ALLEGRO MICROSYSTEMS, INC. 10-K

Item 7. 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 consolidated financial statements and related notes and other information included elsewhere in this Annual Report on Form 10-K (the “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 sections titled “Risk Factors” and “Cautionary Note Regarding Forward-Looking Statements” included elsewhere in this Annual 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. All references to “2021,” “fiscal year 2021” or similar references relate to the 52-week period ended March 26, 2021. All references to “2020,” “fiscal year 2020” or similar references relate to the 52-week period ended March 27, 2020.. 52 Overview Allegro MicroSystems is a leading global designer, developer, manufacturer and marketer of sensor ICs and application-specific analog power ICs enabling the most important emerging technologies in the automotive and industrial markets. We are the number one supplier of magnetic sensor IC solutions worldwide based on market share, driven by our market leadership in automotive. We focus on providing complete IC solutions to sense, regulate and drive a variety of mechanical systems. This includes sensing 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 16 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 fiscal years 2021 and 2020, we generat ed $591.2 million and $650.1 million in total net sales, respectively, with $18.1 million and $37.1 million in net income and $144.8 million and $132.2 million in Adjusted EBITDA in such fiscal years, respectively. On November 2, 2020, we completed our 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 xEVs, 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 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 ASPs and lower ASP declines over time than are typical for our industry. • Invest to lead in chosen markets and apply our intellectual property and technology to pursue adjacent growth markets. We intend to continue to invest in technology advancements and our intellectual property portfolio to maintain the number one market share position in magnetic sensor ICs and achieve leadership positions in power ICs within our target markets. We believe that leveraging our technology and existing research and development, sales and support efforts will enable us to take advantage of synergistic opportunities in new, adjacent growth markets. We believe this strategy of leveraging our known capabilities to target adjacent growth markets will enable us to enjoy greater returns on our research and development investments. • Expand our sales channels and enhance our sales operations and customer relationships. Our global sales infrastructure is optimized to support customers through a combination of key account managers and regional technical and support centers near customer locations that enable us to act as an extension of our customers’ design 53 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 designed to improve our operating results. On August 28, 2020, we acquired Voxtel, a privately-held technology company located in Beaverton, Oregon that specializes in components for eye-safe LiDAR used in ADAS, fully autonomous vehicles, and industrial automation. The total preliminary purchase price of the acquisition was $35.0 million , including certain earnouts that have a potential payout of $15.0 million. The fair value of these earn-outs at acquisition date was $7.3 million. I n addition to the laser technology, Voxtel’s capabilities include its Indium Gallium Arsenide (“InGaAs”) Avalanche Photodiode (“APDs”) and APD photoreceivers—highly sensitive in the important eye-safe region around 1550 nanometers (“nm”). This technology enables images to be obtained over a wide range of weather conditions and over a long-distance or a wide field of view using a laser that doesn’t pose an ocular hazard. The combination of these highly-sensitive detectors and high-peak-power eye-safe lasers, combined 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. Through the end of fiscal year 2020, we held a 100% ownership interest in PSL, a semiconductor wafer fabricator engaged in the manufacturing and testing of foundry wafers. Prior to the divestiture transaction of PSL, PSL accounted for 11.1% of our net sales and supplied 44.2% of our wafer requirements in fiscal year 2020, respectively. In addition, through end of fiscal year 2020, we acted as a distributor of Sanken products in North America, South America and Europe on a low-margin, buy-resale basis pursuant to the Sanken Products Distribution Agreement and Sanken. Our net sales from the distribution of Sanken products in fiscal year 2020 were $35.4 million. On March 28, 2020, in order to further our strategy for developing a flexible and efficient manufacturing model that minimizes capital requirements, lowers operating costs, enhances reliability of supply and supports our growth going forward: 54 • We divested a majority of our ownership interest in PSL to Sanken in the PSL Divestiture, in connection with which: • Our equity interests in PSL were recapitalized in exchange for (i) the contribution by us to PSL of $15.0 million of intercompany debt, representing a portion of the aggregate principal amount of debt owed by PSL to us under the Existing Allegro Loans, (ii) the assumption by us of $42.7 million in aggregate principal amount of debt owed by PSL to Sanken under the PSL-Sanken Loans, that was subsequently forgiven in exchange for our transfer to Sanken of 70% of the issued and outstanding equity interests in PSL, and (iii) the termination of the Existing Allegro Loans and the issuance, pursuant to the Consolidated Loan Agreement, of a note payable to us in an aggregate principal amount of $51.4 million (representing the aggregate principal amount of debt outstanding under the Existing Allegro Loans prior to their termination); and • In