Allegro MicroSystems, Inc. Common Stock 2027 Q2 Earnings Call

Thank you, Victor. Good morning, and thank you for joining us today to discuss Allegro's second quarter fiscal year 2027 results. I am joined today by Allegro's President and Chief Executive Officer, Mike Doogue, and Allegro's Chief Financial Officer, Derek D'Antilio. They will provide highlights of our business, review our second quarter 2027 financial results, and share our third quarter outlook. We will follow our prepared remarks with the Q&A session. Today's call includes remarks about future expectations, plans, and prospects, which are forward-looking statements. Such statements are based on current expectations and assumptions as of today's date and are subject to risks and uncertainties that could cause actual results and events to differ materially from those anticipated or projected on today's call. The company assumes no obligation to update these statements except as required by law.

For a discussion of these risks and uncertainties, please refer to today's press release and the risk factors contained in our periodic SEC filings. Additionally, we will refer to non-GAAP financial measures during today's call. Today's earnings press release, which is available on the Investor Relations page of our website at www.allegromicro.com, contains important information about our non-GAAP financial presentation and also includes reconciliations of our non-GAAP financial measures to the most directly comparable GAAP measures. This call is also being webcast, and a replay will be available in the Events and Presentations section of our IR page shortly. It is now my pleasure to turn the call over to Allegro's President and CEO, Mike Doogue.

Mike? Thank you very much, Jalene, and good morning.

Thank you all for joining our second quarter 2027 earnings call. We saw continued strong momentum in fiscal Q2, delivering our seventh consecutive quarter of sequential sales growth. Second quarter sales were $277 million above the high end of our guidance range and representing a 29% increase year-over-year. Non-GAAP EPS was $0.26, doubling over the second quarter of fiscal 2026. I am pleased to report that our four demand signals are flashing green. In Q2, we delivered our highest quarterly design win performance since our 2020 IPO, with total design wins increasing nearly 40% year-over-year. This success is directly translating to our order book. Bookings increased for the eighth consecutive quarter, up 45% year-over-year, and our backlog continued to expand across our automotive and industrial end markets.

In our Analyst Day earlier this year, we outlined our strategy to drive mid-teen sales growth through dollar content and share gains in secular growth markets. These design win, booking, and backlog metrics that I just mentioned, combined with stronger auto and industrial sales growth, indicate that our strategy is progressing ahead of schedule. In automotive, second quarter sales grew 4% sequentially and 11% year-over-year. This marks the sixth consecutive quarter of double-digit year-over-year growth within our automotive business, and we expect this momentum to continue. Our auto sales growth is underpinned by the architectural shifts towards the electrification of the powertrain, the transition to advanced safety systems, and the shift to electronic architectures in steering and braking. As a result, automotive design wins hit a new record in the second quarter, with more than 75% of these wins in xEV and ADAS systems.

For example, during the quarter, we secured an impactful, highly strategic design win with a leading North American EV manufacturer, capturing direct market share from a competitor. We won this OEM's next generation onboard charger platform utilizing our higher bandwidth 5 megahertz current sensors. In addition, again with this same OEM, we secured a major motor driver win in their vehicle cooling system. These are large wins with initial product shipping in the next 12 months. In ADAS, we recently secured a strategic electronic power steering design with a leading Japanese OEM, gaining market share with our safety grade, high accuracy magnetic position sensors. This win illustrates a broader trend. Today, as automakers upgrade traditional steering and braking systems to support higher levels of autonomy, they require ICs that are more precise and that can deliver higher levels of automotive safety.

This upgrade cycle is a significant growth multiplier for us, driving our dollar content per vehicle higher and fueling our ADAS design wins in the second quarter. As a reminder, our dollar content per braking system can increase by roughly 4X when an automaker transitions to electromechanical braking, otherwise known as EMB. EMB is no longer just a future opportunity. This quarter, one of our customers is actively shipping multiple Allegro ICs into one of the world's first vehicles to deploy EMB systems. This powerful content over market dynamic supports Allegro's continued outgrowth of the broader automotive market. Moving to our industrial and other business, second quarter sales increased 11% sequentially and 79% year-over-year, establishing a new record. Data center also achieved record sales of $46 million in the second quarter, growing more than 150% year-over-year.

