Thank you for standing by, and welcome to Allegro Microsystems' 3rd Q Fiscal 2021 Financial Results. At this time, all participants' lines are in listen only mode. After the speakers' presentation, there will be a question and answer session. Thank you. And I would now like to hand the conference over to Kiri Bai.
Please go ahead.
Good evening, and thank you for joining us today for Allegro's 3rd quarter results for fiscal year 2021. I'm joined today by Allegro's President and Chief Executive Officer, Ravi Big and Allegro's Chief Financial Officer, Paul Walsh. We'll review our quarterly financial performance and provide a summary of our outlook. Our earnings release and the accompanying financial tables are available on the Investor Relations page of our website. This call is being webcasted and a recording will be available on our IR page shortly.
Please note that comments made during this conference call include forward looking statements within the meaning of federal securities laws. These forward looking statements include projections and other statements about future events that are based on current expectations and assumptions and as a result are subject to risks and uncertainties that could cause actual results to vary materially from our projections.
Please refer
to the earnings press release we issued today and other documents filed by us with the SEC, including the risk factors discussed in detail in our final IPO prospectus filed on October 30, 2020. The company assumes no obligation to update any forward looking information presented. The non GAAP financial measures that are discussed today are not intended to replace or be a substitute for the presentation of Allegro's GAAP financial results and may be calculated differently than similar measures used by other companies. We are providing this supplemental information because it may enable investors to make meaningful comparisons of core operating results and more clearly highlight the results of our core ongoing operations. A reconciliation of GAAP to non GAAP financial measures referenced during today's call can be found in our earnings press release, which has been posted to our IR page.
I will now turn the call over to Allegro's President and CEO, Ravi Vogue. Ravi?
Thank you, Katie, and good evening, everyone. We're pleased to report results well above expectations and a strong outlook for the March quarter. Demand momentum accelerated throughout fiscal Q3, resulting in $164,400,000 of revenue, a record for our current business. Strong customer demand was driven in part by the end market recovery, particularly in automotive, coupled with customer restocking. Non GAAP gross margin was up nearly 200 basis points sequentially and non GAAP operating income was up approximately 38% sequentially.
Non GAAP diluted EPS came in at $0.13 per share ahead of our guidance. All considered, it was a great start in our 1st full quarter as a public company. I'm also pleased to report that we remain on track with the strategic objectives we have outlined. In the coming quarter, we expect to continue to benefit from these efforts and from the strong end market tailwinds within the tightening supply chain. With record backlog and bookings, we have extended visibility into the first half fiscal 2022.
With that in mind, 4th quarter revenue is anticipated to increase again sequentially to a new record for the business to $167,000,000 plus or minus $2,000,000 Non GAAP gross margin for fiscal Q4 is also anticipated to move upwards of 50% to 51%, and non GAAP diluted EPS is expected to be in the range of $0.13 to $0.15 I'll now turn the call over to Paul Walsh for a detailed review of the financials. Paul?
Thank you, Ravi. Net revenue in fiscal Q3 of $164,400,000 was up 20% sequentially and 20% 21% compared to the same period last year for our core end markets. Demand surged to record levels across our end markets, but particularly in automotive. We saw bookings accelerate as the quarter progressed with extended order visibility into the first half of fiscal 'twenty two. Automotive revenue increased to 69% of our mix or $113,900,000 increasing 27% sequentially and 15% year over year.
Our industrial revenue was also strong, increasing 9% sequentially to $23,700,000 or 14% of total revenue. It was up 11% year over year. Industrial customer demand accelerated, and we continue to see very healthy backlog. Our other business was $26,900,000 for the quarter or 16% of revenue. This was an increase of 5% sequentially.
Despite meaningful growth across our top customers, we did not have any customers greater than 10% in Q3. GAAP gross margin for the quarter was 45.3%, up sequentially and compared to the year ago period. Our non GAAP gross margin was 49.6%, which does not include adjustments for $1,200,000 and expected future cost savings related to the closing of our AMTC manufacturing facility in Thailand, which totaled 0.7% of net sales. Non GAAP gross margin adjustments include $4,700,000 in mostly onetime IPO related stock compensation charges, transfer pricing of $1,500,000 for the polar fiscal 2021 commitment, dollars 600,000 of onetime costs associated with exiting our AMTC facility and $300,000 of intangible asset amortization for VOXXETO. The strong margin performance occurred despite a rapid acceleration in demand, highlighting the strength of our gross margin profile across all of our product lines.