exchange for the extinguishment of all outstanding indebtedness owed by us to Sanken under the PSL-Sanken Loans, we (i) divested 70% of the issued and outstanding equity interests in PSL to Sanken, as a result of which Sanken holds a 70% majority share in PSL and we hold a 30% interest, and (ii) amended and restated the existing limited liability company agreement of PSL to admit Sanken as a member, reflect the recapitalization of our equity interests and otherwise reflect the rights and obligations of us and Sanken thereunder; • AML entered into a letter agreement with Sanken providing for, among other things, the termination of AML’s services under the Sanken Products Distribution Agreement, and Sanken and PSL entered into a new distribution agreement providing for PSL to serve as a distributor of Sanken products in North America, South America and Europe; and • We entered into certain other agreements and transactions with Sanken and PSL as more fully described under “PSL Divestiture” Item 1. As a result of the PSL Divestiture and the transfer of the Sanken products distribution business to PSL, we were able to materially improve gross profit, operating income and net income, as well as reduce capital expenditures and increase cash flow from operations. Strategically, we believe these changes better enable us to focus solely on our core business in sensor and power applications for the automotive and industrial end markets. • PSL foundry revenue is no longer consolidated in our results in fiscal year 2021, however, PSL did supply 36.1% of our wafer requirements in fiscal year 2021. • Net sales from the distribution of Sanken products are also no longer consolidated in our results in fiscal year 2021. In February 2020, we announced that we would consolidate our assembly and test facilities into a single site, located at the AMPI Facility. We completed this transition and closed the AMTC Facility as of March 2021. We expect to realize a significant reduction in cost of goods sold in subsequent periods. Impact of the COVID-19 Pandemic On March 11, 2020, the COVID-19 outbreak was declared a pandemic by the World Health Organization. The pandemic has resulted in governments around the world implementing increasingly stringent measures to help control the spread of the virus, including quarantines, “shelter in place” and “stay at home” orders, travel restrictions, business curtailments, school closures and other measures. In addition, governments and central banks in several parts of the world have enacted fiscal and monetary stimulus measures to counteract the impacts of the COVID-19 pandemic. We continue to monitor the rapidly evolving conditions and circumstances as well as guidance from international and domestic authorities, including public health authorities, and we may need to take additional actions based on their recommendations. There is considerable uncertainty regarding the impact on our business stemming from current measures and potential future measures that could restrict access to our facilities, limit manufacturing and support operations and place restrictions on our workforce and suppliers. The measures implemented by various authorities related to the COVID-19 pandemic have caused us to change our business practices including those related to where employees work, the distance between employees in our facilities, limitations on in-person meetings between employees and with customers, suppliers, service providers and stakeholders, as well as restrictions on business travel to domestic and international locations or to attend trade shows, investor conferences and other events. 55 The full extent to which the ongoing COVID-19 pandemic adversely affects our financial performance will depend on future developments, many of which are outside of our control, are highly uncertain and cannot be predicted, including, but not limited to, the duration and spread of the pandemic, its severity, the effectiveness of actions to contain the virus or treat its impact and how quickly and to what extent normal economic and operating conditions can resume. The COVID-19 pandemic could also result in additional governmental restrictions and regulations, which could adversely affect our business and financial results. In addition, a recession, depression or other sustained adverse market impact resulting from COVID-19 could materially and adversely affect our business and our access to needed capital and liquidity. Even after the COVID-19 pandemic has lessened or subsided, we may continue to experience adverse impacts on our business and financial performance as a result of its global economic impact. The COVID-19 pandemic may also heighten other risks, including if the business impacts of COVID-19 carry on for an extended period, we may be required to recognize impairments for goodwill and certain long-lived assets including amortizable intangible assets. We have taken actions to mitigate our financial risk given the uncertainty in global markets caused by the COVID-19 pandemic. In March 2020, we borrowed $43.0 million under our credit facilities (including $10.0 million borrowed by PSL under its revolving credit facility (the “PSL Revolver”), the proceeds of which were retained by PSL and are no longer available for use by us following the consummation of the PSL Divestiture). The borrowing was made as part of our ongoing efforts to preserve financial flexibility considering the current uncertainty in the global markets and related effects on our business resulting from the COVID-19 pandemic. While we do not currently expect to use the remaining proceeds from these borrowings following the consummation of the PSL Divestiture for any near-term liquidity needs, we may use the proceeds for working capital and other general corporate purposes. On March 27, 2020, the Coronavirus Aid, Relief and Economic Security Act (the “CARES Act”) was signed