Allegro Microsystems Inc (ALGM)

Interest coverage

		Mar 31, 2025	Dec 31, 2024	Sep 30, 2024	Jun 30, 2024	Mar 31, 2024	Dec 31, 2023	Sep 30, 2023	Jun 30, 2023	Mar 31, 2023	Dec 31, 2022	Dec 23, 2022	Sep 30, 2022	Sep 23, 2022	Jun 30, 2022	Mar 31, 2022	Dec 31, 2021	Sep 30, 2021	Jun 30, 2021	Mar 31, 2021	Dec 31, 2020
Earnings before interest and tax (EBIT) (ttm)	US$ in thousands	-43,766	-26,515	13,550	120,109	200,178	251,603	284,082	282,925	273,669	264,576	204,240	161,724	141,630	122,563	142,510	130,072	57,563	29,449	1,666	1,790
Interest expense (ttm)	US$ in thousands	28,732	24,846	20,938	11,343	6,735	6,136	2,895	2,750	2,512	2,288	1,795	1,889	1,627	2,324	2,549	2,510	4,839	3,961	3,616	2,948
Interest coverage		-1.52	-1.07	0.65	10.59	29.72	41.00	98.13	102.88	108.94	115.64	113.78	85.61	87.05	52.74	55.91	51.82	11.90	7.43	0.46	0.61

March 31, 2025 calculation

Interest coverage = EBIT (ttm) ÷ Interest expense (ttm)
= $-43,766K ÷ $28,732K
= -1.52

The interest coverage ratio of Allegro Microsystems Inc has shown significant fluctuations over the past few years. The ratio was below 1 in the periods ending March 31, 2021 and June 30, 2021, indicating that the company may have had difficulty covering its interest expenses with its operating income during those periods.

However, from September 30, 2021 onwards, the interest coverage ratio improved substantially, reaching its peak in December 31, 2022, at 115.64. This indicates that Allegro Microsystems Inc had more than enough operating income to cover its interest payments during that period.

Subsequently, the interest coverage ratio declined over the following quarters, dropping to negative values by March 31, 2025. A negative interest coverage ratio indicates that the company's operating income was insufficient to cover its interest expenses, raising concerns about its financial health and ability to meet debt obligations.

Overall, Allegro Microsystems Inc's interest coverage ratio has displayed volatility, with periods of strong coverage followed by sharp declines. It is essential for the company to closely monitor and manage its financial position to ensure sustainable profitability and liquidity in the future.