All right, good afternoon. Welcome to one of the afternoon sessions at TD Cowen's 53rd Annual TMT Conference. I'm Josh Buchalter, Semiconductor Analyst at TD Cowen. Very pleased to be joined by Derek and Jalene from Allegro MicroSystems. Thank you for joining us. I've got a bunch of questions lined up, but if anyone in the audience has questions as well, please feel free to raise your hand, and we'll certainly get your question asked. Derek, Jalene, thank you for joining us again this year. I think many in the audience are familiar with the Allegro story, but maybe you could spend a couple of minutes just introducing yourselves and the company.
Sure. Good afternoon, everyone. Thank you, Josh, and thank you, TD Cowen, for having us here. I'm Derek D'Antilio, the CFO at Allegro MicroSystems. I've been here for about four years. This summer will be 30 years, kind of either auditing or in and around semiconductor companies. I've been through about five of these cycles, and we can talk about a little bit of that later. Allegro MicroSystems, maybe I'll let Jalene introduce herself, and then we'll talk about Allegro.
Sure. Jalene Hoover, I've been with Allegro about two and a half years. I've been in semis nearly 30 as well, including Cirrus Logic and Silicon Labs. Thank you for having us here. It's always a pleasure.
A little bit about Allegro MicroSystems. The company went public almost five years ago. It will be five years in October on the NASDAQ. The company has been around, actually, in 2026, it will be 100 years. It was Sprague Electric. Why that is important is because Allegro has been in power semiconductors since Sprague Semiconductor in 1965, three years before Intel was founded, right? There is a lot of incumbency, a lot of IP, a lot of know-how. We are the market share leader in magnetic sensing, which is for automotive and industrial applications. We also have a very strong power franchise.
Allegro is, I think, you're best known for your auto franchise, and that's across both your magnetic sensing and your power ICs. I think some investors struggled to conceptualize the content story, in particular on the magnetic sensing side, because you're not necessarily in the high voltage power discretes, where you've got several hundred dollars of content per inverter, or on the ADAS side. Maybe you could spend a couple of minutes talking about why Allegro's, again, on the sensing and power side, both benefit from the trends that we know and love to talk about in automotive semiconductors.
Absolutely. We split our auto as about 75% of our overall sales. Within that auto, about half of that is what we call e-mobility. E-mobility for us is ADAS applications and XEV powertrain. XEV includes both hybrid and EV. The bigger piece of that is by far ADAS applications today, and both of those are growing quite fast. That e-mobility piece of automotive is growing at mid-teens growth rate over the next several years from a projection standpoint, has grown in the 20s. The other half of our auto is what we call legacy auto, so internal combustion engine applications for both power and magnetic sensing, and safety, comfort, and convenience things in your car. The in-cabin things like LED lighting, seat cooling, motor drivers. The exciting part on the e-mobility side really is in the ADAS side of applications.
We do things like current sensing, measuring current and helping create better loss of the battery, better charging of the battery, faster charging, more mileage on XEV and hybrids. On the ADAS side, we're doing all critical safety applications, so lane keeping assist, electromechanical steering, electromechanical braking, where there's four motor drivers around the car, where there's lots of redundancy in position sensing and those kind of things. That is across both of our magnetic sensing portfolio and our power portfolio. Our SAM opportunity right now on a 400-volt battery and a hybrid is about $40. The majority of that is ADAS content. That goes up as high as $100 when we get our isolated gate drivers for driving high power to silicon carbide in the market, which are in development right now.
How does that $40, I mean, because you've supplied the auto market for a very long time, how does the $40 compare to what you're selling on basically a legacy internal combustion engine vehicle?
It's about $10-$15 on a legacy internal combustion vehicle. Now, ADAS, there are two pieces of our business that are agnostic to powertrain, which is more than half of our overall auto business. ADAS is agnostic to powertrain. That can be on any internal combustion engine car or on an EV or on a hybrid. The same thing with the safety features or the convenience features you have in a car, whether it's LED drivers, lane keeping assist, a lot of the other things that are sitting in your in-cabin things, seat cooling, all of those kind of things.