into law. The CARES Act contains numerous tax provisions including a correction to the applicable depreciation rates available in the original Tax Cuts and Jobs Act (“TCJA”) for Qualified Improvement Property (“QIP”), temporarily establishes a five-year carryback period for current net operating losses (“NOL”), and contains a provision for deferred payment of 2020 employer payroll taxes. The Company currently estimates cash tax benefits of the NOL to be $9.1 million. The QIP change is estimated to result in an incremental cash tax benefit of $1.7 million. Additionally, the Company plans to defer payment of $2.8 million of payroll taxes, with $1.4 million to be paid back in the third quarter of fiscal year 2022 and the remainder in the third quarter of fiscal year 2023. Additional income tax provisions of the CARES Act are currently being evaluated and not expected to have material impacts. 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: Design Wins with New and Existing Customers Our end customers continually develop new products in existing and new application areas, and we work closely with our significant OEM customers in most of our target markets to understand their product roadmaps and strategies. For new products, the time from design initiation and manufacturing until we generate revenue can be lengthy, typically between two and four years. As a result, our future revenue is highly dependent on our continued success at winning design mandates from our customers. Further, because we expect the ASPs of our products to decline over time, 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 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, 56 customers are generally permitted to cancel orders for our products within a specified period. Cancellations of orders could 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. 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, we expect their ASPs to decline. 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 is highly cyclical and is characterized by increasingly rapid technological change, product obsolescence, competitive pricing pressures, evolving standards, short product life cycles and fluctuations in product supply and demand. New technology may result in sudden changes in system designs or platform changes that may render some of our products obsolete and require us to devote significant research and development resources to compete effectively. Periods of rapid growth and capacity expansion are occasionally followed by significant market corrections in which sales decline, inventories accumulate and facilities go underutilized. During periods of expansion, our margins generally improve as fixed costs are spread over higher manufacturing volumes and unit sales. In addition, we may build inventory to meet increasing market demand for our products during these times, which serves to absorb fixed costs further and increase our gross margins. During an expansion cycle, we may increase capital spending and hiring to add to our production capacity. During periods of slower growth or industry contractions, our sales, production and productivity suffer and margins generally decline. Components of Our Results of Operations Net sales Our total net sales are derived from product sales to direct customers and distributors. We sell products globally through our direct sales force, third-party and related party distributors and independent sales representatives. Sales are derived from products for different applications. Our core applications are focused on the automotive, industrial and other industries. Additionally, until the consummation of the PSL Divestiture following the end of fiscal year 2020, we also manufactured products for other applications such as wafer foundry products and acted as a distributor of Sanken products in North America, South America and Europe. We sell magnetic sensor ICs, power ICs and photonics, and until the consummation of the PSL Divestiture following the end of fiscal year 2020, we also sold wafer foundry products and acted as a distributor for Sanken products in North America, South America and Europe. 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. 57 Stock-based compensation In addition to the ratable vesting of our stock-based compensation, upon completion of our IPO, we recognized one-time stock-based compensation charges of $40.4 million in connection with the vesting of all outstanding shares of Class A common stock, $1.6 million in connection with the automatic acceleration of 25% of the standard vesting term of shares of Class L common stock and $1.0 million through the LTCIP/TRIP Award RSU Conversion Program (the “RSU Conversion Program”). In fiscal 2021, these one-time stock-based compensation charges were allocated to cost of goods sold, research and development expenses and selling, general and administrative expenses in the amounts of $4.4 million, $2.3 million and $36.3 million, respectively. Cost of goods sold, gross profit and gross margin Cost of goods sold consists primarily of costs of purchasing raw materials, costs associated with probe, assembly, test 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. In addition, prior to the PSL Divestiture, costs of goods sold also consisted of finished silicon wafers processed by internal and independent foundries. 