Allegro MicroSystems Reports Second Quarter of Fiscal Year 2022 Results

10/28/2021, 2:00 PM (Source: GlobeNewswire)

MANCHESTER, N.H., Oct. 28, 2021 (GLOBE NEWSWIRE) -- Allegro MicroSystems, Inc. (“Allegro” or the “Company”) (Nasdaq:ALGM), a global leader in power and sensing semiconductor solutions for motion control and energy efficient systems, today announced financial results for its second quarter of fiscal year 2022 that ended September 24, 2021. The Company’s net sales increased 3% sequentially and 42% over the same period of the prior year to a new quarterly record of $193.6 million. The Company’s successful execution of its strategic manufacturing and product portfolio transformation supported strong gross margins and significant earnings per share growth.

Quarter Highlights:

  • Total net sales of $193.6 million exceeded expectations due to strength in industrial and other end markets.
  • Automotive net sales of $126.0 million were up 41% year-over-year.
  • Record Industrial net sales of $36.3 million were up 68% year-over-year.
  • The Company continues to see record backlog and low inventory across the supply chain.
  • GAAP gross margin of 53.0% and non-GAAP gross margin of 53.8% contributed to record high profitability.
  • GAAP operating income for the quarter increased to $38.6 million, or 19.9% of net sales. Non-GAAP operating income increased to $46.6 million, or 24.1% of net sales, rising 11% sequentially.
  • Earnings per share exceeded expectations, with GAAP diluted EPS increasing to $0.17 in Q2 and non-GAAP diluted EPS increasing by 11% sequentially to $0.20.

“Our strong Q2 performance highlights two key differentiators in the Allegro business model - our diversification into high growth markets and our structural transformation to achieve improved gross margins,” said Ravi Vig, President and CEO of Allegro MicroSystems. “We are pleased with the progress in both our top line and our gross margin expansion. Despite temporary COVID-related supply chain disruptions affecting fiscal Q3, supply recovery is already underway giving us confidence in a return to growth in Q4 and confidence in revenue growth of about 28% in fiscal 2022. Based on strong end market positioning, business fundamentals, and design win momentum, we believe we are well positioned to deliver low to mid-teens revenue growth and strong gross margins for fiscal 2023.”

Business Summary and Outlook

Automotive represented 65% of revenue and declined 6% sequentially. Revenue was up 41% year-over year, led by the Company’s strategic focus areas of ADAS and xEV which continue to steadily increase as a percent of automotive revenue.

Industrial end markets represented 19% of revenue and increased 20% sequentially and 68% year over year, reaching a new quarterly high. Revenue increased sequentially across all of the Company’s industrial end markets, including green energy and data center, showcasing the diverse nature of the business.

For the third quarter ending December 24, 2021, the Company expects total net sales to be in the range of $180 million to $185 million. The anticipated sequential decline reflects the impact of COVID-related shutdowns of third-party factories in Malaysia that occurred recently. These factories are back online and, given continued strong demand and record levels of backlog, the Company expects a return to sequential growth in the fourth quarter. Based on accelerating design win momentum, the Company now has confidence in revenue growth in the low to mid-teens for fiscal 2023. Non-GAAP gross margin for the third quarter is expected to remain about flat to the new higher levels, and non-GAAP earnings per diluted share for the same period are expected to be in the range of $0.18.

Allegro has not provided a reconciliation of its third fiscal quarter outlook for non-GAAP gross margin and non-GAAP earnings per diluted share because estimates of all of the reconciling items cannot be provided without unreasonable efforts. It is difficult to reasonably provide a forward-looking estimate between such forward-looking non-GAAP measures and the comparable forward-looking GAAP measures. Certain factors that are materially significant to Allegro’s ability to estimate these items are out of its control and/or cannot be reasonably predicted.

Earnings Webcast

A webcast will be held on Thursday, October 28, 2021 at 8:30 a.m. Eastern time. Ravi Vig, President and Chief Executive Officer and Paul Walsh, Chief Financial Officer, will discuss Allegro’s financial results.

The webcast will be available on the Investor Relations section of the Company’s website at investors.allegromicro.com. A recording of the webcast will be posted in the same location shortly after the call concludes and will be available for at least 30 days.

About Allegro MicroSystems

Allegro MicroSystems is a leading global designer, developer, fabless manufacturer and marketer of sensor integrated circuits (“ICs”) and application-specific analog power ICs enabling emerging technologies in the automotive and industrial markets. Allegro’s diverse product portfolio provides efficient and reliable solutions for the electrification of vehicles, automotive ADAS safety features, automation for Industry 4.0 and power saving technologies for data centers and green energy applications.

Forward-Looking Statements

This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. All statements contained in this press release that do not relate to matters of historical fact should be considered forward-looking statements, including, without limitation, statements regarding the expected benefits resulting from our acquisition of Voxtel and our expected financial performance for our third fiscal quarter ending December 24, 2021. In some cases, you can identify forward-looking statements by terms such as “anticipate,” “believe,” “could,” “expect,” “should,” “plan,” “intend,” “estimate,” “target,” “mission,” “may,” “will,” “would,” “should,” “could,” “target,” “potential,” “project,” “predict,” “contemplate,” “potential,” or the negative thereof and similar words and expressions.