Okay. And given what's gone on in the auto market recently, I mean, there's outsized focus on China, certainly. Could you maybe help us understand your exposure to China auto OEMs? And you have a historical relationship with Sanken Electric, or still have a relationship with Sanken, obviously. How does Japan versus China versus the rest of the world within your auto mix?
Yeah, it's a great question. One of the nice parts about our business, and it creates a lot of resiliency, is it's pretty evenly distributed across geographies. China is our biggest market. 27% of our ship-to sales are in China. A little bit less than half of that actually is re-exported back outside of China. Those are the Volkswagens of the world, the Teslas, the Fords, companies we've had as customers for a long time that actually brought us into China over a decade ago. The next tier of customers in China are the Nios, the Geelys, the Cherys, the BYDs that are also exporting a large preponderance of their product, right? There is a long tail of smaller Chinese customers that we service through distribution. Of the 27% ship-to China, a little bit less than half of that's being re-exported.
The actual domestic exposure is about a little bit more than half of that. Japan is about 20% of our sales. North America is about 15% of our sales. I'll call the rest of Asia is about 16% of our sales, which is largely Korea. Europe's about 13% of our sales. Pretty well evenly distributed. We serve almost all the tier ones in the Western world. In the United States, we sell to tier one automotive makers in Europe and in Japan.
OK. As we think about that content expansion story, you mentioned the isolated gate drivers as a big component, but you also have both organic and inorganic investment in XMR sensors. What can that do for your content story, and how important is specifically the TMR sensing piece that you bought with Crocus?
Great question. The TMR piece we have in our business today is relatively small. It's about $5 million a quarter. The large majority of that is medical business for continuous glucose monitoring, Dexcom. It's an interesting new part of our business that came with that Crocus business. We also had a TMR business. We put that together today with the Crocus business that's rebranded as XtremeSense. The real big opportunity for us is to bring that into inverters within XEV. We think that's a big content opportunity uplift to help us get to that $100. There's less competition. That's the key part about that there. TMR is far more precise, less noise, less current loss. We're really excited about that in automotive and also in some of the industrial applications we're going to talk about.
Okay. Yeah, and great segue. Thank you for doing that. Industrial's been a weak market for a while, but I think it was one that we certainly were optimistic was going to be a meaningful growth driver. Again, that's taken, it's been slower than expected because all of industrial semis have been slow. Can you maybe walk through similar types of content and growth drivers you have on the industrial side? What are the key end markets there? Where you're exposed today and where you see the content moving over time?
Sure. Industrial represents about 25% of our sales. Almost all of it is sold through distributors. Absolutely, the last six quarters, we've had a significant inventory correction that we're not averse to. Our distributor inventories have come down. Exiting the March quarter, they have declined 25% compared to the beginning of the fiscal year. Industrial sales came down about 35% during that period of time. The majority of that was really an inventory correction. What's in our industrial business historically has been clean energy, which is largely solar. We design parts for automotive, current sensors for automotive, position sensors, 48-volt parts. They're used in the same applications that they have in industrial. An inverter and a solar inverter would have the same application. Motor drivers for fan cooling within data center, these are historical applications that have made up that 25%.
Industrial automation, which is largely factory automation, or cobots. Those have been the historical pieces of our business. The new pieces of our business are the medical, the AI data center opportunity for us, which is a significant content uptick, which we've put some new slides in our investor deck on. That is liquid cooling. That is also air cooling. That is also 48-volt conversions within the data center. The newest market, which is kind of in the nascency phase, but also in the design win phase, past samples into design wins, is robotics, humanoid robotics. A lot of people talk about that. When we think about a humanoid robotic, the content uplift is quite significant for us. It could actually get as large as automotive for us in terms of content per opportunity. What I mean by that is up as high as $110 per humanoid robotics.