Gross margin improvements also reflect the results of our manufacturing efficiency initiatives, And we just completed the relocation of all production from AMTC ahead of schedule, and we are now in the final wind down phase for this facility. Gross margin was impacted by an increasing mix of wafers supplied by polar, resulting from the rapid recovery in demand versus our prior expectations. For the next few quarters, we expect to continue to source a higher mix of wafers from polar, enabling us to quickly respond to demand, but at a higher cost than wafers sourced from our Asian foundry partners. That said, we fortunately made strategic investments in additional sources of capacity last year, which will provide some additional supply and cost benefits later in fiscal 'twenty 2. Taking into consideration all of these factors, we expect non GAAP gross margin to increase to the 50% to 51% range in fiscal Q4.
We continue to anticipate incremental non GAAP margin improvements throughout FY 'twenty two, broadly in line with our prior expectations, resulting from the benefit of the back end manufacturing consolidation noted earlier. Longer term, we maintain conviction in increasing our non GAAP gross margin toward the mid-fifty percent range as we augment manufacturing efficiency gains with ongoing revenue mix shifts towards higher margin and higher growth markets. Total GAAP operating expenses increased sequentially to $98,600,000 with R and D of $31,000,000 and SG and A of $67,600,000 increase includes significant onetime items related to our IPO, including $38,000,000 in stock based compensation acceleration and $3,700,000 in onetime items associated with the transformational activities we've discussed. The result was a GAAP operating loss $24,200,000 in Q3. Due to our strong performance in the second half, Q3 non GAAP operating expenses were impacted by a $5,000,000 year to date catch up expense for variable compensation, increasing non GAAP OpEx to $53,900,000 Fiscal 2021 has been a uniquely nonlinear year with revenue in the second half now expected to be 32% higher than the first half.
This was not anticipated even quite recently. The catch up aligns our variable compensation accrual to where we now expect to finish the year. As a result, non GAAP R and D investment was $28,000,000 and non GAAP SG and A expense was $25,900,000 Even with the variable compensation catch up, non GAAP operating increased sequentially by 38 percent or $7,700,000 to $27,700,000 representing 16.8 percent of revenue. Again, this does not include adjustments for the $1,200,000 of expected future cost savings related to the closing of our AMTC manufacturing facility in Thailand, which totaled 0.7% of net sales. We expect non GAAP operating expenses to come down in Q4 to be closer to 31% of revenue, which is below the levels our core business operated at throughout fiscal 2020.
We believe this will be the beginning of improved leverage on the step function increase in revenue experienced in Q3. The fiscal Q3 effective tax rate was a negative 85.8 percent and GAAP net loss for the 3rd fiscal quarter was $5,100,000 or $0.04 per diluted share. Non GAAP net income in Q3 increased to $23,000,000 which excludes the impact of 2 months of interest expense on the $300,000,000 of the term loan repayment executed in late November. Only $25,000,000 of that debt remains, and we expect interest expense of about $250,000 to $300,000 per quarter as a result. The Q3 non GAAP effective tax rate was 15.9% and is expected to be 15% to 17% in fiscal Q4.
Weighted average diluted share count for Q3 was 181,200,000 shares as we only had 2 months of the additional 25,000,000 shares offered in the IPO. This resulted in non GAAP diluted earnings per share of 0 point range. Our current diluted share count is about 190,200,000 shares, and we expect that diluted share count to increase nominally to 190,500,000 in the fiscal 4th quarter. Our strong execution and business fundamentals continue to be evident in our balance sheet. Cash and equivalents in Q3 were down 44,000,000 dollars sequentially, but operating cash flows exceeded our expectations given the offset of $72,000,000 in net financing cash outflows from the various transactions undertaken in the quarter.
