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Allegro MicroSystems Reports Second Quarter 2023 Results

MANCHESTER, N.H., Oct. 27, 2022 (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 2023 that ended September 23, 2022.

Quarter Highlights:

  • Total net sales were a record $237.7 million, increasing 23% year-over-year.
  • Automotive net sales were a record $157.4 million, increasing 25% year-over-year.
  • Industrial net sales were a record $48.2 million, increasing 33% year-over-year.
  • GAAP gross margin was 55.5% and non-GAAP gross margin was 56.2%.
  • GAAP operating margin was 25.1% and on a non-GAAP basis was 27.9%.
  • GAAP diluted earnings per share was $0.26 and non-GAAP diluted EPS was $0.31.
  • Closed on acquisition of Heyday Integrated Circuits, a leader in highly integrated gate drivers for high efficiency power applications.

“Allegro achieved another record quarter, reflecting our team’s strong execution and continued robust demand for our magnetic sensor and power IC products despite cross-currents in the broader macroeconomic environment,” said Vineet Nargolwala, President and CEO of Allegro MicroSystems. “In addition to record quarters in both our automotive and industrial end markets, our strategic focus area of E-Mobility (xEV and ADAS) expanded to an all-time high of 41% of automotive sales. We also demonstrated significant operating leverage in our model that contributed to strong bottom-line growth. The markets and applications we serve are underpinned by strong secular trends that we believe will continue to expand and drive growth for Allegro in both the near-term and over the next decade. In addition to our strategic alignment with these fast-growing markets, I believe we are uniquely positioned to address an even larger opportunity to enable our customers’ transition to a more autonomous and sustainable future.”

Business Summary

Automotive net sales increased 5% sequentially and 25% year-over-year and represented 66% of net sales in the quarter. Growth in automotive sales was driven by strong demand in E-Mobility, including IC solutions for xEV Inverter and On-Board-Charging applications, which expanded to a record 41% of automotive net sales.

Industrial net sales increased 20% sequentially and 33% year-over-year to 20% of net sales in the quarter. Record industrial net sales in the quarter was primarily driven by continued momentum for the Company’s solutions in strategic end markets, including Industry 4.0, Clean Energy, EV Charging and Data Center.

Second quarter net sales into Other markets, which includes computing, consumer and smart home, increased sequentially and year-over-year to $32.1 million, or 14% of total net sales.

Outlook

For the third quarter ending December 23, 2022, the Company expects total net sales to be in the range of $240 million to $250 million. Non-GAAP gross margin is expected to be approximately 56.0%, non-GAAP operating expenses are anticipated to be approximately 28% of net sales, and non-GAAP earnings per diluted share are expected to be in the range of $0.31 to $0.33.

Allegro has not provided a reconciliation of its third fiscal quarter outlook for non-GAAP gross margin, non-GAAP operating expenses 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 27, 2022 at 8:30 a.m. Eastern time. Vineet Nargolwala, President and Chief Executive Officer, and Derek D’Antilio, 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 our expected financial performance for our third fiscal quarter ending December 23, 2022. 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,” “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 reliance on a limited number of third-party wafer fabrication facilities and suppliers of other materials; our failure to adjust purchase commitments, supply chain volume and inventory management based on changing market conditions or customer demand; shifts in our product mix or customer mix, which could negatively impact our gross margin; the cyclical nature of the analog semiconductor industry; our ability to compensate for decreases in average selling prices of our products and increases in input costs; increases in inflation rates or sustained periods of inflation in the markets in which we operate; any disruptions at our primary third-party wafer fabrication facilities; 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; 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 dependence on manufacturing operations in the Philippines; our reliance on distributors to generate sales; COVID-19 induced lock-downs and suppression on our supply chain and customer demand; our ability to develop new product features or new products in a timely and cost-effective manner; our ability to manage growth; any slowdown in the growth of our end markets; the loss of one or more significant customers; 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 dependence on international customers and operations; the availability of rebates, tax credits and other financial incentives on end-user demands for certain products; 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; the volatility of currency exchange rates; our indebtedness may limit our flexibility to operate our business; our ability to retain key and highly skilled personnel; 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 or those of our third-party service providers; our principal stockholders have substantial control over us; the inapplicability of the “corporate opportunity” doctrine to any director or stockholder who is not employed by us; the dilutive impact on the price of our shares upon future issuance by us or future sales by our stockholders; our lack of intent to declare or pay dividends for the foreseeable future; anti-takeover provisions in our organizational documents and under the General Corporation Law of the State of Delaware; the exclusive forum provision in our Certificate of Incorporation for disputes with stockholders; our inability to design, implement or maintain effective internal control over financial reporting; changes in tax rates or the adoption of new tax legislation; 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 18, 2022, as amended by Amendment No. 1 on Form 10-K/A filed with the SEC on August 29, 2022, 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.