That really all revolves around the joints. Every single joint in those things needs a motor driver, needs a position sensor, a current sensor. There is a huge opportunity for us, something we are really excited about, in the very early innings.
How synergistic, I mean, on that note about the joints and robots, how synergistic is your sort of beachhead in sensing to your power franchise? Because power, I mean, again, most of your exposure is on the sensing side. Power is smaller but growing and more competitive as well. I was wondering, how much does having the auto-grade sensing components pull in your power content?
It's less than I would personally like, and that's across the entire industry. There's not a lot of bundling going on, particularly in automotive, because the tier ones especially are designing subsystems. The same thing happens within the data center. The fan manufacturers are designing subsystems, right? They're looking at a board. There's not as much cross-selling as we would like. That said, we think there's a real good opportunity to leverage our distribution channel. I would say be more efficient in our distribution channel. We have go-to-market teams now for robotics, go-to-market teams for data center. For some of these fast-growing markets where in the past, it was sold taking automotive-grade parts, putting them in distribution. It was kind of a fulfillment model. We've just hired a new SVP of Sales, who is really focused on industrial, really focused on power.
We think there's a real opportunity here to drive demand and drive pull-through. Today, not as much synergistic as we would like. I think there's a real opportunity there for that.
I think it's also worth mentioning, though, as well, in terms of the power technology. Our isolated gate driver technology, you touched on this earlier, provides a meaningful content uplift opportunity in automotive, driving that to about $30-$40 content opportunity, as well as in our data center. We just, again, created a new slide for that opportunity that increases that opportunity from about $110 to up to $425 with that gate driver technology. That's early innings here, but longer term, a great revenue driver.
Is the $425, is that your data center content opportunity?
Yes.
Per server rack?
On the AI server.
Okay. Got it. I guess, Derek, you touched on this with Crocus and the TMR sensing, but the gate drivers, I believe, was through an acquisition of Heyday. That was, I believe, a year or two before Crocus?
It was.
2022.
Yeah. So how far along are we in that roadmap of getting Heyday into the Allegro sales and distribution network and manufacturing network? When's a reasonable time which we could start to see some meaningful benefit in the model from those? I think that's probably your highest per-socket opportunity.
It is. That business was purchased in late 2022. It was a pre-revenue business. We bought it. Really good, efficient isolated gate driver that packages essentially three functionalities into one package, so 50% smaller than the competitors, about a third cheaper than the competitors, and much more efficient. That product is now in the market, past sampling, getting design wins on it. We got our first automotive design win in isolated gate drivers. We have a GaN win in data center. That is the isolated gate driver for gallium nitride. The isolated gate driver for silicon carbide is scheduled to come out later this year.
I guess following up on that, I mean, a lot of the gate driving, the gate driving market has been owned by companies that also sell power discretes. Is that a disadvantage? Maybe you could talk about the competitive set that you go after on the power side, the magnetic sensing side, and in particular, the gate driving side, given how big that opportunity could be.
Sure. We do not see it as a disadvantage. In fact, we are packaging those things together on the same board. It is a much smaller board real estate for folks, right? We do not see it as a disadvantage. In fact, we can work with multiple GaN device providers, multiple silicon carbide device providers. Not providing the actual devices is actually an advantage. You are allowed to be a lot more interoperable. In terms of competitors on the sensing side, our competitors have traditionally been, we are the market share leader at about 24% market share. Our competitors number two and three are Infineon, Melexis, and then there is kind of a long tail after that. On the power side, it is a far more fragmented market. It depends on where you go in the power side.
We have chosen to compete in areas that we think we have specific advantages in motor drivers, in regulators, in LED drivers, in those kind of areas. We are not competing in GPUs and CPUs. We do not have that capability and do not want to do that. In the areas we compete in, we can typically win on specifications.
I think on the last earnings call, you mentioned that you released 50% more new products this year than last year. What's the ASP uplift you can get even on your core franchise from these new products? Can you maybe talk to the go-to-market and potential contribution from this?
