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 DecemberJune 24, 20212022
or
| | | | | |
| ☐ | 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 Namename of Registrantregistrant as Specifiedspecified 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 registrantregistrant: (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 January 19,July 22, 2022, the registrant had 189,913,804 shares191,269,633 shares of common stock, $0.01 par value per share, outstanding.
TABLE OF CONTENTS
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, 202125, 2022 (the “2021“2022 Annual Report”) and Part II, Item 1A., “Risk Factors” of our subsequently filed Quarterly Reports on Form 10-Q.. 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 pricesreliance 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 ability to protect our proprietary technologydependence on international customers and inventions through patents or trade secrets;operations;
•our ability to commercialize our products without infringing third-party intellectual property rights;
•disruptions or breachesthe availability of our information technology systems;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;
•our dependence on international customers and operations;
•the availability of rebates, tax credits and other financial incentives on end-user demands for certain products;
•the volatility of currency exchange rates;
•risks related to acquisitions of and investments in new businesses, products or technologies, joint ventures and other strategic transactions;
•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 or those of our third-party service providers;
•our principal stockholders have substantial control over us;
•the inapplicability of the “corporate opportunity” doctrine to any director or stockholder who is not employed by us;
•the dilutive impact on the price of our shares upon future issuance by us or future sales by our stockholders;
•our lack of intent to declare or pay dividends for the foreseeable future;
•anti-takeover provisions in our organizational documents and General Corporation Law of the State of Delaware;
•the exclusive forum provision in our Certificate of Incorporation for disputes with stockholders;
•our inability to design, implement or maintain effective internal control over financial reporting;
•changes in tax rates or the adoption of new tax legislation;
•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)
| | | | | | | | | | | |
| December 24, 2021 (Unaudited) | | March 26,
2021 |
| Assets | | | |
| Current assets: | | | |
| Cash and cash equivalents | $ | 259,208 | | | $ | 197,214 | |
| Restricted cash | 7,497 | | | 6,661 | |
| Trade accounts receivable, net of provision for expected credit losses of $70 at December 24, 2021 and allowance for doubtful accounts of $138 at March 26, 2021 | 76,235 | | | 69,500 | |
| Trade and other accounts receivable due from related party | 28,305 | | | 23,832 | |
| Accounts receivable – other | 1,485 | | | 1,516 | |
| Inventories | 78,858 | | | 87,498 | |
| Prepaid expenses and other current assets | 16,198 | | | 18,374 | |
| Current portion of related party note receivable | 1,406 | | | — | |
| Assets held for sale | — | | | 25,969 | |
| Total current assets | 469,192 | | | 430,564 | |
| Property, plant and equipment, net | 207,705 | | | 192,393 | |
| Operating lease right-of-use assets | 15,922 | | | — | |
| Deferred income tax assets | 20,942 | | | 26,972 | |
| Goodwill | 20,043 | | | 20,106 | |
| Intangible assets, net | 35,985 | | | 36,366 | |
| Related party note receivable, less current portion | 6,094 | | | — | |
| Equity investment in related party | 27,456 | | | 26,664 | |
| Other assets, net | 48,078 | | | 14,613 | |
| Total assets | $ | 851,417 | | | $ | 747,678 | |
| Liabilities, Non-Controlling Interest and Stockholders’ Equity | | | |
| Current liabilities: | | | |
| Trade accounts payable | $ | 34,189 | | | $ | 35,389 | |
| Amounts due to related party | 4,051 | | | 2,353 | |
| Accrued expenses and other current liabilities | 59,262 | | | 78,932 | |
| Current portion of operating lease liabilities | 3,339 | | | — | |
| | | |
| | | |
| | | |
| Total current liabilities | 100,841 | | | 116,674 | |
| Obligations due under Senior Secured Credit Facilities | 25,000 | | | 25,000 | |
| Operating lease liabilities, less current portion | 12,907 | | | — | |
| | | |
| Other long-term liabilities | 16,830 | | | 19,133 | |
| Total liabilities | 155,578 | | | 160,807 | |
| Commitments and contingencies (Note 16) | 0 | | 0 |
| Stockholders’ Equity: | | | |
| | | |
| Preferred Stock, $0.01 par value; 20,000,000 shares authorized, no shares issued or outstanding at December 24, 2021 and March 26, 2021 | — | | | — | |
| Common stock, $0.01 par value; 1,000,000,000 shares authorized, 189,797,145 shares issued and outstanding at December 24, 2021; 1,000,000,000 shares authorized, 189,588,161 issued and outstanding at March 26, 2021 | 1,898 | | | 1,896 | |
| | | |
| | | |
| Additional paid-in capital | 612,106 | | | 592,170 | |
| Retained earnings | 97,342 | | | 3,551 | |
| Accumulated other comprehensive loss | (16,677) | | | (11,865) | |
| Equity attributable to Allegro MicroSystems, Inc. | 694,669 | | | 585,752 | |
| Non-controlling interests | 1,170 | | | 1,119 | |
| Total stockholders’ equity | 695,839 | | | 586,871 | |
| Total liabilities, non-controlling interest and stockholders’ equity | $ | 851,417 | | | $ | 747,678 | |
| | | | | | | | | | | |
| 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 | | Nine-Month Period Ended | | Three-Month Period Ended | |
| | December 24,
2021 | | December 25,
2020 | | December 24,
2021 | | December 25,
2020 | | June 24,
2022 | | June 25,
2021 | |
| Net sales | Net sales | $ | 147,168 | | | $ | 138,010 | | | $ | 456,302 | | | $ | 343,529 | | Net sales | $ | 176,044 | | | $ | 152,689 | | |
| Net sales to related party | Net sales to related party | 39,461 | | | 26,439 | | | 112,079 | | | 72,570 | | Net sales to related party | 41,709 | | | 35,453 | | |
| Total net sales | Total net sales | 186,629 | | | 164,449 | | | 568,381 | | | 416,099 | | Total net sales | 217,753 | | | 188,142 | | |
| Cost of goods sold | 85,464 | | | 90,024 | | | 270,524 | | | 224,203 | | |
| Cost of goods sold (Note17) | | Cost of goods sold (Note17) | 99,379 | | | 93,982 | | |
| Gross profit | Gross profit | 101,165 | | | 74,425 | | | 297,857 | | | 191,896 | | Gross profit | 118,374 | | | 94,160 | | |
| Operating expenses: | Operating expenses: | | Operating expenses: | | |
| Research and development | Research and development | 30,297 | | | 30,999 | | | 89,441 | | | 80,509 | | Research and development | 33,857 | | | 29,554 | | |
| Selling, general and administrative | Selling, general and administrative | 37,963 | | | 67,650 | | | 104,115 | | | 118,677 | | Selling, general and administrative | 69,980 | | | 32,064 | | |
| | Change in fair value of contingent consideration | Change in fair value of contingent consideration | (2,700) | | | — | | | (2,100) | | | — | | Change in fair value of contingent consideration | (200) | | | 300 | | |
| Total operating expenses | Total operating expenses | 65,560 | | | 98,649 | | | 191,456 | | | 199,186 | | Total operating expenses | 103,637 | | | 61,918 | | |
| Operating income (loss) | 35,605 | | | (24,224) | | | 106,401 | | | (7,290) | | |
| Operating income | | Operating income | 14,737 | | | 32,242 | | |
| Other income (expense): | Other income (expense): | | Other income (expense): | | |
| Loss on debt extinguishment | — | | | (9,055) | | | — | | | (9,055) | | |
| | Interest expense, net | Interest expense, net | (269) | | | (2,598) | | | (1,764) | | | (1,935) | | Interest expense, net | (120) | | | (345) | | |
| Foreign currency transaction loss | (3) | | | (145) | | | (55) | | | (1,331) | | |
| Income in earnings of equity investment | 287 | | | 949 | | | 792 | | | 1,407 | | |
| 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 | 3,634 | | | (510) | | | 5,216 | | | (297) | | Other, net | (3,429) | | | 48 | | |
| Income (loss) before income tax provision (benefit) | 39,254 | | | (35,583) | | | 110,590 | | | (18,501) | | |
| Income tax provision (benefit) | 6,281 | | | (30,523) | | | 16,687 | | | (27,913) | | |
| Net income (loss) | 32,973 | | | (5,060) | | | 93,903 | | | 9,412 | | |
| Income before income taxes | | Income before income taxes | 12,248 | | | 31,970 | | |
| Income tax provision | | Income tax provision | 1,965 | | | 4,263 | | |
| Net income | | Net income | 10,283 | | | 27,707 | | |
| Net income attributable to non-controlling interests | Net income attributable to non-controlling interests | 37 | | | 35 | | | 112 | | | 103 | | Net income attributable to non-controlling interests | 36 | | | 38 | | |
| Net income (loss) attributable to Allegro MicroSystems, Inc. | $ | 32,936 | | | $ | (5,095) | | | $ | 93,791 | | | $ | 9,309 | | |
| Net income (loss) attributable to Allegro MicroSystems, Inc. per share (Note 17): | | | | | | | | |
| Net income attributable to Allegro MicroSystems, Inc. | | Net income attributable to Allegro MicroSystems, Inc. | $ | 10,247 | | | $ | 27,669 | | |
| Net income attributable to Allegro MicroSystems, Inc. per share: | | Net income attributable to Allegro MicroSystems, Inc. per share: | | | | |
| Basic | Basic | $ | 0.17 | | | $ | (0.04) | | | $ | 0.49 | | | $ | 0.19 | | Basic | $ | 0.05 | | | $ | 0.15 | | |
| Diluted | Diluted | $ | 0.17 | | | $ | (0.04) | | | $ | 0.49 | | | $ | 0.05 | | Diluted | $ | 0.05 | | | $ | 0.14 | | |
| Weighted average shares outstanding: | Weighted average shares outstanding: | | | | | | | | Weighted average shares outstanding: | | | | |
| Basic | Basic | 189,736,901 | | | 124,363,078 | | | 189,665,324 | | | 48,121,026 | | Basic | 190,638,135 | | | 189,585,381 | | |
| Diluted | Diluted | 192,068,222 | | | 124,363,078 | | | 191,678,951 | | | 171,638,787 | | 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 | | Nine-Month Period Ended |
| December 24,
2021 | | December 25,
2020 | | December 24,
2021 | | December 25,
2020 |
| Net income (loss) | $ | 32,973 | | | $ | (5,060) | | | $ | 93,903 | | | $ | 9,412 | |
| Net income attributable to non-controlling interest | 37 | | | 35 | | | 112 | | | 103 | |
| Net income (loss) attributable to Allegro MicroSystems, Inc. | 32,936 | | | (5,095) | | | 93,791 | | | 9,309 | |
| Other comprehensive (loss) income: | | | | | | | |
| Foreign currency translation adjustment | (1,306) | | | 3,972 | | | (4,873) | | | 10,152 | |
| Net actuarial loss amortization of net transition obligation and prior service costs related to defined benefit plans, net of tax | — | | | — | | | — | | | (313) | |
| Comprehensive income (loss) | 31,630 | | | (1,123) | | | $ | 88,918 | | | $ | 19,148 | |
| Other comprehensive (income) loss attributable to non-controlling interest | (3) | | | (10) | | | 61 | | | (34) | |
| Comprehensive income (loss) attributable to Allegro MicroSystems, Inc. | $ | 31,627 | | | $ | (1,133) | | | $ | 88,979 | | | $ | 19,114 | |
| | | | | | | | | | | | | | | |
| Three-Month Period Ended | | |
| June 24,
2022 | | June 25,
2021 | | | | |
| Net income | $ | 10,283 | | | $ | 27,707 | | | | | |
| Net income attributable to non-controlling interest | 36 | | | 38 | | | | | |
| Net income attributable to Allegro MicroSystems, Inc. | 10,247 | | | 27,669 | | | | | |
| Other comprehensive loss: | | | | | | | |
| Foreign currency translation adjustment | (6,818) | | | (30) | | | | | |
| | | | | | | |
| Comprehensive income | 3,429 | | | 27,639 | | | | | |
| Other comprehensive loss attributable to non-controlling interest | 68 | | | 30 | | | | | |
| 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)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | 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 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| 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 September 25, 2020 | 10,000,000 | | | $ | 100 | | | 638,298 | | | $ | 6 | | | | — | | | $ | — | | | — | | | $ | — | | | $ | 439,732 | | | $ | 208,759 | | | $ | (14,133) | | | $ | 1,042 | | | $ | 635,506 | |
| Net (loss) income | — | | | — | | | — | | | — | | | | — | | | — | | | — | | | — | | | — | | | (5,095) | | | — | | | 35 | | | (5,060) | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| Capitalization changes related to organizational structure of affiliates and direct and indirect interests in subsidiaries | — | | | — | | | — | | | — | | | | — | | | — | | | — | | | — | | | 527 | | | — | | | — | | | — | | | 527 | |
| Reclassification of certain class L shares | — | | | — | | | — | | | — | | | | — | | | — | | | — | | | — | | | 298 | | | — | | | — | | | — | | | 298 | |
| Stock-based compensation | — | | | — | | | — | | | — | | | | — | | | — | | | — | | | — | | | 45,876 | | | — | | | — | | | — | | | 45,876 | |
| Issuance of common stock in connection with IPO, net of underwriting discounts and other offering costs | — | | | — | | | — | | | — | | | | — | | | — | | | 25,000,000 | | | 250 | | | 321,175 | | | — | | | — | | | — | | | 321,425 | |
| Conversion of Class A and Class L common stock into common stock in connection with the IPO | (10,000,000) | | | (100) | | | (636,301) | | | (6) | | | | — | | | — | | | 166,500,000 | | | 1,665 | | | (1,559) | | | — | | | — | | | — | | | — | |
| Repurchase of Class A and Class L common stock to cover related taxes | — | | | — | | | (1,997) | | | — | | | | — | | | — | | | (2,068,274) | | | (21) | | | (27,686) | | | — | | | — | | | — | | | (27,707) | |
| Conversion of LTCIP/TRIP awards into restricted stock units in connection with the IPO | — | | | — | | | — | | | — | | | | — | | | — | | | — | | | — | | | 2,081 | | | — | | | — | | | — | | | 2,081 | |
| Cash dividend paid to holders of Class A common stock | — | | | — | | | — | | | — | | | | — | | | — | | | — | | | — | | | (191,242) | | | (208,758) | | | — | | | — | | | (400,000) | |
| Foreign currency translation adjustment | — | | | — | | | — | | | — | | | | — | | | — | | | — | | | — | | | — | | | — | | | 3,962 | | | 10 | | | 3,972 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| Balance at December 25, 2020 | — | | | $ | — | | | — | | | $ | — | | | | — | | | $ | — | | | 189,431,726 | | | $ | 1,894 | | | $ | 589,202 | | | $ | (5,094) | | | $ | (10,171) | | | $ | 1,087 | | | $ | 576,918 | |
ALLEGRO MICROSYSTEMS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY - (continued)
(in thousands, except share amounts)
(Unaudited)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | 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 September 24, 2021 | | | | | | | | | | — | | | $ | — | | | 189,702,550 | | | $ | 1,897 | | | $ | 604,488 | | | $ | 64,406 | | | $ | (15,368) | | | $ | 1,130 | | | $ | 656,553 | |
| Net income | | | | | | | | | | — | | | — | | | — | | | — | | | — | | | 32,936 | | | — | | | 37 | | | 32,973 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| Stock-based compensation, net of forfeitures | | | | | | | | | | — | | | — | | | 94,595 | | | 1 | | | 7,618 | | | — | | | — | | | — | | | 7,619 | |
| Foreign currency translation adjustment | | | | | | | | | | — | | | — | | | — | | | — | | | — | | | — | | | (1,309) | | | 3 | | | (1,306) | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| Balance at December 24, 2021 | | | | | | | | | | — | | | $ | — | | | 189,797,145 | | | $ | 1,898 | | | $ | 612,106 | | | $ | 97,342 | | | $ | (16,677) | | | $ | 1,170 | | | $ | 695,839 | |
ALLEGRO MICROSYSTEMS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY - (continued)
(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 | | | | — | | | $ | — | | | — | | | $ | — | | | $ | 458,697 | | | $ | 194,355 | | | $ | (19,976) | | | $ | 950 | | | $ | 634,132 | |
| Net income | — | | | — | | | — | | | — | | | | — | | | — | | | — | | | — | | | — | | | 9,309 | | | — | | | 103 | | | 9,412 | |
| 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 | — | | | — | | | — | | | — | | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | |
| Stock-based compensation | — | | | — | | | — | | | — | | | | — | | | — | | | — | | | — | | | 46,901 | | | — | | | — | | | — | | | 46,901 | |
| Issuance of common stock in connection with IPO, net of underwriting discounts and other offering costs | — | | | — | | | — | | | — | | | | — | | | — | | | 25,000,000 | | | 250 | | | 321,175 | | | — | | | — | | | — | | | 321,425 | |
| Conversion of Class A and Class L common stock into common stock in connection with the IPO | (10,000,000) | | | (100) | | | (636,301) | | | (6) | | | | — | | | — | | | 166,500,000 | | | 1,665 | | | (1,559) | | | — | | | — | | | — | | | — | |
| Repurchase of Class A and Class L common stock to cover related taxes | — | | | — | | | (1,997) | | | — | | | | — | | | — | | | (2,068,274) | | | (21) | | | (27,686) | | | — | | | — | | | — | | | (27,707) | |
| Conversion of LTCIP/TRIP awards into restricted stock units in connection with the IPO | — | | | — | | | — | | | — | | | | — | | | — | | | — | | | — | | | 2,081 | | | — | | | — | | | — | | | 2,081 | |
| Cash dividend paid to holders of Class A common stock | — | | | — | | | — | | | — | | | | — | | | — | | | | | | | (191,242) | | | (208,758) | | | — | | | — | | | (400,000) | |
| Foreign currency translation adjustment | — | | | — | | | — | | | — | | | | — | | | — | | | — | | | — | | | — | | | — | | | 10,118 | | | 34 | | | 10,152 | |
| 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 December 25, 2020 | — | | — | | $ | — | | | — | | | $ | — | | | | — | | | $ | — | | | 189,431,726 | | | $ | 1,894 | | | $ | 589,202 | | | $ | (5,094) | | | $ | (10,171) | | | $ | 1,087 | | | $ | 576,918 | |
ALLEGRO MICROSYSTEMS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY - (continued)
(in thousands, except share amounts)
(Unaudited)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | 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 | | | | | | | | | | — | | | — | | | — | | | — | | | — | | | 93,791 | | | — | | | 112 | | | 93,903 | |
| Employee stock purchase plan issuances | | | | | | | | | | — | | | — | | | 59,563 | | | — | | | 1,291 | | | — | | | — | | | — | | | 1,291 | |
| Stock-based compensation, net of forfeitures | | | | | | | | | | — | | | — | | | 149,421 | | | 2 | | | 18,645 | | | — | | | — | | | — | | | 18,647 | |
| Foreign currency translation adjustment | | | | | | | | | | — | | | — | | | — | | | — | | | — | | | — | | | (4,812) | | | (61) | | | (4,873) | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| Balance at December 24, 2021 | | | | | | | | | | — | | | $ | — | | | 189,797,145 | | | $ | 1,898 | | | $ | 612,106 | | | $ | 97,342 | | | $ | (16,677) | | | $ | 1,170 | | | $ | 695,839 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | 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)
| | | | | | | | | | | |
