ALLEGRO MICROSYSTEMS, INC.

Previous wording

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our unaudited condensed consolidated financial statements and the related notes and other information included elsewhere in this Quarterly Report, as well as the audited financial statements and the related notes thereto, and the discussion under “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Business” included in our Annual Report on Form 10-K for the year ended March 28, 2025, filed with the SEC on May 22, 2025 (the “2025 Annual Report”).

Current wording

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our unaudited condensed consolidated financial statements and the related notes and other information included elsewhere in this Quarterly Report, as well as the audited financial statements and the related notes thereto, and the discussion under “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Business” included in our Annual Report on Form 10-K for the fiscal year ended March 28, 2025, filed with the SEC on May 22, 2025 (the “2025 Annual Report”).

Previous wording

and June 28, 2024 relate to the 13-week periods ended June 27, 2025 and June 28, 2024, respectively. All references to “2026,” “fiscal year 2026” or similar references relate to the 52-week period ending March 27, 2026. All references to “2025,” “fiscal year 2025” or similar references relate to the 52-week period ended March 28, 2025.

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 six-month periods ended September 26, 2025 and September 27, 2024 relate to the 13- and 26-week periods ended September 26, 2025 and September 27, 2024, respectively. All references to “2026,” “fiscal year 2026” or similar references relate to the 52-week period ending March 27, 2026. All references to “2025,” “fiscal year 2025” or similar references relate to the 52-week period ended March 28, 2025.

Previous wording

We are headquartered in Manchester, New Hampshire and have a global footprint across multiple continents. Our portfolio includes more than 1,500 products, and we ship over 1.5 billion units annually to more than 10,000 customers worldwide. During the three-month periods ended June 27, 2025 and June 28, 2024, we generated $203.4 million and $166.9 million in total net sales, respectively, with $13.2 million and $17.6 million in net loss, respectively.

Current wording

We are headquartered in Manchester, New Hampshire and have a global footprint across multiple continents. Our portfolio includes more than 1,500 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 26, 2025, we generated $214.3 million and $417.7 million in total net sales, respectively, with $6.6 million in net income and $6.6 million in net loss, respectively. During the three- and six-month periods ended

Previous wording

Demand for our products is highly dependent on market conditions in the end markets in which our customers operate, which are generally subject to seasonality, cyclicality, tariffs and other pricing increases and competitive conditions. In addition, a substantial portion of our total net sales is derived from sales to customers that purchase large volumes of our products. These customers generally provide periodic forecasts of their requirements. However, these forecasts do not commit such customers to minimum purchases, and customers can revise these forecasts without penalty. In addition, as is customary in the semiconductor industry, customers are generally permitted to cancel orders for our products within a specified period. Cancellations of orders could result in the loss of anticipated sales without allowing us sufficient time to reduce our inventory and operating expenses. In addition, changes in forecasts or the timing of orders from customers expose us to the risks of inventory shortages or excess inventory. We are currently operating in an inflationary environment for our products as a result of global tariff policies, which also have the potential to reduce end market demand in certain markets. Over the past several quarters, we and other semiconductor companies have experienced a downturn in market demand, primarily driven by softening demand from customers across various markets and digestion of excess accumulated inventory. In addition, factors that cause a reduction in demand from the end users of our OEMs’ or other customers’ products, including as a result of increased prices resulting from global trade policies, tariffs or a recessionary environment in the markets in which we operate, may in the future continue to cause our direct customers to significantly reduce the number of products ordered from us.

