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 one one on your telephone. To withdraw your question, press star one one again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to Jalene 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 Nargolwala, and Allegro's Chief Financial Officer, Derek D'Antilio. 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 session. 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.allegromicro.com. This call is also being webcast, and a replay will be available in the Events and Presentation 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 Nargolwala. Vineet? Thank you, Jalene, 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 $0.40, 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 long-standing heritage in automotive, as well as for our 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 this 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 inverter. 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 March 2023. Beyond e-Mobility, we're seeing some near-term order 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 broad 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, Vineet, and good morning, everyone. Starting with a summary of our Q2 financial results, sales were $276 million, gross margin was 58.3%, operating income was 31.3%, and adjusted EBITDA was 37.1% of sales. As a result, earnings were $0.40 per share, an increase of 29% compared to Q2 of fiscal 2023. Sales to our automotive customers were $206 million, or 75% of our Q2 sales, an increase of 9% sequentially and 31% year-over-year. All automotive sales categories grew sequentially and year-over-year. E-mobility sales increased by 13% sequentially and 60% year-over-year, now representing 50% of second quarter sales, auto sales, up from 41% a year ago. Industrial sales were $51 million, declining 25% sequentially, with the largest percentage declines in data center and broad-based industrial. This largely reflects the timing of shipments between Q1 and Q2 and our careful channel inventory management. Second quarter industrial sales increased by 6% year-over-year. Other sales, which includes consumer applications, were down $19 million, down 10% sequentially and 42% year-over-year, reflecting inventory destocking. Sales through distribution declined as expected and were down 8% sequentially as we continue to manage the channel closely. Channel inventories appear to have stabilized, and POS was up sequentially. From a product perspective, magnetic sensor sales were $176 million, increasing 1% sequentially and 25% year-over-year. Sales of our power products were $100 million, declining 4% sequentially, but increasing 2% year-over-year. Sales by geography were well balanced, with 25% of our sales in China, 21% in the Americas, 20% in the rest of Asia, and 17% each in Europe and in Japan. Highlights in the quarter were 14% sequential growth in Japan and 12% sequential growth in China. Now, turning to Q2 profitability. Gross margin was 58.3% compared to 57.8% in Q1, and above our guidance range of 56%-57%, largely due to favorable product mix and foreign exchange. Operating expenses were $74 million, or 27% of sales, declining by approximately $1 million sequentially, and from 28% of sales a year ago. Second quarter R&D expenses were 14% of sales, and SG&A was 13% of sales. Operating margin was 31.3% of sales, compared to 30.8% in Q1 and 27.9% a year ago. Operating margin dollars increased by 30% year over year on a comparable sales increase of 16%, demonstrating the continued strong operating leverage. The effective tax rate for the quarter was 11.4%, slightly lower than expected due to the geographical mix of income. The second quarter diluted share count was 195.1 million shares, and net income was $78 million or $0.40 per diluted share. Moving to the balance sheet and cash flow. We ended Q2 with cash of $378 million. Cash flow from operations in the quarter was $47 million, and free cash flow was $16 million. From a working capital perspective, DSO was 39 days, down slightly from Q1, and days in inventory were 136 days, compared to 132 in Q1, on slightly lower inventory balances. Capital expenditures in the second quarter were $31 million as we continue to build out our back-end operations in the Philippines. Before I move to Q3 guidance, I'll make a few additional comments about the Crocus acquisition. As Vineet mentioned, we're excited to have closed the Crocus acquisition two days ago on October 31. Since announcing this transaction in August, our teams have been planning for integration, which is now well underway. We are ready to begin selling Crocus products through our sales channels and expect to begin to realize cost synergies beginning in calendar 2024 as integration progresses. We also expect to utilize Crocus's significant tax net operating losses within the first year of close by repatriating IP from France to the U.S. This will allow us to efficiently integrate Crocus into our operations, leverage our US tax rate, and obtain many of the same benefits typically associated with an asset transaction. In connection with the closing of Crocus, we executed a $250 million term loan at SOFR plus 275 basis points. In pro forma, after closing, we have approximately $200 million in cash, and our net leverage is well below 1 turn. In addition, I'm pleased to report that Moody's upgraded Allegro's credit rating to Ba3. Now, with that backdrop, I'll turn to our Q3 outlook. Including two months of Crocus, we expect third quarter sales to be in the range of $250 million to 260 million. Our guidance contemplates a return to normal third quarter seasonality, the lingering impacts from the UAW