UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DCD.C. 20549

_________________

FORM 10-Q

_________________

(Mark One)


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June ~~25, 2021~~24, 2022


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number: 001-39675

_________________

ALLEGRO MICROSYSTEMS, INC.

(Exact ~~Name~~name of ~~Registrant~~registrant as ~~Specified~~specified in its ~~Charter)~~charter)

_________________



Delaware		46-2405937
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

955 Perimeter Road
Manchester,	New Hampshire	03103
(Address of principal executive offices)		(Zip Code)

(603) 626-2300

(Registrant’s telephone number, including area code)

N/A

(Former name, former address and former fiscal year, if changed since last report)

_________________

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading

Symbol(s)

Name of each exchange on which registered

Common Stock, par value $0.01 per share

ALGM

The Nasdaq Global Select Market

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☐☒ No ☒☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

☐☒

Accelerated filer

☐

Non-accelerated filer

☒☐

Smaller reporting company

☐

Emerging growth company

☒☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of July ~~21, 2021,~~22, 2022, the registrant had ~~189,646,542~~191,269,633 shares of common stock, $0.01 par value per share, outstanding.

TABLE OF CONTENTS


		Page

	Forward-Looking Statements	2
PART I.	Financial Information	4
Item 1.	Condensed Consolidated Financial Statements	4
	Condensed Consolidated Balance Sheets as of June 24, 2022 and March 25, ~~202~~1 2022 (Unaudited) ~~and~~ ~~March~~ 2 6 ~~, 2021~~	4
	Condensed Consolidated Statements of Operations for the ~~three-month~~three-month periods ended June 24, 2022 and June 25, ~~202~~1 ~~and~~ ~~June~~ 2 6 , 20 20 2021 (Unaudited)	5
	Condensed Consolidated Statements of Comprehensive Income for the ~~three-month period~~s three-month periods ended June ~~25,202~~1 24, 2022 and June 2 6 , 20 20 25, 2021 (Unaudited)	6
	Condensed Consolidated Statements of Changes in Equity for the ~~three-month period~~s three-month periods ended June ~~25,202~~1 24, 2022 and June 2 6 , 20 20 25, 2021 (Unaudited)	7
	Condensed Consolidated Statements of Cash Flows for the ~~three-month~~three-month periods ended June 2 5 ,~~202~~1 24, 2022 and June 2 6 , 20 20 25, 2021 (Unaudited)	8
	Notes to Unaudited Condensed Consolidated Financial Statements	89
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	2624
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	4840
Item 4.	Controls and Procedures	4841
PART II.	Other Information	4841
Item 1.	Legal Proceedings	4942
Item 1A.	Risk Factors	4942
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	4942
Item 3.	Defaults Upon Senior Securities	4942
Item 4.	Mine Safety Disclosures	4942
Item 5.	Other Information	4942
Item 6.	Exhibits	5043
Signatures		5144

FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q (the “Quarterly Report”) contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. We intend such forward-looking statements to be covered by the safe harbor provisions for forward-looking statements contained in Section 27A of the Securities Act of 1933, as amended and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). All statements other than statements of historical facts contained in this Quarterly Report, including statements regarding our future results of operations and financial position, business strategy, the impact of the ongoing and global COVID-19 pandemic on our business, prospective products and the plans and objectives of management for future operations, may be forward-looking statements. These statements involve known and unknown risks, uncertainties and other important factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements.

Statements regarding our future results of operations and financial position, business strategy and plans and objectives of management for future operations, including, among others, statements regarding the liquidity, growth and profitability strategies and factors and trends affecting our business are forward-looking statements. Without limiting the foregoing, in some cases, you can identify forward-looking statements by terms such as “aim,” “may,” “will,” “should,” “expect,” “exploring,” “plan,” “anticipate,” “could,” “intend,” “target,” “project,” “contemplate,” “believe,” “estimate,” “predict,” “potential,” “seek,” or “continue” or the negative of these terms or other similar expressions, although not all forward-looking statements contain these words. No forward-looking statement is a guarantee of future results, performance, or achievements, and one should avoid placing undue reliance on such statements.

Forward-looking statements are based on our management’s beliefs and assumptions and on information currently available to us. Such beliefs and assumptions may or may not prove to be correct. Additionally, such forward-looking 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 factors, including, but not limited to, those identified in Part I, Item 2. “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and Part II. Item 1A. “Risk Factors” in this Quarterly Report and Part II, Item 1A. “Risk Factors” in our Annual Report on Form 10-K for the year ended March ~~26, 2021~~25, 2022 (the ~~“2021~~“2022 Annual Report”). These risks and uncertainties include, but are 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 ~~ability to compensate for decreases in average selling prices~~reliance on a limited number of ~~our products;~~third-party wafer fabrication facilities and suppliers of other materials;

•~~the cyclical nature of the analog semiconductor industry;~~our failure to adjust purchase commitments 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;

•any downturn in the automotive market;

•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;

•~~any disruptions at our primary third-party wafer fabrication facilities;~~

•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 ability to adjust our supply chain volume to account for changing market conditions and customer demand;

•our reliance on a limited number of third-party wafer fabrication facilities and suppliers of other materials;

•our dependence on manufacturing operations in the Philippines;

•our reliance on distributors to generate sales;

•COVID-19 induced lock-downs and suppression on our ~~indebtedness may limit our flexibility to operate our business;~~

•~~the loss of one or more significant end customers;~~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 ability to raise capital to support our growth strategy;

•our indebtedness may limit our flexibility to operate our business;

•our ability to effectively manage our growth and 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;~~

•our ~~dependence on international customers and operations;~~principal stockholders have substantial control over us;

•the ~~availability~~inapplicability of ~~rebates, tax credits and other financial incentives on end-user demands for certain products;~~the “corporate opportunity” doctrine to any director or stockholder who is not employed by us;

•the ~~volatility~~dilutive impact on the price of ~~currency exchange rates;~~

•~~risks related to acquisitions of and investments in new businesses, products~~our shares upon future issuance by us or ~~technologies, joint ventures and other strategic transactions;~~future sales by our stockholders;

•our ~~ability~~lack of intent to ~~raise capital to support~~declare or pay dividends for the foreseeable future;

•anti-takeover provisions in our ~~growth strategy;~~organizational documents and General Corporation Law of the State of Delaware;

•the exclusive forum provision in our Certificate of Incorporation for disputes with stockholders;

•our ~~ability~~inability to ~~effectively manage our growth and to retain key and highly skilled personnel;~~design, implement or maintain effective internal control over financial reporting;

•changes in tax rates or the adoption of new tax legislation;

•~~risks related to litigation, including securities class action litigation;~~ and

•other events beyond our ~~ability to accurately estimate market opportunity and growth forecasts.~~control.

Moreover, we operate in an evolving environment. New risk factors and uncertainties may emerge from time to time, and it is not possible for management to predict all risk factors and uncertainties.

You should read this Quarterly Report and the documents that we reference in this Quarterly Report completely and with the understanding that our actual future results may be materially different from what we expect. We qualify all of our forward-looking statements by these cautionary statements. Except as required by applicable law, we do not plan to publicly update or revise any forward-looking statements contained in this Quarterly Report, whether as a result of any new information, future events or otherwise.

Unless the context otherwise requires, references to “we,” “us,” “our,” the “Company” and “Allegro” refer to the operations of Allegro MicroSystems, Inc. and its consolidated subsidiaries.

PART I – FINANCIAL INFORMATION

Item 1. Condensed Consolidated Financial Statements

ALLEGRO MICROSYSTEMS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except par value and share amounts)

June 25, 2021 (Unaudited) March 26,
2021
Assets
Current assets:
Cash and cash equivalents $ 221,934 $ 197,214
Restricted cash 7,698 6,661
Trade accounts receivable, net of provision for expected credit losses of $773 at June 25, 2021 and allowance for doubtful accounts of $138 at March 26, 2021 77,843 69,500
Trade and other accounts receivable due from related party 23,657 23,832
Accounts receivable – other 1,613 1,516
Inventories 82,356 87,498
Prepaid expenses and other current assets 12,117 18,374
Assets held for sale 25,309 25,969
Total current assets 452,527 430,564
Property, plant and equipment, net 196,993 192,393
Operating lease right-of-use assets 17,439 0
Deferred income tax assets 20,268 26,972
Goodwill 20,118 20,106
Intangible assets, net 36,301 36,366
Equity investment in related party 26,943 26,664
Other assets, net 26,298 14,613
Total assets $ 796,887 $ 747,678
Liabilities, Non-Controlling Interest and Stockholders' Equity
Current liabilities:
Trade accounts payable $ 34,704 $ 35,389
Amounts due to related party 4,095 2,353
Accrued expenses and other current liabilities 76,771 78,932
Current portion of operating lease liabilities 3,463 0
Total current liabilities 119,033 116,674
Obligations due under Senior Secured Credit Facilities 25,000 25,000
Operating lease liabilities, less current portion 14,231 0
Other long-term liabilities 19,244 19,133
Total liabilities 177,508 160,807
Commitments and contingencies (Note 15) 0 0
Stockholders' Equity:
Preferred Stock, $0.01 par value; 20,000,000 shares authorized, 0 shares issued or outstanding at June 25, 2021 and March 26, 2021 0 0
Common stock, $0.01 par value; 1,000,000,000 shares authorized, 189,581,621 shares issued and outstanding at June 25, 2021; 1,000,000,000 shares authorized, 189,588,161 issued and outstanding at March 26, 2021 1,896 1,896
Additional paid-in capital 597,001 592,170
Retained earnings 31,220 3,551
Accumulated other comprehensive loss (11,865) (11,865)
Equity attributable to Allegro MicroSystems, Inc. 618,252 585,752
Non-controlling interests 1,127 1,119
Total stockholders' equity 619,379 586,871
Total liabilities, non-controlling interest and stockholders' equity $ 796,887 $ 747,678
(Unaudited)


	June 24, 2022		March 25, 2022
Assets
Current assets:
Cash and cash equivalents	$	286,557	$	282,383
Restricted cash	9,715		7,416
Trade accounts receivable, net of provision for expected credit losses of $149 and $105 at June 24, 2022 and March 25, 2022, respectively	91,552		87,359
Trade and other accounts receivable due from related party	30,109		27,360
Accounts receivable – other	1,430		4,144
Inventories	88,933		86,160
Prepaid expenses and other current assets	18,863		14,995
Current portion of related party note receivable	1,875		1,875

Total current assets	529,034		511,692
Property, plant and equipment, net	214,808		210,028
Operating lease right-of-use assets	15,158		16,049
Deferred income tax assets	25,505		17,967
Goodwill	19,953		20,009
Intangible assets, net	36,142		35,970
Related party note receivable, less current portion	5,156		5,625
Equity investment in related party	26,807		27,671
Other assets, net	53,550		47,609
Total assets	$	926,113	$	892,620
Liabilities, Non-Controlling Interests and Stockholders' Equity
Current liabilities:
Trade accounts payable	$	34,492	$	29,836
Amounts due to related party	4,704		5,222
Accrued expenses and other current liabilities	68,952		65,459
Current portion of operating lease liabilities	3,656		3,706



Total current liabilities	111,804		104,223
Obligations due under Senior Secured Credit Facilities	25,000		25,000
Operating lease liabilities, less current portion	11,893		12,748

Other long-term liabilities	14,056		15,286
Total liabilities	162,753		157,257
Commitments and contingencies (Note 13)	0		0
Stockholders' Equity:

Preferred Stock, $0.01 par value; 20,000,000 shares authorized, no shares issued or outstanding at June 24, 2022 and March 25, 2022	—		—
Common stock, $0.01 par value; 1,000,000,000 shares authorized, 191,180,179 shares issued and outstanding at June 24, 2022; 1,000,000,000 shares authorized, 190,473,595 issued and outstanding at March 25, 2022	1,912		1,905


Additional paid-in capital	652,317		627,792
Retained earnings	133,205		122,958
Accumulated other comprehensive loss	(25,198)		(18,448)
Equity attributable to Allegro MicroSystems, Inc.	762,236		734,207
Non-controlling interests	1,124		1,156
Total stockholders' equity	763,360		735,363
Total liabilities, non-controlling interest and stockholders' equity	$	926,113	$	892,620

The accompanying notes are an integral part of these condensed consolidated financial statements.

ALLEGRO MICROSYSTEMS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except share and per share amounts)

(Unaudited)


		Three-Month Period Ended				Three-Month Period Ended
		June 25, 2021		June 26, 2020				June 24, 2022		June 25, 2021
Net sales	Net sales	$	152,689	$	91,381		Net sales	$	176,044	$	152,689
Net sales to related party	Net sales to related party	35,453		23,620			Net sales to related party	41,709		35,453
Total net sales	Total net sales	188,142		115,001			Total net sales	217,753		188,142
Cost of goods sold		93,982		59,300
Cost of goods sold (Note17)							Cost of goods sold (Note17)	99,379		93,982
Gross profit	Gross profit	94,160		55,701			Gross profit	118,374		94,160
Operating expenses:	Operating expenses:						Operating expenses:
Research and development	Research and development	29,554		24,380			Research and development	33,857		29,554
Selling, general and administrative	Selling, general and administrative	32,064		26,789			Selling, general and administrative	69,980		32,064

Change in fair value of contingent consideration	Change in fair value of contingent consideration	300		0			Change in fair value of contingent consideration	(200)		300
Total operating expenses	Total operating expenses	61,918		51,169			Total operating expenses	103,637		61,918
Operating income	Operating income	32,242		4,532			Operating income	14,737		32,242
Other (expense) income:
Other income (expense):							Other income (expense):

Interest (expense) income, net		(345)		313
Foreign currency transaction (loss) gain		(254)		132
Income in earnings of equity investment		279		212
Interest expense, net							Interest expense, net	(120)		(345)
Foreign currency transaction gain (loss)							Foreign currency transaction gain (loss)	1,924		(254)
(Loss) income in earnings of equity investment							(Loss) income in earnings of equity investment	(864)		279
Other, net	Other, net	48		193			Other, net	(3,429)		48
Income before income tax provision		31,970		5,382
Income before income taxes							Income before income taxes	12,248		31,970
Income tax provision	Income tax provision	4,263		528			Income tax provision	1,965		4,263
Net income	Net income	27,707		4,854			Net income	10,283		27,707
Net income attributable to non-controlling interests	Net income attributable to non-controlling interests	38		34			Net income attributable to non-controlling interests	36		38
Net income attributable to Allegro MicroSystems, Inc.	Net income attributable to Allegro MicroSystems, Inc.	$	27,669	$	4,820		Net income attributable to Allegro MicroSystems, Inc.	$	10,247	$	27,669
Net income attributable to Allegro MicroSystems, Inc. per share (Note 16):
Net income attributable to Allegro MicroSystems, Inc. per share:							Net income attributable to Allegro MicroSystems, Inc. per share:
Basic	Basic	$	0.15	$	0.48		Basic	$	0.05	$	0.15
Diluted	Diluted	$	0.14	$	0.48		Diluted	$	0.05	$	0.14
Weighted average shares outstanding:	Weighted average shares outstanding:						Weighted average shares outstanding:
Basic	Basic	189,585,381		10,000,000			Basic	190,638,135		189,585,381
Diluted	Diluted	191,163,074		10,000,000			Diluted	192,406,276		191,163,074

The accompanying notes are an integral part of these condensed consolidated financial statements.

ALLEGRO MICROSYSTEMS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(in thousands)

(Unaudited)


		Three-Month Period Ended				Three-Month Period Ended
		June 25, 2021		June 26, 2020				June 24, 2022		June 25, 2021
Net income	Net income	$	27,707	$	4,854		Net income	$	10,283	$	27,707
Net income attributable to non-controlling interest	Net income attributable to non-controlling interest	38		34			Net income attributable to non-controlling interest	36		38
Net income attributable to Allegro MicroSystems, Inc.	Net income attributable to Allegro MicroSystems, Inc.	27,669		4,820			Net income attributable to Allegro MicroSystems, Inc.	10,247		27,669
Other comprehensive (loss) income:
Other comprehensive loss:							Other comprehensive loss:
Foreign currency translation adjustment	Foreign currency translation adjustment	(30)		4,280			Foreign currency translation adjustment	(6,818)		(30)
Net actuarial loss amortization of net transition obligation and prior service costs related to defined benefit plans, net of tax		0		(313)

Comprehensive income	Comprehensive income	27,639		8,787			Comprehensive income	3,429		27,639
Other comprehensive loss attributable to non-controlling interest	Other comprehensive loss attributable to non-controlling interest	30		7			Other comprehensive loss attributable to non-controlling interest	68		30
Comprehensive income attributable to Allegro MicroSystems, Inc.	Comprehensive income attributable to Allegro MicroSystems, Inc.	$	27,669	$	8,794		Comprehensive income attributable to Allegro MicroSystems, Inc.	$	3,497	$	27,669

The accompanying notes are an integral part of these condensed consolidated financial statements.

ALLEGRO MICROSYSTEMS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

(in thousands, except share amounts)

(Unaudited)

Common Stock, Class A Common Stock, Class L Preferred Stock Common Stock
Additional
Paid-In Capital
Retained Earnings
Accumulated
Other
Comprehensive
Loss
Non-Controlling Interests Total Equity
Shares Amount Shares Amount Shares Amount Shares Amount
Balance at March 27, 2020 10,000,000 $ 100 622,470 $ 6 — $ — 0 $ 0 $ 458,697 $ 194,355 $ (19,976) $ 950 $ 634,132
Net income — — — — — — — — — 4,820 — 34 4,854
Issuance of Class L shares, net of forfeitures — — 15,828 — — — — — — — — — —
Capitalization changes related to organizational structure of affiliates and direct and indirect interests in subsidiaries — — — — — — — — (19,165) — — — (19,165)
Reclassification of certain class L shares — — — — — — — — (298) — — — (298)
Stock-based compensation — — — — — — — — 445 — — — 445
Foreign currency translation adjustment — — — — — — — — — — 4,287 (7) 4,280
Net actuarial loss and amortization of net transition obligation and prior service costs related to defined benefit plans, net of tax — — — — — — — — — — (313) — (313)
Balance at June 26, 2020 10,000,000 — $ 100 638,298 $ 6 — $ — 0 $ 0 $ 439,679 $ 199,175 $ (16,002) $ 977 $ 623,935


	Preferred Stock	Common Stock			Additional Paid-In Capital		Retained Earnings		Accumulated Other Comprehensive Loss			Non-Controlling Interests		Total Equity
		Shares	Amount			Shares					Amount
Balance at March 26, 2021		—	$	—	189,588,161		$	1,896	$	592,170		$	3,551	$	(11,865)	$	1,119	$	586,871
Net income		—	—		—		—		—			27,669		—		38		27,707
Stock-based compensation, net of forfeitures		—	—		(6,540)		—		4,831			—		—		—		4,831
Foreign currency translation adjustment		—	—		—		—		—			—		—		(30)		(30)

Balance at June 25, 2021		—	$	—	189,581,621		$	1,896	$	597,001		$	31,220	$	(11,865)	$	1,127	$	619,379


	Preferred Stock	Common Stock			Additional Paid-In Capital		Retained Earnings		Accumulated Other Comprehensive Loss			Non-Controlling Interests		Total Equity
		Shares	Amount			Shares					Amount
Balance at March 25, 2022		—	$	—	190,473,595		$	1,905	$	627,792		$	122,958	$	(18,448)	$	1,156	$	735,363
Net income		—	—		—		—		—			10,247		—		36		10,283
Stock-based compensation, net of forfeitures		—	—		706,584		7		34,131			—		—		—		34,138
Payments of taxes withheld on net settlement of equity awards		—	—		—		—		(9,606)			—		—		—		(9,606)
Foreign currency translation adjustment		—	—		—		—		—			—		(6,750)		(68)		(6,818)

Balance at June 24, 2022		—	$	—	191,180,179		$	1,912	$	652,317		$	133,205	$	(25,198)	$	1,124	$	763,360

The accompanying notes are an integral part of these condensed consolidated financial statements.

ALLEGRO MICROSYSTEMS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(Unaudited)


		Three-Month Period Ended					Three-Month Period Ended
		June 25, 2021		June 26, 2020			June 24, 2022		June 25, 2021
CASH FLOWS FROM OPERATING ACTIVITIES:	CASH FLOWS FROM OPERATING ACTIVITIES:					CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	Net income	$	27,707	$	4,854	Net income	$	10,283	$	27,707
Adjustments to reconcile net income to net cash provided by operating activities:	Adjustments to reconcile net income to net cash provided by operating activities:					Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	Depreciation and amortization	12,172		11,539		Depreciation and amortization	11,918		12,172
Amortization of deferred financing costs	Amortization of deferred financing costs	25		0		Amortization of deferred financing costs	24		25
Deferred income taxes	Deferred income taxes	(1,454)		(578)		Deferred income taxes	(7,784)		(1,454)
Stock-based compensation	Stock-based compensation	4,831		445		Stock-based compensation	34,136		4,831
Gain on disposal of assets	Gain on disposal of assets	(35)		(38)		Gain on disposal of assets	(3)		(35)

Loss on contingent consideration change in fair value		300		0
(Gain) loss on contingent consideration change in fair value						(Gain) loss on contingent consideration change in fair value	(200)		300

Provisions for inventory and credit losses/bad debt		1,613		(158)
Provisions for inventory and expected credit losses						Provisions for inventory and expected credit losses	2,640		1,613
Unrealized loss on marketable securities						Unrealized loss on marketable securities	3,486		—
Changes in operating assets and liabilities:	Changes in operating assets and liabilities:					Changes in operating assets and liabilities:
Trade accounts receivable	Trade accounts receivable	(9,956)		13,352		Trade accounts receivable	(4,718)		(9,956)
Accounts receivable - other	Accounts receivable - other	(97)		(689)		Accounts receivable - other	2,714		(97)
Inventories	Inventories	5,142		(14,990)		Inventories	(4,888)		5,142
Prepaid expenses and other assets	Prepaid expenses and other assets	1,719		5,163		Prepaid expenses and other assets	(13,102)		1,719
Trade accounts payable	Trade accounts payable	(2,993)		4,833		Trade accounts payable	4,075		(2,993)
Due to/from related parties	Due to/from related parties	1,917		3,573		Due to/from related parties	(3,267)		1,917
Accrued expenses and other current and long-term liabilities	Accrued expenses and other current and long-term liabilities	(2,396)		(1,640)		Accrued expenses and other current and long-term liabilities	1,239		(2,396)

Net cash provided by operating activities	Net cash provided by operating activities	38,495		25,666		Net cash provided by operating activities	36,553		38,495
CASH FLOWS FROM INVESTING ACTIVITIES:	CASH FLOWS FROM INVESTING ACTIVITIES:					CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property, plant and equipment	Purchases of property, plant and equipment	(15,346)		(7,974)		Purchases of property, plant and equipment	(14,389)		(15,346)

Contribution of cash balances due to divestiture of subsidiary		0		(16,335)

Net cash used in investing activities	Net cash used in investing activities	(15,346)		(24,309)		Net cash used in investing activities	(14,389)		(15,346)
CASH FLOWS FROM FINANCING ACTIVITIES:	CASH FLOWS FROM FINANCING ACTIVITIES:					CASH FLOWS FROM FINANCING ACTIVITIES:
Receipts on related party note receivable						Receipts on related party note receivable	469		—

Payments for taxes related to net share settlement of equity awards						Payments for taxes related to net share settlement of equity awards	(9,606)		—

Net cash provided by financing activities		0		0
Net cash used in financing activities						Net cash used in financing activities	(9,137)		—
Effect of exchange rate changes on Cash and cash equivalents and Restricted cash	Effect of exchange rate changes on Cash and cash equivalents and Restricted cash	2,608		(1,269)		Effect of exchange rate changes on Cash and cash equivalents and Restricted cash	(6,554)		2,608
Net increase in Cash and cash equivalents and Restricted cash	Net increase in Cash and cash equivalents and Restricted cash	25,757		88		Net increase in Cash and cash equivalents and Restricted cash	6,473		25,757
Cash and cash equivalents and Restricted cash at beginning of period	Cash and cash equivalents and Restricted cash at beginning of period	203,875		219,876		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:	CASH AND CASH EQUIVALENTS AND RESTRICTED CASH AT END OF PERIOD:	$	229,632	$	219,964	CASH AND CASH EQUIVALENTS AND RESTRICTED CASH AT END OF PERIOD:	$	296,272	$	229,632
RECONCILIATION OF CASH AND CASH EQUIVALENTS AND RESTRICTED CASH:	RECONCILIATION OF CASH AND CASH EQUIVALENTS AND RESTRICTED CASH:					RECONCILIATION OF CASH AND CASH EQUIVALENTS AND RESTRICTED CASH:
Cash and cash equivalents at beginning of period	Cash and cash equivalents at beginning of period	$	197,214	$	214,491	Cash and cash equivalents at beginning of period	$	282,383	$	197,214
Restricted cash at beginning of period	Restricted cash at beginning of period	6,661		5,385		Restricted cash at beginning of period	7,416		6,661
Cash and cash equivalents and Restricted cash at beginning of period	Cash and cash equivalents and Restricted cash at beginning of period	$	203,875	$	219,876	Cash and cash equivalents and Restricted cash at beginning of period	$	289,799	$	203,875
Cash and cash equivalents at end of period	Cash and cash equivalents at end of period	221,934		215,576		Cash and cash equivalents at end of period	286,557		221,934
Restricted cash at end of period	Restricted cash at end of period	7,698		4,388		Restricted cash at end of period	9,715		7,698
Cash and cash equivalents and Restricted cash at end of period	Cash and cash equivalents and Restricted cash at end of period	$	229,632	$	219,964	Cash and cash equivalents and Restricted cash at end of period	$	296,272	$	229,632

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:	SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:					SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid for interest	Cash paid for interest	$	269	$	155	Cash paid for interest	$	452	$	269
Cash paid for income taxes		(538)		382
Cash refunded for income taxes						Cash refunded for income taxes	(1,027)		(538)
Noncash transactions:	Noncash transactions:					Noncash transactions:
Changes in Trade accounts payable related to Property, plant and equipment, net		$	(5,535)	$	(1,289)
Loans to cover purchase of common stock under employee stock plan		0		171
Trade accounts payable related to Property, plant and equipment, net						Trade accounts payable related to Property, plant and equipment, net	$	(2,602)	$	(5,535)

Recognition of right of use assets and lease liability upon adoption of new accounting standard		356		0

Noncash lease liabilities arising from obtaining right-of-use assets						Noncash lease liabilities arising from obtaining right-of-use assets	150		356

The accompanying notes are an integral part of these condensed consolidated financial statements.