Forward-looking statements are based on management’s current expectations, beliefs and assumptions and on information currently available to us. Such statements are subject to a number of known and unknown risks, uncertainties and assumptions, and actual results may differ materially from those expressed or implied in the forward-looking statements due to various important factors, including, but not limited to: downturns or volatility in general economic conditions, including as a result of the COVID-19 pandemic, particularly in the automotive market; our ability to compete effectively, expand our market share and increase our net sales and profitability; our ability to compensate for decreases in average selling prices of our products; the cyclical nature of the analog semiconductor industry; shifts in our product mix or customer mix, which could negatively impact our gross margin; our ability to manage any sustained yield problems or other delays at our third-party wafer fabrication facilities or in the final assembly and test of our products; any disruptions at our primary third-party wafer fabrication facilities; our ability to fully realize the benefits of past and potential future initiatives designed to improve our competitiveness, growth and profitability; our ability to accurately predict our quarterly net sales and operating results; our ability to adjust our supply chain volume to account for changing market conditions and customer demand; our reliance on a limited number of third-party wafer fabrication facilities and suppliers of other materials; our dependence on manufacturing operations in the Philippines; our reliance on distributors to generate sales; our indebtedness may limit our flexibility to operate our business; the loss of one or more significant end customers; our ability to develop new product features or new products in a timely and cost-effective manner; our ability to meet customers’ quality requirements; uncertainties related to the design win process and our ability to recover design and development expenses and to generate timely or sufficient net sales or margins; changes in government trade policies, including the imposition of tariffs and export restrictions; our exposures to warranty claims, product liability claims and product recalls; our ability to protect our proprietary technology and inventions through patents or trade secrets; our ability to commercialize our products without infringing third-party intellectual property rights; disruptions or breaches of our information technology systems; risks related to governmental regulation and other legal obligations, including privacy, data protection, information security, consumer protection, environmental and occupational health and safety, anti-corruption and anti-bribery, and trade controls; our dependence on international customers and operations; the availability of rebates, tax credits and other financial incentives on end-user demands for certain products; the volatility of currency exchange rates; risks related to acquisitions of and investments in new businesses, products or technologies, joint ventures and other strategic transactions; our ability to raise capital to support our growth strategy; our ability to effectively manage our growth and to retain key and highly skilled personnel; changes in tax rates or the adoption of new tax legislation; risks related to litigation, including securities class action litigation; and our ability to accurately estimate market opportunity and growth forecasts; and other important factors discussed under the caption “Risk Factors” in our Annual Report on Form 10-K filed with the Securities and Exchange Commission (“SEC”) on May 19, 2021, as any such factors may be updated from time to time in our other filings with the SEC, which are accessible on the SEC’s website at www.sec.gov and the Investors Relations page of our website at investors.allegromicro.com.

All forward-looking statements speak only as of the date of this press release and, except as required by applicable law, we do not plan to publicly update or revise any forward-looking statements contained herein, whether as a result of any new information, future events, changed circumstances or otherwise.

ALLEGRO MICROSYSTEMS, INC.
CONSOLIDATED STATEMENT OF OPERATIONS
(in thousands, except share and per share amounts)
(Unaudited)

 Three-Month Period Ended Six-Month Period Ended
 September 24,
2021
 September 25,
2020
 September 24,
2021
 September 25,
2020
Net sales$156,445  $114,138  $309,134  $205,519 
Net sales to related party37,165  22,511  72,618  46,131 
Total net sales193,610  136,649  381,752  251,650 
Cost of goods sold91,078  74,879  185,060  134,179 
Gross profit102,532  61,770  196,692  117,471 
Operating expenses:       
Research and development29,590  25,130  59,144  49,510 
Selling, general and administrative34,088  24,238  66,152  51,027 
Change in fair value of contingent consideration300    600   
Total operating expenses63,978  49,368  125,896  100,537 
Operating income38,554  12,402  70,796  16,934 
Other (expense) income:       
Interest (expense) income, net(1,150) 350  (1,495) 663 
Foreign currency transaction gain (loss)202  (1,318) (52) (1,186)
Income in earnings of equity investment226  246  505  458 
Other, net1,534  20  1,582  213 
Income before income tax provision39,366  11,700  71,336  17,082 
Income tax provision6,143  2,082  10,406  2,610 
Net income33,223  9,618  60,930  14,472 
Net income attributable to non-controlling interests37  34  75  68 
Net income attributable to Allegro MicroSystems, Inc.$33,186  $9,584  $60,855  $14,404 
Net income attributable to Allegro MicroSystems, Inc. per share:       
Basic$0.17  $0.96  $0.32  $1.44 
Diluted$0.17  $0.96  $0.32  $1.44 
Weighted average shares outstanding:       
Basic189,673,788  10,000,000  189,629,535  10,000,000 
Diluted191,676,422  10,000,000  191,416,250  10,000,000 


Supplemental Schedule of Total Net Sales

The following table summarizes total net sales by market within the Company’s unaudited consolidated statements of operations:

