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Allegro MicroSystems Reports Fiscal Third Quarter 2023 Results

MANCHESTER, N.H., Jan. 31, 2023 (GLOBE NEWSWIRE) -- Allegro MicroSystems, Inc. (“Allegro” or the “Company”) (Nasdaq:ALGM), a global leader in sensing and power semiconductor solutions for motion control and energy efficient systems, today announced financial results for its third quarter 2023 that ended December 23, 2022.

Quarter Highlights:

  • Total net sales were a record $248.8 million, increasing 33% year-over-year.
  • Automotive net sales were a record $170.1 million, increasing 30.1% year-over-year.
  • Industrial net sales were a record $51.0 million, increasing 59.9% year-over-year.
  • GAAP and non-GAAP gross margins were a record 57.3% and 58.0%, respectively.
  • GAAP and non-GAAP operating margins were a record 26.4% and 30.3%, respectively.
  • GAAP and non-GAAP diluted earnings per share was $0.33 and $0.35, respectively.

“Our team delivered another quarter of record results. Momentum in e-Mobility applications, including xEV and ADAS, as well as strong demand across our magnetic sensor and power IC product portfolios continues to drive growth,” said Vineet Nargolwala, President and CEO of Allegro MicroSystems. “Sales in our Automotive business increased 30 percent year-over-year, with e-Mobility expanding to a record 43 percent of Automotive sales. We also achieved another record quarter in our Industrial business, led by ongoing growth in Clean Energy and Industrial Automation end markets. Complementing our top line performance, fiscal third quarter gross margin expanded to record levels due to higher sales of feature rich products as well as favorable foreign exchange. This allowed us to deliver record GAAP and non-GAAP operating margins of 26 and 30 percent, respectively in the quarter. Further highlighting our operating leverage, GAAP and non-GAAP diluted EPS increased 94 and 84 percent year-over-year, respectively. With Allegro’s strategic alignment to fast-growing secular megatrends, we expect to continue to outperform the broader end markets we serve.”

Business Summary

Automotive net sales increased 8.1% sequentially and 30.1% year-over-year, to 68% 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 43% of total Automotive sales.

Industrial net sales increased 5.9% sequentially and 59.9% year-over-year to 21% 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  Clean Energy and Industrial Automation.

Third quarter net sales into Other markets, which includes computing, consumer and smart home decreased sequentially, however, increased year-over-year to $27.7 million, or 11% of total net sales.

Outlook

For the fourth quarter ending March 31, 2023, the Company expects total net sales to be in the range of $260 million to $270 million. Non-GAAP gross margin is expected to be approximately 57.0%, non-GAAP operating expenses are anticipated to be between 27 percent and 28 percent of net sales, and non-GAAP earnings per diluted share are expected to be in the range of $0.35 to $0.37.

Allegro has not provided a reconciliation of its fourth 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 Tuesday, January 31, 2023 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 90 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 fourth fiscal quarter ending March 31, 2023. 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 Nine-Month Period Ended
 December 23,
2022
 December 24,
2021
 December 23,
2022
 December 24,
2021
Net sales$203,672  $147,168  $572,356  $456,302 
Net sales to related party 45,117   39,461   131,852   112,079 
Total net sales 248,789   186,629   704,208   568,381 
Cost of goods sold 84,776   66,675   247,805   214,811 
Cost of goods sold to related party 21,419   18,789   63,413   55,713 
Gross profit 142,594   101,165   392,990   297,857 
Operating expenses:       
Research and development 39,593   30,297   109,017   89,441 
Selling, general and administrative 37,373   37,963   146,470   104,115 
Change in fair value of contingent consideration    (2,700)  (2,700)  (2,100)
Total operating expenses 76,966   65,560   252,787   191,456 
Operating income 65,628   35,605   140,203   106,401 
Other income (expense):       
Interest expense (613)  (427)  (1,581)  (2,081)
Interest income 360   158   1,144   317 
Foreign currency transaction gain (loss) 407   (3)  2,597   (55)
Income in earnings of equity investment 2,190   287   297   792 
Other, net 4,119   3,634   765   5,216 
Income before income taxes 72,091   39,254   143,425   110,590 
Income tax provision 7,540   6,281   17,943   16,687 
Net income 64,551   32,973   125,482   93,903 
Net income attributable to non-controlling interests 32   37   102   112 
Net income attributable to Allegro MicroSystems, Inc.$64,519  $32,936  $125,380  $93,791 
Net income attributable to Allegro MicroSystems, Inc. per share:       
Basic$0.34  $0.17  $0.66  $0.49 
Diluted$0.33  $0.17  $0.65  $0.49 
Weighted average shares outstanding:       
Basic 191,328,538   189,736,901   191,082,141   189,665,324 
Diluted 193,935,908   192,068,222   193,100,762   191,678,951 