strike, and careful channel inventory management. Our long-term model, including low double-digit sales growth, is still intact, and in fiscal 2024, we expect our strategic focus areas of auto and industrial to outgrow the underlying markets. We expect the gross margin in Q3 to be approximately 54%, reflecting the projected product and channel mix, as well as the initial impact of Crocus. Operating expenses are expected to decline by 4% sequentially and are anticipated to be approximately 28% of sales. We continue to make investments in R&D and sales in our strategic focus areas as we work towards our target operating model. We are also taking prudent actions to manage expenses and working capital as we navigate near-term macroeconomic uncertainties. We expect our non-GAAP tax rate to be approximately 12.5%, and our diluted share count to be approximately 196.5 million shares. As a result, we expect non-GAAP EPS to be between $ 27-31 per share. In Q3, we expect the Crocus impact to be $5 million in sales, $3.5 million in interest expense, and $3 diluted to EPS for the two months that Crocus is included in our results. Going forward, Crocus will be integrated into our magnetic sensor business. Now I'll hand the call back to Vineet for some concluding remarks. Thank you, Derek. We believe our core growth engines and target financial model remain intact. We remain focused on executing our strategy that leverages the intersection of our industry-leading technology with the mega trends of electrification and automation in the automotive and industrial markets. We take great pride in our core value to innovate with purpose, with the goal of delivering the greatest value to our customers, and we remain as bullish as ever and excited about the journey ahead. I want to thank our teams around the globe for delivering great results in Q2, and for their continued hard work and dedication to serve our customers. Now, I turn the call back to Jalene for the Q&A session. Jalene? Thank you, Vineet. This concludes management's prepared remarks. Before we open the call for your questions, I'd like to share our third fiscal quarter conference lineup with you. We are attending UBS's Global Technology Conference on 2 7th and 28th November at the Phoenician in Scottsdale, Arizona, Wells Fargo's seventh Annual TMT Summit on 29th November at the Terranea Resort in Rancho Palos Verdes, California, and Barclays TMT Conference on December 7th at the Palace Hotel in San Francisco, California. We will now open the call to your questions. Amanda, please review our Q&A instructions. Thank you. At this time, we will conduct the question- and- answer session. As a reminder, to ask a question, you will need to press star one one on your telephone and wait. To withdraw your question, please press star one one again. Please stand by as we compile the Q&A roster. Our first question comes from Gary Mobley of Wells Fargo. Please go ahead. Hey, guys. Thanks for taking my question. I want to start out my questions by focusing on the two largest global automotive markets, the U.S. and China. Last quarter, you called out some bookings weakness in China, but since then we've seen some re-acceleration in their light vehicle build rates. So maybe if you can just speak to the bookings trends that you're seeing in China. And I would have thought that the UAW strike would not be tremendously material for, you know, overall global light vehicle production, but maybe if you can just call out or size the impact as you see it here as we go through the third quarter. Yeah. Hi, Gary, this is Vineet. Thanks for the question. So you're right. Last quarter, we had expressed some concerns about trends in China, and I think we were pleased to see that the bookings returned quite strongly for our China business. And certainly our visit to the region, spending a week on the ground with customers and partners, reinforced that the e-mobility trend continues to be really strong and vital within the China customer base. And I think we're just seeing a resumption and a continued acceleration of the order rate. On the UAW part, it's difficult to quantify, but I will tell you that we are seeing order movement between quarters. You know, we've said this before, we are several steps removed at times from the OEMs in terms of the supply chain or the value chain. We don't always get a direct correlation between a platform and our product, but it is clear to us that there has been some order movement between quarters as the tiers and the OEMs rebalance the production schedules as a result of the strike and are managing the various inventory positions as well. Gary, this is Derek. We saw a demarcation. You know, our auto sales were up 9% in Q2, and we saw a demarcation between sales after the strike started in September with the big three automakers in Q3. So while it's been settled now at this point, there's still some lingering effects. So it's not material, but it does have an impact on Q3. The other things that impact Q3 are the return to some normal seasonality, which has been about 4% or 5% prior to the supply chain crisis for the last few years. Thanks. As my follow-up, I wanted to ask about distribution inventory. What was the mix for the second quarter sales? And I would assume, since point of sale was up and sell into the distribution channel was down 8%, as you called out, the inventory decreased in the distribution channel. And maybe you could just speak to the, you know, where it sits today, measured in weeks, relative to where your normal range is. Yeah. So we've talked in the past about our target ranges being about 10-12 weeks, and I would say that we're kind of at the higher end of