Almost every time I talk to one of our marketing or product managers, I hear about fresh and highly positive customer feedback regarding our data center solutions, or I hear about a new business win with both new and existing data center customers. Why? Just one example. The escalating power and higher voltage demands of modern AI workloads serve as a direct catalyst for our current sensor portfolio. As rack power densities surge, the legacy resistive shunts and bulky transformers that have historically measured current in server power supplies, they generate too much heat and take up too much space. These thermal and spatial constraints in the data center, coupled with the critical need for high voltage isolation, are driving the rapid adoption of our advanced magnetic current sensors inside high density power supplies.

During the quarter, our current sensors secured more than 10 design wins with top Taiwanese power supply providers for use in hyperscaler power supply units, battery backup units, and UPS systems. These power systems range from 5 to 30 kilowatt and include wins across new 800 volt architectures. These were major high-value wins, and as a result, our current sensor design wins for data center applications more than doubled sequentially in the quarter. These wins underpin the rapid and near-term growth of our current sensors in the data center. Wins like this, with sticky and diversified new products, also support our strategy to significantly grow Allegro's data center dollar content opportunity from $150 to more than $425 per rack. Of course, we continue to invest in R&D to fuel growth.

In data center, earlier this week, we launched new higher isolation current sensors, footprint shrinking isolated gate drivers, and intelligent 48-volt fan drivers to help developers deliver massive computing performance upgrades without increasing heat, power consumption, or physical size. Now, automation and robotics, where we continue to innovate and secure highly strategic foundational sockets for the next generation of physical AI. During the quarter, we secured a strategic design win with a leading Asian robotics developer who selected our discrete high precision current sensors to monitor the heavy power loads across their humanoid's primary drive joints. Earlier this month, we also secured a major win with a leading Chinese humanoid supplier. This humanoid company selected our market leading high precision inductive position sensor ICs for their large joints. This program will use approximately 60 ICs per humanoid and ramps to production within six months.

While advanced robotics represents a multi-year revenue ramp, our design-in momentum today is establishing our foundational market share for the future. Humanoid robotic hands also present extreme spatial and thermal constraints, well aligned to our integration capabilities at Allegro. I'm excited to share that in fiscal Q3, we will begin sampling our newest robotics innovation, the industry's first fully integrated magnetic sensor and motor driver IC designed specifically for humanoid hands and fingers. By combining high precision TMR magnetic sensors and intelligent power drivers into a single ultra compact chip, we are giving robotics designers the exact component they need to achieve near human dexterity. Early customer interest is incredibly strong, which is a great proof point in our strategy to further increase our dollar content per humanoid through the release of highly differentiated integrated IC solutions for the hand.

Sales to other industrial end markets, which include personal and industrial transport, broad-based industrial, medical, energy infrastructure, and consumer, delivered a fourth sequential quarterly increase in sales. We are encouraged by the broad underlying adoption of our technologies across this highly diversified customer base. Looking ahead, we view energy infrastructure as a particularly exciting future growth vector for our business. As the AI data center build-out accelerates, it is driving an urgent need for solid state transformers, solid state circuit breakers, and battery energy storage systems. Within our energy infrastructure business in Q2, our silicon carbide high voltage gate driver secured its first major design win with a leading solar provider for their next generation inverters. This win serves as a fantastic initial validation of our new technology.

We are seeing strong accelerating pipeline growth across the high voltage gate driver portfolio in energy infrastructure, EV traction inverters, and data center and power infrastructure. To wrap up, the leading indicators across our business give us high confidence in our path to exceed our target model of mid-teens annual sales growth. With record design wins, robust backlog, and expanding content in our target markets, we are extremely well-positioned at the intersection of the world's most critical megatrends. I'll now turn the call over to Derek to provide additional color on our financial performance, as well as our third quarter outlook.