| Nine-Month Period Ended |
| December 24,
2021 | | December 25,
2020 |
| CASH FLOWS FROM OPERATING ACTIVITIES: | | | |
| Net income | $ | 93,903 | | | $ | 9,412 | |
| Adjustments to reconcile net income to net cash provided by operating activities: | | | |
| Depreciation and amortization | 36,522 | | | 36,225 | |
| Amortization of deferred financing costs | 75 | | | 226 | |
| Deferred income taxes | (3,061) | | | (17,526) | |
| Stock-based compensation | 18,647 | | | 46,901 | |
| (Gain) loss on disposal of assets | (349) | | | 272 | |
| Loss on debt extinguishment | — | | | 9,055 | |
| Gain on contingent consideration change in fair value | (2,100) | | | — | |
| | | |
| Provisions for inventory and credit losses/bad debt | 4,787 | | | 3,857 | |
| Unrealized gains on marketable securities | (4,482) | | | — | |
| Changes in operating assets and liabilities: | | | |
| Trade accounts receivable | (6,133) | | | (5,975) | |
| Accounts receivable - other | (9) | | | 115 | |
| Inventories | 3,251 | | | 1,118 | |
| Prepaid expenses and other assets | (11,870) | | | (29,655) | |
| Trade accounts payable | 2,026 | | | 2,411 | |
| Due to/from related parties | (2,775) | | | 8,283 | |
| Accrued expenses and other current and long-term liabilities | (9,874) | | | (1,185) | |
| | | |
| Net cash provided by operating activities | 118,558 | | | 63,534 | |
| CASH FLOWS FROM INVESTING ACTIVITIES: | | | |
| Purchases of property, plant and equipment | (55,792) | | | (25,880) | |
| Acquisition of business, net of cash acquired | (12,549) | | | (8,500) | |
| Proceeds from sales of property, plant and equipment | 27,407 | | | 314 | |
| Investments in marketable securities | (9,189) | | | — | |
| Contribution of cash balances due to divestiture of subsidiary | — | | | (16,335) | |
| Net cash used in investing activities | (50,123) | | | (50,401) | |
| CASH FLOWS FROM FINANCING ACTIVITIES: | | | |
| Related party note receivable | (7,500) | | | 51,377 | |
| Proceeds from initial public offering, net of underwriting discounts and other offering costs | — | | | 321,425 | |
| Payments for taxes related to net share settlement of equity awards | — | | | (27,707) | |
| Proceeds from issuance of common stock under employee stock purchase plan | 1,291 | | | — | |
| Dividends paid | — | | | (400,000) | |
| Borrowings of senior secured debt, net of deferred financing costs | — | | | 315,719 | |
| Repayment of senior secured debt | — | | | (300,000) | |
| Repayment of unsecured credit facilities | — | | | (33,000) | |
| Net cash used in financing activities | (6,209) | | | (72,186) | |
| Effect of exchange rate changes on Cash and cash equivalents and Restricted cash | 604 | | | 3,350 | |
| Net increase in Cash and cash equivalents and Restricted cash | 62,830 | | | (55,703) | |
| Cash and cash equivalents and Restricted cash at beginning of period | 203,875 | | | 219,876 | |
| CASH AND CASH EQUIVALENTS AND RESTRICTED CASH AT END OF PERIOD: | $ | 266,705 | | | $ | 164,173 | |
| RECONCILIATION OF CASH AND CASH EQUIVALENTS AND RESTRICTED CASH: | | | |
| Cash and cash equivalents at beginning of period | $ | 197,214 | | | $ | 214,491 | |
| Restricted cash at beginning of period | 6,661 | | | 5,385 | |
| Cash and cash equivalents and Restricted cash at beginning of period | $ | 203,875 | | | $ | 219,876 | |
| Cash and cash equivalents at end of period | 259,208 | | | 157,653 | |
| Restricted cash at end of period | 7,497 | | | 6,520 | |
| Cash and cash equivalents and Restricted cash at end of period | $ | 266,705 | | | $ | 164,173 | |
| | | |
ALLEGRO MICROSYSTEMS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - (continued)
(in thousands)
(Unaudited)
| | | | | | | | | | | |
| SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: | | | |
| Cash paid for interest | $ | 541 | | | $ | 2,559 | |
| Cash paid for income taxes | 16,635 | | | 7,568 | |
| Noncash transactions: | | | |
| Changes in Trade accounts payable related to Property, plant and equipment, net | $ | (4,934) | | | $ | (786) | |
| Loans to cover purchase of common stock under employee stock plan | — | | | 171 | |
| | | |
| Recognition of right of use assets and lease liability upon adoption of new accounting standard | 356 | | | — | |
| | | |
| | | | | | | | | | | |
| Three-Month Period Ended |
| June 24,
2022 | | June 25,
2021 |
| CASH FLOWS FROM OPERATING ACTIVITIES: | | | |
| Net income | $ | 10,283 | | | $ | 27,707 | |
| Adjustments to reconcile net income to net cash provided by operating activities: | | | |
| Depreciation and amortization | 11,918 | | | 12,172 | |
| Amortization of deferred financing costs | 24 | | | 25 | |
| Deferred income taxes | (7,784) | | | (1,454) | |
| Stock-based compensation | 34,136 | | | 4,831 | |
| Gain on disposal of assets | (3) | | | (35) | |
| | | |
| (Gain) loss on contingent consideration change in fair value | (200) | | | 300 | |
| | | |
| Provisions for inventory and expected credit losses | 2,640 | | | 1,613 | |
| Unrealized loss on marketable securities | 3,486 | | | — | |
| Changes in operating assets and liabilities: | | | |
| Trade accounts receivable | (4,718) | | | (9,956) | |
| Accounts receivable - other | 2,714 | | | (97) | |
| Inventories | (4,888) | | | 5,142 | |
| Prepaid expenses and other assets | (13,102) | | | 1,719 | |
| Trade accounts payable | 4,075 | | | (2,993) | |
| Due to/from related parties | (3,267) | | | 1,917 | |
| Accrued expenses and other current and long-term liabilities | 1,239 | | | (2,396) | |
| | | |
| Net cash provided by operating activities | 36,553 | | | 38,495 | |
| CASH FLOWS FROM INVESTING ACTIVITIES: | | | |
| Purchases of property, plant and equipment | (14,389) | | | (15,346) | |
| | | |
| | | |
| | | |
| | | |
| Net cash used in investing activities | (14,389) | | | (15,346) | |
| CASH FLOWS FROM FINANCING ACTIVITIES: | | | |
| Receipts on related party note receivable | 469 | | | — | |
| | | |
| | | |
| Payments for taxes related to net share settlement of equity awards | (9,606) | | | — | |
| | | |
| | | |
| | | |
| | | |
| | | |
| Net cash used in financing activities | (9,137) | | | — | |
| 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 | 6,473 | | | 25,757 | |
| 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: | $ | 296,272 | | | $ | 229,632 | |
| RECONCILIATION OF CASH AND CASH EQUIVALENTS AND RESTRICTED CASH: | | | |
| Cash and cash equivalents at beginning of period | $ | 282,383 | | | $ | 197,214 | |
| Restricted cash at beginning of period | 7,416 | | | 6,661 | |
| Cash and cash equivalents and Restricted cash at beginning of period | $ | 289,799 | | | $ | 203,875 | |
| Cash and cash equivalents at end of period | 286,557 | | | 221,934 | |
| Restricted cash at end of period | 9,715 | | | 7,698 | |
| Cash and cash equivalents and Restricted cash at end of period | $ | 296,272 | | | $ | 229,632 | |
| | | |
| SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: | | | |
| Cash paid for interest | $ | 452 | | | $ | 269 | |
| Cash refunded for income taxes | (1,027) | | | (538) | |
| Noncash transactions: | | | |
| Trade accounts payable related to Property, plant and equipment, net | $ | (2,602) | | | $ | (5,535) | |
| | | |
| | | |
| 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
(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’sCompany'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, 202118, 2022 (the “2021“2022 Annual Report”). In the opinion of the Company’s management, the financial information for the interim periods presented reflects all adjustments necessary for a fair presentationstatement of the 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 thirdfirst quarter three-month period is a 13-week period ending on the Friday closest to the last day in December.June. The Company’s thirdfirst quarter of fiscal 2023 ended June 24, 2022, and the Company’s first quarter of fiscal 2022 ended December 24, 2021, and the Company’s third quarter of fiscal 2021 ended DecemberJune 25, 2020.2021.
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, currentallowances for expected credit losses/allowances for doubtful accountslosses 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, thatwhich 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 DecemberJune 24, 20212022 and March 26, 2021,25, 2022, Sanken Electric Co., Ltd. (“Sanken”) accounted for 27.0%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 the three- and nine-month periods ended December 24, 2021, Sanken accounted for 21.1% and 19.7% of total net sales, respectively. No other customers accounted for 10% or more of total net sales for either of the three- and nine-month periods ended December 24, 2021. For the three- and nine-month periods ended December 25, 2020, Sanken accounted for 16.1% and 17.4% of total net sales, respectively. No other customers accounted for 10% or more of total net sales for either of the three- and nine-month periods ended December 25, 2020.
During the three-month periodthree months ended DecemberJune 24, 2021,2022, sales from customers located outside of the United States accounted for, in the aggregate, 85.9%87.0% of the Company’s total net sales, with Greater China accounting for 26.1%,25.3% and Japan accounting for 21.1% and South Korea accounting for 10.7%. During the nine-month period ended December 24, 2021, sales from customers located outside of the United States accounted for, in the aggregate, 85.8% of the Company’s total net sales, with Greater China accounting for 25.0%, Japan accounting for 19.7% and South Korea accounting for 10.8%19.2%. No other countries accounted for greater than 10% of total net sales for the three- and nine-month periodsthree months ended DecemberJune 24, 2021.2022.
During the three-month periodthree months ended DecemberJune 25, 2020,2021, sales from customers located outside of the United States, in the aggregate, accounted for 85.4%85.7% of the Company’s total net sales, with Greater China accounting for 28.1%22.7%, Japan accounting for 16.0%18.8% and South Korea accounting for 10.7%. During the nine-month period ended December 25, 2020, sales from customers located outside of the United States, in the aggregate, accounted for 86.1% of the Company’s total net sales, with Greater China accounting for 27.9%, Japan accounting for 17.4% and South Korea accounting for 10.5%11.7%. No other countries accounted for greater than 10% of total net sales for the three- and nine-month periodsthree months ended DecemberJune 25, 2020.2021.
Recently Adopted Accounting Standards
The Company qualifies as an “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 (Topic 842)” (“ASU 2016-02”), 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 amend various aspects of existing guidance for leases and require 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 are 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 to restate the prior period 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 in accordance with the legacy guidance under ASC 840.
A number of practical expedients and policy elections are available under the new guidance to reduce the burden of adoption and ongoing compliance with ASC 842. 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
ALLEGRO MICROSYSTEMS, INC.
Notes to Unaudited Condensed Consolidated Financial Statements – (continued)
(Amounts in thousands, except share and per share amounts)
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.
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 complexity by decreasing the number of credit impairment models that entities use to account for debt instruments. The Company adopted ASU 2016-13 effective March 27, 2021 and concluded that the standard update did not have a material impact on either the 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 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 of delinquency, including information about past events and current economic conditions. The Company’s accounts receivable is 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 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- and nine-month periods ended December 24, 2021, no material changes in the allowance occurred.
Recently Issued Accounting Standards Not Yet Adopted
In October 2021, the FASB issued ASU No. 2021-08, Business Combinations (Topic 805), Accounting for Contract Assets and Contract Liabilities from Contracts with Customers (“ASU 2021-08”), which eliminates the diversity in practice and inconsistency related to the 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, as prepared in accordance with U.S. GAAP. If unable to rely on the acquiree’s accounting due to errors, noncompliance with U.S. GAAP, or differences in accounting policies, the acquirer should consider the terms of the acquired contracts, such as timing of payment, identify each performance obligation in the contracts, and allocate the total transaction price to each identified performance obligation on a relative standalone selling price basis as of contract inception (that is, the date the acquiree entered into the contracts) or contract modification to determine what should be recorded at the acquisition date. The guidance isCompany early adopted ASU 2021-08, effective prospectively for fiscal years beginning after December 15,March 26, 2022 including interim periods within those fiscal years. Earlyand concluded that adoption is permitted, including in an interim period as of the beginningthis ASU did not have a material impact on its financial position, results of the fiscal year that includes that interim period. An entity that early adopts in an interim period shouldoperations, cash flows, or related disclosures. The Company will apply the amendments (1) retrospectively to all business combinations for which the acquisition date occurs on or after the beginning of the fiscal year that includes the interim period of early application and (2)guidance in ASU 2021-08 prospectively to all business combinations that occur on or after the date of initial application. The Company is currently in the process ofadoption.
ALLEGRO MICROSYSTEMS, INC.
Notes to Unaudited Condensed Consolidated Financial Statements – (continued)
(Amounts in thousands, except share and per share amounts)
evaluating the impact of this new guidance on the consolidated financial statements and the related disclosures, which will be dependent on the consummation of any future business combination.
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 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 isCompany 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 asMarch 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-three months ended June 24, 2022 and nine-month periods ended December 24, 2021 and DecemberJune 25, 2020.2021. 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.
Net sales by application:
| | | | | | | | | | | | | | | | | | | | | | | |
| Three-Month Period Ended | | Nine-Month Period Ended |
| December 24,
2021 | | December 25,
2020 | | December 24,
2021 | | December 25,
2020 |
| | | | | | | |
| Automotive | $ | 130,797 | | | $ | 113,902 | | | $ | 390,351 | | | $ | 279,759 | |
| Industrial | 31,903 | | | 23,654 | | | 98,533 | | | 65,710 | |
| Other | 23,929 | | | 26,893 | | | 79,497 | | | 70,630 | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| Total net sales | $ | 186,629 | | | $ | 164,449 | | | $ | 568,381 | | | $ | 416,099 | |
Net sales by product:
| | | | | | | | | | | | | | | | | | | | | | | |
| Three-Month Period Ended | | Nine-Month Period Ended |
| December 24,
2021 | | December 25,
2020 | | December 24,
2021 | | December 25,
2020 |
| Power integrated circuits | $ | 62,859 | | | $ | 54,406 | | | $ | 195,054 | | | $ | 146,276 | |
| Magnetic sensors | 123,543 | | | 109,457 | | | 371,806 | | | 268,956 | |
| Photonics | 227 | | | 586 | | | 1,521 | | | 867 | |
| | | | | | | |
| | | | | | | |
| Total net sales | $ | 186,629 | | | $ | 164,449 | | | $ | 568,381 | | | $ | 416,099 | |
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 | | |
| June 24,
2022 | | June 25,
2021 | | | | |
| | | | | | | |
| Automotive | $ | 149,649 | | | $ | 133,523 | | | | | |
| Industrial | 40,140 | | | 30,309 | | | | | |
| Other | 27,964 | | | 24,310 | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| Total net sales | $ | 217,753 | | | $ | 188,142 | | | | | |
Net sales by product:
| | | | | | | | | | | | | | | |
| Three-Month Period Ended | | |
| June 24,
2022 | | June 25,
2021 | | | | |
| Power integrated circuits | $ | 80,660 | | | $ | 66,672 | | | | | |
| Magnetic sensors | 137,050 | | | 120,642 | | | | | |
| Photonics | 43 | | | 828 | | | | | |
| | | | | | | |
| | | | | | | |
| Total net sales | $ | 217,753 | | | $ | 188,142 | | | | | |
Net sales by geography:
| | | Three-Month Period Ended | | Nine-Month Period Ended | | Three-Month Period Ended | |
| | December 24,
2021 | | December 25,
2020 | | December 24,
2021 | | December 25,
2020 | | June 24,
2022 | | June 25,
2021 | |
| Americas: | Americas: | | | | | | | | Americas: | | | | |
| United States | United States | $ | 26,228 | | | $ | 23,934 | | | $ | 80,854 | | | $ | 57,892 | | United States | $ | 28,391 | | | $ | 26,841 | | |
| Other Americas | Other Americas | 4,921 | | | 5,620 | | | 16,697 | | | 10,797 | | Other Americas | 6,487 | | | 6,349 | | |
| EMEA: | EMEA: | | EMEA: | | |
| Europe | Europe | 29,891 | | | 28,239 | | | 97,108 | | | 70,459 | | Europe | 35,333 | | | 34,751 | | |
| Asia: | Asia: | | Asia: | | |
| Japan | Japan | 39,461 | | | 26,439 | | | 112,079 | | | 72,570 | | Japan | 41,709 | | | 35,453 | | |
| Greater China | Greater China | 48,696 | | | 46,172 | | | 142,158 | | | 116,178 | | Greater China | 55,116 | | | 42,779 | | |
| South Korea | South Korea | 19,935 | | | 17,606 | | | 61,614 | | | 43,733 | | South Korea | 20,979 | | | 21,933 | | |
| Other Asia | Other Asia | 17,497 | | | 16,439 | | | 57,871 | | | 44,470 | | Other Asia | 29,738 | | | 20,036 | | |
| Total net sales | Total net sales | $ | 186,629 | | | $ | 164,449 | | | $ | 568,381 | | | $ | 416,099 | | Total net sales | $ | 217,753 | | | $ | 188,142 | | |
The Company recognizes sales net of returns, credits issued, price protection adjustments and stock rotation rights. At DecemberJune 24, 20212022 and March 26, 2021,25, 2022, these adjustments were $14,399 and current expected credit losses were $16,014 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 net chargesincome of $525 and income of $602 and $898, respectively,$1,613 for the nine-month periodsthree months ended DecemberJune 24, 2022 and June 25, 2021, and December 25, 2020, respectively. Refer to Note 5, “Trade Accounts Receivable, net” for details of these adjustments and allowances.
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.
