Derek D’Antilio: Yes, Vijay, thank you for the question. It usually takes a couple of quarters, right? Historically, it’s taking, generally speaking, about 3 quarters. So I’ll call the December quarter, the first quarter, March is the second quarter and June is the third quarter. So if history is any guidance, that would be the case that Q1 will get back to normal. So we expect right now that Q1 will be our trough quarter. And we’re going to see that across end markets. We’re starting to see it — it’s really kind of a rolling cycle, as you know. So within our consumer business, that’s getting to a trough right now, and that could come sooner, right? And that could start to rebound a little bit sooner. And then I’d expect industrial to rebound. In auto, the dynamic, as Vineet mentioned, is relatively new with the auto inventory rebalancing at the tiers and the subcontractors, which will be, I think, last to kind of complete that rebalancing.
Vijay Rakesh: Got it. And then on the auto side, obviously, a big chunk of your sales there is 75% or something. But the outlook for fiscal ‘24, up 15% to 18% versus where LVP is. Can you talk to what’s driving that? That’s it.
Derek D’Antilio: Yes. So let me give you the numbers. For our fiscal ‘24, which ends in March, we expect our auto sales to be up high teens and overall sales to be up 7%. And for that same period, LVP is about 8%. So we’re about double that, a little bit more than double that, consistent with our model, so 7% to 10% outgrowth on top of that. And really what’s driving that has been the continued design wins and the growth within EV and xEV and the e-mobility side. So the e-mobility side of our business go from 44% of auto a year ago to 54% of auto the same quarter this year.
Vijay Rakesh: And then would you expect to continue that into fiscal ‘25 that same above LVP 10% above LVP growth?
Derek D’Antilio: Yes. We’re not guiding for ‘25 right now, and we’re going to continue to watch the market closely for ‘25, Vijay.
Operator: Our next question comes from Blake Friedman with Bank of America.
Blake Friedman: Just kind of wanted to approach the comments on June from a different perspective. So when I look at your auto and industrial peers on a fee to top basis, most are down anywhere from 20% to 35%. And — and when I look at your March quarter guide, it implies declines on a peak-to-trough basis, closer to mid-teens. So I know you mentioned June would mark the trough of the cycle, but is it fair to say Allegro the peak-to-trough declines this cycle can finish at the lower end of that range?
Derek D’Antilio: Yes. So the way we haven’t given any guidance, Blake, with respect to the June quarter, right? But we had a decline of about 8% in the December quarter. Our guidance is about a decline of 8% in the March quarter. And so again, if history is any guide, we’re expecting that these 3 quarter cycles, we’ll continue to see that kind of a decline in the March quarter as well.
Blake Friedman: Got it. And then just more of a longer-term question on gross margin. I know you outlined the puts and takes to kind of — in the short-term recovery. But to get to your 58% target, can you maybe describe that bridge from 54% to 55% to 58%, puts and takes from there?
Derek D’Antilio: Sure. Good question. So when I look at our Q3, we were actually above 55% on an organic basis before we start to get synergies for Crocus. So that was about a 70 basis point headwind for the Crocus — first quarter of Crocus and we’re continuing to work to get synergies on their business. And as that business scales, we’ll also get gross margin. The other piece of it is our distribution sales are obviously down. And as we’ve talked about in the past, that’s about 800 to 1,000 basis points higher than the OEMs just because of the volumes. So as that starts to normalize, that’s generally about 100 basis points. That kind of brings us back up to that 56% to 57% range. And then our supply chain teams continue to work on a flexible manufacturing model by moving products or standard product to subcontractors, as Vineet talked about China supply chain and then continuing to leverage our back-end facility in the Philippines, but we continue to — we have opportunities for optimization.
And we just finished a large capacity expansion in the Philippines and that’s something that happens every few years. That’s not going to continue into next year. So we’ll continue to leverage the Philippines. So we think with our vendor leverage as we scale our Philippines facility and getting synergies from Crocus, and as the distribution sales start to normalize, we get to that 58% level. And we were there, of course, 2 quarters ago.
Operator: Our next question comes from Joshua Buchalter with TD Cowen.
Joshua Buchalter: I guess I wanted to follow up on the previous one, and I apologize for beating the inventories digestion to that. But did you just say that you expect the June quarter to be down as much as the December and March quarter? And I guess big picture, can you talk to confidence that you’ll be able to get this inventory cleaned up by the June quarter? And any anecdotes about where inventory levels are at your end customers would be helpful.