Current wording

Demand for our products is highly dependent on market conditions in the end markets in which our customers operate, which are generally subject to seasonality, cyclicality, tariffs and other pricing increases and competitive conditions. In addition, a substantial portion of our total net sales is derived from sales to customers that purchase large volumes of our products. These customers generally provide periodic forecasts of their requirements. However, these forecasts do not commit such customers to minimum purchases, and customers can revise these forecasts without penalty. In addition, as is customary in the semiconductor industry, customers are generally permitted to cancel orders for our products within a specified period. Cancellations of orders could result in the loss of anticipated sales without allowing us sufficient time to reduce our inventory and operating expenses. In addition, changes in forecasts or the timing of orders from customers expose us to the risks of inventory shortages or excess inventory. We are currently operating in an inflationary environment for our products as a result of global tariff policies, which also have the potential to reduce end market demand in certain markets. We believe that we are emerging from an extended period in which we and other semiconductor companies experienced a downturn in market demand, primarily driven by reduced demand from customers across various markets and digestion of excess accumulated inventory. In addition, factors that cause a reduction in demand from the end users of our OEMs’ or other customers’ products, including as a result of increased prices resulting from global trade policies, tariffs or a recessionary environment in the markets in which we operate, may in the future continue to cause our direct customers to significantly reduce the number of products ordered from us.

Previous wording

Total net sales increased in the three-month period ended June 27, 2025 compared to the three-month period ended June 28, 2024. The increase was primarily driven by data center applications, industrial automation and robotics, medical and other broad-based industrial applications, and e-Mobility products, which includes our advanced driver assistance systems (“ADAS”) and components for electrified vehicles (“EV”).

Current wording

Total net sales increased in the three-month period ended September 26, 2025 compared to the three-month period ended September 27, 2024. The increase was primarily driven by data center applications, medical applications, industrial automation and robotics, and e-Mobility products, which includes our advanced driver assistance systems (“ADAS”), offset by a decrease in consumer products.

Previous wording

Industrial and other net sales increased in the three-month period ended June 27, 2025 compared to the three-month period ended June 28, 2024, primarily due to an increase in demand for data center applications, industrial automation and robotics, medical and other broad-based industrial applications.

Current wording

Industrial and Other net sales increased in the three-month period ended September 26, 2025 compared to the three-month period ended September 27, 2024, primarily due to increases in demand for data center applications, medical applications, and industrial automation and robotics, offset by a decrease in consumer products.

Previous wording

Greater China net sales increased in the three-month period ended June 27, 2025 compared to the three-month period ended June 28, 2024, primarily driven by an increase in net sales of ADAS and EV and distributors currently managing inventory levels. Other Asia net sales increased in both automotive and industrial and other, primarily in internal combustion engine and data center applications. Americas net sales increased in both automotive and industrial and other applications. Europe net sales increased primarily in automotive markets. Japan net sales declined in automotive, primarily in safety, comfort and convenience applications. South Korea net sales declined in automotive primarily in ADAS and EV.

Current wording

Other Asia net sales increased in the three-month period ended September 26, 2025 compared to the three-month period ended September 27, 2024, in both Automotive and Industrial and Other, primarily in data center applications, safety, comfort and convenience applications and medical applications, offset by a decrease in consumer products. Greater China net sales increased primarily driven by an increase in ADAS and components for electrified vehicles (“EV”), offset by a decrease in consumer products. Other Americas net sales increased in both Automotive and Industrial and Other applications, primarily in ADAS and clean energy. Japan net sales decreased in the Automotive, primarily in safety, comfort and convenience applications and EV, offset with an increase in data center applications. United States net sales declined in both Automotive and Industrial and Other, primarily in ADAS and broad-based industrial, offset by an increase in medical applications.

Previous wording

Cost of goods sold increased in the three-month period ended June 27, 2025 compared to the three-month period ended June 28, 2024, primarily due to higher production volume in support of higher product sales and foreign currency impact.

Current wording

Cost of goods sold increased in the three-month period ended September 26, 2025 compared to the three-month period ended September 27, 2024, primarily due to higher production volume in support of higher product sales and foreign currency impacts.

Previous wording

Cost of goods sold as a percentage of our total net sales was 55.1% and 55.2% for the three-month periods ended June 27, 2025 and June 28, 2024, respectively. The decrease was primarily due to the increase in production volume.