 Three-Month Period Ended Change Six-Month Period Ended Change
 September 24,
2021
 September 25,
2020
 Amount % September 24,
2021
 September 25,
2020
 Amount %
 (Dollars in thousands)
Automotive$126,031  $89,479  $36,552  40.8% $259,554  $165,857  $93,697  56.5%
Industrial36,321  21,650  14,671  67.8% 66,630  42,056  24,574  58.4%
Other31,258  25,520  5,738  22.5% 55,568  43,737  11,831  27.1%
Total net sales$193,610  $136,649  $56,961  41.7% $381,752  $251,650  $130,102  51.7%


Supplemental Schedule of Stock-Based Compensation

The Company recorded stock-based compensation expense in the following expense categories of its unaudited consolidated statements of operations:

 Three-Month Period Ended Six-Month Period Ended
(In thousands)September 24,
2021
 September 25,
2020
 September 24,
2021
 September 25,
2020
Cost of sales$722  $53  $1,250  $150 
Research and development1,043  32  1,795  53 
Selling, general and administrative4,431  495  7,982  822 
Total stock-based compensation$6,196  $580  $11,027  $1,025 


Supplemental Schedule of Acquisition Related Intangible Amortization Costs

The Company recorded intangible amortization expense related to its acquisition of Voxtel in the following expense categories of its unaudited consolidated statements of operations:

 Three-Month Period Ended Six-Month Period Ended
(In thousands)September 24,
2021
 September 25,
2020
 September 24,
2021
 September 25,
2020
Cost of sales$273  $105  546  105 
Selling, general and administrative16  9  45  9 
Total intangible amortization$289  $114  $591  $114 


ALLEGRO MICROSYSTEMS, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands, except share and per share amounts)

 September 24,
2021
(Unaudited)
 March 26,
2021
Assets   
Current assets:   
Cash and cash equivalents$248,579  $197,214 
Restricted cash7,105  6,661 
Trade accounts receivable, net of provision for expected credit losses of $176 at September 24, 2021 and allowance for doubtful accounts of $138 at March 26, 202173,971  69,500 
Trade and other accounts receivable due from related party23,853  23,832 
Accounts receivable - other1,295  1,516 
Inventories78,042  87,498 
Prepaid expenses and other current assets13,069  18,374 
Assets held for sale  25,969 
Total current assets445,914  430,564 
Property, plant and equipment, net198,069  192,393 
Operating lease right-of-use assets17,054   
Deferred income tax assets20,134  26,972 
Goodwill20,093  20,106 
Intangible assets, net36,131  36,366 
Equity investment in related party27,169  26,664 
Other assets, net38,687  14,613 
Total assets$803,251  $747,678 
Liabilities, Non-Controlling Interest and Stockholders' Equity   
Current liabilities:   
Trade accounts payable$29,158  $35,389 
Amounts due to related party3,686  2,353 
Accrued expenses and other current liabilities52,049  78,932 
Current portion of operating lease liabilities3,523   
Total current liabilities88,416  116,674 
Obligations due under Senior Secured Credit Facilities25,000  25,000 
Operating lease liabilities, less current portion13,793   
Other long-term liabilities19,489  19,133 
Total liabilities146,698  160,807 
Commitments and contingencies   
Stockholders' Equity:   
Preferred Stock, $0.01 par value; 20,000,000 shares authorized, no shares issued or outstanding at September 24, 2021 and March 26, 2021   
Common stock, $0.01 par value; 1,000,000,000 shares authorized, 189,702,550 shares issued and outstanding at September 24, 2021; 1,000,000,000 shares authorized, 189,588,161 issued and outstanding at March 26, 20211,897  1,896 
Additional paid-in capital604,488  592,170 
Retained earnings64,406  3,551 
Accumulated other comprehensive loss(15,368) (11,865)
Equity attributable to Allegro MicroSystems, Inc.655,423  585,752 
Non-controlling interests1,130  1,119 
Total stockholders' equity656,553  586,871 
Total liabilities, non-controlling interest and stockholders' equity$803,251  $747,678 


ALLEGRO MICROSYSTEMS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(Unaudited)