We generated $35,000,000 in operating cash flow in the quarter, Our quarter ending cash balance was $164,000,000 inclusive of restricted cash. Accounts receivable balances were $89,000,000 the quarter with DSO of 49 days, which was down 2 days compared to the 2nd fiscal quarter and consistent with historical norms. Net inventory decreased sequentially by $11,000,000 to finish at $94,000,000 reflecting accelerating demand. Channel inventories remain at historic lows, while POS sell through is at historic highs. In summary, we are approaching spending with a high level of discipline while continuing to focus on our long term objectives related to our business transformation and margin expansion story.
Ravi?
Thank you, Paul. Strong third quarter demand supported the early innings of the market recovery, has put us about a year ahead of our prior internal revenue expectations. As Paul mentioned, our operations team responded well to the rapidly increasing demand and we were able to maintain good margins. Revenue is at new highs. We are raising our outlook and we expect a year over year growth that our year over year growth will outperform market forecast in fiscal 'twenty two.
Unique to Allegro will be the benefits of our manufacturing transformation that are expected to reduce our costs and improve our profitability while maintaining our supply flexibility in fiscal 'twenty two and beyond. Coming back to the Q3, power IC products were up 8% sequentially and 25% year over year, representing 23% of the revenue. As you know, we are the market leader in magnetic sensor ICs, which represented 67% of revenue. 3rd quarter automotive strength helped drive 27% sequential magnetic sensor IC growth and 19% year over year growth. Taking a closer look at our automotive end markets, our revenue was up 27% to 113,900,000 We believe that half of our growth reflects automotive production rates.
Industry automotive production forecast increased by about 2,000,000 during the quarter and the consensus now is that about 23,000,000 cars were produced. Based on our customer history and the relatively low inventories at customers coming into the quarter, we believe that the remainder of our sequential automotive revenue growth reflects market share gains and restocking in about equal measure. Our automotive customer order rates continue to be well ahead of car production, suggestive of continued restocking into fiscal Q4. While the global recovery provides nice tailwinds, we are focused on long term sustainable growth, and I'm happy to report that design wins increased over 60% sequentially in Q3 overall and 81% for automotive. This type of momentum is indicative of real progress towards the market share and growth objectives.
ADAS and XCV represent approximately 1 third of our automotive business and these applications continue to grow at long term rates that outpace our foundational business in ice and safety, comfort and convenience. Last quarter, we had some terrific design wins on both ADAS and XCV, securing an electric power steering program for customers in Korea, including both our magnetic sensors and power ICs. We also won new XEV inverter and steering system business at multiple Japanese Tier 1 customers for global vehicle platforms. These program wins are expected to start contributing to revenue as soon as the Q4. Our foundational business, ICE and Safety, Comfort and Convenience, both grew double digits sequentially and year over year in Q3.
We believe we are gaining share in these applications, giving us further confidence in the longevity of this revenue. We also see market share momentum as we expand our leadership position with our innovative XMR on silicon technology that enhances energy efficiency in powertrains for both electrified and ICE vehicles. Our back biased GMR speed sensor ICs offer market leading installation flexibility, improving performance and reducing the overall system size, complexity and cost in transmission systems. Last year, we began servicing production orders for these products and we believe the rapid adoption of this emerging technology demonstrates we are further distancing ourselves from the competition. Our industrial business was up 9% sequentially and 11% year over year.
This includes our strategic focus areas like Industry 4.0, green energy, data center and a long tail of business we call broad based industrial. Heightened global customer demand across our industrial end markets exceeded our supply and incoming order rates remained strong during the quarter, with signs of pent up demand exiting Q3. Within industrial, broad based grew nearly 50% sequentially in Q3, addressing a broad range of small customers and applications. This business is mainly serviced through the distribution channel and we're seeing great pull through, as Paul mentioned, with record POS levels and declining channel inventories. Sequentially, data center and industry 4.0 growth took a pause as expected, but we see continued future momentum.
Data center was double the revenue level compared to the same time last year. This reflects the market share growth resulting from our unique IP and high voltage capabilities that are perfectly intersecting the demand for higher efficiency and 48 volts in data center cooling. And finally, renewable energy was up 10% sequentially. We sell our current sensors and motor drivers into renewable energy applications like solar inverters, photovoltaic combiner boxes, solar panel tracking systems and wind inverters. These are applications where reduced power dissipation, high voltage isolation and small form factors are important, exactly where our products shine.
