Allegro Microsystems Inc (ALGM) Reports Modest Sales Growth and Strong Free Cash Flow in Q3 2024
Total Sales: Increased by 2% year-over-year to $254.9 million.
Automotive Sales: Grew by 18% year-over-year, with e-Mobility sales up 45%.
Gross Margin: GAAP gross margin was 52.5%, while non-GAAP gross margin stood at 54.6%.
Operating Margin: GAAP operating margin was 14.4%, with non-GAAP operating margin at 27.2%.
Diluted EPS: GAAP diluted EPS at $0.17, non-GAAP diluted EPS at $0.32.
Free Cash Flow: Increased by more than 170% sequentially.
Q4 Outlook: Net sales expected to be between $230 million to $240 million with non-GAAP diluted EPS between $0.19 to $0.23.
On February 1, 2024, Allegro Microsystems Inc (NASDAQ:ALGM) released its 8-K filing, announcing financial results for the third quarter ended December 29, 2023. The company, a leading designer, developer, fabless manufacturer, and marketer of sensor ICs and application-specific analog power ICs, reported a modest increase in total sales, driven by significant growth in the Automotive sector, particularly in e-Mobility applications.
Financial Performance and Challenges
Allegro's third-quarter performance highlighted a 2% increase in total sales year-over-year, reaching $254.9 million. The Automotive segment was particularly robust, with an 18% increase in sales compared to the previous year. This growth is significant as it demonstrates the company's strong position in the automotive industry, especially in the rapidly expanding e-Mobility market, which now represents 54% of the Automotive sales.
Despite these achievements, the company is cautious about the short-term outlook, expecting continued inventory adjustments across end markets. However, Allegro's record levels of design win momentum provide confidence in its ability to grow above the market in the mid to long term.
Financial Achievements and Industry Significance
The company's financial achievements, including a substantial increase in free cash flow and a solid non-GAAP EPS, are critical for Allegro's ongoing investments in growth and innovation. These results are particularly important in the semiconductor industry, where consistent investment in research and development is essential for maintaining a competitive edge.
Key Financial Metrics
Allegro reported a GAAP gross margin of 52.5% and a non-GAAP gross margin of 54.6%. The operating margin on a GAAP basis was 14.4%, while the non-GAAP operating margin was 27.2%. The diluted EPS on a GAAP basis stood at $0.17, with the non-GAAP diluted EPS at $0.32. These metrics are important as they reflect the company's profitability and efficiency in generating earnings.
"Sales into e-Mobility applications increased by 45% year-over-year to 54% of third-quarter Automotive sales, establishing a new milestone. While we expect continued inventory digestion across end markets in the short-term, our design win momentum continues at record levels and reinforces our confidence in our ability to grow above market in the mid to long term, consistent with our target financial model, said Vineet Nargolwala, President and CEO of Allegro.
For the fourth quarter ending March 29, 2024, Allegro expects net sales to be in the range of $230 million to $240 million, with a non-GAAP gross margin between 53% and 54%, and non-GAAP diluted EPS between $0.19 to $0.23.
Allegro is well positioned to support the megatrends of electrification and automation, and we are taking appropriate actions to navigate near-term impacts from inventory digestion, said Derek DAntilio, CFO of Allegro. We are prudently managing our costs and significantly improving cash flow while continuing to invest strategically for growth.
The company's balance sheet remains solid, with cash and cash equivalents of $214.3 million as of December 29, 2023. Allegro's commitment to strategic investments, cost management, and cash flow improvement positions it well to capitalize on long-term industry trends despite near-term market challenges.
Allegro Microsystems Inc (NASDAQ:ALGM) continues to demonstrate its ability to navigate a complex market landscape, leveraging its strengths in the automotive and industrial sectors to deliver value to shareholders and customers alike.
Explore the complete 8-K earnings release (here) from Allegro Microsystems Inc for further details.
This article first appeared on GuruFocus.
