ALLEGRO MICROSYSTEMS INC
For the period ended Dec 27, 2024. Filed Jan 31, 2025.
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A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Dec 27, 2024 · Filed Jan 31, 2025
ALGM$28.17+5.1%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2024-09-27; filed 2024-11-01.
0000950170-24-119808
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2024-12-27; filed 2025-01-31.
0000950170-25-011434
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 131 previous paragraphs and 119 current paragraphs.
65 unchanged; 51 reworded; 3 added; 10 removed; 5 previous and 0 current paragraphs rearranged.
Tables are not compared: 9 previous and 9 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (3)
Current report
During the nine-month period ended December 27, 2024, we entered into certain related party transactions with Sanken Electric Co., Ltd (“Sanken”). See Note 14, “Related Party Transactions” to the unaudited condensed consolidated financial statements included in this Quarterly Report for additional information.
Current report
Nine-Month Period Ended December 27, 2024 Compared to Nine-Month Period Ended December 29, 2023
Current report
SG&A expenses decreased in the nine-month period ended December 27, 2024 compared to the nine-month period ended December 29, 2023, primarily due to a decrease in the annual incentive program and outside service costs, partially offset by an increase in personnel and severance expenses.
Removed paragraphs (10)
Previous report
On July 23, 2024, we entered into a share repurchase agreement (the “Share Repurchase Agreement” and the transaction thereunder, the “Sanken Transaction”) with Sanken Electric Co., Ltd. (“Sanken”), pursuant to which we agreed to repurchase 38,767,315 shares of our common stock from Sanken at a price per share equal to the price per share at which the underwriters in a public underwritten equity offering of shares of our common stock would purchase shares (the “Equity Offering”). The repurchase of shares of common stock occurred in two separate closings, with the first closing taking place after the closing of the Equity Offering (the “First Closing”) and the second closing (the “Second Closing”) occurring after the receipt of the proceeds from borrowings under the Refinanced 2023 Term Loan Facility (as defined below). The First Closing of the share repurchase was conditioned upon the closing of the Equity Offering and certain other conditions, and the Second Closing of the share repurchase was conditioned upon the receipt of net proceeds of no less than $300.0 million from incremental term loans under the Refinanced 2023 Term Loan Facility. Pursuant to the terms of the Share Repurchase Agreement, Sanken reimbursed us for the expenses incurred by us in connection with the transactions contemplated by the Share Repurchase Agreement, plus a facilitation fee of $35.0 million.
Previous report
To fund the First Closing, we entered into an underwriting agreement (the “Underwriting Agreement”) with Barclays Capital Inc. and Morgan Stanley & Co. LLC, as representatives of the several underwriters (the “Underwriters”) on July 24, 2024, pursuant to which we agreed to sell 25,000,000 shares of our common stock, to the Underwriters at a price of $23.16 per share. Under the terms of the Underwriting Agreement, we granted the Underwriters a 30-day option to purchase up to an additional 3,750,000 shares of common stock at the same purchase price, which option was exercised in full prior to the closing of the Equity Offering.
Previous report
On July 26, 2024, we completed the Equity Offering pursuant to the Underwriting Agreement of 28,750,000 shares of our common stock at a public offering price of $24.00 per share resulting in net proceeds to us of approximately $665.9 million, after deducting approximately $24.2 million of underwriting discounts. As described above, we used the net proceeds of the Equity Offering to complete the First Closing under the Share Repurchase Agreement.
Previous report
On July 29, 2024, we completed the First Closing under the Share Repurchase Agreement, repurchasing 28,750,000 shares of our common stock for aggregate consideration of $628.3 million, which was the Equity Offering price, less the facilitation fee of $35.0 million, underwriting discounts, and reimbursable transaction expenses. The shares repurchased in the First Closing were retired.
Previous report
In connection with the Share Repurchase Agreement, we entered into a Second Amended and Restated Stockholders Agreement with Sanken (the “Second Amended and Restated Stockholders Agreement”), which amended and restated the Amended and Restated Stockholders Agreement, dated as of June 16, 2022, by and among us, Sanken and OEP SKNA, L.P. (“OEP”). The Second Amended and Restated Stockholders Agreement, which became effective in accordance with its terms on July 29, 2024, removed OEP as a party and amended certain rights and obligations of us and Sanken.
Previous report
On August 7, 2024, we completed the Second Closing under the Share Repurchase Agreement, repurchasing 10,017,315 shares of our common stock for aggregate cash consideration of $225.5 million, which was the Equity Offering price less underwriting discounts and reimbursable transaction expenses. As described above, we used a portion of the proceeds from the Refinanced 2023 Term Loan Facility and existing cash on hand to complete the Second Closing. The shares repurchased in the Second Closing were retired.