A key element of the industrial story is our market leading current sensor family. We recently released the 2nd generation of our innovative power monitoring chip, which has been a game changer in energy measurements. The new device further simplifies power measurement in AC and DC powered applications, particularly IoT devices, building and home automation, and even server and telecom power. This product, like many in our portfolio, supports our mission to leverage technology to deliver a more sustainable future. In the Q3, we were acknowledged by the 2020 Carbon Disclosure Project for taking coordinated action on climate and water issues.
Allegro is proud to be committed to cleaner skies and our scores reflect the outperformance for our sector and regional averages. Allegro's other business was up sequentially by 5%. The near term growth is due primarily to the end market recovery, with notable growth in IoT applications. We expect the COVID specific momentum in printers and peripherals that has contributed to higher run rates in the other business will steadily decline as the end markets normalize. Now for the fiscal Q4 guidance.
As we discussed, we continue to see strong momentum to date in the Q4 with record backlog. However, as you know, we are closely monitoring demand and navigating through the supply chain challenges created by the rapid recovery in the industry. Balancing these factors, we expect both automotive and industrial revenue to be up low single digits sequentially, and we expect other to be flat with company revenue expected to be in the range of $165,000,000 to $169,000,000 We expect non GAAP gross margin to be in the range of 50% 51%, trending upwards from Q3. We expect non GAAP operating expenses to decline to 51,500,000 to 53,000,000 dollars we expect non GAAP diluted earnings per share to be in the range of $0.13 to $0.15 per share. Just to wrap up, we are extraordinarily excited about the team's ability to respond to the increasing demand and contribute to a record quarter.
Good visibility and backlog are giving us confidence in delivering another record quarter in fiscal Q4. With progress on our manufacturing efficiency initiatives, driving margin improvements and strong momentum in our design funnel, I continue to believe we are well positioned to deliver on our long term objectives. We will now be happy to take your questions. Katie?
Thank you, Ravi. Operator, will you please review the question and answer instructions with our participants?
Thank And your first question comes from the line of Gary Mobley from Wells Fargo. Your line is now open.
Thanks for taking my question. And let me extend my congratulations on a strong finish this calendar year. I wanted to start out by asking about gross margin. So Paul, you did a pretty good job at sort of walking us through the variance in the reported December quarter relative to gross margin guide and you're obviously expecting an improvement. But I was wondering if you can break down for us what sort of capacity limitations you have with UMC, how that may be forcing you to take more than your purchase amendments with Polar and how that overall played out in the gross margin impact in the December quarter and into the March quarter?
Then I have a follow-up.
Sure. Thanks, Gary. Yes, we one of the drivers for gross margin in the quarter was the mix of wafers towards polar. We actually consider ourselves fortunate to be able to have that as a safety belt, if you will. And we've indicated that in the coming quarters, we'll rely on a heavier mix from polar.
But long term, we're committed to continuing to expand at UMC and with other foundry partners as well. So I think it's something that we could work through. We don't have any capacity limitations necessarily that will impede us in our near term growth. So we feel pretty good about it.
Okay. As a follow-up and related to the topic, I wanted to ask you guys about your qualification and your eventual transition of manufacturing at TSMC. Could you give us some sort of update there? Thank you.
So Paul, I'll take that.
Sure.
Yes. So our TSMC activity has been ongoing. We expect to have revenue from that activity in our next fiscal year, in fiscal year 'twenty two, getting wafers to supply demand in the second half, and we expect it to ramp up into fiscal 'twenty three. This is as expected, given the long qualification cycles that we have in automotive. We had projected this particular start rate.
Your next question from Mark Lipacis with Jefferies. Your line is now open.
Hi. Thanks for taking my questions. So first question on the backlog. So it sounds like the backlog went up a lot. Paul, can you talk about to the extent how the profile of that backlog has changed maybe like from 90 days ago?
To what extent do you have a backlog visibility into that goes into the June quarter, 2 quarters out instead of just the Q1? And then, and I think I'm hoping that you can help me reconcile the backlog is up and there's not it's not obvious that there's a lot of constraints from your suppliers like you're guiding for about 2% growth at the midpoint. And I'm wondering if you could just help me about the difference reconciling strong backlog, growth in the backlog and lower sequential growth outlook? Thanks.