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 Nine-Month Period Ended Change
 December 23,
2022
 December 24,
2021
 Amount % December 23,
2022
 December 24,
2021
 Amount %
 (Dollars in thousands)
Automotive$170,107 $130,797 $39,310 30.1% $477,154 $390,351 $86,803 22.2%
Industrial 51,014  31,903  19,111 59.9%  139,330  98,533  40,797 41.4%
Other 27,668  23,929  3,739 15.6%  87,724  79,497  8,227 10.3%
Total net sales$248,789 $186,629 $62,160 33.3% $704,208 $568,381 $135,827 23.9%


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 Nine-Month Period Ended
(In thousands)December 23,
2022
 December 24,
2021
 December 23,
2022
 December 24,
2021
Cost of sales$1,156 $742 $3,112 $1,992
Research and development 3,174  1,019  6,013  2,814
Selling, general and administrative 4,572  5,859  42,117  13,841
Total stock-based compensation$8,902 $7,620 $51,242 $18,647


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 Nine-Month Period Ended
(In thousands)December 23,
2022
 December 24,
2021
 December 23,
2022
 December 24,
2021
Cost of sales$589 $273  1,240  819
Selling, general and administrative 23  23  68  68
Total intangible amortization$612 $296 $1,308 $887


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

 December 23,
2022
 March 25,
2022
Assets   
Current assets:   
Cash and cash equivalents$334,306  $282,383 
Restricted cash 9,822   7,416 
Trade accounts receivable, net of provision for expected credit losses of $147 and $105 at December 23, 2022 and March 25, 2022, respectively 97,225   87,359 
Trade and other accounts receivable due from related party 31,070   27,360 
Accounts receivable – other 2,169   4,144 
Inventories 119,580   86,160 
Prepaid expenses and other current assets 22,030   14,995 
Current portion of related party note receivable 3,750   1,875 
Total current assets 619,952   511,692 
Property, plant and equipment, net 232,076   210,028 
Operating lease right-of-use assets 14,740   16,049 
Deferred income tax assets 46,262   17,967 
Goodwill 28,230   20,009 
Intangible assets, net 53,130   35,970 
Related party note receivable, less current portion 9,375   5,625 
Equity investment in related party 27,968   27,671 
Other assets 52,332   47,609 
Total assets$1,084,065  $892,620 
Liabilities, Non-Controlling Interest and Stockholders’ Equity   
Current liabilities:   
Trade accounts payable$49,945  $29,836 
Amounts due to related party 5,659   5,222 
Accrued expenses and other current liabilities 77,796   65,459 
Current portion of operating lease liabilities 3,828   3,706 
Total current liabilities 137,228   104,223 
Obligations due under Senior Secured Credit Facilities 25,000   25,000 
Operating lease liabilities, less current portion 11,358   12,748 
Deferred income tax liabilities 4,438    
Other long-term liabilities 11,485   15,286 
Total liabilities 189,509   157,257 
Commitments and contingencies   
Stockholders' Equity:   
Preferred Stock, $0.01 par value; 20,000,000 shares authorized, no shares issued or outstanding at December 23, 2022 and March 25, 2022     
Common stock, $0.01 par value; 1,000,000,000 shares authorized, 191,435,869 shares issued and outstanding at December 23, 2022; 1,000,000,000 shares authorized, 190,473,595 issued and outstanding at March 25, 2022 1,914   1,905 
Additional paid-in capital 667,908   627,792 
Retained earnings 248,338   122,958 
Accumulated other comprehensive loss (24,781)  (18,448)
Equity attributable to Allegro MicroSystems, Inc. 893,379   734,207 
Non-controlling interests 1,177   1,156 
Total stockholders’ equity 894,556   735,363 
Total liabilities, non-controlling interest and stockholders’ equity$1,084,065  $892,620 