Previous report
On September 20, 2024, we, along with Sanken, Polar Semiconductor LLC (“PSL”), and PS Investment Aggregator, L.P. (“Subscriber”), completed the transaction (the “PSL Closing”) contemplated by a Sale and Subscription Agreement that we, Sanken, PSL and Subscriber entered into on April 25, 2024 (the “PSL Agreement” and the transaction thereunder, the “PSL Transaction”). As contemplated by the PSL Agreement, Subscriber and certain of its affiliates agreed to make capital contributions to PSL of $175.0 million in exchange for an equity interest in PSL, and we agreed to discharge the PSL Promissory Notes (as defined in Note 14, “Related Party Transactions” to the condensed consolidated financial statements included in this Quarterly Report) held by us for a value of $10.4 million in exchange for PSL equity interests. Following the PSL Closing, we owned approximately 10.2% of PSL. As a result of the share issuance to Subscriber, we recognized a net loss of $2.8 million related to the difference between the selling price per share and its carrying amount per share and after a gain from the conversion of the PSL Promissory Notes. The loss is included in Other (expense) income, net in the condensed consolidated statements of operations.
Previous report
At the PSL Closing, we, Sanken and Subscriber entered into an amended and restated limited partnership agreement (the “Limited Partnership Agreement”) with Polar Semiconductor GP I, LLC. The Limited Partnership Agreement contains representations, warranties and covenants of the parties customary for a transaction of this type, the reimbursement of expenses and costs, and restrictions on transfers.
Previous report
Six-Month Period Ended September 27, 2024 Compared to Six-Month Period Ended September 29, 2023
Previous report
Selling, general and administrative (“SG&A”) expenses decreased in the six-month period ended September 27, 2024 compared to the six-month period ended September 29, 2023, primarily due to a decrease in the annual incentive program and outside service costs, partially offset by an increase in personnel and severance expenses.
Reworded paragraphs (51)
Previous wording
We operate on a 52- or 53-week fiscal year ending on the last Friday of March. Each fiscal quarter has 13 weeks, except in a 53-week year, when the fourth fiscal quarter has 14 weeks. All references to the three- and six-month periods ended September 27, 2024 and September 29, 2023 relate to the 13- and 26-week periods ended September 27, 2024 and September 29, 2023, respectively. All references to “2025,” “fiscal year 2025” or similar references relate to the 52-week period ending March 28, 2025. All references to “2024,” “fiscal year 2024” or similar references relate to the 52-week period ended March 29, 2024.
Current wording
We operate on a 52- or 53-week fiscal year ending on the last Friday of March. Each fiscal quarter has 13 weeks, except in a 53-week year, when the fourth fiscal quarter has 14 weeks. All references to the three- and nine-month periods ended December 27, 2024 and December 29, 2023 relate to the 13- and 39-week periods ended December 27, 2024 and December 29, 2023, respectively. All references to “2025,” “fiscal year 2025” or similar references relate to the 52-week period ending March 28, 2025. All references to “2024,” “fiscal year 2024” or similar references relate to the 52-week period ended March 29, 2024.
Previous wording
We are a leading global designer, developer, fabless manufacturer and marketer of sensor integrated circuits (“ICs”) and application-specific analog power ICs enabling the most critical technologies in the automotive and industrial markets. We are a leading supplier of magnetic sensor IC solutions worldwide, based on market share, driven by our market leadership in the automotive market. Our products are foundational to automotive and industrial electronic systems. Our sensor ICs enable our customers to precisely measure motion, speed, position and current, while our power ICs include high-temperature and high-voltage capable motor drivers, power management ICs, light emitting diode driver ICs and isolated gate drivers. We believe that our technology expertise, combined with our deep applications knowledge and strong customer relationships, enable us to develop solutions that provide more value to customers than typical ICs. Compared to a typical IC, our solutions are more integrated, intelligent and sophisticated for complex applications and easier for customers to use.
Current wording
We are a leading global designer, developer, fabless manufacturer and marketer of sensor integrated circuits (“ICs”) and application-specific analog power ICs enabling the most critical technologies in the automotive and industrial and other markets. We are a leading supplier of magnetic sensor IC solutions worldwide, based on market share, driven by our market leadership in the automotive market. Our products are foundational to automotive and industrial electronic systems. Our sensor ICs enable our customers to precisely measure motion, speed, position and current, while our power ICs include high-temperature and high-voltage capable motor drivers, power management ICs, light emitting diode driver ICs and isolated gate drivers. We believe that our technology expertise, combined with our deep applications knowledge and strong customer relationships, enable us to develop solutions that provide more value to customers than typical ICs. Compared to a typical IC, our solutions are more integrated, intelligent and sophisticated for complex applications and easier for customers to use.
Previous wording
We are headquartered in Manchester, New Hampshire and have a global footprint across multiple continents. Our portfolio includes more than 1,000 products, and we ship over 1.5 billion units annually to more than 10,000 customers worldwide. During the three- and six-month periods ended September 27, 2024, we generated $187.4 million and $354.3 million in total net sales, respectively, with $(33.6) million and $(51.2) million in net loss, respectively. During the three- and six-month periods ended September 29, 2023, we generated $275.5 million and $553.8 million in total net sales, respectively, with $65.7 million and $126.6 million in net income, respectively.