Current wording

Cost of goods sold as a percentage of our total net sales was 53.7% and 54.3% for the three-month periods ended

Previous wording

Research and development (“R&D”) expenses increased in the three-month period ended June 27, 2025 compared to the comparable period in fiscal year 2025, primarily due to the increase of R&D personnel costs.

Current wording

Research and development (“R&D”) expenses increased in the three-month period ended September 26, 2025 compared to the comparable period in fiscal year 2025, primarily due to the increase in personnel costs, including the projected funding of the annual incentive program.

Previous wording

Selling, general and administrative (“SG&A”) expenses increased in the three-month period ended June 27, 2025 compared to the three-month period ended June 28, 2024, primarily due to an increase in outside service and personnel costs.

Current wording

Selling, general and administrative (“SG&A”) expenses increased in the three-month period ended September 26, 2025 compared to the three-month period ended September 27, 2024, primarily due to an increase in personnel costs, including the projected funding of the annual incentive program.

Previous wording

Interest income decreased in the three-month period ended June 27, 2025 compared to the three-month period ended June 28, 2024, primarily due to lower cash and cash equivalent balances.

Current wording

Interest income decreased in the three-month period ended September 26, 2025 compared to the three-month period ended September 27, 2024, primarily due to lower cash and cash equivalents balances.

Previous wording

The foreign currency loss recorded in the three-month period ended June 27, 2025 was primarily due to U.S. Dollar weakening against the Euro. The foreign currency loss recorded in the three-month period ended June 28, 2024 was primarily due to realized and unrealized losses from our Philippine location.

Current wording

The foreign currency loss recorded in the three-month period ended September 26, 2025 was primarily due to the U.S. Dollar weakening against various currencies, including the Euro and the Philippine Peso. The foreign currency gain recorded in the three-month period ended September 27, 2024 was primarily due to the U.S. Dollar strengthening against the Philippine Peso.

Previous wording

Income tax provision and the effective income tax rate were approximately $3.2 million and (31.7)%, respectively, in the three-month period ended June 27, 2025, compared to income tax provision and effective income tax rate of approximately $1.0 million and (6.3)%, respectively, in the three-month period ended June 28, 2024. The change in the effective tax rate for the three-month period ended June 27, 2025, compared to the three-month period ended June 28, 2024 results mainly from a decrease in GAAP loss before taxes and increased non-deductible share-based compensation, offset by increased foreign-derived intangible income tax benefit and the quarterly impact of discrete transaction benefits.

Current wording

Income tax benefit and the effective income tax rate were approximately $9.3 million and 342.5%, respectively, in the three-month period ended September 26, 2025, compared to income tax benefit and effective income tax rate of approximately $9.5 million and 22.0%, respectively, in the three-month period ended September 27, 2024. The change in the effective tax rate for the three-month period ended September 26, 2025, compared to the three-month period ended September 27, 2024 primarily resulted from a decrease in GAAP loss before taxes and the One Big Beautiful Bill Act (“OBBB”) impacts described in Note 13, “Income Taxes” to the unaudited condensed consolidated financial statements included in this Quarterly Report.

Previous wording

ended June 28, 2024, primarily due to an increase in e-Mobility products, which includes ADAS and EV.

Current wording

ended September 27, 2024, primarily due to an increase in demand for e-Mobility products, which includes ADAS and EV, partially offset by a decrease in safety, comfort and convenience applications.

Previous wording

The increase in MS sales was primarily due to an increase in demand for our magnetic speed, tunneling magnetoresistance (“TMR”) sensor solutions and our current and isolator products. The increase in PIC sales was primarily driven by an increase in demand for our motor products and high performance power products.

Current wording

The increase in MS sales was primarily due to an increase in demand for our TMR sensor solutions and magnetic speed, offset by a reduction in magnetic position products. The increase in PIC sales was primarily driven by an increase in demand for our motor products and high performance power products.

