Good morning. Thank you all for taking the time to come in person and those online for joining us this morning. Welcome to Allegro Microsystems Analyst Day event. I'm Jolene Hoover. I head up Investor Relations and Corporate Communications. I am not going to read these forward-looking statements, but I do encourage you to read them later when the presentation will be available online in the Investor Relations section of our website under Events and Presentations. In summary, I'd like to caution you that today's presentation and the accompanying oral remarks can include forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. And now, it's my pleasure to introduce you to Mike Duke, President and CEO.

Thank you, Jolene, and good morning, everyone. Welcome to Boston. I think we've escaped any major snowstorms so far, but I know many of you came from far

and wide, and I hope the weather continues to cooperate.

I do want to reiterate a sincere thank you to everyone here in the audience, also everyone joining us online for our 2026 Analyst Day. The event is a timely one. It essentially marks my one-year anniversary as Allegro's CEO. that makes this a great time to reflect both on the past year and on the years to come. Speaking of this past year, our fiscal year is almost finished, finishes in March, and it's been a pivotal year for Allegro in many ways. We're pleased to report that on a year-over-year basis, our sales are on a pace to grow by more than 20% year-over-year. And in addition, as we exit our fourth quarter, we're on pace to have more than a 400 basis point increase in gross margin. So we have very positive momentum. And this positive momentum, it's actually the perfect jumping off point for today's discussion because positive momentum is the essence of what we're calling Allegro reimagined, and that's the focus of the day today. Here on this page, the agenda, I'm going to start the day by summarizing the key takeaway messages. We want you to hear those up front. Then I'll also talk a bit about what's new and different with me serving as Allegro CEO. After that, I'll hand over the stage to the great lineup of speakers. They'll give you a more detailed view of the entire Allegro story, and as you can see at the end of the session, there will be ample time for Q&A, there will be lunch, and there's also a demo room nearby. I encourage you all, if you have the time, to go see the demos. It's a unique opportunity to see our products sort of in the wild, in action, to understand not only what they do, but how we build leadership positions in certain applications. All right, so before we take a deeper dive across many speakers into the Allegro story, I wanted to put today's takeaways on a page. And the Allegro story, it really does start with our differentiated and durable technology. Throughout the day, you'll hear the entire speaker lineup talk about our growing leadership position across both magnetic sensors and power ICs. The products that we make, they are the fundamental drivers of an improved growth story that we're telling today. And I have to say, after 27 years at the company, I sincerely believe our products and our technology, they're better than they've ever been. What do we do with these excellent products? We believe they are the basis upon which we can continue to outperform in our core XEV and ADAS markets. XEV and ADAS, these are the markets that should enable us to grow much faster than automotive vehicle production or automotive SAR. We'll use those two terms interchangeably today. So even in a low auto SAR environment, we're modeling the growth rate of Allegro, of our automotive business, to be north of 10% on a CAGR basis. So low double-digit growth for automotive, that's a great story for auto, but the Allegro growth story actually gets even better from there, and the reason is because of our growing industrial business. You'll see a lot of statistics throughout the morning, but our industrial SAAM, it's growing at a 17% CAGR. And we believe we can grow our industrial sales even faster than the market. The reason it's a result of our expanding dollar content in the data center and in Humanoid Robots, among other applications. So let's put this all together, right? We grow automotive at a CAGR north of 10%. We grow industrial at a high teens CAGR. And what this results is an overall sales CAGR for Allegro in the mid-teens. So mid-teens growth, that'll be the foundation of our new financial model, which we'll roll out for you today. And this is a significant upgrade in terms of the growth model that we had at our analyst day three years ago. We are super focused on sales growth. Of course, we're focused on a lot more than that. we're also marching down a clear path with a systematic plan to get our gross margins back up and above 55%. And we're going to do all this while limiting our OPEX growth essentially to match the rate of inflation. So in aggregate, we're improving sales and gross margins. We have this prudent approach to managing OPEX. This puts us on a path on a go-forward basis to double our revenue and quadruple our EPS. And this is the roadmap that we all have to create significant shareholder value for our shareholders. So what we have here now on the page, this is a representation of the strategic engine driving the company forward. So on the left, you see an array of important technologies. We started investing more and more in precision sensors and TMR technology. Build upon that, we invested in 48-volt power, isolated gate drivers, more intelligent motor drivers. When we were making these investments, we knew these were the right investments for XEV and ADAS. So at the center of the page, you see this 18% CAGR for the SAM for XEV and ADAS. This is what we were targeting initially. But we also knew that the same technology would one day come to the data center. The same technology was essential in humanoid robots and so when you look over on the right that's where you see the even larger growth opportunity for the company in these emerging industrial markets to put some numbers to what's on the page our automotive sam for xcv and 8s it's a five billion dollar sam that's what's growing at 18 percent in the industrial space the the targeted sam on the page three and a half billion in data center and robotics and automation that's the one growing with 27% CAGR. So these are large secular growth markets. And we have a bold strategy where we are taking our market-leading technologies and intersecting them with these large secular growth markets, and in particular, in areas where we see growing dollar content for Allegro. So with this strategy, we're harnessing new secular tailwinds, and we're driving Allegro's growth potential to new heights. So on the page now, this is really an overview of what's new and different with me in the seat for the past year. There's been a fair amount of change and it all begins with a sharpened strategic focus. So we've sharpened our focus on high growth auto and industrial markets. We just talked about those. It's worth noting, again, a clear and important part of the strategy. We're focusing once again on these areas of the market where we see strong dollar content gains, and I'll walk you through some examples of those gains in just a few minutes. Throughout the day, you'll learn how we've reallocated our R&D spending to focus more on our target markets, again, XEV, ADAS, data center, and robotics, and you'll hear how Rick, our SVP of sales, he'll explain an important change in our go-to-market strategy, which is helping us harness the growth opportunities across both automotive and industrial. Throughout the past year, we've also strengthened our relentless focus on profitability. We've always been focused on it. When I look back over the last year, we now have a broader team focused day in and day out on gross margin improvement, a more global team, and we're marching down this path to get north of 55% gross margins. Derek will walk you through a bridge and a deep discussion of what that journey looks like. Another key focus for us over the past year, it's what I'm calling disruptive innovation. And here on the page, that's really creating these new vectors of value. So what we're doing is we're investing in new technologies, new products that can create new high growth revenue streams for Allegro. We're trying to create multiple new $100 million revenue streams in the future. And this is not really a new concept. When I was CTO, this was a focus for our team, and our work's well underway. We're actually sampling customers with some of these new technologies today, getting positive feedback. And even in some cases, we're seeing clear potential for gross margins in excess of 70% with some of these new product areas. And we won't be talking in depth about these areas today for one reason, which is competitive reasons. We don't want to tip off the competition too, too much in terms of exactly what we're doing. But you'll see some of these technologies discussed at a high level. I encourage you to pay attention in the robotics section that Mark Gill will undertake later on today. He will talk about a new force sensor technology that we're investing in primarily for the hands in humanoid robots. the last change that's certainly worth noting we had an excellent team coming into the year over the last 12 months we brought in new leaders we have a very cohesive team of people who are dedicated to the cause we're working hard to grow sales faster get margins north of 55 percent and ultimately increase shareholder value i'll go through a list of the new leaders a bit later on in my session this morning. But we have a great new team, very focused on the mission. All right. So Derek's going to take you through a deep dive on the model at the end of the session today. But we didn't want you to have to wait so long to see the model. So I'm flashing it up on the page. And the model all starts with the mid-teen sales growth that you can see at the top of the chart. As I mentioned, the march back to greater than 55% gross margins is also essential and what we see in the end is that when you drive sales faster and grow faster you increase gross margins certainly a positive impact on our operating margin free cash flow and our earnings so this is the roadmap we're all good at math when you look to the future this is the roadmap that says as we deliver this model we're on a path to double revenue and quadruple eps and like I said, this is the blueprint for value creation at Allegro. All right, so that is actually the summary of the takeaway messages for today. We wanted to hit you with them up front. All of you snapping pictures, that's fantastic. Feel free. So we wanted to set the stage about what you're going to hear, but there's so much more to say, and that's what you're going to hear about starting with me and from the rest of the speaker list here today. And I want to zoom out for a minute and just ground ourselves and talk a bit more, hey, why is Allegro a durable and compelling investment? And really, what do we do? So at our core, we are leaders in sensors and power ICs. And these ICs, they enable electromechanical systems to sense, move, and manage power with efficiency and precision. So we're in a lot of motors, electric motors. We're in a lot of power conversion devices. When you look at our magnetic sensors, These represent 61% of sales, and they act as the eyes and the ears of these electromechanical systems. They're giving sensor feedback. We have the broadest portfolio of magnetic sensor ICs in the world. We span from Hall to TMR. We were early investors in TMR, leaders in the space. And so we have this complete toolkit in sensing with this broad portfolio. we can make customized ideal solutions that solve our customers most pressing problems and that's one way we differentiate in the market when you look at our power ICs these are the muscles of these electromechanical systems they control motors and they efficiently manage energy conversion systems from 12 to more than 800 volts in the world of power we have a lot of unique IP we We have unique and differentiated high voltage IP, we have market-leading algorithms for spinning motors, and we have this 120-volt auto grade zero wafer process, which is important for both sensors and power, but it's really perfect for the 48-volt revolution that's happening in cars, in the data center, and in robots. So in the end, we have these foundational pieces of power IP. We ultimately can make electric motors smaller and more efficient, or power conversion systems smaller and more efficient. This is exactly what our customers want. Across auto and industrial, the name of the game is size and efficiency, and we unlock significant benefits for our customers. In terms of Allegro's focus markets, just over 70% of sales coming from the automotive market. Within automotive, our focus is squarely on XEV and ADAS. I want to reiterate, when we talk X-EVs, the reason for the X, we actually benefit whether hybrid or battery electric vehicles are adopted. We have significantly higher dollar content in an HEV and in a BEV compared to an ICE car. So we don't much mind, as vehicles electrify, if they're hybrids, fine. If they're battery electric vehicles, that's great too. the other focus area of 8s that stands for advanced driver assistance systems in allegro's world that means steering and braking so anytime your car is taking over the steering or the braking there's a good chance there's an allegro auto grade high reliability system behind that steering and braking system why do we talk so much about xev and 8s it's actually where the value is in automotive semis, and it's where our dollar content opportunity is expanding the most rapidly, and it's also where our technology is most critical and resonates best with customers, so it's a great automotive foundation. When we think of industrial coming in at 28% of sales, this is where we see higher growth, right? There's a high teens CAGR for the market, and we believe we can deliver a high teens CAGR for our sales in the industrial market. And this is because there's a new evolution for Allegro's business. I talked earlier about how our fundamental technologies are crossing over into the data center, into the robotics market. And this is really boosting the growth of our industrial business. And across both auto and industrial, we're winning broadly because we have leadership positions in precision motion control and in hyper-efficient power management. And our solutions are highly sought after by our customers. If we zoom out for a minute, you know, I talked about a lot of markets, but the markets are actually well aligned to the megatrends that we're all dealing with every day. They're in front of us both personally and professionally. So we have a great growth story in electrification, in automation of the factory or the car, and certainly in the data center. And all of these megatrends that are upon us today, these are all growth drivers for Allegro's business today. You look to the right, advanced humanoid robotics, we've certainly secured wins in this space, but this would be an example of a megatrend driving significant SAM expansion and value creation for Allegro on a go-forward basis. And it creates a very strong story. And let's put some numbers to that story. So to start, our serviceable available market, or SAM, it totals nearly $14 billion by fiscal 31. That's a good number, but there are better numbers on this page. So if we look at the composition of the market, our focus areas, they're the ones in blue on the slide. XEV, ADAS, AI, data centers and robotics, they represent a combined $8.4 billion, SAM, and that's growing at a 21% CAGR. if you look right in the middle of the slide the rest of the market outside of our focus areas in blue there's a kegger of two percent so this growth differential it's certainly not a coincidence it's a hundred percent by design this is the essence when i talk about a focused strategy at allegro we are focusing in these markets that have the 21 percent growth rate and dialing down our investments in markets that contribute to that 2% growth rate. We've deliberately positioned the whole company for growth in the fastest growing pockets of the market, and again, where our dollar content is rapidly expanding. So as we look at this chart on the previous page, if you look at the gray on the bottom, there's a 12% CAGR. That was the overall growth rate of Allegro's total SAM. And we're coming in today saying we're going to grow with a mid-teens sales CAGR. So the obvious question is, well, how do you outgrill the market? A somewhat obvious answer is that we do it primarily through share gains. So our share gain story, it really comes down to two main engines driving the gains. The first one is accelerated innovation. We'll talk a lot today about differentiated technologies like TMR, like isolated gate drivers. Great opportunities for share gain there. Just as important to the story is this fundamental evolution in our go-to-market strategy. I'll save the details for Rick's presentation, but by dividing our sales force into an automotive sales force and an industrial sales force, we're really unlocking faster rates of design wins, better customer coverage. Before that, we were geographically aligned. We had sales coverage on a geo basis. What we're doing now is because we see this strong growth rate at industrial, we've architected a system where without taking our foot off the gas in any way in automotive, we're now giving more attention to the industrial market and harnessing this secular growth. So dollar content. Dollar content, it's absolutely essential to understanding the story. I'm going to walk you through a few examples. So on the left part of this slide, you see an example for an onboard charger. So an onboard charger. This is the charging circuit that is inside your car. When you plug a cable in from outside your car into the car, there's a charger. It charges the battery in the car. And we believe we're leaders in this space for current sensing today. We'll sell five or six current sensors into an onboard charger. But there's a step change happening within Allegro, and it's coming through the form of our isolated gate drivers. And those are abbreviated IGDs on the slide for brevity. We're working with customers, sampling our new gallium nitride and silicon carbide gate drivers to customers. And we're actually working on the same board where our current sensors already reside in the charger. And what we're seeing is next to the five to six current sensors, there could be 12, sometimes even 32 of our gate drivers on the board. And the ASPs for these two products just model them as essentially the same. so what you can see is a greater than 3x dollar content expansion opportunity in the charger and if I were to run you through an example for an automotive inverter in an EV you'll see a similar story so this is just an example of how dollar content contributes to the growth story there's an equally impressive ADAS growth story on the right 2x to 3x content gains Troy is going to walk you through that in depth when he takes the stage and talks about automotive The dollar content story, it's equally impressive in the industrial market. We'll start on the left with the data center. So what you see in the center next to the robot, that's a data center rack. And as AI and advanced data center applications roll out, the power consumed by that rack, it goes up tremendously. And what that means is you need to have a lot more cooling solutions inside the data center rack. So as many of you are aware, we're leaders in high-efficiency fan drivers that spin the advanced fans, doing a lot of the cooling.