Current wording
We are headquartered in Manchester, New Hampshire and have a global footprint across multiple continents. Our portfolio includes more than 1,000 products, and we ship over 1.5 billion units annually to more than 10,000 customers worldwide. During the three- and nine-month periods ended December 27, 2024, we generated $177.9 million and $532.2 million in total net sales, respectively, with $(6.8) million and $(58.0) million in net loss, respectively. During the three- and nine-month periods ended December 29, 2023, we generated $255.0 million and $808.8 million in total net sales, respectively, with $33.4 million and $160.0 million in net income, respectively.
Previous wording
Inflation rates in the markets in which we operate have increased and may continue to rise. Inflation over the last several quarters has led us to experience higher costs, including higher labor costs, wafer and other costs for materials from suppliers, and transportation and energy costs. Our suppliers have raised their prices and may continue to raise prices, and in the competitive markets in which we operate, we may not be able to make corresponding price increases to preserve our gross margins and profitability. If inflation rates continue to rise or remain elevated for a sustained period of time, they could have a material adverse effect on our business, financial condition, results of operations and liquidity. While we have generally been able to offset increases in these costs through various productivity and cost reduction initiatives, as well as adjusting our selling prices and releasing new products with improved gross margins, our ability to increase our average selling prices depends on market conditions and competitive dynamics. Given the timing of our actions compared to the timing of these inflationary pressures, there may be periods during which we are unable to fully recover the increases in our costs.
Current wording
Although inflation has moderated in recent periods, inflation rates in the markets in which we operate have increased and may continue to rise. Inflation in recent quarters has led us to experience higher costs, including higher labor costs, wafer and other costs for materials from suppliers, and transportation and energy costs. Our suppliers have raised their prices and may continue to raise prices, and in the competitive markets in which we operate, we may not be able to make corresponding price increases to preserve our gross margins and profitability. If inflation rates continue to rise or remain elevated for a sustained period of time, they could have a material adverse effect on our business, financial condition, results of operations and liquidity. While we have generally been able to offset increases in these costs through various productivity and cost reduction initiatives, as well as adjusting our selling prices and releasing new products with improved gross margins, our ability to increase our average selling prices depends on market conditions and competitive dynamics. Given the timing of our actions compared to the timing of these inflationary pressures, there may be periods during which we are unable to fully recover the increases in our costs.
Previous wording
Gross margin has been, and will continue to be, affected by a variety of factors, including the ASPs of our products, product mix in a given period, material costs, yields, manufacturing costs and efficiencies. We believe the primary driver of gross margin is the ASP negotiated between us and our customers relative to material costs and yields. Our pricing and margins depend on the volumes and the features of the products we produce and sell to our customers. As our products mature and unit volumes increase, we expect their ASPs to decline in the long term. We continually monitor and work to reduce the cost of our products and improve the potential value our solutions provide to our customers, as we target new design win opportunities and manage the product life cycles of our existing customer designs. We also maintain a close relationship with our suppliers and subcontractors to improve quality, increase yields and lower manufacturing costs. As a result, these declines often coincide with improvements in manufacturing yields and lower wafer, assembly, and testing costs, which offset some or all of the margin reduction that results from declining ASPs. However, we expect our gross margin to fluctuate on a quarterly basis as a result of changes in ASPs due to product mix, new product introductions, transitions into volume manufacturing and manufacturing costs. Gross margin generally decreases if production volumes are lower as a result of decreased demand as it did in the first quarter, which leads to a reduced absorption of our fixed manufacturing costs. Gross margin generally increases when the opposite occurs.
Current wording
Gross margin has been, and will continue to be, affected by a variety of factors, including the ASPs of our products, product mix in a given period, material costs, yields, manufacturing costs and efficiencies. We believe the primary driver of gross margin is the ASP negotiated between us and our customers relative to material costs and yields. Our pricing and margins depend on the volumes and the features of the products we produce and sell to our customers. As our products mature and unit volumes increase, we expect their ASPs to decline in the long term. We continually monitor and work to reduce the cost of our products and improve the potential value our solutions provide to our customers, as we target new design win opportunities and manage the product life cycles of our existing customer designs. We also maintain a close relationship with our suppliers and subcontractors to improve quality, increase yields and lower manufacturing costs. As a result, these declines often coincide with improvements in manufacturing yields and lower wafer, assembly, and testing costs, which offset some or all of the margin reduction that results from declining ASPs. However, we expect our gross margin to fluctuate on a quarterly basis as a result of changes in ASPs due to product mix, new product introductions, transitions into volume manufacturing and manufacturing costs. Gross margin generally decreases if production volumes are lower as a result of decreased demand as it did throughout fiscal year 2025, which leads to a reduced absorption of our fixed manufacturing costs. Gross margin generally increases when the opposite occurs.