 Six-Month Period Ended
 September 24,
2021
 September 25,
2020
CASH FLOWS FROM OPERATING ACTIVITIES:   
Net income$60,930  $14,472 
Adjustments to reconcile net income to net cash provided by operating activities:   
Depreciation and amortization24,511  24,026 
Amortization of deferred financing costs25   
Deferred income taxes(2,246) 1,307 
Stock-based compensation11,027  1,025 
(Gain) loss on disposal of assets(330) 293 
Loss on contingent consideration change in fair value600   
Provisions for inventory and bad debt2,869  209 
Changes in operating assets and liabilities:   
Trade accounts receivable(2,299) 6,196 
Accounts receivable - other181  (1,292)
Inventories4,415  (8,772)
Prepaid expenses and other assets(6,761) (16,725)
Trade accounts payable(6,188) 2,793 
Due to/from related parties1,312  10,731 
Accrued expenses and other current and long-term liabilities(17,192) (5,623)
Net cash provided by operating activities69,876  28,640 
CASH FLOWS FROM INVESTING ACTIVITIES:   
Purchases of property, plant and equipment(33,821) (18,091)
Acquisition of business, net of cash acquired(12,549) (8,500)
Proceeds from sales of property, plant and equipment27,407  282 
Investments(4,334)  
Contribution of cash balances due to divestiture of subsidiary  (16,335)
Net cash used in investing activities(23,297) (42,644)
CASH FLOWS FROM FINANCING ACTIVITIES:   
Proceeds from issuance of common stock under employee stock purchase plan1,291   
Net cash provided by financing activities1,291   
Effect of exchange rate changes on Cash and cash equivalents and Restricted cash3,939  2,480 
Net increase in Cash and cash equivalents and Restricted cash51,809  (11,524)
Cash and cash equivalents and Restricted cash at beginning of period203,875  219,876 
CASH AND CASH EQUIVALENTS AND RESTRICTED CASH AT END OF PERIOD:$255,684  $208,352 
RECONCILIATION OF CASH AND CASH EQUIVALENTS AND RESTRICTED CASH:   
Cash and cash equivalents at beginning of period$197,214  $214,491 
Restricted cash at beginning of period6,661  5,385 
Cash and cash equivalents and Restricted cash at beginning of period$203,875  $219,876 
Cash and cash equivalents at end of period248,579  201,998 
Restricted cash at end of period7,105  6,354 
Cash and cash equivalents and Restricted cash at end of period$255,684  $208,352 
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:   
Cash paid for interest$269  $107 
Cash paid for income taxes$7,993  $6,385 
Noncash transactions:   
Changes in Trade accounts payable related to Property, plant and equipment, net$(3,183) $(4,000)
Loans to cover purchase of common stock under employee stock plan  171 
Recognition of right of use assets and lease liability upon adoption of new accounting standard356   

Non-GAAP Financial Measures

In addition to the measures presented in our consolidated financial statements, we regularly review other metrics, defined as non-GAAP financial measures by the SEC, to evaluate our business, measure our performance, identify trends, prepare financial forecasts and make strategic decisions. The key metrics we consider are non-GAAP Gross Profit, non-GAAP Gross Margin, non-GAAP Operating Expenses, non-GAAP Operating Income, non-GAAP Operating Margin, non-GAAP Profit before Tax, non-GAAP Provision for Income Tax, non-GAAP Net Income, non-GAAP Net Income per Share, EBITDA, Adjusted EBITDA and Adjusted EBITDA margin (collectively, the “Non-GAAP Financial Measures”). These Non-GAAP Financial Measures provide supplemental information regarding our operating performance on a non-GAAP basis that excludes certain gains, losses and charges of a non-cash nature or that occur relatively infrequently and/or that management considers to be unrelated to our core operations, and in the case of non-GAAP Provision for Income Tax, management believes that this non-GAAP measure of income taxes provides it with the ability to evaluate the non-GAAP Provision for Income Taxes across different reporting periods on a consistent basis, independent of special items and discrete items, which may vary in size and frequency. By presenting these Non-GAAP Financial Measures, we provide a basis for comparison of our business operations between periods by excluding items that we do not believe are indicative of our core operating performance, and we believe that investors’ understanding of our performance is enhanced by our presenting these Non-GAAP Financial Measures, as they provide a reasonable basis for comparing our ongoing results of operations. Management believes that tracking and presenting these non-GAAP Financial Measures provides management and the investment community with valuable insight into matters such as: our ongoing core operations, our ability to generate cash to service our debt and fund our operations; and the underlying business trends that are affecting our performance. These Non-GAAP Financial Measures are used by both management and our board of directors, together with the comparable GAAP information, in evaluating our current performance and planning our future business activities. In particular, management finds it useful to exclude non-cash charges in order to better correlate our operating activities with our ability to generate cash from operations and to exclude certain cash charges as a means of more accurately predicting our liquidity requirements. We believe that these Non-GAAP Financial Measures, when used in conjunction with our GAAP financial information, also allow investors to better evaluate our financial performance in comparison to other periods and to other companies in our industry.

These Non-GAAP Financial Measures have significant limitations as analytical tools. Some of these limitations are that:

  • such measures do not reflect our cash expenditures, or future requirements for capital expenditures or contractual commitments;
  • such measures exclude certain costs which are important in analyzing our GAAP results;
  • such measures do not reflect changes in, or cash requirements for, our working capital needs;
  • such measures do not reflect the interest expense, or the cash requirements necessary to service interest or principal payments on our debt;
  • such measures do not reflect our tax expense or the cash requirements to pay our taxes;
  • although depreciation and amortization are non-cash charges, the assets being depreciated and amortized will often have to be replaced in the future;
  • such measures do not reflect any cash requirements for such replacements; and
  • other companies in our industry may calculate such measures differently than we do, thereby further limiting their usefulness as comparative measures.

The Non-GAAP Financial Measures are supplemental measures of our performance that are neither required by, nor presented in accordance with, GAAP. These Non-GAAP Financial Measures should not be considered as substitutes for GAAP financial measures such as gross profit, gross margin, net income or any other performance measures derived in accordance with GAAP. Also, in the future we may incur expenses or charges such as those added back in the calculation of these Non-GAAP Financial Measures. Our presentation of these Non-GAAP Financial Measures should not be construed as an inference that future results will be unaffected by unusual or nonrecurring items.

