Allegro MicroSystems, Inc. (NASDAQ:ALGM) Q1 2025 Earnings Conference Call August 1, 2024 8:30 AM ET Company Participants Jalene Hoover - Vice President of Investor Relations & Corporate Communications Vineet Nargolwala - President & Chief Executive Officer Derek D'Antilio - Senior Vice President, Chief Financial Officer & Treasurer Conference Call Participants Chris Caso - Wolfe Research Blayne Curtis - Jefferies Quinn Bolton - Needham Vijay Rakesh - Mizuho Thomas O'Malley - Barclays Joshua Buchalter - TD C ...

Company Performance - Allegro MicroSystems reported quarterly earnings of $0.03 per share, exceeding the Zacks Consensus Estimate of $0.02 per share, but down from $0.39 per share a year ago, representing an earnings surprise of 50% [1] - The company posted revenues of $166.92 million for the quarter ended June 2024, surpassing the Zacks Consensus Estimate by 1.10%, but down from $278.29 million year-over-year [1] - Over the last four quarters, Allegro MicroSystems has surpassed consensus EPS estimates four times and revenue estimates three times [1] Future Outlook - The current consensus EPS estimate for the upcoming quarter is $0.08 on revenues of $186.9 million, and for the current fiscal year, it is $0.43 on revenues of $796.2 million [4] - The estimate revisions trend for Allegro MicroSystems is mixed, resulting in a Zacks Rank 3 (Hold), indicating expected performance in line with the market in the near future [4] Industry Context - The Electronics - Semiconductors industry, to which Allegro MicroSystems belongs, is currently in the bottom 40% of over 250 Zacks industries, which may impact stock performance [5] - Another company in the same industry, Ichor Holdings, is expected to report quarterly earnings of $0.03 per share, reflecting a year-over-year change of +50%, with revenues anticipated at $197.75 million, up 6.9% from the previous year [5][6]