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 DecemberJune 24, 20212022 and March 26, 202125, 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 December 24, 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 | $ | 16,348 | | | $ | — | | | $ | — | | | $ | 16,348 | | Money market fund deposits | $ | 96,395 | | | $ | — | | | $ | — | | | $ | 96,395 | |
| Restricted cash: | Restricted cash: | | Restricted cash: | |
| Money market fund deposits | Money market fund deposits | 7,497 | | | — | | | — | | | 7,497 | | Money market fund deposits | 9,715 | | | — | | | — | | | 9,715 | |
| Other assets, net (long-term): | Other assets, net (long-term): | | Other assets, net (long-term): | |
| Investments in marketable securities | Investments in marketable securities | $ | 13,393 | | | $ | — | | | $ | — | | | $ | 13,393 | | Investments in marketable securities | 8,538 | | | — | | | — | | | 8,538 | |
| Total assets | Total assets | $ | 37,238 | | | $ | — | | | $ | — | | | $ | 37,238 | | 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 | $ | — | | | $ | — | | | $ | 2,700 | | | $ | 2,700 | | Contingent consideration | $ | — | | | $ | — | | | $ | 2,600 | | | $ | 2,600 | |
| Total liabilities | Total liabilities | $ | — | | | $ | — | | | $ | 2,700 | | | $ | 2,700 | | Total liabilities | $ | — | | | $ | — | | | $ | 2,600 | | | $ | 2,600 | |
ALLEGRO MICROSYSTEMS, INC.
Notes to Unaudited Condensed Consolidated Financial Statements – (continued)
(Amounts in thousands, except share and per share amounts)
| | | 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 | | | $ | — | | | $ | — | | | $ | 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 | | | — | | | — | | | 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 | | | $ | — | | | $ | — | | | $ | 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 | — | | | — | | | 4,800 | | | 4,800 | | Contingent consideration | — | | | — | | | 2,800 | | | 2,800 | |
| Total liabilities | Total liabilities | $ | — | | | $ | — | | | $ | 4,800 | | | $ | 4,800 | | Total liabilities | $ | — | | | $ | — | | | $ | 2,800 | | | $ | 2,800 | |
The following table represents the unrealized gains and losses on investments in marketable securities held with a readily determinable fair value for the nine-month periodthree months ended DecemberJune 24, 2021:2022:
| | | | | | | |
| | | |
Net gains and losses recognized during the period on equity securities | $ | 4,482 (3,486) | | | |
| Less: Net gains and losses recognized during the period on equity securities sold during the period | — | | | |
Unrealized gains and losses recognized during the reporting period on equity securities still held at the reporting date | $ | 4,482 (3,486) | | | |
In addition to the unrealized gains in the table above, the change in fair value of the equity securities was impacted by unrealized foreign currency exchange losses of $278$323 for the nine-month periodthree months ended DecemberJune 24, 2022. There were 0 investments in marketable securities during the three months ended June 25, 2021.
The following table shows the change in fair value of Level 3 contingent consideration inIn connection with the fiscal year 2021 purchase of Voxtel, Inc. (“Voxtel”), a privately-heldprivately 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 nine-month periodcontingent 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 periods ended DecemberJune 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 | (2,100)300 | |
| |
Balance at December 24,June 25, 2021 | $ | 2,7005,100 | |
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 15,12, “Retirement Plans.”
During the nine-month periodsthree months ended DecemberJune 24, 20212022 and DecemberJune 25, 2020,2021, 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
TradeThe 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) consistedare 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:
| | | | | | | | | | | |
| December 24,
2021 | | March 26,
2021 |
| Trade accounts receivable | $ | 120,500 | | | $ | 108,546 | |
| Less: | | | |
| Provision for expected credit losses and allowance for doubtful accounts | (70) | | | (138) | |
| Returns and sales allowances | (15,944) | | | (15,274) | |
| Related party trade accounts receivable | (28,251) | | | (23,634) | |
| Total | $ | 76,235 | | | $ | 69,500 | |
Changes in the Company’s provision for expected credit losses / allowance for doubtful accounts and returns and sales allowances were as follows:
| | | | | | | | | | | | | | | | | | | | |
| Description | | Provision for Expected Credit Losses / 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 | | (68) | | | 114,047 | | | 113,979 | |
| Write-offs, net of recoveries | | — | | | (113,377) | | | (113,377) | |
| Balance at December 24, 2021 | | $ | 70 | | | $ | 15,944 | | | $ | 16,014 | |
| | | | | | | | | | | | | | | | | | | | |
| 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 | | (150) | | | 103,660 | | | 103,510 | |
| Write-offs, net of recoveries | | — | | | (104,408) | | | (104,408) | |
| Balance at December 25, 2020 | | $ | 138 | | | $ | 16,437 | | | $ | 16,575 | |
| | | | | | | | | | | | | | | | | | | | |
| 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:
| | | December 24,
2021 | | March 26,
2021 | | June 24,
2022 | | March 25,
2022 |
| Raw materials and supplies | Raw materials and supplies | $ | 11,751 | | | $ | 9,629 | | Raw materials and supplies | $ | 12,334 | | | $ | 11,941 | |
| Work in process | Work in process | 45,089 | | | 50,095 | | Work in process | 57,661 | | | 55,855 | |
| Finished goods | Finished goods | 22,018 | | | 27,774 | | Finished goods | 18,938 | | | 18,364 | |
| | Total | Total | $ | 78,858 | | | $ | 87,498 | | Total | $ | 88,933 | | | $ | 86,160 | |
The Company recorded inventory provisionswrite-offs totaling $348 $2,115 and $5,389$3,189 for the three-three months ended June 24, 2022 and nine-month periods ended December 24,June 25, 2021, respectively,respectively.
7. Property, Plant and $885Equipment, net
Property, plant and $2,958equipment, 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-three months ended June 24, 2022 and nine-month periods ended DecemberJune 25, 2020, respectively.
The Company discontinued a product line manufactured by Voxtel and subsequently recognized impairment charges, which represented much of the increase in inventory provisions, for the related inventory of $— and $3,106 for the three- and nine-month periods ended December 24, 2021, respectively.
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
ALLEGRO MICROSYSTEMS, INC.
Notes to Unaudited Condensed Consolidated Financial Statements – (continued)
(Amounts in thousands, except share and per share amounts)
Property, plant and equipment, net to Assets held for sale in fiscal year 2021. The sale of the AMTC Facility was completed on August 3, 2021 following receipt of government approvals in Thailand and the fulfillment of customary closing conditions. The Company received cash of $27,405, which with related selling costs, resulted in a gain on the final disposition of $370.
8. Property, Plant and Equipment, net
Property, plant and equipment, net is stated at cost, and consisted of the following:
| | | | | | | | | | | |
| December 24,
2021 | | March 26,
2021 |
| Land | $ | 16,257 | | | $ | 16,602 | |
| Buildings, building improvements and leasehold improvements | 57,282 | | | 56,911 | |
| Machinery and equipment | 528,786 | | | 491,025 | |
| Office equipment | 6,252 | | | 6,281 | |
| Construction in progress | 27,971 | | | 29,201 | |
| Total | 636,548 | | | 600,020 | |
| Less accumulated depreciation | (428,843) | | | (407,627) | |
| Total | $ | 207,705 | | | $ | 192,393 | |
Totaldepreciation expense amounted to $10,893 and $33,235 for the three- and nine-month periods ended December 24, 2021, respectively, and $11,255 and $33,861 for the three- and nine-month periods ended December 25, 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’sCompany's long-lived assets, net, based on physical location of the assets, as of DecemberJune 24, 20212022 and March 26, 202125, 2022 are as follows:
| | | December 24,
2021 | | March 26,
2021 | | June 24,
2022 | | March 25,
2022 |
| United States | United States | $ | 34,793 | | | $ | 36,529 | | United States | $ | 35,606 | | | $ | 35,221 | |
| Philippines | Philippines | 166,087 | | | 148,374 | | Philippines | 171,318 | | | 167,488 | |
| Thailand | — | | | 1,698 | | |
| | Other | Other | 7,328 | | | 7,190 | | Other | 8,491 | | | 7,746 | |
| Total | Total | $ | 208,208 | | | $ | 193,791 | | Total | $ | 215,415 | | | $ | 210,455 | |
Amortization of prepaid tooling costs amounted to $31$32 and $97$33 for the three-three months ended June 24, 2022 and nine-month periods ended December 24,June 25, 2021, respectively, and $18 and $54 for the three- and nine-month periods ended December 25, 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 | |
| |
CurrencyForeign currency translation | (63)12 | |
Balance at December 24,June 25, 2021 | $ | 20,04320,118 | |
Intangible assets, net is as follows:
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | June 24, 2022 |
| Description | | Gross | | Accumulated
Amortization | | Net Carrying
Amount | | Weighted-Average Lives |
| Patents | | $ | 37,604�� | | | $ | 15,860 | | | $ | 21,744 | | | 10 years |
| Customer relationships | | 6,806 | | | 6,590 | | | 216 | | | 9 years |
| Process technology | | 13,100 | | | 2,015 | | | 11,085 | | | 12 years |
| Indefinite-lived and legacy process technology | | 4,050 | | | 1,650 | | | 2,400 | | | |
| Trademarks | | 200 | | | 74 | | | 126 | | | 5 years |
| Legacy trademarks | | 629 | | | 58 | | | 571 | | | |
| Other | | 32 | | | 32 | | | — | | | |
| 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)
Intangible assets, net is as follows:
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | December 24, 2021 |
| Description | | Gross | | Accumulated
Amortization | | Net Carrying
Amount | | Weighted- Average Lives |
| Patents | | $ | 35,558 | | | $ | 14,580 | | | $ | 20,978 | | | 10 years |
| Customer relationships | | 6,899 | | | 6,640 | | | 259 | | | 9 years |
| Process technology | | 13,100 | | | 1,470 | | | 11,630 | | | 12 years |
| Indefinite-lived and legacy process technology | | 4,050 | | | 1,650 | | | 2,400 | | | |
| Trademarks | | 200 | | | 54 | | | 146 | | | 5 years |
| Legacy trademarks | | 629 | | | 57 | | | 572 | | | |
| Other | | 32 | | | 32 | | | — | | | |
| Total | | $ | 60,468 | | | $ | 24,483 | | | $ | 35,985 | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | 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 | | | — | | | |
| Total | | $ | 56,953 | | | $ | 20,587 | | | $ | 36,366 | | | |
Intangible assets amortization expense was $1,087 and $3,190 for the three- and nine-month periods ended December 24, 2021, respectively, and $926 and $2,310 for the three- and nine-month periods ended December 25, 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 significant costs capitalized during either of the first nine months of fiscal years 2022 or 2021.
As of DecemberJune 24, 2021,2022, annual amortization expense of intangible assets for the next five fiscal years is expected to be as follows:
| | | | | |
| Remainder of 2022 | $ | 935 | |
| 2023 | 3,612 | |
| 2024 | 3,480 | |
| 2025 | 3,260 | |
| 2026 | 3,032 | |
| Thereafter | 21,666 | |
| Total | $ | 35,985 | |
ALLEGRO MICROSYSTEMS, INC.
Notes to Unaudited Condensed Consolidated Financial Statements – (continued)
(Amounts in thousands, except share and per share amounts)
10. Other Assets, net
The composition of other assets, net is as follows:
| | | | | | | | | | | |
| December 24,
2021 | | March 26,
2021 |
| VAT receivables long-term, net | $ | 10,659 | | | $ | 8,177 | |
| Income taxes receivable long-term | 11,462 | | | — | |
Investments in marketable securities (1) | 13,393 | | | — | |
| Deposits | 9,680 | | | 3,573 | |
| Prepaid contracts long-term | 1,466 | | | 1,295 | |
| Deferred financing costs | 74 | | | 149 | |
| Other | 1,344 | | | 1,419 | |
| Total | $ | 48,078 | | | $ | 14,613 | |
(1) Represents equity investments in an entity whose equity securities have a readily determinable fair value. These strategic investments represent less than a 20% ownership interest in the entity, and the Company does not maintain power over or control of the entity. These investments are measured at fair value with unrealized gains and losses related to changes in the entity’s stock price and the impact of changes in foreign exchange rates each included in the consolidated statements of operations. | | | | | |
| Remainder of 2023 | $ | 2,942 | |
| 2024 | 3,758 | |
| 2025 | 3,499 | |
| 2026 | 3,240 | |
| 2027 | 2,926 | |
| Thereafter | 16,806 | |
| Total | $ | 33,171 | |
11.9. Accrued Expenses and Other Current Liabilities
The composition of accrued expenses and other current liabilities is as follows:
| | | December 24,
2021 | | March 26,
2021 | | June 24,
2022 | | March 25,
2022 |
| | Accrued management incentives | Accrued management incentives | $ | 24,927 | | | $ | 21,538 | | Accrued management incentives | $ | 9,814 | | | $ | 33,607 | |
| Accrued salaries and wages | Accrued salaries and wages | 16,639 | | | 15,060 | | Accrued salaries and wages | 23,313 | | | 14,699 | |
| Base acquisition purchase price due | 2,000 | | | 14,588 | | |
| Deposits on AMTC Facility | — | | | 14,531 | | |
| | Accrued vacation | Accrued vacation | 5,423 | | | 5,739 | | Accrued vacation | 7,140 | | | 5,715 | |
| Accrued severance | Accrued severance | 709 | | | 572 | | Accrued severance | 4,308 | | | 839 | |
| Accrued professional fees | Accrued professional fees | 1,949 | | | 2,029 | | Accrued professional fees | 5,219 | | | 1,252 | |
| Accrued income taxes | Accrued income taxes | 2,096 | | | 514 | | Accrued income taxes | 11,161 | | | 1,831 | |
| Accrued utilities | Accrued utilities | 604 | | | 623 | | Accrued utilities | 2,157 | | | 607 | |
| Other current liabilities | Other current liabilities | 4,915 | | | 3,738 | | Other current liabilities | 5,840 | | | 6,909 | |
| Total | Total | $ | 59,262 | | | $ | 78,932 | | Total | $ | 68,952 | | | $ | 65,459 | |
12. 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 10 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:
ALLEGRO MICROSYSTEMS, INC.
Notes to Unaudited Condensed Consolidated Financial Statements – (continued)
(Amounts in thousands, except share and per share amounts)
| | | | | | | | | | | | | | | |
| Three-Month Period Ended | | Nine-Month Period Ended |
| December 24, 2021 | | | | December 24, 2021 | | |
| Lease costs: | | | | | | | |
| Operating lease expense | $ | 1,075 | | | | | $ | 3,378 | | | |
| Short term lease expense | 190 | | | | | 332 | | | |
| | | | | | | |
| Other information: | | | | | | | |
| Operating cash flows from operating leases | $ | 1,259 | | | | | $ | 3,733 | | | |
| Weighted-average remaining lease term – operating leases | 5.53 years | | | | 5.53 years | | |
| Weighted-average discount rate – operating leases | 4.5 | % | | | | 4.5 | % | | |
Rent expense incurred under operating lease agreements was $1,454 and $4,226 for the three- and nine-month periods ended December 24, 2021, respectively, and $1,172 and $3,477 for the three- and nine-month periods ended December 25, 2020.
As of December 24, 2021, expirations of lease obligations by fiscal year were as follows:
| | | | | |
| Remainder of 2022 | $ | 1,056 | |
| 2023 | 3,886 | |
| 2024 | 3,503 | |
| 2025 | 3,070 | |
| 2026 | 2,597 | |
| Thereafter | 4,406 | |
| Total undiscounted lease payments | $ | 18,518 | |
| Less: present value adjustment | (2,272) | |
| Total operating lease liabilities | $ | 16,246 | |
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)
13.10. 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 20272028 (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 DecemberJune 24, 2021.2022. As of both DecemberJune 24, 20212022 and March 26, 2021,25, 2022, the Company had $25,000 outstanding under the Term Loan Facility and had not borrowed on the Revolving Credit Facility.
Included in the Term Loan Facility were deferred financing costs As of $9,374, whichJune 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$174, 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 and $249 at December 24, 2021 andcondensed March 26, 2021, respectivelyconsolidated 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 $1,196 $1,102 at DecemberJune 24, 2021)2022) at the bank’s prevailing interest rate. While thisThe line of credit initially expired on August 21, 2021 (in connection with certain delays as a result of the COVID-19 pandemic and its impact on bank operations), the line of credit was extended in September 2021 and is now expecteddue to expire on August 21,31, 2022. There were no borrowings outstanding under this line of credit as of DecemberJune 24, 20212022 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 $1,495$1,378 at DecemberJune 24, 2021)2022) at the bank’s prevailing interest rate. While thisThe line of credit initially expired on June 30, 2021 (in connection with certain delays as a result of the COVID-19 pandemic and its impact onbank operations), the line of credit was extended in September 2021 and is now expecteddue to expire on June 30, 2022.2023. There were no borrowings outstanding under this line of credit as of DecemberJune 24, 20212022 and March 26, 2021.25, 2022.
14.
ALLEGRO MICROSYSTEMS, INC.
Notes to Unaudited Condensed Consolidated Financial Statements – (continued)
(Amounts in thousands, except share and per share amounts)
11. Other Long-Term Liabilities
The composition of other long-term liabilities is as follows:
| | | December 24,
2021 | | March 26,
2021 | | June 24,
2022 | | March 25,
2022 |
| | Accrued management incentives | Accrued management incentives | $ | 734 | | | $ | 628 | | Accrued management incentives | $ | 31 | | | $ | 826 | |
| Accrued retirement | Accrued retirement | 10,655 | | | 10,656 | | Accrued retirement | 8,646 | | | 8,903 | |
| Accrued contingent consideration | Accrued contingent consideration | 2,700 | | | 4,800 | | Accrued contingent consideration | 2,600 | | | 2,800 | |
| Provision for uncertain tax positions (net) | Provision for uncertain tax positions (net) | 2,741 | | | 2,774 | | Provision for uncertain tax positions (net) | 2,779 | | | 2,757 | |
| Other | — | | | 275 | | |
| | Total | Total | $ | 16,830 | | | $ | 19,133 | | Total | $ | 14,056 | | | $ | 15,286 | |
15.12. 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
ALLEGRO MICROSYSTEMS, INC.
Notes to Unaudited Condensed Consolidated Financial Statements – (continued)
(Amounts in thousands, except share and per share amounts)
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.