Previous wording
Pursuant to the 2017 Tax Cuts and Jobs Act, beginning in fiscal year 2023, U.S. tax law now requires us to capitalize and amortize domestic and foreign research and development expenditures over five and 15 years, for domestic and foreign research, respectively (“174 Capitalization”). The impact of 174 Capitalization for fiscal year 2025 is an increase in annual cash taxes of approximately $5.0 million and a foreign derived intangible income benefit of $5.5 million. Additionally, the Internal Revenue Service has issued Notice 2024-12 and is expected to issue final guidance which may modify this law or change its impact.
Current wording
Pursuant to the 2017 Tax Cuts and Jobs Act, beginning in fiscal year 2023, U.S. tax law now requires us to capitalize and amortize domestic and foreign research and development expenditures over five and 15 years, for domestic and foreign research, respectively (“174 Capitalization”). The impact of 174 Capitalization for fiscal year 2025 is an increase in annual cash taxes of approximately $2.0 million and a foreign derived intangible income benefit of approximately $4.0 million. Additionally, the Internal Revenue Service has issued Notice 2024-12 and is expected to issue final guidance which may modify this law or change its impact.
Previous wording
Total net sales decreased in the three-month period ended September 27, 2024 compared to the three-month period ended September 29, 2023. The decrease was primarily driven by an overall reduction in customer held inventory and corresponding to a decline in shipments across all end markets. The decline in shipments impacted all applications, including e-Mobility products, safety comfort and convenience applications, and broad-based and other industrial applications, including clean energy and automation, and data center applications, partially offset by an increase in smart home applications.
Current wording
Total net sales decreased in the three-month period ended December 27, 2024 compared to the three-month period ended December 29, 2023. The decrease was primarily driven by an overall reduction in customer-held inventory and resulting in a decline in shipments across all end markets. The decline in shipments impacted nearly all applications, including e-Mobility products, internal combustion engine, safety comfort and convenience applications, and other industrial applications, including clean energy and automation, data center applications, and smart home applications, partially offset by an increase in broad-based industrial applications.
Previous wording
Automotive net sales decreased in the three-month period ended September 27, 2024 compared to the three-month period ended September 29, 2023, primarily due to inventory rebalancing with our automotive contract manufacturing customers looking to manage excess supply, as well as changes in product mix across all general applications.
Current wording
Automotive net sales decreased in the three-month period ended December 27, 2024 compared to the three-month period ended December 29, 2023, primarily due to inventory rebalancing with our automotive contract manufacturing customers looking to reduce inventory levels, as well as changes in product mix across all general applications.
Previous wording
Industrial and other net sales decreased in the three-month period ended September 27, 2024 compared to the three-month period ended September 29, 2023, primarily due to a decrease in demand for our broad-based and other industrial applications, in addition to distributor inventory reductions, partially offset by an increase in sales of smart home applications.
Current wording
Industrial and other net sales decreased in the three-month period ended December 27, 2024 compared to the three-month period ended December 29, 2023, primarily due to a decrease in demand for our data center applications, other industrial applications, and sales of smart home applications, partially offset by an increase in broad-based industrial applications.
Previous wording
The decline in PIC sales was primarily driven by a decrease in demand for our motor products. The decrease in MS and other sales was primarily due to a decline in demand for our current and isolator products, as well as our magnetic speed and position sensors, partially offset by an increase of sales for our tunnel magnetoresistance (“TMR”) solutions.
Current wording
The decrease in MS and other sales was primarily due to a decline in demand for our current and isolator products, as well as our magnetic speed and position sensors, partially offset by an increase of sales for our tunnel magnetoresistance (“TMR”) solutions. The decline in PIC sales was primarily driven by a decrease in demand for our motor products and high performance power products.
Previous wording
Americas net sales decreased in the three-month period ended September 27, 2024 compared to the three-month period ended September 29, 2023, primarily due to the decline in demand in the United States automotive and industrial and other markets across all applications. In addition, Greater China net sales declined in automotive markets primarily driven by reduced net sales of electric vehicles and advanced driver assistance systems applications. Europe net sales declined in automotive and industrial and other markets, primarily driven by lower net sales across all applications.
Current wording
Greater China net sales decreased in the three-month period ended December 27, 2024 compared to the three-month period ended December 29, 2023, primarily driven by reduced net sales of electric vehicles and advanced driver assistance systems applications, offset by an increase in broad-based applications. Americas net sales decreased due to the decline in demand in the United States automotive and industrial and other markets, primarily across all applications. Europe net sales declined in automotive markets, primarily driven by decline in electric vehicles. Other Asia net sales declined in data center applications, offset by an increase in broad-based industrial applications. South Korea net sales declined primarily in safety, comfort and convenience applications.
Previous wording
Cost of goods sold decreased in the three-month period ended September 27, 2024 compared to the three-month period ended September 29, 2023, primarily due to a reduction in shipped volume, as well as change in product mix, partially offset by an increase in amortization of intangible assets in relation to the acquisition of Crocus Technology International Corp. (“Crocus”).