And if you look to the lower left of the page,

a few years ago we had less than $150 available in a data center rack. And in a few years from now, we'll have more than $425 of opportunity. Within the 425 could be hundreds of these fan drivers, but we're also adding in current sensors and gate drivers into power supplies in the rack. So our 10 megahertz TMR current sensor is really our very fast current sensor portfolio already ramping in data center power supply applications. And we are sampling broadly the same power supply customers with our isolated gate drivers. So we're seeing a rapid expansion in dollar content. Two quarters ago, we publicly stated 8% of our sales overall were coming from the data center market in the December ending quarter, that number went up to 10%, which we also stated publicly. So this phenomenon, this growth phenomenon in data center, it is happening now, and it's a driver for the business now and for many years to come. When you look to the right in robotics, I'll save that story largely for Mark, but I do want to add a few anecdotes. So I've traveled the world, whether it's in China or the U.S., working with advanced humanoid robot companies. A trend keeps emerging. we keep hearing things like, we would use 75 of your position sensors in our robot. We would use 75 of your current sensors in your robot. And then I say there's about 50 motor drivers in a humanoid robot, although I was at our demo station yesterday and our newly appointed CTO assured me there's far more motors in a robot. So that's the beauty of these types of markets. They're always evolving, but the story is constant that Allegro has a tremendous dollar content opportunity in humanoid robots, and Mark will walk you through that story in depth. From a tech perspective, TMR, in the end, it is just another type of magnetic sensor. It's not radically different categorically from a Hall Effect sensor, but it does provide a few key differences. Higher accuracy, higher resolution, and higher speed. So when you're in an ADAS motor in a car, steering or braking motor if you're in the shoulder motor of a robot quite honestly they don't really want to use Hall effect angular encoders they want the precision they want the accuracy of a TMR based sensor so we're seeing great gains in both ADAS and robotics with our TMR technology the same is true in EVs and in the data center whether it's in that onboard charger or in the power supply I spoke about customers prefer very fast fast response time sensors and with our Hall sensors we can't go fast enough with our TMR sensors like our 10 megahertz TMR sensor that we recently released this is the ideal solution for these power supply companies in the data center and also in power conversion in the car so in the end we see TMR as a important share gain engine for Allegro there are far fewer competitors for us in the TMR space so this is a winning formula for Allegro the second platform are isolated gate drivers as systems move to higher voltages in XEV chargers in AI power supplies our gate drivers are essential for enabling greater power density and efficiency in both AC to DC and DC to DC conversion applications so we can accomplish in a single chip the same functions that many of our competitors require two chips to implement so ultimately we end up delivering size benefits and also efficiency benefits it's a disruptive technology unlocking a new multi-billion dollar Sam and here's where we also believe we can gain significant share on a go-forward basis so when I think of technology leadership it's never accidental and here on this page it's a depiction of how we're being smarter and more focused with our R&D spending and I want to just start with the numbers in the top 15 to 17 percent pretty much as long as I've been at Allegro which has been a long time we've managed the company with R&D spending as a percent of sales in this 15 to 17 percent average window we are not changing that when I talk disruptive innovation more innovation in the right markets we can do this without spending more money and we're doing it through reallocation as you see here on the page so we're systematically reducing investment in these lower growth other categories I want to point out that if you look at the focus auto box it's the same amount of investment both in a backward-looking and forward-looking perspective we're not taking our foot off the gas in any way on auto what you do see is increased investment in focus industrial. Here we have the higher growth opportunity, higher gross margins, and we're able to pivot our R&D focus to the areas of greatest growth without spending incremental dollars. At the top of the stack, cost innovation. So this is something I've talked about a lot in the last year. There's many elements of cost innovation, but if I were to summarize it maybe the cleanest way, I'm very impressed with what the teams have done. We're taking chips, very high volume chips that are selling today, the next generation, same form, fit, function, and performance, we might be shrinking the chip 30%, 40%, 50%. So this will have a positive contribution to COGS reduction and ultimately higher gross And this will be an evolution. There's many products going through this evolution. But this will have a strong impact on our path back above 55% gross margin. and it's starting now and should continue for many quarters to come. All right, one of my favorite topics. I'm a big fan of AI, and some of us were talking about it out before the presentation started. I want to give you a feel of what we're doing within Allegro with AI, and I'm proud of the team. It was not necessarily through my leadership. It was through other leaders in the room. They really brought us to the point where we were ahead of the curve with AI adoption at Allegro, and what does that mean? On the left, this is a representation of the chip design process. So we are well down a path using advanced AI tools to be more efficient in our design process. What that means for a reasonably complex chip, perhaps we needed 12 engineers to make that chip in the past. Through the use of AI, we can drop that down, something like nine engineers. And what we will then do with the same pool of engineers, we can make more products, we can make them faster, And we can use new products as a powerful growth engine, both for revenue growth and for gross margin growth. In the middle, it really is depicting AI in the factory. So over the last 12 to 18 months, whether it's improving yields, decreasing test times, better factory floor planning, the team's done a great job adopting AI. And I got to be honest, the fun thing about AI is that it's evolving so quickly that each and every quarter we're adopting new techniques, spreading them out across the company. to unlock these efficiency gains through AI that will have a positive impact going forward. In the rightmost picture, you see the hand there. This is really a representation of the fact that we are already down a path and already sampling early prototypes to customers to start embedding edge AI into some of our products. We've found a lot of use cases where people say, you have the sensor data, can you do more intelligent things with it and help me solve problems in my end application, and this is an area of investment. This is one of the new growth vectors I spoke about earlier, and we're in the early stages, but getting very positive feedback from Allegro, from our customers. All right, so I'm getting close to the end, but this is an important chart. This is a chart in response to many of the survey feedback elements that so many of you gave to us, and it tries to describe the major growth drivers for Allegro, both in the near term and the medium term. So I want to start on the bottom of the chart. That gray area, these are our other markets. And the point I want you to walk away with, this is a solid foundational business that continues to grow. Some of the questions we've been getting as ice cars decline, what happens to the base business, it continues to grow. It's not all ice. Within the industrial space, we have two-wheeler growth, we have energy infrastructure growth, and we have medical market growth. And even within auto, there's still share gains happening for Allegro, mostly in motors for safety, comfort, and convenience applications, some of them in the cabin, et cetera. So this is a stable business that continues to grow. The more exciting piece of the slide is the blue on top of the gray. These are the focus areas. Again, XEV, ADAS, data center, and robotics. Here you see significant sales growth, and here's where we're modeling an ability to grow well into the double digits from a sales CAGR perspective. The growth is happening today. If you look at the picture, we broke it into essentially two halves divided by the chart line in the middle. You can see XEV, ADAS, and Data Center are the growth drivers for the next few years. They're the growth drivers now. Various sensors driving the growth, TMR already driving above market growth. When you get to the outer period, this is where robotics kicks in. This is where the advanced ADAS systems with much higher dollar content kick in, where 48-volt markets start to truly scale, and here's where our isolated gate drivers start to contribute more to the growth story. The takeaway here, there is a little bit of a decoder for you to see what the growth drivers are, but this is why we believe we can deliver this mid-double-digit sales CAGR on a go-forward basis.

All right, back to the team.