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.”). defined benefit plan was as follows:
| | | | | | | | | | | | | | | | | | | | | | | |
| Three-Month Period Ended | | Nine-Month Period Ended |
| December 24,
2021 | | December 25,
2020 | | December 24,
2021 | | December 25,
2020 |
| Service cost | $ | 365 | | | $ | 296 | | | $ | 1,119 | | | $ | 843 | |
| Interest cost | 158 | | | 166 | | | 485 | | | 474 | |
| Expected return on plan assets | (75) | | | (79) | | | (230) | | | (231) | |
| | | | | | | |
| | | | | | | |
| Amortization of prior service cost | 1 | | | 2 | | | 1 | | | 6 | |
| Actuarial loss | 51 | | | 47 | | | 156 | | | 126 | |
| Net periodic pension expense | $ | 500 | | | $ | 432 | | | $ | 1,531 | | | $ | 1,218 | |
Information on Plan Assets
The table below sets forth the fair value of the entity’s plan assets as of December 24, 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 December 24,
2021 | | Level 1 | | Level 2 | | Level 3 |
| Assets of non-U.S. defined benefit plan: | | | | | | | |
| Government securities | $ | 2,005 | | | $ | 2,005 | | | $ | — | | | $ | — | |
| Unit investment trust fund | 1,217 | | | — | | | 1,217 | | | — | |
| Loans | 578 | | | — | | | — | | | 578 | |
| Bonds | 706 | | | — | | | 706 | | | — | |
| Stocks and other investments | 2,338 | | | 1,224 | | | 2 | | | 1,112 | |
| Total | $ | 6,844 | | | $ | 3,229 | | | $ | 1,925 | | | $ | 1,690 | |
| | | | | | | | | | | | | | | | | | | | | | | |
| 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 | | | $ | — | | | $ | — | |
| Unit investment trust fund | 1,221 | | | — | | | 1,221 | | | — | |
| Loans | 584 | | | — | | | — | | | 584 | |
| Bonds | 1,112 | | | — | | | 1,112 | | | — | |
| 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 | | | | | |
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 ninethree months ended DecemberJune 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 | 308 | | | — | | Additions during the year | 159 | | | — | |
| Redemptions during the year | Redemptions during the year | (289) | | | — | | Redemptions during the year | (107) | | | — | |
| Revaluation of equity securities | Revaluation of equity securities | (5) | | | 13 | | Revaluation of equity securities | (1) | | | — | |
| Change in foreign currency exchange rates | Change in foreign currency exchange rates | (20) | | | (34) | | Change in foreign currency exchange rates | (2) | | | (3) | |
| Balance at December 24, 2021 | $ | 578 | | | $ | 1,112 | | |
| Balance at June 25, 2021 | | 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-three months ended June 24, 2022 and nine-month periods ended December 24,June 25, 2021, the Company contributed approximately $344approximately $372 and $1,040 to its non-U.S. pension plan, respectively. During the three- and nine-month periods ended December 25, 2020, the Company contributed approximately $249 and $736$353 to its non-U.S. pension plan, respectively. The Company expects to contribute approximately $1,425approximately $1,546 to itsits non-U.S. pension plan in fiscal year 2022.2023.
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 20212022 and 2020,2021, respectively. The total values of the Pension Promise in the amounts of 663684 and 928661 British Pounds Sterling at DecemberJune 24, 20212022 and March 26, 2021,25, 2022, respectively (approximately $882 $838 and $1,272$875 at DecemberJune 24, 20212022 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 $655$1,430 and $3,000 for the three- and nine-month periods ended December 24, 2021, respectively, and approximately $1,112 and $3,181$1,256 for the three-three months ended June 24, 2022 and nine-month periods ended DecemberJune 25, 2020,2021, 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 approximateapproximately $256 andly $209 and $639 $218 for the three-three months ended June 24, 2022 and nine-month periods ended December 24,June 25, 2021, respectively, and approximately $207 and $592 for the three- and nine-month periods ended December 25, 2020, respectively.
ALLEGRO MICROSYSTEMS, INC.
Notes to Unaudited Condensed Consolidated Financial Statements – (continued)
(Amounts in thousands, except share and per share amounts)
16.13. 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 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 $863 and $1,518 as of December 24, 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 does not believe there are any such matters that could have a material adverse effect on the Company’s financial position, results of operations or cash flows. 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 no accrual of such amounts at DecemberJune 24, 20212022 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. No significant environmental accruals were established at DecemberJune 24, 2021 and2022 or March 26, 2021.25, 2022.
17.14. 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- and nine-month periods ended December 25, 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 124,363,078 shares for the three-month period ended December 25, 2020.
ALLEGRO MICROSYSTEMS, INC.
Notes to Unaudited Condensed Consolidated Financial Statements – (continued)
(Amounts in thousands, except share and per share amounts)
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.
| | | Three-Month Period Ended | | Nine-Month Period Ended | | Three-Month Period Ended | |
| | December 24,
2021 | | December 25,
2020 | | December 24,
2021 | | December 25,
2020 | | June 24,
2022 | | June 25,
2021 | |
| Net income attributable to Allegro MicroSystems, Inc. | Net income attributable to Allegro MicroSystems, Inc. | $ | 32,936 | | | $ | (5,095) | | | $ | 93,791 | | | $ | 9,309 | | Net income attributable to Allegro MicroSystems, Inc. | $ | 10,247 | | | $ | 27,669 | | |
| Net income attributable to common stockholders | Net income attributable to common stockholders | 32,973 | | | (5,060) | | | 93,903 | | | 9,412 | | Net income attributable to common stockholders | 10,283 | | | 27,707 | | |
| Basic weighted average shares of common stock | Basic weighted average shares of common stock | 189,736,901 | | | 124,363,078 | | | 189,665,324 | | | 48,121,026 | | Basic weighted average shares of common stock | 190,638,135 | | | 189,585,381 | | |
| Dilutive effect of common stock equivalents | Dilutive effect of common stock equivalents | 2,331,321 | | | — | | | 2,013,627 | | | 123,517,761 | | Dilutive effect of common stock equivalents | 1,768,141 | | | 1,577,693 | | |
| Diluted weighted average shares of common stock | Diluted weighted average shares of common stock | 192,068,222 | | | 124,363,078 | | | 191,678,951 | | | 171,638,787 | | Diluted weighted average shares of common stock | 192,406,276 | | | 191,163,074 | | |
| Basic net income attributable to Allegro MicroSystems, Inc. per share | Basic net income attributable to Allegro MicroSystems, Inc. per share | $ | 0.17 | | | $ | (0.04) | | | $ | 0.49 | | | $ | 0.19 | | Basic net income attributable to Allegro MicroSystems, Inc. per share | $ | 0.05 | | | $ | 0.15 | | |
| Basic net income attributable to common stockholders per share | Basic net income attributable to common stockholders per share | $ | 0.17 | | | $ | (0.04) | | | $ | 0.50 | | | $ | 0.20 | | Basic net income attributable to common stockholders per share | $ | 0.05 | | | $ | 0.15 | | |
| Diluted net income attributable to Allegro MicroSystems, Inc. per share | Diluted net income attributable to Allegro MicroSystems, Inc. per share | $ | 0.17 | | | $ | (0.04) | | | $ | 0.49 | | | $ | 0.05 | | Diluted net income attributable to Allegro MicroSystems, Inc. per share | $ | 0.05 | | | $ | 0.14 | | |
| Diluted net income attributable to common stockholders per share | Diluted net income attributable to common stockholders per share | $ | 0.17 | | | $ | (0.04) | | | $ | 0.49 | | | $ | 0.05 | | Diluted net income attributable to common stockholders per share | $ | 0.05 | | | $ | 0.14 | | |
The computed net income per share for the three-three months ended June 24, 2022 and nine-month periods ended December 24,June 25, 2021 and December 25, 2020 does not assume conversion of securities that would have an antidilutive effect on income per share. AsFor the Company was in a net loss position forthree months ended June 24, 2022 and June 25, 2021, there were 19,272 and 1,988 restricted share units (“RSUs”), respectively, excluded as conversion of such securities would have an antidilutive effect on income per share. For the three-month periodthree months ended DecemberJune 24, 2022 and June 25, 2020, common stock equivalents2021, there were 46,991 and no performance share units (“PSUs”), respectively, excluded as conversion of 57,553,282 were deemed antidilutive.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 | | Nine-Month Period Ended | | Three-Month Period Ended | |
| | December 24,
2021 | | December 25,
2020 | | December 24,
2021 | | December 25,
2020 | | June 24,
2022 | | June 25,
2021 | |
| Restricted stock units | Restricted stock units | 1,199,816 | | | 377,767 | | | 1,046,229 | | | 125,922 | | Restricted stock units | 668,259 | | | 820,221 | | |
| Performance stock units | Performance stock units | 1,117,532 | | | 422,768 | | | 959,084 | | | 140,923 | | Performance stock units | 1,080,201 | | | 752,235 | | |
| Employee stock purchase plan | Employee stock purchase plan | 13,973 | | | — | | | 8,314 | | | — | | Employee stock purchase plan | 19,681 | | | 5,237 | | |
| Shares related to Common Stock Conversion | — | | | 56,752,747 | | | — | | | 123,250,916 | | |
| | Total | Total | 2,331,321 | | | 57,553,282 | | | 2,013,627 | | | 123,517,761 | | Total | 1,768,141 | | | 1,577,693 | | |
18.15. 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”), restricted share units (“RSUs”)PSUs, RSUs and restricted shares (all part of our equity incentive plan).
During the nine months ended December 24, 2021, the Company granted 1,030,887 RSUs to employees with an estimated grant date fair value of $25.47. Stock-based compensation expense related to non-vested awards not yet recorded at December 24, 2021 was $25,133, which is expected to be recognized over a weighted-average of 1.34 years. During the nine months ended December 24, 2021, 168,717 shares vested.
PSUs are included at 100% - 200% of target goals. The intrinsic value of the PSU’s that were unvested during the nine months ended December 24, 2021 was $36,708. The total compensation cost related to unvested awards not yet recorded at December 24, 2021 was $13,765, which is expected to be recognized over a weighted average of 1.78 years. No shares vested during the nine months ended December 24, 2021.
During the nine months ended December 24, 2021, 227,530 shares of the Company’s restricted common stock vested. In addition, 24,014 shares were forfeited, which reduced common stock outstanding during the same period. The Company
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 154,783121,573 unvested shares of restricted common stock at DecemberJune 24, 20212022 with a weighted average grant date fair value of $14.00 and remaining vesting period of 1.07 years.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 | | Nine-Month Period Ended | | Three-Month Period Ended | |
| | December 24,
2021 | | December 25,
2020 | | December 24,
2021 | | December 25,
2020 | | June 24,
2022 | | June 25,
2021 | |
| Cost of sales | Cost of sales | $ | 742 | | | $ | 4,694 | | | $ | 1,992 | | | $ | 4,844 | | Cost of sales | $ | 832 | | | $ | 528 | | |
| Research and development | Research and development | 1,019 | | | 2,984 | | | 2,814 | | | 3,037 | | Research and development | 1,128 | | | 752 | | |
| Selling, general and administrative | Selling, general and administrative | 5,859 | | | 38,198 | | | 13,841 | | | 39,020 | | Selling, general and administrative | 32,176 | | | 3,551 | | |
| Total stock-based compensation | Total stock-based compensation | $ | 7,620 | | | $ | 45,876 | | | $ | 18,647 | | | $ | 46,901 | | 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.
1916. Income Taxes
The Company recorded the following tax (benefit) provision in its unaudited condensed consolidated statements of operations:
| | | | | | | | | | | | | | | | | | | | | | | |
| Three-Month Period Ended | | Nine-Month Period Ended |
| December 24,
2021 | | December 25,
2020 | | December 24,
2021 | | December 25,
2020 |
| Operating taxes | $ | 6,517 | | | $ | (12,169) | | | $ | 17,785 | | | $ | (9,764) | |
| Discrete tax items | (236) | | | (18,354) | | | (1,098) | | | (18,149) | |
| Provision (benefit) for income taxes | $ | 6,281 | | | $ | (30,523) | | | $ | 16,687 | | | $ | (27,913) | |
| Annual operating tax rate | 16.6 | % | | 34.2 | % | | 16.1 | % | | 52.8 | % |
| Effective tax rate | 16.0 | % | | 85.8 | % | | 15.1 | % | | 150.9 | % |
| | | | | | | | | | | | | | | |
| Three-Month Period Ended | | |
| June 24,
2022 | | June 25,
2021 | | | | |
| | | | | | | |
| | | | | | | |
| Provision for income taxes | $ | 1,965 | | | $ | 4,263 | | | | | |
| Annual operating tax rate | 16.3 | % | | 15.9 % | | | | |
| Effective tax rate | 16.0 | % | | 13.3 | % | | | | |
The Company’s provision (benefit) 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 $6,281, or 16.0%, and $16,687, or 15.1%, for the three- and nine-month periods ended December 24, 2021, respectively. Income tax benefit and the effective income tax rate were $30,523, or 85.8%, and $27,913, or 150.9%, for the three- and nine-month periods ended December 25, 2020, respectively. The increase in income tax expense was primarily attributable to tax impacts of the IPO transaction recorded in the prior three- and nine-month period. The IPO transaction resulted in excess tax over financial reporting deductions related to a $40,440 stock-based compensation charge (and the related incremental tax deductions), a $16,000 one-time dividend treated as compensation expense for tax purposes, as well as a tax loss on the divestiture of Polar Semiconductor, LLC (“PSL”). The tax impacts of these transactions and other discrete transactions caused an overall U.S. NOL that will be carried back five years. Additional fluctuations in our effective income tax rate relate primarily to differences in our U.S. taxable income, estimated FDII benefits, GILTI income, research credits, non-deductible stock-based compensation charges, and discrete tax items.
ALLEGRO MICROSYSTEMS, INC.
Notes to Unaudited Condensed Consolidated Financial Statements – (continued)
(Amounts in thousands, except share and per share amounts)
20.17. Related Party Transactions
Transactions involving Sanken
The Company sells products and services 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 the Company’sCompany products and services to Sanken totaled $39,461totaled $41,709 and $112,079$35,453 during the three-three months ended June 24, 2022 and nine-month periods ended December 24,June 25, 2021, respectively,respectively. Although certain costs are commingled, shared or allocated, cost of goods sold and $26,439 and $72,570 during the three- and nine-month periods ended December 25, 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 $28,251$30,081 and $21,595$27,256 as of DecemberJune 24, 20212022 and March 26, 2021,25, 2022, respectively. Other accounts receivable from Sanken totaled $54 and $198$28 and $104 as of DecemberJune 24, 20212022 and March 26, 2021,25, 2022, respectively.
Transactions involving PSLTermination of Sanken Distribution Agreement
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”) (subsequently changed to Polar Semiconductor, LLC), 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 technologiesa plan to be used by PSItransition the supply chain and sales activity in Japan from Sanken to manufacture productsthe Company. During the planning process, both parties will define the transition timeline and method for thecustomer communication, supply chain transfer and sales coverage. 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 andalso define a method to continue engagement with 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 PSL by Sanken in the formsupport of an up-front annual fee, with PSL 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 that the companies fail to agree upon the annual fee for that fiscal year within three months after the commencement of such fiscal year. During the three- and nine-month periods ended December 24, 2021, the Company (through PSL) received no fees from Sanken pursuant to the IC Technology Development Agreement, and, during the same periods, the Company paid no 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. During the three- and nine-month periods ended December 25, 2020, the Company (through PSL) received fees of $300 and $900, respectively, from Sanken pursuant to the IC Technology Development Agreement, and, during the same periods, the Company paid fees of $300 and $900 to PSL pursuant to the IC Technology Development Agreement.select customers.
In April 2015, PSL and Sanken entered into a discrete technology development agreement (as amended, the “Discrete Technology Development Agreement”Transactions involving Polar Semiconductor, LLC (“PSL”), pursuant to which the parties agreed upon the general terms under which they, from time to time, would undertake 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 were 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 a related party under the Discrete Technology Development Agreement, which was paid in the first quarter of fiscal year 2022. The Discrete Technology Development Agreement terminated on March 31, 2021 in accordance with its terms.
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 distribution of Sanken products in the U.S. and Europe at the same time.
The Company continues to purchasepurchases 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 $11,837totaled $14,671 and $38,346$13,380 for the three-three months ended June 24, 2022 and nine-month periods ended December 24,June 25, 2021, respectively, and $11,558 and $33,448 for the three- and nine-month periods ended December 25, 2020, respectively. For the three- and nine-month periods ended December 25, 2020, these amounts include $1,500 and $5,000, respectively, of price support payments. The price support payments were for fiscal year 2021 only. Accounts payable to PSL included in amounts due to a related party totaled $4,051$4,704 and $1,739$5,222 as of DecemberJune 24, 20212022 and March 26, 2021,25, 2022, respectively.
ALLEGRO MICROSYSTEMS, INC.
Notes to Unaudited Condensed Consolidated Financial Statements – (continued)
(Amounts in thousands, except share and per share amounts)
Note Receivable from PSL
On December 2, 2021, AML entered into a loanloan agreement with PSL wherein PSL provided an initial promissory note to AML for a principal amount of $7,500 (“Initial$7,500 (the “Initial PSL Loan”). The Initial PSL Loan will be repaid in equal installments, comprising of 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 quarter (April 1,st, July 1,st, October 1,st, and January 1st)1). In addition, PSL has the option of borrowing up to an additional $7,500 on or around January 1, 2023$7,500 under the same terms of the PSL Loan (“Secondary(the “Secondary PSL Loan”, and, collectivelytogether with the Initial PSL Loan, the “PSL Promissory Notes”). The loan funds will be used by PSL to procure a deep ultraviolet scannerscanner and other associated manufacturing tools necessary to increase wafer fabrication capacity in support of the Company’s increasing wafer demand.
Transactions involving Sanken Electric Europe Ltd. (“SEEL”)
During fiscal year ended March 26, 2021 (and following As of June 24, 2022, the outstanding balance of the PSL Divestiture), Sanken, throughPromissory Notes was $7,031. During the three months ended June 24, 2022, PSL formed SEEL in ordermade a quarterly payment to coverAML 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 distribution business in Europe.election to draw upon the Secondary PSL Loan. The Company, in connection with the transition services agreement with Sanken andSecondary PSL paid certain costsLoan was funded to PSL on behalf of them, and as such, had no related party accounts receivable from SEEL as of December 24, 2021. The Company had related party accounts receivable from SEEL of $1,272 as of March 26, 2021.July 1, 2022.
Sublease Agreement
In 2014, the Company, through one of its subsidiaries, entered into a sublease agreement with Sanken pursuant to which the subsidiaryit subleases from Sanken certain office building space in Japan.Japan from Sanken. The sublease automatically renews on an annual basis unless either party provides notice to the other party otherwise and can otherwise be terminated by either party upon providing six
ALLEGRO MICROSYSTEMS, INC.
Notes to Unaudited Condensed Consolidated Financial Statements – (continued)
(Amounts in thousands, except share and per share amounts)
months’ prior notice. The Company made aggregate payments of approximatelyapproximately $48 and $56 and $166 to Sanken under the sublease agreement during the three-three months ended June 24, 2022 and nine-month periods ended December 24,June 25, 2021, respectively, and $59 and $173 during the three- and nine-month periods ended December 25, 2020, respectively.