ALLEGRO MICROSYSTEMS, INC.

Notes to Unaudited Condensed Consolidated Financial Statements ~~– (continued)~~

(Amounts in thousands, except share and per share amounts)

1. Nature of the Business and Basis of Presentation

Allegro MicroSystems, Inc., together with its consolidated subsidiaries (“AMI” or the “Company”), is a global leader in designing, developing and manufacturing sensing and power solutions for motion control and energy-efficient systems in automotive and industrial markets. The Company is headquartered in Manchester, New Hampshire and has a global footprint ~~with 16 locations~~ across 4multiple continents.

The accompanying unaudited condensed consolidated financial statements have been prepared by the Company. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States ~~of America~~ (“U.S. GAAP”) have been condensed or omitted pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). The unaudited condensed consolidated financial statements include the Company's accounts and those of its subsidiaries. All intercompany balances have been eliminated in consolidation. These unaudited condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K filed with the SEC on May ~~19, 2021~~18, 2022 (the ~~“2021~~“2022 Annual Report”). In the opinion of the ~~Company's~~Company’s management, the financial information for the interim periods presented reflects all adjustments necessary for a fair ~~presentation~~statement of the ~~Company's~~Company’s financial position, results of operations and cash. The results reported in these unaudited condensed consolidated financial statements are not necessarily indicative of results that may be expected for the entire year.

On November 2, 2020, the Company completed its initial public offering (“IPO”). Refer to Note 1, “Nature of Business and Basis of Presentation” to the Company’s 2021 Annual Report for details.

Financial Periods

The Company’s first quarter three-month period is a 13-week period ending on the Friday closest to the last day in June. The Company’s first quarter of fiscal ~~2022~~2023 ended June ~~25, 2021,~~24, 2022, and the Company’s first quarter of fiscal ~~2021~~2022 ended June ~~26, 2020.~~25, 2021.

2. Summary of Significant Accounting Policies

Use of Estimates

The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, and disclosures of contingencies at the date of the unaudited condensed consolidated financial statements and the reported amounts of net sales and expenses during the reporting period. Such estimates relate to useful lives of fixed and intangible assets, allowances for ~~doubtful accounts~~expected credit losses and customer returns and sales allowances. Such estimates could also relate to the fair value of acquired assets and liabilities, including goodwill and intangible assets, net realizable value of inventory, accrued liabilities, the valuation of stock-based awards, deferred tax valuation allowances, and other reserves. On an ongoing basis, management evaluates its estimates. Actual results could differ from those estimates, and such differences may be material to the unaudited condensed consolidated financial statements.

~~Reclassifications~~

~~Certain reclassifications have been made to prior-period amounts to conform to current-period reporting classifications.~~

Concentrations of Credit Risk and Significant Customers

Financial instruments that potentially subject the Company to concentrations of credit risk consist primarily of cash, cash equivalents and accounts receivable. The Company maintains its cash and cash equivalents with financial institutions, which management believes to be of a high credit quality. To manage credit risk related to accounts receivables, the Company evaluates the creditworthiness of its customers and maintains allowances, to the extent necessary, for potential credit losses based upon the aging of its accounts receivable balances and known collection issues. The Company has not experienced any significant credit losses ~~to date.~~during the prior two years.

As of June ~~25, 2021~~24, 2022 and March ~~26, 2021,~~25, 2022, Sanken Electric Co., Ltd. (“Sanken”) accounted for ~~23.2%~~24.7% and ~~22.7%~~23.8% of the Company’s outstanding trade accounts receivable, net, respectively, including related party trade accounts receivable. No other customers accounted for 10% or more of outstanding trade accounts receivable, net during those periods.

For the three months ended June 24, 2022 and June 25, 2021, Sanken accounted for 19.2% and 18.8% of total net sales, respectively. No other customers accounted for 10% or more of total net sales for either of the three months ended June 24, 2022 or June 25, 2021.

ALLEGRO MICROSYSTEMS, INC.

Notes to Unaudited Condensed Consolidated Financial Statements – (continued)

(Amounts in thousands, except share and per share amounts)

~~For~~During the three months ended June ~~25, 2021 and June 26, 2020, Sanken~~24, 2022, sales from customers located outside of the United States accounted for, ~~18.8%~~ ~~and 20.5%~~in the aggregate, 87.0% of the Company’s total net sales, ~~respectively.~~with Greater China accounting for 25.3% and Japan accounting for 19.2%. No other ~~customers~~countries accounted for greater than 10% ~~or more~~ of total net sales for ~~either of~~ the three months ended June ~~25, 2021 or June 26, 2020.~~24, 2022.

During the three months ended June 25, 2021, sales from customers located outside of the United States, ~~accounted for,~~ in the aggregate, accounted for 85.7% of the Company’s total net sales, with Greater China accounting for 22.7%, Japan accounting for 18.8% and South Korea accounting for 11.7%. No other countries accounted for greater than 10% of total net sales for the three months ended June 25, 2021.

During the three months ended June 26, 2020, sales from customers located outside of the United States, in the aggregate, accounted for 88.7% of the Company’s total net sales, with Greater China accounting for 27.9%, Japan accounting for 20.5% and South Korea accounting for 11.8%. No other countries accounted for greater than 10% of total net sales for the three months ended June 26, 2020.

Recently Adopted Accounting Standards

The Company qualifies as “emerging growth company” as defined in the Jumpstart Our Business Startups Act of 2012 and has elected to “opt in” to the extended transition related to complying with new or revised accounting standards, which means that when a standard is issued or revised and it has different application dates for public and nonpublic companies, the Company will adopt the new or revised standard at the time nonpublic companies adopt the new or revised standard and will do so until such time that the Company either (i) irrevocably elects to “opt out” of such extended transition period or (ii) no longer qualifies as an emerging growth company. The Company may choose to early adopt any new or revised accounting standards whenever such early adoption is permitted for nonpublic companies.

In ~~February 2016,~~October 2021, the Financial Accounting Standards Board (“FASB”) issued ~~its new lease accounting guidance in~~ Accounting Standards Update (“ASU”) ~~2016‑02, “Leases~~No. 2021-08, Business Combinations (Topic ~~842)”~~805), Accounting for Contract Assets and Contract Liabilities from Contracts with Customers (“ASU ~~2016-02”~~2021-08”), which is codified as Accounting Standard Codification (“ASC”) Topic 842 (“ASC 842”) and replaces ASC Topic 840, Leases (“ASC 840”). ASU 2016-02 and all subsequent amendments amends various aspects of existing guidance for leases and requires significant additional quantitative and qualitative disclosures about lease arrangements. ASU 2016-02 requires lessees to recognize lease assets representing the right to use an underlying asset and lease liabilities representing the obligation to make lease payments over the lease term, measured on a discounted basis, for substantially all leases. ASU 2016-02 retains a distinction between finance leases and operating leases using classification criteria that is substantially similar to the previous lease guidance. Although the Company has elected to opt-in to the extended transition dates for new or revised accounting standards to align with nonpublic companies, the Company elected to early adopt ASU 2016-02 effective March 27, 2021. The Company used the optional transition method to the modified retrospective approach, which eliminates the ~~requirement~~diversity in practice and inconsistency related to ~~restate~~ the ~~prior period~~accounting for acquired revenue contracts with customers in a business combination. The amendments in ASU 2021-08 require an acquiring entity to apply ASC Topic 606, Contracts with Customers (“ASC 606”), to recognize and measure contract assets and contract liabilities in a business combination as if the acquired contracts with customers were originated by the acquiring entity at the acquisition date. An acquirer may assess how the acquiree applied ASC 606 and generally should recognize and measure the acquired contract assets and contract liabilities consistent with the recognition and measurement in the acquiree’s financial ~~statements. Under this transition provision, the Company has applied ASU 2016-02 to reporting periods beginning on March 27, 2021, while prior periods continue to be reported and disclosed~~statements, as prepared in accordance with U.S. GAAP. If unable to rely on the ~~legacy guidance under ASC 840.~~

~~A number~~acquiree’s accounting due to errors, noncompliance with U.S. GAAP, or differences in accounting policies, the acquirer should consider the terms of ~~practical expedients~~the acquired contracts, such as timing of payment, identify each performance obligation in the contracts, and ~~policy elections are available under~~allocate the ~~new guidance~~total transaction price to ~~reduce~~each identified performance obligation on a relative standalone selling price basis as of contract inception (that is, the ~~burden of adoption and ongoing compliance with ASC 842.~~ date the acquiree entered into the contracts) or contract modification to determine what should be recorded at the acquisition date. The Company elected the “package of practical expedients”, which permitted the Company to retain lease classification and initial direct costs for any identified leases that existed prior to adoption of ASC 842. Under this transition guidance, the Company also did not reassess whether any existing contracts at March 27, 2021 are or contain leases and carried forward its initial determination under legacy lease guidance. The Company has elected not to adopt the “hindsight” practical expedient and, therefore, will measure the right-of-use (“ROU”) asset and lease liability using the remaining portion of the lease term at adoption on March 27, 2021.

The Company made an accounting policy election available under the new lease standard to not recognize lease assets and lease liabilities for leases with a term of 12 months or less. For all other leases, the initial measurement of the lease liability is based on the present value of future lease payments over the lease term at the application date or the commencement date of the lease. Lease payments may include fixed rent escalation clauses or payments that depend on an index or a rate (such as the consumer price index) measured using the index or applicable rate at lease commencement. Subsequent changes in the index or rate and any other variable payments, such as market-rate base rent adjustments, are recognized as variable lease expense in the period incurred. Payments for terminating a lease are included in lease payments only when it is probable they will be incurred. To determine the present value of lease payments, the Company uses its incremental borrowing rate, as the leases generally do not have a readily determinable implicit discount rate. The Company applies judgment in assessing factors such as Company-specific credit risk, lease term, nature and quality of the underlying collateral, currency and economic environment in determining the lease-specific incremental borrowing rate. The carrying value of the ROU assets at the application date equals the lease liability adjusted for any initial direct costs incurred and lease payments made at or before the commencement date and for any lease incentives.

~~ALLEGRO MICROSYSTEMS, INC.~~

~~Notes to Unaudited Condensed Consolidated Financial Statements – (continued)~~

~~(Amounts in thousands, except share and per share amounts)~~

The Company’s leases generally include a non-lease component representing additional services transferred to the Company. The Company has made an accounting policy election to account for lease and non-lease components in its contacts as a single lease component for all asset classes. The non-lease components are usually variable in nature and recorded in variable lease expense in the period incurred.

~~Adoption of ASC 842 resulted in ROU assets of~~ ~~$18,403~~ ~~and lease liabilities of~~ ~~$18,759~~ related to the Company’s operating leases at March 27, 2021. The Company does not have any leases classified as finance leases. The adoption of ASC 842 did not materially impact the Company’s consolidated net income or consolidated cash flows and did not result in a cumulative-effect adjustment to the opening balance of retained earnings.

In June 2016, the FASB issued ASU No. 2016-13, “Measurement of Credit Losses on Financial Instruments” (“ASU 2016-13”), which adds an impairment model (known as the current expected credit loss (“CECL”) model) that is based on expected losses rather than incurred losses. Under the new guidance, an entity recognizes as an allowance its estimate of expected credit losses, which the FASB believes will result in more timely recognition of such losses. The ASU is also intended to reduce the complexity by decreasing the number of credit impairment models that entities use to account for debt instruments. The Companyearly adopted ASU ~~2016-13~~2021-08, effective March ~~27, 2021~~26, 2022 and concluded that ~~the standard update~~adoption of this ASU did not have a material impact on ~~either the~~its financial position, results of operations, cash flows, or related disclosures. ~~There was no impact on beginning balance retained earnings upon adoption of this ASU.~~

The Company ~~is exposed~~will apply the guidance in ASU 2021-08 prospectively to ~~credit losses primarily through trade and other financing receivables arising from revenue transactions. The Company uses an~~ ~~aging schedule method~~ ~~to estimate current expected credit losses based on days~~all business combinations that occur after the date of ~~delinquency, including information about past events and current economic conditions. The Company’s accounts receivable is separated int~~adoption.~~o two~~ categories using a portfolio methodology to evaluate the allowance under the CECL impairment model based on sales categorization and similar credit quality and worthiness of the customers: original equipment manufacturers (“OEMs”) and distributors. The receivables in each category share similar risk characteristics. The change to the CECL impairment model resulted in an immaterial increase in the provision for expected credit losses compared to the allowance for doubtful accounts under the previous incurred loss method.

The Company increases the allowance for expected credits losses when the Company determines all or a portion of a receivable is uncollectible. The Company recognizes recoveries as a decrease to the allowance for expected credit losses. For the three-month period ended June 25, 2021, no material changes in the allowance occurred.

~~Recently Issued Accounting Standards Not Yet Adopted~~

In May 2021, the FASB issued ASU No. 2021-04, Earnings Per Share (Topic 260), Debt—Modifications and Extinguishments (Subtopic 470-50), Compensation—Stock Compensation (Topic 718), and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40) (“ASU 2021-04”). ASU 2021-04 outlines how an entity should account for modifications made to equity-classified written call options, including stock options and warrants to purchase the entity’s own common stock. The guidance in the ASU requires an entity to treat a modification of an equity-classified written call ~~options~~option that does not cause the option to become liability-classified as an exchange of the original option for a new option. This guidance applies whether the modification is structured as an amendment to the terms and conditions of the equity-classified written call option or as termination of the original option and issuance of a new option. The ~~guidance is~~Company adopted ASU 2021-04, effective ~~prospectively for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years. Early adoption is permitted, including in an interim period as~~March 26, 2022, and concluded that it did not have a material impact on its financial position, results of the beginning of the fiscal year that includes that interim period. The Company is currently in the process of evaluating the impact of this new guidance on the consolidated financial statements and theoperations, cash flows, or related disclosures.

Recently Issued Accounting Standards Not Yet Adopted

None applicable.

3. Revenue from Contracts with Customers

The Company generates revenue from the sale of magnetic sensor integrated circuits (“ICs”) and application-specific analog power semiconductors. The following tables summarize net sales disaggregated by application, by product and by geography for the three months ended June ~~25, 2021~~24, 2022 and June ~~26, 2020.~~25, 2021. The categorization of net sales by application is determined using various characteristics of the product and the application into which the Company’s product will be incorporated. The categorization of net sales by geography is determined based on the location to which the products are ~~being shipped to.~~shipped.

1110

ALLEGRO MICROSYSTEMS, INC.

Notes to Unaudited Condensed Consolidated Financial Statements – (continued)

(Amounts in thousands, except share and per share amounts)

Net sales by application:


		Three-Month Period Ended				Three-Month Period Ended
		June 25, 2021		June 26, 2020				June 24, 2022		June 25, 2021

Automotive	Automotive	$	133,523	$	76,378		Automotive	$	149,649	$	133,523
Industrial	Industrial	30,309		20,406			Industrial	40,140		30,309
Other	Other	24,310		18,217			Other	27,964		24,310

Total net sales	Total net sales	$	188,142	$	115,001		Total net sales	$	217,753	$	188,142

Net sales by product:


		Three-Month Period Ended				Three-Month Period Ended
		June 25, 2021		June 26, 2020				June 24, 2022		June 25, 2021
Power integrated circuits	Power integrated circuits	$	66,672	$	41,599		Power integrated circuits	$	80,660	$	66,672
Magnetic sensors	Magnetic sensors	120,642		73,402			Magnetic sensors	137,050		120,642
Photonics	Photonics	828		0			Photonics	43		828

Total net sales	Total net sales	$	188,142	$	115,001		Total net sales	$	217,753	$	188,142

Net sales by geography:


		Three-Month Period Ended				Three-Month Period Ended
		June 25, 2021		June 26, 2020				June 24, 2022		June 25, 2021
Americas:	Americas:						Americas:
United States	United States	$	26,841	$	12,996		United States	$	28,391	$	26,841
Other Americas	Other Americas	6,349		1,928			Other Americas	6,487		6,349
EMEA:	EMEA:						EMEA:
Europe	Europe	34,751		17,846			Europe	35,333		34,751
Asia:	Asia:						Asia:
Japan	Japan	35,453		23,620			Japan	41,709		35,453
Greater China	Greater China	42,779		32,071			Greater China	55,116		42,779
South Korea	South Korea	21,933		13,612			South Korea	20,979		21,933
Other Asia	Other Asia	20,036		12,928			Other Asia	29,738		20,036
Total net sales	Total net sales	$	188,142	$	115,001		Total net sales	$	217,753	$	188,142

The Company recognizes sales net of returns, credits issued, price protection adjustments and stock rotation rights. At June ~~25, 2021~~24, 2022 and March ~~26, 2021,~~25, 2022, these adjustments were ~~$13,799~~$14,399 and ~~$15,412,~~$14,924, respectively, and were netted against trade accounts receivable in the unaudited condensed consolidated balance sheets. These amounts represent activity of income of $525 and ~~charges of~~ ~~$1,613~~ ~~and $1,740, respectively,~~$1,613 for the three months ended June 24, 2022 and June 25, 2021, ~~and June 26, 2020,~~ respectively.

Unsatisfied performance obligations primarily represent contracts for products with future delivery dates. The Company elected not to ~~not~~ disclose the amount of unsatisfied performance obligations as these contracts have original expected durations of less than one year.

1211

ALLEGRO MICROSYSTEMS, INC.

Notes to Unaudited Condensed Consolidated Financial Statements – (continued)

(Amounts in thousands, except share and per share amounts)

4. Fair Value Measurements

The following tables present information about the Company’s financial assets and liabilities as of June ~~25, 2021~~24, 2022 and March ~~26, 2021~~25, 2022 measured at fair value on a recurring basis and indicate the level of the fair value hierarchy utilized to determine such fair values:


		Fair Value Measurement at June 25, 2021 Using:									Fair Value Measurement at June 24, 2022 Using:
		Level 1		Level 2		Level 3		Total			Level 1		Level 2		Level 3		Total
Assets:	Assets:									Assets:
Cash equivalents:	Cash equivalents:									Cash equivalents:
Money market fund deposits	Money market fund deposits	$	16,334	$	0	$	0	$	16,334	Money market fund deposits	$	96,395	$	—	$	—	$	96,395
Restricted cash:	Restricted cash:									Restricted cash:
Money market fund deposits	Money market fund deposits	7,698		0		0		7,698		Money market fund deposits	9,715		—		—		9,715
Other assets, net (long-term):										Other assets, net (long-term):
Investments in marketable securities										Investments in marketable securities	8,538		—		—		8,538
Total assets	Total assets	$	24,032	$	0	$	0	$	24,032	Total assets	$	114,648	$	—	$	—	$	114,648
Liabilities:	Liabilities:									Liabilities:
Other long-term liabilities:	Other long-term liabilities:									Other long-term liabilities:
Contingent consideration	Contingent consideration	$	0	$	0	$	5,100	$	5,100	Contingent consideration	$	—	$	—	$	2,600	$	2,600
Total liabilities	Total liabilities	$	0	$	0	$	5,100	$	5,100	Total liabilities	$	—	$	—	$	2,600	$	2,600


		Fair Value Measurement at March 26, 2021 Using:									Fair Value Measurement at March 25, 2022 Using:
		Level 1		Level 2		Level 3		Total			Level 1		Level 2		Level 3		Total
Assets:	Assets:									Assets:
Cash equivalents:	Cash equivalents:									Cash equivalents:
Money market fund deposits	Money market fund deposits	$	16,327	$	0	$	0	$	16,327	Money market fund deposits	$	16,927	$	—	$	—	$	16,927
Restricted cash:	Restricted cash:									Restricted cash:
Money market fund deposits	Money market fund deposits	6,661		0		0		6,661		Money market fund deposits	7,416		—		—		7,416
Other assets, net (long-term):										Other assets, net (long-term):
Investments in marketable securities										Investments in marketable securities	12,346		—		—		12,346
Total assets	Total assets	$	22,988	$	0	$	0	$	22,988	Total assets	$	36,689	$	—	$	—	$	36,689
Liabilities:	Liabilities:									Liabilities:
Other long-term liabilities:	Other long-term liabilities:									Other long-term liabilities:
Contingent consideration	Contingent consideration	0		0		4,800		4,800		Contingent consideration	—		—		2,800		2,800
Total liabilities	Total liabilities	$	0	$	0	$	4,800	$	4,800	Total liabilities	$	—	$	—	$	2,800	$	2,800

The following table ~~shows~~represents the unrealized gains and losses on investments in marketable securities held with a readily determinable fair value for the three months ended June 24, 2022:



Net losses recognized during the period on equity securities	$	(3,486)
Less: Net gains and losses recognized during the period on equity securities sold during the period	—
Unrealized losses recognized during the reporting period on equity securities still held at the reporting date	$	(3,486)

In addition to the unrealized gains in the table above, the change in fair value of ~~Level 3 contingent consideration~~the equity securities was impacted by unrealized foreign currency exchange losses of $323 for the three months ended June 24, 2022. There were 0 investments in marketable securities during the three months ended June 25, 2021.

In connection with the fiscal year 2021 purchase of Voxtel, Inc. (“Voxtel”), a ~~privately-held~~privately held technology company located in Beaverton, Oregon, that develops, manufactures and supplies photonic and advanced 3D imaging technologies (the “Voxtel Acquisition”), the Company is required to make contingent payments, subject to the entity achieving certain sales and revenue thresholds. The contingent consideration payments are up to $15,000. The fair value of the liabilities for the contingent payments recognized upon the Voxtel Acquisition as part of the purchase accounting opening balance sheet

ALLEGRO MICROSYSTEMS, INC.