Thank you, Mark. Yes, we have in ordinary times, we have very good visibility into our backlog. We continue to have excellent visibility into what we've seen. Certainly, the demand has accelerated like everyone has seen. So we have good visibility, certainly, and it gives us great confidence in the current quarter, but we do have good visibility into the June quarter as well.
So I think it gives us a lot of confidence and it certainly helps with our planning going forward.
Okay, great. That's helpful. And then the a lot of times when you get into demand environments like this, people start worrying about double ordering and building inventory safety stocks are pretty high. Can you give us a sense what kind of visibility do you have into your products once you ship them? Do you have visibility all the way into the production line?
Does it end before that? And how you've been through the cycles before. How do you kind of manage or assess when you get to a point where you get concerned about the risks of double ordering and inventories building up out there? That's all I had.
Well, I mean, our ordering patterns, our demand patterns and backlog is something we monitor every week. And that's just been a discipline we've had for a long time. The visibility that we have and most do have is we have great visibility into the distribution channel. And as we alluded to earlier in the call, those inventories are at are quite lean. And so but beyond that into the non distribution level of customers, I think it's a different the visibility is certainly different in its in I would probably ask Ravi to if you want to share any color on how what we would see there from that type from that channel?
Yes. I think, as Paul said, we have been monitoring customers. What we know is that we are in constant communication with many of our customers given the rapid acceleration of the backlog and we've been trying to monitor the demand signals. We do know that there is substantial end customer pull at this point. There is a substantial restocking of the end customer, but also their production rates have been increasing.
So it really is a blend, but I think as we could expect that in times like this, we've all been through the semiconductor cycles and in times like this, we do have the risks of backlog of actually shipments getting ahead of themselves. So we monitor this very carefully and we are very cautious in making sure that to the best of our ability that customers are not getting ahead in terms of their order patterns.
That's very helpful. Thank you.
Your next question is from line Curtis of Barclays. Your line is now open.
Good afternoon. Thanks for taking my question. Just kind of curious, it's kind of gross margins and inventories. Inventories came down. Obviously, you're trying to manage, I'm assuming, some mix of polar.
Obviously, it's a headwind of gross margins. So I'm just kind of curious how you're thinking about managing the inventories back up? And then just a little color as to the improvement you're seeing in the March quarter? And then kind of just if you could help us a little bit more with the trajectory, you literally get back to some more normalized levels.
But can you just give a
little more granularity on the timing of when this polar mix could come off and when if you could get some better allocations at
it? Sure. Blaine, I'll take that. So yes, inventory came down. It really wasn't a surprise given the acceleration in demand and revenue.
We're
very focused on ensuring that we have the appropriate levels of inventory. And so we continue to look at that both for the March quarter and beyond, both from a capacity perspective with UMC, but also with being able to manage to fill anything we might need from Polar as we alluded to. Long term, the strategy and as to when that may happen, when we would roll off polar, it's a little unclear at the moment just because of the demand environment. But it's not a long term strategic goal to in fact, our long term strategic goal is to wind continue to wind Polar down, which would create a significant sustainable tailwind on gross margin long term.
Okay. And then I do want to ask you, I know it's a small part of the business, but Photonics actually was almost last few quarters a little under $1,000,000 So just any comments on the it seems like it's coming in a bit better than at least what I had, drivers of Photonics and kind of any outlook? I know it's a small segment, but it seems like it's tracking a bit better versus what I had.
Yes. I think photonics is a segment where at this point, it's really in the reinvestment phase. So we are focused on product development and re architecting that business to be more applicable to the to automotive lighter. As we've said in the past, our real metrics for this particular business will come down to our product releases and customer engagements in the automotive front. Yes, we have small revenue, but our real revenue is going to come from and our real focus is on the automotive LiDAR, which we expect to start progressing in terms of products and design wins over the next couple of quarters.
And your next question from John Pitzer of Credit Suisse. Your line is now open.
Yes, good afternoon, Ravi, Paul. Congratulations on solid results. Thanks for letting me ask the question.
