Allegro Microsystems Reports Significant Financial Challenges, Decline in Revenue and Net Income

Allegro Microsystems, Inc. reported significant financial challenges in its latest 10-Q filing for the period ending September 27, 2024. The company experienced a substantial decline in revenue, with net sales for the three-month period totaling $187.4 million, down 32% from $275.5 million in the same period of the previous year. For the six-month period, net sales decreased by 36% to $354.3 million from $553.8 million. This decline was attributed to reduced customer demand, inventory rebalancing, and a decrease in shipments across all end markets, particularly in automotive and industrial applications.

The company's gross profit for the three-month period fell to $85.7 million, a 46.3% decrease from $159.5 million in the prior year, resulting in a gross margin of 45.7%, down from 57.9%. Operating income also suffered, with a reported income of $4.1 million, a dramatic drop of 94.4% compared to $72.9 million in the same quarter of 2023. Allegro reported a net loss of $33.6 million for the three-month period, contrasting sharply with a net income of $65.7 million in the previous year.

For the six-month period, the net loss was $51.4 million, compared to a net income of $126.5 million in the same period of 2023. The company’s total assets decreased to $1.49 billion from $1.53 billion, while total liabilities rose significantly, with long-term debt increasing to $396.1 million from $249.6 million.

Strategically, Allegro has been active in expanding its manufacturing capabilities, including operations in the Philippines and the acquisition of Crocus Technology International Corp. The company also executed a share repurchase agreement with Sanken Electric Co., Ltd., repurchasing 38.8 million shares, funded through an equity offering that raised approximately $665.9 million. This equity offering involved the sale of 28.8 million shares at $24.00 per share.

The company’s operational expenses have also increased, with research and development costs rising to 23.2% of total net sales, up from 15.8% in the previous year. Selling, general, and administrative expenses also increased to 20.3% of total net sales from 15.7%. The company is facing challenges related to inflation, which has led to higher costs for labor and materials, impacting profitability.

Overall, Allegro Microsystems is navigating a difficult financial landscape marked by declining revenues, increased debt, and strategic shifts aimed at long-term growth amidst current market pressures.