Notes to Unaudited Condensed Consolidated Financial Statements – (continued)

(Amounts in thousands, except share and per share amounts)

totaled $7,300 and was estimated by discounting to present value the probability-weighted contingent payments expected to be made. Assumptions used in this calculation were units sold, expected revenue, discount rate and various probability factors. The ultimate settlement of contingent consideration could deviate from current estimates based on the actual results of these financial measures. This liability is considered to be a Level 3 financial liability that is remeasured during each reporting period. The change in fair value of contingent consideration for the Voxtel Acquisition is included in change in fair value of contingent consideration in the unaudited condensed consolidated statements of operations.

The following table shows the change in fair value of Level 3 contingent consideration in connection with an acquisition in fiscal year 2021 for the three-month ~~period~~periods ended June 24, 2022 and June 25, 2021:


	Level 3 Contingent Consideration
Balance at March 25, 2022	$	2,800
Change in fair value of contingent consideration	(200)

Balance at June 24, 2022	$	2,600

Balance at March 26, 2021	$	4,800
Change in fair value of contingent consideration	300

Balance at June 25, 2021	$	5,100

Assets and liabilities measured at fair value on a recurring basis also consist of marketable securities, unit investment trust ~~fund,~~funds, loans, bonds, stock and other investments which are the Company’s defined benefit plan assets. Fair value information for those assets and liabilities, including their classification in the fair value hierarchy, is included in Note ~~14,~~12, “Retirement Plans.”

During the three months ended June 24, 2022 and June 25, 2021, ~~and June 26, 2020,~~ there were no transfers among Level 1, Level 2 and Level 3 asset or liabilities.

5. Trade Accounts Receivable, net

Trade accounts receivable, net (including related party trade accounts receivable) consisted of the following:


	June 24, 2022		March 25, 2022
Trade accounts receivable	$	136,032	$	129,539
Less:
Provision for expected credit losses	(149)		(105)
Returns and sales allowances	(14,250)		(14,819)
Related party trade accounts receivable	(30,081)		(27,256)
Total	$	91,552	$	87,359

ALLEGRO MICROSYSTEMS, INC.

Notes to Unaudited Condensed Consolidated Financial Statements – (continued)

(Amounts in thousands, except share and per share amounts)

~~5. Trade Accounts Receivable, net~~

~~Trade~~The Company is exposed to credit losses primarily through trade and other financing receivables arising from revenue transactions. The Company uses an aging schedule method to estimate current expected credit losses (“CECL”) based on days of delinquency, including information about past events and current economic conditions. The Company’s accounts receivable ~~net (including related party trade accounts receivable) consisted~~are separated into two categories using a portfolio methodology to evaluate the allowance under the CECL impairment model based on sales categorization and similar credit quality and worthiness of the ~~following:~~

June 25,
2021 March 26,
2021
Trade accounts receivable $ 115,189 $ 108,546
Less:
Provision for expected credit losses and allowance for doubtful accounts (773) (138)
Returns and sales allowances (13,026) (15,274)
Related party trade accounts receivable (23,547) (23,634)
Total $ 77,843 $ 69,500
customers: original equipment manufacturers (“OEMs”) and distributors. The receivables in each category share similar risk characteristics. The Company increases the provision for expected credits losses when the Company determines all or a portion of a receivable is uncollectible, and the Company recognizes recoveries as a decrease to the provision for expected credit losses.

Changes in the Company’s ~~allowance for doubtful accounts~~expected credit losses and returns and sales allowances were as follows:

Description Allowance for
Doubtful
Accounts Returns
and Sales
Allowances Total
Balance at March 26, 2021 $ 138 $ 15,274 $ 15,412
Charged to costs and expenses or revenue 635 40,582 41,217
Write-offs, net of recoveries 0 (42,830) (42,830)
Balance at June 25, 2021 $ 773 $ 13,026 $ 13,799

Description Allowance for
Doubtful
Accounts Returns
and Sales
Allowances Total
Balance at March 27, 2020 $ 288 $ 17,185 $ 17,473
Charged to costs and expenses or revenue 0 28,995 28,995
Write-offs, net of recoveries 0 (27,255) (27,255)
Balance at June 26, 2020 $ 288 $ 18,925 $ 19,213


Description	Provision for Expected Credit Losses		Returns and Sales Allowances		Total
Balance at March 25, 2022	$	105	$	14,819	$	14,924
Charged to costs and expenses or revenue	44		27,753		27,797
Settlements, net of recoveries	—		(28,322)		(28,322)
Balance at June 24, 2022	$	149	$	14,250	$	14,399

Balance at March 26, 2021	$	138	$	15,274	$	15,412
Charged to costs and expenses or revenue	635		40,582		41,217
Settlements, net of recoveries	—		(42,830)		(42,830)
Balance at June 25, 2021	$	773	$	13,026	$	13,799

6. Inventories

Inventories include material, labor and overhead and consisted of the following:


		June 25, 2021		March 26, 2021			June 24, 2022		March 25, 2022
Raw materials and supplies	Raw materials and supplies	$	9,295	$	9,629	Raw materials and supplies	$	12,334	$	11,941
Work in process	Work in process	44,739		50,095		Work in process	57,661		55,855
Finished goods	Finished goods	28,322		27,774		Finished goods	18,938		18,364

Total	Total	$	82,356	$	87,498	Total	$	88,933	$	86,160

The Company recorded inventory ~~provisions~~write-offs totaling ~~$3,189~~$2,115 and ~~$1,583~~$3,189 for the three months ended June 24, 2022 and June 25, 2021, respectively.

7. Property, Plant and ~~June 26, 2020, respectively. During~~Equipment, net

Property, plant and equipment, net is stated at cost, and consisted of the following:


	June 24, 2022		March 25, 2022
Land	$	15,374	$	15,775
Buildings, building improvements and leasehold improvements	58,518		59,816
Machinery and equipment	558,373		542,745
Office equipment	6,128		6,247
Construction in progress	22,229		22,428
Total	660,622		647,011
Less accumulated depreciation	(445,814)		(436,983)
Total	$	214,808	$	210,028

Totaldepreciation expense amounted to $10,850 and $11,120 for the three months ended June ~~25, 2021, the Company discontinued a product line manufactured by Voxtel~~24, 2022 and ~~subsequently recognized impairment charges for the related inventory, which represented most of the increase in inventory provisions.~~

~~7. Assets Held for Sale~~

As of March 26, 2021, the Company had entered into a definitive agreement to sell its Thailand-based facility (the “AMTC Facility”) as it had already transferred production to the Manila, Philippines facility, which was reclassified from Property, plant and equipment, net to Assets held for sale in fiscal year 2021. The sale of the AMTC Facility is expected to close within the calendar year, subject to government approvals in Thailand and customary closing conditions. The change in carrying value of the assets held for sale from March 26, 2021 to June 25, 2021, ~~of $660 was related to the impact of foreign currency translation.~~respectively.

ALLEGRO MICROSYSTEMS, INC.

Notes to Unaudited Condensed Consolidated Financial Statements – (continued)

(Amounts in thousands, except share and per share amounts)

~~8. Property, Plant and Equipment, net~~

~~Property, plant and equipment, net is stated at cost, and consisted of the following:~~

June 25,
2021 March 26,
2021
Land $ 16,573 $ 16,602
Buildings, building improvements and leasehold improvements 57,953 56,911
Machinery and equipment 514,831 491,025
Office equipment 6,300 6,281
Construction in progress 19,779 29,201
Total 615,436 600,020
Less accumulated depreciation (418,443) (407,627)
Total $ 196,993 $ 192,393

~~Totaldepreciation expense amounted to~~ ~~$11,120~~ ~~and $10,809 for the three months ended June 25, 2021 and June 26, 2020, respectively.~~

Long-lived assets include property, plant and equipment and related deposits on such assets, and capitalized tooling costs. The geographic locations of the Company's long-lived assets, net, based on physical location of the assets, as of June ~~25, 2021~~24, 2022 and March ~~26, 2021~~25, 2022 are as follows:


		June 25, 2021		March 26, 2021			June 24, 2022		March 25, 2022
United States	United States	$	36,726	$	36,529	United States	$	35,606	$	35,221
Philippines	Philippines	153,282		148,374		Philippines	171,318		167,488
Thailand		0		1,698

Other	Other	7,331		7,190		Other	8,491		7,746
Total	Total	$	197,339	$	193,791	Total	$	215,415	$	210,455

Amortization of prepaid tooling costs amounted to ~~$33~~$32 and ~~$17~~$33 for the three months ended June 24, 2022 and June 25, 2021, ~~and June 26, 2020,~~ respectively.

9.8. Goodwill and Intangible Assets

The table below summarizes the changes in the carrying amount of goodwill as follows:


	Total
Balance at March 25, 2022	$	20,009

Foreign currency translation	(56)
Balance at June 24, 2022	$	19,953

Balance at March 26, 2021	$	20,106

~~Currency~~Foreign currency translation	12
Balance at June 25, 2021	$	20,118

Intangible assets, net is as follows:


		June 25, 2021								June 24, 2022
Description	Description	Gross		Accumulated Amortization		Net Carrying Amount		Weighted- Average Lives	Description	Gross		Accumulated Amortization		Net Carrying Amount		Weighted-Average Lives
Patents	Patents	$	33,703	$	13,013	$	20,690	10 years	Patents	$	37,604��	$	15,860	$	21,744	10 years
Customer relationships	Customer relationships	6,923		6,610		313		9 years	Customer relationships	6,806		6,590		216		9 years
Process technology	Process technology	13,100		924		12,176		12 years	Process technology	13,100		2,015		11,085		12 years
Indefinite-lived and legacy process technology	Indefinite-lived and legacy process technology	4,050		1,650		2,400			Indefinite-lived and legacy process technology	4,050		1,650		2,400
Trademarks	Trademarks	200		34		166		5 years	Trademarks	200		74		126		5 years
Legacy trademarks	Legacy trademarks	627		71		556			Legacy trademarks	629		58		571
Other	Other	32		32		0			Other	32		32		—
Total	Total	$	58,635	$	22,334	$	36,301		Total	$	62,421	$	26,279	$	36,142


	March 25, 2022
Description	Gross		Accumulated Amortization		Net Carrying Amount		Weighted-Average Lives
Patents	$	36,577	$	15,304	$	21,273	10 years
Customer relationships	6,582		6,348		234		9 years
Process technology	13,100		1,742		11,358		12 years
Indefinite-lived and legacy process technology	4,050		1,650		2,400
Trademarks	200		64		136		5 years
Legacy trademarks	627		58		569
Other	32		32		—
Total	$	61,168	$	25,198	$	35,970

Intangible assets amortization expense was $1,036 and $1,019 for the three months ended June 24, 2022 and June 25, 2021, respectively. The majority of the Company’s intangible assets are related to patents, as noted above.

ALLEGRO MICROSYSTEMS, INC.

Notes to Unaudited Condensed Consolidated Financial Statements – (continued)

(Amounts in thousands, except share and per share amounts)

March 26, 2021
Description Gross Accumulated
Amortization Net Carrying
Amount Weighted- Average Lives
Patents $ 32,751 $ 12,307 $ 20,444 10 years
Customer relationships 6,193 5,865 328 9 years
Process technology 13,100 651 12,449 12 years
Indefinite-lived and legacy process technology 4,050 1,650 2,400
Trademarks 200 24 176 5 years
Legacy trademarks 627 58 569
Other 32 32 0
Total $ 56,953 $ 20,587 $ 36,366

~~Intangible assets amortization expense was~~ ~~$1,019~~ and $713 for the three months ended June 25, 2021 and June 26, 2020, respectively. The majority of the Company’s intangible assets are related to patents as noted above. The Company capitalizes external legal costs incurred in the defense of its patents when it believes that a significant, discernible increase in value will result from the defense and a successful outcome of the legal action is probable. When the Company capitalizes patent defense costs, it amortizes these costs over the remaining estimated useful life of the patent, which is generally 10 years. There were no ~~such costs capitalized during either of the first three months of fiscal years 2022 or 2021.~~

As of June ~~25, 2021,~~24, 2022, annual amortization expense of intangible assets for the next five fiscal years is expected to be as follows:


Remainder of 2022		$	2,626
2023		3,363
Remainder of 2023				Remainder of 2023	$	2,942
2024	2024	3,244		2024	3,758
2025	2025	3,042		2025	3,499
2026	2026	2,826		2026	3,240
2027				2027	2,926
Thereafter	Thereafter	21,200		Thereafter	16,806
Total	Total	$	36,301	Total	$	33,171

~~10.~~9. Accrued Expenses and Other Current Liabilities

The composition of accrued expenses and other current liabilities is as follows:

June 25,
2021 March 26,
2021
Accrued management incentives $ 8,013 $ 21,538
Accrued salaries and wages 22,282 15,060
Base acquisition purchase price due 14,588 14,588
Deposits on AMTC Facility 14,162 14,531
Accrued vacation 5,969 5,739
Accrued severance 710 572
Accrued professional fees 2,293 2,029
Accrued income taxes 3,711 514
Accrued utilities 708 623
Other current liabilities 4,335 3,738
Total $ 76,771 $ 78,932


	June 24, 2022		March 25, 2022

Accrued management incentives	$	9,814	$	33,607
Accrued salaries and wages	23,313		14,699


Accrued vacation	7,140		5,715
Accrued severance	4,308		839
Accrued professional fees	5,219		1,252
Accrued income taxes	11,161		1,831
Accrued utilities	2,157		607
Other current liabilities	5,840		6,909
Total	$	68,952	$	65,459

~~ALLEGRO MICROSYSTEMS, INC.~~

~~Notes to Unaudited Condensed Consolidated Financial Statements – (continued)~~

~~(Amounts in thousands, except share and per share amounts)~~

~~11. Leases~~

The Company determines if an arrangement is or contains a lease at inception, which is the date on which the terms of the contract are agreed to and the agreement creates enforceable rights and obligations. The Company also considers whether its service arrangements include the right to control the use of an asset.

The Company leases real estate, equipment and vehicles under operating lease agreements that have initial terms ranging from 1 to 11 years. The Company does not have any leases classified as finance leases. Some leases include one or more options to exercise renewal terms, generally at the Company’s sole discretion, that can extend the lease term. Certain leases contain rights to terminate whereby those termination options are held by either the Company, the lessor, or both parties. These options to extend or terminate a lease are included in the lease term only when it is reasonably certain that the Company will exercise that option. The Company’s leases generally do not contain any material restrictive covenants.

~~Operating lease cost is recognized on a straight-line basis over the lease term. Information regarding the Company’s leases are as follows:~~

~~Three-Month Period Ended~~

June 25,
2021

~~Lease costs:~~

~~Operating lease expense~~

~~1,149~~

~~Short term lease expense~~

~~Other information:~~

~~Operating cash flows from operating leases~~

~~1,230~~

~~Weighted-average remaining lease term – operating leases~~

~~5.97 years~~

~~Weighted-average discount rate – operating leases~~

~~4.6~~

~~Rent expense incurred under operating lease agreements was~~ ~~$1,235~~ ~~and~~ ~~$1,183~~ ~~for the three months ended June 25, 2021 and June 26, 2020, respectively.~~

~~As of June 25, 2021, expirations of lease obligations by fiscal year were as follows:~~

Remainder of 2022 $ 3,149
2023 3,694
2024 3,296
2025 3,021
2026 2,639
Thereafter 4,496
Total undiscounted lease payments $ 20,295
Less: present value adjustment (2,601)
Total operating lease liabilities $ 17,694

~~Information as Lessee under ASC 840~~

~~Future minimum lease payments for noncancellable operating leases as reported under the previous lease guidance as of March 26, 2021 are as follows:~~

2022 $ 2,887
2023 2,726
2024 2,644
2025 2,172
2026 1,773
Thereafter 3,713
Total $ 15,915

~~ALLEGRO MICROSYSTEMS, INC.~~

~~Notes to Unaudited Condensed Consolidated Financial Statements – (continued)~~

~~(Amounts in thousands, except share and per share amounts)~~

~~12.~~10. Debt and Other Borrowings

On September 30, 2020, the Company entered into a term loan credit agreement with Credit Suisse AG, Cayman Islands Branch, as administrative agent and collateral agent, and the other agents, arrangers and lenders party thereto, providing for a $325,000 senior secured term loan facility due in ~~2027~~2028 (the “Term Loan Facility”). On September 30, 2020, the Company also entered into a revolving facility credit agreement with Mizuho Bank, Ltd., as administrative agent and collateral agent, and the other agents, arrangers and lenders party thereto, providing for a $50,000 senior secured revolving credit facility expiring in 2023 (the “Revolving Credit Facility” and, together with the Term Loan Facility, the “Senior Secured Credit Facilities”). The Revolving Credit Facility is secured by a lien on the same collateral and on the same basis as the Term Loan Facility. Interest on the Term Loan Facility is calculated at LIBOR plus 3.75% to 4.00% based on the Company’s net leverage ratio, and LIBOR is subject to a 0.5% floor. The Company’s outstanding borrowings bore an interest rate of ~~4.25%~~4.81% at June ~~25, 2021.~~24, 2022. As of both June ~~25, 2021~~24, 2022 and March ~~26, 2021,~~25, 2022, the Company had $25,000 outstanding under the Term Loan Facility and had 0tnot borrowed on the Revolving Credit Facility.

~~Included in the Term Loan Facility were deferred financing costs~~ As of ~~$9,374, which~~June 24, 2022 and March 25, 2022, the ~~Company has deducted from the carrying amount presented on its unaudited consolidated balance sheet and~~ ~~amortized into interest expense or recognized as loss on debt extinguishment~~. Included in the Revolving Credit Facility were deferred financing costs of $300, which the Company classified the related short-term and long-term portions within “Prepaid expenses and other current assets” and “Other assets” on its unaudited consolidated balance sheet and is amortizing those costs over the term of the facility. ~~The~~ unamortized portion of the deferred financing costs associated with the Revolving Credit Facility was $124 and $149~~$224~~, respectively, and the related short-term and long-term portions were classified within “Prepaid expenses and other current assets” and “Other assets” on its unaudited ~~at June 25, 2021.~~condensed consolidated balance sheets.

On November 26, 2019, the Company, through its subsidiaries, entered into a line of credit agreement with a financial institution that provides for a maximum borrowing capacity of 60,000 Philippine pesos (approximately ~~$1,230~~$1,102 at June ~~25, 2021)~~24, 2022) at the bank’s prevailing interest rate. The line of credit is due to expire on August 31, ~~2021.~~2022. There were 0no borrowings outstanding under this line of credit as of June ~~25, 2021~~24, 2022 and March ~~26, 2021.~~25, 2022.

On November 20, 2019, the Company, through its subsidiaries, entered into a line of credit agreement with a financial institution that provides for a maximum capacity of 75,000 Philippine pesos (approximately ~~$1,537~~$1,378 at June ~~25, 2021)~~24, 2022) at the bank’s prevailing interest rate. The line of credit is due to expire on June 30, 2023. There were 0no borrowings outstanding under this line of credit as of June ~~25, 2021~~24, 2022 and March ~~26, 2021. The line of credit expired on June 30, 2021, subsequent~~25, 2022.

ALLEGRO MICROSYSTEMS, INC.

Notes to ~~that date, due to delays as a result of the current pandemic situation~~Unaudited Condensed Consolidated Financial Statements – (continued)

(Amounts in thousands, except share and ~~its impact with the bank operations. The bank notified the Company of an extension up to September 28, 2021 for all paperwork to be processed.~~per share amounts)

~~13.~~11. Other Long-Term Liabilities

The composition of other long-term liabilities is as follows:


		June 25, 2021		March 26, 2021			June 24, 2022		March 25, 2022

Accrued management incentives	Accrued management incentives	$	543	$	628	Accrued management incentives	$	31	$	826
Accrued retirement	Accrued retirement	10,810		10,656		Accrued retirement	8,646		8,903
Accrued contingent consideration	Accrued contingent consideration	5,100		4,800		Accrued contingent consideration	2,600		2,800
Provision for uncertain tax positions (net)	Provision for uncertain tax positions (net)	2,791		2,774		Provision for uncertain tax positions (net)	2,779		2,757
Other		0		275

Total	Total	$	19,244	$	19,133	Total	$	14,056	$	15,286

~~14.~~12. Retirement Plans

The Company recognizes the funded status (i.e., the difference between the fair value of plan assets and the benefit obligations) of its defined benefit pension plans in its unaudited condensed consolidated balance sheets with a corresponding adjustment to accumulated other comprehensive income, net of tax. These amounts will continue to be recognized as a component of future net periodic benefit costs consistent with the Company’s past practice. Further, actuarial gains and losses and prior service costs that arise in future periods and are not recognized as net periodic benefit costs in the same periods will be recognized as a component of other comprehensive income. Those amounts will also be recognized as a component of future net periodic benefit costs consistent with the Company’s past practice. The Company uses a measurement date for its defined benefit pension plans and other postretirement benefit plans that is equivalent to its fiscal year-end.

~~ALLEGRO MICROSYSTEMS, INC.~~

~~Notes to Unaudited Condensed Consolidated Financial Statements – (continued)~~

~~(Amounts in thousands, except share and per share amounts)~~

Plan Descriptions

Non-U.S. Defined Benefit Plan

The Company, through its wholly owned subsidiary, Allegro MicroSystems Philippines, Inc. (“AMPI”), has a defined benefit pension plan, which is a noncontributory plan that covers substantially all employees of the respective subsidiary. The plan’s assets are invested in common trust funds, bonds and other debt instruments and stocks.

Effect on the unaudited statements of operations

Expense related to the non-United States (“~~U.S”~~U.S.”). defined benefit plan was as follows:

Three-Month Period Ended
June 25,
2021 June 26,
2020
Service cost $ 383 $ 270
Interest cost 166 152
Expected return on plan assets (79) (78)
Amortization of prior service cost 0 2
Actuarial loss 53 34
Net periodic pension expense $ 523 $ 380

~~Information on Plan Assets~~

The table below sets forth the fair value of the entity’s plan assets as of June 25, 2021 and March 26, 2021, using the same three-level hierarchy of fair value inputs described in the significant accounting policies included in the Company’s 2021 Annual Report.

Fair Value at June 25,
2021 Level 1 Level 2 Level 3
Assets of non-U.S. defined benefit plan:
Government securities $ 1,832 $ 1,832 $ 0 $ 0
Unit investment trust fund 1,079 0 1,079 0
Loans 633 0 0 633
Bonds 983 0 983 0
Stocks and other investments 2,568 1,436 2 1,130
Total $ 7,095 $ 3,268 $ 2,064 $ 1,763

Fair Value at March 26,
2021 Level 1 Level 2 Level 3
Assets of non-U.S. defined benefit plan:
Government securities $ 1,646 $ 1,646 $ 0 $ 0
Unit investment trust fund 1,221 0 1,221 0
Loans 584 0 0 584
Bonds 1,112 0 1,112 0
Stocks and other investments 3,081 1,947 1 1,133
Total $ 7,644 $ 3,593 $ 2,334 $ 1,717


	Three-Month Period Ended
	June 24, 2022		June 25, 2021
Service cost	$	328	$	383
Interest cost	197		166
Expected return on plan assets	(78)		(79)


Amortization of prior service cost	(2)		—
Actuarial loss	21		53
Net periodic pension expense	$	466	$	523

1917

ALLEGRO MICROSYSTEMS, INC.

Notes to Unaudited Condensed Consolidated Financial Statements – (continued)

(Amounts in thousands, except share and per share amounts)

Information on Plan Assets

The table below sets forth the fair value of the entity’s plan assets as of June 24, 2022 and March 25, 2022, using the same three-level hierarchy of fair value inputs described in the significant accounting policies included in the Company’s 2022 Annual Report.