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

 Nine-Month Period Ended
 December 23,
2022
 December 24,
2021
CASH FLOWS FROM OPERATING ACTIVITIES:   
Net income$125,482  $93,903 
Adjustments to reconcile net income to net cash provided by operating activities:   
Depreciation and amortization 36,705   36,522 
Amortization of deferred financing costs 74   75 
Deferred income taxes (28,387)  (3,061)
Stock-based compensation 51,242   18,647 
Loss (gain) on disposal of assets 287   (349)
Change in fair value of contingent consideration (2,700)  (2,100)
Provisions for inventory and receivables reserves 1,744   4,787 
Unrealized loss (gain) on marketable securities 5   (4,482)
Changes in operating assets and liabilities:   
Trade accounts receivable (5,894)  (6,133)
Accounts receivable - other 2,000   (9)
Inventories (39,136)  3,251 
Prepaid expenses and other assets (17,761)  (11,870)
Trade accounts payable 19,553   2,026 
Due to/from related parties (3,273)  (2,775)
Accrued expenses and other current and long-term liabilities 5,717   (9,874)
Net cash provided by operating activities 145,658   118,558 
CASH FLOWS FROM INVESTING ACTIVITIES:   
Purchases of property, plant and equipment (49,563)  (55,792)
Acquisition of business, net of cash acquired (19,728)  (12,549)
Proceeds from sales of property, plant and equipment    27,407 
Investments in marketable securities    (9,189)
Net cash used in investing activities (69,291)  (50,123)
CASH FLOWS FROM FINANCING ACTIVITIES:   
Loans made to related party (7,500)  (7,500)
Receipts on related party notes receivable 1,875    
Payments for taxes related to net share settlement of equity awards (12,642)   
Proceeds from issuance of common stock under employee stock purchase plan 1,573   1,291 
Net cash used in financing activities (16,694)  (6,209)
Effect of exchange rate changes on Cash and cash equivalents and Restricted cash (5,344)  604 
Net increase in Cash and cash equivalents and Restricted cash 54,329   62,830 
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:$344,128  $266,705 
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 334,306   259,208 
Restricted cash at end of period 9,822   7,497 
Cash and cash equivalents and Restricted cash at end of period$344,128  $266,705 
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:   
Noncash transactions:   
Property, plant and equipment purchases included in trade accounts payable$(2,462) $(4,934)
Noncash lease liabilities arising from obtaining right-of-use assets 1,926   1,906 


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 (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.
  • (Income) loss 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 in applicable periods. We calculate non-GAAP Net Income as Net Income excluding the same items excluded above 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 Nine-Month Period Ended
  December 23,
2022
 September 23,
2022
 December 24,
2021
 December 23,
2022
 December 24,
2021
  (Dollars in thousands)
Reconciliation of Non-GAAP Gross Profit           
           
GAAP Gross Profit  $   142,594  $   132,022  $   101,165  $   392,990  $   297,857 
           
Voxtel inventory impairment              3,106 
Stock-based compensation  1,156   1,124   742   3,112   1,992 
AMTC Facility consolidation one-time costs              144 
Amortization of acquisition-related intangible assets  589   378   273   1,240   819 
COVID-19 related expenses        137      796 
Total Non-GAAP Adjustments $        1,745  $        1,502  $        1,152  $        4,352  $        6,857 
           
Non-GAAP Gross Profit $   144,339  $   133,524  $   102,317  $   397,342  $   304,714 
Non-GAAP Gross Margin  58.0%  56.2%  54.8%  56.4%  53.6%


  Three-Month Period Ended Nine-Month Period Ended
  December 23,
2022
 September 23,
2022
 December 24,
2021
 December 23,
2022
 December 24,
2021
  (Dollars in thousands)
Reconciliation of Non-GAAP Operating Expenses           
           
GAAP Operating Expenses $       76,966  $       72,184   $       65,560   $     252,787   $     191,456  
           
Research and Development Expenses          
GAAP Research and Development Expenses  39,593  35,567   30,297   109,017   89,441 
Stock-based compensation  3,174  1,711   1,019   6,013   2,814 
AMTC Facility consolidation one-time costs             2 
COVID-19 related expenses       6      20 
Transaction fees  1  201      404    
Non-GAAP Research and Development Expenses  36,418  33,655   29,272   102,600   86,605 
           