Previous wording

SG&A expenses as a percentage of our total net sales was 23.4% and 24.1% in the three-month periods ended June 27, 2025 and June 28, 2024, respectively. The decrease as a percentage of total net sales was primarily due to the increase in net sales, partially offset by an increase in outside service, personnel costs and the funding of the annual incentive program.

Current wording

SG&A expenses as a percentage of our total net sales was 21.5% and 22.1% in the six-month periods ended September 26, 2025 and September 27, 2024, respectively. The decrease as a percentage of total net sales was primarily due to the increase in net sales, partially offset by an increase in the projected funding of the annual incentive program and outside service and personnel costs.

Previous wording

As of June 27, 2025, we had $129.1 million of cash and cash equivalents and $326.4 million of working capital, compared to $121.3 million of cash and cash equivalents and $370.8 million of working capital as of March 28, 2025. Working capital is impacted by the timing and extent of our business needs. A payment of $25.0 million was applied to the outstanding balance of the 2025 Refinanced Loans (as defined in Note 9, “Debt and Other Borrowings” to the unaudited condensed consolidated financial statements included in this Quarterly Report) on July 31, 2025.

Current wording

As of September 26, 2025, we had $117.5 million of cash and cash equivalents and $348.8 million of working capital, compared to $121.3 million of cash and cash equivalents and $370.8 million of working capital as of March 28, 2025. Working capital is impacted by the timing and extent of our business needs.

Previous wording

Our primary requirements for liquidity and capital resources besides our growth initiatives are working capital, capital expenditures, principal and interest payments on our outstanding debt, and other general corporate needs. Historically, these cash requirements have been met through cash provided by operating activities and cash and cash equivalents. Our current capital deployment strategy for fiscal year 2026 is to utilize cash on hand and capacity under our revolving credit facility to support our continued growth initiatives into select markets and planned capital expenditures, as well as consider potential acquisitions. As of June 27, 2025, the Company was not party to any off-balance sheet arrangements that have had or are reasonably likely to have a current or future material effect on our financial condition, results of operations, liquidity, capital expenditures, or capital resources. The cash requirements for the upcoming fiscal year relate to our operating leases, operating and capital purchase commitments, and expected contributions to our defined benefit and contribution plans. Additionally, we expect to continue to strategically invest in expanding our operations in China, Europe, Japan and India in order to directly manage and service our customers in these markets, which could result in increases in our total net sales, cost of goods sold and operating expenses. For information regarding the Company’s expected cash requirements and timing of payments related to leases, noncancellable purchase commitments and pension and defined contribution plans, see Note 12, “Leases,” Note 15, “Retirement Plans,” and Note 16, “Commitments and Contingencies” to the audited consolidated financial statements in the Company’s 2025 Annual Report.

Current wording

Our primary requirements for liquidity and capital resources besides our growth initiatives are working capital, capital expenditures, principal and interest payments on our outstanding debt, and other general corporate needs. Historically, these cash requirements have been met through cash provided by operating activities and cash and cash equivalents. Our current capital deployment strategy for fiscal year 2026 is to utilize cash on hand and capacity under our revolving credit facility to support our continued growth initiatives into select markets and planned capital expenditures, as well as consider potential acquisitions. As of September 26, 2025, the Company was not party to any off-balance sheet arrangements that have had or are reasonably likely to have a current or future material effect on our financial condition, results of operations, liquidity, capital expenditures, or capital resources. The cash requirements for the current fiscal year relate to our operating leases, operating and capital purchase commitments, and expected contributions to our defined benefit and contribution plans. Additionally, we expect to continue to strategically invest in expanding our operations in China, Japan, India and Philippines expansion in order to directly manage and service our customers in these markets, which could result in increases in our total net sales, cost of goods sold and operating expenses. For information regarding the Company’s expected cash requirements and timing of payments related to leases, noncancellable purchase commitments and pension and defined contribution plans, see Note 12, “Leases,” Note 15, “Retirement Plans,” and Note 16, “Commitments and Contingencies” to the audited consolidated financial statements in the Company’s 2025 Annual Report.