Consulting Agreement
In December 2018September 2017 and prior to Reza Kazerounian becoming a member of the Company’s board of directors,Board, the Company entered into a board executive advisor agreement, as amended in June 2018 (the “Consulting Agreement”), with Mr. Kazerounian, pursuant to which the Company engaged Mr. Kazerounian to serve as executive advisor to the board of directorsBoard 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’s employmentKazerounian 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 directorsBoard and Mr. Kazerounian each have the right to terminate the Consulting Agreement at any time. During the three-three months ended June 24, 2022 and nine-month periods ended December 24,June 25, 2021, the Company paid aggregate fees of $69 and $191, respectively, to Mr. Kazerounian pursuant to the Consulting Agreement. During the three- and nine-month periods ended December 25, 2020, the Company paid aggregate fees of $82$72 and $262,$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.
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, 202118, 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 20212022 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- and nine-month periodsthree months ended DecemberJune 24, 20212022 and DecemberJune 25, 20202021 relate to the 13-week periods ended DecemberJune 24, 20212022 and DecemberJune 25, 2020,2021, 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 onea 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- and nine-month periodsthree months ended DecemberJune 24, 2022 and June 25, 2021, we generated $186.6$217.8 million and $568.4$188.1 million in total net sales, respectively, with $33.0$10.3 million and $93.9$27.7 million in net income, respectively, and $54.9$66.7 million and $167.7and $53.8 million in Adjusted EBITDA in such fiscal periods, respectively. During the three- and nine-month periods ended December 25, 2020, we generated $164.4 million and $416.1 million in total net sales, respectively with $5.1 million in net loss and $9.4 million in net income and $39.6 million and $98.6 million in. For additional information regarding Adjusted EBITDA, a non-GAAP financial measure, please refer to “Non-GAAP Financial Measures” in such fiscal periods, respectively.
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.document.
•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 locatedfocus 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 componentsan 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 additionapplications, 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 inprocess 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 conditionsmaterials 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 announcedsupplies that we would consolidateuse in production.
With our assemblyefforts to leverage our fixed cost and test facilities into a single site, located atoperating 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 and closed on the sale of the AMTC Facility in August 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 revenuesales can be lengthy, typically between two and four years. As a result, our future revenuesales is highly dependent on our continued success at winning design mandates from our customers. Further, 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. CancellationsWhile 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 aan 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. Shutdowns of third-party factories, in connection with COVID-19 or other factors beyond our control, have affected, and are expected to continue to affect our product sales in the next fiscal quarter. 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, testtesting 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 areis 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 areis 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 gain recorded in the three months ended DecemberJune 24, 20212022 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)
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 representsis 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 (benefit)
Our provision or benefit 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 DecemberJune 24, 20212022 Compared to Three-Month Period Ended DecemberJune 25, 20202021
The following table summarizes our results of operations for the three-month periods ended DecemberJune 24, 20212022 and DecemberJune 25, 2020.2021.
| | | Three-Month Period Ended | | Change | | Three-Month Period Ended | | Change |
| | December 24,
2021 | | December 25,
2020 | | $ | | % | | June 24,
2022 | | June 25,
2021 | | $ | | % |
| | (Dollars in thousands) | | (Dollars in thousands) |
Total net sales (1) | Total net sales (1) | $ | 186,629 | | | $ | 164,449 | | | $ | 22,180 | | | 13.5 | % | Total net sales (1) | $ | 217,753 | | | $ | 188,142 | | | $ | 29,611 | | | 15.7 | % |
| Cost of goods sold | Cost of goods sold | 85,464 | | | 90,024 | | | (4,560) | | | (5.1) | % | Cost of goods sold | 99,379 | | | 93,982 | | | 5,397 | | | 5.7 | % |
| Gross profit | Gross profit | 101,165 | | | 74,425 | | | 26,740 | | | 35.9 | % | Gross profit | 118,374 | | | 94,160 | | | 24,214 | | | 25.7 | % |
| Operating expenses: | Operating expenses: | | Operating expenses: | |
| Research and development | Research and development | 30,297 | | | 30,999 | | | (702) | | | (2.3) | % | Research and development | 33,857 | | | 29,554 | | | 4,303 | | | 14.6 | % |
| Selling, general and administrative | Selling, general and administrative | 37,963 | | | 67,650 | | | (29,687) | | | (43.9) | % | Selling, general and administrative | 69,980 | | | 32,064 | | | 37,916 | | | 118.3 | % |
| | Change in fair value of contingent consideration | Change in fair value of contingent consideration | (2,700) | | | — | | | (2,700) | | | 100.0 | % | Change in fair value of contingent consideration | (200) | | | 300 | | | (500) | | | (166.7) | % |
| Total operating expenses | Total operating expenses | 65,560 | | | 98,649 | | | (33,089) | | | (33.5) | % | Total operating expenses | 103,637 | | | 61,918 | | | 41,719 | | | 67.4 | % |
| Operating income (loss) | 35,605 | | | (24,224) | | | 59,829 | | | 247.0 | % | |
| Operating income | | Operating income | 14,737 | | | 32,242 | | | (17,505) | | | (54.3) | % |
| Other income (expense), net: | Other income (expense), net: | | Other income (expense), net: | |
| Loss on debt extinguishment | — | | | (9,055) | | | 9,055 | | | — | % | |
| | Interest expense, net | Interest expense, net | (269) | | | (2,598) | | | 2,329 | | | (89.6) | % | Interest expense, net | (120) | | | (345) | | | 225 | | | (65.2) | % |
| Foreign currency transaction loss | (3) | | | (145) | | | 142 | | | (97.9) | % | |
| Income in earnings of equity investment | 287 | | | 949 | | | (662) | | | (69.8) | % | |
| 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 | 3,634 | | | (510) | | | 4,144 | | | (812.5) | % | Other, net | (3,429) | | | 48 | | | (3,477) | | | (7,243.8) | % |
| Total other income (expense), net | 3,649 | | | (11,359) | | | 15,008 | | | 132.1 | % | |
| Income (loss) before income tax provision (benefit) | 39,254 | | | (35,583) | | | 74,837 | | | 210.3 | % | |
| Income tax provision (benefit) | 6,281 | | | (30,523) | | | 36,804 | | | (120.6) | % | |
| Net income (loss) | 32,973 | | | (5,060) | | | 38,033 | | | 751.6 | % | |
| 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 | 1,965 | | | 4,263 | | | (2,298) | | | (53.9) | % |
| Net income | | Net income | 10,283 | | | 27,707 | | | (17,424) | | | (62.9) | % |
| Net income attributable to non-controlling interests | Net income attributable to non-controlling interests | 37 | | | 35 | | | 2 | | | 5.7 | % | Net income attributable to non-controlling interests | 36 | | | 38 | | | (2) | | | (5.3) | % |
| Net income (loss) attributable to Allegro MicroSystems, Inc. | $ | 32,936 | | | $ | (5,095) | | | $ | 38,031 | | | 746.4 | % | |
| Net income attributable to Allegro MicroSystems, Inc. | | 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.
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 |
| | December 24,
2021 | | December 25,
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 | 45.8 | % | | 54.7 | % | Cost of goods sold | 45.6 | % | | 50.0 | % |
| Gross profit | Gross profit | 54.2 | % | | 45.3 | % | Gross profit | 54.4 | % | | 50.0 | % |
| Operating expenses: | Operating expenses: | | Operating expenses: | |
| Research and development | Research and development | 16.2 | % | | 18.9 | % | Research and development | 15.5 | % | | 15.7 | % |
| Selling, general and administrative | Selling, general and administrative | 20.3 | % | | 41.1 | % | Selling, general and administrative | 32.1 | % | | 17.0 | % |
| | Change in fair value of contingent consideration | Change in fair value of contingent consideration | (1.4) | % | | — | % | Change in fair value of contingent consideration | (0.1) | % | | 0.2 | % |
| Total operating expenses | Total operating expenses | 35.1 | % | | 60.0 | % | Total operating expenses | 47.5 | % | | 32.9 | % |
| Operating income (loss) | 19.1 | % | | (14.7) | % | |
| Operating income | | Operating income | 6.9 | % | | 17.1 | % |
| Other income (expense), net: | Other income (expense), net: | | Other income (expense), net: | |
| Loss on debt extinguishment | — | % | | (5.5) | % | |
| | Interest expense, net | Interest expense, net | (0.1) | % | | (1.6) | % | Interest expense, net | (0.1) | % | | (0.2) | % |
| Foreign currency transaction loss | — | % | | (0.1) | % | |
| Income in earnings of equity investment | 0.1 | % | | 0.5 | % | |
| 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 | 1.9 | % | | (0.3) | % | Other, net | (1.6) | % | | 0.1 | % |
| Total other income (expense), net | 1.9 | % | | (7.0) | % | |
| Income (loss) before income tax provision (benefit) | 21.0 | % | | (21.7) | % | |
| Income tax provision (benefit) | 3.4 | % | | (18.6) | % | |
| Net income (loss) | 17.6 | % | | (3.1) | % | |
| 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 | 1.0 | % | | 2.3 | % |
| Net income | | 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 (loss) attributable to Allegro MicroSystems, Inc. | 17.6 | % | | (3.1) | % | |
| Net income attributable to Allegro MicroSystems, Inc. | | Net income attributable to Allegro MicroSystems, Inc. | 4.7 | % | | 14.6 | % |
Total net sales
Total net sales increased by $22.2$29.6 million, or 13.5%15.7%, to $186.6$217.8 million in the three-month period ended DecemberJune 24, 20212022 from $164.4$188.1 million in the three-month period ended DecemberJune 25, 2020.2021. This increase was primarily due to the continued economic recovery and increase in demand across most automotive and industrial solutions. Much of the favorable growth in total net sales was attributable to higher demand forshipment of our ADAS, safety, comfortdata center, advanced driver assistance systems (“ADAS”), electrified vehicle (“xEV”), and convenience, xEV, broad-based industrial and gamingcomputing applications.
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 | | | | | | | | | | | | | | | | | | | | |
| | December 24,
2021 | | December 25,
2020 | | Amount | | % | | Three-Month Period Ended | | Change |
| | (Dollars in thousands) | | June 24,
2022 | | June 25,
2021 | | Amount | | % |
| | | (Dollars in thousands) |
| Automotive | Automotive | $ | 130,797 | | | $ | 113,902 | | | $ | 16,895 | | | 14.8 | % | Automotive | $ | 149,649 | | | $ | 133,523 | | | $ | 16,126 | | | 12.1 | % |
| Industrial | Industrial | 31,903 | | | 23,654 | | | 8,249 | | | 34.9 | % | Industrial | 40,140 | | | 30,309 | | | 9,831 | | | 32.4 | % |
| Other | Other | 23,929 | | | 26,893 | | | (2,964) | | | (11.0) | % | Other | 27,964 | | | 24,310 | | | 3,654 | | | 15.0 | % |
| Total net sales | Total net sales | $ | 186,629 | | | $ | 164,449 | | | $ | 22,180 | | | 13.5 | % | Total net sales | $ | 217,753 | | | $ | 188,142 | | | $ | 29,611 | | | 15.7 | % |
|
The increase in net sales by marketto our end markets was driven primarily by increases in automotive of $16.1 million, or 12.1%, industrial of $16.9$9.8 million, or 32.4%, and other of $3.7 million, or 14.8%,15.0%.
Automotive net sales increased in the three-month period ended June 24, 2022 compared to the three-month period ended June 25, 2021, primarily due to higher demand for our ADAS and industrial of $8.2 million, or 34.9%, partially offset by a decrease in other of $3.0 million, or 11.0%.xEV applications.
AutomotiveIndustrial net sales increased in the three-month period ended DecemberJune 24, 20212022 compared to the three-month period ended DecemberJune 25, 20202021, primarily due to our customers’ increased vehicle production across most markets due to the on-going recovery from the COVID-19 pandemic. As a result, we experienced higher demand for our ADAS, safety, comfortin data center and convenience and xEV applications during the third quarter of 2022 compared to the same period last year.Industry 4.0 applications.
Other net sales improved induring the three-month period ended DecemberJune 24, 20212022 compared to the three-month period ended DecemberJune 25, 20202021, mainly due primarily to the growth across our industrial applications, including data center and factory automation.increases in demand for 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 |
| | December 24,
2021 | | December 25,
2020 | | Amount | | % | | June 24,
2022 | | June 25,
2021 | | Amount | | % |
| | (Dollars in thousands) | | (Dollars in thousands) |
| Power integrated circuits | $ | 62,859 | | | $ | 54,406 | | | $ | 8,453 | | | 15.5 | % | |
| Magnetic sensors | 123,543 | | | 109,457 | | | 14,086 | | | 12.9 | % | |
| 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 | 227 | | | 586 | | | (359) | | | (61.3) | % | Photonics | 43 | | | 828 | | | (785) | | | (94.8) | % |
| | Total net sales | Total net sales | $ | 186,629 | | | $ | 164,449 | | | $ | 22,180 | | | 13.5 | % | Total net sales | $ | 217,753 | | | $ | 188,142 | | | $ | 29,611 | | | 15.7 | % |
|
The increase in net sales by product was driven primarily by increases of $14.1$16.4 million, or 12.9%13.6%, in magnetic sensor ICMS product sales and $8.5$14.0 million, or 15.5%21.0%, in power integrated circuitPIC 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 |
| | December 24,
2021 | | December 25,
2020 | | Amount | | % | | June 24,
2022 | | June 25,
2021 | | Amount | | % |
| | (Dollars in thousands) | | (Dollars in thousands) |
| Americas: | Americas: | | Americas: | |
| United States | United States | $ | 26,228 | | | $ | 23,934 | | | $ | 2,294 | | | 9.6 | % | United States | $ | 28,391 | | | $ | 26,841 | | | $ | 1,550 | | | 5.8 | % |
| Other Americas | Other Americas | 4,921 | | | 5,620 | | | (699) | | | (12.4) | % | Other Americas | 6,487 | | | 6,349 | | | 138 | | | 2.2 | % |
| EMEA: | EMEA: | | EMEA: | |
| Europe | Europe | 29,891 | | | 28,239 | | | 1,652 | | | 5.9 | % | Europe | 35,333 | | | 34,751 | | | 582 | | | 1.7 | % |
| Asia: | Asia: | | Asia: | |
| Japan | Japan | 39,461 | | | 26,439 | | | 13,022 | | | 49.3 | % | Japan | 41,709 | | | 35,453 | | | 6,256 | | | 17.6 | % |
| Greater China | Greater China | 48,696 | | | 46,172 | | | 2,524 | | | 5.5 | % | Greater China | 55,116 | | | 42,779 | | | 12,337 | | | 28.8 | % |
| South Korea | South Korea | 19,935 | | | 17,606 | | | 2,329 | | | 13.2 | % | South Korea | 20,979 | | | 21,933 | | | (954) | | | (4.3) | % |
| Other Asia | Other Asia | 17,497 | | | 16,439 | | | 1,058 | | | 6.4 | % | Other Asia | 29,738 | | | 20,036 | | | 9,702 | | | 48.4 | % |
| Total net sales | Total net sales | $ | 186,629 | | | $ | 164,449 | | | $ | 22,180 | | | 13.5 | % | Total net sales | $ | 217,753 | | | $ | 188,142 | | | $ | 29,611 | | | 15.7 | % |
Net sales increased across mostthe majority of our geographic locations in the three-month period ended DecemberJune 24, 20212022 compared to the three-month period ended DecemberJune 25, 20202021, 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 continuescontinue to rise.
The increase in net sales of $12.3 million, or 28.8%, in Greater China related to higher automotive demand, primarily in our ADAS and xEV offerings. Other Asia experienced sales growth of $9.7 million, or 48.4%, mainly in our data center sector. Net sales in Japan grew $13.0$6.3 million, or 49.3%17.6%, which was primarily driven by higher demand for our automotive applications, particularly safety, comfort and convenience, internal combustion engine (“ICE”), xEV and ADAS.industrial applications. The increase in net sales of $2.5 million, or 5.5%, in Greater China and $2.3 million, or 9.6%, in the United States related to
higher demand for our broad-based industrial and ADAS offerings. South Korea experienced sales growth of $2.3$1.6 million, or 13.2%5.8%, mainly due to higher demand across all automotive sectors, while Other Asia sales growth of $1.1 million, or 6.4%, was attributable primarily to higher data center demand in our industrial sector. The increase in net sales of $1.7 million, or 5.9%, in Europe, predominantly comprised of Germany and France, was primarily driven by increasescontent and market share gains in wireless infrastructure and factory automation demand.our ADAS applications.
Cost of goods sold, gross profit and gross margin
Cost of goods sold decreasedincreased by $4.6$5.4 million, or 5.1%5.7%, to $85.5$99.4 million in the three-month period ended DecemberJune 24, 20212022 from $90.0$94.0 million in the three-month period ended DecemberJune 25, 2020.2021. The decreaseincrease in cost of goods sold was primarily attributable to decreases in amortization of manufacturing cost absorptions and conversion costs and lower Voxtel impacts, mainly from the discontinuation of a product line, partially offset by higher overall production volume in the third quarter of 2022.sales volume.
Gross profitprofit increased by $26.7$24.2 million, or 35.9%25.7%, to approximately $101.1$118.4 million in the three-month period ended DecemberJune 24, 20212022 from $74.4$94.2 million in the three-month period ended DecemberJune 25, 2020.2021. The increase in gross profit was driven by a $22.2 the $29.6
million operational increase in total net sales to all end markets discussed above, coupled withpartially offset by the impacts to cost of goods sold discussed above.
R&D expenses
R&D expenses decreasedincreased by $0.7$4.3 million, or 2.3%14.6%, to $30.3$33.9 million in the three-month period ended DecemberJune 24, 20212022 from $31.0$29.6 million in the three-month period ended DecemberJune 25, 2020.2021. This decreaseincrease was primarily due to decreasesa combined $3.8 million increase in personnel costs, including variable compensation costs, and general operating expenses and higher stock-based compensation expense of $2.0 million and inventory and supplies of $1.0 million, partially offset by a combined $2.2 million increase in employee-related variable compensation costs, as well as general operating expenses, including dues and subscriptions.$0.4 million.
R&D expenses represented 16.2%represented 15.5% of our total net sales for the three-month period ended DecemberJune 24, 2021,2022, a decrease from 18.9%15.7% of our total net sales for the three-month period ended DecemberJune 25, 2020.2021. This percentage decrease was primarily due to the growth in net sales in the three-month period ended DecemberJune 24, 2021 and, to a lesser extent, the impacts to R&D expenses discussed above.2022.