Current wording
Cost of goods sold decreased in the three-month period ended December 27, 2024 compared to the three-month period ended December 29, 2023, primarily due to a reduction in shipped volume, as well as a change in product mix, partially offset by an increase in amortization of intangible assets in relation to the acquisition of Crocus Technology International Corp. (“Crocus”).
Previous wording
Cost of goods sold as a percentage of our total net sales was 54.3% and 42.1% for the three-month period ended September 27, 2024 and September 29, 2023, respectively. The increase was primarily due to the reduction in production volume, as well as a change in product mix noted above.
Current wording
Cost of goods sold as a percentage of our total net sales was 54.3% and 47.5% for the three-month periods ended December 27, 2024 and December 29, 2023, respectively. The increase was primarily due to the reduction in production volume, as well as a change in product mix noted above.
Previous wording
Gross margin was 45.7% and 57.9% for the three-month period ended September 27, 2024 and September 29, 2023, respectively. The decrease was primarily due to the decline in net sales and product mix noted above.
Current wording
Gross margin was 45.7% and 52.5% for the three-month periods ended December 27, 2024 and December 29, 2023, respectively. The decrease was primarily due to the decline in net sales and a change in product mix noted above.
Previous wording
Research and development (“R&D”) expenses increased in the three-month period ended September 27, 2024 in comparison to the comparable period in fiscal year 2024, primarily due to the increase in R&D supplies, partially offset by a reduction from R&D tax credits and personnel costs, including the annual incentive program.
Current wording
Research and development (“R&D”) expenses decreased in the three-month period ended December 27, 2024 compared to the comparable period in fiscal year 2024, primarily due to the reduction of R&D personnel costs, including the annual incentive program and a reduction in depreciation.
Previous wording
R&D expenses as a percentage of our total net sales was 23.2% and 15.8% for the three-month periods ended September 27, 2024 and September 29, 2023, respectively. The increase was primarily due to the increase in R&D supplies, partially offset by reduction from R&D tax credits and personnel costs including the annual incentive program, in addition to the decline in net sales.
Current wording
R&D expenses as a percentage of our total net sales was 24.4% and 17.4% for the three-month periods ended December 27, 2024 and December 29, 2023, respectively. The increase was primarily due to the decline in net sales, partially offset by the reduction from R&D personnel costs, including the annual incentive program.
Previous wording
Selling, general and administrative (“SG&A”) expenses decreased in the three-month period ended September 27, 2024 compared to the three-month period ended September 29, 2023, primarily due to a decrease in the annual incentive program and outside service costs, partially offset by an increase in personnel and severance expenses.
Current wording
Selling, general and administrative (“SG&A”) expenses decreased in the three-month period ended December 27, 2024 compared to the three-month period ended December 29, 2023, primarily due to a decrease in outside service costs, personnel and severance expenses, and the annual incentive program.
Previous wording
SG&A expenses as a percentage of our total net sales was 20.3% and 15.7% in the three-month periods ended September 27, 2024 and September 29, 2023, respectively. The increase as a percentage of total net sales was primarily due to a decrease in the annual incentive program and outside service costs, partially offset by an increase in personnel and severance expenses in addition to the decline in net sales.
Current wording
SG&A expenses as a percentage of our total net sales was 21.3% and 20.7% in the three-month periods ended December 27, 2024 and December 29, 2023, respectively. The increase as a percentage of total net sales was primarily due to the decline in net sales, partially offset by a decrease in outside service costs, personnel and severance expenses, and the annual incentive program.
Previous wording
Interest expense increased in the six-month period ended September 27, 2024 compared to the six-month period ended September 29, 2023, due to higher interest payments on the Refinanced 2023 Term Loan Facility, which increased our total outstanding debt balance.
Current wording
Interest expense increased in the three-month period ended December 27, 2024 compared to the three-month period ended December 29, 2023, due to higher interest payments on the Refinanced 2023 Term Loan Facility (as defined in Note 9, “Debt and Other Borrowings” to the unaudited condensed consolidated financial statements included in this Quarterly Report), which increased our total outstanding debt balance.
Previous wording
The foreign currency loss recorded in the six-month period ended September 27, 2024 was primarily due to the U.S. Dollar strengthening against the Peso. The foreign currency loss recorded in the six-month period ended September 29, 2023 was primarily due to realized and unrealized losses from the U.S. Dollar strengthening against the Philippine Peso from our Philippine location.
Current wording
The foreign currency loss recorded in the three-month period ended December 27, 2024 was primarily due to realized and unrealized losses from our Philippine location. The foreign currency gain recorded in the three-month period ended December 29, 2023 was primarily due to realized and unrealized gains from our Philippine and France locations.
Previous wording
We also recorded a net loss of $2.8 million as a result of the PSL Closing in the three-month period ended September 27, 2024 related to the difference between the selling price per share and its carrying amount per share and after a gain from the conversion of the PSL Promissory notes. Unrealized losses of $2.3 million related to our investment in marketable securities were offset by $3.7 million of gains related to sales of our investment in marketable securities and earnings in our money market fund deposits in the three-month period ended September 29, 2023.