Our prior disclosure referred to non-GAAP Gross Profit and non-GAAP Gross Margin as Adjusted Gross Profit and Adjusted Gross Margin, respectively. No changes have been made to how we calculate these measures.

Non-GAAP Gross Profit and Non-GAAP Gross Margin

We calculate non-GAAP Gross Profit and non-GAAP Gross Margin excluding the items below from cost of goods sold in applicable periods, and we calculate non-GAAP Gross Margin as non-GAAP Gross Profit divided by total net sales.

  • Voxtel inventory impairment—Represents costs related to the discontinuation of one of our product lines manufactured by Voxtel.
  • PSL and Sanken Distribution Agreement—Represents the elimination of inventory cost amortization and foundry service payment related to one-time costs incurred in connection with the disposition of Polar Semiconductor, LLC (“PSL”) during the fiscal year ended March 26, 2021 (the “PSL Divestiture”).
  • Stock-based compensation—Represents non-cash expenses arising from the grant of stock-based awards.
  • AMTC Facility consolidation one-time costs—Represents one-time costs incurred in connection with closing of our manufacturing facility in Thailand (the “AMTC Facility”) and transitioning of test and assembly functions to our manufacturing facility in the Philippines (the “AMPI Facility”) announced in fiscal year 2020, consisting of: moving equipment between facilities, contract terminations and other non-recurring charges. The closure and transition of the AMTC Facility was substantially completed in March 2021 and closed on the sale in August 2021. These costs are in addition to, and not duplicative of, the adjustments noted in note (*) below.
  • Amortization of acquisition-related intangible assets—Represents non-cash expenses associated with the amortization of intangible assets in connection with the acquisition of Voxtel, which closed in August 2020.
  • COVID-19 related expenses—Represents expenses attributable to the COVID-19 pandemic primarily related to increased purchases of masks, gloves and other protective materials, and overtime premium compensation paid for maintaining 24-hour service at the AMPI Facility.

(*) Non-GAAP Gross Profit and the corresponding calculation of non-GAAP Gross Margin do not include adjustments consisting of:

  • Additional AMTC-related costs—Represents costs relating to the closing of the AMTC Facility and the transitioning of test and assembly functions to the AMPI Facility in the Philippines announced in fiscal year 2020 consisting of the net savings expected to result from the movement of work to the AMPI Facility, which facility had duplicative capacity based on the buildouts of the AMPI Facility in fiscal years 2019 and 2018. The elimination of these costs did not reduce our production capacity and therefore did not have direct effects on our ability to generate revenue. The closure and transition of the AMTC Facility was substantially completed in March 2021 and closed on the sale in August 2021.
  • Out of period adjustment for depreciation expense of giant magnetoresistance assets (“GMR assets”)—Represents a one-time depreciation expense related to the correction of an immaterial error, related to 2017, for certain manufacturing assets that have reached the end of their useful lives.

Non-GAAP Operating Expenses, non-GAAP Operating Income and non-GAAP Operating Margin

We calculate non-GAAP Operating Expenses and non-GAAP Operating Income excluding the same items excluded above to the extent they are classified as operating expenses, and also excluding the items below in applicable periods. We calculate non-GAAP Operating Margin as non-GAAP Operating Income divided by total net sales.

  • Transaction fees—Represents transaction-related legal and consulting fees incurred primarily in connection with (i) the acquisition of Voxtel in fiscal year 2020, and (ii) one-time transaction-related legal and consulting fees in fiscal 2021.
  • Severance—Represents severance costs associated with (i) labor savings initiatives to manage overall compensation expense as a result of the declining sales volume during the applicable period, including a voluntary separation incentive payment plan for employees near retirement and a reduction in force, (ii) the closing of the AMTC Facility and the transitioning of test and assembly functions to the AMPI Facility announced and initiated in fiscal year 2020, and (iii) costs related to the discontinuation of one of our product lines manufactured by Voxtel in fiscal year 2022.
  • Change in fair value of contingent consideration—Represents the change in fair value of contingent consideration payable in connection with the acquisition of Voxtel.

(**) Non-GAAP Operating Income does not include adjustments consisting of those set forth in note (*) to the calculation of non-GAAP Gross Profit, and the corresponding calculation of non-GAAP Gross Margin, above or:

  • Labor savings—Represents salary and benefit costs related to employees whose positions were eliminated through voluntary separation programs or other reductions in force (not associated with the closure of the AMTC Facility or any other plant or facility) and a restructuring of overhead positions from high-cost to low-cost jurisdictions net of costs for newly hired employees in connection with such restructuring.

EBITDA, Adjusted EBITDA, and Adjusted EBITDA Margin

We calculate EBITDA as net income minus interest income (expense), tax provision (benefit), and depreciation and amortization expenses. We calculate Adjusted EBITDA as EBITDA excluding the same items excluded above and also excluding the items below in applicable periods. We calculate Adjusted EBITDA Margin as Adjusted EBITDA divided by total net sales.

