Allegro MicroSystems tops Q2 profit estimates as sales rise 29%

Allegro MicroSystems Inc. (ALGM) said on Oct. 29 that fiscal second-quarter sales rose 29% from a year earlier to $276.88 million, above the $265 million to $275 million range it gave on July 30. Non-GAAP diluted earnings per share of 26 cents topped the 25-cent consensus estimate compiled by Finnhub, and revenue was in line with the $276.23 million consensus estimate from the same source.

The quarter ended Sept. 25. Allegro makes power and sensing semiconductors for motion control and energy-efficient systems, according to the release.

On a GAAP basis, the company reported diluted earnings per share of 12 cents, up from 3 cents a year earlier.

Here's how the company did:

• Revenue: $276.88 million vs. $276.23 million expected, according to Finnhub, and $214.29 million a year earlier
• Non-GAAP diluted EPS: 26 cents vs. 25 cents expected, according to Finnhub, and 13 cents a year earlier
• GAAP diluted EPS: 12 cents vs. 3 cents a year earlier
• Non-GAAP operating margin: 20.6% vs. 13.9% a year earlier
• GAAP operating income: $35.45 million vs. $6.24 million a year earlier

Segment results

Automotive sales were $172.49 million, up 11% from $155.85 million a year earlier.

Industrial and Other sales were $104.39 million, up 79% from $58.45 million a year earlier. The company said data center sales set a new record.

Demand and design wins

“Our forward demand signals strengthened significantly this quarter,” CEO Mike Doogue said. He said the leading indicators across the business give the company high confidence in its path to exceed its target model of mid-teens annual sales growth.

Revenue has risen in each of the last three quarters, from $214.3 million to $259.2 million, according to its SEC filings.

Third-quarter guidance

For the quarter ending Dec. 25, the company expects net sales of $278 million to $288 million. The midpoint implies growth of 23% from a year earlier.

The company also expects non-GAAP gross margin of 51.5% to 52.5%, operating expenses of $87 million, plus or minus $1 million, and non-GAAP diluted EPS of 25 cents to 29 cents. The midpoint of the EPS range implies an 80% increase.

The company said it has not reconciled those non-GAAP outlook figures to GAAP because estimates of all the reconciling items cannot be provided without unreasonable efforts.

Cash and balance sheet

Non-GAAP free cash flow was $30.51 million, compared with $13.92 million a year earlier. Adjusted EBITDA was $69.23 million, up from $40.82 million.

On Sept. 30, after the quarter closed, the company made a $25 million voluntary debt repayment. “During the quarter, we also continued to execute on our strategic priorities of expanding profitability and generating strong cash flow,” CFO Derek D’Antilio said, adding that the repayment underscores “the strength of our balance sheet.”