Sure. We have not talked publicly about the ASP uplift, which is competitive information. Generally speaking, there is a higher ASP for two reasons on the new products. One, the specifications are better. Two, particularly in auto, every year there is kind of a 2% or 3% cost down, just productivity. The fact that you start the clock running again at the beginning of the year helps with an ASP reset. Our goal is to have approximately 20%-25% of our sales come from what I will call new products, which are products released in the last four years. In the last few years, we have had a really focused effort of being much more efficient within ROI, within our R&D organizations. We put metrics in our PSU plans. We put metrics in our annual compensation plans to drive that.
That is really starting to show that fruit by taping out 50% more products with not that much more investment within that R&D space. As we talked about earlier, we are designing the majority of our products for automotive, which can be leveraged to the industrial space without significant R&D dollars or even significant sales dollars at this point.
Got it. You guys also recently had a CEO change that I think surprised a lot of people. You named Mike Doogue, who's absolutely no stranger to Allegro as a new CEO. Can you maybe provide some background on the timing of the change and also what any changes that we should be expecting from the outside looking in and why the board chose Mike?
Sure. Mike Doogue has been at Allegro for going on 28 years. Mike was our first ever Chief Technology Officer and probably the best Chief Technology Officer I've ever seen at commercializing products, which is really good. Mike ran all of our business units in the last couple of years, ran operations. When Ravi Vig retired almost four years ago, Mike was considered a candidate for the CEO. He'd been at the company for 25 years, but he needed some more seasoning, I would say, in various different aspects of the business. We brought in Vineet Nargolwala, who came from our biggest customer, Sensata, or one of our biggest customers, Sensata. Vineet and myself also have a lot of public company experience at the time. Mike really didn't. Mike was a candidate then, but needed a little more seasoning.
I think Vineet, myself, and others and Jalene have put in place a lot of public company practices over the last two and a half years. The board felt like Mike was ready for that role right now. I think it's a good time to do that. Very well received internally. Mike's an engineer's engineer, has about 75 patents, really understands how to commercialize our technology. I don't think you'll see any marked changes in strategy. Mike ran strategy. Mike and I developed the strategy. That won't change very much. I think the execution might be a little bit more pointed in certain areas. Taking some of these new technologies like TMR and gate drivers, accelerating those things, accelerating the cost roadmap might be accelerated. Things like, for example, switching from gold to copper with gold being at all-time highs on lead frame wires.
Mike just knows where to look for those things. And Mike knows the industry really, really well. Quite frankly, he'd be here right now, but he's in Japan with customers. Customers love Mike as well.
Yeah. I mean, I was surprised on the earnings call. Given his background, he seemed as focused on operations and costs as he did the traditional CTO role and commercialization. I mean, what are his, I guess, initial priorities? Is he more focused on sales? Is it on ops? I mean, how will, I guess, he define success in his first year and any meaningful changes that he makes?
Sure. Mike and I and the rest of the management team are absolutely focused on execution over the next 6, 9, 12 months. Execution means coming out of this downturn that we have painfully been in for a number of quarters with the sales side of things, executing on the new product sales, right? Our sales team now has a whole bunch of new products they go and sell. Selling those products that we have, expanding that content. We are ultra-focused on getting those gross margins back above 50% in the near term, right? All of us are focused and rowing in the same direction. Our compensation plans are based on those things. Those are the things here in the near term. We will continue to optimize our balance sheet as well. We are paying down debt pretty fast.
We're doing all those things you'd want to do to improve both profit margins and sort of return on capital.
I would layer into that, too. It is something you touched on, Josh, that Mike has this really unique combination of having that design background, but also the appreciation for the fractional pennies that comes with running operations. He is really committed. You see it in what he speaks to innovating within a spending envelope.