SG&A expenses
SG&A expenses decreasedexpenses increased by $29.7$38.0 million, or 43.9%118.3%, to $38.0$70.0 million in the three-month period ended DecemberJune 24, 20212022 from $67.7$32.1 million in the three-month period ended DecemberJune 25, 2020.2021. This decreaseincrease was primarily due to loweran increase of $28.6 million in stock-based compensation expense, including accelerated expense from the retirement of $32.3our former chief executive officer of approximately $26.3 million, as well as higher personnel costs, including variable compensation costs, of $4.4 million and combined decrease in facilities, supplies and personnel costs of $5.5 million. These lower costs were partially offset by higher general operating expenses$1.6 million comprised of $8.1 million, particularly higher employee-related variable compensation and personnel costs, professional fees contract laborand dues and subscription costs. In addition, we recognized $3.8 million of severance and other transition costs as well as severance expense relatedmainly due to the departurecombined impacts of an officerour recent changes in the third quarter of fiscal 2022.leadership.
SG&A expenses represented 20.3%32.1% of our total net sales for the three-month period ended DecemberJune 24, 2021, a decrease2022, an increase from 41.1%17.0% of our total net sales for the three-month period ended DecemberJune 25, 2020.2021. This percentage decreaseincrease was primarily due to the impacts noted above, partially offset by growth in net sales in the three-month period ended DecemberJune 24, 2021. In addition, the percentage decrease represents the lower SG&A expenses as discussed above, as those costs were incrementally higher for the three-month period ended December 25, 2020 due in large part to IPO-related costs and accelerated vesting of the Class A and L common stock and RSU Conversion Program incurred during that period.2022.
Loss on debt extinguishmentInterest expense, net
Loss on debt extinguishment reflected a $9.1Interest expense, net was $0.1 million loss in the three-month period ended December 25, 2020, representing the write-off of unamortized balances of previously deferred financing costs as a result of the $300.0 million Term Loan Facility principal balance repayment on November 25, 2020.
Interest expense, net
Interest expense, net wasJune 24, 2022 compared to $0.3 million in the three-month period ended December 24, 2021 compared to interest expense, net of $2.6 million in the three-month period ended DecemberJune 25, 2020.2021. The decrease in interest expense was primarily due to lower outstanding debt balances duringhigher interest income received from a related party in the three-month period ended December 24, 2021 attributable to
first quarter of 2023. The mandatory interest payments on the original $325.0 million senior secured debt before repayment of $300.0 million of this balance after the IPO in the three-month period ended December 25, 2020.Term Loan Facility remained relatively consistent.
Foreign currency transaction lossgain (loss)
We recorded an insignificant amount ofa foreign currency transaction loss in the three-month period ended December 24, 2021 compared to a lossgain of $0.1$1.9 million in the three-month period ended December 25, 2020. The foreign currency transactionJune 24, 2022 compared to a loss of $0.3 million in the three-month period ended December 24, 2021 wasJune 25, 2021. The foreign currency transaction gains or losses recorded in each three-month period were primarily due to the realized and unrealized gains or losses from our UK location of $0.4 million, mostly offset by $0.2 million of realized and unrealized gains from our Philippines location, as well as approximately $0.2 million of unrealized gains on our investments in marketable securities. The foreign currency transaction loss recorded in the three-month period ended December 25, 2020 was primarily due to $0.3 million of realized and unrealized losses from our UK and Philippines locations, partly offset by $0.2 million of realized and unrealized gains from our Thailand location.
Income(Loss) income in earnings of equity investment
Income(Loss) income in earnings of equity investment reflected alosses of $0.9 million and gains of $0.3 million gain in the three-month period ended DecemberJune 24, 2022 and June 25, 2021, compared to a $0.9 million gain in the three-month period ended December 25, 2020,respectively, representing the earnings on our 30% investment in PSL.
Other, net
Other, net increaseddecreased by $4.1$3.5 million to $3.6a loss of more than $3.4 million of miscellaneous gain in the three-month period ended December 24, 2021 from $0.5 million of miscellaneous loss in the three-month period ended DecemberJune 24, 2022 from less than $0.1 million of gains in the three-month period ended June 25, 2020. This increase2021. The decrease in the three-month period ended June 24, 2022 was largely attributableprimarily due to $3.5 million of unrealized gainslosses on equity securities and a $0.4 million gain related to the sale of scrap metal.marketable securities.
Income tax provision (benefit)
Income tax expense and the effective income tax raratete were $6.3 were $2.0 million, or 16.0%, respectively, in the three-month period December 24, 2021, and income tax benefit and the effective tax rate were $30.5$4.3 million,, or 85.8%13.3%, respectively, in the three-month period Decemberended June 24, 2022 and June 25, 2020.2021, respectively. The increase in incomequarter ending June 25, 2021 effective tax expenserate was primarily attributable tofavorably impacted by one-time state tax impacts of the IPO transaction recorded in the prior three-month period. The IPO transactionrefunds. Current year 174 Capitalization resulted in excess tax over financial reporting deductions related to a $40.4 million stock-based compensation charge (and the related incremental tax deductions), a $16.0 million one-time dividend treated as compensation expense for tax purposes, as well as a tax loss on the divestiture of PSL. The tax impacts of these transactions and other discrete transactions caused an overall U.S. NOL that will be carried back five years. Additional fluctuations in our effective income tax rate relate primarily to differences in ourincreased U.S. taxable income estimatedand 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 GILTI income, research credits, non-deductible stock-based compensation charges, and discrete tax items.
Nine-Month Period Ended December 24, 2021 Compared to Nine-Month Period Ended December 25, 2020
The following table summarizes our results of operations for the nine-month periods ended December 24, 2021 and December 25, 2020.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Nine-Month Period Ended | | Change | | | | |
| December 24,
2021 | | December 25,
2020 | | $ | | % | | | | | |
| (Dollars in thousands) |
Total net sales (1) | $ | 568,381 | | | $ | 416,099 | | | $ | 152,282 | | | 36.6 | % | | | | | | |
| Cost of goods sold | 270,524 | | | 224,203 | | | 46,321 | | | 20.7 | % | | | | | | |
| Gross profit | 297,857 | | | 191,896 | | | 105,961 | | | 55.2 | % | | | | | | |
| Operating expenses: | | | | | | | | | | | | | |
| Research and development | 89,441 | | | 80,509 | | | 8,932 | | | 11.1 | % | | | | | | |
| Selling, general and administrative | 104,115 | | | 118,677 | | | (14,562) | | | (12.3) | % | | | | | | |
| | | | | | | | | | | | | |
| Change in fair value of contingent consideration | (2,100) | | | — | | | (2,100) | | | 100.0 | % | | | | | | |
| Total operating expenses | 191,456 | | | 199,186 | | | (7,730) | | | (3.9) | % | | | | | | |
| Operating income (loss) | 106,401 | | | (7,290) | | | 113,691 | | | 1559.5 | % | | | | | | |
| Other income (expense), net: | | | | | | | | | | | | | |
| Loss on debt extinguishment | — | | | (9,055) | | | 9,055 | | | — | % | | | | | | |
| Interest expense, net | (1,764) | | | (1,935) | | | 171 | | | (8.8) | % | | | | | | |
| Foreign currency transaction loss | (55) | | | (1,331) | | | 1,276 | | | (95.9) | % | | | | | | |
| Income in earnings of equity investment | 792 | | | 1,407 | | | (615) | | | (43.7) | % | | | | | | |
| Other, net | 5,216 | | | (297) | | | 5,513 | | | 1856.2 | % | | | | | | |
| Total other income (expense), net | 4,189 | | | (11,211) | | | 15,400 | | | 137.4 | % | | | | | | |
| Income (loss) before income tax provision (benefit) | 110,590 | | | (18,501) | | | 129,091 | | | 697.8 | % | | | | | | |
| Income tax provision (benefit) | 16,687 | | | (27,913) | | | 44,600 | | | (159.8) | % | | | | | | |
| Net income | 93,903 | | | 9,412 | | | 84,491 | | | 897.7 | % | | | | | | |
| Net income attributable to non-controlling interests | 112 | | | 103 | | | 9 | | | 8.7 | % | | | | | | |
| Net income attributable to Allegro MicroSystems, Inc. | $ | 93,791 | | | $ | 9,309 | | | $ | 84,482 | | | 907.5 | % | | | | | | |
(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 consolidated financial statements included elsewhere in this Quarterly Report for additional information regarding our related party net sales for the periods set forth above.
The following table sets forth our results of operations as a percentage of total net sales for the periods presented.
| | | | | | | | | | | |
| Nine-Month Period Ended |
| December 24,
2021 | | December 25,
2020 |
| Total net sales | 100.0 | % | | 100.0 | % |
| Cost of goods sold | 47.6 | % | | 53.9 | % |
| Gross profit | 52.4 | % | | 46.1 | % |
| Operating expenses: | | | |
| Research and development | 15.7 | % | | 19.3 | % |
| Selling, general and administrative | 18.3 | % | | 28.5 | % |
| Change in fair value of contingent consideration | (0.4) | % | | — | % |
| Total operating expenses | 33.6 | % | | 47.8 | % |
| Operating income (loss) | 18.8 | % | | (1.7) | % |
| Other income (expense), net: | | | |
| Loss on debt extinguishment | — | % | | (2.2) | % |
| Interest expense, net | (0.3) | % | | (0.5) | % |
| Foreign currency transaction loss | (0.1) | % | | (0.4) | % |
| Income in earnings of equity investment | 0.1 | % | | 0.3 | % |
| Other, net | 1.0 | % | | (0.1) | % |
| Total other income (expense), net | 0.7 | % | | (2.9) | % |
| Income (loss) before income tax provision (benefit) | 19.5 | % | | (4.6) | % |
| Income tax provision (benefit) | 3.0 | % | | (6.8) | % |
| Net income | 16.5 | % | | 2.2 | % |
| Net income attributable to non-controlling interests | — | % | | — | % |
| Net income attributable to Allegro MicroSystems, Inc. | 16.5 | % | | 2.2 | % |
Total net sales
Total net sales increased174 Capitalization were offset by $152.3 million, or 36.6%, to $568.4 million in the nine-month period ended December 24, 2021 from $416.1 million in the nine-month period ended December 25, 2020. This increase was primarily due to the continued economic recovery and increases in demand for ADAS, safety, comfort and convenience, xEV, wireless infrastructure, personal mobility, industrial automation and gaming applications.
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.
| | | | | | | | | | | | | | | | | | | | | | | |
| Nine-Month Period Ended | | Change |
| December 24,
2021 | | December 25,
2020 | | Amount | | % |
| (Dollars in thousands) |
| | | | | | | |
| Automotive | $ | 390,351 | | | $ | 279,759 | | | $ | 110,592 | | | 39.5 | % |
| Industrial | 98,533 | | | 65,710 | | | 32,823 | | | 50.0 | % |
| Other | 79,497 | | | 70,630 | | | 8,867 | | | 12.6 | % |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| Total net sales | $ | 568,381 | | | $ | 416,099 | | | $ | 152,282 | | | 36.6 | % |
| | | | | | | |
Net sales to our end markets increased by $152.3 million, or 36.6%, to $568.4 million in the nine-month period ended December 24, 2021 from $416.1 million in the nine-month period ended December 25, 2020.
Automotive net sales increased in the nine-month period ended December 24, 2021 compared to the nine-month period ended December 25, 2020 due to the continued higher demand for our ADAS, safety, comfort and convenience, xEV and ICE applications.
Industrial and other net sales increased in the nine-month period ended December 24, 2021 compared to the nine-month period ended December 25, 2020 primarily due to increased demand in gaming, industrial automation, wireless infrastructure and personal mobility.
Sales Trends by Product
The following table summarizes net sales by product:
| | | | | | | | | | | | | | | | | | | | | | | |
| Nine-Month Period Ended | | Change |
| December 24,
2021 | | December 25,
2020 | | Amount | | % |
| (Dollars in thousands) |
| Power integrated circuits (“PIC”) | $ | 195,054 | | | $ | 146,276 | | | $ | 48,778 | | | 33.3 | % |
| Magnetic sensors (“MS”) | 371,806 | | | 268,956 | | | 102,850 | | | 38.2 | % |
| Photonics | 1,521 | | | 867 | | | 654 | | | 75.4 | % |
| | | | | | | |
| | | | | | | |
| Total | $ | 568,381 | | | $ | 416,099 | | | $ | 152,282 | | | 36.6 | % |
The growth in net sales by product was driven by increases in magnetic sensor IC product sales of $102.9 million and in power IC product sales of $48.8 million during the nine-month period ended December 24, 2021 compared to the same period last year.
Sales Trends by Geographic Location
The following table summarizes net sales by geographic location based on ship-to location.
| | | | | | | | | | | | | | | | | | | | | | | |
| Nine-Month Period Ended | | Change |
| December 24,
2021 | | December 25,
2020 | | Amount | | % |
| (Dollars in thousands) |
| Americas: | | | | | | | |
| United States | $ | 80,854 | | | $ | 57,892 | | | $ | 22,962 | | | 39.7 | % |
| Other Americas | 16,697 | | | 10,797 | | | 5,900 | | | 54.6 | % |
| EMEA: | | | | | | | |
| Europe | 97,108 | | | 70,459 | | | 26,649 | | | 37.8 | % |
| Asia: | | | | | | | |
| Japan | 112,079 | | | 72,570 | | | 39,509 | | | 54.4 | % |
| Greater China | 142,158 | | | 116,178 | | | 25,980 | | | 22.4 | % |
| South Korea | 61,614 | | | 43,733 | | | 17,881 | | | 40.9 | % |
| Other Asia | 57,871 | | | 44,470 | | | 13,401 | | | 30.1 | % |
| Total | $ | 568,381 | | | $ | 416,099 | | | $ | 152,282 | | | 36.6 | % |
Thean increase in net sales across geographic locations in the nine-month period ended December 24, 2021 compared to the nine-month period ended December 25, 2020 was primarily due to content and market share gains as many countries continue to experience economic expansion coming outcurrent year non-deductible executive compensation of the COVID-19 pandemic and demand for many of our products and applications rose year-over-year.approximately $6.7 million.
The increase in net sales in Japan of $39.5 million, or 54.4%, which was primarily driven by higher demand for our ICE, safety, comfort and convenience, ADAS, xEV and personal mobility offerings. The increase in net sales of $26.6 million, or 37.8%, in Europe, predominantly comprised of Germany and France, was primarily driven by increases in ICE, safety, comfort and convenience, ADAS, xEV and industrial offerings. The increase in net sales of $26.0 million, or 22.4%, in Greater China related to higher automotive demand, primarily in our ADAS and ICE applications, as well as increased demand in our industrial sectors. Net sales were higher by $28.9 million, or 42.0%, in the United States and Other Americas (predominantly Mexico), primarily driven by the COVID-19 recovery, as well as content and market share gains in ICE,
ADAS, safety, comfort and convenience and industrial applications. South Korea and Other Asia experienced sales growth of $17.9 million, or 40.9%, and $13.4 million, or 30.1%, respectively, mainly due to higher automotive demand, specifically in ADAS, safety, comfort and convenience, ICE, personal mobility and industrial motor control applications.
Cost of goods sold, gross profit and gross margin
Cost of goods sold increased by $46.3 million, or 20.7%, to $270.5 million in the nine-month period ended December 24, 2021 from $224.2 million in the nine-month period ended December 25, 2020. 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 $3.1 million related to the discontinuation of a legacy Voxtel product line during the first nine months of 2022.
Gross profit increased by $106.0 million, or 55.2%, to $297.9 million in the nine-month period ended December 24, 2021 from $191.9 million in the nine-month period ended December 25, 2020. The increase in gross profit was driven by a $152.3 million increase in net sales in all markets, partially offset by the impacts to cost of goods sold discussed above.
R&D expenses
R&D expenses increased by $8.9 million, or 11.1%, to $89.4 million in the nine-month period ended December 24, 2021 from $80.5 million in the nine-month period ended December 25, 2020. This increase was primarily due to a combined $6.4 million increase in employee-related variable compensation costs, contract labor, and inventory and supplies costs and a combined $2.5 million increase in office supplies and travel and meeting costs.
R&D expenses represented 15.7% of our total net sales for the nine-month period ended December 24, 2021, a decrease from 19.3% of our total net sales in the nine-month period ended December 25, 2020. This percentage decrease was primarily due to the growth in net sales in the nine-month period ended December 24, 2021.
SG&A expenses
SG&A expenses decreased by $14.6 million, or 12.3%, to $104.1 million in the nine-month period ended December 24, 2021 from $118.7 million in the nine-month period ended December 25, 2020. This decrease was primarily due to a $25.2 million decrease in stock-based compensation expense, partially offset by increases of $6.8 million increase in combined employee-related variable compensation and personnel costs, and inventory and supplies costs and $3.0 million in combined professional fees, severance and travel and meeting costs.
SG&A expenses represented 18.3% of our total net sales in the nine-month period ended December 24, 2021, a decrease from 28.5% of our total net sales in the nine-month period ended December 25, 2020. This percentage decrease was primarily due to the growth in net sales in the nine-month period ended December 24, 2021. In addition, the percentage decrease represents the lower SG&A expenses as discussed above, as those costs were incrementally higher for the nine-month period ended December 25, 2020 due in large part to IPO-related costs and accelerated vesting of the Class A and L common stock and RSU Conversion Program incurred during that period.
Loss on debt extinguishment
Loss on debt extinguishment reflected a $9.1 million loss in the nine-month period ended December 25, 2020, representing the write-off of unamortized balances of previously deferred financing costs as a result of the $300.0 million Term Loan Facility principal balance repayment on November 25, 2020.
Interest expense, net
Interest expense, net was relatively flat at $1.8 million for the nine months ended December 24, 2021 compared to $1.9 million for the nine months ended December 25, 2020.
Foreign currency transaction loss
Foreign currency transaction loss decreased by $1.2 million to $0.1 million in the nine-month period ended December 24, 2021 compared to $1.3 million in the nine-month period ended December 25, 2020. The foreign currency transaction loss recorded in the nine months ended December 24, 2021 was primarily due to $0.6 million of realized and unrealized losses from our UK location, mostly offset by $0.2 million of realized and unrealized gains from our Philippines location, as well as approximately $0.3 million of unrealized gains on our investments in marketable securities. The foreign
currency transaction loss recorded in the nine-month period ended December 25, 2020 was primarily attributable to $2.2 million of realized and unrealized losses from our UK location, partially offset by $1.4 million of realized and unrealized gains from our Thailand location.
Income in earnings of equity investment
Income in earnings of equity investment reflected a $0.8 million gain in the nine-month period ended December 24, 2021 compared to a $1.4 million gain in the nine-month period ended December 25, 2020, representing the earnings on our 30% investment in PSL.
Other, net
Other, net increased by $5.5 million to $5.2 million of miscellaneous gains in the nine months ended December 24, 2021 from $0.3 million of miscellaneous loss in the nine months ended December 25, 2020. This increase was attributable primarily to $4.5 million of unrealized gains on marketable securities and a $0.4 million gain related to the sale of the AMTC Facility recognized during the first nine months of 2022.