Previous wording

The following table summarizes our cash flows for the three-month periods ended June 27, 2025 and June 28, 2024:

Current wording

The following table summarizes our cash flows for the six-month periods ended September 26, 2025 and September 27, 2024:

Previous wording

Net cash provided by operating activities was $61.6 million in the three-month period ended June 27, 2025, resulting primarily from a net loss of $13.2 million and noncash charges of $26.2 million, further adjusted by a net increase in cash from a decrease in net operating assets and liabilities of $48.5 million. Noncash charges primarily included increases of $16.2 million for depreciation and amortization, $10.8 million of stock-based compensation, and $3.5 million for provisions for inventory and expected credit losses, partially offset by $5.1 million of deferred income taxes. The net decrease in operating assets and liabilities consisted of a $36.0 million decrease in prepaid expenses and other assets, a $7.2 million decrease in inventories, an $8.0 million increase in accrued expenses and other current and long-term liabilities, and a $6.3 million increase in trade accounts payable, partially offset by a $5.3 million increase in trade accounts receivable, net and a $3.6 million decrease in net amounts due to related party. The increase in trade accounts receivable, net was primarily a result of increased sales year-over-year. Trade accounts payable increased primarily due to the timing of payments to suppliers and vendors, including unpaid capital expenditures of $2.8 million. The decrease in prepaid expenses and other assets was mostly due to the timing of tax payments. The decrease in inventories was primarily the result of the increase in net sales. The decrease in net amounts due to related party was primarily due to variations in the timing of such payments in the ordinary course of business. The increase in accrued expenses and other current and long-term liabilities was primarily the result of higher accrued income taxes and accrued personnel costs.

Current wording

Net cash provided by operating activities was $82.0 million in the six-month period ended September 26, 2025, resulting primarily from a net loss of $6.6 million and noncash charges of $59.5 million, further adjusted by a net increase in cash from a decrease in net operating assets and liabilities of $29.1 million. Noncash charges primarily included increases of $32.8 million for depreciation and amortization, $24.4 million of stock-based compensation, and $4.5 million for provisions for inventory and expected credit losses, partially offset by $4.2 million of deferred income taxes. The net decrease in operating assets and liabilities consisted of a $26.6 million decrease in prepaid expenses and other assets, a $9.3 million decrease in inventories, a $14.0 million increase in other changes in operating assets and liabilities, net, and a $4.2 million increase in trade accounts payable, partially offset by a $21.7 million increase in trade accounts receivable, net and a $3.3 million decrease in net amounts due to related party. The increase in trade accounts receivable, net was primarily a result of increased sales year-over-year and timing of collections. Trade accounts payable increased, primarily due to the timing of payments to suppliers and vendors, including unpaid capital expenditures of $1.1 million. The decrease in prepaid expenses and other assets was mostly due to the timing of tax payments. The decrease in inventories was primarily the result of the increase in net sales. The decrease in net amounts due to related party was primarily due to variations in the timing of such payments in the ordinary course of business. The increase in other changes in operating assets and liabilities, net was primarily the result of higher accrued income taxes and accrued personnel costs.

Previous wording

Net cash provided by operating activities was $34.2 million in the three-month period ended June 28, 2024, resulting primarily from net loss of $17.6 million and noncash charges of $24.7 million, partially offset by a net increase in cash from a decrease in net operating assets and liabilities of $27.1 million. The net decrease in operating assets and liabilities consisted of a $55.1 million decrease in trade accounts receivable, net, a $16.0 million increase in inventories, a $14.0 million decrease in accrued expenses and other current and long-term liabilities, and a $1.7 million increase in prepaid expenses and other assets, partially offset by a $3.4 million increase in net amounts due to related party and a $0.2 million increase in trade accounts payable. The increase in inventories was primarily the result of inventory builds to support anticipated sales growth for the remainder of fiscal year 2025. The decrease in accrued expenses and other current and long-term liabilities was primarily the result of a reduction in accrued personnel costs due to the timing of payments pursuant to our annual incentive compensation plan. The increase in prepaid expenses and other assets was mostly due to higher long-term deposits and the timing of tax payments. The decrease in trade accounts receivable, net, was primarily a result of decreased sales year-over-year. Trade accounts payable decreased primarily due to the timing of payments to suppliers and vendors, including unpaid capital expenditures of $5.5 million. The increase in net amounts due to related party was primarily due to variations in the timing of such payments in the ordinary course of business.