Current wording
We recorded a gain of $0.7 million related to our investment in marketable securities and earnings in our money market fund deposits in the three-month period ended December 29, 2023.
Previous wording
Income tax benefit and the effective income tax rate were $(9.5) million and 22.0%, respectively, in the three-month period ended September 27, 2024, compared to income tax provision and effective income tax rate of $7.4 million and 10.1%, respectively, in the three-month period ended September 29, 2023. The increase in the effective tax rate (“ETR”) was mainly due to a decrease in forecasted GAAP income before taxes, less tax deductions for share-based compensation, and an increase in nondeductible expenses primarily related to the Sanken Transaction and PSL Transaction.
Current wording
Income tax benefit and the effective income tax rate were $(0.8) million and 10.6%, respectively, in the three-month period ended December 27, 2024, compared to income tax provision and effective income tax rate of $3.0 million and 8.2%, respectively, in the three-month period ended December 29, 2023. The increase in the effective tax rate (“ETR”) was mainly due to a decrease in forecasted GAAP income before taxes, less tax deductions for share-based compensation, and an increase in nondeductible expenses primarily related to the share repurchase transaction with Sanken (the “Sanken Transaction”) and PSL financing transaction (the “PSL Transaction” and the closing thereunder, the “PSL Closing”), each of which are described in more detail in Note 14, “Related Party Transactions” to the unaudited condensed consolidated financial statements included in this Quarterly Report.
Previous wording
The following table summarizes our results of operations and our results of operations as a percentage of total net sales for the six-month periods ended September 27, 2024 and September 29, 2023.
Current wording
The following table summarizes our results of operations and our results of operations as a percentage of total net sales for the nine-month periods ended December 27, 2024 and December 29, 2023.
Previous wording
Total net sales decreased in the six-month period ended September 27, 2024 compared to the six-month period ended September 29, 2023. The decrease was primarily driven by an overall reduction in customer held inventory and corresponding to a decline in shipments across all end markets. The decline in shipments impacted all applications including e-Mobility products, safety comfort and convenience applications, and broad-based and other industrial applications, including clean energy and automation, data center applications and consumer and smart home products.
Current wording
Total net sales decreased in the nine-month period ended December 27, 2024 compared to the nine-month period ended December 29, 2023. The decrease was primarily driven by an overall reduction in customer-held inventory resulting in a decline in shipments across all end markets. The decline in shipments impacted all applications including e-Mobility products, internal combustion engine, safety comfort and convenience applications, and broad-based and other industrial applications, including clean energy and automation, data center applications and consumer and smart home products.
Previous wording
Automotive net sales decreased in the six-month period ended September 27, 2024 compared to the six-month period ended September 29, 2023, primarily due to inventory rebalancing with our automotive contract manufacturing customers looking to manage excess supply, as well as changes in product mix across all general markets.
Current wording
Automotive net sales decreased in the nine-month period ended December 27, 2024 compared to the nine-month period ended December 29, 2023, primarily due to inventory rebalancing with our automotive contract manufacturing customers looking to reduce inventory levels, as well as changes in product mix across all general markets.
Previous wording
Industrial and other net sales decreased in the six-month period ended September 27, 2024 compared to the six-month period ended September 29, 2023, primarily due to a decrease in demand for our broad-based and other industrial applications, in addition to distributor inventory reductions.
Current wording
Industrial and other net sales decreased in the nine-month period ended December 27, 2024 compared to the nine-month period ended December 29, 2023, primarily due to a decrease in demand for our data center applications and our broad-based and other industrial applications, in addition to distributor inventory reductions.
Previous wording
The decline in PIC sales was primarily driven by a decrease in demand for our motor products. The decrease in MS and other sales was due to a decline in demand for our current and isolator products, as well as our magnetic speed and position sensors, partially offset by an increase in sales of our TMR solutions.
Current wording
The decrease in MS and other sales was due to a decline in demand for our current and isolator products, as well as our magnetic speed and position sensors, partially offset by an increase in sales of our TMR solutions. The decline in PIC sales was primarily driven by a decrease in demand for our motor products and high performance power products.
Previous wording
Americas net sales decreased in the six-month period ended September 27, 2024 compared to the six-month period ended September 29, 2023, primarily due to the decline in the United States automotive and industrial markets across all applications. In Greater China, net sales declined in automotive markets and industrial markets across all applications, which are served through distributors currently managing inventory levels. In addition, Europe net sales declined in automotive and industrial, where demand in internal combustion engine has declined. South Korea net sales declined in the automotive industries, primarily safety, comfort and convenience applications, Other Asia net sales declined across industrial markets, while Japan net sales declined in safety, comfort and convenience applications, data center applications and advanced driver assistance systems, partially offset by an increase in broad-based applications and electric vehicles.