	Fair Value at June 24, 2022		Level 1		Level 2		Level 3
Assets of non-U.S. defined benefit plan:
Government securities	$	1,834	$	1,834	$	—	$	—
Unit investment trust fund	1,194		—		1,194		—
Loans	555		—		—		555
Bonds	607		—		607		—
Stocks and other investments	2,193		1,166		2		1,025
Total	$	6,383	$	3,000	$	1,803	$	1,580


	Fair Value at March 25, 2022		Level 1		Level 2		Level 3
Assets of non-U.S. defined benefit plan:
Government securities	$	1,920	$	1,920	$	—	$	—
Unit investment trust fund	1,165		—		1,165		—
Loans	553		—		—		553
Bonds	676		—		676		—
Stocks and other investments	2,783		1,716		2		1,065
Total	$	7,097	$	3,636	$	1,843	$	1,618

The following table shows the change in fair value of Level 3 plan assets for the three months ended June 24, 2022 and June 25, 2021:


		Level 3 Non-U.S. Defined Plan Assets					Level 3 Non-U.S. Defined Plan Assets
							Loans		Stocks
Balance at March 25, 2022						Balance at March 25, 2022	$	553	$	1,065
Additions during the year						Additions during the year	171		—
Redemptions during the year						Redemptions during the year	(152)		—
Revaluation of equity securities						Revaluation of equity securities	4		—
Change in foreign currency exchange rates						Change in foreign currency exchange rates	(21)		(40)
Balance at June 24, 2022						Balance at June 24, 2022	$	555	$	1,025
		Loans		Stocks
Balance at March 26, 2021	Balance at March 26, 2021	$	584	$	1,133	Balance at March 26, 2021	$	584	$	1,133
Additions during the year	Additions during the year	159		0		Additions during the year	159		—
Redemptions during the year	Redemptions during the year	(107)		0		Redemptions during the year	(107)		—
Revaluation of equity securities	Revaluation of equity securities	(1)		0		Revaluation of equity securities	(1)		—
Change in foreign currency exchange rates	Change in foreign currency exchange rates	(2)		(3)		Change in foreign currency exchange rates	(2)		(3)
Balance at June 25, 2021	Balance at June 25, 2021	$	633	$	1,130	Balance at June 25, 2021	$	633	$	1,130

The investments in the Company’s major benefit plans largely consist of low-cost, broad-market index funds to mitigate risks of concentration within the market sectors. In recent years, the Company’s investment policy has shifted toward a closer matching of the interest-rate sensitivity of the plan assets and liabilities. The appropriate mix of equity and bond investments is determined primarily through the use of detailed asset-liability modeling studies that look to balance the impact of changes in the discount rate against the need to provide asset growth to cover future service cost. The Company,

ALLEGRO MICROSYSTEMS, INC.

Notes to Unaudited Condensed Consolidated Financial Statements – (continued)

(Amounts in thousands, except share and per share amounts)

through its wholly owned subsidiary, Allegro MicroSystems, LLC’s (“AML”), non-U.S. defined benefit plan, has added a greater proportion of fixed income securities with return characteristics that are more closely aligned with changes in liabilities caused by discount rate volatility. There are no significant restrictions on the amount or nature of the investments that may be acquired or held by the plans.

During the three months ended June ~~25, 2021~~24, 2022 and June ~~26, 2020,~~25, 2021, the Company contributed approximately ~~$353~~$372 and ~~$240~~ $353 to its non-U.S. pension plan, respectively. The Company expects to contribute approximately ~~$943~~$1,546 to its non-U.S. pension plan in fiscal year ~~2021.~~2023.

Other Defined Benefit Plans

In December 1993, the Company commenced with a rollover pension promise agreement (“Pension Promise”) to offer a then European employee an insured annuity upon their retirement at age 65. The employee was the only eligible participant of the Pension Promise. The impact associated with the expense and related other income with the Pension Promise was insignificant in fiscal years ~~2021~~2022 and ~~2020,~~2021, respectively. The total values of the Pension Promise in the amounts of ~~703 and 928~~ 684 and 661 British Pounds Sterling at June ~~25, 2021~~24, 2022 and March ~~26, 2021,~~25, 2022, respectively ~~(approximately $1,107~~ (approximately $838 and ~~$1,272~~$875 at June ~~25, 2021~~24, 2022 and March ~~26, 2021,~~25, 2022, respectively), were classified with other in other assets, net and accrued retirement in other long-term liabilities in the Company’s unaudited condensed consolidated balance sheets.

Defined Contribution Plan

The Company has a 401(k) plan that covers all employees meeting certain service and age requirements. Employees are eligible to participate in the plan upon hire when the service and age requirements are met. Employees may contribute up to 35% of their compensation, subject to the maximum contribution allowed by the Internal Revenue Service. All employees are 100% vested in their contributions at the time of plan entry.

Eligible AML U.S. employees may contribute up to 50% of their pretax compensation to a defined contribution plan, subject to certain limitations, and AML may match, at its discretion, 100% of the participants’ pretax contributions, up to a maximum of 5% of their eligible compensation. Matching contributions by AML totaled approximately ~~$1,256~~$1,430 and ~~$1,029~~$1,256 for the three months ended June ~~25, 2021~~24, 2022 and June ~~26, 2020,~~25, 2021, respectively.

The Company, through its AML subsidiary, Allegro MicroSystems Europe, Ltd. (“Allegro Europe”), also has a defined contribution plan (the “AME Plan”) covering substantially all employees of Allegro Europe. Contributions to the AME Plan by the Company totaled approximately ~~$218~~$256 and ~~$179~~$218 for the three months ended June ~~25, 2021~~24, 2022 and June ~~26, 2020,~~25, 2021, respectively.

~~15.~~13. Commitments and Contingencies

Insurance

The Company, through its subsidiaries, utilizes self-insured employee health programs for employees in the United States. The Company records estimated liabilities for its self-insured health programs based on information provided by the

~~ALLEGRO MICROSYSTEMS, INC.~~

~~Notes to Unaudited Condensed Consolidated Financial Statements – (continued)~~

~~(Amounts in thousands, except share and per share amounts)~~

third-party plan administrators, historical claims experience and expected costs of claims incurred but not reported. The Company monitors its estimated liabilities on a quarterly basis. As facts change, it may become necessary to make adjustments that could be material to the Company’s unaudited condensed consolidated financial position and results of operations. ~~The accrued liability related to self-insurance was $1,585~~ ~~and $1,518 as of June 25, 2021 and March 26, 2021, respectively, and was included in accrued expenses and other current liabilities in the Company’s unaudited consolidated balance sheets.~~

Legal proceedings

The Company is subject to various legal proceedings and claims, the outcomes of which are subject to significant uncertainty. The Company records an accrual for legal contingencies when it is determined that it is probable that a liability has been incurred and the amount of the loss can be reasonably estimated. In making such determinations, the Company evaluates, among other things, the degree of probability of an unfavorable outcome and, when it is probable that a liability has been incurred, ~~and~~ the ability to make a reasonable estimate of the loss. If the occurrence of liability is probable, the Company will disclose the nature of the contingency, and if estimable, will provide the likely amount of such loss or range of loss. Furthermore, the Company does not believe there are any matters that could have a material adverse effect on financial position, results of operations or cash flows.

ALLEGRO MICROSYSTEMS, INC.

Notes to Unaudited Condensed Consolidated Financial Statements – (continued)

(Amounts in thousands, except share and per share amounts)

Indemnification

From time to time, the Company has agreed to indemnify and hold harmless certain customers for potential allegations of infringement of intellectual property rights and patents arising from the use of its products. To date, the Company has not recognized or incurred any costs in connection with such indemnification arrangements; therefore, there was 0no accrual of such amounts at June ~~25, 2021~~24, 2022 or March ~~26, 2021.~~25, 2022.

Environmental Matters

The Company establishes accrued liabilities for environmental matters when it is probable that a liability has been incurred and the amount of the liability can be reasonably estimated. If the contingency is resolved for an amount greater or less than the accrual, or the Company’s share of the contingency increases or decreases or other assumptions relevant to the development of the estimate were to change, the Company would recognize an additional expense or benefit in the unaudited condensed consolidated statements of operations during the period such determination was made. ~~NaN~~No significant environmental accruals were established at June ~~25, 2021~~24, 2022 or March ~~26, 2021.~~25, 2022.

~~16.~~14. Net Income per Share

In connection with completion of the Company’s IPO on November 2, 2020 and immediately following the pricing of the IPO, all outstanding shares of Class A common stock and Class L common stock were automatically converted into an aggregate of 166,500,000 shares of common stock (the “Common Stock Conversion”). Outstanding shares of Class A and Class L common stock were converted to common stock in the Common Stock Conversion at conversion rates of approximately 15.822 and 13.010 shares of common stock to each share of Class A and Class L common stock, respectively. As part of the Common Stock Conversion, 2,066,508 and 1,766 shares of common stock were returned to the Company for tax payments made on behalf of holders of Class A common stock and Class L common stock, respectively, in withhold to cover tax transactions.

Prior to the Company’s IPO, shares of Class A common stock were entitled to a priority dividend of 8%. After Class A shareholders received an annualized return on capital of 8%, distributions of the remaining value were split between Class A and Class L shareholders based on the achievement of certain return targets. In determining income to the Class A stockholders for computing basic and diluted earnings per share for the three months ended June 26, 2020, the Company did not allocate income to the shares of Class L common stock in accordance with ASC 260, because such classes of shares would not have shared in the distribution had all of the income for the periods been distributed. Accordingly, earnings per share calculations were provided only for the Class A shares with a weighted average of 10,000,000 shares for the three months ended June 26, 2020.

The following table sets forth the basic and diluted net income attributable to Allegro MicroSystems, Inc. per share. ~~The number of shares of common stock reflected in the calculation is the total shares of common stock (vested and unvested) held on the IPO date, after the Common Stock Conversion.~~

~~ALLEGRO MICROSYSTEMS, INC.~~


	Three-Month Period Ended
	June 24, 2022		June 25, 2021
Net income attributable to Allegro MicroSystems, Inc.	$	10,247	$	27,669
Net income attributable to common stockholders	10,283		27,707
Basic weighted average shares of common stock	190,638,135		189,585,381
Dilutive effect of common stock equivalents	1,768,141		1,577,693
Diluted weighted average shares of common stock	192,406,276		191,163,074
Basic net income attributable to Allegro MicroSystems, Inc. per share	$	0.05	$	0.15
Basic net income attributable to common stockholders per share	$	0.05	$	0.15
Diluted net income attributable to Allegro MicroSystems, Inc. per share	$	0.05	$	0.14
Diluted net income attributable to common stockholders per share	$	0.05	$	0.14

~~Notes to Unaudited Condensed Consolidated Financial Statements – (continued)~~

~~(Amounts in thousands, except share and per share amounts)~~

Three-Month Period Ended
June 25,
2021 June 26,
2020
Net income attributable to Allegro MicroSystems, Inc. $ 27,669 $ 4,820
Net income attributable to common stockholders 27,707 4,854
Basic weighted average shares of common stock 189,585,381 10,000,000
Dilutive effect of common stock equivalents 1,577,693 0
Diluted weighted average shares of common stock 191,163,074 10,000,000
Basic net income attributable to Allegro MicroSystems, Inc. per share $ 0.15 $ 0.48
Basic net income attributable to common stockholders per share $ 0.15 $ 0.49
Diluted net income attributable to Allegro MicroSystems, Inc. per share $ 0.14 $ 0.48
Diluted net income attributable to common stockholders per share $ 0.14 $ 0.49

The computed net income per share for the three months ended June ~~25, 2021~~24, 2022 and June ~~26, 2020~~25, 2021 does not assume conversion of securities that would have an antidilutive effect on income per share. ~~There~~For the three months ended June 24, 2022 and June 25, 2021, there were 19,272 and 1,988 restricted share units (“RSUs”), respectively, excluded ~~for the three months ended June 25, 2021~~ as conversion of such securities would have an antidilutive effect on income per share. ~~There were 0 such convertible securities to consider for~~For the three months ended June ~~26, 2020.~~24, 2022 and June 25, 2021, there were 46,991 and no performance share units (“PSUs”), respectively, excluded as conversion of such securities would have an antidilutive effect on income per share.

The following table represents issuable weighted average share information for the respective periods:


		Three-Month Period Ended		Three-Month Period Ended
		June 25, 2021	June 26, 2020			June 24, 2022	June 25, 2021
Restricted stock units	Restricted stock units	820,221	0		Restricted stock units	668,259	820,221
Performance stock units	Performance stock units	752,235	0		Performance stock units	1,080,201	752,235
Employee stock purchase plan	Employee stock purchase plan	5,237	0		Employee stock purchase plan	19,681	5,237

Total	Total	1,577,693	0		Total	1,768,141	1,577,693

~~17.~~15. Common Stock and Stock-Based Compensation

The Company accounts for stock-based compensation through the measurement and recognition of compensation expense for share-based payment awards made to employees over the related requisite service period, including ~~stock options, performance share units (“PSUs”),~~PSUs, RSUs and restricted shares (all part of our equity incentive plan).

During the three months ended June 25, 2021, the Company granted 894,876 RSUs to employees with an estimated grant date fair value of $24.79. Stock-based compensation expense related to non-vested awards not yet recorded at June 25, 2021 was $31,320, which is expected to be recognized over a weighted-average of 1.78 years. During the three months ended June 25, 2021, 3,217 shares vested.

PSUs are included at 100% - 200% of target goals. The intrinsic value of the PSU’s vested during the three months ended June 25, 2021 was $30,490. The total compensation cost related to non-vested awards not yet recorded at June 25, 2021 was $19,420, which is expected to be recognized over a weighted average of 2.28 years. NaN shares vested during the three months ended June 25, 2021.

During the three months ended June 25, 2021, 54,729 shares of the Company’s restricted common stock vested. In addition, 9,757 shares were forfeited, which reduced common stock outstanding during the same period. The Company had 341,841 unvested shares of restricted common stock at June 25, 2021 with a weighted average grant date fair value of $14.00 and remaining vesting period of 1.58 years.

2220

ALLEGRO MICROSYSTEMS, INC.

Notes to Unaudited Condensed Consolidated Financial Statements – (continued)

(Amounts in thousands, except share and per share amounts)

During the three months ended June 24, 2022 and June 25, 2021, the Company granted RSUs to employees of 1,959,952 and 894,876, respectively, with an estimated grant date fair value of $22.89 and $24.79, respectively. During the three months ended June 24, 2022 and June 25, 2021, 1,031,565 and 3,217 shares vested, respectively, and 120,270 and 28,152 shares were cancelled, respectively. Stock-based compensation expense related to non-vested awards not yet recorded at June 24, 2022 was $47,863, which is expected to be recognized over a weighted-average of 1.73 years.

PSUs are included at 87% - 200% of target goals. The intrinsic value of the PSU’s vested during the three months ended June 24, 2022 and June 25, 2021 was $27,002 and $30,490, respectively. A total of 855,916 and no shares vested during the three months ended June 24, 2022 and June 25, 2021, respectively. The total compensation cost related to non-vested awards not yet recorded at June 24, 2022 was $14,024, which is expected to be recognized over a weighted average of 1.52 years.

During the three months ended June 24, 2022 and June 25, 2021, 18,953 and 54,729 shares of the Company’s restricted common stock, respectively, vested. In addition, No shares and 9,757 shares, respectively, were forfeited, which reduced common stock outstanding during the same periods. The Company had 121,573 unvested shares of restricted common stock at June 24, 2022 with a weighted average grant date fair value of $14.00 and remaining vesting period of 0.82 years.

The Company recorded stock-based compensation expense in the following expense categories of its unaudited condensed consolidated statements of operations:


		Three-Month Period Ended				Three-Month Period Ended
		June 25, 2021		June 26, 2020				June 24, 2022		June 25, 2021
Cost of sales	Cost of sales	$	528	$	97		Cost of sales	$	832	$	528
Research and development	Research and development	752		21			Research and development	1,128		752
Selling, general and administrative	Selling, general and administrative	3,551		327			Selling, general and administrative	32,176		3,551
Total stock-based compensation	Total stock-based compensation	$	4,831	$	445		Total stock-based compensation	$	34,136	$	4,831

During the first fiscal quarter of 2023, the Company’s (former) President and Chief Executive Officer, Ravi Vig, provided notice of his retirement from the Company and its board of directors (the “Board”), effective June 13, 2022. Additionally, the Company entered into a second amended and restated severance agreement (the “Second A&R Severance Agreement”) with Mr. Vig that amended and restated the amended agreement from September 30, 2020. As provided for in the Second A&R Severance Agreement, the Company agreed, in addition to other cash-settled and health insurance-related compensation, to modifications to Mr. Vig’s stock-based compensation, including: (i) acceleration of the vesting of all unvested RSUs, (ii) modification of certain PSUs with performance conditions that had been achieved as of the retirement date to permit these awards to remain outstanding and eligible to vest in accordance with their terms, and (iii) the forfeiture of certain unvested PSUs with performance conditions that had not been achieved as of the retirement date and replacement thereof with new immediately vesting RSUs. The impact of these modifications on stock-based compensation expense was $26,349 for the three months ended June 24, 2022, which was recorded in selling, general and administrative expense in the Company’s unaudited condensed consolidated statements of operations.

1816. Income Taxes

The Company recorded the following tax ~~(benefit)~~ provision in its unaudited condensed consolidated statements of operations:


		Three-Month Period Ended						Three-Month Period Ended
		June 25, 2021			June 26, 2020					June 24, 2022			June 25, 2021
Operating taxes		$	5,118		$	816
Discrete tax items		(855)			(288)

Provision for income taxes	Provision for income taxes	$	4,263		$	528			Provision for income taxes	$	1,965		$	4,263
Annual operating tax rate	Annual operating tax rate	15.9 %			15.2 %				Annual operating tax rate	16.3		%	15.9 %
Effective tax rate	Effective tax rate	13.3		%	9.8		%		Effective tax rate	16.0		%	13.3		%

The Company’s provision for income taxes is comprised of the year-to-date taxes based on an estimate of the annual effective tax rate plus the tax impact of discrete items.

The Company is subject to tax in the U.S. and various foreign jurisdictions. The Company’s effective tax rate can fluctuate primarily based on: the mix of its U.S. and foreign income; the impact of discrete transactions; and the difference

ALLEGRO MICROSYSTEMS, INC.

Notes to Unaudited Condensed Consolidated Financial Statements – (continued)

(Amounts in thousands, except share and per share amounts)

between the amount of tax benefit generated by the foreign derived intangible income deduction (“FDII”) and research credits offset by the additional tax from the global intangible low-tax income.

The quarter ending June 25, 2021 effective tax rate was favorably impacted by one-time state tax refunds. Current year IRC Section 174 capitalization (“174 Capitalization”) resulted in increased U.S. taxable income ~~(“GILTI”).~~and cash taxes: however, it also produced an additional FDII benefit of $9,000 with offsetting inclusions from Subpart F of $2,837. The net current year benefits of 174 Capitalization were offset by an increase in current year non-deductible executive compensation of approximately $6,721.

The Company regularly assesses the likelihood of outcomes that could result from the examination of its tax returns by the IRS and other tax authorities to determine the adequacy of its income tax reserves and expense. Should actual events or results differ from the Company’s then-current expectations, charges or credits to the Company’s provision for income taxes may become necessary. Any such adjustments could have a significant effect on the results of operations.

Income tax expense and the effective income tax rate were $4,263, or 13.3%, and $528, or 9.8%, for the three-month periods ending June 25, 2021 and June 26, 2020, respectively. The fluctuation in our effective income tax rate relates primarily to differences in our US taxable income, estimated FDII benefits, research credits, non-deductible stock-based compensation charges, and discrete tax items.

~~19.~~17. Related Party Transactions

Transactions involving Sanken

The Company sells products to, and purchases in-process products from, Sanken. ~~In addition, prior to March 28, 2020,~~As of June 24, 2022, Sanken held approximately 51.5% of the ~~Company also sold products for Sanken.~~Company’s outstanding common stock.

Net sales of ~~Company’s~~Company products to Sanken totaled ~~$35,453~~$41,709 and ~~$23,620~~$35,453 during the three months ended June 24, 2022 and June 25, 2021, respectively. Although certain costs are commingled, shared or allocated, cost of goods sold and ~~June 26, 2020, respectively.~~gross margins attributable to related party sales are consistent with those of third-party customers. Trade accounts receivables, net of allowances from Sanken, totaled ~~$23,545~~$30,081 and ~~$21,595~~$27,256 as of June ~~25, 2021~~24, 2022 and March ~~26, 2021,~~25, 2022, respectively. Other accounts receivable from Sanken totaled ~~$110~~$28 and ~~$198~~$104 as of June ~~25, 2021~~24, 2022 and March ~~26, 2021,~~25, 2022, respectively.

~~ALLEGRO MICROSYSTEMS, INC.~~Termination of Sanken Distribution Agreement

~~Notes to Unaudited Condensed Consolidated Financial Statements – (continued)~~

~~(Amounts in thousands, except share and per share amounts)~~

~~Transactions involving PSL~~

In May ~~2009,~~2022, the Company entered into a ~~technology development agreement (the “IC Technology Development Agreement”)~~letter of intent with ~~Polar Semiconductor, Inc. (“PSI”), which was subsequently changed~~Sanken to develop a plan to transition the supply chain and sales activity in Japan from Sanken to the Company. During the planning process, both parties will define the transition timeline and method for customer communication, supply chain transfer and sales coverage. The Company and Sanken will also define a method to continue engagement with Sanken on the support of select customers.

Transactions involving Polar Semiconductor, LLC (“PSL”), and Sanken, pursuant to which the parties agreed upon the general terms under which they may, from time to time, undertake certain activities (the “IC Process Development Activities”) to develop new technologies to be used by PSI to manufacture products for the Company and Sanken, as well as the ownership and use of such technologies following their development. The IC Technology Development Agreement provides that the expenses for all IC Process Development Activities will be shared equally by the Company and Sanken on an annual basis (subject to any exceptions upon which the parties may agree from time to time), with such expenses being paid to PSI by Sanken in the form of an up-front annual fee, with PSI being responsible for any expenses that exceed the amount of such fee. The IC Technology Development Agreement will continue in effect until such time as the Company, PSL and Sanken mutually agree to its termination or adopt a successor agreement, or in the event the companies fail to agree upon the annual fee for a fiscal year within three months after the commencement of such fiscal year. During both of the three months ended June 25, 2021 and June 26, 2020, the Company (through PSL) received 0 fees from Sanken pursuant to the IC Technology Development Agreement, and, during the same periods, the Company paid 0 fees to PSL pursuant to the IC Technology Development Agreement. There are also no expected payments to be made during the remainder of fiscal year 2022 and beyond.

In April 2015, PSL and Sanken entered into a discrete technology development agreement (as amended, the “Discrete Technology Development Agreement”), pursuant to which the parties agreed upon the general terms under which they, from time to time, undertook certain activities (the “Discrete Development Activities”) to develop new technologies to be used by PSL to manufacture products for Sanken, as well as the ownership and use of such technologies following their development. In June 2018, the Company, PSL and Sanken entered into an amendment to the Discrete Technology Development Agreement pursuant to which the parties agreed to the assignment of all rights and obligations of PSL under such agreement to the Company and to certain amendments to the terms of such agreement. The Discrete Technology Development Agreement provided that the expenses for all Discrete Development Activities to be shared equally by the Company and Sanken on an annual basis (subject to any exceptions upon which the parties agreed to from time to time). As of March 26, 2021, the Company had accrued $614 included in amounts due to related party under this agreement, which was paid in the first quarter of fiscal year 2022. The agreement in accordance with its terms of the Amendment 2, Article 10, terminated on March 31, 2021.

On March 28, 2020, the Company entered into an agreement to divest a majority of its ownership interest in PSL to Sanken, in order to better align with its fabless, asset-lite scalable manufacturing strategy (the “PSL Divestiture”). In addition, this also resulted in PSL taking over the Sanken distribution business at the same time.