Paul, I wanted to go back
and just revisit the fiscal Q3 gross margins to make sure I understand the delta that's going on. Just relative to where the Street was versus where you reported, was most of it the 70 bps from the closure? And if that's it, why couldn't you recognize that in the December quarter? Or is this all being driven by incremental costs from things
like Polar? Good question, John. Basically, when I think of the revenue guidance range, like we anticipated having this amount, the 70 bps or thereabouts, as we entered the quarter and it was part of what I would characterize as our guidance range of 50 to 51 back in November. Without that, I was guiding towards 50%. So this so at 49 point 6%, we were quite close to the 50%.
And the reason we can't really include it because it's viewed much more as it's viewed more as a pro form a adjustment rather than a non GAAP adjustment. That said, we don't I mean, with AMTC, the Thailand facility being essentially complete with production and in the wind down phase, we really won't have that going forward.
So effectively, the fiscal Q4 gross margin guidance includes the benefit from the Thailand closure?
Yes, exactly. Yes, that's the way. Perfect. Yes, we should see some benefit. We're in the wind down phase and you know how those things are.
There's a little bit of ramp up, but we should be seeing that.
And then my second question for Robbie, just on the auto side, you talked about kind of half of the strength you think being restocking. I'm just kind of curious, I think this is the first time that I can remember where major auto OEMs are being forced to shutter capacity because they can't get semiconductors, which tells you both how cyclically strong things are, but perhaps more importantly, how much more structurally important ships are to building cars. I'm kind of curious, do you think this will change how the auto guys view inventory? And will they just hold structurally more inventory? And especially given that your cost side of the equation is moving up, how do you think about pricing visavis your rising cost and tight supply right now?
Yes. So, I think we're already seeing the impact of the tight the tightening of the belt buckles on the part of the automotive supply chain in the COVID quarters. And I think inventories got down to extraordinarily low levels. I think this was a trend actually that started in the prior year. So we came into this year with extraordinarily low inventory levels and we continued through the COVID quarters with where inventory kept declining.
And no one forecasted the recovery, this rebound in automotive. And this large recovery has completely depleted or it has been depleting the supply chain, the semi supply chain. And as you've rightly stated that semis are becoming more and more critical to the operation of vehicles. And what we're seeing now, I think we're seeing the backlog trends change as we speak. We're seeing our visibilities go out a couple of quarters, maybe sometimes or more, which is something which is quite unusual for us.
So I think there is something going on in the automotive supply from the part of our automotive customers where they are giving us bigger visibility. And I think they are trying to address this shortfall by increasing their restocking. It doesn't really apply to us, but what you see is that the high end processors are competing against the trends or the demands created by cellular and 5 gs. And I think the automotive customers are ending up recognizing this. I'm sorry, what was the second part of your question?
It was sort of your pricing philosophy right now. Can you take pricing up to cover cost increases? Can you take it up beyond that? How are you trying to manage incremental costs with long term customer relations?
So we typically, we're not transactional both with our suppliers or with our customers. What that means is that we're not a commodity company and we don't commoditize either our purchasing or our selling. So we have long term agreements with our suppliers on and I think that's critical suppliers in terms of pricing, which we expect will help us whether there's constraints that everybody that a lot of companies are seeing. But on the other hand, we also have agreements with our customers that we look at. And when situations occur that are out of our control, we do have conversations with customers on pricing.
We are addressing pricing in a limited fashion right now, while we continue to monitor the market, we continue to monitor the supply chain and continue to monitor the supply chain's costs. So, yes, it is a conversation that we're having with our customers with some of our customers.
Perfect. Thank you very much.
And next question from Srini Pachauri of SMBC. Your line is now open.
And congrats on the being a public company and solid execution. Ravi, I just want to go back to your comment about design wins. I think you mentioned your design wins are up about 80% or so. And you also said that your ICE business is up double digits, which is a little bit surprising to me. So if you could talk about give us a bit more color on the design win pipeline and where you're winning these designs and if these are for ICE versus XGB and ADAS?
And also, I think in the past you said you were optimistic about improving gross margins with the new products. If you could talk about if these new design wins are going to drive any incremental margin opportunity?