Income tax provision (benefit)
Income tax expense and the effective income tax rate were $16.7 million, or 15.1%, respectively, in the nine-month period ended December 24, 2021, and income tax benefit and the effective income tax rate were $27.9 million, or 150.9%, respectively, in the nine-month period ended December 25, 2020. The increase in income tax expense was primarily attributable to tax impacts of the IPO transaction recorded in the prior nine- month period. The IPO transaction resulted in excess tax over financial reporting deductions related to a $40.4 million stock-based compensation charge (and the related incremental tax deductions), a $16.0 million one-time dividend treated as compensation expense for tax purposes, as well as a tax loss on the divestiture of PSL. The tax impacts of these transactions and other discrete transactions caused an overall U.S. NOL that will be carried back five years. Additional fluctuations in our effective income tax rate relate primarily to differences in our U.S. taxable income, estimated FDII benefits, GILTI income, research credits, non-deductible stock-based compensation charges, and discrete tax items.
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 metricsmeasures 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 IncomeEarnings 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-GAAPNon-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;
•suchcertain measures do not reflect any cash requirements for such replacements; and
•other companies in our industry may calculate such measures differently than we do, thereby further limiting their usefulness as comparative measures.
The Non-GAAP Financial Measures are supplemental measures of our performance that are neither required by, nor presented in accordance with, GAAP. These Non-GAAP Financial Measures should not be considered as substitutes for GAAP financial measures such as gross profit, gross margin, net income or any other performance measures derived in accordance with GAAP. Also, in the future we may incur expenses or charges such as those being adjusted in the calculation of these Non-GAAP Financial Measures. Our presentation of these Non-GAAP Financial Measures should not be construed as an inference that future results will be unaffected by unusual or nonrecurring items.
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.
•Inventory cost amortization - Represents intercompany inventory transactions incurred from purchases made from PSL in fiscal year 2020. Such costs are one-time incurred expenses impacting our operating results during fiscal year 2021 following the disposition of PSL during the fiscal year ended March 26, 2021 (the “PSL Divestiture”). Such costs did not have a continuing impact on our operating results after our second fiscal quarter of fiscal year 2021.
•Foundry service payment - Represents foundry service payments incurred under our Price Support Agreement with PSL in respect to the guaranteed capacity at PSL to support our production forecast and are one-time costs incurred impacting our operating results during fiscal year 2021 following the PSL Divestiture. Such costs did have a continuing impact on our operating results after fiscal year 2021.
•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 inas of the end of March 2021, and closed onwe sold the saleAMTC Facility in August 2021. These costs are in addition to, and not duplicative of, the adjustments noted in note (*) below.
•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 inthrough 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 and closed on the sale in August 2021.
•Out of period adjustment for depreciation expense of giant magnetoresistance assets (“GMR assets”)—Represents a one-time depreciation expense related to the correction of an immaterial error, related to 2017, for certain manufacturing assets that have reached the end of their useful lives.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 of Voxtel in fiscal year 2020, (ii) one-time transaction-related legal and consulting fees in fiscal 2021, (iii) one-time transaction-related legal, consulting and registration fees related to a secondary offering on behalf of certain shastockhreholdersolders in fiscal 2022 and (iv)(ii) one-time transaction-related legal and consulting fees in fiscal 2023 and 2022 not related to (iii)(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, (iii)(ii) severance costs related to the discontinuation of one of our product lines manufactured by Voxtel in fiscal year 2022, and (iv)(iii) nonrecurring separation costs related to the departuredepartures of an officerexecutive officers in fiscal yearyears 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 on sale of equipment—Represents non-core miscellaneous losses and gains on the sale of equipment.
•Miscellaneous legal judgment charge—Represents a one-time charge associated with the final payment of the previously accrued amount payable with respect to a VAT dispute related to the construction of the AMPI Facility.
•Foreign currency translation (gain) loss—Represents losses and gains resulting from the remeasurement and settlement of intercompany debt and operational transactions, as well as transactions with external customers or vendors denominated in currencies other than the functional currency of the legal entity in which the transaction is recorded.
•Income(Loss) income in earnings of equity investment—Represents our equity method investment in PSL.
•Unrealized gainsloss 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 ProvisionIncome Taxes excluding the same items excluded above and also excluding the items below in applicable periods.above. We calculate non-GAAP Net Income as Net Income excluding the same items excluded above and also excluding the itemsitem below in applicable periods.
•Loss on debt extinguishment—Represents one-time costs representing deferred financing costs associated with the $300.0 million of our term loan facility repaid during the nine-month period ended December 25, 2020.
•Interest on repaid portion of term loan facility—Represents interest expense associated with the $300.0 million of our term loan facility repaid during the period.
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 | | Nine-Month Period Ended |
| | December 24,
2021 | | September 24,
2021 | | December 25,
2020 | | December 24,
2021 | | December 25,
2020 |
| | (Dollars in thousands) |
| Reconciliation of Gross Profit | | | | | | | | | | |
| | | | | | | | | | |
| GAAP Gross Profit | | $ | 101,165 | | $ | 102,532 | | $ | 74,425 | | $ | 297,857 | | $ | 191,896 |
| | | | | | | | | | |
| Voxtel inventory impairment | | — | | 271 | | — | | 3,106 | | — |
| Inventory cost amortization | | — | | — | | — | | — | | 2,698 |
| Foundry service payment | | — | | — | | 1,500 | | — | | 5,000 |
| Stock-based compensation | | 742 | | 722 | | 4,694 | | 1,992 | | 4,844 |
| AMTC Facility consolidation one-time costs | | — | | 7 | | 607 | | 144 | | 1,559 |
| Amortization of acquisition-related intangible assets | | 273 | | 273 | | 273 | | 819 | | 378 |
| COVID-19 related expenses | | 137 | | 316 | | 65 | | 796 | | 138 |
| Total Non-GAAP Adjustments | | $ | 1,152 | | $ | 1,589 | | $ | 7,139 | | $ | 6,857 | | $ | 14,617 |
| | | | | | | | | | |
| Non-GAAP Gross Profit* | | $ | 102,317 | | $ | 104,121 | | $ | 81,564 | | $ | 304,714 | | $ | 206,513 |
| Non-GAAP Gross Margin* (% of net sales) | | 54.8% | | 53.8% | | 49.6% | | 53.6% | | 49.6% |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
*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 $1,198 for the three months ended December 24, 2021, September 24, 2021, and December 25, 2020, respectively,and (ii) additional AMTC related costs of $— and $6,553 for the nine months ended December 24, 2021 and December 25, 2020, respectively, and out of period adjustment for depreciation expense of GMR assets of $— and $768 for the nine months ended December 24, 2021 and December 25, 2020, respectively. | | | | | | | | | | | | | | | | | | | | | | | | |
| | 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 | | Nine-Month Period Ended | | Three-Month Period Ended | |
| | December 24,
2021 | | September 24,
2021 | | December 25,
2020 | | December 24,
2021 | | December 25,
2020 | | June 24,
2022 | | March 25,
2022 | | June 25,
2021 | |
| | (Dollars in thousands) | | (Dollars in thousands) |
| Reconciliation of Operating Expenses | | |
| Reconciliation of Non-GAAP Operating Income | | Reconciliation of Non-GAAP Operating Income | | |
| | GAAP Operating Expenses | | $ | 65,560 | | | $ | 63,978 | | | $ | 98,649 | | | $ | 191,456 | | | $ | 199,186 | | |
| GAAP Operating Income | | GAAP Operating Income | | $ | 14,737 | | $ | 30,249 | | $ | 32,242 | |
| | Research and Development Expenses | | |
| GAAP Research and Development Expenses | | 30,297 | | | 29,590 | | | 30,999 | | | 89,441 | | | 80,509 | | |
| Stock-based compensation | | 1,019 | | | 1,043 | | | 2,984 | | | 2,814 | | | 3,037 | | |
| AMTC Facility consolidation one-time costs | | — | | | — | | | 1 | | | 2 | | | 2 | | |
| | COVID-19 related expenses | | 6 | | | 8 | | | 32 | | | 20 | | | 92 | | |
| Transaction fees | | — | | | — | | | — | | | — | | | 18 | | |
| | Non-GAAP Research and Development Expenses | | 29,272 | | | 28,539 | | | 27,982 | | | 86,605 | | | 77,360 | | |
| | Selling, General and Administrative Expenses | | |
| GAAP Selling, General and Administrative Expenses | | 37,963 | | | 34,088 | | | 67,650 | | | 104,115 | | | 118,677 | | |
| Voxtel inventory impairment | | Voxtel inventory impairment | | — | | — | | 2,835 | |
| Stock-based compensation | Stock-based compensation | | 5,859 | | | 4,431 | | | 38,198 | | | 13,841 | | | 39,020 | | Stock-based compensation | | 34,136 | | 14,901 | | 4,831 | |
| AMTC Facility consolidation one-time costs | AMTC Facility consolidation one-time costs | | 108 | | | 151 | | | 1,620 | | | 583 | | | 4,138 | | AMTC Facility consolidation one-time costs | | 96 | | 74 | | 463 | |
| Amortization of acquisition-related intangible assets | Amortization of acquisition-related intangible assets | | 23 | | | 16 | | | 71 | | | 68 | | | 80 | | Amortization of acquisition-related intangible assets | | 295 | | 295 | | 302 | |
| COVID-19 related expenses | COVID-19 related expenses | | 356 | | | 551 | | | 338 | | | 1,288 | | | 4,676 | | COVID-19 related expenses | | — | | 514 | | 730 | |
| | Change in fair value of contingent consideration | | Change in fair value of contingent consideration | | (200) | | 100 | | 300 | |
| Transaction fees | Transaction fees | | 1,085 | | | 6 | | | 1,729 | | | 1,114 | | | 3,699 | | Transaction fees | | 1,799 | | 389 | | 23 | |
| Severance | Severance | | 578 | | | — | | | (181) | | | 746 | | | 156 | | Severance | | 4,186 | | — | | 168 | |
| Non-GAAP Selling, General and Administrative Expenses | | 29,954 | | | 28,933 | | | 25,875 | | | 86,475 | | | 66,908 | | |
| | | Change in fair value of contingent consideration | | (2,700) | | | 300 | | | — | | | (2,100) | | | — | | |
| | Total Non-GAAP Adjustments | Total Non-GAAP Adjustments | | 6,334 | | | 6,506 | | | 44,792 | | | 18,376 | | | 54,918 | | Total Non-GAAP Adjustments | | $ | 40,312 | | $ | 16,273 | | $ | 9,652 | |
| | Non-GAAP Operating Expenses * | | $ | 59,226 | | | $ | 57,472 | | | $ | 53,857 | | | $ | 173,080 | | | $ | 144,268 | | |
| Non-GAAP Operating Income | | Non-GAAP Operating Income | | $ | 55,049 | | $ | 46,522 | | $ | 41,894 | |
| Non-GAAP Operating Margin (% of net sales) | | Non-GAAP Operating Margin (% of net sales) | | 25.3% | | 23.2% | | 22.3% | |
*
Non-GAAP Operating Expenses do not include adjustments for the following components of our net income: (i) additional AMTC related costs of $—, $—, and $19 for the three months ended December 24, 2021, September 24, 2021, and December 25, 2020, respectively, and labor savings costs of $—, $—, and $109 for the three months ended December 24, 2021, September 24, 2021, and December 25, 2020, respectively, and (ii) additional AMTC related costs of $— and $723 for the nine months ended December 24, 2021 and December 25, 2020, respectively, and labor savings costs of $— and $218 for the nine months ended December 24, 2021 and December 25, 2020, respectively.
| | | | | | | | | | | | | | | | | | | | | | | | |
| | 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 | | Nine-Month Period Ended |
| | December 24,
2021 | | September 24,
2021 | | December 25,
2020 | | December 24,
2021 | | December 25,
2020 |
| | (Dollars in thousands) |
| Reconciliation of Operating Income (Loss) | | | | | | | | | | |
| | | | | | | | | | |
| GAAP Operating Income (Loss) | | $ | 35,605 | | | $ | 38,554 | | | $ | (24,224) | | | $ | 106,401 | | | $ | (7,290) | |
| | | | | | | | | | |
| Voxtel inventory impairment | | — | | | 271 | | | — | | | 3,106 | | | — | |
| Inventory cost amortization | | — | | | — | | | — | | | — | | | 2,698 | |
| Foundry service payment | | — | | | — | | | 1,500 | | | — | | | 5,000 | |
| Stock-based compensation | | 7,620 | | | 6,196 | | | 45,876 | | | 18,647 | | | 46,901 | |
| AMTC Facility consolidation one-time costs | | 108 | | | 158 | | | 2,228 | | | 729 | | | 5,699 | |
| Amortization of acquisition-related intangible assets | | 296 | | | 289 | | | 344 | | | 887 | | | 458 | |
| COVID-19 related expenses | | 499 | | | 875 | | | 435 | | | 2,104 | | | 4,906 | |
| | | | | | | | | | |
| Change in fair value of contingent consideration | | (2,700) | | | 300 | | | — | | | (2,100) | | | — | |
| Transaction fees | | 1,085 | | | 6 | | | 1,729 | | | 1,114 | | | 3,717 | |
| Severance | | 578 | | | — | | | (181) | | | 746 | | | 156 | |
| Total Non-GAAP Adjustments | | $ | 7,486 | | | $ | 8,095 | | | $ | 51,931 | | | $ | 25,233 | | | $ | 69,535 | |
| | | | | | | | | | |
| Non-GAAP Operating Income* | | $ | 43,091 | | | $ | 46,649 | | | $ | 27,707 | | | $ | 131,634 | | | $ | 62,245 | |
| Non-GAAP Operating Margin* (% of net sales) | | 23.1% | | 24.1% | | 16.8% | | 23.2% | | 15.0% |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
*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 $1,217 for the three months ended December 24, 2021, September 24, 2021, and December 25, 2020, respectively, labor savings costs of $—, $—, and $109 for the three months ended December 24, 2021, September 24, 2021, and December 25, 2020, respectively, and (ii) additional AMTC related costs of $— and $7,276 for the nine months ended December 24, 2021 and December 25, 2020, respectively, labor savings costs of $— and $218 for the nine months ended December 24, 2021 and December 25, 2020, respectively, and out of period adjustment for depreciation expense of GMR assets of $— and $768 for the nine months ended December 24, 2021 and December 25, 2020, respectively. | | | | | | | | | | | | | | | | | | | | | | | | |
| | 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 | | Nine-Month Period Ended |
| | December 24,
2021 | | September 24,
2021 | | December 25,
2020 | | December 24,
2021 | | December 25,
2020 |
| | (Dollars in thousands) |
| Reconciliation of EBITDA and Adjusted EBITDA | | | | | | | | | | |
| | | | | | | | | | |
| GAAP Net Income (Loss) | | $ | 32,973 | | | $ | 33,223 | | | $ | (5,060) | | | $ | 93,903 | | | $ | 9,412 | |
| | | | | | | | | | |
| Interest expense, net | | 269 | | | 1,150 | | | 2,598 | | | 1,764 | | | 1,935 | |
| Income tax provision (benefit) | | 6,281 | | | 6,143 | | | (30,523) | | | 16,687 | | | (27,913) | |
| Depreciation & amortization | | 12,011 | | | 12,339 | | | 12,199 | | | 36,522 | | | 36,225 | |
| EBITDA | | $ | 51,534 | | | $ | 52,855 | | | $ | (20,786) | | | $ | 148,876 | | | $ | 19,659 | |
| | | | | | | | | | |
| | | | | | | | | | |
| Non-core (gain) loss on sale of equipment | | (19) | | | (296) | | | (7) | | | (350) | | | 286 | |
| Voxtel inventory impairment | | — | | | 271 | | | — | | | 3,106 | | | — | |
| Miscellaneous legal judgment charge | | — | | | — | | | 574 | | | — | | | 574 | |
| Loss on debt extinguishment | | — | | | — | | | 9,055 | | | — | | | 9,055 | |
| Foreign currency translation loss (gain) | | 3 | | | (202) | | | 145 | | | 55 | | | 1,331 | |
| Income in earnings of equity investment | | (287) | | | (226) | | | (949) | | | (792) | | | (1,407) | |
| Unrealized gains on investments | | (3,504) | | | (978) | | | — | | | (4,482) | | | — | |
| Stock-based compensation | | 7,620 | | | 6,196 | | | 45,876 | | | 18,647 | | | 46,901 | |
| AMTC Facility consolidation one-time costs | | 108 | | | 158 | | | 2,228 | | | 729 | | | 5,699 | |
| COVID-19 related expenses | | 499 | | | 875 | | | 435 | | | 2,104 | | | 4,906 | |
| | | | | | | | | | |
| Change in fair value of contingent consideration | | (2,700) | | | 300 | | | — | | | (2,100) | | | — | |
| Transaction fees | | 1,085 | | | 6 | | | 1,729 | | | 1,114 | | | 3,717 | |
| Severance | | 578 | | | — | | | (181) | | | 746 | | | 156 | |
| Inventory cost amortization | | — | | | — | | | — | | | — | | | 2,698 | |
| Foundry service payment | | — | | | — | | | 1,500 | | | — | | | 5,000 | |
| | | | | | | | | | |
| Adjusted EBITDA* | | $ | 54,917 | | | $ | 58,959 | | | $ | 39,619 | | | $ | 167,653 | | | $ | 98,575 | |
| Adjusted EBITDA Margin* (% of net sales) | | 29.4% | | 30.5% | | 24.1% | | 29.5% | | 23.7% |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
| | 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 | | | | | |
*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 $1,217 for the three months ended December 24, 2021, September 24, 2021, and December 25, 2020, respectively, and labor savings costs of $—, $—, and $109 for the three months ended December 24, 2021, September 24, 2021, and December 25, 2020, respectively, and (ii) additional AMTC related costs of $— and $7,276 for the nine months ended December 24, 2021 and December 25, 2020, respectively, and labor savings costs of $— and $218 for the nine months ended December 24, 2021 and December 25, 2020, respectively.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three-Month Period Ended | | Nine-Month Period Ended |
| | December 24,
2021 | | September 24,
2021 | | December 25,
2020 | | December 24,
2021 | | December 25,
2020 |
| | (Dollars in thousands) |
| Reconciliation of Income (Loss) before Tax Provision (Benefit) | | | | | | | | | | |
| | | | | | | | | | |
| GAAP Income (Loss) before Tax Provision (Benefit) | | $ | 39,254 | | | $ | 39,366 | | | $ | (35,583) | | | $ | 110,590 | | | $ | (18,501) | |
| | | | | | | | | | |
| Non-core (gain) loss on sale of equipment | | (19) | | | (296) | | | (7) | | | (350) | | | 286 | |
| Voxtel inventory impairment | | — | | | 271 | | | — | | | 3,106 | | | — | |
| Miscellaneous legal judgment charge | | — | | | — | | | 574 | | | — | | | 574 | |
| Loss on debt extinguishment | | — | | | — | | | 9,055 | | | — | | | 9,055 | |
| Foreign currency translation loss (gain) | | 3 | | | (202) | | | 145 | | | 55 | | | 1,331 | |
| Income in earnings of equity investment | | (287) | | | (226) | | | (949) | | | (792) | | | (1,407) | |
| Unrealized gains on investments | | (3,504) | | | (978) | | | — | | | (4,482) | | | — | |
| Inventory cost amortization | | — | | | — | | | — | | | — | | | 2,698 | |
| Foundry service payment | | — | | | — | | | 1,500 | | | — | | | 5,000 | |
| Stock-based compensation | | 7,620 | | | 6,196 | | | 45,876 | | | 18,647 | | | 46,901 | |
| Interest on repaid portion of Term Loan Facility | | — | | | — | | | 2,163 | | | — | | | 2,163 | |
| AMTC Facility consolidation one-time costs | | 108 | | | 158 | | | 2,228 | | | 729 | | | 5,699 | |