The Company ~~continues to purchase~~purchases in-process products from PSL. PSL is a subsidiary of Sanken, 70% owned by Sanken and 30% owned by the Company.

Purchases of various products from PSL totaled ~~$13,380~~$14,671 and ~~$11,923~~$13,380 for the three months ended June ~~25, 2021~~24, 2022 and ~~June 26, 2020, respectively. These amounts include~~ $0 ~~and $1,800 of price support payments made for the three months ended~~ June 25, 2021, ~~and June 26, 2020,~~ respectively. ~~The price support payments were for fiscal year 2021 only and no such payments are expected to be made in fiscal 2021 and beyond.~~ Accounts payable to PSL included in amounts due to related party totaled ~~$4,119~~$4,704 and ~~$1,739~~$5,222 as of June ~~25, 2021~~24, 2022 and March ~~26,~~25, 2022, respectively.

On December 2, 2021, ~~respectively.~~AML entered into a loa

~~Transactions involving Sanken Electric Europe Ltd. (“SEEL”~~n agreement with PSL wherein PSL provided an initial promissory note to AML for a principal amount of $7,500 (the “Initial PSL Loan”)

~~During fiscal~~. The Initial PSL Loan will be repaid in equal installments, comprising principal and interest accrued at 1.26% per annum, over a term of four years with payments due on the first day of each calendar year ~~ended March 26, 2021~~quarter (April 1, July 1, October 1, and ~~after~~January 1). In addition, PSL has the option of borrowing up to an additional $7,500 under the same terms of the PSL ~~Divestiture, Sanken, through~~Loan (the “Secondary PSL ~~formed SEEL to cover its distribution business in Europe. The Company in connection~~Loan” and, together with the ~~TSA agreement with Sanken~~Initial PSL Loan, the “PSL Promissory Notes”). The loan funds will be used by PSL to procure a deep ultraviolet scanner and ~~PSL paid certain costs on behalf~~other associated manufacturing tools necessary to increase wafer fabrication capacity in support of ~~them, and as such, had related party accounts receivable from SEEL of~~ ~~$16~~ ~~and $1,272 as~~the Company’s increasing wafer demand. As of June ~~25, 2021 and March 26, 2021, respectively.~~24, 2022, the outstanding balance of the PSL Promissory Notes was $7,031. During the three months ended June 24, 2022, PSL made a quarterly payment to AML of $500, which included $31 of interest income. On July 1, 2022, PSL made a quarterly payment to AML of $491, which included $22 of interest income.

During the first quarter of 2023, PSL informed the Company of its election to draw upon the Secondary PSL Loan. The Secondary PSL Loan was funded to PSL on July 1, 2022.

Sublease Agreement

In 2014, the Company, through one of its subsidiaries, entered into a sublease agreement with Sanken pursuant to which it subleases certain office building space in Japan from Sanken. The sublease automatically renews on an annual basis unless either party provides notice to the other party otherwise and can be terminated by either party upon providing six ~~months’ notice. The Company made aggregate payments of approximately~~ ~~$56~~ ~~and~~ ~~$57~~ ~~to Sanken under the sublease agreement during each of the three months ended June 25, 2021 and June 26, 2020, respectively.~~

2422

ALLEGRO MICROSYSTEMS, INC.

Notes to Unaudited Condensed Consolidated Financial Statements – (continued)

(Amounts in thousands, except share and per share amounts)

months’ notice. The Company made aggregate payments of approximately $48 and $56 to Sanken under the sublease agreement during the three months ended June 24, 2022 and June 25, 2021, respectively.

Consulting Agreement

~~The~~In September 2017 and prior to Reza Kazerounian becoming a member of the Board, the Company entered into a board executive advisor agreement, as amended in June 2018 (the “Consulting Agreement”), with ~~Reza Kazerounian in June 2018, before~~ Mr. Kazerounian, ~~became a member of the Company’s board of directors,~~ pursuant to which the Company engaged Mr. Kazerounian to serve as executive advisor to the ~~board of directors~~Board and the office of Chief Executive Officer. The Consulting Agreement provides for a fee payable to Mr. Kazerounian on a monthly basis in exchange for his services (which fee was reduced from $30 per month to $19 per month in connection with Mr. Kazerounian’s appointment to the board of directors in June 2018), as well as a grant of 12,000 shares of the Company’s Class L common stock and a signing bonus of $54 in connection with the execution of the Consulting Agreement.services. The Consulting Agreement provides that if Mr. Kazerounian is terminated by the ~~board of directors,~~Board, he will be entitled to a severance payment in the amount of ~~$180 as well as a six-month vesting acceleration of his shares of Class L common stock.~~$180. The ~~board of directors~~Board and Mr. Kazerounian each have the right to terminate the Consulting Agreement at any time. During the three months ended June ~~25, 2021~~24, 2022 and June ~~26, 2020,~~25, 2021, the Company paid aggregate fees of ~~$56~~$72 and ~~$90,~~$56, respectively, to Mr. Kazerounian pursuant to the Consulting Agreement.

Employment Relationship

On June 20, 2022, the Board elected Kojiro Hatano to the Board as a class II director, to serve until the Company’s 2022 annual meeting of shareholders and until his successor is duly elected and qualified. Mr. Hatano was elected to the Board as a designee of Sanken pursuant to the Company’s Amended and Restated Stockholders Agreement, dated as of June 16, 2022. Mr. Hatano has served as Manager of Business Performance for the Company since January 2006. During the three months ended June 24, 2022 and June 25, 2021, Mr. Hatano received compensation, consisting of salary, benefits and reimbursement of living expenses of approximately $51 and $48, respectively, from the Company. This amount was partially reimbursed to the Company by Sanken.

2523

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

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 25, 2022, filed with the Securities and Exchange Commission (“SEC”) on May ~~19, 2021~~18, 2022 (the ~~“2021~~“2022 Annual Report”).

In addition to historical data, this discussion contains forward-looking statements about our business, results of operations, cash flows, financial condition and prospects based on current expectations that involve risks, uncertainties and assumptions. Our actual results could differ materially from such forward-looking statements. Factors that could cause or contribute to those differences include, but are not limited to, those identified below and those discussed in the section titled “Forward-Looking Statements” and in Part ~~II,~~I, Item 5,1A. “Risk Factors” of our ~~2021~~2022 Annual Report and Part II. Item 1A. “Risk Factors” of this Quarterly Report. Additionally, our historical results are not necessarily indicative of the results that may be expected for any period in the future.

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.~~weeks such as in fiscal year 2023. All references to the three months ended June ~~25, 2021~~24, 2022 and June ~~26, 2020~~25, 2021 relate to the 13-week periods ended June ~~25, 2021~~24, 2022 and June ~~26, 2020,~~25, 2021, respectively. All references to ~~“2021,~~“2022,” “fiscal year ~~2021”~~2022” or similar references relate to the 52-week period ended March ~~26, 2021.~~25, 2022.

Overview

Allegro MicroSystems, Inc., together with its consolidated subsidiaries (“AMI”, “we”, “us” or “our”) is a leading global designer, developer, manufacturer and marketer of sensor integrated circuits (“ICs”) and application-specific analog power ICs enabling the most important emerging technologies in the automotive and industrial markets. We are ~~the number one~~a leading supplier of magnetic sensor IC solutions worldwide based on market share, driven by our market leadership in ~~the automotive industry.~~automotive. We focus on providing complete IC solutions to sense, regulate and drive a variety of mechanical systems. This includes sensing the angular or linear position of a shaft or actuator, driving an electric motor or actuator, and regulating the power applied to sensing and driving circuits so they operate safely and efficiently.

We are headquartered in Manchester, New Hampshire and have a global footprint with 1617 locations across four continents. Our portfolio includes more than 1,000 products, and we ship over one billion units annually to more than 10,000 customers worldwide. During the three months ended June 24, 2022 and June 25, 2021, ~~and June 26, 2020,~~ we generated ~~$188.1~~$217.8 million and ~~$115.0~~$188.1 million in total net sales, respectively, with ~~$27.7~~$10.3 million and ~~$4.9~~$27.7 million in net income, respectively, and ~~$53.8~~$66.7 million ~~and $26.2~~and $53.8 million in Adjusted EBITDA in such fiscal periods, ~~respectively.~~respectively. For additional information regarding Adjusted EBITDA, a non-GAAP financial measure, please refer to “Non-GAAP Financial Measures” in this document.

On November 2, 2020, we completed our initial public offering (“IPO”) of 28,750,000 shares of our common stock at an offering price of $14.00 per share, of which 25,000,000 shares were sold by us and 3,750,000 shares were sold by selling stockholders, resulting in net proceeds to us of approximately, $321.4 million after deducting $20.1 million of underwriting discounts and $8.5 million of offering costs. Our common stock is now listed on the Nasdaq Global Select Market under the ticker symbol “ALGM.”

~~Our Growth Strategies and Outlook~~

~~We plan to pursue the following strategies to continue to grow our sales and enhance our profitability:~~

•~~Invest in research and development that is market-aligned and focused on targeted portfolio expansion.~~ We believe that our investments in research and development in the areas of product design, automotive-grade wafer fabrication technology and IC packaging development are critical to maintaining our competitive advantage. In both the automotive and industrial markets, major technology shifts driven by disruptive technologies are creating high-growth opportunities in areas such as electrified vehicles (“xEVs”), advanced driver assistance systems (“ADAS”), Industry 4.0, data centers and green energy applications. Our knowledge of customers’ end systems has driven an expansion of our sensor IC and power solutions to enable these new technologies. By aligning our research and development investments with disruptive technology trends while undergoing a rigorous ROI review, we believe we can deliver an attractive combination of growth and profitability.

•~~Emphasize the automotive “first” philosophy to align our product development with the most rigorous applications and safety standards.~~ We have been intentional about incorporating support for the stringent automotive operating voltages, temperature ranges and safety and reliability standards into every part of our operations, from design to manufacturing. We believe our focus on meeting or exceeding industry standards as the baseline for product development increases our opportunity in the automotive market as customers look for trusted suppliers to deliver highly reliable solutions for rapidly growing emerging markets, and that our philosophy of designing for automotive safety and reliability gives us a meaningful lead over new entrants attempting to enter the automotive market. For example, we will apply this philosophy of innovation, quality and reliability to our new photonics portfolio which supplies components into safety-critical Light Detection and Ranging (“LiDAR”) applications. We also believe we can use our expertise in designing for the automotive market and our expanding product portfolio to capitalize on increasing demand among industrial customers for ruggedized solutions that meet the highest quality and reliability standards. Additionally, in our experience, demand for solutions that meet or exceed stringent safety and reliability specifications supports higher average sales prices (“ASP”) and lower ASP declines over time than are typical for our industry.

•~~Invest to lead in chosen markets and apply our intellectual property and technology to pursue adjacent growth markets.~~ We intend to continue to invest in technology advancements and our intellectual property portfolio to maintain the number one market share position in magnetic sensor ICs and achieve leadership positions in power ICs within our target markets. We believe that leveraging our technology and existing research and development, sales and support efforts will enable us to take advantage of synergistic opportunities in new, adjacent growth markets. We believe this strategy of leveraging our known capabilities to target adjacent growth markets will enable us to enjoy greater returns on our research and development investments.

•~~Expand our sales channels and enhance our sales operations and customer relationships.~~ Our global sales infrastructure is optimized to support customers through a combination of key account managers and regional technical and support centers near customer locations that enable us to act as an extension of our customers’ design teams, providing us with key insights into product requirements and accelerating the adoption and ramp up of our products in customer designs. We intend to continue strengthening our relationships with our existing customers while also enabling our channel partners to support demand creation and fulfillment for smaller broad-based industrial customers. We believe we will be able to further penetrate the industrial market and efficiently scale our business to accelerate growth by enabling our channel partners to become an extension of our demand generation and customer support efforts.

•~~Continue to improve our gross margins through product innovation and cost optimization.~~ We strive to improve our profitability by both rapidly introducing new products with value-added features and reducing our manufacturing costs through our fabless, asset-lite manufacturing model. We expect to continue to improve our product mix by developing new products for growth markets where we believe we can generate higher ASPs and/or higher gross margins. We also intend to further our relationships with key foundry suppliers to apply our product and applications knowledge to develop differentiated and cost-efficient wafer processes and packages. We believe we can reduce our manufacturing costs by leveraging the advanced manufacturing capabilities of our strategic suppliers, implementing more cost-effective packaging technologies and leveraging both internal and external assembly and test capacity to reduce our capital requirements, lower our operating costs, enhance reliability of supply and support our continued growth.

•~~Pursue selective acquisitions and other strategic transactions.~~ We evaluate and pursue selective acquisitions and other transactions to facilitate our entrance into new applications, add to our intellectual property portfolio and design resources, and accelerate our growth. From time to time, we acquire companies, technologies or assets and participate in joint ventures when we believe they will cost effectively and rapidly improve our product development or manufacturing capabilities or complement our existing product offerings. For example, our August 2020 acquisition of Voxtel and its affiliate, LadarSystems, Inc., brings together Voxtel’s laser and imaging expertise and our automotive leadership and scale to enable what we believe will be the next generation of ADAS.

•~~Maintain commitment to sustainability.~~ We intend to continue to innovate with purpose, addressing critical global challenges related to energy efficiency, vehicle emissions and clean and renewable energy with our sensing and power management product portfolio. In addition, we strive to operate our business in a socially responsible and environmentally sustainable manner, and we strive to maintain a commitment to social responsibility in our supply chain and disclosure of the environmental impact of our business operations.

Recent Initiatives to Improve Results of Operations

We ~~have recently~~ implemented several initiatives during the fiscal year 2022 and into fiscal year 2023designed to improve our operating ~~results.~~results during those fiscal years and going forward.

~~On August 28, 2020,~~We continue to implement initiatives to improve gross margins, which is calculated as gross profit divided by total net sales. Our gross margin improved from 50.0% in the first quarter of 2022 compared to 54.4% in the first quarter of 2023. This gross margin improvement was a result of our operational transformation, improved product mix of higher average selling prices (“ASPs”) on more value-added products, increased leverage of our distribution channel, and continued efficiency and leverage on higher volumes. We expect to continue to realize this lower level of cost of goods and improvements in operating income for the immediate future. Additionally, we ~~acquired Voxtel, Inc. (“Voxtel”),~~will continue to leverage our facility to increase production where demand for our products warrants.

We have been successful in increasing our ASPs through a ~~privately-held technology company located~~focus on feature-rich products and selective price increases. Increased ASPs and manufacturing efficiencies have allowed us to continue to improve gross margin in ~~Beaverton, Oregon that specializes in components~~an environment of limited capacity at our suppliers and rising input costs. Limited supply and increased demand for ~~eye-safe LiDAR used in ADAS, fully autonomous vehicles,~~many of our products and ~~industrial automation (the “Voxtel Acquisition”). In addition~~applications, as well as supply chain disruptions related to the ~~laser technology, Voxtel’s capabilities include its Indium Gallium Arsenide (“InGaAs”) Avalanche Photodiode (“APDs”)~~COVID-19 pandemic, have contributed to input cost increases on the components needed to manufacture our products. We will continue to consider opportunities for strategic price increases and ~~APD photoreceivers—highly sensitive in~~process efficiencies to offset input cost increases on the ~~important eye-safe region around 1550 nanometers (“nm”). This technology enables images to be obtained over a wide range of weather conditions~~materials and over a long-distance or a wide field of view using a laser that does not pose an ocular hazard. The combination of these highly sensitive detectors and high-peak-power eye-safe lasers with Voxtel’s custom integrated circuits and electro-optical packaging expertise, allows for cost-effective, compact laser-ranging and 3D-image sensing. In addition, Voxtel holds more than 38 US patents, representing a comprehensive Laser Detection and Ranging (“LADAR”)/LiDAR photonic technology suite.

~~In February 2020, we announced~~supplies that we ~~would consolidate~~use in production.

With our ~~assembly~~efforts to leverage our fixed cost and ~~test facilities into a single site, located at~~operating margin improvements, we have attained efficiencies through cost structure improvements, streamlining of manufacturing and support processes, and further utilization of excess capacity. These manufacturing efficiencies allowed us to leverage higher volumes to keep pace with increasing demand across most of our manufacturing facility in the Philippines (the “AMPI Facility”). As such, we completed the transition and closed our manufacturing facility in Thailand (the “AMTC Facility”) in March 2021. As a result, we expect to realize a significant reduction inapplications, while reducing cost of goods sold and increasing the absorption of fixed costs. Although these initiatives have resulted in ~~subsequent periods.~~gross margin and operating income improvements over the previous quarters, we cannot ensure that these trends will continue over the long-term.

In May 2022, we entered into an agreement to acquire Heyday Integrated Circuits (“Heyday”), a privately held company specializing in compact, fully integrated isolated gate drivers that enable energy conversion in high-voltage gallium nitride and silicon carbide wide-bandgap semiconductor designs (the “Heyday Acquisition”). The Heyday Acquisition is expected to complement our existing solutions for energy efficiency, including our market-leading current sensor solutions. Additionally, it is expected to significantly expand Allegro’s addressable market for xEV, solar inverters, data center and 5G power supplies, and broad-market industrial applications. We are currently awaiting regulatory approval of the transaction, and we anticipate completion of the acquisition by the third quarter of fiscal 2023.

Other Key Factors and Trends Affecting our Operating Results

Our financial condition and results of operations have been, and will continue to be, affected by numerous other factors and trends, including the following:

Inflation

Inflation rates in the markets in which we operate have increased and may continue to rise. Inflation over the last several months has led us to experience higher costs, including higher labor costs, wafer and other costs for materials from suppliers, and transportation costs. Our suppliers have raised their prices and may continue to raise prices, and in the competitive markets in which we operate, we may not be able to make corresponding price increases to preserve our gross margins and profitability. If inflation rates continue to rise or remain elevated for a sustained period of time, they could have a material adverse effect on our business, financial condition, results of operations and liquidity.We have generally been able to offset increases in these costs through various productivity and cost reduction initiatives, as well as adjusting our selling prices to pass through some of these higher costs to our customers; however, our ability to raise our selling prices depends on market conditions and competitive dynamics. Given the timing of our actions compared to the timing of these inflationary pressures, there may be periods during which we are unable to fully recover the increases in our costs.

Design Wins with New and Existing Customers

Our end customers continually develop new products in existing and new application areas, and we work closely with our significant OEM customers in most of our target markets to understand their product roadmaps and strategies. For new products, the time from design initiation and manufacturing until we generate ~~revenue~~sales can be lengthy, typically between two and four years. As a result, our future ~~revenue~~sales is highly dependent on our continued success at winning design mandates from our customers. Further, ~~because~~despite current inflationary and pricing conditions, we expect the ASPs of our products to decline over time, and we consider design wins to be critical to our future success and anticipate being increasingly dependent on revenue from newer design wins for our newer products. The selection process is typically lengthy and may require us to incur significant design and development expenditures in pursuit of a design win with no assurance that our solutions will be selected. As a result, the loss of any key design win or any significant delay in the ramp-up of volume production of the customer’s products into which our product is designed could adversely affect our business. In addition, volume production is contingent upon the successful introduction and market acceptance of our customers’ end products, which may be affected by several factors beyond our control.

Customer Demand, Orders and Forecasts

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 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, but 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~~While historically we have permitted order cancellations for most customers, most of our current customer order backlog is noncancellable, which helps to mitigate our exposure to unforeseen order cancellations. However, cancellations of orders could still 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 exposes us to the risks of inventory shortages or excess inventory. We continue to see demand for our products exceed supply, and we are currently operating in an inflationary environment.

Manufacturing Costs and Product Mix

Gross margin ~~or gross profit as a percentage of total net sales,~~ has been, and will continue to be, affected by a variety of factors, including the ASPs of our products, product mix in a given period, material costs, yields, manufacturing costs and efficiencies. We believe the primary driver of gross margin is the ASP negotiated between us and our customers relative to material costs and yields. Our pricing and margins depend on the volumes and the features of the products we produce and sell to our customers. As our products mature and unit volumes increase, despite current price leverage, we expect their ASPs to ~~decline.~~decline in the long term. We continually monitor and work to reduce the cost of our products and improve the potential value our solutions provide to our customers

as we target new design win opportunities and manage the product life-cycles of our existing customer designs. We also maintain a close relationship with our suppliers and subcontractors to improve quality, increase yields and lower manufacturing costs. As a result, these declines often coincide with improvements in manufacturing yields and lower wafer, assembly, and testing costs, which offset some or all of the margin reduction that results from declining ASPs. However, we expect our gross margin to fluctuate on a quarterly basis as a result of changes in ASPs due to product mix, new product introductions, transitions into volume manufacturing and manufacturing costs. Gross margin generally decreases if production volumes are lower as a result of decreased demand, which leads to a reduced absorption of our fixed manufacturing costs. Gross margin generally increases when the opposite occurs.

Cyclical Nature of the Semiconductor Industry

The semiconductor industry ishas historically been highly cyclical and is characterized by increasingly rapid technological change, product obsolescence, competitive pricing pressures, evolving standards, short product life-cycles and fluctuations in product supply and demand. New technology may result in sudden changes in system designs or platform changes that may render some of our products obsolete and require us to devote significant research and development resources to compete effectively. Periods of rapid growth and capacity expansion are occasionally followed by significant market corrections in which sales decline, inventories accumulate and facilities go underutilized. During periods of expansion, our margins generally improve as fixed costs are spread over higher manufacturing volumes and unit sales. In addition, we may build inventory to meet increasing market demand for our products during these times, which serves to absorb fixed costs further and increase our gross margins. During an expansion cycle, we may increase capital spending and hiring to add to our production capacity. During periods of slower growth or industry contractions, our sales, production and productivity suffer and margins generally decline.

Components of Our Results of Operations

Net sales

Our total net sales are derived from product sales to direct customers and distributors. We sell products globally through our direct sales force, third-party and related party distributors and independent sales representatives. Sales are derived from products for different applications. Our core applications are focused on the automotive, industrial and other industries.

We sell magnetic sensor ICs, power ICs and photonics in the Americas, EMEA and Asia. Revenue is generally recognized when control of the products is transferred to the customer, which typically occurs at a point in time upon shipment or delivery, depending on the terms of the contract. When we transact with a distributor, our contractual arrangement is with the distributor and not with the end customer. Whether we transact business with and receive the order from a distributor or directly from an end customer through our direct sales force and independent sales representatives, our revenue recognition policy and resulting pattern of revenue recognition for the order are the same. We recognize revenue net of sales returns, price protection adjustments, stock rotation rights and any other discounts or credits offered to our customers.

Cost of goods sold, gross profit and gross margin

Cost of goods sold consists primarily of costs of purchasing raw materials, costs associated with probe, assembly, ~~test~~testing and shipping our products, costs of personnel, including stock-based compensation, costs of equipment associated with manufacturing, procurement, planning and management of these processes, costs of depreciation and amortization, costs of logistics and quality assurance, and costs of royalties, value-added taxes, utilities, repairs and maintenance of equipment, and an allocated portion of our occupancy costs.

Gross profit is calculated as total net sales less cost of goods sold. Gross profit is affected by numerous factors, including average selling price, revenue mix by product, channel and customer, foreign exchange rates, seasonality, manufacturing costs and the effective utilization of our facilities. Another factor impacting gross profit is the time required

for the expansion of existing facilities to reach full production capacity. As a result, gross profit varies from period to period and year to year. We expect cost of goods sold to decrease in absolute dollars and as a percentage of total net sales in the future, primarily as a result of the closure of the AMTC Facility and the transfer of the Sanken products distribution business to PSL.

A significant portion of our costs ~~are~~is fixed, and, as a result, costs are generally difficult to adjust or may take time to adjust in response to changes in demand. In addition, our fixed costs increase as we expand our capacity. If we expand

capacity faster than required by our sales growth, our gross margin could be negatively affected. Gross margin is calculated as gross profit divided by total net sales.