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

 Three-Month Period Ended Six-Month Period Ended
 September 23,
2022
 September 24,
2021
 September 23,
2022
 September 24,
2021
Net sales$192,640  $156,445  $368,684  $309,134 
Net sales to related party 45,026   37,165   86,735   72,618 
Total net sales 237,666   193,610   455,419   381,752 
Cost of goods sold 105,644   91,078   205,023   185,060 
Gross profit 132,022   102,532   250,396   196,692 
Operating expenses:       
Research and development 35,567   29,590   69,424   59,144 
Selling, general and administrative 39,117   34,088   109,097   66,152 
Change in fair value of contingent consideration (2,500)  300   (2,700)  600 
Total operating expenses 72,184   63,978   175,821   125,896 
Operating income 59,838   38,554   74,575   70,796 
Other income (expense):       
Interest expense (531)  (1,228)  (968)  (1,654)
Interest income 467   78   784   159 
Foreign currency transaction gain (loss) 266   202   2,190   (52)
(Loss) income in earnings of equity investment (1,029)  226   (1,893)  505 
Other, net 75   1,534   (3,354)  1,582 
Income before income taxes 59,086   39,366   71,334   71,336 
Income tax provision 8,438   6,143   10,403   10,406 
Net income 50,648   33,223   60,931   60,930 
Net income attributable to non-controlling interests 34   37   70   75 
Net income attributable to Allegro MicroSystems, Inc.$50,614  $33,186  $60,861  $60,855 
Net income attributable to Allegro MicroSystems, Inc. per share:       
Basic$0.26  $0.17  $0.32  $0.32 
Diluted$0.26  $0.17  $0.32  $0.32 
Weighted average shares outstanding:       
Basic 191,284,631   189,673,788   190,959,616   189,629,535 
Diluted 192,639,576   191,676,422   192,654,097   191,416,250 


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 23,
2022
 September 24,
2021
 Amount % September 23,
2022
 September 24,
2021
 Amount %
 (Dollars in thousands)
Automotive$157,398 $126,031 $31,367 24.9% $307,047 $259,554 $47,493 18.3%
Industrial 48,176  36,321  11,855 32.6%  88,316  66,630  21,686 32.5%
Other 32,092  31,258  834 2.7%  60,056  55,568  4,488 8.1%
Total net sales$237,666 $193,610 $44,056 22.8% $455,419 $381,752 $73,667 19.3%


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 23,
2022
 September 24,
2021
 September 23,
2022
 September 24,
2021
Cost of sales$1,124 $722 $1,956 $1,250
Research and development 1,711  1,043  2,839  1,795
Selling, general and administrative 5,369  4,431  37,545  7,982
Total stock-based compensation$8,204 $6,196 $42,340 $11,027


Supplemental Schedule of Acquisition Related Intangible Amortization Costs

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

 Three-Month Period Ended Six-Month Period Ended
(In thousands)September 23,
2022
 September 24,
2021
 September 23,
2022
 September 24,
2021
Cost of sales$378 $273  651  546
Selling, general and administrative 23  16  45  45
Total intangible amortization$401 $289 $696 $591