So we talked a lot about strategy. Strategy is only as good as the team that executes it. And like I mentioned, we have a fantastic team, but we did make it better over the past year. First, we brought in Rick as our SVP of global sales. You'll hear from him in a minute. In the fall, we brought in Troy to be SVP of products. And the two of them really, really upskilled the team and are doing a tremendous job. A few weeks ago, we announced the promotions of Ian Kent. He was our VP of operations, now our SVP of operations, running all of our global operations in quality, which would be in our internal factory and OSATs, and we promoted Jamie Haas to CTO, filling the former role that I had. Jamie's a 20-year serial innovator that I've worked with very closely. No one better than him to carry the torch of innovation with purpose. So I'm honored to work beside this team. It's one of the best-performing teams I've seen at Allegro, and we're all focused on creating value as we look to the future. So now let me end where I began, takeaway messages. I'll keep it simpler this time, though. This page does capture the essence of Allegro Reimagined, which is fairly simple. A more focused, faster-growing, more profitable company with a clear mission to create shareholder value by intersecting these market-leading technologies to these secular growth trends that are upon us today. So that is it for me. I'm now excited to have the rest of the speakers come up, led, of course, by Troy Coleman, our SVP of products. Troy, take it away.

All right. Thank you, Mike. Good morning, everyone. I'm Troy Coleman, and I'm proud to lead the products organization here at Allegro. I started at Allegro just a few short months ago, so I thought I'd step back and share a little bit about why as it gets to the very heart of the discussion that we're having here today. After 25 years in the semiconductor industry, I saw something truly special in Allegro, a company with world-class technology and products, deep and trusted customer partnerships, and a leadership team under Mike that has a clear, focused, and compelling vision for the future. Mike's strategy of Allegro Reimagined isn't just a tagline. It's a disciplined plan to win and grow in the fastest end segments of the market. I chose Allegro because I'm completely confident in this plan and our team's ability to execute. So nowhere is that opportunity more apparent than here in automotive. Over the next 20 minutes or so, I hope to give you some perspective of how we're bringing that vision to life in our largest and most dynamic end market. I'll focus on three key messages here today. First, how the rapid adoption of XEV and ADAS is increasing our dollar content by upwards of two to three times. Secondly, I'll detail our competitive edge. Our leadership is not accidental. It is based on that foundation of technology as well as deep, trusted customer partnerships that ultimately lead to share gains. And finally, I'll explain how our new product investments are already addressing the new wave of innovation in vehicle architectures that ultimately ensures our growth for years to come. But before we look forward, it's important to understand the foundation that we're building upon. Allegro has been a trusted partner in the automotive industry for over 30 years. That deep pedigree means that our customers, the world's leading OEMs and Tier 1s, rely on us for the quality, reliability, efficiency, and performance that is required in these most demanding applications. As you can see here, we have an incredibly comprehensive portfolio. From the ICE or internal combustion engine to the XEV powertrain or powertrain agnostic solutions such as ADAS and safety, comfort, and convenience. Over the course of the discussion today, I'll talk about XEV and ADAS as our focus automotive, and ICE and SEC, which I'll use for simplicity, as our other automotive. I'll just touch briefly on SEC, because we're going to touch on that just briefly today. But on the SEC front, think about this as the LED lighting in the front or the rear of your car, maybe your window lift motors, your heating and cooling system. Effectively, there's motors throughout the car. So this is an area, along with ICE, that we continue to gain share and ultimately grow. So that would be an important part of the growth plan that we share with you here today. An additional theme that you'll see throughout the discussion is the shift in new vehicle architectures, and specifically 48 volts. So I'll touch on 48 volts and what that effectively means to our customers and to Allegro. So Allegro's uniquely positioned to win and capitalize on these industry trends, and hopefully to show you a little bit about that in the upcoming slides. So you're probably wondering, how does Allegro consistently outgrow the market when the total vehicle production really doesn't drastically change? And that's effectively what this chart is showing, that the total number of vehicles is probably around that 1% to 2% growth range. But what this also shows is the two most important secular trends that are driving our business today. And that is the shift to XEV as well as the adoption of ADAS. You can see that here denoted by the blue and the light blue for hybrid and battery electric, and then by the green line for the ADAS adoption itself. So the key takeaway here is that our growth is being supercharged by the mix of vehicles being produced. This is ultimately helping us to accelerate our opportunity in ADAS and XEV, and ultimately lead us to outpacing the total vehicle production market, or what we call SAR, by 7% to 10%. So, let's take a look at the numbers. This slide helps to underpin our strategy. By 2031, our focus automotive growth opportunity is growing to about $5 billion at an 18% CAGR. You can see here XEV SAM is running at about 23%, the ADAS about 10%. So this effectively is why the majority of our product investments are geared and biased towards XEV and ADAS. Although ICE and SEC are growing at a slower rate, Allegro is and will continue to grow and gain share in this space and ultimately drive a part of that as a part of our overall plan that we'll share with you here today. So, I know there's a bunch of numbers on the slide here, but I wanted to sum it up like this. At the end of the day, with Allegro's products, as well as the 2x increase in new products that Mike mentioned earlier, we are poised to grow faster than the market and outpace SAR by 7% to 10%. All right, let's look at the dollar content by vehicle. So, this is a visual of the growth of the vehicle itself. and as the industry moves towards an electrified, software-defined vehicle of tomorrow, our dollar content grows. We see a clear path from the $40 in fiscal year 21 to $60 today to upwards of $100 in the future based on the adoption of those standards like XEV ADAS and 48 volts as well as the adoption of our new products. You can see here the colored dots denoting that. In fiscal year 21, our primary opportunity was around braking and steering, maybe a couple in-cabin motors. But as you move towards XEV and that XEV acceleration, you can see here in blue how new onboard chargers or inverters come into the mix. And then as you move forward, that adoption of 48 volts, as well as ADAS continuing to be adopted across all vehicle types, It starts to come in play, and you see new innovation like steer-by-wire, as well as electromechanical braking, as well as the overall 48-volt architecture. So this increase in dollar content per vehicle, along with share gains from our targeted product investments, is effectively the core of our sustained long-term growth opportunity here in automotive. So I hope that gives you a picture of the opportunity that's in front of us in automotive. Next, I'm going to dive into XEV, ADAS, and 48 volts and talk about how each of those are giving us an opportunity to accelerate our growth. So let's start with XEV. As vehicles electrify, the demand on the powertrain becomes immensely more complex as you're having to manage high voltages from 48 volts all the way up to 800 volts. This opportunity is for Allegro to really participate in. As you move from a traditional gas-powered vehicle to the hybrid electric and battery electric vehicle of the future, our content opportunity grows by nearly three times. You can see here in an ICE vehicle, a 12-volt ICE vehicle, the majority of our opportunity was really position sensors, speed sensors, maybe some in-cabin motor drivers. But as that shift happens to hybrid and battery electric, you see our new opportunities of content coming onto the board. You see our TMR-based angle sensors and current sensors. You see our new isolated gate drivers and even advanced motor drivers. So our technology here excels in these XEV applications. As Mike mentioned, the understanding of our products and how they fit in this system is pretty well understood. I mean, at the end of the day, our sensors are the eyes and the ears of the system, and our power ICs are the brains and the muscles that in here help us to effectively manage the flow of energy. So why does Allegro win in the XEV space? We win because we solve our customers' most difficult challenges. From superior accuracy to power density to better efficiency and overall system-level cost savings. Let me touch on power density for a second. Power density is effectively driving more and more power into a smaller and lighter space. So if I am able to reduce my die size by, let's say, 60%, along with my package solution, be able to triple the output power, that's effectively power density. And it's critical in applications like EV, where space and size and weight are really critical. You can see here on the right-hand side how our products are solving our customers' challenges today. From our Extreme Sense TMR, highest bandwidth solution that basically is used for next-gen power architectures like SICK and GAN, I'm highlighting the 10 megahertz solution here today, and I would probably be remiss if I didn't basically mention that the Electronic Design News just named this the product of the year last week. and maybe I guess since I'm still on that theme let me stick with that for a second because just last week we also introduced the industry's most accurate current sensor and at CES we introduced the industry's most power dense current sensor so some on the team is calling that the triple crown effectively the highest bandwidth the most accurate and the most power dense current sensor on the market just showcasing that we're continuing to lead and drive and strengthen our leadership here in the magnetic current sensor area. All right, our isolated gate drivers are doing in one chip what our competitors do in two. And our motor drivers help our customers spin motors quieter and more efficiently than anyone. You'll see all of this firsthand in the demos that we have set up for you later today. Let's now transition and take a look at ADAS. so ADAS for Allegro is primarily defined as steering and braking you can see as these systems evolve towards fail safe applications like steer by wire our content opportunity grows by nearly two to three times the evolution of ADAS is also showing signs of integrating some of the more power train components like an inverter with the steering and braking developing something that the industry is calling corner modules. So this is effectively having the propulsion, the steering, and the braking all within a single wheelbase. You can see from this that we're positioned pretty well in the steering market today, but as this innovation happens to corner modules or even electromechanical and steer by wire, our content opportunity continues to grow, but we can also continue to strengthen and build upon that leadership that we have in that space. So for these ADAS systems, the analogy is the same. Our sensors are the eyes and the ears, and our power ICs are the brains and the muscles to ensure precise, fail-safe control. We win in these sockets where failure is not an option.

So let's talk a little bit about that.