Awesome. Thank you. I guess on that note, he became CEO at a very interesting time to be running a public semiconductor company and immediately jumped into the tariff chaos. What are you guys seeing in behaviors from your customers? Any changes? I mean, for the most part, there have been some exceptions. I've been surprised that most companies are saying they're not seeing any meaningful changes in order patterns or customer behaviors. What are you guys seeing on both the autos and industrial side?
I would echo that. We said on our public call, we're not seeing any meaningful changes. We ship all of our products from the Philippines, from our backend facility in the Philippines. We ship about 15% of our products into North America, a little bit less than that in the United States. All those are exempt anyways as semiconductors, at least today. We ship about 27% into China. We're not seeing any meaningful changes in order patterns. Certainly in the March quarter, we did a good scrub to see, did we have any pull ahead in that March quarter? We didn't see any in the revenue numbers. In my guidance for the June quarter, we don't see any pull aheads. We have customers requesting things for pull aheads, but we're talking about that now and negotiating how that might work. That's not in our numbers right now.
Got it. I mean, on that note, how do you feel? You took some proactive measures last year to get inventory in check. It feels like you guys have gotten a good handle on inventory for a while. Now you've just been kind of waiting for end demand to improve. Is that a fair characterization? Is there more inventory digestion that needs to be done? I mean, how would you categorize on-books, channel, and then end customer inventory levels right now?
Sure. I'll talk about the on-books, which is kind of disconnected from the end market, right? The on-books inventory, we've brought down our finished goods the last two quarters. We'll continue to bring down our finished goods. That's good. We're using those finished goods that we built ahead a little bit to supply some of the in-quarter order rates. That's been helpful. We brought down finished goods by about 13% in the March quarter. We're able to dial down production a little bit, able to fulfill some orders out of finished goods. The preponderance of our on-books inventory is wafer or die bank, which is quite helpful to have on-books because three years ago we didn't have that, and many people didn't have that. It was difficult to supply in-quarter orders.
In terms of distributor inventories, our distributor inventories came down 25% exiting the March quarter, this March quarter, compared to the beginning of the year. While sales dropped 31%, 25% of that was a decline in inventories with our distributors and then a decline in inventories at our auto customers. We feel like we're in pretty good shape in most regions of the world with distributors. We get direct information there from all the large distributors. On the auto side, the direct side of things, I think we're in really good shape in North America. We took a lot of our inventory out of the channel in the June quarter of 2024. Very early in the cycle, we started allowing customers to cancel, to push out orders out of LTAs. We think that was the right thing to do for us, at least.
China was down 50% that quarter, rebounded pretty strongly. We think we're shipping to demand there in most regions of the world. The area that probably has a little bit of excess inventory still is Europe and maybe a little bit in Japan where they carry inventory.
Okay, so if I were to summarize, basically everywhere is back to normal, shipping to end demand and consumption other than North America and Japan. Is that a?
In pockets of industrial as well.
Okay, yeah, that was my question.
Things like that.
Is that an auto comment?
That's an auto comment.
OK, and industrial, there's still some pockets.
Correct.
OK, got it. I wanted to ask about your manufacturing network as well. You historically had a primary partnership with Polar Semiconductor in the United States. Then over the last several years, you've qualified UMC and TSMC and also more recently partnering with Chinese foundries. What portion of the mix is serviced today by each of your respective foundry partners? Does that need to change over time? What are your plans for your manufacturing roadmap?
Sure. All of our wafer manufacturing is outsourced. 50% of it approximately comes from UMC in Taiwan, about a third from Polar Semiconductor in Minnesota, about 10%-15% from TSMC. Wafer production just coming off the line in China in qualification lots, not yet in production and not yet shipping to customers. A little bit with Tower from the Crocus acquisition, small amount, a couple of percentage points. I do not expect that to change significantly in the short term, but we do expect to ramp up that China for China supply chain with product coming out of the complete China supply chain by the end of this fiscal year. We already have had OSATs in China for a number of years. From a backend standpoint, we do all of our probe, all of our tests currently in the Philippines at our own facility.