Selling, General and Administrative Expenses          
GAAP Selling, General and Administrative Expenses  37,373  39,117   37,963   146,470   104,115 
Stock-based compensation  4,572  5,369   5,859   42,117   13,841 
AMTC Facility consolidation one-time costs  291  90   108   477   583 
Amortization of acquisition-related intangible assets  23  23   23   68   68 
COVID-19 related expenses       356      1,288 
Transaction fees  35  63   1,085   1,695   1,114 
Severance       578   4,186   746 
Non-GAAP Selling, General and Administrative Expenses  32,452  33,572   29,954   97,927   86,475 
           
Change in fair value of contingent consideration    (2,500)  (2,700)  (2,700)  (2,100)
           
Total Non-GAAP Adjustments             8,096              4,957               6,334             52,260             18,376  
           
Non-GAAP Operating Expenses $       68,870  $       67,227   $       59,226   $     200,527   $     173,080  


  Three-Month Period Ended Nine-Month Period Ended
  December 23,
2022
 September 23,
2022
 December 24,
2021
 December 23,
2022
 December 24,
2021
  (Dollars in thousands)
Reconciliation of Non-GAAP Operating Income           
           
GAAP Operating Income  $      65,628  $      59,838  $      35,605  $   140,203  $   106,401 
           
Voxtel inventory impairment              3,106 
Stock-based compensation  8,902   8,204   7,620   51,242   18,647 
AMTC Facility consolidation one-time costs  291   90   108   477   729 
Amortization of acquisition-related intangible assets  612   401   296   1,308   887 
COVID-19 related expenses        499      2,104 
Change in fair value of contingent consideration     (2,500)  (2,700)  (2,700)  (2,100)
Transaction fees  36   264   1,085   2,099   1,114 
Severance        578   4,186   746 
Total Non-GAAP Adjustments $        9,841  $        6,459  $        7,486  $      56,612  $      25,233 
           
Non-GAAP Operating Income $      75,469  $      66,297  $      43,091  $   196,815  $   131,634 
Non-GAAP Operating Margin (% of net sales)   30.3%  27.9%  23.1%  27.9%  23.2%


  Three-Month Period Ended Nine-Month Period Ended
  December 23,
2022
 September 23,
2022
 December 24,
2021
 December 23,
2022
 December 24,
2021
  (Dollars in thousands)
Reconciliation of EBITDA and Adjusted EBITDA          
           
GAAP Net Income $      64,551  $      50,648  $      32,973  $   125,482  $      93,903 
           
Interest expense  613   531   427   1,581   2,081 
Interest income  (360)  (467)  (158)  (1,144)  (317)
Income tax provision  7,540   8,438   6,281   17,943   16,687 
Depreciation & amortization  12,580   12,207   12,011   36,705   36,522 
EBITDA  $      84,924  $      71,357  $      51,534  $   180,567  $   148,876 
           
Non-core loss (gain) on sale of equipment  37   253   (19)  287   (350)
Voxtel inventory impairment              3,106 
Foreign currency translation (gain) loss  (407)  (266)  3   (2,597)  55 
(Income) loss in earnings of equity investment  (2,190)  1,029   (287)  (297)  (792)
Unrealized (gain) loss on investments  (3,453)  (28)  (3,504)  5   (4,482)
Stock-based compensation  8,902   8,204   7,620   51,242   18,647 
AMTC Facility consolidation one-time costs  291   90   108   477   729 
COVID-19 related expenses        499      2,104 
Change in fair value of contingent consideration     (2,500)  (2,700)  (2,700)  (2,100)
Transaction fees  36   264   1,085   2,099   1,114 
Severance        578   4,186   746 
Adjusted EBITDA $      88,140  $      78,403  $      54,917  $   233,269  $   167,653 
Adjusted EBITDA Margin (% of net sales)  35.4%  33.0%  29.4%  33.1%  29.5%


  Three-Month Period Ended Nine-Month Period Ended
  December 23,
2022
 September 23,
2022
 December 24,
2021
 December 23,
2022
 December 24,
2021
  (Dollars in thousands)
Reconciliation of Non-GAAP Profit before Tax          
           