Fail-safe performance is the name of the game in the ADAS system. Our customers value the safety and reliability that Allegro products bring. All of our products are designed with the highest level of functional safety in mind, driving ASIL-D requirements, which ultimately our customers require and depend on. In addition to our differentiated products, we're able to build trusted partnerships with our customers around these solutions. And that ultimately makes, when these products are designed in, much harder to replace without a ton of effort. And so that's something that Mike called sticky earlier. We'll touch on that a little bit. Let me touch on a couple of examples here on the right-hand side. The angle and torque sensors are delivering up to 20 times lower noise for a better steering feel. You'll see that in one of the demos here today. Our power management ICs help our customers deliver over 50% less bill of materials. and our motor drivers built on our 120 volt process technology is helping to enable compact highly efficient true 48 volt systems so although we have leadership in this space here today we're not standing still as an example we'll be introducing a new solution later this spring that has a level of integration that's never been seen before in this new application so just a little bit of a teaser there. All right, moving forward. One of the themes that we mentioned throughout XEV and ADAS is that shift to 48 volts. Let me touch on that and a little bit about what that means for our customers as well as for Allegro. First, Allegro is driving the shift to 48 volt power, which ultimately is a huge advantage for our customers in efficiency and in weight. On the left-hand side here, you can see some of the advantages to the OEMs. With four times lower current required in comparison to a 12-volt system, the amount of cabling used in the car can be drastically reduced, estimated to be five times lighter in weight. And you can see that just by the depiction of the gauge of the wire on the screen here. That also inherently drives 16 times less heat generated within the car. and ultimately what that means is better overall battery life and extended battery life. So for those that like to have your EVs driving longer distances and maybe have a little bit of range anxiety, ultimately the shift to 48 volts is going to help with that. Allegro is uniquely positioned to win in the 48-volt space because of our 120-volt process technology. This ultimately helps us build 48-volt solutions that are true 48 volts and our competitors are struggling to match that type of performance. Over the past many years, our customers have also lacked a sizable number of components in the 48-volt space. I think that's starting to evolve, but it hasn't been a challenge with Allegro. We actually have an expansive portfolio of 48-volt solutions today, from our motor drivers to our isolated gate drivers to power management ICs and even current sensors that are meeting our customers 48 volt needs today as many of you know 48 volts is not just restricted to automotive we're seeing 48 volts interest from our data center and our robotics customers as they move to that 48 volt backbone and mark will talk a little bit about that later today so that's a look at our leadership across the technology vectors but ultimate validation of any strategy is with our customers. So let's take a look at what our customers have to say. Our success is validated by the deep, trusted partnerships that we build with industry leaders such as the ones here on the screen. From a couple of these examples, you can also see that customers in China ultimately value the same Allegro differentiators that our customers worldwide do. Safety, reliability, and performance. This also makes our products sticky, as I mentioned. And yes, in China, products are sticky. It also reinforces the importance of our China for China supply chain strategy, which Rick will touch on a little bit later today. I also wanted to give you one specific example of what a true customer partnership looks like. At a recent meeting at CES, a prominent customer in the ADAS space came to a meeting prepared, and I mean very prepared to share with us their system level challenges across all of their next generation programs and projects. Throughout that discussion it became very apparent that Allegro's products as well as our ability to innovate and willingness to innovate with our customers gave us, put us in a very good position to ultimately win their business. This open dialogue and discussion and relationships that are built in this way has been something that Mike has fostered over the years And it ultimately gives us a model for how we listen to our customers, how we act with urgency, and ultimately how we win with our customers. I'm confident that in working with Rick, that we can build many more relationships just like these. And it's examples like this that give me confidence that we can consistently outgrow the market across the board here. All right, I'm now going to shift from our leadership across XEV, ADAS, and 48V to what drives, how this ultimately drives sustainable growth for Allegro. So this kind of brings it all back together. As I mentioned in the intro, between now and fiscal year 31, our focus areas of XEV and ADAS will drive a nearly $5 billion opportunity at an 18% CAGR. This reinforces our strategy to align our resources towards those areas where our products are most differentiated and valued in that XEV ADAS and 48-volt space. And I'll also reiterate from previous slides that along with our products and the relationships that we build with our customers, we are poised to grow in focus automotive and in other automotive faster than that combined 8% growth of the market itself. so this is the foundation of our financial outlook I'll show what that means from a revenue perspective so our strategy of focusing on these high growth areas is poised to deliver greater than 10% growth in the automotive space we expect our focus areas to approach probably a 20% CAGR over the next decade I know I've only briefly touched on the other automotive space here too But you can see in that gray bar, Other Automotive is also consistently growing. We see an opportunity as SEC and ADAS get adopted more into ICE, that ICE will also continue to grow and gain share. So that's an important piece of our overall plan. But ultimately, what this means is that we are effectively driving towards greater than 10% growth across the automotive space. We'll continue to expand our existing portfolio while also addressing new opportunities around inductive, TMR sensors, and isolated gate drivers. So based on all of this, I'm confident that we can consistently outgrow the market and drive automotive to be a very big piece of what we do here at Allegro. All right, this brings me to my key takeaways for the discussion today. And in closing, I guess if there's only three things that you remember from the automotive piece of this discussion, I hope that it's this. First, regardless of what happens in the automotive industry from ICE to XEV or otherwise, Allegro is poised to grow faster than the market through content expansion and share Second, we have a competitive edge in technology and in innovation. From our 120 volt process technology to delivering products that meet our customer safety, reliability, and performance, we are uniquely positioned as invaluable partners. And third, our new product investments across TMR sensors, the isolated gate drivers, advanced motor drivers, are already addressing the shift in vehicle architectures, and we are uniquely positioned to win an XEV, ADAS, and the 48-volt space. All right, all in all, the opportunity in automotive is great. I'm excited to be a part of the Allegro team, and I'm confident that we can grow and gain share across this space. Next, I'll turn it over to Mark to talk about industrial, and I can tell you that my products team is equally excited about the opportunity here in the industrial space.

Thank you, Troy. For those that don't know me, my name is Mark Hill, and I've been with Allegro for the past six years. So you just heard about our expanding opportunity in the automotive market, where we have been successful for the last three decades. So today, what I want to show you is how we are leveraging that same DNA of innovation and quality to capture the next growth story, which is the industrial market. So my goal over the next 20 minutes is to focus on three themes that describe Allegro's industrial business. So first, where are we strategically focusing? Where are we focusing our investments to build a powerful and sustainable growth engine? Then secondly, how are we winning in today's fastest growing markets like AI data center? And then how are we building on that leadership for tomorrow's robotics revolution? And then third, I'd like to provide some insight into our targeted high teens revenue growth with elevated margins in this market. So as Mike outlined earlier on, we see powerful megatrends that are shaping the industrial market. First, in this new electrified world, distributed energy from solar farms, EV charging stations, battery backup, and a whole bunch of others presents immense opportunities for power conversion. For Allegro, these are the same fundamental problems of efficiency and safety that we solved for the electric vehicle, and they're now just playing out on a grid-wide scale. our 48 volt and 800 volt product capabilities are perfect to deliver energy efficient industrial solutions now second is a transition to a more automated future for years the world's leading automakers as you just heard have trusted allegro to solve complex motion problems in their adas systems. The core magnetic circuit design from our market-leading angle sensors for these in steering and braking systems, and they've been proven over billions of miles on the road, this same core design is the foundation for the high-precision factory motion sensors that we're delivering today. And as we'll see shortly, this same capability is positioning us to lead in the next frontier of humanoid robotics. And third is the advent of artificial intelligence. AI is in creating an unprecedented demand for power in data centers, and Allegro is at the heart of this solution. But as Mike noted earlier, our relationship with AI runs much deeper. We're not just enabling it in data centers, we're embedding it in our design tools to accelerate innovation, and building enhancements into our future products to create truly smart, edge-sensing solutions. And you're going to see more on that later. So these powerful megatrends create for us nearly a $6 billion industrial opportunity, growing at about 17% annually. Now, to truly understand this strategy, it's key to recognize that industrial is not just a singular market, but it's a combination of two focus markets, namely AI data center and robotics, that drive an accelerated top-line growth, and then a wide-ranging industrial other group that drives higher gross margins and safeguards against market cyclicality. And it's this end-market diversity that's an opportunity to showcase our strengths and leverage the attributes that define Allegro. For example, for our customers, our lead customers in AI data center or robotics, for them, success requires deep technical partnerships. Here, our dedicated engineering and sales teams work hand-in-hand with our customers to define next-generation innovative solutions. for critical applications like energy infrastructure that must run 24 by 7 there is no substitute for trust this is where our customers value our automotive heritage and our commitment to quality and reliability and for fast-moving markets like medical wearables or power tools customers need a partner that can support dynamic supply needs across the globe Our worldwide presence and multi-source manufacturing strategy keep ahead of changing ordering patterns and deliver confidence in supply. So now that we've established the key megatrends that drive our strategy, let's dive into the fast-growing market of AI data centers. The shift towards AI, I think, has fundamentally reshaped data center requirements and deployments. The need for specialized processes has driven a significant increase in overall energy consumption, leading to the development of hyperscalers that require unprecedented amounts of electricity. Now, as Troy mentioned in his automotive discussion, when system architecture changes are aligned with differentiated Allegro content, then the resulting opportunity accelerates beyond simple deployment numbers. As you can see from this image, when the data center architectures transition from traditional to modern hyperscalers, we're experiencing more than a tenfold increase in our motor driver content. And where historically we were just cooling the processes, today in an AI data center, the fan opportunity is actually over-indexed to cooling the power supply subsystems. Together, our fan motor drivers, our high bandwidth current sensing portfolio, and our new isolated gate drivers deliver a $1.7 billion SAM for Allegro, growing at over 20% for the long term. And it's important to note that this 425 average content per rack we talk about here already contemplates a transition to more liquid cooling in some high-end compute trays of the AI hyperscalers. So now Allegro's content growth evolves from first delivering the power to the racks and then secondly cooling the processes that consume that power. So let's start with the power delivery challenge. So offering a wide range of current sensors for this application, our customers confirmed that our devices that support 800-volt operation increase efficiency for their high-voltage DC systems. While our 10 megahertz bandwidth products reduce the size of bulky transformers, and our tiny 3 millimeter square products enable accurate current sensing in the incredibly dense spaces found in the hyperscaler environments. Looking forward, our isolated gate drivers enable new, more efficient hybrid power architectures built on silicon carbide or GAN switches that reduce system size by up to 40%, directly addressing the industry's need for insatiable demand for power density. but remember today the majority of our revenue for data center power systems is with our fan drivers and these are needed to cool the power subsystems and as rack power increases the opportunity for the fan drivers grows accordingly with that power so the second opportunity we mentioned is cooling the processors. And all that processing generates an enormous amount of heat that needs to be extracted. Whether it's 12 volt or 48 volt, air cooling or liquid cooling, our efficient, quiet motor drivers running increasingly high RPM power the processor cooling systems that are critical to keep this multi-billion dollar facilities online. Overall, our revenue in data center has historically been driven by fan motor drivers, which we see will continue to grow into the future. This past year, our current sensors started meaningful production, and within the next two years, the isolated gate driver revenue starts. The move from in data centers to 48-volt and even higher working voltages actually aligns perfectly with the products that we deliver for the electric vehicle, allowing Allegro to rapidly deliver a robust and innovative product portfolio here. So now I want to jump forward a second and move to the market that we believe will define the next decade of technological advancements, and that's in humanoid robotics. Once again, Allegro's content opportunity evolves with the evolution of the system content. Today's household robots have just got a few joints, each with an opportunity for Allegro's sensing and motor drive components. Factory robotic arms have 5 to 10 joints, each with an opportunity for position sensors, current sensors, and motor drivers. So building on our foundation of automotive-grade quality, we see factory automation having an opportunity for us for about a $400 million SAM. But more recently, we see an emerging opportunity into more sophisticated robots, where a wide range of service robots, quadrupeds, or humanoid robots, they're being imagined. Now, interestingly, these robots run typically on a 48- or 60-volt bus for all the reasons of efficiency that Troy mentioned earlier on, creating yet another share gain opportunity with our specific leadership in automotive ADAS, 120-volt-capable processes, and ASIL safety systems. So today, we're hearing that Allegra's core technology is aligned well with the requirements of these robotic systems that can deliver more than $150 per robot to us. Now, to capture this value, our opportunities begin in the larger joints like hips or shoulders where our accurate TMR or inductive sensors provide the critical feedback on force, position, and torque needed for stable, powerful movement. Embedded algorithms within our high-efficiency motor drivers dramatically reduce torque ripple and audible noise, resulting in smoother and more reliable operation of these long limbs. But the key to unlocking the full opportunity value lies in the hands, where miniaturization and integration are paramount. So to consider the size of this opportunity, I invite you, just take a look at your own hands for a second. And consider the number of joints in front of you, each needing motors and multiple sensing modalities. For these robots to be truly dextrous, Allegro is creating an integrated miniaturized chip that combines the muscles of our motor drivers with the nerve endings of many of our tiny TMR sensors. It's a small single package that is truly exciting our customers, combining sensing and acting, and will be sampled to our lead partners in the second half of this year. With at least $150 on every high-end robot, conservatively, this represents a $1.4 billion SAM, growing at over 30%. And yeah, this SAM could be higher. Today, I want to give you a little bit of early insight into a new product area for this market. where Allegro is the exclusive licensee of an advanced force-sensing technology based on quantum tunneling, which is the fundamental principle underneath TMR. As Mike referenced earlier on in his AI slide, this surface-sensing technology enables the hand to manage delicate tasks like grip strength. And when connected through our smart interface IC, it forms an array of intelligent edge sensors, allowing the robot's hand to feel and react instantly. Now, this is very different from applying magnets to a fingertip. This technology is immune from stray fields. It's also very different from capacitive sensing. This technology allows any reasonable material to be used in the hand or the gripper. This level of smart sensing is the key that unlocks truly dexterous motion and will be sampled again to select customers in the second half of this year. And you will have the opportunity to see a demo of this after lunch today. So to be clear, while the factory automation revenue is being captured today, significant humanoid robotic revenue is still years away. But the battle for the architecture of the future is being fought and won right now. So having looked at the focus areas of the industrial market, let's just look at the other industrial areas. And they include things like energy infrastructure, personal mobility, and a variety of consumer and other medical products. The largest opportunity in the other industrial market area is the energy infrastructure. And it's at the very center of the global transition to more resilient power. In solar inverters, our 1 megahertz or 5 megahertz current sensors provide precise measurement for maximum power point tracking, enhancing the energy harvesting efficiency of these systems. For EV charging stations, they're crucial for accurate billing, overcurrent protection, and ensuring safe charging. In battery backup systems, our sensors enable precise monitoring of charge and discharge, vital for extending battery life, but also ensuring overall system safety. And on that theme of safety, our high bandwidth 10 megahertz TMR sensors provide the fastest fault detection on the market, protecting these high value assets from any catastrophic failure. So then finally, let's talk about the engine for capturing the long tail of innovation across the globe, representing a market of about $1.5 billion. It's where we partner with thousands of customers, from the established leaders to the next waves of startups that value our industry-leading performance. These markets allow us to leverage the full breadth of the Allegro portfolio in powerful ways, In personal mobility or in two-wheelers, for example, we're taking our deep expertise in automotive products and applying it directly to power the future of urban mobility. For medical or portable products, our leadership in low-power TMR or hall-effect sensing is enabling a new generation of wearables that enhance health and wellness. At a recent meeting at CES, I saw power tool executives just broadly smiling as they put our motor drivers through their paces and were thrilled with what they saw. And through our catalog business, we empower innovators everywhere, giving them direct and rapid access to the broadest range of magnetic sensing products. So this broad market exposure is actually the perfect complement to our targeted focus markets. It provides a stable, higher margin revenue stream and gives us a valuable window into emerging trends that may define tomorrow's growth opportunities. It's what makes our industrial portfolio so powerful and durable. So let's bring this all back together again then. As you can see, we're positioning ourselves to capture a share of nearly a $6 billion market driven today by the growth in AI data center, factory automation, energy infrastructure, while the future is accelerated by robotics. But what makes this opportunity truly compelling for Allegro is the quality of the growth. First, it's incredibly efficient. Because the core challenges in the industrial market mirror those of the automotive market, we achieve significant R&D leverage. We're building on our existing world-class IP to create a new revenue stream with a higher return on investment. And second, this market structure is accretive to our margin model. The diversity of industrial customer base generally supports a favorable pricing environment for Allegro where customers are typically ordering product in the tens of thousands rather than the tens of millions that you might find in the automotive environment. And we're able to leverage our high-volume automotive manufacturing capability for this but often make reductions in component costs through bill and material changes. So overall, the industrial business generally enjoys elevated gross margins and stronger profitability. So what this chart represents is a higher growth, higher margin business that perfectly complements our automotive leadership. So you've heard from me about the values that we bring to our industrial customers, and perhaps it's time, therefore, to hear from them directly. Whether it's reducing noise in a data center liquid cooling pump, or improving efficiency in a server power supply, or reducing system footprint in industrial automation systems, our innovative products resonate with these industrial customers worldwide. So what does this mean for our financial outlook? We see a clear, multi-phased industrial strategy built on markets where we believe we can effectively compete and can deliver to our financial commitments of a high-teens revenue growth at elevated margins. In the near term, our market growth is powered by our leadership in AI data centers. Across all industrial markets, our advanced current sensors, motor drivers, and game-changing extreme sense TMR technology are winning designs today and creating a powerful revenue stream. Looking ahead, that market momentum is supercharged by winning the next wave of innovation in robotics. And additionally, our investments in isolated gate drivers, inductive angle sensing, and these highly integrated robotic hand solutions will become significant new revenue engines layering on top of our existing growth. Margin growth is enabled by reusing our automotive core technology, delivering higher ROI, and by the pricing and costing favorability that we typically enjoy with this customer base. Through Mike's leadership, we have now an updated, clear, and executable plan. We're driving near-term results with our existing leadership positions while simultaneously investing in the next pillars of growth, ensuring higher margin, high teens growth trajectory for years to come. So let's go back to where I started from. Today, I look to deliver a clear message. First, the industrial market is a core strategic growth engine for Allegro with well-defined focal points. Second, we're making investments to extend that leadership from the data center and the factory floor into the robots that will define the next decade. And then third, we are leveraging our automotive expertise and building a higher growth, higher margin business that will be a powerful driver of value for years to come. Thank you. With that, I'll hand over to Rick to explore our new sales strategy. Rick.