We do about half of our assembly at our facility in the Philippines, which is proprietary packaging, small lots, customized things. Most of the standard packaging is done at the large OSATs in Malaysia, Taiwan, and the Philippines.
How does the China for China strategy play in? What's your vision there? Is that proactive on your part, or are you seeing the legitimate pull from Chinese customers already to have your parts sourced at least from a manufacturing basis locally?
It is actually both, but it started three years ago, essentially, when customers were having a request. Before it became a sort of demand, it was a request to have a plan to do something in China. We started this process about three years ago. As you know, it is a long process to qualify a wafer, particularly for automotive. We have also used OSAT in China for assembly for the past several years. About 10% of our assembly has been done in China. We also last year qualified another OSAT for probe assembly and test so we can have some turnkey in China. That is expected to start shipping at the end of this fiscal year. Luckily, this process started three years ago for us because it is a multi-year process.
It is starting to bear fruit right now, especially when you start to deal with some of these geopolitical issues.
Got it. I actually wanted to circle back to your comments on the auto and tier one inventory levels. I think given the shortages and how painful they were in 2021 and 2022, I've at least been surprised at how quickly and aggressively the tier ones have wanted to move back to pre-COVID inventory levels and in some instances even below that. I'd just be curious to hear your perspective on what's the right move for the industry. Could you maybe provide perspective on why they're thinking that's the right level?
Yeah, I could tell you why they think it's the right level. It's because sitting in a CFO seat, I think if you're managing working capital and you're managing single-digit operating margins and you know your suppliers have capacity, I would absolutely try and push some of that inventory back onto my suppliers. That's why your suppliers have capacity, right? As we all know, this all tightens up at the same time, generally speaking. That's what causes these supply chain crunches. I think they think that's the right move right now, but that's what causes these large oscillations between supply crunches and sort of gluts in inventory.
I mean, how much, let's say there was a 5% increase in SAR or 10% increase in SAR. I mean, how much better would it need to get before we would get to a period where you would expect to see some pockets of shortages?
We're already starting to see pockets of shortages on the wafer side and certain raw materials for quick turn items, particularly in things like data center. We're not seeing that in auto. I think many of us on the semiconductor side have stocked up on wafers. There are other parts, whether it's magnets, whether it's rare earth minerals, and those kind of things where there could be supply shortages if all that happened at the same time.
OK. Wanted to shift a little bit on gross margins. You mentioned earlier that you're currently below 50%. You're laser-focused on getting back into the 50% range, and you have a higher target longer term. How much of that is utilizations? What other levers do you have at your disposal to bring gross margins higher, including even many of the new products we talked about? Are they gross margin accretive?
Yeah, sure. In the short term, the sort of largest lever is volume. Every dollar of revenue generally translates into 65 cents of gross margin because we have the fixed costs already in the Philippines. If it is manufactured in the Philippines, a probe, assemble, test, we get 65 cents on the dollar. That is accretive to gross margins. That is the biggest lever in the short term. The other pieces are as industrial comes back and distribution comes back, that has a better gross margin than auto because of the volumes. The volumes are just significantly smaller, serving a tail of 10,000 customers versus a concentrated auto space who are buying millions of parts. That is better gross margin. New parts help. There are two sort of cost dynamics. One is in the March quarter, our gross margins troughed.
As I said, the reason for that is pricing largely comes down in the March quarter, particularly in automotive. That hits the P&L right in that quarter. Even while we've negotiated cost reductions with OSATs and wafer suppliers, that takes about a quarter or two to cycle through inventory into the P&L. There is some timing there. You'll see that most years. The second piece is we did a modest restructuring, which will start to phase into the P&L in the second half of fiscal 2026. Those four things, coupled with the new products, really help drive those gross margins to at least 65% accretion on the gross margin side and possibly above that with those tailwinds.
Yeah, I want to get back to the restructuring. First, I mean, it was obviously, as we talked, it was a very strange time for the industry where everyone took advantage of, not took advantage, but benefited from pricing uplifts a couple of years ago. What's the right through cycle margin profile for you guys?