Yes. So in terms of design wins, we were up 60% Q over Q and the bulk of those design wins were in our XEV or ADAS areas. And when I say XEV, it could be hybrid electric or battery electric. And some of these design wins are impactful. We expect that they will actually have meaningful revenue impact starting this particular quarter and accelerating beyond.
So and similar to the ADAS wins that we're having, typically our XCV and ADAS business is our emerging business and has higher margins than our ice business, which is more mature. So we are really happy about this trend that we're seeing where our XEV and ADAS products are being deemed as best in class and being picked up by market leading customers. And this is worldwide. We're seeing it in Japan. We're seeing it in Korea.
We're seeing it in Europe. So the second part of your question was on ICE. So the ICE quarter over quarter growth is really representative of the bounce back in car production and the restocking that's going on right now. It's not really a content growth at this point. Got
it. And then one for Paul. Paul, gross margin, a lot of questions have been asked on the topic. But if you look beyond the fiscal Q4, as we look out to the next fiscal year, can you talk about the puts and takes of gross margin? I guess what I'm trying to get is if the benefits related to the Thailand factory are fully baked in fiscal Q4, you still have any additional benefits coming in June and beyond?
And then if there are any other drivers beyond the next fiscal I mean, next quarter? Thank you.
Sure, Srini. Yes, as Thailand rolls off and we become basically a single have a single back end manufacturing facility in fiscal 2022. We expect to see incremental improvements throughout the year, certainly. So that's a strong tailwind. And the polar wafer mix is something more of a short term tailwind headwind that offsets that.
And I think as we go through, like many of our peers, as we look at different areas where costs may be rising, we're looking at how we offset those. And so and we also anticipate just certain efficiencies that would help throughout the next fiscal year.
And the next question from Vijay Rakesh of Mizuho. Your line is now open.
Hi, Ravi and Paul congrats on a good 2020. Just had a question on your autos. When you look at the combustion engine ICE versus TV, wondering what the split was of that as in autos in September and how it trended in December, did the mix shift significantly or how the shift moved?
Yes. So, Vijay, as we've spoken before, ice dominates the market in terms of car production and car volume, so it has a much larger established base. EV is an emerging segment, rapidly growing. We are extraordinarily excited about it, but it's still coming off a small car production base. So the best thing I can tell you is that our XEV business grew 57% year over year, which is for the quarter.
So it's talking about extraordinarily strong momentum. We are seeing rapid acceleration in the adoption of our products in this particular area. We are very excited about some of the new products that we released and we will continue to focus our R and D in this particular area.
Got it. And then with the December quarter, it looks like autos, I think you said, grew 15% year on year. EBITDA, like you said, LVP grew 2% year on year. How do you expect, as you go forward, any thoughts on how investors should be looking at the outperformance versus LBT?
Thanks. Yes. We were looking at this data ourselves. And what is always difficult as a semiconductor supplier is that our numbers in terms of the clear multiplicity of LVP, get modified or modulated by supply chain strategies on our customers. So inventory bills tend to boost things up and inventory declines or burn offs tend to pull things down.
So in 2019 calendar year, it was a very large pullback in automotive, especially in analog and central space. And a lot of it was a result of inventory pullback. So some of the data might look a little larger than expected because of inventory pullbacks. But we are seeing content growth. I mean, it is just as for example, my XEV statistic, it's a wonderful statement on how we see our things growing.
We're seeing growth in ADAS. Again, that's a content story for us. So we do expect to continue to outperform the LVP market, I mean, the auto production market statistics.
Got it. Thanks.
And next question from Quinn Bolton of Needham and Company. Your line is now open.
Hi, Ravi and Paul. Congratulations on the nice revenue and strong backlog. I wanted to ask, Ravi, I think you mentioned in the script that auto production is back to 23,000,000 units in the 4th quarter. If I annualize that, it looks like we're kind of back to pre COVID levels. Wondering, as you look forward into March June, do you expect some of the semiconductor shortages that are pretty well known?
Does that take the auto production down for a couple of quarters until the supply chain can work through those issues. Just wondering if you had any thoughts on kind of where production goes the next couple of quarters. Yes.
I mean, it's a good question. We follow IHS and LMC and we use them. We believe that they're probably a little smarter than we are projecting automotive production. The expectation for this coming year is still running between $85,000,000 $88,000,000 Given that we ended last quarter with a $23,000,000 vehicle quarter, They will be they are projecting a little bit of flattening, actually the projection flattening in terms of the production rates. We're seeing the demand at this point.
