0001193125-25-259807
SEC filingAllegro MicroSystems Q2 FY26 revenue grew 14.4% YoY to $214.3M, led by data center and e-Mobility; gross margin improved 60 bps to 46.3%.
Allegro MicroSystems reported strong fiscal second quarter results for the period ended September 26, 2025. Total net sales rose 14.4% year-over-year to $214.3 million, driven by robust demand in data center applications, medical, industrial automation and robotics, and e-Mobility products (including ADAS), partially offset by weakness in consumer products. Gross profit increased 15.9% to $99.3 million, with gross margin expanding 60 basis points to 46.3%, primarily due to higher sales volume and favorable product mix. Operating income grew 53.5% to $6.2 million, as operating expenses increased 14.0% driven by higher personnel costs and annual incentive program funding, but declined as a percentage of sales to 43.4%. Net income swung from a loss of $33.6 million in the prior year quarter to income of $6.6 million, reflecting improved operating performance and the absence of a $34.8 million loss on a forward repurchase contract recorded in the prior year. The effective tax rate was 342.5% due to a low pre-tax loss and impacts from the One Big Beautiful Bill Act.
Automotive net sales increased 11.6% to $155.8 million, driven by e-Mobility products including ADAS. Industrial & Other net sales surged 22.5% to $58.4 million, powered by data center, medical, and industrial automation demand, partially offset by a decline in consumer products. By product type, Power IC sales jumped 42.4% to $83.6 million, fueled by motor products, while Magnetic Sensor sales grew modestly by 1.6% to $130.7 million, led by TMR sensor solutions but partially offset by reduced magnetic position product sales. Geographically, Greater China and Other Asia posted strong gains of 26.3% and 61.7% respectively, while Japan and the United States declined 5.7% and 13.8%.
The MD&A highlights ongoing inflation and tariff-related cost pressures, but management notes that they are emerging from an extended industry downturn. The company is focused on design wins, product mix improvements, and cost reduction initiatives to sustain margin expansion. Liquidity remains solid with $117.5 million in cash and $348.8 million in working capital, and the company continues to invest in capacity expansion in China, Japan, India, and the Philippines. No specific forward guidance is provided in the MD&A, but the strategic emphasis on high-growth applications like ADAS, EV, data center, and industrial automation suggests continued momentum in these areas.
As of September 26, 2025, the company held $117.5 million in cash and cash equivalents and $9.3 million in restricted cash, totaling $126.8 million. Total assets were $1.384 billion, with goodwill of $203.5 million and intangible assets, net, of $250.9 million. Total debt stood at $287.7 million, comprising $285.0 million in term loan borrowings (net of $4.6 million unamortized issuance costs) and $7.3 million in finance lease liabilities. The company had no outstanding borrowings under its $256.0 million revolving credit facility. Stockholders' equity was $945.8 million, with an accumulated deficit of $60.3 million and accumulated other comprehensive loss of $26.4 million.
The company disclosed no material purchase commitments or contractual obligations beyond normal operating leases and debt. The Notes reference a restructuring plan initiated in June 2025, with estimated future charges of approximately $7.2 million, primarily for severance and real estate actions. The company also has a $256.0 million revolving credit facility with no outstanding borrowings as of the balance sheet date.
During the six-month period ended September 26, 2025, the company repurchased no shares of common stock. In the prior fiscal year, the company completed a $853.8 million share repurchase from Sanken Electric Co., Ltd. The company made $60.0 million in term loan repayments during the period. Capital expenditures totaled $17.0 million, representing 4.1% of net sales. No dividends were declared or paid on common stock.
The company operates as a single reportable segment. Net sales by market for the six-month period were: Automotive $300.1 million and Industrial and Other $117.6 million. By product: Magnetic sensors $259.9 million and Power integrated circuits $157.8 million. Geographically, sales were: Americas $68.8 million, EMEA $58.7 million, and Asia $290.2 million (including Greater China $119.4 million, Japan $69.2 million, South Korea $38.0 million, and Other Asia $63.5 million).
Operating cash flow (CFO) of $82.0M significantly exceeded the net loss of ($6.6M), indicating strong cash generation despite a GAAP loss. The primary non-cash add-backs were depreciation and amortization ($32.8M), stock-based compensation ($24.4M), and provisions for inventory and credit losses ($4.5M). Working capital was a net source of cash, driven by a $26.6M decrease in prepaid expenses and other assets and a $9.3M reduction in inventories, partially offset by a $21.7M increase in trade accounts receivable.
Capital expenditures (capex) of $17.0M were moderate relative to CFO, resulting in a free cash flow (CFO minus capex) of approximately $65.0M. The company did not repurchase any shares during the period and paid only $23K in dividends to non-controlling interest, so capital returns were minimal. Financing activities used $70.7M, primarily from $60.0M in term loan repayments and $9.3M in tax payments related to equity awards.
Overall, cash flow quality is solid, with CFO covering capex and debt repayments. The main anomaly is the large working capital swing in prepaid expenses, which should be monitored for sustainability.