| Amortization of acquisition-related intangible assets | | 296 | | | 289 | | | 344 | | | 887 | | | 458 | |
| COVID-19 related expenses | | 499 | | | 875 | | | 435 | | | 2,104 | | | 4,906 | |
| | | | | | | | | | |
| Change in fair value of contingent consideration | | (2,700) | | | 300 | | | — | | | (2,100) | | | — | |
| Transaction fees | | 1,085 | | | 6 | | | 1,729 | | | 1,114 | | | 3,717 | |
| Severance | | 578 | | | — | | | (181) | | | 746 | | | 156 | |
| Total Non-GAAP Adjustments | | $ | 3,679 | | | $ | 6,393 | | | $ | 62,912 | | | $ | 19,664 | | | $ | 81,537 | |
| | | | | | | | | | |
| Non-GAAP Profit before Tax* | | $ | 42,933 | | | $ | 45,759 | | | $ | 27,329 | | | $ | 130,254 | | | $ | 63,036 | |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
*Non-GAAP Profit before Tax does not include adjustments for the following components of our net income: (i) additional AMTC related costs of $—, $—, and $1,217 for the three months ended December 24, 2021, September 24, 2021, and December 25, 2020, respectively, labor savings costs of $—, $—, and $109 for the three months ended December 24, 2021, September 24, 2021, and December 25, 2020, respectively, and (ii) additional AMTC related costs of $— and $7,276 for the nine months ended December 24, 2021 and December 25, 2020, respectively, labor savings costs of $— and $218 for the nine months ended December 24, 2021 and December 25, 2020, respectively, and out of period adjustment for depreciation expense of GMR assets of $— and $768 for the nine months ended December 24, 2021 and December 25, 2020, respectively.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three-Month Period Ended | | Nine-Month Period Ended |
| | December 24,
2021 | | September 24,
2021 | | December 25,
2020 | | December 24,
2021 | | December 25,
2020 |
| | (Dollars in thousands) |
| Reconciliation of Income Tax Provision (Benefit) | | | | | | | | | | |
| | | | | | | | | | |
| GAAP Income Tax Provision (Benefit) | | $ | 6,281 | | | $ | 6,143 | | | $ | (30,523) | | | $ | 16,687 | | | $ | (27,913) | |
| GAAP effective tax rate | | 16.0% | | 15.6% | | 85.8% | | 15.1% | | 150.9% |
| | | | | | | | | | |
| Tax effect of adjustments to GAAP results | | 561 | | | 946 | | | 34,872 | | | 3,598 | | | 37,539 | |
| | | | | | | | | | |
| Non-GAAP Provision for Income Taxes * | | $ | 6,842 | | | $ | 7,089 | | | $ | 4,349 | | | $ | 20,285 | | | $ | 9,626 | |
| Non-GAAP effective tax rate | | 15.9% | | 15.5% | | 15.9% | | 15.6% | | 15.3% |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
*Non-GAAP Provision for Income Taxes does not include tax adjustments for the following components of our net income: additional AMTC related costs, labor savings costs, and out of period adjustment for depreciation expense of GMR assets. The related tax effect of those adjustments to GAAP results were $—, $— and $297 for the three months ended December 24, 2021, September 24, 2021, and December 25, 2020, respectively, and $— and $1,851 for the nine months ended December 24, 2021 and December 25, 2020, respectively.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three-Month Period Ended | | Nine-Month Period Ended |
| | December 24,
2021 | | September 24,
2021 | | December 25,
2020 | | December 24,
2021 | | December 25,
2020 |
| | (Dollars in thousands) |
| Reconciliation of Net Income (Loss) | | | | | | | | | | |
| | | | | | | | | | |
| GAAP Net Income (Loss) | | $ | 32,973 | | | $ | 33,223 | | | $ | (5,060) | | | $ | 93,903 | | | $ | 9,412 | |
| GAAP Basic Earnings (Loss) per Share | | $ | 0.17 | | | $ | 0.18 | | | $ | (0.04) | | | $ | 0.50 | | | $ | 0.20 | |
| GAAP Diluted Earnings (Loss) per Share | | $ | 0.17 | | | $ | 0.17 | | | $ | (0.04) | | | $ | 0.49 | | | $ | 0.05 | |
| | | | | | | | | | |
| Non-core (gain) loss on sale of equipment | | (19) | | | (296) | | | (7) | | | (350) | | | 286 | |
| Voxtel inventory impairment | | — | | | 271 | | | — | | | 3,106 | | | — | |
| Miscellaneous legal judgment charge | | — | | | — | | | 574 | | | — | | | 574 | |
| Loss on debt extinguishment | | — | | | — | | | 9,055 | | | — | | | 9,055 | |
| Foreign currency translation loss (gain) | | 3 | | | (202) | | | 145 | | | 55 | | | 1,331 | |
| Income in earnings of equity investment | | (287) | | | (226) | | | (949) | | | (792) | | | (1,407) | |
| Unrealized gains on investments | | (3,504) | | | (978) | | | — | | | (4,482) | | | — | |
| Inventory cost amortization | | — | | | — | | | — | | | — | | | 2,698 | |
| Foundry service payment | | — | | | — | | | 1,500 | | | — | | | 5,000 | |
| Stock-based compensation | | 7,620 | | | 6,196 | | | 45,876 | | | 18,647 | | | 46,901 | |
| Interest on repaid portion of Term Loan Facility | | — | | | — | | | 2,163 | | | — | | | 2,163 | |
| AMTC Facility consolidation one-time costs | | 108 | | | 158 | | | 2,228 | | | 729 | | | 5,699 | |
| Amortization of acquisition-related intangible assets | | 296 | | | 289 | | | 344 | | | 887 | | | 458 | |
| COVID-19 related expenses | | 499 | | | 875 | | | 435 | | | 2,104 | | | 4,906 | |
| | | | | | | | | | |
| Change in fair value of contingent consideration | | (2,700) | | | 300 | | | — | | | (2,100) | | | — | |
| Transaction fees | | 1,085 | | | 6 | | | 1,729 | | | 1,114 | | | 3,717 | |
| Severance | | 578 | | | — | | | (181) | | | 746 | | | 156 | |
| Tax effect of adjustments to GAAP results | | (561) | | | (946) | | | (34,872) | | | (3,598) | | | (37,539) | |
| | | | | | | | | | |
| Non-GAAP Net Income* | | $ | 36,091 | | | $ | 38,670 | | | $ | 22,980 | | | $ | 109,969 | | | $ | 53,410 | |
| Basic weighted average common shares | | 189,736,901 | | | 189,673,788 | | | 124,363,078 | | | 189,665,324 | | | 48,121,026 | |
| Diluted weighted average common shares | | 192,068,222 | | | 191,676,422 | | | 181,916,360 | | | 191,678,951 | | | 171,638,787 | |
| Non-GAAP Basic Earnings per Share | | $ | 0.19 | | $ | 0.20 | | $ | 0.18 | | $ | 0.58 | | $ | 1.11 |
| Non-GAAP Diluted Earnings per Share | | $ | 0.19 | | $ | 0.20 | | $ | 0.13 | | $ | 0.57 | | $ | 0.31 |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
*Non-GAAP Net Income does not include adjustments for the following components of our net income: (i) additional AMTC related costs of $—, $—, and $1,217 for the three months ended December 24, 2021, September 24, 2021, and December 25, 2020, respectively, labor savings costs of $—, $—, and $109 for the three months ended December 24, 2021, September 24, 2021, and December 25, 2020, respectively, and (ii) additional AMTC related costs of $— and $7,276 for the nine months ended December 24, 2021 and December 25, 2020, respectively, labor savings costs of $— and $218 for the nine months ended December 24, 2021 and December 25, 2020, respectively, and out of period adjustment for depreciation expense of GMR assets of $— and $768 for the nine months ended December 24, 2021 and December 25, 2020, respectively, and (iii) the related tax effect of adjustments to GAAP results $—, $—, and $297 for the three months ended December 24, 2021, September 24, 2021, and December 25, 2020, respectively, and $— and $1,851 for the nine months ended December 24, 2021 and December 25, 2020, respectively.
Liquidity and Capital Resources
As of DecemberJune 24, 2021,2022, we had $259.2$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 $368.4 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 20222023 is to utilizeinvest 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 DecemberJune 24, 20212022, 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 20212022 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 our access to the capital markets and unutilized loan facilities, 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 leastduring the next twelve12 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 twelve12 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 periodsthree months ended DecemberJune 24, 20212022 and DecemberJune 25, 2020:2021:
| | | Nine-Month Period Ended | | Three-Month Period Ended |
| | December 24, 2021 | | December 25, 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 | $ | 118,558 | | | $ | 63,534 | | Net cash provided by operating activities | $ | 36,553 | | | $ | 38,495 | |
| Net cash used in investing activities | Net cash used in investing activities | (50,123) | | | (50,401) | | Net cash used in investing activities | (14,389) | | | (15,346) | |
| Net cash used in financing activities | Net cash used in financing activities | (6,209) | | | (72,186) | | 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 | 604 | | | 3,350 | | 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 | $ | 62,830 | | | $ | (55,703) | | Net increase in cash and cash equivalents and restricted cash | $ | 6,473 | | | $ | 25,757 | |
Operating Activities
Net cash provided by operating activities was $118.6$36.6 million in the ninethree months ended DecemberJune 24, 2021,2022, resulting primarily from our net income of $93.9$10.3 million and noncash charges of $50.0$44.2 million, partially offset by a net decrease in operating assets and liabilities of $25.4$17.9 million. Net changes in operating assets and liabilities consisted of a $11.9$13.1 million increase in prepaid expenses, a $9.9$4.9 million decreaseincrease in accrued expenses and other current and long-term liabilities,inventories, a $6.1$4.7 million increase in trade accounts receivable, net, and a $2.8$3.3 million increasedecrease in net amounts due from related parties, partially offset by a $3.3$1.2 million decreaseincrease in inventoriesaccrued expenses and other current and long-term liabilities, a $2.0$4.1 million increase in trade accounts payable.payable and a $2.7 million decrease in other accounts receivable. The increase in prepaid expenses and other assets werewas primarily due to an increase in prepaid contracts andhigher long-term deposits and the timing of tax payments, including value-added taxes receivable, insurance and contract costs. The decreaseincrease in accrued expenses and other
current and long-term liabilitiesinventories was primarily duethe result of inventory builds to the release of deposits related to the sale of our AMTC Facility and reduction of the balance due on the Voxtel acquisition, partially offset by higher accrued personnel costs, particularly for management incentive bonuses, and higher income taxes due.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 increasedecrease in net amounts due fromto 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, 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. 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 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 decreased 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. 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. Accounts payable increased mainly due to higher operating purchases, including unpaid capital expenditures of $4.9 million, partially offset by the timing of payments to vendors and suppliers.
Net cash provided by operating activities was $63.5 million in the nine-month period ended December 25, 2020, resulting primarily from our net income of $9.4 million and noncash charges of $79.0 million, partially offset by a net increase in operating assets andThe decrease in operating liabilities of $24.9 million. Net changes in operating assets and liabilities consisted of a $29.7 million increase in prepaid expenses, a $6.0 million increase in trade accounts receivable, net and a $1.2 million decrease in accrued expenses and other current and long-term liabilities, partially offset by a $8.3 million decrease in net amounts due from related parties, a $2.4 million increase in trade accounts payable, a $1.1 million decrease in inventories and a $0.1 million decrease in accounts receivable – other. The increase in prepaid expenses and other assets excludingwas primarily due to the impacttiming of the noncash removal of PSL-related assets of $5.2 milliontax payments, including value-added taxes receivable,
insurance and the acquisition of Voxtel, included an $18.7 millioncontract costs. The increase in prepaid taxes, a $3.6 million increase in VAT receivables, a $3.5 million increase in prepaid insurance and a $2.8 million increase in amortizable patent costs. Changes related to trade accounts receivable, net accounts receivable – other, andamounts due from/to related parties werewas primarily due to variations in the timing of such payments in the ordinary course of business. The decrease in accrued expenses and other current and long-term liabilities is the result of a $14.9 million increase in balances from March 27, 2020, adjusted for $26.5 million of noncash increases related to the Voxtel acquisition primarily for deferred and contingent consideration, offset by the $7.6 million impact of the noncash removal of PSL and Sanken distribution related assets. Trade accounts payable were impacted by the noncash 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 $1.1 million inventory decrease is the result of a $33.2 million reduction in balances from March 27, 2020, offset by a $32.3 million impact of the noncash removal of PSL and Sanken distribution business related assets and $3.0 million of noncash inventory provisions, reduced by $3.1 million of inventory added in the acquisition of Voxtel.
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 in a stabilization of capital expenditures in the future.equipment.
Net cash used in investing activities was $50.1$14.4 million in the ninethree months ended DecemberJune 24, 2021,2022, consisting of purchases of property, plant and equipment of $55.8 million, payments related to the acquisition of Voxtel of $12.5 million, and purchases of marketable securities of $9.2 million, partially offset by $27.4 million of cash received for the sale of the AMTC Facility.equipment.
Net cash used in investing activities was $50.4$15.3 million in the nine-month periodthree months ended DecemberJune 25, 2020,2021, consisting of $25.9 million of purchases of property, plant and equipment, $8.5 million of cash expended for the acquisition of Voxtel and $16.3 million of cash removed as a result of the PSL Divestiture, partially offset by $0.3 million of proceeds from sales of property, plant and equipment.
Financing Activities
Net cash used in financing activities was $6.2$9.1 million in the ninethree months ended DecemberJune 24, 2021,2022, consisting of funds loanedtaxes related to PSLthe net settlement of $7.5 million,equity awards, partially offset by $1.3 million of proceeds received in connection withrelated to the issuance of common stock underquarterly payment from PSL on our employee stock purchase plan.related party loan.
NetThere was no net cash used in financing activities was $72.2 million in the nine-month periodthree months ended DecemberJune 25, 2020, consisting of $400.0 million of dividends paid prior to our IPO, $300.0 million for repayment of senior secured debt, $27.7 million of payments for taxes related to net share settlement of equity awards, and $33.0 million for repayment of unsecured credit facilities, partially offset by $315.7 million of borrowing of senior secured debt, net of deferred financing costs, $321.4
million of proceeds from initial public offering, net of underwriting discounts and other offering costs, and a $51.4 million related party note receivable.
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 DecemberJune 24, 2021,2022, we had $25.0$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 defineddebt 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 December 24, 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 1.50%, the Cost of Funds Rate (as defined in the credit agreement) plus 2.50%, or the Eurodollar Rate plus 2.50%.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 theRevolving Credit Facility was $0.2 million at December 24, 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 line of credit agreement with Union Bank of the Philippines, Inc. that providesRefer to Note 10, “Debt and Other Borrowings” for a maximum borrowing capacity of 60.0 million Philippine pesos (approximately $1.2 million) at the bank’s prevailing interest rate. While this line of credit initially expired on August 21, 2021 (in connection with certain delays as a result of the COVID-19 pandemic and its impact on bank operations),information regarding the line of credit was extendedagreements in September 2021 and is now expected to expire on August 21, 2022. There were no borrowings outstanding under this line of credit as of December 24, 2021 and March 26, 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 millionour Philippine pesos (approximately $1.5 million) at the bank’s prevailing interest rate. While this line of credit initially expired on June 30, 2021 (in connection with certain delays as a result of the COVID-19 pandemic and its impact onbank operations), the line of credit was extended in September 2021 and is now expected to expire on June 30, 2022. There were no borrowings outstanding under this line of credit as of December 24, 2021 and March 26, 2021.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 20212022 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 20212022 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 DecemberJune 24, 2021.2022. Based on the evaluation of our disclosure controls and procedures as of DecemberJune 24, 2021,2022, 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 waswere no changechanges 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 hashave materially affected, or isare reasonably likely to materially affect, our internal control over financial reporting.
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 toThe 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 2021the 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.
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.
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.
Item 6. Exhibits.Exhibits
(a) Exhibits
| | | | | | | | | | | | | | | | | | |
| Exhibit No. | | Description of Exhibit | | | | | | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
4.110.1 | | | | | | | | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
10.1 | | | | | | | | | | | | |
| | | | | | | | | | | | |
| 10.2 | | | | | | | | | | | | |
| | | | | | | | | | | | |
| 10.3 | | | | | | | | | | | | |
| | | | | | | | | | | | |
| 10.4 | | | | | | | | | | | | |
| | | | | | | | | | | | |
| 10.5 | | | | | | | | | | | | |
| | | | | | | | | | | | |
10.6 | | | | | | | | | | | | |
| | | | | | | | | | | | |
| 31.1 | | | | | | | | | | | | |
| | | | | | | | | | | | |
| 31.2 | | | | | | | | | | | | |
| | | | | | | | | | | | |
| 32.1 | | | | | | | | | | | | |
| | | | | | | | | | | | |
| 32.2 | | | | | | | | | | | | |
| | | | | | | | | | | | |
| 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.
** Certification is not deemed “filed” for purposes of Section 18 of the Exchange Act or otherwise subject to the liability of that section. Such certification is not deemed to be incorporated by reference into any filing under the Securities Act or the Exchange Act except to the extent that the registrant specifically incorporates it by reference.
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: February 2,August 1, 2022 | | By: | /s/ Ravi VigVineet Nargolwala |
| | | Ravi VigVineet Nargolwala |
| | | President and Chief Executive Officer (principal executive officer) |
| | | |
Date: February 2,August 1, 2022 | | By: | /s/ Derek P. D’Antilio |
| | | Derek P. D’Antilio |
| | | Senior Vice President, Chief Financial Officer and Treasurer (principal financial and accounting officer) |