First Quarter Financial Highlights and Business Outlook [First Quarter 2025 Financial Highlights](index=1&type=section&id=First%20Quarter%202025%20Financial%20Highlights) Allegro reported Q1 FY2025 sales of **$167 million** and non-GAAP EPS of **$0.03**, alongside inventory rebalancing and capital actions Q1 FY2025 Key Financial Metrics (GAAP vs. Non-GAAP) | Financial Metric | Q1 FY2025 (ended June 28, 2024) | Q4 FY2024 (ended Mar 29, 2024) | Q1 FY2023 (ended June 30, 2023) | | :--- | :--- | :--- | :--- | | **Total Net Sales** | **$166.9M** | **$240.6M** | **$278.3M** | | GAAP Gross Margin % | 44.8% | 51.2% | 56.8% | | GAAP Operating Margin % | (6.4)% | 6.6% | 25.4% | | GAAP Diluted EPS | $(0.09) | $(0.04) | $0.31 | | Non-GAAP Gross Margin % | 48.8% | 53.8% | 57.8% | | Non-GAAP Operating Margin % | 6.0% | 23.8% | 30.8% | | Non-GAAP Diluted EPS | $0.03 | $0.25 | $0.39 | Q1 FY2025 Net Sales by Market (vs. Prior Periods) | Market | Q1 FY2025 (ended June 28, 2024) | Q4 FY2024 (ended Mar 29, 2024) | Q1 FY2023 (ended June 30, 2023) | | :--- | :--- | :--- | :--- | | Automotive | $131.2M | $181.9M | $185.4M | | Industrial and other | $35.7M | $58.6M | $92.9M | - Made a **$50 million** voluntary debt repayment during the quarter[2](index=2&type=chunk) - Announced a repurchase and retirement of **39 million** shares from its majority shareholder, which is expected to broaden ownership and increase liquidity[2](index=2&type=chunk)[3](index=3&type=chunk) [Business Outlook for Second Quarter 2025](index=1&type=section&id=Business%20Outlook) Allegro projects Q2 FY2025 net sales of **$182-192 million**, expecting low double-digit growth and non-GAAP EPS of **$0.04-0.08** Q2 FY2025 Non-GAAP Outlook | Metric | Expected Range/Value | | :--- | :--- | | Net Sales | $182M - $192M | | Gross Margin | 49% - 51% | | Interest Expense | Approx. $7M | | Diluted EPS | $0.04 - $0.08 | - The company expects a return to low double-digit sequential sales growth in the second quarter[2](index=2&type=chunk) - Allegro noted that it cannot provide a reconciliation of its forward-looking non-GAAP measures to GAAP measures without unreasonable effort due to the unpredictability of certain factors[6](index=6&type=chunk) Financial Statements (GAAP) [Condensed Consolidated Statement of Operations](index=5&type=section&id=CONDENSED%20CONSOLIDATED%20STATEMENT%20OF%20OPERATIONS) Allegro reported Q1 FY2025 net sales of **$166.9 million** (**40%** decrease), leading to a GAAP operating loss of **$10.6 million** and net loss of **$17.7 million** Q1 FY2025 Statement of Operations Summary (Year-over-Year) | Metric (in thousands) | Q1 FY2025 (ended June 28, 2024) | Q1 FY2024 (ended June 30, 2023) | % Change | | :--- | :--- | :--- | :--- | | Net Sales | $166,919 | $278,293 | (40.0)% | | Gross Profit | $74,771 | $157,950 | (52.7)% | | Operating (Loss) Income | $(10,630) | $70,746 | N/A | | Net (Loss) Income | $(17,613) | $60,889 | N/A | | Diluted (Loss) Income per Share | $(0.09) | $0.31 | N/A | Q1 FY2025 Net Sales by Market (Year-over-Year) | Market (in thousands) | Q1 FY2025 | Q1 FY2024 | % Change | | :--- | :--- | :--- | :--- | | Automotive | $131,184 | $185,430 | (29)% | | Industrial and other | $35,735 | $92,863 | (62)% | | **Total Net Sales** | **$166,919** | **$278,293** | **(40)%** | [Condensed Consolidated Balance Sheets](index=6&type=section&id=CONDENSED%20CONSOLIDATED%20BALANCE%20SHEETS) Allegro's total assets decreased to **$1.45 billion**, with liabilities reduced to **$339.0 million** and equity at **$1.11 billion** as of June 28, 2024 Balance Sheet Summary (Quarter-over-Quarter) | Account (in thousands) | June 28, 2024 | March 29, 2024 | | :--- | :--- | :--- | | Cash and cash equivalents | $173,136 | $212,143 | | Inventories | $175,901 | $162,302 | | **Total Assets** | **$1,448,890** | **$1,530,603** | | Long-term debt | $202,589 | $249,611 | | **Total Liabilities** | **$339,048** | **$398,887** | | **Total Stockholders' Equity** | **$1,109,842** | **$1,131,716** | [Condensed Consolidated Statements of Cash Flows](index=7&type=section&id=CONDENSED%20CONSOLIDATED%20STATEMENTS%20OF%20CASH%20FLOWS) Q1 FY2025 net cash from operations was **$34.2 million**, with **$11.0 million** used in investing and **$60.4 million** in financing, resulting in a **$38.0 million** cash decrease Cash Flow Summary (Year-over-Year) | Cash Flow Activity (in thousands) | Q1 FY2025 (ended June 28, 2024) | Q1 FY2024 (ended June 30, 2023) | | :--- | :--- | :--- | | Net cash provided by operating activities | $34,196 | $49,663 | | Net cash used in investing activities | $(10,977) | $(34,939) | | Net cash used in financing activities | $(60,378) | $(11,035) | | **Net (decrease) increase in cash** | **$(37,984)** | **$3,616** | - A