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

 September 23,
2022
 March 25,
2022
Assets   
Current assets:   
Cash and cash equivalents$293,588  $282,383 
Restricted cash 9,694   7,416 
Trade accounts receivable, net of provision for expected credit losses of $189 and $105 at September 23, 2022 and March 25, 2022, respectively 86,669   87,359 
Trade and other accounts receivable due from related party 32,528   27,360 
Accounts receivable – other 1,598   4,144 
Inventories 98,426   86,160 
Prepaid expenses and other current assets 19,232   14,995 
Current portion of related party note receivable 3,750   1,875 
Total current assets 545,485   511,692 
Property, plant and equipment, net 219,240   210,028 
Operating lease right-of-use assets 14,002   16,049 
Deferred income tax assets 33,786   17,967 
Goodwill 28,037   20,009 
Intangible assets, net 52,268   35,970 
Related party note receivable, less current portion 10,313   5,625 
Equity investment in related party 25,778   27,671 
Other assets 50,893   47,609 
Total assets$979,802  $892,620 
Liabilities, Non-Controlling Interest and Stockholders' Equity   
Current liabilities:   
Trade accounts payable$40,620  $29,836 
Amounts due to related party 4,709   5,222 
Accrued expenses and other current liabilities 63,941   65,459 
Current portion of operating lease liabilities 3,484   3,706 
Total current liabilities 112,754   104,223 
Obligations due under Senior Secured Credit Facilities 25,000   25,000 
Operating lease liabilities, less current portion 10,870   12,748 
Deferred income tax liabilities 4,140    
Other long-term liabilities 11,163   15,286 
Total liabilities 163,927   157,257 
Commitments and contingencies   
Stockholders' Equity:   
Preferred Stock, $0.01 par value; 20,000,000 shares authorized, no shares issued or outstanding at September 23, 2022 and March 25, 2022     
Common stock, $0.01 par value; 1,000,000,000 shares authorized, 191,308,141 shares issued and outstanding at September 23, 2022; 1,000,000,000 shares authorized, 190,473,595 issued and outstanding at March 25, 2022 1,913   1,905 
Additional paid-in capital 662,082   627,792 
Retained earnings 183,819   122,958 
Accumulated other comprehensive loss (33,028)  (18,448)
Equity attributable to Allegro MicroSystems, Inc. 814,786   734,207 
Non-controlling interests 1,089   1,156 
Total stockholders’ equity 815,875   735,363 
Total liabilities, non-controlling interest and stockholders' equity$979,802  $892,620 


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

 Six-Month Period Ended
 September 23,
2022
 September 24,
2021
CASH FLOWS FROM OPERATING ACTIVITIES:   
Net income$60,931  $60,930 
Adjustments to reconcile net income to net cash provided by operating activities:   
Depreciation and amortization 24,125   24,511 
Amortization of deferred financing costs 49   25 
Deferred income taxes (16,431)  (2,246)
Stock-based compensation 42,340   11,027 
Loss (gain) on disposal of assets 250   (330)
Change in fair value of contingent consideration (2,700)  600 
Provisions for inventory and receivables reserves 232   2,869 
Unrealized loss (gain) on marketable securities 3,458   (978)
Changes in operating assets and liabilities:   
Trade accounts receivable 5,520   (2,299)
Accounts receivable - other 2,546   181 
Inventories (17,328)  4,415 
Prepaid expenses and other assets (9,470)  (6,761)
Trade accounts payable 8,928   (6,188)
Due to/from related parties (5,681)  1,312 
Accrued expenses and other current and long-term liabilities (4,264)  (17,192)
Net cash provided by operating activities 92,505   69,876 
CASH FLOWS FROM INVESTING ACTIVITIES:   
Purchases of property, plant and equipment (35,220)  (33,821)
Acquisition of business, net of cash acquired (20,429)  (12,549)
Proceeds from sales of property, plant and equipment    27,407 
Investments in marketable securities    (4,334)
Net cash used in investing activities (55,649)  (23,297)
CASH FLOWS FROM FINANCING ACTIVITIES:   
Loans made to related party (7,500)   
Receipts on related party notes receivable 937    
Payments for taxes related to net share settlement of equity awards (9,606)   
Proceeds from issuance of common stock under employee stock purchase plan 1,573   1,291 
Net cash (used in) provided by financing activities (14,596)  1,291 
Effect of exchange rate changes on Cash and cash equivalents and Restricted cash (8,777)  3,939 
Net increase in Cash and cash equivalents and Restricted cash 13,483   51,809 
Cash and cash equivalents and Restricted cash at beginning of period 289,799   203,875 
CASH AND CASH EQUIVALENTS AND RESTRICTED CASH AT END OF PERIOD:$303,282  $255,684 
RECONCILIATION OF CASH AND CASH EQUIVALENTS AND RESTRICTED CASH:   
Cash and cash equivalents at beginning of period$282,383  $197,214 
Restricted cash at beginning of period 7,416   6,661 
Cash and cash equivalents and Restricted cash at beginning of period$289,799  $203,875 
Cash and cash equivalents at end of period 293,588   248,579 
Restricted cash at end of period 9,694   7,105 
Cash and cash equivalents and Restricted cash at end of period$303,282  $255,684 
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:   
Noncash transactions:   
Property, plant and equipment purchases included in trade accounts payable$(3,877) $(3,183)
Noncash lease liabilities arising from obtaining right-of-use assets 374   699 
        