Yeah, we still think our target operating model is 58%, right? Back when we put that out, it was in March of 2023. We had an analyst day. We put out the 58%. We were at 58.3%. I got asked, wow, isn't that a bit conservative? You're already there, right? I said the actual margins at that time, excluding all the FX, the pricing was probably in the 55%-56% range. Excluding those things, that's where we were, right? There's a whole bunch of things helping us get back to the 58%. It's going to take some work. It's going to take some time. I think that's still our long-term target model.
You mentioned the restructuring. What are the actions that you're taking operationally that are involved in this restructuring? What's the ultimate impact you could see on the COGS and OpEx lines?
Sure. We continue to move our operations closer to our customers, closer to our vendors. What I mean by that, in the Philippines, where we have our manufacturing facility, we have 2,800 employees. We also opened a shared services center in the Philippines in November of 2023. We have continued to migrate functions: accounting, finance, IT, HR, logistics, purchasing to that facility in the Philippines. It is working out fantastic. There is not only a cost advantage, but there is also an advantage of being closer to our customers. 70% of our customers are in Asia. The majority of our vendors are in Asia. All the shipping happens out of the Philippines. It is just much more efficient. We will continue to leverage that. This restructuring was much more of a repositioning. It had nothing to do with where we were in a cycle.
It had to do with the fact that we're repositioning resources to the regions we're in. We'll continue to do that even in an upcycle. We'll continue to take costs out. That was about $15 million on a run rate basis, about half of which is cost of goods sold. Half of that is OpEx. We won't stop there. We'll continue to find opportunities for efficiencies.
We talked about Crocus and Heyday, which I think you guys are happy with the turnout thus far of those tuck-in and M&A deals. Is that still part of your plan? Do you see more room for strategic acquisitions? I mean, you've been recently in the news of acquisitions on the other end. I'd be curious to hear, do you feel like the balance sheet is at a spot where you could add more if you wanted to?
Yeah, we have a pretty modest amount of debt on our balance sheet. We just made another voluntary debt payment two weeks ago. We'll continue to make voluntary debt payments to bring that's the use of our free cash flow right now. We have a lot of opportunity to grow the organic business. Releasing 50% new parts. Our sales team has a whole bunch of new products that they can sell today. We think there's a lot of opportunity to really stretch that and execute on that. It's a lot less risky than doing M&A. That said, we continue to look at things that make sense for us. When I say make sense, they have to be pretty close to home. They have to be a technology that we understand. Crocus fit that right down the middle. We understand magnetic sensing. We already had a TMR business.
We can assign engineers to it. We can assign management to it. We have to be able to bring it to our customers. It has to fit with one of our end markets, right? Of course, there are some financial profiles. Those first three are critically important. The most meaningful measure I look at when we buy a company is variable contribution margin from a financial metric because you can fix OpEx. You can fix fixed costs. You generally can't fix what a customer is willing to pay for that product. If they're not paying for it, they're probably not going to pay for it even after you buy it.
We're bumping up on time here. On the earnings call, you announced plans to have an analyst day. I think, Jalene, you mentioned after the October call. Can you talk about I think your most recent one was two and a half years ago. Understand you can't front-run the event. Why is now the right time to have another investor day?
Our fifth-year anniversary as a public company is in October of 2025. We would like to have it following that. It could be in the December quarter or the March quarter, TBD. Similar to our March event, we have had some changes in our leadership team, so it is a reintroduction of that team. Also, crystallization of our strategy, which, as we have talked today, has not changed significantly, but it is worthy to walk through. There are still misperceptions about the company, so this provides an opportunity for us to address those, as well as to introduce the general audience to our team.
A bunch of questions lined up. If anyone in the audience has questions as well, please feel free to raise your hand. We will certainly get your question asked. Derek, Jalene, thank you for joining us again this year. I think many in the audience.