.
As a way to manage their inventory and we can see that.
And that provides us another lever for visibility so as Ravi mentioned earlier in my view is that.
I don't know when the supply demand.
We'll balance, but I think many beat.
Between what we see from our end customers.
What we see from our peers and what we see internally.
Thank you.
That's that's not in the near term or the medium term.
Thank you very helpful.
Okay.
And at this time there are no further audio questions. We will now turn the conference back over to Ms. Katy.
<unk> remarks.
Okay. Thank you Holly.
That does conclude today's conference call. Thank you for joining us today.
Ralph.
And thank you. This concludes today's.
And for this call you may now disconnect.
Okay.
Okay.
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