Non-GAAP Financial Measures

In addition to the measures presented in our consolidated financial statements, we regularly review other measures, 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 measures 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;
  • certain 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 being adjusted 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.

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.
  • Stock-based compensation—Represents non-cash expenses arising from the grant of stock-based awards. A significant portion of the cost included in fiscal year 2023 related to retirement of the former CEO.
  • AMTC Facility consolidation one-time costs—Represents one-time costs incurred in connection with closing of the AMTC Facility and transitioning of test and assembly functions to 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 as of the end of March 2021, and we sold the AMTC Facility in August 2021.
  • 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 and Heyday Integrated Circuits (“Heyday”), which closed in September 2022.
  • 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 through fiscal year 2022.

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) one-time transaction-related legal, consulting and registration fees related to a secondary offering on behalf of certain stockholders in fiscal 2022, (ii) one-time transaction-related legal and consulting fees in fiscal 2023 and 2022 not related to (i), and (iii) the acquisition of Heyday.
  • Severance—Represents severance costs associated with (i) 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, (ii) costs related to the discontinuation of one of our product lines manufactured by Voxtel in fiscal year 2022, and (iii) nonrecurring separation costs related to the departures of executive officers in fiscal years 2023 and 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.

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 loss (gain) 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.
  • (Loss) income in earnings of equity investment—Represents our equity method investment in Polar Semiconductor, LLC (“PSL”).
  • Unrealized (gain) loss 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 Income Taxes 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 23,
2022
 June 24,
2022
 September 24,
2021
 September 23,
2022
 September 24,
2021
  (Dollars in thousands)
Reconciliation of Non-GAAP Gross Profit           
           
GAAP Gross Profit  $132,022  $118,374  $102,532  $250,396  $196,692 
           
Voxtel inventory impairment        271      3,106 
Stock-based compensation  1,124   832   722   1,956   1,250 
AMTC Facility consolidation one-time costs        7      144 
Amortization of acquisition-related intangible assets  378   273   273   651   546 
COVID-19 related expenses        316      659 
Total Non-GAAP Adjustments $1,502  $1,105  $1,589  $2,607  $5,705 
           
Non-GAAP Gross Profit $133,524  $119,479  $104,121  $253,003  $202,397 
Non-GAAP Gross Margin  56.2%   54.9%   53.8%   55.6%   53.0% 


  Three-Month Period Ended Six-Month Period Ended
  September 23,
2022
 June 24,
2022
 September 24,
2021
 September 23,
2022
 September 24,
2021
  (Dollars in thousands)
Reconciliation of Non-GAAP Operating Expenses           
           
GAAP Operating Expenses $72,184  $103,637  $63,978 $175,821  $125,896
           
Research and Development Expenses          
GAAP Research and Development Expenses  35,567   33,857   29,590  69,424   59,144
Stock-based compensation  1,711   1,128   1,043  2,839   1,795
AMTC Facility consolidation one-time costs             2
COVID-19 related expenses        8     14
Transaction fees  201   202     403   
Non-GAAP Research and Development Expenses  33,655   32,527   28,539  66,182   57,333
           