Current wording

Net cash provided by operating activities was $49.7 million in the six-month period ended September 27, 2024, resulting primarily from a net loss of $51.2 million and noncash charges of $93.2 million, further adjusted by a net increase in cash from a decrease in net operating assets and liabilities of $7.7 million. Noncash charges include increases for $34.8 million for loss on change in fair value of forward repurchase contract, $32.5 million of depreciation and amortization, $21.7 million of stock-based compensation and $6.6 million of other non-cash reconciling items, partially offset by $7.8 million of deferred income taxes. The net decrease in operating assets and liabilities consisted of a $41.4 million decrease in trade accounts receivable, net, a $13.7 million increase in trade accounts payable and a $4.1 million increase in net amounts due to related party, partially offset by an $18.8 million increase in inventories, a $15.8 million increase in prepaid expenses and other assets, and a $16.8 million decrease in other changes in operating assets and liabilities, net. The decrease in trade accounts receivable, net, was primarily a result of decreased sales year-over-year. Trade accounts payable increased primarily due to the timing of payments to suppliers and vendors, including unpaid capital expenditures of $4.1 million. The increase in net amounts due to related party was primarily due to variations in the timing of such payments in the ordinary course of business. The increase in inventories was primarily the result of inventory builds of standard products to support anticipated sales growth. The increase in prepaid expenses and other assets was mostly due to higher long-term deposits and the timing of tax payments. The decrease in other changes in operating assets and liabilities, net was primarily the result of a reduction in accrued personnel costs due to the timing of payments pursuant to our annual incentive compensation plan.

Previous wording

Net cash used in investing activities was $10.6 million in the three-month period ended June 27, 2025, consisting of purchases of property, plant and equipment.

Current wording

Net cash used in investing activities was $17.0 million in the six-month period ended September 26, 2025, consisting of purchases of property, plant and equipment.

Previous wording

Net cash used in investing activities was $11.0 million in the three-month period ended June 28, 2024, consisting of purchases of property, plant and equipment.

Current wording

Net cash used in investing activities was $20.9 million in the six-month period ended September 27, 2024, consisting of purchases of property, plant and equipment.

Previous wording

Net cash used in financing activities was $44.2 million in the three-month period ended June 27, 2025, primarily consisting of $35.0 million of payments on our 2025 Refinanced Loans and $9.0 million of taxes related to the net settlement of equity awards.

Current wording

Net cash used in financing activities was $70.7 million in the six-month period ended September 26, 2025, primarily consisting of $60.0 million of payments on our 2025 Refinanced Loans and $9.3 million of taxes related to the net settlement of equity awards.

Previous wording

Net cash used in financing activities was $60.4 million in the three-month period ended June 28, 2024, consisting of a $50.0 million payment on our 2023 Term Loan Facility and $11.2 million of taxes related to the net settlement of equity awards.

Current wording

Net cash used in financing activities was $53.3 million in the six-month period ended September 27, 2024, consisting of $853.8 million of repurchases of our common stock, $50.0 million of payment on our Refinanced 2023 Term Loan Facility and $12.3 million of taxes related to the net settlement of equity awards, partially offset by the issuance of common stock of $665.9 million, net proceeds of $193.5 million from the Refinanced 2023 Term Loan Facility, proceeds received in connection with the issuance of common stock under our employee stock purchase plan and proceeds received related to the quarterly payment from PSL on our related party loan.