significant use of cash in financing activities was a **$50.0 million** payment on the 2023 term loan facility[18](index=18&type=chunk) Non-GAAP Financial Measures and Reconciliations [Reconciliation of Non-GAAP Gross Profit](index=8&type=section&id=Reconciliation%20of%20Non-GAAP%20Gross%20Profit) Q1 FY2025 non-GAAP gross profit was **$81.4 million** (**48.8%** margin), adjusted from GAAP gross profit of **$74.8 million** by **$6.6 million** in non-GAAP items Q1 FY2025 GAAP to Non-GAAP Gross Profit Reconciliation (in thousands) | Metric | Q1 FY2025 | | :--- | :--- | | GAAP Gross Profit | $74,771 | | GAAP Gross Margin % | 44.8% | | **Total Non-GAAP Adjustments** | **$6,635** | | *Purchased intangible amortization* | *$4,875* | | *Restructuring costs* | *$1,200* | | *Stock-based compensation* | *$561* | | Non-GAAP Gross Profit | $81,406 | | Non-GAAP Gross Margin % | 48.8% | [Reconciliation of Non-GAAP Operating Expenses & Income](index=9&type=section&id=Reconciliation%20of%20Non-GAAP%20Operating%20Expenses%20%26%20Income) Q1 FY2025 non-GAAP operating income was **$10.0 million** (**6.0%** margin), contrasting with a GAAP operating loss of **$10.6 million** after **$20.6 million** in adjustments Q1 FY2025 GAAP to Non-GAAP Operating Income Reconciliation (in thousands) | Metric | Q1 FY2025 | | :--- | :--- | | GAAP Operating (Loss) Income | $(10,630) | | GAAP Operating Margin % | (6.4)% | | **Total Non-GAAP Adjustments** | **$20,595** | | *Stock-based compensation* | *$10,118* | | *Purchased intangible amortization* | *$5,410* | | *Restructuring costs* | *$2,414* | | *Transaction-related costs* | *$1,842* | | Non-GAAP Operating Income | $9,965 | | Non-GAAP Operating Margin % | 6.0% | [Reconciliation of EBITDA and Adjusted EBITDA](index=11&type=section&id=Reconciliation%20of%20EBITDA%20and%20Adjusted%20EBITDA) Q1 FY2025 Adjusted EBITDA was **$21.9 million** (**13.1%** margin), derived by adjusting the GAAP net loss of **$17.6 million** for standard add-backs and non-GAAP items Q1 FY2025 GAAP Net Loss to Adjusted EBITDA Reconciliation (in thousands) | Metric | Q1 FY2025 | | :--- | :--- | | GAAP Net (Loss) Income | $(17,613) | | Interest expense, net | $4,883 | | Income tax provision | $1,040 | | Depreciation & amortization | $16,458 | | **EBITDA** | **$4,768** | | Stock-based compensation | $10,118 | | Restructuring costs | $2,414 | | Other adjustments | $4,649 | | **Adjusted EBITDA** | **$21,949** | | Adjusted EBITDA Margin % | 13.1% | [Reconciliation of Non-GAAP Profit before Tax and Income Tax Provision](index=11&type=section&id=Reconciliation%20of%20Non-GAAP%20Profit%20before%20Tax%20and%20Income%20Tax%20Provision) Allegro's Q1 FY2025 non-GAAP profit before tax was **$6.7 million**, adjusted from a GAAP loss of **$16.6 million** by **$23.3 million** in non-GAAP items Q1 FY2025 GAAP to Non-GAAP Pre-Tax Profit Reconciliation (in thousands) | Metric | Q1 FY2025 | | :--- | :--- | | GAAP (Loss) Income before Income Taxes | $(16,573) | | Total Non-GAAP Adjustments | $23,300 | | **Non-GAAP Profit before Tax** | **$6,727** | Q1 FY2025 GAAP to Non-GAAP Tax Provision Reconciliation (in thousands) | Metric | Q1 FY2025 | | :--- | :--- | | GAAP Income Tax Provision | $1,040 | | GAAP effective tax rate | (6.3)% | | Tax effect of adjustments to GAAP results | $(395) | | **Non-GAAP Income Tax Provision** | **$645** | | **Non-GAAP effective tax rate** | **9.6%** | [Reconciliation of Non-GAAP Earnings per Share](index=13&type=section&id=Reconciliation%20of%20Non-GAAP%20Earnings%20per%20Share) Allegro reported Q1 FY2025 non-GAAP diluted EPS of **$0.03**, contrasting with a GAAP loss of **($0.09)**, derived from a non-GAAP net income of **$6.0 million** Q1 FY2025 GAAP to Non-GAAP EPS Reconciliation | Metric | Q1 FY2025 | | :--- | :--- | | GAAP Diluted (Loss) Earnings per Share | $(0.09) | | GAAP Net (Loss) Income (in thousands) | $(17,675) | | Total Non-GAAP Adjustments (pre-tax, in thousands) | $23,300 | | Tax effect of adjustments (in thousands) | $395 | | **Non-GAAP Net Income (in thousands)** | **$6,020** | | Diluted weighted average common shares | 194,705,716 | | **Non-GAAP Diluted Earnings per Share** | **$0.03** | [Reconciliation of Non-GAAP Free Cash Flow](index=13&type=section&id=Reconciliation%20of%20Non-GAAP%20Free%20Cash%20Flow) Q1 FY2025 non-GAAP free cash flow was **$23.2 million** (**13.9%** of net sales), derived from GAAP operating cash flow of **$34.2 million** less capital expenditures Q1 FY2025 Free Cash Flow Reconciliation (in thousands) | Metric | Q1 FY2025 | | :--- | :--- | | GAAP Operating Cash Flow | $34,196 | | Purchases of property, plant and equipment | $(10,977) | | **Non-GAAP Free Cash Flow** | **$23,219** | | Non-GAAP Free Cash Flow % of net sales | 13.9% |