that range right now, Gary, and we've been there now for this quarter. And what we've seen is, the inventories in the channel have stabilized. The good news is POS was up higher than, you know, our sell into the channel, and we'll continue to watch that very closely. And the split in Q2 was about 50/50, so 50% OEM, 50% distribution. We expect that split in Q3 to be higher OEM and a little bit lower distribution as we continue to manage that. And that's part of the reason why the gross margin guide in Q2 is coming down. That's about 100 basis points, as I've talked about in the past, where selling into the channel because of the volumes has a significantly higher gross margin. So we'll continue to manage that very, very closely in the short term to make sure that we're not over shipping into the channel. Thanks, guys. One moment for our next question. Our next question comes from Blayne Curtis at Barclays. Please go ahead. Hey, good morning, guys. Thanks for taking my question. I wanted to ask on the inventory in industrial. I mean, you went through a cycle in the other consumer bucket, and there was a period where you were kind of shipping a backlog. I'm just kind of curious what your perspective is in industrial, how much inventory is there, and kind of how long this correction might take? So I'll start with some numbers, Blayne, I'll turn it over to Vineet. But you know, when you look at industrial, we continued to ship from backlog really in Q4 and Q1. So our industrial sales were actually up 17% in Q1 compared to Q4, and Q4 had 14 weeks, so it was really up in the low 20s. So coming down 25% in Q2, part of that is the timing of when our scheduled shipments were scheduled to ship. So that's part of it. But there is inventory in the channel, as I just talked about. We continue to watch that closely. We certainly expect sales to distribution and industrial to be muted again in Q3 and be down again in Q3 as part of our guidance. And we'll watch that closely until we think that, you know, we're not overshipping the demand. Yeah, Blayne, what I would add is, when you think about the end markets within our industrial business, this broad industrial, which again, is a highly fragmented set of different applications, but one of the big markets is solar. As we supply our set of ICs for a variety of applications that make up the solar ecosystem, the solar business is pretty, pretty, muted at this point. And so when we take a step back and take a look at the inventory positions at our distributors that serve the industrial market, so data center is another one. And we say the inventory positions are well within the comfortable range, maybe at some places they're a little bit higher. We're watching the POS very carefully to make sure that we are not creating or exacerbating the inventory problem. That's why we are intentionally managing our shipments into those industrial distributors. But I would say that the end markets of data center and solar in particular are the ones that are muted. I think it's anybody's guess as to how long it's gonna take for those markets to recover and come back. Okay? But it's probably gonna be a couple of quarters, at least. Thanks. And then the $5 million from the Crocus acquisition, is that being recorded in the industrial bucket? Largely will be in the industrial bucket, Blayne, yes. Okay. Thanks, guys. Thank you. One moment for our next question. Our next question comes from Blake Friedman of Bank of America. Your line is open. Hi, thanks for taking my question. Wanted to touch on gross margin again. I know you gave some brief comments, but, you know, last time you were around this $250 million revenue level, gross margins were still able to hold around 58%. And so just in the 54% guidance for December, just was hoping you could quantify more the puts and takes into that. Hi, Blake, this is Derek. Yeah, I mean, our gross margins have only touched 58% twice, once this quarter and once two quarters ago. In this quarter here in Q2, we had a really positive product mix, you know, magnetic sensing and in particular, some products within that. We also had some positive foreign exchange. What I've talked about in the past is kind of the near-term gross margins being in that 56% range. And when I look at Q3, if I exclude the initial impacts of Crocus, the base business gross margins are about 55%, and that includes a headwind of around 100 basis points from the decline in channel inventory. So as channel inventories start to normalize, you know, the base business goes back to around 56%, and product mix can have about 100 basis points ± impact on that gross margin. We're still working towards us structurally improving our cost structures and working towards our target model of 58%. On the Crocus business, their variable contribution margins are quite acceptable to us right now, but they're a business that needs to scale, and as we start getting some of the cost synergies and bringing in some of our supply chain and some of our logistics, we expect to get their gross margins overall to our target model as well over time. Great, very helpful. And then also just maybe within your December guidance as well, just specifically in terms of your autos outlook, I know you mentioned it should, should grow year-over-year, but if, is there any way you can kind of talk about the, the buckets in terms of e-mobility and non-e-mobility as you kind of look in the next quarter? That'd be great. Thanks. Yeah, Blake, this is Vineet. I'll answer that. So, we continue to be very pleased with our momentum in e-mobility, and we expect e-mobility to stay strong, as we look to the next quarter sequentially. We are seeing some order