Allegro Microsystems Inc (ALGM) Q1 2026 Earnings Call Highlights: Strong Revenue Growth and ...
Gross Margin: 48.2%, an increase of 260 basis points sequentially.
Operating Margin: 11.1% of sales, up from 9% in Q4 and 6% a year ago.
Non-GAAP EPS: $0.09, above the midpoint of guidance.
Adjusted EBITDA: 16.4% of sales.
Automotive Sales Growth: 3% sequential increase, 13% year-over-year growth.
E-mobility Sales Growth: 16% sequential increase, 31% year-over-year growth.
Industrial and Other Sales Growth: 11% sequential increase, 50% year-over-year growth.
Cash Flow from Operations: $62 million.
Free Cash Flow: $51 million or 25% of sales.
Debt Repayment: Voluntary repayment of $35 million, reducing debt balance to $310 million.
Net Debt: Reduced to $181 million from $224 million at the end of Q4.
Inventory Days: 141 days, down from 148 in Q4.
Warning! GuruFocus has detected 5 Warning Signs with ALGM.
Release Date: July 31, 2025
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
Allegro Microsystems Inc (NASDAQ:ALGM) reported strong first quarter results with sales of $203 million and a gross margin of 48.2%, both above the high end of guidance ranges.
The company saw significant growth in e-mobility sales, particularly in current sensors for xEV applications, with a 16% sequential increase and a 31% year-over-year increase.
Allegro Microsystems Inc (NASDAQ:ALGM) achieved more than 75% of first quarter design wins in strategic focus areas, including e-mobility, data center, robotics and automation, clean energy, and medical applications.
The company released innovative new products, such as an ASIL C current sensor and a FortiGate BYOL motor driver IC, enhancing its leadership in EV inverters and data center cooling solutions.
Allegro Microsystems Inc (NASDAQ:ALGM) continues to optimize manufacturing processes, resulting in cost reductions and improved gross margins, with a focus on relentless innovation and performance leadership.
Negative Points
Operating expenses were $75 million, which was $3 million above the outlook due to increased variable compensation and R&D spending.
The company faces foreign exchange headwinds from a weakening US dollar, impacting gross margins.
There is ongoing competition in the Chinese market, particularly at the lower end, which could impact Allegro Microsystems Inc (NASDAQ:ALGM)'s market share.
The company is not yet shipping to true end demand, indicating potential inventory imbalances in the distribution channel.
Allegro Microsystems Inc (NASDAQ:ALGM) is still in the process of transitioning its products to a China for China supply chain, which requires significant effort and time.
Q & A Highlights
Q: Can you discuss the forward demand picture and the impact of potential tariff pull-ins versus continued recovery? A: Michael Doogue, President and CEO, explained that Allegro is seeing positive trends such as strong bookings and growing backlog. While tariffs create uncertainty, discussions with customers indicate potential future component shortages due to real demand, particularly in industrial and automotive sectors. Derek D'Antilio, CFO, added that the impact of tariffs on Allegro is currently immaterial, with no direct impact on their shipments.
Q: What helped drive the upside in gross margin, and how do you see the drivers of gross margin moving forward? A: Derek D'Antilio, CFO, noted that Q1 gross margin exceeded expectations due to better-than-expected revenue and cost benefits from supplier negotiations. Looking forward, they expect continued benefits from cost reductions and a favorable mix, with a projected gross margin of 48% to 50% in Q2.
Q: How do you view the automotive demand recovery, and what are your expectations for automotive sales growth? A: Michael Doogue, President and CEO, mentioned that S&P revised their automotive production forecast upwards, indicating a flat vehicle production landscape. Allegro is seeing increased demand from automotive customers, with signs pointing to a recovery in the sector.
Q: Can you provide more details on the industrial exposure, particularly in clean energy and data center sectors? A: Michael Doogue, President and CEO, explained that while clean energy is a part of their industrial focus, they are seeing strong growth in data center and robotics sectors. The industrial business has experienced four consecutive quarters of growth, with data center leading the recent uptick.
Q: What are the future drivers for e-mobility, and how do you see the timing of new products impacting growth? A: Michael Doogue, President and CEO, highlighted that e-mobility growth is driven by increasing dollar content in steering and braking systems, as well as current sensors in EVs. Allegro's isolated gate drivers are expected to drive significant growth, particularly in the EV and data center markets.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
This article first appeared on GuruFocus.
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