Selling, General and Administrative Expenses          
GAAP Selling, General and Administrative Expenses  39,117   69,980   34,088  109,097   66,152
Stock-based compensation  5,369   32,176   4,431  37,545   7,982
AMTC Facility consolidation one-time costs  90   96   151  186   475
Amortization of acquisition-related intangible assets  23   22   16  45   45
COVID-19 related expenses        551     932
Transaction fees  63   1,597   6  1,660   29
Severance     4,186     4,186   168
Non-GAAP Selling, General and Administrative Expenses  33,572   31,903   28,933  65,475   56,521
           
Change in fair value of contingent consideration  (2,500)  (200)  300  (2,700)  600
           
Total Non-GAAP Adjustments  4,957   39,207   6,506  44,164   12,042
           
Non-GAAP Operating Expenses $67,227  $64,430  $57,472 $131,657  $113,854


  Three-Month Period Ended Six-Month Period Ended
  September 23,
2022
 June 24,
2022
 September 24,
2021
 September 23,
2022
 September 24,
2021
  (Dollars in thousands)
Reconciliation of Non-GAAP Operating Income           
           
GAAP Operating Income  $59,838  $14,737  $38,554  $74,575  $70,796 
           
Voxtel inventory impairment        271      3,106 
Stock-based compensation  8,204   34,136   6,196   42,340   11,027 
AMTC Facility consolidation one-time costs  90   96   158   186   621 
Amortization of acquisition-related intangible assets  401   295   289   696   591 
COVID-19 related expenses        875      1,605 
Change in fair value of contingent consideration  (2,500)  (200)  300   (2,700)  600 
Transaction fees  264   1,799   6   2,063   29 
Severance     4,186      4,186   168 
Total Non-GAAP Adjustments $6,459  $40,312  $8,095  $46,771  $17,747 
           
Non-GAAP Operating Income $66,297  $55,049  $46,649  $121,346  $88,543 
Non-GAAP Operating Margin (% of net sales)   27.9%   25.3%   24.1%   26.6%   23.2% 


  Three-Month Period Ended Six-Month Period Ended
  September 23,
2022
 June 24,
2022
 September 24,
2021
 September 23,
2022
 September 24,
2021
  (Dollars in thousands)
Reconciliation of EBITDA and Adjusted EBITDA          
           
GAAP Net Income $50,648  $10,283  $33,223  $60,931  $60,930 
           
Interest expense  531   437   1,228   968   1,654 
Interest income  (467)  (317)  (78)  (784)  (159)
Income tax provision  8,438   1,965   6,143   10,403   10,406 
Depreciation & amortization  12,207   11,918   12,339   24,125   24,511 
EBITDA  $71,357  $24,286  $52,855  $95,643  $97,342 
           
Non-core loss (gain) on sale of equipment  253   (3)  (296)  250   (331)
Voxtel inventory impairment        271      3,106 
Foreign currency translation (gain) loss  (266)  (1,924)  (202)  (2,190)  52 
Loss (income) in earnings of equity investment  1,029   864   (226)  1,893   (505)
Unrealized (gain) loss on investments  (28)  3,486   (978)  3,458   (978)
Stock-based compensation  8,204   34,136   6,196   42,340   11,027 
AMTC Facility consolidation one-time costs  90   96   158   186   621 
COVID-19 related expenses        875      1,605 
Change in fair value of contingent consideration  (2,500)  (200)  300   (2,700)  600 
Transaction fees  264   1,799   6   2,063   29 
Severance     4,186      4,186   168 
Adjusted EBITDA $78,403  $66,726  $58,959  $145,129  $112,736 
Adjusted EBITDA Margin (% of net sales)  33.0%   30.6%   30.5%   31.9%   29.5% 


  Three-Month Period Ended Six-Month Period Ended
  September 23,
2022
 June 24,
2022
 September 24,
2021
 September 23,
2022
 September 24,
2021
  (Dollars in thousands)
Reconciliation of Non-GAAP Profit before Tax          
           