Thank you, Mark. And good morning, everyone. And thank you for the time this morning. I'm Rick Modermo, and I am the new head of sales here at Allegro. I brought with me my speaker notes because Jalene said if I'm not off here in 15 minutes, she's coming up and getting me, which nobody wants to see, especially me. So next month is my one-year anniversary here at Allegro. When I joined here, I brought with me about 30 years of semiconductor sales experience. Over that 30 years, I've not made a lot of changes, not a lot of moves from company to company. But when I have, I've looked for companies that bring three things. number one solutions that are important to the customers we serve in either solving their problems or unleashing their products it's really important to be important to the customers you're serving number two inside the company a culture that truly puts the customer at the center of everything we do. And then number three, a strong, experienced leadership. Hopefully by the end of today, you'll agree with me that I do feel we have a really strong blend of all three here at Allegro and driving our growth. Over the next 10 to 15 minutes, or under 15 minutes, I'll discuss the strategic changes that we are making to the sales organization, probably the biggest change that we've made in my first year, and we'll talk about what drove those changes, and hopefully which will accelerate our growth going forward. We'll talk about how we're applying our technology to the high growth areas, and how those growth areas are being driven by the megatrends that Mike spoke to in the beginning of all this. I'll provide some color on our continued momentum in China, and then lastly, I'll give you look at our sales pipeline which shows that it's robust and growing through the end of the decade and more than drives the growth that we've been talking about here today our entire go-to-market strategy is driven on deep customer intimacy now it sounds like a catchphrase but customer intimacy true customer intimacy is more than just customer relationships let me give you an example of this that just played out this past month this past month we had one of our top customers join us at our offices they flew in their engineering and purchasing executives and we spent time with our leadership for hours discussing their challenges going forward and how we may help them get through those and unleash a new product for them. In those meetings, we created a new product that's going to help solve their problems. That product will then be unleashed to all customers going forward. That's what customer intimacy looks like in action. Our most successful top-selling products are not off-the-shelf components. In a lot of instances, it's that co-collaboration with our customers that generate these products, and then we make it available to all. This collaborative process creates incredibly durable and sticky products, which then translates into resilient predictable revenue going forward and lastly it creates a strong competitive moat against our competitors I've led this sales process in the three previous companies that I worked for and all it really takes is making sure that we have the correct people the right sales structure and a very planned and purposeful sales approach all this focus on the customer really led us to a question our customers are not organized by geography so why should we be this insight was a catalyst for a pivotal shift that we made in our sales structure as you can see here as customer feedback is truly at the center of what we do, we reorganized our sales team to better support this. We moved away from a geographic model to one that is focused on end markets, both automotive and industrial teams. This allows for deeper expertise and a more focused sales approach to each. We are taking the proven playbook that has defined our decades of success in the demanding automotive segment and we're applying those same disciplines and methodology now more purposefully against the industrial segment we're maintaining a sharp focus on automotive this actually increases our focus to those that are calling on the automotive segment and strategically attacking the significant opportunity that mark just spoke about from the industrial landscape. This isn't about trying something new. It's about leveraging that successful formula to capture new growth. To accelerate our reach and our growth, we deploy a purposeful two-prong distribution strategy. We have a deep global partnership with companies like Arrow and Future that helps us drive scale and logistics while simultaneously we are leveraging specialty distributors like DigiKey and Mauser to help us penetrate that broader industrial market, giving us access to thousands of customers and emerging applications. This comprehensive channel strategy ensures we are capturing growth at every market of the level of the market so as you've been hearing a lot today the most powerful megatrends are shaping the future really work in our favor precision sensing demand is rising which is great news for us driven by ADAS robotics and factory automation. All of those demand precision sensing. The exponential growth in data center demand extreme reliability and efficiency. Other perfect areas for us to address and help our customers address. And then lastly, the electrification of all things requires efficiency across all markets. By aligning our market-focused teams to these trends, we are positioned to unlock the mid-teens revenue growth that you've been hearing about today. This growth is built on a stable and well-balanced foundation. As you can see from this slide, our sales are geographically diverse. This balance reduces risk. risk. Furthermore, we're not overly dependent on any one customer to drive our revenue, which provides another layer of stability. Our channel mix is evenly split between distribution and direct sales, giving us the flexibility on how we go to market around the world. Let me double-click on this 28% of our business that is in China. 90% of our China business is safety-critical automotive or automotive powertrain. 90% of our business. Both of those applications are extremely sticky. i'd also like to point out that our design win rates in the in the region are accelerating as well this past year our design wins in china grew 35 percent from the year prior so the combination of the accelerating design wins and the stickiness of our products and the applications we serve give us high confidence in continued growth in China? Looking forward, why am I confident that growth can continue? It really comes down to two simple thoughts. Number one, their investment strategies are in direct alignment with the core of what we do. Their focus on data center, robotics, ADAS, XEV is everything that you heard today, and it's what they're focused on. And number two, we have a strong China for China supply chain to service this growth. We've already established our back end in China, and our products are ramping. We're currently working with partners and customers to approve this process. Our long-range plan is to do a broader product rollout that are fabricated on wafer technology from China as well. So our overall China for China strategy is built on three key core pillars. First, it's local innovation and support. We have built a strong local team of application engineers and business development leaders who are working hand-in-hand with our China customers in co-developing solutions. They're not just selling parts. They're co-developing solutions and providing real-time support, which gives us a significant speed and relationship advantage advantage from our competitors who are managing this space from afar. Second is local partnerships. Our strategy is to be deeply embedded in the local ecosystem. We are aligned with winning domestic OEMs who are not just leading within China, but are now exporting those innovative vehicles to around the world. So our success will grow as their success grows. And third, I've already mentioned our local supply chain. We are actively qualifying local Chinese foundries and OSATs. This is not just about cost reduction. It is about building a resilient domestic chain, supply chain, and insulating us from geopolitical friction. It also helps us to serve our Chinese customers more effectively. Now, this brings me to probably the most forward-looking metric and something I live every day, which is our sales pipeline. This chart here shows you our current identified and active opportunities that we are working with our customers. As you can see, they are growing robustly through the end of the decade. Most importantly, it more than supports this mid-teens revenue growth rate that we've been talking about, giving us high confidence in our ability to meet or beat these long-term goals. Critically, we have the pipeline, and now we have the sales structure to convert that to revenue. We've been talking a lot today about the industrial market and how this offers a considerable growth opportunity for us here at Allegro. Our success is validated by the company we keep. In the industrial space, we directly partner with market leaders like Delta, NIDEC, and Lighton, while our channel partners are supporting the critical, broader industrial market. A positive example of this success over this past year on industrial is a greater than 100% increase in design wins for our data center business specifically this past year. Another positive reflection of this focus played out this past January at the CES show. Our overall customer meetings were up year over year, but more dramatically, 50% of those meetings were with industrial customers looking to solve very complex problems. That's kicked off a lot of follow-up meetings where we're going to collaborate with those customers to solve their problems. And in automotive, our advantage is built on three decades of trust, along with the scalable solutions that Troy mentioned, from ICE to EV. We have collaborated with, or are designed in at, the top worldwide OEMs and Tier 1s. This is a testament to the already established customer intimacy that we have in automotive. Early in my presentation and throughout this presentation, I've mentioned to you the criticality of this collaboration and customer intimacy. A great example of this played out recently with one of our top tier ones. Our work with them led them to a major OEM win for their application. It also spawned a series of products for us. and now those products are available to all customers around the world. The auto industry has changed or will continue to change more in this decade than it has in the past 50 years, and we are aligned to support that growth. Lastly, our customers consistently praise our collaboration and technical solutions, noting how we help them get to market faster and meet stringent requirements. This is backed by industry recognition with recent awards for our technology, service, and partnerships with the leaders in automotive, AI, and data center markets. So in summary, Allegro has a clear, focused go-to-market strategy. We are aligned with durable megatrends, our business is built on a stable, balanced foundation, and our sales pipeline confirms a good growth trajectory. With that, I'll move this over to the financial piece, which you're probably all most interested in, and that's our CFO, Derek.