Operating Expenses

Research and development (“R&D”) expenses

R&D expenses consist primarily of personnel-related costs of our research and development organization, including stock-based compensation, costs of development of wafers and masks, license fees for computer-aided design software, costs of development testing and evaluation, costs of developing automated test programs, equipment depreciation and related occupancy and equipment costs. While most of the costs incurred are for new product development, a significant portion of these costs ~~are~~is related to process technology development and proprietary package development. R&D expenses also include costs for technology development by external parties. We expect further increases in R&D expenses, in absolute dollars, ~~and as a percentage of total net sales~~ as we continue the development of innovative technologies and processes for new product offerings, as well as increase the headcount of our R&D personnel in future years.

Selling, General and Administrative (“SG&A”) expenses

SG&A expenses consist primarily of personnel-related costs, including stock-based compensation, and sales commissions to independent sales representatives, professional fees, including the costs of accounting, audit, legal, regulatory and tax compliance. Additionally, costs related to advertising, trade shows, corporate marketing, as well as an allocated portion of our occupancy costs, also comprise SG&A expenses.

We anticipate our selling and marketing expenses to increase in absolute terms as we expand our sales force and increase our sales and marketing activities. We also anticipate that we will incur increased accounting, audit, legal, regulatory, compliance and director and officer insurance costs as well as investor and public relations expenses associated with being a public company.

Change in fair value of contingent consideration

The change in fair value of contingent consideration represents the ~~loss~~gain recorded in the three months ended June ~~25, 2021~~24, 2022 resulting from the adjustment in contingent consideration related to the acquisition of Voxtel, ~~Acquisition.~~Inc. (“Voxtel”).

Interest ~~(expense) income,~~expense, net

Interest ~~(expense) income,~~expense, net is comprised of interest expense from term loan debt and credit facilities we maintain with various financial ~~institutions and previously on borrowings under the PSL-Sanken Loans (which were forgiven in connection with the PSL Divestiture).~~institutions. Current expense is partially mitigated by income earned on our cash and cash equivalents, consisting primarily of certain investments that have contractual maturities no greater than three months at the time of purchase.

Foreign currency transaction gain (loss) ~~gain~~

We incur transaction gains and losses resulting from intercompany transactions as well as transactions with customers or vendors denominated in currencies other than the functional currency of the legal entity in which the transaction is recorded.

~~Income~~(Loss) income in earnings of equity investment

~~Income~~(Loss) income in earnings of equity investment ~~represents~~is related to our equity investment in ~~connection with the PSL Divestiture.~~PSL.

Other, net

Other, net primarily consists of miscellaneous income and expense items unrelated to our core operations.

Income tax provision

Our provision for income taxes is ~~comprised of the year-to-date taxes~~ based on an estimate of the annual effective tax rate plus the tax impact of discrete items.

We are subject to tax in the U.S. and various foreign jurisdictions. Our effective income tax rate fluctuates primarily because of: the change in the mix of our U.S. and foreign income; the impact of discrete transactions and law changes; and the difference between the amount of tax benefits generated by the foreign derived intangible income deduction (“FDII”) and

research credits, offset by the additional tax costs associated with global intangible low-tax income and non-deductible stock-based compensation charges.

Pursuant to impacts of the 2017 Tax Cuts and Jobs Act, beginning in fiscal year 2023, U.S. tax law now requires us to capitalize and amortize domestic and foreign research and development expenditures over five and fifteen years, respectively (“~~GILTI”~~174 Capitalization”).

While it is possible that Congress may defer, modify, or repeal this provision, potentially with retroactive effect, we have no assurance that this provision will be reversed. Although our first quarter fiscal 2023 cash from operations was not materially impacted, if legislation is not passed and made effective retroactively, we estimate the impact of this legislative change will increase our annual cash taxes by $21.0 million and produce an increased FDII effective tax rate benefit. The actual impact of 174 Capitalization on cash taxes and the effective tax rate depends on if Congress passes additional legislation, whether such legislation is made effective retroactively, the amount of the research and development expenditures incurred by the Company during the fiscal year, and upon additional guidance the Internal Revenue Service (“IRS”) may issue related to this provision.

We regularly assess the likelihood of outcomes that could result from the examination of our tax returns by the IRS and other tax authorities to determine the adequacy of our income tax reserves and expense. Should actual events or results differ from our then-current expectations, charges or credits to our provision for income taxes may become necessary. Any such adjustments could have a significant effect on our results of operations.

Results of Operations

Three-Month Period Ended June ~~25, 2021~~24, 2022 Compared to Three-Month Period Ended June ~~26, 2020~~25, 2021

The following table summarizes our results of operations for the three-month periods ended June ~~25, 2021~~24, 2022 and June ~~26, 2020.~~25, 2021.


		Three-Month Period Ended				Change					Three-Month Period Ended				Change
		June 25, 2021		June 26, 2020		$		%			June 24, 2022		June 25, 2021		$		%
		(Dollars in thousands)									(Dollars in thousands)
Total net sales (1)	Total net sales (1)	$	188,142	$	115,001	$	73,141	63.6	%	Total net sales (1)	$	217,753	$	188,142	$	29,611	15.7	%
Cost of goods sold	Cost of goods sold	93,982		59,300		34,682		58.5	%	Cost of goods sold	99,379		93,982		5,397		5.7	%
Gross profit	Gross profit	94,160		55,701		38,459		69.0	%	Gross profit	118,374		94,160		24,214		25.7	%
Operating expenses:	Operating expenses:									Operating expenses:
Research and development	Research and development	29,554		24,380		5,174		21.2	%	Research and development	33,857		29,554		4,303		14.6	%
Selling, general and administrative	Selling, general and administrative	32,064		26,789		5,275		19.7	%	Selling, general and administrative	69,980		32,064		37,916		118.3	%
Impairment of long-lived assets		—		—		—		—	%

Change in fair value of contingent consideration	Change in fair value of contingent consideration	300		—		300		—	%	Change in fair value of contingent consideration	(200)		300		(500)		(166.7)	%
Total operating expenses	Total operating expenses	61,918		51,169		10,749		21.0	%	Total operating expenses	103,637		61,918		41,719		67.4	%
Operating income	Operating income	32,242		4,532		27,710		611.4	%	Operating income	14,737		32,242		(17,505)		(54.3)	%
Other (expense) income, net:
Other income (expense), net:										Other income (expense), net:

Interest (expense) income, net		(345)		313		(658)		(210.2)	%
Foreign currency transaction (loss) gain		(254)		132		(386)		(292.4)	%
Income in earnings of equity investment		279		212		67		—	%
Interest expense, net										Interest expense, net	(120)		(345)		225		(65.2)	%
Foreign currency transaction gain (loss)										Foreign currency transaction gain (loss)	1,924		(254)		2,178		(857.5)	%
(Loss) income in earnings of equity investment										(Loss) income in earnings of equity investment	(864)		279		(1,143)		(409.7)	%
Other, net	Other, net	48		193		(145)		(75.1)	%	Other, net	(3,429)		48		(3,477)		(7,243.8)	%
Total other (expense) income, net		(272)		850		(1,122)		(132.0)	%
Income before provision for income taxes		31,970		5,382		26,588		494.0	%
Total other expense, net										Total other expense, net	(2,489)		(272)		(2,217)		815.1	%
Income before income tax provision										Income before income tax provision	12,248		31,970		(19,722)		(61.7)	%
Income tax provision	Income tax provision	4,263		528		3,735		707.4	%	Income tax provision	1,965		4,263		(2,298)		(53.9)	%
Net income	Net income	27,707		4,854		22,853		470.8	%	Net income	10,283		27,707		(17,424)		(62.9)	%
Net income attributable to non-controlling interests	Net income attributable to non-controlling interests	38		34		4		11.8	%	Net income attributable to non-controlling interests	36		38		(2)		(5.3)	%
Net income attributable to Allegro MicroSystems, Inc.	Net income attributable to Allegro MicroSystems, Inc.	$	27,669	$	4,820	$	22,849	474.0	%	Net income attributable to Allegro MicroSystems, Inc.	$	10,247	$	27,669	$	(17,422)	(63.0)	%

(1)Our total net sales for the periods presented above include related party net sales generated through our distribution agreement with Sanken. See our unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report for additional information regarding our related party net sales for the periods set forth above.

3128

The following table sets forth our results of operations as a percentage of total net sales for the periods presented.


		Three-Month Period Ended					Three-Month Period Ended
		June 25, 2021		June 26, 2020			June 24, 2022		June 25, 2021
Total net sales	Total net sales	100.0	%	100.0	%	Total net sales	100.0	%	100.0	%
Cost of goods sold	Cost of goods sold	50.0	%	51.6	%	Cost of goods sold	45.6	%	50.0	%
Gross profit	Gross profit	50.0	%	48.4	%	Gross profit	54.4	%	50.0	%
Operating expenses:	Operating expenses:					Operating expenses:
Research and development	Research and development	15.7	%	21.1	%	Research and development	15.5	%	15.7	%
Selling, general and administrative	Selling, general and administrative	17.0	%	23.3	%	Selling, general and administrative	32.1	%	17.0	%

Change in fair value of contingent consideration	Change in fair value of contingent consideration	0.2	%	—	%	Change in fair value of contingent consideration	(0.1)	%	0.2	%
Total operating expenses	Total operating expenses	32.9	%	44.4	%	Total operating expenses	47.5	%	32.9	%
Income from operations		17.1	%	4.0	%
Other (expense) income, net:
Operating income						Operating income	6.9	%	17.1	%
Other income (expense), net:						Other income (expense), net:

Interest (expense) income, net		(0.2)	%	0.3	%
Foreign currency transaction (loss) gain		(0.2)	%	0.1	%
Income in earnings of equity investment		0.1	%	0.1	%
Interest expense, net						Interest expense, net	(0.1)	%	(0.2)	%
Foreign currency transaction gain (loss)						Foreign currency transaction gain (loss)	0.9	%	(0.2)	%
(Loss) income in earnings of equity investment						(Loss) income in earnings of equity investment	(0.4)	%	0.1	%
Other, net	Other, net	0.1	%	0.2	%	Other, net	(1.6)	%	0.1	%
Total other (expense) income, net		(0.2)	%	0.7	%
Income before provision for income taxes		16.9	%	4.7	%
Total other expense, net						Total other expense, net	(1.2)	%	(0.2)	%
Income before income tax provision						Income before income tax provision	5.7	%	16.9	%
Income tax provision	Income tax provision	2.3	%	0.5	%	Income tax provision	1.0	%	2.3	%
Net income	Net income	14.6	%	4.2	%	Net income	4.7	%	14.6	%
Net income attributable to non-controlling interests	Net income attributable to non-controlling interests	—	%	—	%	Net income attributable to non-controlling interests	—	%	—	%
Net income attributable to Allegro MicroSystems, Inc.	Net income attributable to Allegro MicroSystems, Inc.	14.6	%	4.2	%	Net income attributable to Allegro MicroSystems, Inc.	4.7	%	14.6	%

Total net sales

Total net sales increased by ~~$73.1~~$29.6 million,, or ~~63.6%~~15.7%, to ~~$188.1~~$217.8 million in the three-month period ended June 24, 2022 from $188.1 million in the three-month period ended June 25, ~~2021 from~~ ~~$115.0 million~~ ~~in the three-month period ended June 26, 2020~~.2021. This increase was primarily ~~due~~attributable to ~~the continued economic recovery and increase in demand for~~higher shipment of our data center, advanced driver assistance systems ~~as well as higher demand for data center~~(“ADAS”), electrified vehicle (“xEV”), and ~~industrial automation~~computing applications. ~~Gaming and other consumer applications also contributed to the increase in total net sales.~~

Sales Trends by Market

The following table summarizes total net sales by market. The categorization of net sales by market is based on the characteristics of the end product and application into which our product will be designed.


		Three-Month Period Ended				Change
		June 25, 2021		June 26, 2020		Amount		%			Three-Month Period Ended				Change
		(Dollars in thousands)									June 24, 2022		June 25, 2021		Amount		%
											(Dollars in thousands)
Automotive	Automotive	$	133,523	$	76,378	$	57,145	74.8	%	Automotive	$	149,649	$	133,523	$	16,126	12.1	%
Industrial	Industrial	30,309		20,406		9,903		48.5	%	Industrial	40,140		30,309		9,831		32.4	%
Other	Other	24,310		18,217		6,093		33.4	%	Other	27,964		24,310		3,654		15.0	%
Total net sales	Total net sales	$	188,142	$	115,001	$	73,141	63.6	%	Total net sales	$	217,753	$	188,142	$	29,611	15.7	%

The increase in net sales ~~by market~~to our end markets was driven primarily by increases in automotive ~~of $57.1~~of $16.1 million, or ~~74.8%~~12.1%, industrial of ~~$9.9~~$9.8 million, or ~~48.5%~~32.4%, and other of ~~$6.1~~$3.7 million, or ~~33.4%~~15.0%.

Automotive net sales increased in the three-month period ended June ~~25, 2021~~24, 2022 compared to the three-month period ended June ~~26, 2020~~25, 2021, primarily due to higher demand for our ~~customers’~~ADAS and xEV applications.

Industrial net sales increased ~~vehicle production across most markets~~in the three-month period ended June 24, 2022 compared to the three-month period ended June 25, 2021, primarily due to ~~the on-going recovery from the COVID-19 pandemic. Content~~increased demand in ~~xEV continued to increase year-over-year,~~data center and ~~we experienced strong recoveries in ADAS, comfort and convenience and internal combustion engine (“ICE”) applications during the first quarter of 2022.~~Industry 4.0 applications.

~~Industrial and other~~

Other net sales improved induring the three-month period ended June 24, 2022 compared to the three-month period ended June 25, 2021, ~~compared~~mainly due to the three-month period ended June 26, 2020 due primarily to the continued demand in data center applications, gaming, grid infrastructure that includes renewable energy and EV charging, as well as a COVID-related increaseincreases in demand for ~~printers and other peripherals.~~certain computer products.

Sales Trends by Product

The following table summarizes net sales by product:


		Three-Month Period Ended				Change					Three-Month Period Ended				Change
		June 25, 2021		June 26, 2020		Amount		%			June 24, 2022		June 25, 2021		Amount		%
		(Dollars in thousands)									(Dollars in thousands)
Power integrated circuits		$	66,672	$	41,599	$	25,073	60.3	%
Magnetic sensors		120,642		73,402		47,240		64.4	%
Power integrated circuits (“PIC”)										Power integrated circuits (“PIC”)	$	80,660	$	66,672	$	13,988	21.0	%
Magnetic sensors (“MS”)										Magnetic sensors (“MS”)	137,050		120,642		16,408		13.6	%
Photonics	Photonics	828		—		828		—	%	Photonics	43		828		(785)		(94.8)	%

Total net sales	Total net sales	$	188,142	$	115,001	$	73,141	63.6	%	Total net sales	$	217,753	$	188,142	$	29,611	15.7	%

The increase in net sales by product was driven by increases of ~~$47.2~~$16.4 million, or ~~64.4%~~13.6%, in ~~magnetic sensor IC product sales, $25.1 million, or 60.3%, in power integrated circuit~~MS product sales and $14.0 million, or 21.0%, in PIC product sales, partially offset by a decrease of $0.8 million in Photonics sales.

Sales Trends by Geographic Location

The following table summarizes net sales by geographic location based on ship-to location.


		Three-Month Period Ended				Change					Three-Month Period Ended				Change
		June 25, 2021		June 26, 2020		Amount		%			June 24, 2022		June 25, 2021		Amount		%
		(Dollars in thousands)									(Dollars in thousands)
Americas:	Americas:									Americas:
United States	United States	$	26,841	$	12,996	$	13,845	106.5	%	United States	$	28,391	$	26,841	$	1,550	5.8	%
Other Americas	Other Americas	6,349		1,928		4,421		229.3	%	Other Americas	6,487		6,349		138		2.2	%
EMEA:	EMEA:									EMEA:
Europe	Europe	34,751		17,846		16,905		94.7	%	Europe	35,333		34,751		582		1.7	%
Asia:	Asia:									Asia:
Japan	Japan	35,453		23,620		11,833		50.1	%	Japan	41,709		35,453		6,256		17.6	%
Greater China	Greater China	42,779		32,071		10,708		33.4	%	Greater China	55,116		42,779		12,337		28.8	%
South Korea	South Korea	21,933		13,612		8,321		61.1	%	South Korea	20,979		21,933		(954)		(4.3)	%
Other Asia	Other Asia	20,036		12,928		7,108		55.0	%	Other Asia	29,738		20,036		9,702		48.4	%
Total net sales	Total net sales	$	188,142	$	115,001	$	73,141	63.6	%	Total net sales	$	217,753	$	188,142	$	29,611	15.7	%

Net sales increased across ~~all~~the majority of our geographic locations in the three-month period ended June ~~25, 2021~~24, 2022 compared to the three-month period ended June ~~26, 2020~~25, 2021, primarily due to content and market share gains, as ~~many countries continue to experience economic expansion coming out of the COVID-19 pandemic and~~ demand for many of our products and applications ~~rose.~~continue to rise.

The increase in net sales of ~~$16.9~~$12.3 million, or 94.7%, in Europe, predominantly comprised of Germany and France, was primarily driven by increases in automotive demand. The increase in net sales in the United States of $13.8 million, or 106.5%, was primarily driven by the COVID-19 recovery, as well as content and market share gains in ADAS, xEV, ICE,

comfort and convenience and industrial applications. Net sales in Japan grew $11.8 million, or 50.1%, which was primarily driven by higher demand for our industrial, xEV and ADAS offerings. The increase in net sales of $10.7 million, or 33.4%28.8%, in Greater China related to higher automotive demand, primarily in our ADAS ~~safety~~ and ~~comfort and convenience sectors. South Korea and~~xEV offerings. Other Asia experienced sales growth of ~~$8.3~~$9.7 million, or 48.4%, mainly in our data center sector. Net sales in Japan grew $6.3 million, or 17.6%, which was primarily driven by higher demand for our safety, comfort and ~~$7.1~~convenience, xEV and industrial applications. The increase in net sales in the United States of $1.6 million, ~~respectively, mainly due to higher automotive demand~~or 5.8%, was primarily driven by content and ~~other customer and peripherals, respectively.~~market share gains in our ADAS applications.

Cost of goods sold, gross profit and gross margin

Cost of goods sold increased by ~~$34.7~~$5.4 million, or ~~58.5%~~5.7%, to $99.4 million in the three-month period ended June 24, 2022 from $94.0 million in the three-month period ended June 25, ~~2021 from $59.3 million in the three-month period ended June 26, 2020.~~2021. The increase in cost of goods sold was primarily attributable to higher production volume and increases in amortization of manufacturing cost absorptions and excess inventory reserves, specifically expenses of $2.8 million related to the discontinuation of a legacy Voxtel product line during the first quarter of 2022.sales volume.

Gross ~~profit~~profit increased by ~~$38.5~~$24.2 million, or ~~69.0%~~25.7%, to $118.4 million in the three-month period ended June 24, 2022 from $94.2 million in the three-month period ended June 25, ~~2021 from $55.7 million in the three-month period ended June 26, 2020.~~2021. The increase in gross profit was driven by ~~a $73.1~~ the $29.6

million ~~operational~~ increase in total net sales to all end markets discussed above, partially offset by the impacts to cost of goods sold discussed above.

R&D expenses

R&D expenses increased by ~~$5.2~~$4.3 million, or ~~21.2%~~14.6%, to $33.9 million in the three-month period ended June 24, 2022 from $29.6 million in the three-month period ended June 25, ~~2021 from $24.4 million in the three-month period ended June 26, 2020.~~2021. This increase was primarily due to a combined ~~$4.4~~$3.8 million increase in personnel costs, including variable compensation costs, and general operating expenses ~~including inventory and supplies,~~ and higher stock-based compensation expense of ~~$0.2~~$0.4 million.

R&D expenses ~~represented~~represented 15.5% of our total net sales for the three-month period ended June 24, 2022, a decrease from 15.7% of our total net sales for the three-month period ended June 25, ~~2021, a decrease from 21.1% of our total net sales for the three-month period ended June 26, 2020.~~2021. This percentage decrease was primarily due to the growth in net sales in the three-month period ended June ~~25, 2021.~~24, 2022.

SG&A expenses

SG&A ~~expenses~~expenses increased by ~~$5.3~~$38.0 million, or ~~19.7%~~118.3%, to $70.0 million in the three-month period ended June 24, 2022 from $32.1 million in the three-month period ended June 25, ~~2021 from $26.8 million in the three-month period ended June 26, 2020.~~2021. This increase was primarily due to ~~increases~~an increase of ~~$3.2~~$28.6 million in ~~each of~~ stock-based compensation expense, ~~and contract labor and~~including accelerated expense from the retirement of our former chief executive officer of approximately $26.3 million, as well as higher personnel costs, including variable compensation costs, of ~~$2.5 million. These higher~~$4.4 million and combined costs ~~were partially offset by lower facilities costs and~~of $1.6 million comprised of professional fees and dues and subscription costs. In addition, we recognized $3.8 million of ~~$2.3 million~~severance and ~~$2.1 million, respectively.~~other transition costs mainly due to the combined impacts of our recent changes in leadership.

SG&A expenses represented 32.1% of our total net sales for the three-month period ended June 24, 2022, an increase from 17.0% of our total net sales for the three-month period ended June 25, ~~2021, a decrease from 23.3% of our total net sales for the three-month period ended June 26, 2020.~~2021. This percentage ~~decrease~~increase was primarily due to the impacts noted above, partially offset by growth in net sales in the three-month period ended June ~~25, 2021.~~24, 2022.

~~Interest (expense) income, net~~

Interest expense, net

Interest expense, net was $0.1 million in the three-month period ended June 24, 2022 compared to $0.3 million in the three-month period ended June 25, ~~2021~~2021. The decrease in interest expense was primarily due to higher interest income received from a related party in the first quarter of 2023. The mandatory interest payments on the Term Loan Facility remained relatively consistent.

Foreign currency transaction gain (loss)

We recorded a foreign currency transaction gain of $1.9 million in the three-month period ended June 24, 2022 compared to ~~interest income, net~~a loss of $0.3 million in the three-month period ended June 26, 2020. The increase in interest expense was primarily due to mandatory interest payments on the Term Loan Facility in the first quarter of 2022 compared to higher interest income received from related parties during the same period last year.

~~Foreign currency transaction (loss) gain~~

~~We recorded a foreign currency transaction loss of~~ ~~$0.3 million~~ ~~in the three-month period ended June~~ 25, ~~2021 compared to a gain of~~ ~~$0.1 million~~ ~~in the three-month period ended June 26, 2020.~~2021. The foreign currency transaction ~~loss~~gains or losses recorded in ~~the~~each three-month period ~~ended June 25, 2021 was~~were primarily due to the realized and unrealized gains or losses from our UK ~~location~~location.

(Loss) income in ~~excess~~earnings of ~~$0.2~~equity investment

(Loss) income in earnings of equity investment reflected losses of $0.9 million~~. The foreign currency transaction gain recorded~~ and gains of $0.3 million in the three-month period ended June ~~26, 2020 was primarily due to $1.5 million of realized~~24, 2022 and ~~unrealized gains from our Thailand location, offset in part by $1.1 million and $0.1 million of realized and unrealized losses from our UK and Philippines locations, respectively.~~

~~Income in earnings of equity investment~~

~~Income in earnings of equity investment reflected a~~ ~~$0.3 million~~ ~~gain in the three-month period ended~~ June 25, 2021, respectively, representing the earnings on our 30% investment in PSL.

Other, net

Other, net decreased by ~~$0.2~~$3.5 million to a loss of more than $3.4 million in the three-month period ended June 24, 2022 from less than $0.1 millionof ~~miscellaneous~~ gains in the three-month period ended June 25, ~~2021 from~~ ~~$0.2 million~~ ~~of miscellaneous gains~~2021. The decrease in the three-month period ended June ~~26, 2020.~~24, 2022 was primarily due to $3.5 million of unrealized losses on marketable securities.