GAAP Income before Income Taxes $       72,091   $       59,086   $       39,254   $     143,425   $     110,590  
           
Non-core loss (gain) on sale of equipment  37   253   (19)  287   (350)
Voxtel inventory impairment              3,106 
Foreign currency translation (gain) loss $(407) $(266) $3  $(2,597) $55 
(Income) loss in earnings of equity investment $(2,190) $1,029  $(287) $(297) $(792)
Unrealized (gain) loss on investments $(3,453) $(28) $(3,504) $5  $(4,482)
Stock-based compensation  8,902   8,204   7,620   51,242   18,647 
AMTC Facility consolidation one-time costs  291   90   108   477   729 
Amortization of acquisition-related intangible assets  612   401   296   1,308   887 
COVID-19 related expenses        499      2,104 
Change in fair value of contingent consideration     (2,500)  (2,700)  (2,700)  (2,100)
Transaction fees  36   264   1,085   2,099   1,114 
Severance        578   4,186   746 
Total Non-GAAP Adjustments $         3,828   $         7,447   $         3,679   $       54,010   $       19,664  
           
Non-GAAP Profit before Tax $       75,919   $       66,533   $       42,933   $     197,435   $     130,254  


  Three-Month Period Ended Nine-Month Period Ended
  December 23,
2022
 September 23,
2022
 December 24,
2021
 December 23,
2022
 December 24,
2021
  (Dollars in thousands)
 Reconciliation of Non-GAAP Provision for Income Taxes          
           
 GAAP Income Tax Provision $        7,540  $        8,438  $        6,281  $      17,943  $      16,687 
GAAP effective tax rate  10.5%  14.3%  16.0%  12.5%  15.1%
           
Tax effect of adjustments to GAAP results  (461)  (1,663)  561   3,776   3,598 
           
Non-GAAP Provision for Income Taxes $        7,079  $        6,775  $        6,842  $      21,719  $      20,285 
Non-GAAP effective tax rate   9.3%  10.2%  15.9%  11.0%  15.6%


  Three-Month Period Ended Nine-Month Period Ended
  December 23,
2022
 September 23,
2022
 December 24,
2021
 December 23,
2022
 December 24,
2021
  (Dollars in thousands)
Reconciliation of Non-GAAP Net Income          
           
GAAP Net Income  $       64,551   $       50,648   $       32,973   $     125,482   $       93,903  
GAAP Basic Earnings per Share $0.34  $0.26  $0.17  $0.66  $0.50 
GAAP Diluted Earnings per Share $0.33  $0.26  $0.17  $0.65  $0.49 
           
Non-core loss (gain) on sale of equipment  37   253   (19)  287   (350)
Voxtel inventory impairment              3,106 
Foreign currency translation (gain) loss  (407)  (266)  3   (2,597)  55 
Loss (income) in earnings of equity investment  (2,190)  1,029   (287)  (297)  (792)
Unrealized (gain) loss on investments  (3,453)  (28)  (3,504)  5   (4,482)
Stock-based compensation  8,902   8,204   7,620   51,242   18,647 
AMTC Facility consolidation one-time costs  291   90   108   477   729 
Amortization of acquisition-related intangible assets  612   401   296   1,308   887 
COVID-19 related expenses        499      2,104 
Change in fair value of contingent consideration     (2,500)  (2,700)  (2,700)  (2,100)
Transaction fees  36   264   1,085   2,099   1,114 
Severance        578   4,186   746 
Tax effect of adjustments to GAAP results  461   1,663   (561)  (3,776)  (3,598)
           
Non-GAAP Net Income $       68,840   $       59,758   $       36,091   $     175,716   $     109,969  
Basic weighted average common shares  191,328,538   191,284,631   189,736,901   191,082,141   189,665,324 
Diluted weighted average common shares  193,935,908   192,639,576   192,068,222   193,100,762   191,678,951 
Non-GAAP Basic Earnings per Share $0.36  $0.31  $0.19  $0.92  $0.58 
Non-GAAP Diluted Earnings per Share $0.35  $0.31  $0.19  $0.91  $0.57 
                     

Investor Contact:
Jalene Hoover
VP of Investor Relations & Corporate Communications
+1 (512) 751-6526
jhoover@allegromicro.com


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