Thank you, Rick, and good morning, everyone. and thank you for coming to Boston in mid-February. Beautiful weather. For those of you who don't know me, I'm Derek D'Antilio, the CFO here at Allegro. Been here about five years at Allegro, and in my five years at Allegro, I've certainly seen the company evolve quite a bit. I joined a year after the IPO, and in those five years, I've seen the final transition from an IDM to a completely fabulous company. We've become a completely independent company for the first time in over 30 years. I've watched the transition of our leadership team that Mike talked about. And now I'm more optimistic than I've ever been. And as you've heard today, we have very large opportunities focused on some very exciting markets within auto, data center, robotics, and a lot of other areas within industrial that are in our greenhouse. So my agenda today, I'll start with our historical financial performance, which gives a little bit of a basis of where we're going in the future. We've actually been there before with some of these metrics. I'll recap the SAM that you've heard about today, both in automotive and industrial, and what it means in total. I'll discuss some of the recent investments we've made over the last three years that set us up well for scale and value creation. Then we'll spend the bulk of our time on the future. The target financial model that Mike introduced earlier today, and very importantly, the bridges of how we get there from a gross margin and operating margin standpoint. And finally, I'll close with our capital allocation strategy. So our financial priorities at Allegro are quite simple. There are four of them. First, we're focused on accelerating the pace of revenue growth. As Mike and the others have talked about, we're now targeting mid-teen sales growth. That's a pretty significant upgrade from our prior model of low double digits. Second, we're committed to continued gross margin expansion. And to me, this is a direct reflection of our technology and the customers value it and our operational execution. Third, we expect to use significant operating leverage to help drive earnings power and free cash flow much faster than sales growth. And then fourth, we'll reinvest that free cash flow in growth opportunities, both organic, potentially inorganic, and potentially select share repurchases, all while maintaining a very, very strong balance sheet. First, let's look at our historical performance. From our IPO year through fiscal 24, our sales grew at a double-digit sales pace, and our earnings grew more than twice as fast as sales. Then, like the rest of the industry, we hit the inventory correction. It was painful, but we acted decisively and early and took actions for our customers and our business, and as a result, we were operating profit and free cash flow positive even at the trough. We've also learned some lessons and adapted our business processes, and I believe now we're in a better position for sustainable, profitable growth going forward. And now you can see here, the reacceleration has begun. And FY26 is shaping up to be a very, very strong recovery year. Sales are projected to grow by more than 20% at the midpoint of our Q4 guidance. And EPS is projected to again double year over year. The key takeaways here are, one, we have a history of above market growth in sales. Two, our team has now navigated through both a prolonged down cycle and up cycles. And three, operating leverage has been and will continue to be a very powerful earnings multiplier. So let's talk about priority number one, sales growth, accelerating sales growth. As you've heard a lot about today from Mike and the others, we're well positioned in large and growing markets. As you can see here on the chart, our total market opportunity is nearly $14 billion. And these markets are growing at a healthy 12%. But the real story is where we're focused. We've targeted the highest growth segments of automotive and industrial. And within auto, XEV and ADAS are projected to grow a combined 18% CAGR and a nearly $5 billion SAM. Within industrial, the focus markets that you heard about today include some of the fastest growing markets like data center and robotics. Those are projected to grow at a combined rate of 27%, the market. these focus areas combined represent about eight and a half billion dollar opportunity growing at 21 percent and as mike talked about we've realigned our resources we're making investments in growth and research and development and sales to ensure we continue to outgrow the broader markets moving to our second priority and a little bit of history here and one that i'm particularly focused on is improving gross and operating margins. As you can see here in this chart, before the inventory correction, we consistently improved both gross and operating margins. From our IPO in fiscal 21 through fiscal 24, our average gross margins were 55% and our average operating margins were 24%. The inventory correction was tough and steep for Allegro, the way we manage with our customers and inventory. And I believe many of the changes you've heard about today make us stronger and more resilient going forward. And now we're projecting to exit fiscal 26 at the midpoint of our Q4 guidance at 50% gross margin. That's already 440 basis points above what it was one year ago. Demonstrates the leverage on the gross margin side. And in Q4, operating margins are projected to be approximately 16%, nearly double trough levels, again demonstrating that leverage. Now turning a little bit to operating expenses and a key element of how we get that leverage. We've had a very disciplined approach to OPEX management while making investments. Over the last five years, we have invested both in organic growth and inorganic growth. And a significant portion of these investments have been really funded through aggressive, what we call aggressive cost reallocation. Taking costs from areas that are not growing or areas that are cash positive and moving those into the growth areas. From an R&D investment standpoint, we're funding the leadership and that's historically average about 15% of sales, but we didn't cut that in the trough. That's extremely important that we continue to fund that leadership and technology that drives our business. And OPEX has historically averaged about 30% of sales. Within R&D, as Mike talked about, we're focused on both releasing compelling new products but also achieving significant cost reductions of upwards of 50% on existing products. And over the last several years, there's been a real focus internally on R&D efficiency. In fact, it's been a key element of our incentive compensation plans, and this focus has yielded results and improvements in cycle time and allowed us to more than double the number of product releases in the last five years while increasing OPEX at a rate of about 7% a year, inclusive of acquisitions. We've also integrated two acquisitions of technology over the last three years, largely into the R&D organization. One, the TRMR that you heard about today, and the second one, the isolated gate drivers. Looking at SG&A, we continue to be very disciplined here. And again, making reallocation of cost to fast-growing markets and regions within sales. and our G&A has actually been about flat for five years since the year of our public offering by focusing on efficiency, leveraging a new Philippine Shared Services Center, a center of excellence, and now starting to automate and use AI. And again, we have the SG&A in place to do well over a billion dollars. We were there two years ago. Let's discuss our business model and our manufacturing strategy. we have a fabulous business model. We believe this fabulous model and some of the investments we've made over the last three years really in our Philippines facility pave the way for scale and significant operating leverage going forward. Our global footprint includes partners that give us the capability to support multiple supply chain lanes for our customers. On the front end, we work with multiple wafer fabs running both standard and proprietary Allegro processes in the U.S., Taiwan, and other countries. And for assembly and test, we also have multiple sources. We work with market-leading OSATs in Asia, and all proprietary packaging and almost all test is done in our own facility in the Philippines. Our experience has been that having in-house tests really supports better customer quality and customer service and cycle times to your customers. and as Rick mentioned, specifically for China which is about a quarter of our shipments we're executing on our China for China strategy which began almost five years ago this is not new we've qualified local OSATs in China and we're already shipping from those OSATs we're also qualifying local fabs in China and again as Rick mentioned this isn't just about cost, although that's a benefit It's about building a resilient local supply chain in China to give our customers confidence that we can continue to deliver regardless of geopolitical friction. The good news, as I said, much of the investment's already been made that's required to accelerate our sales and gain the operating leverage. As you can see here, over the past four years, we've invested approximately $400 million in capital, largely in our back-end facility in the Philippines and also in R&D. And for the past two years our CapEx has been now at or below our target of five percent of sales really on growth opportunities and maintenance CapEx. These investments can now support up to about 1.2 billion dollars in sales and that's not a hard sailing it's based on mix. We've also invested in focused M&A around technologies that fit our profile. We've invested in TMR and isolated gate drivers you heard about today. These technologies really bolster our market-leading sensor portfolio with the TMR and give us a compelling opportunity in the fast-growing high-power market of data center and automotive with the isolated gate drivers. And all of these investments that have already been made mean we're well positioned to deliver strong return on invested capital going forward in value creation for all of us now let's turn to the financial model this is our vision for the next three to five years we're targeting mid teen sales growth as you've heard by focusing on the fastest growing segments of the market coupled with making investments to continue to gain share by releasing these new products like TMR, isolated gate drivers, 10 megahertz current sensors. We're targeting returning to above our historical average of 55% gross margins. And I should mention, this is not an absolute ceiling, but I believe this is a very credible target. And on the next page, I'll walk you through the bridge to get back above these numbers. We have a very defined path with identified projects to get back to the mid-50s and once we get there, we'll identify opportunities to keep going. We're maintaining our targeted operating margins at or above 32% driven by operating leverage. And putting it all together, we're targeting earnings per share of more than $2, which is four times FY26 earnings per share. And finally, we're targeting free cash flow of 20 to 25% of sales. We believe this model provides a path to significantly more earnings power than our prior model. Now turning to the gross margin bridge. How do we get back to that mid-50s? It comes down to three things. The biggest piece of it, the biggest driver, is operating leverage. As our sales grow, because we've already made the investments, we get more leverage from our factory in the Philippines and our fixed costs. The fixed costs have actually been flattish for the last three years. Second, we continue to make opportunities for factory efficiencies. We're constantly driving improvements in automation, equipment utilization, and reductions in cycle times. That has both benefits for gross margins and reductions in our on-balance sheet inventories. And third, a part that I talk a lot about is optimizing our variable contribution margin, or what many call product margin. The variable contribution margins for Allegro, since our IPO, have averaged a healthy 60% to 65%, the drop-through. So VCM does include a lot of these factors you see here on the screen. And those can move that towards the higher end of that drop-through range or the lower end of the drop-through range. Of course, as Mark talked about, our goal is to continue to drive a higher mix of industrial products, which historically have had a significantly higher gross margin profile that are automotive products largely because of the volumes that our customers are buying in and because of the manufacturing requirements. Release more feature-rich products such as the TMA, the gate drivers, some of these current sensors you'll see later today in the demo rooms. A sharper focus on cost innovation. And this is something that's particularly endearing to me when we're looking at things like 30, 40, 50% reductions in the bomb cost. For example, converting from gold to copper wire and significant die size reduction with things like TMR. And finally, there is a cost benefit to ramping our China for China supply chain. We will do all that with acknowledging that we will have to continue to manage ASPs and particularly on the auto side, continue to deliver productivity gains in the form of ASPs to our customers. And this is a target and a bridge that we're very confident in. Now turning to our third priority, leveraging that to take advantage of the operating leverage to continue to get that 2x drop-through on EPS compared to sales. As I mentioned, from our IPO until the year of the inventory correction, our operating margins averaged 24%. During our trough year, the inventory correction, our operating margins dropped to just below 10%. And as you can see, we're expected to exit FY26 back at 16%. And again, looking at this operating bridge, you can see most of our gross margin improvement is driven by volume, which could lead to 4 to 8 percentage points on operating margin. We expect operating leverage on the OPEX, as Mike talked about growing it at inflation, to add another 10 to 14 percentage points to operating income. These two things result in powerful operating leverage and, again, that 2x EPS growth compared to sales. Finally, turning to our fourth priority is our capital allocation. First, I should mention, we're on pace to generate record-free cash flow in fiscal 26. And our top priorities for the use of that cash is investing in growth. will fund R&D and sales efforts that continue to give us leadership in the markets that we talked about today, particularly the fastest-growing markets that we want to be leaders in. We will pursue M&A, and we have done that in the past, with very selective criteria. For M&A to work for Allegro, it has to be complementary to our technology. For example, TMI was very complementary to what we already do in magnetic sensing. It has to accelerate growth in one of those strategic focus areas that we talked about today. And finally, of course, it has to be accretive to our financial model in some way. We also plan to maintain a very strong balance sheet and balance debt pay down with liquidity. We've already reduced debt by $165 million over the last two years, and our leverage ratio, our net leverage ratio, is below 1 to 1 right now. finally we may do opportunistic share repurchases if they make sense for our shareholders and before we move to Q&A I just want to recap some of the key takeaways from today one Allegro is a technology leader we compete on specifications not on price we're number one in magnetic sensing and have leading-edge power ICs we're upgrading our sales growth targets from low double digits to mid-teens. That's a significant upgrade. We plan to extend our technology and market leadership with the leading-edge technologies of TMR, gate drivers, and some of the current sensing opportunities you've heard about today. Our R&D and sales engine are squarely focused on these growth markets, and we're reallocating our resources there. And last but not least, the new target financial model provides a path to more than $2 of EPS, a significant upgrade to the earnings power compared to our prior model. With that, I'll turn it back over to Jolene for the rest of the program.