Income tax provision

Income tax expense and the effective income tax rate ~~were~~were $2.0 million, or 16.0%, and $4.3 million, or 13.3%, ~~and $0.5 million, or 9.8%~~, respectively, in the three-month period ended June 24, 2022 and June 25, 2021, ~~and June 26, 2020,~~ respectively. The ~~fluctuation in our~~quarter ending June 25, 2021 effective ~~income~~ tax rate ~~relates primarily to differences~~was favorably impacted by one-time state tax refunds. Current year 174 Capitalization resulted in ~~our~~increased U.S. taxable income ~~estimated~~and cash taxes; however, it also produced an additional FDII benefit of $9.0 million with offsetting inclusions from Subpart F of $2.8 million. The net current year benefits ~~research credits,~~of 174 Capitalization were offset by an increase in current year non-deductible ~~stock-based~~executive compensation ~~charges, and discrete tax items.~~of approximately $6.7 million.

Non-GAAP Financial Measures

In addition to the measures presented in our consolidated financial statements, we regularly review other ~~metrics,~~ 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 ~~metrics~~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~~Earnings 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~~Non-GAAP Financial Measures provides management and the investment community with valuable insight into matters such as: our ongoing core ~~operations,~~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;

•~~such~~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 ~~added back~~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.

Our prior disclosure referred to non-GAAP Gross Profit and non-GAAP Gross Margin as Adjusted Gross Profit and Adjusted Gross Margin, respectively. No changes have been made to how we calculate these measures.

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.

•PSL and Sanken Distribution Agreement—Represents the elimination of inventory cost amortization and foundry service payment related to one-time costs incurred in connection with the disposition of PSL during the fiscal year ended March 26, 2021 (the “PSL Divestiture”).

•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 our 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 ~~in March 2021. These costs are in addition to, and not duplicative~~as of the ~~adjustments noted~~end of March 2021, and we sold the AMTC Facility in ~~note (*) below.~~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.

•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.~~

~~(*) Non-GAAP Gross Profit and the corresponding calculation of non-GAAP Gross Margin do not include adjustments consisting of:~~

•~~Additional AMTC-related costs—Represents costs relating to the closing of the AMTC~~ Facility ~~and the transitioning of test and assembly functions to the AMPI Facility in the Philippines announced in~~through fiscal year ~~2020 consisting of the net savings expected to result from the movement of work to the AMPI Facility, which facility had duplicative capacity based on the buildouts of the AMPI Facility in fiscal years 2019~~ and 2018. The elimination of these costs did not reduce our production capacity and therefore did not have direct effects on our ability to generate revenue. The closure and transition of the AMTC Facility was substantially completed in March 2021.2022.

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 transaction-related legal and consulting fees incurred primarily in connection with (i) ~~the acquisition~~one-time transaction-related legal, consulting and registration fees related to a secondary offering on behalf of ~~Voxtel~~certain stockholders in fiscal ~~year 2020,~~2022 and (ii) one-time transaction-related legal and consulting fees in fiscal ~~2021.~~2023 and 2022 not related to (i).

•Severance—Represents (i) severance costs associated with (i) labor savings initiatives to manage overall compensation expense as a result of the declining sales volume during the applicable period, including a voluntary separation incentive payment plan for employees near retirement and a reduction in force, (ii) 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, ~~and (iii)~~(ii) severance costs related to the discontinuation of one of our product lines manufactured by Voxtel in fiscal year ~~2022.~~

•~~Impairment~~2022, and (iii) nonrecurring separation costs related to the departures of ~~long-lived assets—Represents impairment charge incurred~~executive officers in ~~connection with the planned sale of the AMTC Facility.~~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.

(**) Non-GAAP Operating Income does not include adjustments consisting of those set forth in note (*) to the calculation of non-GAAP Gross Profit, and the corresponding calculation of non-GAAP Gross Margin, above or:

•Labor savings - Represents salary and benefit costs related to employees whose positions were eliminated through voluntary separation programs or other reductions in force (not associated with the closure of the AMTC Facility or any other plant or facility) and a restructuring of overhead positions from high-cost to low-cost jurisdictions net of costs for newly hired employees in connection with such restructuring.

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 (gain) loss ~~(gain)~~ on sale of equipment—Represents non-core miscellaneous losses and gains on the sale of equipment.

•Foreign currency translation ~~loss~~ (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) income in earnings of equity investment—Represents our equity method investment in PSL.

•Unrealized 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 ~~Tax Provision~~Income Taxes excluding the same items excluded ~~above and also excluding the item below in applicable periods.~~above. We calculate non-GAAP Net Income as Net Income excluding the same items excluded above and also excluding the item below 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
	June 24, 2022		March 25, 2022		June 25, 2021
	(Dollars in thousands)
Reconciliation of Non-GAAP Gross Profit

GAAP Gross Profit	$	118,374	$	109,603	$	94,160

Voxtel inventory impairment	—		—		2,835
Stock-based compensation	832		1,184		528
AMTC Facility consolidation one-time costs	—		—		137
Amortization of acquisition-related intangible assets	273		273		273
COVID-19 related expenses	—		296		343
Total Non-GAAP Adjustments	$	1,105	$	1,753	$	4,116

Non-GAAP Gross Profit	$	119,479	$	111,356	$	98,276
Non-GAAP Gross Margin	54.9%		55.6%		52.2%


	Three-Month Period Ended
	June 24, 2022		March 25, 2022		June 25, 2021
	(Dollars in thousands)
Reconciliation of Non-GAAP Operating Expenses

GAAP Operating Expenses	$	103,637	$	79,354	$	61,918

Research and Development Expenses
GAAP Research and Development Expenses	33,857		32,432		29,554
Stock-based compensation	1,128		1,119		752
AMTC Facility consolidation one-time costs	—		—		2

COVID-19 related expenses	—		3		6
Transaction fees	202		5		—

Non-GAAP Research and Development Expenses	32,527		31,305		28,794

Selling, General and Administrative Expenses
GAAP Selling, General and Administrative Expenses	69,980		46,822		32,064
Stock-based compensation	32,176		12,598		3,551
AMTC Facility consolidation one-time costs	96		74		324
Amortization of acquisition-related intangible assets	22		22		29
COVID-19 related expenses	—		215		381
Transaction fees	1,597		384		23
Severance	4,186		—		168
Non-GAAP Selling, General and Administrative Expenses	31,903		33,529		27,588


Change in fair value of contingent consideration	(200)		100		300

Total Non-GAAP Adjustments	39,207		14,520		5,536

Non-GAAP Operating Expenses	$	64,430	$	64,834	$	56,382


	Three-Month Period Ended
	June 24, 2022		March 25, 2022		June 25, 2021
	(Dollars in thousands)
Reconciliation of Non-GAAP Operating Income

GAAP Operating Income	$	14,737	$	30,249	$	32,242

Voxtel inventory impairment	—		—		2,835
Stock-based compensation	34,136		14,901		4,831
AMTC Facility consolidation one-time costs	96		74		463
Amortization of acquisition-related intangible assets	295		295		302
COVID-19 related expenses	—		514		730

Change in fair value of contingent consideration	(200)		100		300
Transaction fees	1,799		389		23
Severance	4,186		—		168
Total Non-GAAP Adjustments	$	40,312	$	16,273	$	9,652

Non-GAAP Operating Income	$	55,049	$	46,522	$	41,894
Non-GAAP Operating Margin (% of net sales)	25.3%		23.2%		22.3%


	Three-Month Period Ended
	June 24, 2022		March 25, 2022		June 25, 2021
	(Dollars in thousands)
Reconciliation of EBITDA and Adjusted EBITDA

GAAP Net Income	$	10,283	$	25,652	$	27,707

Interest expense (income), net	120		(707)		345
Income tax provision	1,965		4,504		4,263
Depreciation & amortization	11,918		12,006		12,172
EBITDA	$	24,286	$	41,455	$	44,487

Non-core (gain) loss on sale of equipment	(3)		1		(35)
Voxtel inventory impairment	—		—		2,835

Foreign currency translation (gain) loss	(1,924)		513		254
Loss (income) in earnings of equity investment	864		(215)		(279)
Unrealized loss on investments	3,486		760		—
Stock-based compensation	34,136		14,901		4,831
AMTC Facility consolidation one-time costs	96		74		463
COVID-19 related expenses	—		514		730

Change in fair value of contingent consideration	(200)		100		300
Transaction fees	1,799		389		23
Severance	4,186		—		168
Adjusted EBITDA	$	66,726	$	58,492	$	53,777
Adjusted EBITDA Margin (% of net sales)	30.6%		29.2%		28.6%


	Three-Month Period Ended
	June 24, 2022		March 25, 2022		June 25, 2021
	(Dollars in thousands)
Reconciliation of Non-GAAP Profit before Tax

GAAP Income before Tax Provision	$	12,248	$	30,156	$	31,970

Non-core (gain) loss on sale of equipment	(3)		1		(35)
Voxtel inventory impairment	—		—		2,835

Foreign currency translation (gain) loss	(1,924)		513		254
Loss (income) in earnings of equity investment	864		(215)		(279)
Unrealized loss on investments	3,486		760		—
Stock-based compensation	34,136		14,901		4,831
AMTC Facility consolidation one-time costs	96		74		463
Amortization of acquisition-related intangible assets	295		295		302
COVID-19 related expenses	—		514		730

Change in fair value of contingent consideration	(200)		100		300
Transaction fees	1,799		389		23
Severance	4,186		—		168
Total Non-GAAP Adjustments	$	42,735	$	17,332	$	9,592

Non-GAAP Profit before Tax	$	54,983	$	47,488	$	41,562


	Three-Month Period Ended
	June 24, 2022		March 25, 2022		June 25, 2021
	(Dollars in thousands)
Reconciliation of Non-GAAP Provision for Income Taxes

GAAP Income Tax Provision	$	1,965	$	4,504	$	4,263
GAAP effective tax rate	16.0%		14.9%		13.3%

Tax effect of adjustments to GAAP results	5,900		2,817		2,091

Non-GAAP Provision for Income Taxes	$	7,865	$	7,321	$	6,354
Non-GAAP effective tax rate	14.3%		15.4%		15.3%

Three-Month Period Ended
June 25,
2021 March 26,
2021 June 26,
2020
(Dollars in thousands)
Reconciliation of Gross Profit
GAAP Gross Profit $ 94,160 $ 87,006 $ 55,701
Voxtel inventory impairment 2,835 — —
PSL and Sanken distribution agreement — 930 3,383
Stock-based compensation 528 314 97
AMTC Facility consolidation one-time costs 137 625 544
Amortization of acquisition-related intangible assets 273 273 —
COVID-19 related expenses 343 64 —
Total Non-GAAP Adjustments $ 4,116 $ 2,206 $ 4,024
Non-GAAP Gross Profit* $ 98,276 $ 89,212 $ 59,725
Non-GAAP Gross Margin* (% of net sales) 52.2% 50.9% 51.9%

*~~Non-GAAP Gross Profit and the corresponding calculation of non-GAAP Gross Margin do not include adjustments for the following components of our net income: (i) additional AMTC related costs of~~ $—~~, $—, and $3,074 for the three months ended June 25, 2021, March 26, 2021, and June 26, 2020, respectively.~~

Three-Month Period Ended
June 25,
2021 March 26,
2021 June 26,
2020
(Dollars in thousands)
Reconciliation of Operating Expenses
GAAP Operating Expenses $ 61,918 $ 67,558 $ 51,169
Research and Development Expenses
GAAP Research and Development Expenses 29,554 28,140 24,380
Stock-based compensation 752 536 21
AMTC Facility consolidation one-time costs 2 — —
COVID-19 related expenses 6 8 —
Transaction fees — — —
Non-GAAP Research and Development Expenses 28,794 27,596 24,359
Selling, General and Administrative Expenses
GAAP Selling, General and Administrative Expenses 32,064 34,799 26,789
Stock-based compensation 3,551 2,119 327
AMTC Facility consolidation one-time costs 324 1,488 1,161
Amortization of acquisition-related intangible assets 29 37 —
COVID-19 related expenses 381 250 4,000
Transaction fees 23 3,727 117
Severance 168 — 337
Non-GAAP Selling, General and Administrative Expenses 27,588 27,178 20,847
Impairment of long-lived assets — 7,119 —
Change in fair value of contingent consideration 300 (2,500) —
Total Non-GAAP Adjustments 5,536 12,784 5,963
Non-GAAP operating expenses * $ 56,382 $ 54,774 $ 45,206

*~~Non-GAAP Operating Expenses do not include adjustments for the following components of our net income: (i) additional AMTC related costs of~~ $—~~, $—, and $324 for the three months ended June 25, 2021, March 26, 2021, and June 26, 2020, respectively, and labor savings costs of~~ $—~~, $—, and $109 for the three months ended June 25, 2021, March 26, 2021, and June 26, 2020, respectively.~~

Three-Month Period Ended
June 25,
2021 March 26,
2021 June 26,
2020
(Dollars in thousands)
Reconciliation of Operating Income
GAAP Operating Income $ 32,242 $ 19,448 $ 4,532
Voxtel inventory impairment 2,835 — —
PSL and Sanken distribution agreement — 930 3,383
Stock-based compensation 4,831 2,969 445
AMTC Facility consolidation one-time costs 463 2,113 1,705
Amortization of acquisition-related intangible assets 302 310 —
COVID-19 related expenses 730 322 4,000
Impairment of long-lived assets — 7,119 —
Change in fair value of contingent consideration 300 (2,500) —
Transaction fees 23 3,727 117
Severance 168 — 337
Total Non-GAAP Adjustments $ 9,652 $ 14,990 $ 9,987
Non-GAAP Operating Income* $ 41,894 $ 34,438 $ 14,519
Non-GAAP Operating Margin* (% of net sales) 22.3 % 19.7 % 12.6 %

*~~Non-GAAP Operating Income and the corresponding calculation of non-GAAP Operating Margin do not include adjustments for the following components of our net income: (i) additional AMTC related costs of~~ $—~~, $—, and $3,398 for the three months ended June 25, 2021, March 26, 2021, and June 26, 2020, respectively, and labor savings costs of~~ $—~~, $—, and $109 for the three months ended June 25, 2021, March 26, 2021, and June 26, 2020, respectively.~~

Three-Month Period Ended
June 25,
2021 March 26,
2021 June 26,
2020
(Dollars in thousands)
Reconciliation of EBITDA and Adjusted EBITDA
GAAP Net Income $ 27,707 $ 8,689 $ 4,854
Interest expense (income), net 345 668 (313)
Income tax provision 4,263 8,361 528
Depreciation & amortization 12,172 12,082 11,539
EBITDA $ 44,487 $ 29,800 $ 16,608
Non-core (gain) loss on sale of equipment (35) 156 (38)
Voxtel inventory impairment 2,835 — —
Foreign currency translation loss (gain) 254 1,558 (132)
Income in earnings of equity investment (279) (6) (212)
Stock-based compensation 4,831 2,969 445
AMTC Facility consolidation one-time costs 463 2,113 1,705
COVID-19 related expenses 730 322 4,000
Impairment of long-lived assets — 7,119 —
Change in fair value of contingent consideration 300 (2,500) —
Transaction fees 23 3,727 117
Severance 168 — 337
PSL and Sanken distribution agreement — 930 3,383
Adjusted EBITDA* $ 53,777 $ 46,188 $ 26,213
Adjusted EBITDA Margin* (% of net sales) 28.6% 26.4% 22.8%

*~~Adjusted EBITDA and the corresponding calculation of Adjusted EBITDA Margin do not include adjustments for the following components of our net income: (i) additional AMTC related costs of~~ $—~~, $—, and $3,398 for the three months ended June 25, 2021, March 26, 2021, and June 26, 2020, respectively, and labor savings costs of~~ $—~~, $—, and $109 for the three months ended June 25, 2021, March 26, 2021, and June 26, 2020, respectively.~~

Three-Month Period Ended
June 25,
2021 March 26,
2021 June 26,
2020
(Dollars in thousands)
Reconciliation of Income before Tax Provision
GAAP Income before Tax Provision $ 31,970 $ 17,050 $ 5,382
Non-core (gain) loss on sale of equipment (35) 156 (38)
Voxtel inventory impairment 2,835 — —
Foreign currency translation loss (gain) 254 1,558 (132)
Income in earnings of equity investment (279) (6) (212)
PSL and Sanken distribution agreement — 930 3,383
Stock-based compensation 4,831 2,969 445
AMTC Facility consolidation one-time costs 463 2,113 1,705
Amortization of acquisition-related intangible assets 302 310 —
COVID-19 related expenses 730 322 4,000
Impairment of long-lived assets — 7,119 —
Change in fair value of contingent consideration 300 (2,500) —
Transaction fees 23 3,727 117
Severance 168 — 337
Total Non-GAAP Adjustments $ 9,592 $ 16,698 $ 9,605
Non-GAAP Profit before Tax* $ 41,562 $ 33,748 $ 14,987

*~~Non-GAAP Profit before Tax does not include adjustments for the following components of our net income: (i) additional AMTC related costs of~~ $—~~, $—, and $3,398 for the three months ended June 25, 2021, March 26, 2021, and June 26, 2020, respectively, labor savings costs of~~ $—~~, $—, and $109 for the three months ended June 25, 2021, March 26, 2021, and June 26, 2020, respectively.~~

Three-Month Period Ended
June 25,
2021 March 26,
2021 June 26,
2020
(Dollars in thousands)
Reconciliation of Income Tax Provision
GAAP Income Tax Provision $ 4,263 $ 8,361 $ 528
GAAP effective tax rate 13.3% 49.0% 9.8%
Tax effect of adjustments to GAAP results 2,091 (3,053) 1,808
Non-GAAP Provision for Income Taxes * $ 6,354 $ 5,308 $ 2,336
Non-GAAP effective tax rate 15.3% 15.8% 15.6%

*Non-GAAP Provision for Income Taxes does not include tax adjustments for the following components of our net income: additional AMTC related costs and labor savings costs. The related tax effect of those adjustments to GAAP results were $—~~, $— and $786 for the three months ended June 25, 2021, March 26, 2021, and June 26, 2020, respectively.~~

Three-Month Period Ended
June 25,
2021 March 26,
2021 June 26,
2020
(Dollars in thousands)
Reconciliation of Net Income
GAAP Net Income $ 27,707 $ 8,689 $ 4,854
GAAP Basic Earnings per Share $ 0.15 $ 0.05 $ 0.49
GAAP Diluted Earnings per Share $ 0.14 $ 0.05 $ 0.49
Non-core (gain) loss on sale of equipment (35) 156 (38)
Voxtel inventory impairment 2,835 — —
Foreign currency translation loss (gain) 254 1,558 (132)
Income in earnings of equity investment (279) (6) (212)
PSL and Sanken distribution agreement — 930 3,383
Stock-based compensation 4,831 2,969 445
AMTC Facility consolidation one-time costs 463 2,113 1,705
Amortization of acquisition-related intangible assets 302 310 —
COVID-19 related expenses 730 322 4,000
Impairment of long-lived assets — 7,119 —
Change in fair value of contingent consideration 300 (2,500) —
Transaction fees 23 3,727 117
Severance 168 — 337
Tax effect of adjustments to GAAP results (2,091) 3,053 (1,808)
Non-GAAP Net Income* $ 35,208 $ 28,440 $ 12,651
Basic weighted average common shares 189,585,381 189,429,893 10,000,000
Diluted weighted average common shares 191,163,074 190,860,556 10,000,000
Non-GAAP Basic Earnings per Share $ 0.19 $ 0.15 $ 1.27
Non-GAAP Diluted Earnings per Share $ 0.18 $ 0.15 $ 1.27

*~~Non-GAAP Net Income does not include adjustments for the following components of our net income: (i) additional AMTC related costs of~~ $—~~, $—, and $3,398 for the three months ended June 25, 2021, March 26, 2021, and June 26, 2020, respectively, and labor savings costs of~~ $—~~, $—, and $109 for the three months ended June 25, 2021, March 26, 2021, and June 26, 2020, respectively, and (ii) the related tax effect of adjustments to GAAP results~~ $—~~, $— and $786 for the three months ended June 25, 2021, March 26, 2021, and June 26, 2020, respectively.~~


	Three-Month Period Ended
	June 24, 2022		March 25, 2022		June 25, 2021
	(Dollars in thousands)
Reconciliation of Non-GAAP Net Income

GAAP Net Income	$	10,283	$	25,652	$	27,707
GAAP Basic Earnings per Share	$	0.05	$	0.14	$	0.15
GAAP Diluted Earnings per Share	$	0.05	$	0.13	$	0.14

Non-core (gain) loss on sale of equipment	(3)		1		(35)
Voxtel inventory impairment	—		—		2,835

Foreign currency translation (gain) loss	(1,924)		513		254
Loss (income) in earnings of equity investment	864		(215)		(279)
Unrealized loss on investments	3,486		760		—
Stock-based compensation	34,136		14,901		4,831
AMTC Facility consolidation one-time costs	96		74		463
Amortization of acquisition-related intangible assets	295		295		302
COVID-19 related expenses	—		514		730

Change in fair value of contingent consideration	(200)		100		300
Transaction fees	1,799		389		23
Severance	4,186		—		168
Tax effect of adjustments to GAAP results	(5,900)		(2,817)		(2,091)

Non-GAAP Net Income	$	47,118	$	40,167	$	35,208
Basic weighted average common shares	190,638,135		189,997,738		189,585,381
Diluted weighted average common shares	192,406,276		192,125,252		191,163,074
Non-GAAP Basic Earnings per Share	$	0.25	$	0.21	$	0.19
Non-GAAP Diluted Earnings per Share	$	0.24	$	0.21	$	0.18

Liquidity and Capital Resources

As of June ~~25, 2021,~~24, 2022, we had ~~$221.9~~$286.6 million of cash and cash equivalents and $417.2 million of working capital compared to $282.4 million of cash and cash equivalents and ~~$333.5 million of working capital compared to $197.2 million of cash and cash equivalents and $313.9~~$407.5 million of working capital as of March ~~26, 2021.~~25, 2022. Working capital is impacted by the timing and extent of our business needs.

Our primary requirements for liquidity and capital 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.~~equivalents. Our current capital deployment strategy for ~~2022~~2023 is to ~~utilize~~invest excess cash on hand to support our continued growth initiatives into select markets, ~~and~~ planned capital ~~expenditures.~~ expenditures and strategic arrangements, as well as consider potential acquisitions. As of June ~~25, 2021~~24, 2022, the Company is not party to any off-balance sheet arrangements that have 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. For information regarding the Company’s expected cash requirements and timing of payments related to ~~debt and borrowing capacity,~~ leases and noncancellable purchase commitments, ~~and pension and defined contribution plans,~~ see Note ~~15,~~17, “Commitments and Contingencies”, to the Company’s 2022 Annual Report. Additionally, refer to Note ~~12, “Debt and Other Borrowings” and Note 14,~~16, “Retirement Plans” to the Company’s ~~2021~~2022 Annual ~~Report.~~Report for more information related to the Company’s pension and defined contribution plans.

~~We have experienced and expect to continue to experience—to a smaller degree—increases in accounting, legal and professional fees and other costs associated with being a public company.~~

We believe that our existing cash ~~resources, together with the proceeds from our IPO and our access to the capital markets,~~ will be sufficient to finance our continued operations, growth strategy, planned capital expenditures and the additional expenses that we expect to incur ~~as a public company for at least~~during the next ~~twelve~~12 months. In order to support and achieve our future growth plans, we may need or seek advantageously to obtain additional funding through equity or debt financing. We believe that our current operating structure will facilitate sufficient cash flows from operations to satisfy our expected long-term liquidity requirements beyond the next ~~twelve~~12 months. If these resources are not sufficient to satisfy our liquidity requirements due to changes in circumstances, we may be required to seek additional financing. If we raise additional funds by issuing equity securities, our stockholders will experience dilution. Debt financing, if available, may contain covenants that significantly restrict our operations or our ability to obtain additional debt financing in the future. Any additional financing that we raise may contain terms that are not favorable to us or our stockholders. We cannot assure you that we would be able to obtain additional financing on terms favorable to us or our existing stockholders, or at all.