movement in our ICE shipments, or product set, and so we expect that to be down. But as we said before, on a year-over-year basis, we are still expecting overall order to have good growth. Thank you. Thanks. One moment for our next question. Our next question comes from Joshua Buchalter at TD Cowen. Please go ahead. Hey, guys. Morning. Thanks for taking my question. I wanted to follow up on that second one from Blake. I mean, so the, yeah, in the outlook for, you know, at least should grow year-over-year. I mean, I have to model a pretty sharp sequential decline to get anywhere close to, you know, flat year-over-year. Which it sounds like really the only headwind that you've explicitly called out was the order movement related to the UAW strike. And I guess, can you help, any more details you can give us on the auto segment from a sequential basis, or are there any other pockets of weakness that you think you're sort of undershipping demand right now? Thank you. Yeah, one number thing I'll clarify, Joshua. Year-over-year, you know, we expect auto to well outgrow the market. So auto for the overall year, fiscal 2024 versus 2023, will well outgrow the market. Okay, and so Yeah, so Sorry, go ahead. Yeah, go ahead, Josh. I was just gonna follow up on that. I mean, do you have confidence that after undershipping in the third quarter on the auto basis, you should return to sequential growth? Could you remind us of, like, what seasonal is? Because it's been so atypical for the last several quarters. Yeah, Josh, that's. We're not saying it will return to sequential growth next year. We haven't commented on Q4. We're saying that Q3, you know, auto is gonna be down probably mid-single digits. In Q3, e-mobility will remain robust. The sharper decline in Q3 is gonna be industrial and other, as we've talked about. For the fiscal year, though, we expect auto to be well above, you know, market growth rates and well above our target operating model of 7%-10% above auto production growth. Okay, got it. Yeah, I think within... And then Josh, within that, obviously, e-mobility is what is really driving, you know, overall growth for us in auto. As I said in my prepared remarks, we're really agnostic in terms of the content between full hybrids and BEVs, and so the content is very similar for us right now. We are agnostic and actually supporting both platforms and growth in both platforms for our customers. We, you know, correlated to that, pure ICE vehicles will see some decline, and I think that's pretty well understood broadly by third-party estimates as well. Our safety, comfort, and convenience business is really agnostic to the powertrain. That continues to be really stable and starts to see a little bit of content lift with more electrified content. Okay, got it. Thank you for all the color there. And, for my follow-up, you called out, and I understand you don't have perfect visibility into the channel, and it sounds like things are stabilizing, from a channel perspective in industrial. But I guess as I think about your on-books inventories, they're still running, you know, higher than they have in the past. Are you comfortable with where things are now? Is there more work to do on, for your on-books perspective that, over the next coming couple quarters? I'd just be curious how you're thinking about that. Thank you. Yeah, Josh, this is Derek. So the on-books inventories, you know, the, the absolute dollar amount came down about $1 million from Q1. The days went up a little bit on the sales ticking down about 1%. So, you know, I think we're still comfortable at those levels because the majority of that inventory is in wafer and actually in die bank now. So the good news is, we've been able to put in place more probers and move that inventory to die, probe die bank, which means it's good die. And that lasts quite some time, but we are continuing to manage those inventory levels to make sure that we're aligning wafer receipts with projected demand and certainly managing finished goods inventories, and we're also managing working capital very tightly and CapEx, as you might imagine, here, you know, in the, in the near term. Got it. Thank you. You're welcome. As a reminder, please press star one one on your telephone to ask a question. Our next question comes from Christopher Caso at Wolfe Research. Chris, your line is open. Yes, thank you. Good morning. I guess the first question is regarding the backlog and visibility going forward. You know, obviously, lead times and have been long, product has been short. You know, as things get a little bit more normal, how does that affect your visibility in the backlog, you know, as we look into the December quarter, and, you know, does that have any implications for the March quarter? You know, what do you consider to be, you know, kind of normal seasonal behavior for the March quarter, and what sort of visibility do you have for that now? Hey, Chris, this is Vineet. So, so I want to start answering that question by saying that, you know, the visibility that we really get is first based on our design wins. So our design wins and the customer forecast that comes with those design wins is really what we use for our, call it our mid to long-term planning purposes, and that, that sets the table for our R&D investments, our capital investments, our factory planning, and so on. And then in the near term, that forecast gets turned into orders, which then become part of the backlog. And you're right that as lead times have come back more into the normal range, you know, the backlog has moderated to what we would call the normal range, right? Typically, it's two quarters with what we would consider normal. We're