We do have two team members here on the other side of the room, so if you could please raise your hand if you have a question and wait until you get the mic to ask your question so everybody can hear it. Thank you.

First, hi, I'm Gary with Loop Capital. I appreciate the thorough walkthrough of how you're going to gain market share, but I wanted to ask about share gain opportunities on the magnetic sensing side, which is over 60% of your revenue. And I guess my pushback is that we already have medium market share, highly fragmented markets, and let's call it 15%, 16% market share. Your focus is on margin creation. So, you know, given those constraints in the market structure, you know, is there some sort of natural resistance to additional share gains, no matter, you know, how much you invest organically? And related, is there an opportunity to, you know, consolidate the market in what is otherwise a fragmented market?

Great. I am live, right? You can all hear me? So, thank you, Gary. So, you know, first I'll point out we have actually managed to gain share in magnetic sensors from the time of our IPO to today. So we've been demonstrating an ability to do that. We do it in various ways. So I would say when I look at the future of magnetic sensing, there's key drivers in angular position sensors and in current sensors. This is the area of the technologies where they intersect with XEV, ADAS, Robotics, Data Center. And we've been doing a lot of investment. We've demonstrated an ability to have unique, truly unique, market-leading products. The 10 megahertz TMR current sensor that I spoke about, there isn't another very fast magnetic sensor on the marketplace today that I'm aware of. And it's starting to get designed in at a very positive clip into data center power supplies, into EV applications. And that's a model we step and repeat. Through TMR, when I mention rotary position and fast current sensors, we will leverage that technology to bring truly unique products to market. If you look at the number of competitors we have for Hall ICs, I don't actually know the number, but it's something north of 12 competitors, I think. But when you go into the TMR space, you're in low single digits. And it's through all these dynamics that we feel we can continue to gain on the magnetic sensor side.

So, looking at the sales funnel going from about $2.5 billion over five years, that looks like a 20% CAGR if I do my math right, so like you said, well ahead of the mid-teens revenue guide. Could you talk about what would have to happen for revenue growth to end up at the mid-double digits guide versus what has to happen for things to come in better than that? Is that 20% already being under?

I can kick that off, Rick, and you can add your expertise. You know, we showed the funnel, the pipeline for a reason, which is to show we have the opportunities to deliver the mid-teens growth. And Rick, more so than even myself, has lived in this world of managing a funnel where you want to have the opportunities there to have upside potential. Good things happen, bad things happen in the development cycle. To get back to your question, you know, within that funnel, there are probabilities on certain programs. The types of things where we can kind of push and pull win rates up or down, you have market-leading products come to market maybe a little earlier than you expected, competitive positioning, another competitor might fall down. These are the types of things dynamically that can happen to boost that win rate or push it down. What I look at, you know, I'll give you an example for our isolated gate drivers, lots of opportunities in that funnel. We are working extremely hard as a global team. We've put marketing people, engineering people in all corners of the globe to drive the win rate on a technology like that up and to the right. And if we accomplish higher than model win rates with this emerging technology, that's the type of thing that could push actual sales above the green line in that graph and closer to the top of the bar. What did I forget, Rick?

I think you're right. I think the only thing I would add to it, which is what we talked about in the presentation, is this is the main reason why we are having the change in our organization. So instead of one individual having to call on automotive one day and industrial next, we're having each individual team get a deeper expertise in the applications that the customers are working on so that we can improve those win rates across both.

And maybe one more. You asked a good question. Take the humanoid robotics market, which I'm a firm believer in. And we definitely have the technology that that market wants. If that market were to come in faster than our assumptions, if opportunities now turned into real revenue in the humanoid market earlier than expected, that would be the type of driver we could envision as well. We have questions biased heavily to one half of the road.

Tom, I'm with Barquis, thank you guys for putting this on, I appreciate it. Two questions, one is to the end of your response there, just on humanoids. How much of that is baked in to the long-term growth trajectory, and when do you see that inflecting? I don't know if you have revenue today coming from humanoids, but when do you see that elbow in the curve? And then the second is just on the gross margin walkthrough. Clearly, price is the only thing that's moving against you. You look kind of like the high single-digit impact over the next three to five years. Is that a steady cadence of pricing headwind, 2% to 3%? Or are you making any makeshift or anything that's changing that's resulting in that?

That was a good twofer. You remember the second half because I'm going to forget it. So in humanoids, you know, we, every market leader, we're under NDA, so we can't talk in any great depth. But what we've been seeing is we do see companies who are saying, hey, in the next 12 to 18 months, there are companies saying that's when we'll have 10,000 or let's say low tens of thousands of robots. Then there's sort of two camps in the robotic space. There are some very bullish companies, you know who they are, saying soon there will be millions of robots sold, soon being within a three-year window. There's also some conservative companies. What we modeled in our numbers was a more conservative case. We didn't want to go to the, when we modeled the SAM, we didn't go to the most aggressive SAM growth model we can find. We're not even using the most aggressive dollar content model because everything's dynamic. What we know is there will be a tremendous amount of sensors and motor drivers in humanoid robots. We know that over time there will be many, many robots sold, but I think it will start to become more material revenue for Allegro in roughly a three-year period. To your question about are we already selling? We're selling into advanced robots and have been for years. It's meaningful revenue. We're not disclosing the amount right now, but it's meaningful revenue in factory automation, et cetera, et cetera. And we have secured recent wins with leading humanoid companies as well. And we're in a little bit of that dance together just to see what forecasts look like over the next 12 to 24 months.

And Tom, on your second question, on the financial model, I encourage you to look at it in totality. We're increasing our sales growth rate to mid-teens from low double digits, right? And there's some trade-offs that happen there, particularly the geographical mix. But even on the gross margins, that 55% is certainly not a ceiling. It's our near term, three to five year target. We have expectations of getting there sooner, and there's defined path, and I feel really good about the credibility of that. A lot of it's driven by volume, of course, leverage, we've already made those investments, a significant amount comes from leverage. We continue to make factory automation improvements, and we're going to continue to see, I think they're going to see that accelerate. And on the VCM part, the question on your pricing, you know, as we saw the last couple of years, pricing came down last year, more frictional than it has in the past. We talked about our earnings call a few weeks ago. We expect this year's pricing environment to be much better. And the productivity gains our customers typically expect are that low single digits. That was different last year, so we troughed on the gross margins. And if that gross margin, the VCM, came in a higher mix of industrial products, bigger cost advantages on our BOM side of things, we could come in higher than that 60% to 65%, which would drive higher gross margins. So it's certainly not a ceiling. It's a very credible target, and there's actually defined projects internally to get to those mid-50s. Over here, Vanessa.

Yeah, it's Joe Moore from Morning Stanley. Just to follow up to that last question, there was a time when you had contemplated 58% gross margin in your five-year outlook, and you've been at 56% before. What is the difference now? Is it mix? Is it the sort of volume in different areas? Is it price? And then just how big a variable is price when you think out five years? Is it like one or two points? Is it bigger than that?

Yeah, it's a great question. I remember at our last analyst day, almost exactly three years ago, we were actually that quarter, we topped 58.2% gross margin on a non-gap base. We only did that two quarters. And I said to people at the time, and people questioned whether or not our target was too conservative, being 58, we were kind of already there. And what I said at the time, which is true, is we were really at about 56%, right? And a lot of things are structurally different now three years later. One is certainly price. That was the most elevated price has been in the automotive market probably ever in semiconductors. Two, input costs have not come down, right? Input costs continue to go up, whether it's commodities, gold, energy, labor costs. Those things don't come down. So while price comes down, those things don't come down as fast. So it's fundamentally a different starting point. That said, we feel really good about that bridge back to the mid-'50s, a lot of it's leverage that we talked about. It is a grind to get back there, and I feel really confident in getting back to that mid-'50s. And those are really the differences between what we looked at three years ago and now.