Cash Flows from Operating, Investing and Financing Activities

The following table summarizes our cash flows for the ~~nine-month periods~~three months ended June ~~25, 2021~~24, 2022 and June ~~26, 2020:~~25, 2021:


		Three-Month Period Ended					Three-Month Period Ended
		June 25, 2021		June 26, 2020			June 24, 2022		June 25, 2021
		(dollars in thousands)					(dollars in thousands)
Net cash provided by operating activities	Net cash provided by operating activities	$	38,495	$	25,666	Net cash provided by operating activities	$	36,553	$	38,495
Net cash used in investing activities	Net cash used in investing activities	(15,346)		(24,309)		Net cash used in investing activities	(14,389)		(15,346)
Net cash provided by financing activities		—		—
Net cash used in financing activities						Net cash used in financing activities	(9,137)		—
Effect of exchange rate changes on cash and cash equivalents	Effect of exchange rate changes on cash and cash equivalents	2,608		(1,269)		Effect of exchange rate changes on cash and cash equivalents	(6,554)		2,608
Net increase in cash and cash equivalents and restricted cash	Net increase in cash and cash equivalents and restricted cash	$	25,757	$	88	Net increase in cash and cash equivalents and restricted cash	$	6,473	$	25,757

Operating Activities

Net cash provided by operating activities was $36.6 million in the three months ended June 24, 2022, resulting primarily from our net income of $10.3 million and noncash charges of $44.2 million, partially offset by a net decrease in operating assets and liabilities of $17.9 million. Net changes in operating assets and liabilities consisted of a $13.1 million increase in prepaid expenses, a $4.9 million increase in inventories, a $4.7 million increase in trade accounts receivable, net, and a $3.3 million decrease in net amounts due from related parties, partially offset by a $1.2 million increase in accrued expenses and other current and long-term liabilities, a $4.1 million increase in trade accounts payable and a $2.7 million decrease in other accounts receivable. The increase in prepaid expenses and other assets was primarily due to higher long-term deposits and the timing of tax payments, including value-added taxes receivable, insurance and contract costs. The increase in inventories was primarily the result of inventory builds to support anticipated sales growth in fiscal 2023. The increase in trade accounts receivable, net was primarily a result of increased sales year-over-year, as well as the timing of receipts from customers. The decrease in net amounts due to related parties 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, partially offset by higher management incentive payments. Accounts payable increased mainly due to the timing of payments to suppliers and vendors, partially offset by higher operating purchases, including unpaid capital expenditures of $2.6 million. The decrease in accounts receivable - other was primarily due to increased distributor sales year-over-year, as well as the timing of receipts from Sanken.

Net cash provided by operating activities was $38.5 million in the three months ended June 25, 2021, resulting primarily from our net income of $27.7 million and noncash charges of $17.5 million, partially offset by a net decrease in operating assets and liabilities of $6.7 million. Net changes in operating assets and liabilities consisted of a $10.0 million increase in trade accounts receivable, net, ~~and~~ a $2.4 million decrease in accrued expenses and other current and long-term liabilities and a $3.0 million decrease in trade accounts payable, partially offset by a $5.1 million decrease in inventories, a $1.7 million decrease in prepaid expenses, and a $1.9 million increase in net amounts due from related parties. TheThe increase in trade accounts receivable, net was primarily a result of increased sales year-over-year,, as well as the timing of receipts from ~~customers~~. customers. The decrease in accrued expenses and other current and long-term liabilities was primarily the result of management incentive payments, partially offset by higher accrued personnel costs. Accounts payable ~~decrease~~ddecreased mainly due to the timing of payments to suppliers and vendors, partially offset by higher operating purchases, including unpaid capital expenditures of ~~$5.5 million~~.$5.5 million. The decrease in inventories was primarily a result of the continued drawdown after building inventory up in prior periods to support anticipated sales growth and recovery from the COVID-19 pandemic. The decrease in prepaid expenses and other assets ~~were~~was primarily due to the timing of tax payments, including value-added taxes receivable,

insurance and contract costs. The increase in net amounts due to related parties was primarily due to variations in the timing of such payments in the ordinary course of business.

Net cash provided by operating activities was $25.7 million in three-month period ended June 26, 2020, resulting primarily from our net income of $4.9 million and non-cash charges of $11.2 million, partially offset by net changes in operating assets and liabilities of $9.6 million. Net changes in operating assets and liabilities consisted of a decrease of $3.6 million in due from/to related parties, a $4.8 million increase in trade accounts payable, a $13.4 million decrease in trade accounts receivable, net, a $5.2 million decrease in prepaid expenses and other assets, partially offset by a $15.0 million increase in inventories, a $1.6 million decrease in accrued expenses and other current and long-term liabilities, and a $0.7

million increase in accounts receivable – other. The decrease in prepaid expenses and other assets was primarily due to the impact of the non-cash removal of PSL-related assets of $5.2 million and a decrease of short-term prepaid arrangements of $2.0 million, partially offset by an increase of deferred IPO costs of $0.4 million and an increase of $0.9 million in other assets due to long-term prepaid contracts. Trade accounts payable were impacted by the non-cash removal of PSL-related liabilities of $4.2 million, with the difference due to timing of such payments in the ordinary course of business. The $15.0 million inventory increase is the result of the $18.8 million reduction in balances from March 27, 2020, adjusted for a $32.2 million impact of the non-cash removal of PSL and Sanken distribution business related assets and $1.6 million of non-cash inventory provisions. The decrease in accrued expenses and other current and long-term liabilities is primarily due to the impact of the non-cash removal of PSL-related liabilities of $7.6 million, partially offset by non-cash $6.0 million of deferred taxes. Trade accounts receivable, net, accounts receivable – other, due from/to related parties was primarily due to variations in the timing of such payments in the ordinary course of business.

Investing Activities

Net cash used in investing activities primarily consists of purchases ~~and sales~~ of property, plant and equipment, partially offset by proceeds from sales of property, plant and ~~equipment. We expect our multi-year transition from an integrated device manufacturer to our current fabless, asset-lite manufacturing model, including the completion of the PSL Divestiture, will result~~equipment.

Net cash used in ~~a decrease in capital expenditures~~investing activities was $14.4 million in the ~~future.~~three months ended June 24, 2022, consisting of purchases of property, plant and equipment.

Net cash used in investing activities was $15.3 million in the three months ended June 25, 2021, consisting of purchases of property, plant and equipment.

Financing Activities

Net cash used in ~~investing~~financing activities was ~~$24.3~~$9.1 million in the three months ended June 24, 2022, consisting of taxes related to the net settlement of equity awards, partially offset by proceeds received related to the quarterly payment from PSL on our related party loan.

There was no net cash used in financing activities in the three months ended June 26, 2020, consisting of $8.0 million of purchases of property, plant and equipment and $16.3 million of cash removed as a result of the PSL Divestiture. The $8.0 million change is the result of a change in property, plant and equipment, net of $113.2 million, the impact of the non-cash removal of PSL-related assets of $115.3 million, depreciation of $10.8 million and non-cash purchases in accounts payable of $0.3 million, partially offset by foreign exchange impact of $5.2 million.

~~Financing Activities~~

~~Net cash provided by financing activities was $— in each of the three months ended~~ June 25, 2021 ~~and June 26, 2020.~~.

Debt Obligations

On September 30, 2020, we entered into a term loan credit agreement with Credit Suisse AG, Cayman Islands Branch, as administrative agent and collateral agent, and the other agents, arrangers and lenders party thereto, providing for a $325.0 million senior secured term loan facility due in 2027 (the “Term Loan Facility”). On September 30, 2020, we also entered into a revolving facility credit agreement with Mizuho Bank, Ltd., as administrative agent and collateral agent, and the other agents, arrangers and lenders party thereto, providing for a $50.0 million senior secured revolving credit facility expiring in 2023 (the “Revolving Credit Facility” and, together with the Term Loan Facility, the “Senior Secured Credit Facilities”). As of June ~~25, 2021,~~24, 2022, we had $25.0 million in aggregate principal amount of debt outstanding under our Senior Secured Credit Facilities.

~~Description of Credit Facilities~~

~~Term Loan Facility~~

~~The Term Loan Facility bears interest at a rate per year of, at~~ There were no material changes in our ~~option, either (i) the Base Rate (as defined~~debt obligations from those disclosed in ~~the credit agreement) plus an applicable margin from 2.75% to 3.00% depending on~~ our net leverage ratio, or (ii) the Eurodollar Rate (as defined in the credit agreement) plus an applicable margin from 3.75% to 4.00% depending on our net leverage ratio. The Eurodollar Rate is subject to a floor of 0.50%. At June 25, 2021, all term loan borrowings were designated as Eurodollar loans and bore interest of 4.25%.

~~We incurred deferred financing costs of~~ ~~$9.4 million~~ ~~in connection with the Term Loan Facility, the total of which was amortized into interest expense or recognized as loss on debt extinguishment as of March 26, 2021.~~

~~The Term Loan Facility contains certain covenants that may, among other things and subject to certain exceptions, restrict the ability of us to:~~

•~~create, incur, assume or suffer to exist any lien upon any of its property, assets, or revenue;~~

•~~create, incur, or assume indebtedness;~~

•~~merge, consolidate or amalgamate with or into any other entity;~~

•~~purchase or otherwise acquire all or substantially all of the assets, liabilities or properties of any other entity;~~

•~~sell, lease, transfer or otherwise dispose of all or substantially all of its assets or properties;~~

•~~enter into transactions with affiliates;~~

•~~pay dividends or make other distributions; or~~

•~~change the nature of its business activities, its fiscal year, or its governing documents.~~

Borrowings under the Term Loan Facility are secured by 100% of the stock of our domestic subsidiaries, portions of the stock of certain of our foreign subsidiaries, and substantially all of our and our subsidiaries’ other property and assets, in each case subject to various exceptions.

We may be required to make mandatory prepayments of the Term Loan Facility if we have Excess Cash Flow (as defined in the credit agreement) if we make certain sales of assets outside the ordinary course of business, or if we suffer certain property loss events. We may make optional prepayments from time to time without premium or penalty.

~~Revolving Credit Facility~~

The Revolving Credit Facility bears interest at a rate per year of, at our option, the Base Rate plus 1.5%, the Cost of Funds Rate (as defined in the credit agreement) plus 2.5%, or the Eurodollar Rate plus 2.5%.In addition, commencing on the last business day of December 2020, we are required to pay, on a quarterly basis, a non-refundable commitment fee of 0.50% per year on the average daily unused commitments under the Revolving Credit Facility.

~~We incurred financing costs of~~ ~~$0.3 million~~ in connection with the Revolving Credit Facility, which we classified the related short-term and long-term portions within Prepaid expenses and other current assets and Other assets on our unaudited consolidated balance sheet and are amortizing these costs over the term of the facility. The unamortized portion of the deferred financing costs associated with the~~Revolving Credit Facility was~~ ~~$0.2 million at June 25, 2021~~.

The Revolving Credit Facility contains certain financial and non-financial covenants, including a maximum net leverage ratio applicable to the Revolving Credit Facility in the event that utilization exceeds 35% of the revolving loan commitment.

Borrowings under the Revolving Credit Facility are secured by 100% of the stock of our domestic subsidiaries, portions of the stock of certain of our foreign subsidiaries, and substantially all of our subsidiaries’ other property and assets, in each case subject to various exceptions.2022 Annual Report.

AMPI Credit Facilities

~~On November 26, 2019, AMPI entered into a~~Refer to Note 10, “Debt and Other Borrowings” for information regarding the line of credit ~~agreement with Union Bank of the Philippines, Inc. that provides for a maximum borrowing capacity of 60.0 million~~agreements in our Philippine ~~pesos (approximately $1.2 million) at the bank’s prevailing interest rate. The line of credit expires on August 31, 2021.~~

On November 20, 2019, AMPI entered into a line of credit agreement with BDO Unibank that provides for a maximum borrowing capacity of 75.0 million Philippine pesos (approximately $1.5 million) at the bank’s prevailing interest rate. The line of credit expired on June 30, 2021, subsequent to that date, due to delays as a result of the current pandemic situation and its impact with the bank operations. The bank notified the Company of an extension up to September 28, 2021 for all paperwork to be processed.location.

Recent Accounting Pronouncements

See Note 2, “Summary of Significant Accounting Policies” in the unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report for a full description of recent accounting pronouncements, including the respective dates of adoption or expected adoption and effects on our condensed consolidated financial statements contained in Item 1 of this Quarterly Report.

Critical Accounting ~~Policies and~~ Estimates

The preparation of financial statements in conformity with ~~accounting principles generally accepted in the United States (“~~U.S. ~~GAAP”)~~GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, and disclosures of contingencies at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Our significant accounting policies are described in Note 2, “Summary of Significant Accounting Policies” to our consolidated financial statements included in our ~~2021~~2022 Annual Report. There have been no material changes in our critical accounting policies and estimates since March ~~26, 2021.~~25, 2022.

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

There have been no material changes in our exposures to market risk since March ~~26, 2021.~~25, 2022. For details on the Company’s interest rate, foreign currency exchange, and inflation risks, see ~~“Item~~“Part I, Item 7A. ~~Quantitative~~“Quantitative and Qualitative Information About Market Risks” in our ~~2021~~2022 Annual Report.

Item 4. Controls and Procedures.

Limitations on Effectiveness of Controls and Procedures

In designing and evaluating our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act), management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. In addition, the design of disclosure controls and procedures must reflect the fact that there are resource constraints and that management is required to apply judgment in evaluating the benefits of possible controls and procedures relative to their costs.

Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our Chief Executive Officer and ~~Senior Vice President,~~ Chief Financial Officer ~~and Treasurer~~ (our principal executive officer and principal financial officer, respectively), evaluated the effectiveness of our disclosure controls and procedures ~~(as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act)~~ as of June ~~25, 2021.~~24, 2022. Based on the evaluation of our disclosure controls and procedures as of June ~~25, 2021,~~24, 2022, our Chief Executive Officer and Chief Financial Officer concluded that, as of such date, our disclosure controls and procedures were effective at the reasonable assurance level.

Changes in Internal Control over Financial Reporting

There ~~was~~were no ~~change~~changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15(d)-15(f) under the Exchange Act) that occurred during the period covered by this Quarterly Report that ~~has~~have materially affected, or isare reasonably likely to materially affect, our internal control over financial reporting.

4841

PART II—OTHER INFORMATION

Item 1. Legal Proceedings.

From time to time, we may be involved in claims and proceedings arising in the ordinary course of our business. The outcome of any such claims or proceedings, regardless of the merits, is inherently uncertain. We are not currently party to any material legal proceedings, and we are not aware of any pending or threatened legal proceeding against us that we believe could have a material adverse effect on our business, operating results, cash flows or financial condition.

Item 1A. Risk Factors.

~~There have been no material changes to~~The information presented below updates, and should be read in conjunction with, the risk factors in Part I, Item 1A. “Risk Factors” ~~disclosed~~ in ~~Item 1A of our 2021~~the Company’s 2022 Annual Report. Except as presented below. There were no other significant changes in the Company’s risk factors during the quarter ended June 24, 2022.

Sustained inflation could have a material adverse effect on our business, financial condition, results of operations and liquidity.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

None.

Item 3. Defaults Upon Senior Securities.

None.

Item 4. Mine Safety Disclosures.

Not applicable.

Item 5. Other Information.

None.

4942

Item 6. Exhibits

(a) Exhibits

Exhibit No.

Description of Exhibit

10.1

~~Addendum~~Second Amended and Restated Severance Agreement, dated May 6, 2022, by and between Allegro MicroSystems, Inc . and Ravi Vig (incorporated by reference from Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on May 9, 2022).*

10.2

Letter Agreement, dated May 6, 2022, between Allegro MicroSystems, Inc. and Ravi Vig (incorporated by reference from Exhibit 10.2 to the Company’s Current Report on Form 8-K filed on May 9, 2022).*

10.3

Employment Agreement, dated May 2, 2022, by and between Allegro MicroSystems, Inc. and Vineet Nargolwala (incorporated by reference from Exhibit 10.3 to the Company’s Current Report on Form 8-K filed on May 9, 2022).*

10.4

Separation Agreement and General Release, dated December 17, 2021, by and between Allegro MicroSystems, Inc. and Christopher Brown.*

10.5

Amended and Restated Stockholders Agreement of Allegro MicroSystems, Inc., dated as of June ~~30, 2021, by and among Allegro MicroSystems, Inc., OEP SKNA, L.P. and Sanken Electric Co., Ltd.~~16, 2022 (incorporated by reference tofrom Exhibit 10.1 ~~of Allegro MicroSystems Inc.’s~~to the Company’s Current Report on Form 8-K filed on ~~July 1, 2021)~~June 21, 2022).

31.1

Certification of Principal Executive Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2

Certification of Principal Financial Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1

Certification of Principal Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

32.2

Certification of Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

101.INS

Inline XBRL Instance Document. The instance document does not appear in the interactive data file because its XBRL tags are embedded within the inline XBRL document.

101.SCH

Inline XBRL Taxonomy Extension Schema Document.

101.CAL

Inline XBRL Taxonomy Extension Calculation Linkbase Document.

101.DEF

Inline XBRL Taxonomy Extension Definition Linkbase Document.

101.LAB

Inline XBRL Taxonomy Extension Label Linkbase Document.

101.PRE

Inline XBRL Taxonomy Extension Presentation Linkbase Document.

104

Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101 filed herewith).

* Indicates management contract or compensatory plan, contract or arrangement.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


	ALLEGRO MICROSYSTEMS, INC.

Date: ~~July 30, 2021~~August 1, 2022	By:	/s/ ~~Ravi Vig~~Vineet Nargolwala
		~~Ravi Vig~~Vineet Nargolwala
		President and Chief Executive Officer (principal executive officer)

Date: ~~July 30, 2021~~August 1, 2022	By:	/s/ ~~Paul V. Walsh, Jr.~~Derek P. D’Antilio
		~~Paul V. Walsh, Jr.~~Derek P. D’Antilio
		Senior Vice President, Chief Financial Officer and Treasurer (principal financial and accounting officer)

5144


	June 25, 2021 (Unaudited)		March 26, 2021
Assets
Current assets:
Cash and cash equivalents	$	221,934	$	197,214
Restricted cash	7,698		6,661
Trade accounts receivable, net of provision for expected credit losses of $773 at June 25, 2021 and allowance for doubtful accounts of $138 at March 26, 2021	77,843		69,500
Trade and other accounts receivable due from related party	23,657		23,832
Accounts receivable – other	1,613		1,516
Inventories	82,356		87,498
Prepaid expenses and other current assets	12,117		18,374
Assets held for sale	25,309		25,969
Total current assets	452,527		430,564
Property, plant and equipment, net	196,993		192,393
Operating lease right-of-use assets	17,439		0
Deferred income tax assets	20,268		26,972
Goodwill	20,118		20,106
Intangible assets, net	36,301		36,366
Equity investment in related party	26,943		26,664
Other assets, net	26,298		14,613
Total assets	$	796,887	$	747,678
Liabilities, Non-Controlling Interest and Stockholders' Equity
Current liabilities:
Trade accounts payable	$	34,704	$	35,389
Amounts due to related party	4,095		2,353
Accrued expenses and other current liabilities	76,771		78,932
Current portion of operating lease liabilities	3,463		0



Total current liabilities	119,033		116,674
Obligations due under Senior Secured Credit Facilities	25,000		25,000
Operating lease liabilities, less current portion	14,231		0

Other long-term liabilities	19,244		19,133
Total liabilities	177,508		160,807
Commitments and contingencies (Note 15)	0		0
Stockholders' Equity:

Preferred Stock, $0.01 par value; 20,000,000 shares authorized, 0 shares issued or outstanding at June 25, 2021 and March 26, 2021	0		0
Common stock, $0.01 par value; 1,000,000,000 shares authorized, 189,581,621 shares issued and outstanding at June 25, 2021; 1,000,000,000 shares authorized, 189,588,161 issued and outstanding at March 26, 2021	1,896		1,896


Additional paid-in capital	597,001		592,170
Retained earnings	31,220		3,551
Accumulated other comprehensive loss	(11,865)		(11,865)
Equity attributable to Allegro MicroSystems, Inc.	618,252		585,752
Non-controlling interests	1,127		1,119
Total stockholders' equity	619,379		586,871
Total liabilities, non-controlling interest and stockholders' equity	$	796,887	$	747,678


	Common Stock, Class A				Common Stock, Class L			Preferred Stock			Common Stock			Additional Paid-In Capital		Retained Earnings		Accumulated Other Comprehensive Loss		Non-Controlling Interests		Total Equity
	Shares		Amount		Shares	Amount		Shares	Amount		Shares	Amount
Balance at March 27, 2020	10,000,000		$	100	622,470	$	6	—	$	—	0	$	0	$	458,697	$	194,355	$	(19,976)	$	950	$	634,132
Net income	—		—		—	—		—	—		—	—		—		4,820		—		34		4,854
Issuance of Class L shares, net of forfeitures	—		—		15,828	—		—	—		—	—		—		—		—		—		—
Capitalization changes related to organizational structure of affiliates and direct and indirect interests in subsidiaries	—		—		—	—		—	—		—	—		(19,165)		—		—		—		(19,165)
Reclassification of certain class L shares	—		—		—	—		—	—		—	—		(298)		—		—		—		(298)
Stock-based compensation	—		—		—	—		—	—		—	—		445		—		—		—		445





Foreign currency translation adjustment	—		—		—	—		—	—		—	—		—		—		4,287		(7)		4,280
Net actuarial loss and amortization of net transition obligation and prior service costs related to defined benefit plans, net of tax	—		—		—	—		—	—		—	—		—		—		(313)		—		(313)
Balance at June 26, 2020	10,000,000	—	$	100	638,298	$	6	—	$	—	0	$	0	$	439,679	$	199,175	$	(16,002)	$	977	$	623,935


Description	Allowance for Doubtful Accounts		Returns and Sales Allowances		Total
Balance at March 26, 2021	$	138	$	15,274	$	15,412
Charged to costs and expenses or revenue	635		40,582		41,217
Write-offs, net of recoveries	0		(42,830)		(42,830)
Balance at June 25, 2021	$	773	$	13,026	$	13,799


	March 26, 2021
Description	Gross		Accumulated Amortization		Net Carrying Amount		Weighted- Average Lives
Patents	$	32,751	$	12,307	$	20,444	10 years
Customer relationships	6,193		5,865		328		9 years
Process technology	13,100		651		12,449		12 years
Indefinite-lived and legacy process technology	4,050		1,650		2,400
Trademarks	200		24		176		5 years
Legacy trademarks	627		58		569
Other	32		32		0
Total	$	56,953	$	20,587	$	36,366


Remainder of 2022	$	3,149
2023	3,694
2024	3,296
2025	3,021
2026	2,639
Thereafter	4,496
Total undiscounted lease payments	$	20,295
Less: present value adjustment	(2,601)
Total operating lease liabilities	$	17,694


2022	$	2,887
2023	2,726
2024	2,644
2025	2,172
2026	1,773
Thereafter	3,713
Total	$	15,915


	Fair Value at June 25, 2021		Level 1		Level 2		Level 3
Assets of non-U.S. defined benefit plan:
Government securities	$	1,832	$	1,832	$	0	$	0
Unit investment trust fund	1,079		0		1,079		0
Loans	633		0		0		633
Bonds	983		0		983		0
Stocks and other investments	2,568		1,436		2		1,130
Total	$	7,095	$	3,268	$	2,064	$	1,763


	Fair Value at March 26, 2021		Level 1		Level 2		Level 3
Assets of non-U.S. defined benefit plan:
Government securities	$	1,646	$	1,646	$	0	$	0
Unit investment trust fund	1,221		0		1,221		0
Loans	584		0		0		584
Bonds	1,112		0		1,112		0
Stocks and other investments	3,081		1,947		1		1,133
Total	$	7,644	$	3,593	$	2,334	$	1,717