Current wording
In Greater China, net sales decreased in the nine-month period ended December 27, 2024 compared to the nine-month period ended December 29, 2023, primarily due to the decline in automotive markets and industrial markets, offset by broad-based industrial applications, which are served through distributors currently managing inventory levels. Americas net sales decreased primarily due to the decline in the United States automotive and industrial markets across primarily all applications. In addition, Europe net sales declined in automotive and industrial, where demand in broad-based and other industrial applications has declined along with electric vehicles. South Korea net sales declined in the automotive applications, primarily safety, comfort and convenience applications, along with other declines in all auto applications. Other Asia net sales declined across industrial markets and auto markets in general, while Japan net sales declined in internal combustion engines, safety, comfort and convenience applications, advanced driver assistance systems and data center applications, partially offset by an increase in broad-based applications.
Previous wording
Cost of goods sold decreased in the six-month period ended September 27, 2024 compared to the six-month period ended September 29, 2023, primarily due to a reduction in shipped volume as well as a change in product mix, partially offset by an increase in amortization of intangible assets in relation to the acquisition of Crocus.
Current wording
Cost of goods sold decreased in the nine-month period ended December 27, 2024 compared to the nine-month period ended December 29, 2023, primarily due to a reduction in shipped volume as well as a change in product mix, partially offset by an increase in amortization of intangible assets in relation to the acquisition of Crocus.
Previous wording
Cost of goods sold as a percentage of our total net sales was 54.7% and 42.7% for the six-month period ended September 27, 2024 and September 29, 2023, respectively. The increase was primarily due to the reduction in production volume, as well as a change in product mix noted above.
Current wording
Cost of goods sold as a percentage of our total net sales was 54.6% and 44.2% for the nine-month periods ended December 27, 2024 and December 29, 2023, respectively. The increase was primarily due to the reduction in production volume, as well as a change in product mix noted above.
Previous wording
Gross profit decreased in the six-month period ended September 27, 2024 compared to the six-month period ended September 29, 2023, due to the decrease in net sales and a change in product mix noted above.
Current wording
Gross profit decreased in the nine-month period ended December 27, 2024 compared to the nine-month period ended December 29, 2023, due to the decrease in net sales and a change in product mix noted above.
Previous wording
Gross margin was 45.3% and 57.3% for the six-month period ended September 27, 2024 and September 29, 2023, respectively. The decrease was primarily due to the decline in net sales and product mix noted above.
Current wording
Gross margin was 45.4% and 55.8% for the nine-month periods ended December 27, 2024 and December 29, 2023, respectively. The decrease was primarily due to the decline in net sales and a change in product mix noted above.
Previous wording
Research and development (“R&D”) expenses increased in the six-month period ended September 27, 2024 in comparison to the comparable period in fiscal year 2024, primarily due to an increase in R&D supplies and personnel costs partially offset by a reduction from R&D tax credits.
Current wording
R&D expenses increased in the nine-month period ended December 27, 2024 compared to the comparable period in fiscal year 2024, primarily due to an increase in R&D supplies, partially offset by a reduction from personnel costs, depreciation and R&D tax credits.
Previous wording
R&D expenses as a percentage of our total net sales was 25.0% and 15.6% for the six-month periods ended September 27, 2024 and September 29, 2023, respectively. The increase was primarily due to the increase in R&D supplies and personnel costs partially offset by a reduction from R&D tax credits noted above in addition to the decline in net sales.
Current wording
R&D expenses as a percentage of our total net sales was 24.8% and 16.2% for the nine-month periods ended December 27, 2024 and December 29, 2023, respectively. The increase was primarily due to the increase in R&D supplies in addition to the decline in net sales, partially offset by a reduction from personnel costs, depreciation and R&D tax credits noted above.
Previous wording
SG&A expenses as a percentage of our total net sales was 22.1% and 15.8% in the six-month periods ended September 27, 2024 and September 29, 2023, respectively. The increase as a percentage of total net sales was primarily due to a decrease in the annual incentive program and outside service costs, partially offset by an increase in personnel and severance expenses in addition to the decline in net sales.
Current wording
SG&A expenses as a percentage of our total net sales was 21.8% and 17.3% in the nine-month periods ended December 27, 2024 and December 29, 2023, respectively. The increase as a percentage of total net sales was primarily due to the decline in net sales, partially offset by a decrease in outside service costs, personnel and severance expenses, and the annual incentive program.
Previous wording
Interest expense increased in the three-month period ended September 27, 2024 compared to the three-month period ended September 29, 2023, due to higher interest payments on the Refinanced 2023 Term Loan Facility, which increased our total outstanding debt balance.
Current wording
Interest expense increased in the nine-month period ended December 27, 2024 compared to the nine-month period ended December 29, 2023, due to higher interest payments on the Refinanced 2023 Term Loan Facility, which increased our total outstanding debt balance.
Previous wording
Interest income decreased in the six-month period ended September 27, 2024 compared to the six-month period ended September 29, 2023, primarily due to lower cash and cash equivalent balances.