The auto customers are wanting every product that we can every unit that we can ship at this point. So the demand is strong. We see the visibility out in next couple of quarters. It's a unique situation right now where the backlog extends, giving us extraordinary visibility beyond our 90 day typical visibility that we have. So it's looking strong for now.
I think there is it is a combination of, for us, a content story that we've got content increasing. It's a combination of some restocking that I believe that's going on. And I don't believe it's an LVP growth story. So it's going to be either flat or just mildly declining, but not of any real significance.
Great. And then the follow-up question I had is you mentioned the restocking activity and it sounds like we've gotten down to very low levels through the supply chain here in the second half of twenty twenty. From your experience going through past auto cycles, how long does that restocking activity typically play out? Is that a 2 to 4 quarter kind of phenomenon? Does it come back quicker?
Or just any sense on how long that restocking could over how many quarters do you think that plays out? Yes.
Well, it's interesting, but I'm not sure that history really applies to this because I think with the increased reliance on semiconductors, I think there may be we may be seeing a change in the near term strategy, near to mid term strategy on automotive customers. They may be looking to have higher levels of inventory at this point just to protect themselves against the supply constraints that they're seeing today. I really don't have a better answer than that. So we're just going to have to wait it out. We're going to have to see how it goes.
We don't see it pulling back much throughout this year. We see continued we see that our fiscal 2022 will be strong. So we're pretty excited about that, and we're pretty happy about the visibility we have. Great. Thank you.
The last question from Mark Lipacis of Jefferies. Your line is now open.
Hi. Thanks for walking me back into the queue. So I had a question on the industrial markets. I know when you were doing the roadshows, this is it seemed to be like a greenfield opportunity, largely a greenfield opportunity, and you're expecting very healthy growth in that market. Can you just remind us in this market to what extent are you taking chips that you had originally designed for the automotive market and just opportunistically finding opportunities for them in the industrial market versus designing products from scratch for this market?
And can you talk a little bit about the sales cycle, the sales process here in industrial versus autos? Is it a shorter should we think about a shorter sales process there? Thank you.
Yes. So, yes, it's a great question. Our industrial business is actually a mix of both targeted design products as well as a leverage of products that apply very well across the automotive and industrial spaces. So, for example, our current sensors that we do for automotive, they have similar types of requirements in the industrial space. They are in the solar inverters as well as in the HEV inverters in vehicles.
So there is some synergy. There's more synergy than we would expect in our electrification product portfolio. There's also more synergy that we would expect in our motion control product portfolio. But we're particularly proud of the activities that we've done in data center where we've developed and released a family of quiet motion fan drivers that include embedded algorithms and address the 3 phase fan cooling needs for data centers and servers. And this particular product line is growing dramatically.
The increased needs of data centers, cooling needs of data centers, but it also speaks to the adoption of our technology and how well it's been targeting this particular market space. So it's a blend. We see both types of activities. Our 48 volt automotive activities line up very well with the 48 volt industrial activity. So our wafer technologies line up very well.
We do not work very, very deeply in the 5 volt and sub-five volt levels. So there is a lot of synergy over there. The design cycles certainly are quicker. And what I would say is that once you get designed into a platform at when you when you win a new project on that same platform, the ramps happen very, very quickly. We sometimes get very little notice in this particular space.
Katie?
Great. Well, operator, I think that is our last call, our last question. So thank you all for joining us today.
I just want to thank everyone in this afternoon, our first earnings Q and A session. As a public company, we're very excited. We talked a lot today about bookings and our visibility and it's we feel fortunate that this is where we are in having this in our initial launch as a public company. So it's very exciting for us and we look forward to speaking with you soon.
And thank you, Paul. And I just wanted to wrap up. I wanted to second Paul's comments. It is an exciting journey that we've been on. And we're particularly proud of the quarter we've had.
We're particularly proud of the visibility we have into the next year, both in the top line as well as in gross margin and the continued initiatives that we have that hopefully could help us deliver good quarters in the future good and great quarters in the future. Thank you all for attending and have a great evening.