MANCHESTER, N.H., July 31, 2024 (GLOBE NEWSWIRE) -- Allegro MicroSystems, Inc. ("Allegro") (NASDAQ:ALGM), a global leader in power and sensing solutions for motion control and energy-efficient systems, today announced the allocation of a $400,000,000 term loan tranche (the "Term Loan"), consisting of new term loans incurred, in relevant part, to facilitate the repurchase of shares from Allegro's majority shareholder, Sanken Electric Co., Ltd. ("Sanken"), to fully refinance Allegro's existing term loan facil ...

MANCHESTER, N.H., July 31, 2024 (GLOBE NEWSWIRE) -- Allegro MicroSystems, Inc. (“Allegro”) (Nasdaq: ALGM), a global leader in power and sensing solutions for motion control and energy-efficient systems, today announced the allocation of a $400,000,000 term loan tranche (the "Term Loan"), consisting of new term loans incurred, in relevant part, to facilitate the repurchase of shares from Allegro’s majority shareholder, Sanken Electric Co., Ltd. (“Sanken”), to fully refinance Allegro’s existing term loan faci ...

MANCHESTER, N.H., July 29, 2024 (GLOBE NEWSWIRE) -- Allegro MicroSystems, Inc. (NASDAQ:ALGM) ("Allegro"), a global leader in power and sensing solutions for motion control and energy-efficient systems, announced today that it has completed the closing of the first of two repurchases for a total of 39 million shares of common stock from Allegro's largest shareholder, Sanken Electric Co., Ltd. ("Sanken"), all of which will be retired. The closing of the first repurchase was financed by issuing approximately 2 ...

MANCHESTER, N.H., July 29, 2024 (GLOBE NEWSWIRE) -- Allegro MicroSystems, Inc. (Nasdaq: ALGM) (“Allegro”), a global leader in power and sensing solutions for motion control and energy-efficient systems, announced today that it has completed the closing of the first of two repurchases for a total of 39 million shares of common stock from Allegro’s largest shareholder, Sanken Electric Co., Ltd. (“Sanken”), all of which will be retired. The closing of the first repurchase was financed by issuing approximately ...

Company Overview - Allegro MicroSystems, Inc. is a global leader in power and sensing solutions for motion control and energy-efficient systems, focusing on automotive and industrial markets [5] - The company designs, develops, and manufactures sensor integrated circuits and application-specific analog power ICs, contributing to the electrification of vehicles and energy-efficient technologies [5] Offering Details - Allegro announced a primary offering of 25,000,000 shares of common stock at a public offering price of $24.00 per share, resulting in gross proceeds of $600,000,000 [1] - After accounting for underwriters' discounts, net proceeds to Allegro are expected to be $579,000,000 [1] - The underwriters have a 30-day option to purchase an additional 3,750,000 shares at the public offering price [1] - Proceeds will be used to repurchase shares from Allegro's majority shareholder, Sanken Electric Co., Ltd., at the same price per share as the offering [1] - Post-offering, Sanken will hold approximately 33.2% of Allegro's outstanding common stock, or 32.5% if the underwriters' option is fully exercised [1] Underwriters and Advisors - Barclays, Morgan Stanley, and UBS Investment Bank are acting as joint lead book-running managers for the offering [2] - BofA Securities, Mizuho, and Jefferies are serving as book-running managers, while PJT Partners and Needham & Company are co-managers [2] - PJT Partners is also acting as a financial advisor to Allegro [2] Regulatory Information - The offering is made pursuant to an effective shelf registration statement filed with the SEC on July 23, 2024 [2] - Shares will be offered only by means of a prospectus supplement and the accompanying prospectus [2]

Company Overview - Allegro MicroSystems, Inc. is a global leader in power and sensing solutions for motion control and energy-efficient systems, focusing on sensor integrated circuits and application-specific analog power ICs [3] - The company provides solutions for various sectors, including automotive electrification, ADAS safety features, Industry 4.0 automation, and energy-saving technologies for data centers and clean energy applications [3] Recent Developments - Allegro announced the launch of syndication for an incremental term loan under a Credit Agreement dated June 21, 2023, with proceeds intended for share repurchase from its majority shareholder, Sanken Electric Co., Ltd. [1] - The completion of these transactions is subject to market conditions, and there is no assurance regarding the timing or terms of the Incremental Term Loan [1] Financial Arrangements - Morgan Stanley and Barclays are acting as joint lead arrangers and book-runners for the Incremental Term Loan, while PJT Partners serves as the financial advisor to Allegro [2]

Company Overview - Allegro MicroSystems, Inc. is a global leader in power and sensing solutions for motion control and energy-efficient systems, focusing on sensor integrated circuits and application-specific analog power ICs [3] - The company provides solutions for various markets, including automotive, industrial, and clean energy applications, supporting the electrification of vehicles and automation for Industry 4.0 [3] Recent Developments - Allegro announced the launch of syndication for an incremental term loan under a Credit Agreement dated June 21, 2023, with proceeds intended for share repurchase from its majority shareholder, Sanken Electric Co., Ltd. [1] - The completion of these transactions is subject to market conditions, and there is no assurance regarding the timing or terms of the Incremental Term Loan [1] Financial Arrangements - Morgan Stanley and Barclays are acting as joint lead arrangers and book-runners for the Incremental Term Loan, while PJT Partners serves as the financial advisor to Allegro [2]