Current wording
Interest income decreased in the nine-month period ended December 27, 2024 compared to the nine-month period ended December 29, 2023, primarily due to lower cash and cash equivalent balances.
Previous wording
We recorded a loss on the change in fair value of a forward repurchase contract in the six-month period ended September 27, 2024, primarily due to the various settlement dates under the Share Repurchase Agreement.
Current wording
We recorded a loss on the change in fair value of a forward repurchase contract in the nine-month period ended December 27, 2024, primarily due to the various settlement dates under the Share Repurchase Agreement with Sanken as part of the Sanken Transaction.
Previous wording
The foreign currency gain recorded in the three-month period ended September 27, 2024 was primarily due to U.S. Dollar strengthening against the Philippine Peso. The foreign currency gain recorded in the three-month period ended September 29, 2023, was primarily due to realized and unrealized gains from the British Pound strengthening against the Euro in our United Kingdom location, partially offset by the U.S. Dollar strengthening against the Philippine Peso.
Current wording
The foreign currency loss recorded in the nine-month period ended December 27, 2024 was primarily due to realized and unrealized losses from our Philippine location. The foreign currency loss recorded in the nine-month period ended December 29, 2023 was related to our Philippines and United Kingdom locations, offset by gains in our France location.
Previous wording
We also recorded a net loss of $2.8 million as a result of the PSL Closing in the six-month period ended September 27, 2024 related to the difference between the selling price per share and its carrying amount per share and after a gain from the conversion of the PSL Promissory Notes, partially offset by $0.8 million of gains related to earnings in our money market fund deposits. We recorded unrealized losses of $11.2 million related to our investment in marketable securities, partially offset by $10.6 million of gains related to sales of our investment in marketable securities and earnings in our money market fund deposits in the six-month period ended September 29, 2023.
Current wording
We also recorded a net loss of $2.8 million as a result of the PSL Closing in the nine-month period ended December 27, 2024 related to the difference between the selling price per share and its carrying amount per share and after a gain from the conversion of PSL promissory notes that we held, partially offset by $1.2 million of gains related to earnings in our money market fund deposits. We recorded unrealized losses of $11.2 million related to our investment in marketable securities, partially offset by $11.3 million of gains related to sales of our investment in marketable securities and earnings in our money market fund deposits in the nine-month period ended December 29, 2023.
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Rearranged previous paragraphs (5)
Previous report — wording carried elsewhere
On August 6, 2024, we entered into Amendment No. 2 (the “Second Amendment”) to the revolving credit facility credit agreement entered into on June 21, 2023 (as amended, the “2023 Revolving Credit Agreement” and the credit facility thereunder, as amended, the “2023 Revolving Credit Facility”) with Allegro MicroSystems, LLC, Morgan Stanley Senior Funding, Inc., as the administrative agent and the collateral agent, and each lender from time to time party thereto. The Second Amendment increased the total capacity of the 2023 Revolving Credit Facility to $256.0 million.
Previous report — wording carried elsewhere
The Second Amendment also provided for a new $400 million tranche of term loans maturing in 2030 (the “Refinanced 2023 Term Loan Facility”), the proceeds of which were primarily used to (i) repurchase a portion of our common stock in connection with the Second Closing, (ii) refinance the 2023 Term Loan Facility (as defined in Note 9, “Debt and Other Borrowings” to the condensed consolidated financial statements included in this Quarterly Report), (iii) pay fees and expenses in connection with the foregoing and (iv) for general corporate purposes. The Refinanced 2023 Term Loan Facility amortizes at a rate of 1.00% per annum. The Refinanced 2023 Term Loan Facility bears interest, at our option, at a rate equal to (i) Term SOFR (as defined in the 2023 Revolving Credit Agreement) in effect from time to time plus 2.25% or (ii) the highest of (x) the Federal funds rate, as published by the Federal Reserve Bank of New York, plus 0.50%, (y) the prime lending rate or (z) the one-month Term SOFR plus 1.0% in effect from time to time plus 1.25%. The 2023 Term Loan Refinancing will mature on October 31, 2030. The Refinanced 2023 Term Loan Facility is subject to covenants consistent with the 2023 Revolving Credit Agreement covenants. As the terms of the refinancing were not substantially different than the terms of the Second Amendment, the refinancing was accounted for as a debt modification. In conjunction with the refinancing, we recognized $3.6 million as a debt discount which will amortized to interest expense over the remaining term using the effective interest method. Borrowings under the Second Amendment are collateralized by substantially all of our assets.
Previous report — wording carried elsewhere
We recorded a loss on the change in fair value of a forward repurchase contract in the three-month period ended September 27, 2024, due to the various settlement dates under the Share Repurchase Agreement.
Previous report — wording carried elsewhere
(1) Our total net sales and cost of goods sold for the periods presented above include related party sales and cost of goods sold generated with Sanken. See our unaudited condensed consolidated financial statements included in this Quarterly Report for additional information regarding our related party net sales for the periods set forth above.
Previous report — wording carried elsewhere
Loss on change in fair value of forward repurchase contract