GAAP Income before Tax Provision $59,086  $12,248  $39,366  $71,334  $71,336 
           
Non-core loss (gain) on sale of equipment  253   (3)  (296)  250   (331)
Voxtel inventory impairment        271      3,106 
Foreign currency translation (gain) loss  (266)  (1,924)  (202)  (2,190)  52 
Loss (income) in earnings of equity investment  1,029   864   (226)  1,893   (505)
Unrealized (gain) loss on investments  (28)  3,486   (978)  3,458   (978)
Stock-based compensation  8,204   34,136   6,196   42,340   11,027 
AMTC Facility consolidation one-time costs  90   96   158   186   621 
Amortization of acquisition-related intangible assets  401   295   289   696   591 
COVID-19 related expenses        875      1,605 
Change in fair value of contingent consideration  (2,500)  (200)  300   (2,700)  600 
Transaction fees  264   1,799   6   2,063   29 
Severance     4,186      4,186   168 
Total Non-GAAP Adjustments $7,447  $42,735  $6,393  $50,182  $15,985 
           
Non-GAAP Profit before Tax $66,533  $54,983  $45,759  $121,516  $87,321 


  Three-Month Period Ended Six-Month Period Ended
  September 23,
2022
 June 24,
2022
 September 24,
2021
 September 23,
2022
 September 24,
2021
  (Dollars in thousands)
Reconciliation of Non-GAAP Provision for Income Taxes          
           
GAAP Income Tax Provision $8,438  $1,965  $6,143  $10,403  $10,406 
GAAP effective tax rate  14.3%  16.0%  15.6%  14.6%  14.6%
           
Tax effect of adjustments to GAAP results  (1,663)  5,900   946   4,237   3,037 
           
Non-GAAP Provision for Income Taxes $6,775  $7,865  $7,089  $14,640  $13,443 
Non-GAAP effective tax rate   10.2%   14.3%   15.5%   12.0%   15.4% 


  Three-Month Period Ended Six-Month Period Ended
  September 23,
2022
 June 24,
2022
 September 24,
2021
 September 23,
2022
 September 24,
2021
  (Dollars in thousands)
Reconciliation of Non-GAAP Net Income          
           
GAAP Net Income  $50,648  $10,283  $33,223  $60,931  $60,930 
GAAP Basic Earnings per Share $0.26  $0.05  $0.18  $0.32  $0.32 
GAAP Diluted Earnings per Share $0.26  $0.05  $0.17  $0.32  $0.32 
           
Non-core loss (gain) on sale of equipment  253   (3)  (296)  250   (331)
Voxtel inventory impairment        271      3,106 
Foreign currency translation (gain) loss  (266)  (1,924)  (202)  (2,190)  52 
Loss (income) in earnings of equity investment  1,029   864   (226)  1,893   (505)
Unrealized (gain) loss on investments  (28)  3,486   (978)  3,458   (978)
Stock-based compensation  8,204   34,136   6,196   42,340   11,027 
AMTC Facility consolidation one-time costs  90   96   158   186   621 
Amortization of acquisition-related intangible assets  401   295   289   696   591 
COVID-19 related expenses        875      1,605 
Change in fair value of contingent consideration  (2,500)  (200)  300   (2,700)  600 
Transaction fees  264   1,799   6   2,063   29 
Severance     4,186      4,186   168 
Tax effect of adjustments to GAAP results  1,663   (5,900)  (946)  (4,237)  (3,037)
           
Non-GAAP Net Income $59,758  $47,118  $38,670  $106,876  $73,878 
Basic weighted average common shares  191,284,631   190,638,135   189,673,788   190,959,616   189,629,535 
Diluted weighted average common shares  192,639,576   192,406,276   191,676,422   192,654,097   191,416,250 
Non-GAAP Basic Earnings per Share $0.31  $0.25  $0.20  $0.56  $0.39 
Non-GAAP Diluted Earnings per Share $0.31  $0.24  $0.20  $0.55  $0.39 


Investor Contact:
Derek D’Antilio
Chief Financial Officer
Phone: (603) 626-2300
ddantilio@allegromicro.com


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