back within that range. So we have good visibility for the next couple of quarters, and the forecast continues to evolve based on the design wins. So hopefully that gives you a sense for how we think about visibility and how we think about the next couple of quarters. Got it. If, if I could ask a follow-up on the Crocus acquisition, if you could speak to the rationale for that, because obviously, you guys were already doing internal work on, on TMR sensors. You know, what, what, what, what was the decision to, to go out and, and, and buy as opposed to, you know, continue that development internally? Yeah, Chris, great question, and really appreciate the opportunity to come back to this topic because it's really important. So, as I said in my prepared remarks, Allegro has traditionally been really strong in developing TMR for ADAS applications in automotive. And when we looked at the Crocus technology and how that had evolved in the last couple of years, we found that to be a really good fit for xEV applications, as these applications started to become more demanding in terms of accuracy and robustness over temperature and over life. So we felt, you know, at some level, yes, it's a build versus buy decision, but by bringing Crocus into the portfolio, we've accelerated our roadmap by several years, and we can now bring this TMR technology today, with a little bit of work from our engineers, make it automotive grade and bring it to our automotive customers pretty much instantaneously. And that's the work that's gonna happen over the next few days and weeks, where our sales team, along with the Crocus team, is gonna go to all of the automotive customers. And I'll remind you that Crocus today doesn't really have any automotive business, largely industrial. And so we're gonna bring this technology to our automotive customers and some of our more demanding industrial customers, and we'll be able to really grow this, grow TMR within the overall space and certainly within the Allegro portfolio. So we're really excited about the prospect of bringing a much more comprehensive magnetic sensing portfolio to our customers, and we believe that this will help us differentiate even further in the applications we serve, as well as open up new applications for us to go after. If I could just follow quickly on that too, and given, you know, the need for qualification, the auto customers, you know, the need to bring those up to automotive grade, can you give us a sense of, you know, what the qualification time would be and when we'd start to see an impact at those auto customers? Yeah, it's a great question. So auto quals typically are long cycle, right? It takes at least a year to get auto qual if you're starting from scratch. The good news is that the Crocus team is already in process of qualifying their technology at several key OEMs. We can now come in and help accelerate that. And so we believe that, you know, we'll be able to see some impact from automotive customers, you know, much sooner than what a traditional qual cycle would call for. That's helpful. Thank you. Thanks for the question, Chris. One moment for our next question. Our next question comes from Quinn Bolton at Needham and Company. Please go ahead. Hey, guys. Just, I guess trying to think about the puts and takes around the auto outlook. You know, you're guiding it down in December. Some of that seasonality, some of it's the UAW strike, but, you know, all of those things feel like they're, you know, shorter term in nature. And so I guess I'm struggling to think why you wouldn't return to kind of normal seasonality or strength again in March. I mean, are you guys seeing a broader slowdown in auto, that that's, you know, calculated into the current outlook? Or, you know, is do you know, I guess, why wouldn't you return to normal seasonality in March? Hi, Quinn, this is Vineet. So, so we're, you know, we're not explicitly guiding for next quarter. Having said that, we are not seeing a slowdown overall in auto, right? So, a while back, we had talked about auto production still being muted, coming off of the supply chain crisis and still needing to get to somewhere in the range of 90 million units globally in order to achieve overall balance in the industry. And I think we're still the industry is still on the way there. And we can debate what the mix is gonna be, and as I said, in my prepared remarks, we've become very agnostic to the mix between hybrids and BEVs, and that's largely the two primary flavors that we believe the OEMs are really working on. So, we've also said earlier today that we see continued strength in e-Mobility, and it's really some near-term movement around orders between quarters, plus the seasonality that is calculated into our Q3 guidance here. Yeah, but it sounds, I mean, it sounds like you guys agree that the strike and seasonality are kind of shorter-term events, and so it doesn't sound like you see anything- Yeah longer term that's causing you to become more cautious on the outlook. You're just giving December quarter guidance. Yeah You're not commenting beyond, but, but we shouldn't be reading into, you know, these comments that, that, you know, this is an extended slowdown. That's correct. Yeah I think our comments right now are just limited to Q3. We don't see any broader slowdown in automotive. Obviously, it's a very dynamic market right now, but at this point, we don't see any reason to believe there's a slowdown in auto. Great. To bifurcate a bit, bifurcate a bit, Quinn, you know, that's absolutely true, but industrial and other does have a different dynamic, right? Where this is, historically, it's taken a couple of quarters of inventory digestion