  • Non-core (gain) loss on sale of equipment—Represents non-core miscellaneous losses and gains on the sale of equipment.
  • Foreign currency translation (gain) loss—Represents losses and gains resulting from the remeasurement and settlement of intercompany debt and operational transactions, as well as transactions with external customers or vendors denominated in currencies other than the functional currency of the legal entity in which the transaction is recorded.
  • Income in earnings of equity investment—Represents our equity method investment in PSL.
  • Unrealized gains on investments—Represents mark-to-market adjustments on equity investments with readily determinable fair values.

Non-GAAP Profit before Tax, Non-GAAP Net Income, and Non-GAAP Basic and Diluted Earnings Per Share

We calculate non-GAAP Profit before Tax as Income before Tax Provision excluding the same items excluded above and also excluding the item below in applicable periods. We calculate non-GAAP Net Income as Net Income excluding the same items excluded above and also excluding the item below in applicable periods.

Non-GAAP Provision for Income Tax

In calculating non-GAAP Provision for Income Tax, we have added back the following to GAAP Income Tax Provision:

  • Tax effect of adjustments to GAAP results—Represents the estimated income tax effect of the adjustments to non-GAAP Profit Before Tax described above and elimination of discrete tax adjustments.
  Three-Month Period Ended Six-Month Period Ended
  September 24,
2021
 June 25,
2021
 September 25,
2020
 September 24,
2021
 September 25,
2020
  (Dollars in thousands)
Reconciliation of Gross Profit          
           
GAAP Gross Profit $102,532  $94,160  $61,770  $196,692  $117,471 
           
Voxtel inventory impairment 271  2,835    3,106   
PSL and Sanken distribution agreement     2,815    6,198 
Stock-based compensation 722  528  53  1,250  150 
AMTC Facility consolidation one-time costs 7  137  408  144  952 
Amortization of acquisition-related intangible assets 273  273  105  546  105 
COVID-19 related expenses 316  343  73  659  73 
Total Non-GAAP Adjustments $1,589  $4,116  $3,454  $5,705  $7,478 
           
Non-GAAP Gross Profit* $104,121  $98,276  $65,224  $202,397  $124,949 
Non-GAAP Gross Margin* (% of net sales) 53.8% 52.2% 47.7% 53.0% 49.7%

 * Non-GAAP Gross Profit and the corresponding calculation of non-GAAP Gross Margin do not include adjustments for the following components of our net income: (i) additional AMTC related costs of $—, $—, and $2,281 for the three months ended September 24, 2021, June 25, 2021, and September 25, 2020, respectively, and out of period adjustment for depreciation expense of GMR assets of $—, $—, and $768 for the three months ended September 24, 2021, June 25, 2021, and September 25, 2020, respectively, and (ii) additional AMTC related costs of $— and $5,355 for the six months ended September 24, 2021 and September 25, 2020, respectively, and out of period adjustment for depreciation expense of GMR assets of $— and $768 for the six months ended September 24, 2021 and September 25, 2020, respectively.


  Three-Month Period Ended Six-Month Period Ended
  September 24,
2021
 June 25,
2021
 September 25,
2020
 September 24,
2021
 September 25,
2020
  (Dollars in thousands)
Reconciliation of Operating Expenses          
           
GAAP Operating Expenses $63,978  $61,918  $49,368  $125,896  $100,537 
           
Research and Development Expenses          
GAAP Research and Development Expenses 29,590  29,554  25,130  59,144  49,510 
Stock-based compensation 1,043  752  32  1,795  53 
AMTC Facility consolidation one-time costs   2    2   
COVID-19 related expenses 8  6    14   
Non-GAAP Research and Development Expenses 28,539  28,794  25,098  57,333  49,457 
           
Selling, General and Administrative Expenses          
GAAP Selling, General and Administrative Expenses 34,088  32,064  24,238  66,152  51,027 
Stock-based compensation 4,431  3,551  495  7,982  822 
AMTC Facility consolidation one-time costs 151  324  1,358  475  2,519 
Amortization of acquisition-related intangible assets 16  29  9  45  9 
COVID-19 related expenses 551  381  398  932  4,398 
Transaction fees 6  23  1,871  29  1,988 
Severance   168    168  337 
Non-GAAP Selling, General and Administrative Expenses 28,933  27,588  20,107  56,521  40,954 
           
Change in fair value of contingent consideration 300  300    600   
           
Total Non-GAAP Adjustments 6,506  5,536  4,163  12,042  10,126 
           
Non-GAAP operating expenses * $57,472  $56,382  $45,205  $113,854  $90,411 

 * Non-GAAP Operating Expenses do not include adjustments for the following components of our net income: (i) additional AMTC related costs of $—, $—, and $380 for the three months ended September 24, 2021, June 25, 2021, and September 25, 2020, respectively, and (ii) additional AMTC related costs of $— and $704 for the six months ended September 24, 2021 and September 25, 2020, respectively, and labor savings costs of $— and $109 for the six months ended September 24, 2021 and September 25, 2020, respectively.