Vijay from his little idea. Just a quick question on the industrial side. I think looking at the 17% growth, it looks like industrial, you've got 35% of your mix by 2031, let's say. Within that, what do you see data center and robotics as a mix? And just a second part to that, you mentioned geographic mix would change as well. Just wondering what the mix would be between China, because China seems to be growing a lot faster for you. I think you mentioned 35% growth in the past year. So, thanks.

Thank you. So, when we think about industrial growth, both in the short, medium, and long term, we're modeling the bulk of the industrial growth coming from the data center. And that's for a couple different reasons. You're all aware of the very high growth rates for capital spending in the data center, but we also have the dollar content growth story on top of that. So, as we look at the industrial business growing in the high teens, biggest portion will be from the data center. Like I said, robotics starts to kick in in about three years. And when you look out about five years, the robotics piece starts to become certainly more meaningful, still would be smaller than the data center piece. Oh, geographic mix. When we think about the geographic mix, you know, you heard a lot from Rick when he was talking about everything we're doing to maintain positive momentum and growth in China. So we are confident in the growth of the China business for all the reasons that he mentioned. I do think that over time, as you start to look at data center growth and some of the robotics growth, I would anticipate that the percentage of our revenue from China starts to come down more naturally as there's more growth outside of China. So there will be a slight shift there. I'm not projecting that to be from share loss or things like that. I just think some of the dynamics and some of the main growth vectors will happen a bit more outside of China for us.

Mark?

Mark's been raising his hand dutifully.

I think you're ready, Quinn.

Oh, Quinn. You had it. Quinn from Needham. Thanks for hosting that presentation. I want to follow up on the sort of pricing question. As you guys highlighted in both of the targeted markets, you've got your focus areas and sort of the other areas, and as you makeshift to the focus areas where I assume you have a higher mix of sole-sourced or proprietary products, does that change the pricing dynamic over time? Could you see less pricing pressure as the focus areas become a higher percentage of the mix over the five-year model?

Yeah, thanks, Clint. So, you know, certainly because I mentioned how we're shifting R&D spending to the focus areas. So that's where we're going to have our most differentiated products, most value-add products. And as a result of that, typically what we found when we're in that type of mode of innovation, there is less pricing friction. We have more pricing power in those markets.

so that would that would be the expectation okay great and then um i think mike in your presentation you talked about some new end markets being 100 million dollar opportunities wondering if you might be able to comment on uh product opportunities such as the isolated gate drivers do you see that becoming a hundred million dollar product category say within the the three to five year financial

model that you set out today that is a very fair question quinn yeah so we we set this threshold of $100 million, sort of to say, hey, this is something that would be meaningful for the company. So it's a good point. Yeah, we would expect to see the isolated gate drivers getting above $100 million within a five-year window.

Thanks for the informative presentations. Really appreciate it. Mark Lipatis from Evercore ISI. A question for Derek. You talk about maintaining a strong balance sheet. How do you quantify that? is you think about a net leverage ratio you target or a cash that you want to keep on the balance sheet. A question for Mike. As you are, you know, expanding the foundries for manufacturing your chips, how do you protect your intellectual property? It sounds like, it seems to me that you could be exposed to risk of your intellectual property being taken. And then for Rick, the data center business is up a lot. you've been doing sales for a long time like how do you how do we know that there's not double order and everybody might talked about the capex numbers they're through the roof and and there aren't real supply chain constraints and you know is it just the simple truth that semiconductor companies can never figure out that there's double ordering or is like like how do you manage that

process thank you yeah mark so in terms of maintaining a strong balance sheet There's multiple ways to define it, right? As I talked about, we are on track to have a record-free cash flow year in FY26, so that's a good starting point. The second piece is we've paid down a significant amount of debt, $165 million that we used to buy the Crocus business, that we used to buy back some shares two summers ago at $23.16. We've paid $165 million back, voluntary accelerated repayments. And the reason we did that is for two reasons. One is it's a creative DPS to do that, and two is it moves the enterprise value right from debt holders to all of us in this room we'll continue to balance those two things right now we're sitting on cash of about 160 million dollars which equates to one metric of liquidity of you know give or take six months of opx plus capex we have a 250 million dollar completely undrawn revolver so if you're really good on liquidity side we'll continue to probably make voluntary debt repayments and as we've talked about we'll continue to look at both internal investments but a lot of that comes from really aggressive cost reallocation and look at inorganic opportunities that really really fit well right things like the tmr business things like isolated gate drivers that fit with our technology we can sell them to our existing customers our team knows how to sell them and it's accretive to our financial model so it's all those things in the mix

so the second question was wafer tech ip yeah so you know when we look at our ecosystem as we've stated publicly many times, the bulk of our wafers are coming from a single partner in Taiwan and another partner in North America. And in both cases, we have installed our own proprietary technology in both of those locations. And I should point out, we get a lot of questions not yet today. Do we see 8-inch capacity becoming a problem going forward? We do not see that with our partners. So that means we don't have to go to too many other partners to get our capacity, and these two partners that we've worked with have protected our IP fantastically over the decades we've been working with them. If your question was in relation perhaps to working with new fabs in China, an interesting phenomenon exists in automotive where the bulk of our automotive revenue, and we disclose perhaps for the first time today that 90% of our revenue in China is automotive, it's actually on older parts. So we are moving process technologies to China that are quite old. They're quite old, but they represent most of the revenue in the automotive space there today. We don't consider that particular process node to be a very high risk because it's an older node. We're being very selective that we're not moving the truly critical new technologies to new partners that we don't have a deep relationship with.

I would hit on the data center and is there double ordering?

So like we talked about in my presentation is, and this may sound cordy, but let me explain, which is it gets down to the customer intimacy piece. So each of our main providers into the data center, we have very formalized QBRs. A couple weeks, we're all flying out there to meet with three of them and get engaged into some very good conversations about their demand and what's driving that demand. and it really works when you're face-to-face versus just taking on orders, number one. Number two is we're still feeling across the business delinquencies against that demand. And when you start looking at their ordering habits, they're having delinquency to those end customers. So it's really working that entire ecosystem to understand where the build rate and who's ahead and who's not. And right now, based on these QBRs that we're having face-to-face and based on the entire ecosystem, we still feel people are behind the demand, not in front of it.

Hi, Sam from TD Cowan.

You guys mentioned you still have an appetite for M&A. And based on this, Sam, that you're taking aim at and the two acquisitions you've already done in the last few years, I don't see any obvious gaps in the portfolio. So is there a technology that you'd note that that's an obvious win for you guys that you, you know, selectively would be interested in buying?

Yeah, it's a great question, Sam. Not particularly. I mean, what we would be looking for, like Derek mentioned in his presentation, you know, we're always looking something that would be fundamental to the story and perhaps something we don't have today, right? That would be naturally what you'd be looking for. But we want it to be one sigma away from what we do today, not two or three. so a good example when mark was talking about some of the four sensing technology in robotics now we went out with a prudent approach where we got an exclusive license from a company and we're now able to sort of test that technology before even thinking about a tuck-in or a smaller acquisition in that space but when you think about humanoid robotics you want to have four sensors that we have a phrase internal to the company that we want to own the humanoid hand there's so much electronics in the hand and we're targeting areas where we could increase our dollar content in systems where we already have

significant content hi Liam far think of America thank you for taking my questions we're data center portfolio what needs to happen to make that a creative towards gross margins and what kind of timeline should we expect for that to kind of kick in and it's kind of follow on to that how much of a headwind can data center beat a gross margin in the near term before those higher margin sockets kick in?

I can stop, Mike, and you can talk about when they kick in. So today, we've talked about this publicly, our data center business gross margins in the aggregate are a couple hundred basis points below our fleet average. And the reason for that is the majority of the products we're selling and have been motor drivers, which just have a little bit lower gross margin. They're still good, but below our fleet average. As we start to sell current sensors, which we did the last couple of quarters, is that becomes a bigger piece of that portfolio. That's one of our flagship products, one of our higher-margin products. That will naturally move the gross margins in data center up. And some of these intelligent motor drivers, some of the cost reductions we talk about also helps. The third layer of that stool is the isolated gate drivers, silicon carbide and gallium nitrate. Those products are in sampling right now. That really also helps the gross margins going forward.

Yeah, and the current sensors are ramping nicely now. When you go to the demo room, you can see a data center power supply. We can point out the current sensors inside of them. So that is happening now. The isolated gate drivers in the last call, we said that will start to meaningfully contribute revenue to data center in 18 to 24 months. But I will go back to the topic of cost innovation that I brought up. So Troy owns all the products. So he and I have been putting our heads together. And there are many things we're looking at in terms of just getting cogs down for the high-running motor drivers as well. We have plenty of ideas there. I don't ever think about the growth of our data center business, even with the motor drivers or fan drivers, as anything but exciting. We'll manage the gross margins. We're out there trying to get all the business we can get. We can work around the margins.

Thanks for the follow-up question. Derek, you mentioned that your current OPEX can support a billion dollars in annual revenue, and your manufacturing footprint can support, what, $1.2 billion? You're effectively there now. And so how do you keep your OPEX growth at inflationary only without having to add more people? And should we think about in just a year or two when you're at $1.2 billion in revenue that the capital intensity grows up from that 5% targeted level?

So on the OPEX side, in fiscal 24, we did $1048, almost $1050 billion in revenue, with the OPEX infrastructure we have today, and actually slightly less. We hadn't fully integrated the Crocus business. We had just bought the isolated gate driver business. So we actually have more of an OPEX infrastructure today than we did two years ago. So I'm very comfortable the OPEX infrastructure itself can support well over a billion dollars, particularly on the sales and on the G&A side. We've been very aggressive with cost reallocations, and we'll continue to do that. That said, the investments in OPEX will be in R&D. They will be in these fast-growing areas. We'll make investments there. We'll talk about those investments. Same thing in sales in some of the fastest-growing markets of the world. G&A, we're getting a lot of benefit from having our Center of Excellence in the Philippines. We continue to move functions there. And then we're just getting started on the AI side of things, and I think that's going to be a huge benefit. So on the OPEX, we got it already for the Q4, going to be $81 million, up $2 million from Q3, really payroll tax reset. And I did say on the call that I expect that number actually to go down in Q1. And if you did the math off of that, it's about inflationary increase in fiscal 27. So we're very comfortable with that. On the investments we've made, again, we did 104.8 two years ago before we were midway through that CapEx cycle in the Philippines. So we're very comfortable with the capacity we have there. We actually have four buildings in our Philippines facility right now. The third building is halfway facilitized with equipment right now. The fourth building is just a shell. So that doesn't even count that building beyond that $1.2 billion, and MIX will be dependent on that. So we have plenty of capacity with our back-end facility in the Philippines and with our OSAT partners and our FAB partners.

Any other questions? We don't have any online. If there are no more questions, we can wrap up.

Awesome. So I want to thank you all for being here today. Really thank you for your support, especially if you own chairs, if you follow us. We appreciate all of you. We know you're very busy people, so we appreciate you taking time out of your busy schedules to be here today. And once again, I do encourage you all to go through the demo area to take a peek at the demos. But thank you for coming. Thank you for your questions. And thank you for your support.

Thank you.