in the channel with where those products are sold in those two markets. Understood. And then, Derek, you know, just kind of trying to parse the gross margin. Sounds like the channel mix to OEMs is about 100 basis points. Sounds like Crocus is about 100 basis points. I guess in the near term, you know, if I just run the math, it looks like Crocus comes in with effectively zero gross profit to kind of, you know, impact overall corporate margins by 100 basis points. How should we be thinking about the gross margin trajectory, you know, over the balance of this year and then into fiscal 2025? Do you think it sort of stays in this 54%-55% range, given sort of the drag on Crocus? Or, do you think that you can kind of get back to the more that, that 56% level, that, that I guess I would call more your, your, your sort of, you know, near term target for gross margins? Yeah. So the first quarter, the initial impacts of Crocus include some kind of, you know, sort of start-up costs, if you will, Quinn, and the gross margins are above zero, so I'm sort of rounding with those numbers. But the core of the base business, you know, in Q3, is about 55%, and that includes the headwind from the channel inventory management. So that brings it to 56% if we kind of normalize the channel business on a go-forward basis. We also expect to start to get some synergies on the cost side as we move back-end operations for Crocus and some of the other things to our suppliers and our back-end facility in the Philippines in 2024. So in the medium term, that 56% gross margin is what we expect, and then we're continuing to work towards our target operating model of, you know, improving our gross margins by 50-100 basis points and getting to 58%. The other thing I'd mention in Q3 is, it's the initial quarter of Crocus from OpEx, right? And OpEx is still down 4%. It would have been down 10% without Crocus, and we'll continue to bring them into our organization, part of our magnetic sensing business, as we integrate that. Understood. Thank you. One moment for our next question. Our next question comes from Vijay Rakesh at Mizuho. Please go ahead. Vijay Rakesh, your line is open. Please go ahead. One moment for our next question. Our next question comes from Natalia Winkler at Jefferies. Please go ahead. Hi, thank you for taking my question. So on the BMW announcement, you guys highlighted that it's a sole source kind of win for you, and I was just curious, like, is this the normal approach for some of those e-mobility design wins you guys are seeing? And also, have you seen any shift between kind of the sole source and dual source approach coming out of the shortages? Are you seeing kind of incrementally, OEMs move using one model of sourcing versus the other? Hi, Natalia, this is Vineet. Thanks for the question. The short answer is that it depends on the OEM. I would say that, yes, there is certainly efforts on the part of some OEMs to make sure that they have at least a dual source for some of the key components. But there is also, you know, our case, where we have redundant sources of manufacturing, so we are able to bring supply chain resiliency to bear. And so when we present to our OEMs, it's the most comprehensive portfolio of products, especially when it comes to magnetic sensing and some of the power applications we serve. And then we talk about the supply chain resiliency that's inbuilt into our supply chain with multiple sources for wafers, multiple packaging, assembly, and test locations. And so that allows us to get to a sole source position. I would tell you that the complexity of designing the xEV powertrains and systems, as well as the demanding nature of some of these applications, where we certainly present as the best option that can meet those needs across, across life and across a wide range of operating conditions, lends us to be sole sourced in most of these cases. That's very helpful. Thank you. And as a follow-up, Vineet, would you mind speaking a little bit more to the data center dynamics? It sounds like over the last few quarters, you guys have highlighted somewhat of weakness in there. Has there been any structural kind of change to what's pulling the demand? And are you seeing any sort of near-term or midterm tailwinds that might kind of shift that dynamic? Yeah, Natalia, it's a really good question. So first of all, data center is a very small part of our business. It's less than 5% of our total sales. In the near term, we don't really see any change in the data center dynamic. You know, we're in constant communication with our data center partners, tiers and distributors, and they're not indicating any sense of a change in direction or the market starting to recover. The positive, if I can call out one, is that we continue to have new design wins with our data center customers. So we've, in the past, talked about the shift towards 48-volt architecture, that results in new platforms, new product requirements, and for us, new design wins. As the industry moves to three-phase fans or three-phase motors, you know, there's more content for us. We're seeing design win activity associated with that. But for the next couple of quarters, we don't really see any potential recovery in the data center space. Thank you. One moment for our next question. Our next question comes from Vijay Rakesh at Mizuho. Please go ahead, Vijay. Vijay Rakesh, your line is now open. One moment for our next question. At this time, I am showing no further questions in the queue. I would now like to hand it back to Jalene for closing remarks. Thank you, Amanda. We appreciate you taking the time to join us this morning. This concludes this morning's conference call.