  Three-Month Period Ended Six-Month Period Ended
  September 24,
2021
 June 25,
2021
 September 25,
2020
 September 24,
2021
 September 25,
2020
  (Dollars in thousands)
Reconciliation of Operating Income          
           
GAAP Operating Income $38,554  $32,242  $12,402  $70,796  $16,934 
           
Voxtel inventory impairment 271  2,835    3,106   
PSL and Sanken distribution agreement     2,815    6,198 
Stock-based compensation 6,196  4,831  580  11,027  1,025 
AMTC Facility consolidation one-time costs 158  463  1,766  621  3,471 
Amortization of acquisition-related intangible assets 289  302  114  591  114 
COVID-19 related expenses 875  730  471  1,605  4,471 
Change in fair value of contingent consideration 300  300    600   
Transaction fees 6  23  1,871  29  1,988 
Severance   168    168  337 
Total Non-GAAP Adjustments $8,095  $9,652  $7,617  $17,747  $17,604 
           
Non-GAAP Operating Income* $46,649  $41,894  $20,019  $88,543  $34,538 
Non-GAAP Operating Margin* (% of net sales) 24.1% 22.3% 14.6% 23.2% 13.7%

 * Non-GAAP Operating Income and the corresponding calculation of non-GAAP Operating Margin do not include adjustments for the following components of our net income: (i) additional AMTC related costs of $—, $—, and $2,330 for the three months ended September 24, 2021, June 25, 2021, and September 25, 2020, respectively, and out of period adjustment for depreciation expense of GMR assets of $—, $—, and $768 for the three months ended September 24, 2021, June 25, 2021, and September 25, 2020, respectively, and (ii) additional AMTC related costs of $— and $5,728 for the six months ended September 24, 2021 and September 25, 2020, respectively, labor savings costs of $— and $109 for the six months ended September 24, 2021 and September 25, 2020, respectively, and out of period adjustment for depreciation expense of GMR assets of $— and $768 for the six months ended September 24, 2021 and September 25, 2020, respectively.


  Three-Month Period Ended Six-Month Period Ended
  September 24,
2021
 June 25,
2021
 September 25,
2020
 September 24,
2021
 September 25,
2020
  (Dollars in thousands)
Reconciliation of EBITDA and Adjusted EBITDA          
           
GAAP Net Income $33,223  $27,707  $9,618  $60,930  $14,472 
           
Interest expense (income), net 1,150  345  (350) 1,495  (663)
Income tax provision 6,143  4,263  2,082  10,406  2,610 
Depreciation & amortization 12,339  12,172  12,487  24,511  24,026 
EBITDA $52,855  $44,487  $23,837  $97,342  $40,445 
           
Non-core (gain) loss on sale of equipment (296) (35) 331  (331) 293 
Voxtel inventory impairment 271  2,835    3,106   
Foreign currency translation (gain) loss (202) 254  1,318  52  1,186 
Income in earnings of equity investment (226) (279) (246) (505) (458)
Unrealized gains on investments (978)     (978)  
Stock-based compensation 6,196  4,831  580  11,027  1,025 
AMTC Facility consolidation one-time costs 158  463  1,766  621  3,471 
COVID-19 related expenses 875  730  471  1,605  4,471 
Change in fair value of contingent consideration 300  300    600   
Transaction fees 6  23  1,871  29  1,988 
Severance   168    168  337 
PSL and Sanken distribution agreement     2,815    6,198 
Adjusted EBITDA* $58,959  $53,777  $32,743  $112,736  $58,956 
Adjusted EBITDA Margin* (% of net sales) 30.5
% 28.6
% 24.0
% 29.5
% 23.4
%

 * Adjusted EBITDA and the corresponding calculation of Adjusted EBITDA Margin do not include adjustments for the following components of our net income: (i) additional AMTC related costs of $—, $—, and $2,330 for the three months ended September 24, 2021, June 25, 2021, and September 25, 2020, respectively, and (ii) additional AMTC related costs of $— and $5,728 for the six months ended September 24, 2021 and September 25, 2020, respectively, and labor savings costs of $— and $109 for the six months ended September 24, 2021 and September 25, 2020, respectively.


  Three-Month Period Ended Six-Month Period Ended
  September 24,
2021
 June 25,
2021
 September 25,
2020
 September 24,
2021
 September 25,
2020
  (Dollars in thousands)
Reconciliation of Income before Tax Provision          
           
GAAP Income before Tax Provision $39,366  $31,970  $11,700  $71,336  $17,082 
           
Non-core (gain) loss on sale of equipment (296) (35) 331  (331) 293 
Voxtel inventory impairment 271  2,835    3,106   
Foreign currency translation (gain) loss (202) 254  1,318  52  1,186 
Income in earnings of equity investment (226) (279) (246) (505) (458)
Unrealized gains on investments (978)     (978)  
PSL and Sanken distribution agreement     2,815    6,198 
Stock-based compensation 6,196  4,831  580  11,027  1,025 
AMTC Facility consolidation one-time costs 158  463  1,766  621  3,471 
Amortization of acquisition-related intangible assets 289  302  114  591  114 
COVID-19 related expenses 875  730  471  1,605  4,471 
Change in fair value of contingent consideration 300  300    600   
Transaction fees 6  23  1,871  29  1,988 
Severance   168    168  337 
Total Non-GAAP Adjustments $6,393  $9,592  $9,020  $15,985  $18,625 
           
