EPS of $-0.09 decreased by 126.9% from previous year
Gross margin of 44.8%
Net income of -17.68M
""We believe that inventory rebalancing in automotive will continue into our second quarter and customers are returning to a more normal ordering pattern."" - Vineet Nargolwala
In Q1 2025, Allegro MicroSystems Inc (ALGM) reported revenue of $167 million, representing a significant decline of 40% year-over-year and 31% sequentially. The performance was primarily impacted by inventory destocking across automotive and industrial markets, with management emphasizing their strategy of responsibly reducing inventory levels. Despite these challenges, non-GAAP EPS was reported at $0.03 at the high end of guidance, indicating positive momentum towards future growth. CEO Vineet Nargolwala highlighted optimism for a recovery driven by increased demand in xEV markets, while cautioning against ongoing inventory challenges in the industrial sector. Overall, Allegro is positioning itself for future growth by launching innovative products and taking decisive steps in corporate governance with a notable share repurchase transaction.
Key Performance Indicators
Revenue
166.92M
QoQ: -30.62% | YoY:-39.41%
Gross Profit
74.77M
44.79% margin
QoQ: -39.35% | YoY:-53.12%
Operating Income
-10.63M
QoQ: -127.47% | YoY:-114.58%
Net Income
-17.68M
QoQ: -148.42% | YoY:-126.94%
EPS
-0.09
QoQ: -148.37% | YoY:-126.88%
Revenue Trend
Margin Analysis
Key Insights
**Revenue:** $167 million, down 40% YoY, down 31% QoQ.
**Gross Profit:** $74.8 million, reflecting a gross margin of 44.8%.
**Operating Income:** -$10.6 million, with an operating margin of -6.3%.
**Net Income:** -$17.7 million, corresponding to an EPS of -$0.091.
**Cash Flow from Operations:** $34 million, Free Cash Flow was reported at $23.2 million, indicating prudent cash management despite reduced sales.
Financial Highlights
Financial Performance Overview:
- Revenue: $167 million, down 40% YoY, down 31% QoQ.
- Gross Profit: $74.8 million, reflecting a gross margin of 44.8%.
- Operating Income: -$10.6 million, with an operating margin of -6.3%.
- Net Income: -$17.7 million, corresponding to an EPS of -$0.091.
- Cash Flow from Operations: $34 million, Free Cash Flow was reported at $23.2 million, indicating prudent cash management despite reduced sales.
- Cash and Equivalents: $184 million, with a current ratio of 4.65 suggesting a strong liquidity position.
Additionally, management projected a Q2 2025 revenue growth of 12%, signaling a potential recovery as inventory issues are resolved. Comparative Performance: Allegro's gross margin of 44.8% remains competitive against industry averages; however, the operating margin has dipped significantly compared to prior periods. Investors should note the lower performance impacts from recent strategic undertakings such as share repurchases from Sanken Electric.
Income Statement
Metric
Value
YoY Change
QoQ Change
Revenue
166.92M
-39.41%
-30.62%
Gross Profit
74.77M
-53.12%
-39.35%
Operating Income
-10.63M
-114.58%
-127.47%
Net Income
-17.68M
-126.94%
-148.42%
EPS
-0.09
-126.88%
-148.37%
Key Financial Ratios
currentRatio
4.65
grossProfitMargin
44.8%
operatingProfitMargin
-6.37%
netProfitMargin
-10.6%
returnOnAssets
-1.22%
returnOnEquity
-1.59%
debtEquityRatio
0.2
operatingCashFlowPerShare
$0.18
freeCashFlowPerShare
$0.12
priceToBookRatio
4.93
priceEarningsRatio
-77.28
Net Income vs. Revenue
Expense Breakdown
Management Commentary
Key Management Insights:
- Inventory Management: CEO Nargolwala stated, "We made progress reducing inventory in direct and distribution channels, which we expect to continue throughout Q2."
- Market Outlook: Management is optimistic about future demand in the xEV market, indicating, "We remain encouraged with the estimates for continued double-digit growth in XEVs."
- Governance Changes: Nargolwala noted the significance of reducing Sanken's control over Allegro stating, "This event marks the first time in nearly 35 years that Allegro has not been controlled by another company and opens a new chapter in our journey of growth and transformation."
These insights reflect Allegro's commitment to revitalizing its market position and improving governance post-repurchase.
"We believe that inventory rebalancing in automotive will continue into our second quarter and customers are returning to a more normal ordering pattern."
â Vineet Nargolwala
"We continue to invest for growth and remain focused on those aspects of the business that we control."
â Vineet Nargolwala
Forward Guidance
Management has set Q2 revenue guidance between $182 million and $192 million, pressing for sequential growth as inventory levels stabilize. Alongside a projected gross margin between 49% and 51%, this forecast suggests positive momentum as Allegro refines its operational strategy and capitalizes on emerging market demands, particularly in electric vehicles and renewable energy applications.
Competitive Position
Company
Gross Margin
Operating Margin
Return on Equity
P/E Ratio
ALGM Focus
44.79%
-6.37%
-1.59%
-77.28%
SYNA
46.90%
-4.04%
-1.57%
-33.55%
MCHP
59.40%
17.70%
2.02%
95.04%
QRVO
37.50%
0.52%
0.01%
6,689.61%
MPWR
55.10%
20.90%
4.38%
87.83%
Gross Profit Margin
Operating Profit Margin
Return on Equity
P/E Ratio Comparison
Investment Outlook
Given the detailed analysis of Allegro MicroSystems' Q1 2025 results, the company appears poised for a gradual recovery supported by strategic initiatives and product innovation. Although current performance reflects significant headwinds, particularly in inventory management and revenue contraction, Allegro's commitment to operational excellence and recovery in automotive demand represents a compelling investment narrative. Investors should closely monitor upcoming quarterly results for insights into whether the projected growth materializes and to assess the sustainability of improved governance following the share buyback.
Key Investment Factors
Growth Potential
Allegro's emphasis on innovation, such as launching new sensor products and advancing its power portfolio for clean energy solutions, signals potential for robust growth in strategic markets like automotive and industrial automation.
Profitability Risk
Risks include ongoing inventory management challenges, fluctuations in global automotive demand, and potential impacts from geopolitical events such as tariffs affecting Chinese manufacturers.
Financial Position
Despite reporting losses in Q1, Allegro maintains a healthy balance sheet with significant cash reserves and a strong current ratio, positioning it well to navigate short-term challenges while pursuing growth opportunities.
SWOT Analysis
Strengths
Strong cash position with $184 million in cash equivalents
Industry-leading position in magnetic sensing technology
Diverse product offerings across automotive and industrial markets
Weaknesses
Significant revenue drop of 40% year-over-year
Negative net income and operating income in Q1 2025
Inventory management challenges in both channels
Opportunities
Growing demand for xEVs and electric applications
Expansion in the renewable energy sector
Recent share repurchase enhances independence and governance
Threats
Ongoing geopolitical risks affecting international supply chain
Fluctuating demand in automotive sector post-pandemic