Non-GAAP Profit before Tax* $45,759  $41,562  $20,720  $87,321  $35,707 

 * Non-GAAP Profit before Tax does not include adjustments for the following components of our net income: (i) additional AMTC related costs of $—, $—, and $2,661 for the three months ended September 24, 2021, June 25, 2021, and September 25, 2020, respectively, and out of period adjustment for depreciation expense of GMR assets of $—, $—, and $768 for the three months ended September 24, 2021 and September 25, 2020, respectively, and (ii) additional AMTC related costs of $— and $6,059 for the six months ended September 24, 2021 and September 25, 2020, respectively, labor savings costs of $— and $109 for the six months ended September 24, 2021 and September 25, 2020, respectively, and out of period adjustment for depreciation expense of GMR assets of $— and $768 for the six months ended September 24, 2021 and September 25, 2020, respectively.


  Three-Month Period Ended Six-Month Period Ended
  September 24,
2021
 June 25,
2021
 September 25,
2020
 September 24,
2021
 September 25,
2020
  (Dollars in thousands)
Reconciliation of Income Tax Provision          
           
GAAP Income Tax Provision $6,143  $4,263  $2,082  $10,406  $2,610 
GAAP effective tax rate 15.6% 13.3% 17.8% 14.6% 15.3%
           
Tax effect of adjustments to GAAP results 946  2,091  859  3,037  2,667 
           
Non-GAAP Provision for Income Taxes * $7,089  $6,354  $2,941  $13,443  $5,277 
Non-GAAP effective tax rate 15.5% 15.3% 14.2% 15.4% 14.8%

 * Non-GAAP Provision for Income Taxes does not include tax adjustments for the following components of our net income: additional AMTC related costs and labor savings costs. The related tax effect of those adjustments to GAAP results were $—, $— and $768 for the three months ended September 24, 2021, June 25, 2021, and September 25, 2020, respectively, and $— and $1,554 for the six months ended September 24, 2021 and September 25, 2020, respectively.


  Three-Month Period Ended Six-Month Period Ended
  September 24,
2021
 June 25,
2021
 September 25,
2020
 September 24,
2021
 September 25,
2020
  (Dollars in thousands)
Reconciliation of Net Income          
           
GAAP Net Income $33,223  $27,707  $9,618  $60,930  $14,472 
GAAP Basic Earnings per Share $0.18  $0.15  $0.96  $0.32  $1.45 
GAAP Diluted Earnings per Share $0.17  $0.14  $0.96  $0.32  $1.45 
           
Non-core (gain) loss on sale of equipment (296) (35) 331  (331) 293 
Voxtel inventory impairment 271  2,835    3,106   
Foreign currency translation (gain) loss (202) 254  1,318  52  1,186 
Income in earnings of equity investment (226) (279) (246) (505) (458)
Unrealized gains on investments (978)     (978)  
PSL and Sanken distribution agreement     2,815    6,198 
Stock-based compensation 6,196  4,831  580  11,027  1,025 
AMTC Facility consolidation one-time costs 158  463  1,766  621  3,471 
Amortization of acquisition-related intangible assets 289  302  114  591  114 
COVID-19 related expenses 875  730  471  1,605  4,471 
Change in fair value of contingent consideration 300  300    600   
Transaction fees 6  23  1,871  29  1,988 
Severance   168    168  337 
Tax effect of adjustments to GAAP results (946) (2,091) (859) (3,037) (2,667)
           
Non-GAAP Net Income* $38,670  $35,208  $17,779  $73,878  $30,430 
Basic weighted average common shares 189,673,788  189,585,381  10,000,000  189,629,535  10,000,000 
Diluted weighted average common shares 191,676,422  191,163,074  10,000,000  191,416,250  10,000,000 
Non-GAAP Basic Earnings per Share 0.20  0.19  1.78  0.39  3.04 
Non-GAAP Diluted Earnings per Share 0.20  0.18  1.78  0.39  3.04 

 * Non-GAAP Net Income does not include adjustments for the following components of our net income: (i) additional AMTC related costs of $—, $—, and $2,661 for the three months ended September 24, 2021, June 25, 2021, and September 25, 2020, respectively, and out of period adjustment for depreciation expense of GMR assets of $—, $—, and $768 for the three months ended September 24, 2021, June 25, 2021, and September 25, 2020, respectively, and (ii) additional AMTC related costs of $— and $6,059 for the six months ended September 24, 2021 and September 25, 2020, respectively, labor savings costs of $— and $109 for the six months ended September 24, 2021 and September 25, 2020, respectively, and out of period adjustment for depreciation expense of GMR assets of $— and $768 for the six months ended September 24, 2021 and September 25, 2020, respectively, and (iii) the related tax effect of adjustments to GAAP results $—, $—, and $768 for the three months ended September 24, 2021, June 25, 2021, and September 25, 2020, respectively, and $— and $1,554 for the six months ended September 24, 2021 and September 25, 2020, respectively.

Investor Contact:
Katherine Blye
Investor Relations
Phone: (603) 626-2306
kblye@ALLEGROMICRO.com


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