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 due to the PSL Divestiture and as a result of the closure of the AMTC Facility and the transfer of the Sanken products distribution business to PSL. A significant portion of our costs are fixed and, as a result, costs are generally difficult to adjust or may take time to adjust in response to changes in demand. In addition, our fixed costs increase as we expand our capacity. If we expand capacity faster than required by our sales growth, our gross margin could be negatively affected. Gross margin is calculated as gross profit divided by total net sales. Operating Expenses Research and development (“R&D”) expenses R&D expenses consist primarily of personnel-related costs of our research and development organization, including stock-based compensation, costs of development of wafers and masks, license fees for computer-aided design software, costs of development testing and evaluation, costs of developing automated test programs, equipment depreciation and related occupancy and equipment costs. While most of the costs incurred are for new product development, a significant portion of these costs are 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. In connection with the closing of our IPO during the third fiscal quarter of 2021, we recognized one-time stock-based compensation expense of $40.4 million, consisting of $4.1 million within cost of goods sold, $1.8 million within R&D expenses, and $34.5 million within SG&A expenses, in connection with the vesting of all outstanding shares of our Class A 58 common stock. We also recognized one-time stock-based compensation expense of $1.6 million, consisting of $0.2 million within cost of goods sold, $0.1 million within R&D expenses, and $1.3 million within SG&A expenses, in connection with the automatic acceleration of 25% of the standard vesting term of shares of our Class L common stock at that time. In addition, we recognized one-time stock-based compensation expense of $1.0 million, consisting of $0.1 million within cost of goods sold, $0.4 million within R&D expenses, and $0.5 million within SG&A expenses, in connection with the RSU Conversion Program. Impairment of long-lived assets Impairment of long-lived assets reflects a $7.1 million expense in the fiscal year ended March 26, 2021, representing impairment charges on the sale of the AMTC Facility. No impairment expense was recorded for the fiscal year ended March 27, 2020. Change in fair value of contingent consideration The change in fair value of contingent consideration represents the gain recorded in the fiscal year ended March 26, 2021 resulting from the write-down in contingent consideration related to the Voxtel acquisition. There were no amounts recorded for the fiscal year ended March 27, 2020. Loss on debt extinguishment Loss on debt extinguishment represents the loss associated with the partial repayment of our Term Loan Facility on November 25, 2020. There were no amounts recorded for the fiscal year ended March 27, 2020. Interest (expense) income, net Interest (expense) income, 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). 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 (loss) gain We incur transaction gains and losses resulting from intercompany transactions as well as transactions with customers or vendors denominated in currencies other than the functional currency of the legal entity in which the transaction is recorded. The largest contributor of the foreign currency transaction (loss) gain is the result of an intercompany loan to our subsidiary that operates the AMTC Facility where at the end of each reporting period we revalue the amounts due under the loan to the U.S. Dollar. Income in earnings of equity investment Income in earnings of equity investment represents our equity investment in connection with the PSL Divestiture. There were no amounts recorded for the fiscal year ended March 27, 2020. Other, net Other, net primarily consists of miscellaneous income and expense items unrelated to our core operations. Income tax provision (benefit) Our provision for income taxes is comprised of the year-to-date taxes based on an estimate of the annual effective tax rate plus the tax impact of discrete items. We are subject to tax in the U.S. and various foreign jurisdictions. Our effective income tax rate (“ETR”) 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”) offset by the additional tax costs associated with global intangible low-tax income (“GILTI”) and the base erosion tax (“BEAT”). 59 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 Fiscal Year 2021 Compared to Fiscal Year 2020 The following table summarizes our results of operations for the fiscal years ended March 26, 2021 and March 27, 2020. Fiscal Year Ended Change Change Attributable to Divestiture Operational Change after Divestiture March 26, 2021 March 27, 2020 $ % $ % (Dollars in thousands) Total net sales $ 591,207 $ 650,089 $ (58,882) (9.1) % $ 107,792 $ 48,910 7.5 % Cost of goods sold 312,305 388,813 (76,508) (19.7) % 101,458 24,950 6.4 % Gross profit 278,902 261,276 17,626 6.7 % 6,334 23,960 9.2 % Operating expenses: Research and development 108,649 102,052 6,597 6.5 % 3,279 9,876 9.7 % Selling, general and administrative 153,476 106,396 47,080 44.2 % 7,136 54,216 51.0 % Impairment of long-lived assets 7,119 — 7,119 — % — 7,119 — % Change in fair value of contingent consideration (2,500) — (2,500) — % — (2,500) — % Total operating expenses 266,744 208,448 58,296 28.0 % 10,415 68,711 33.0 % Operating income 12,158 52,828 (40,670) (77.0) % (4,081) (44,751) (84.7 %) Other (expense) income, net: Loss on debt extinguishment (9,055) — (9,055) — % — (9,055) — % Interest expense, net (2,603) (110) (2,493) 2266.4 % (3,342) (5,835) 5304.5 % Foreign currency transaction (loss) gain (2,889) 1,391 (4,280) (307.7) % 2 (4,278) (307.5 %) Income in earnings of equity investment 1,413 — 1,413 — % — 1,413 — % Other expense, net (475) (831) 356 (42.8) % (279) 77 (9.3 %) Total other (expense) income, net (13,609) 450 (14,059) (3124.2) % (3,619) (17,678) (3928.4 %) (Loss) income before income taxes (1,451) 53,278 (54,729) (102.7) % (7,700) (62,429) (117.2 %) (Benefit) provision for income taxes (19,552) 16,173 (35,725) (220.9) % 540 (35,185) (217.6 %) Net income 18,101 37,105 (19,004) (51.2) % (8,240) (27,244) (73.4 %) Net income attributable to non-controlling interests 148 134 14 10.4 % — 14 10.4 % Net income attributable to Allegro MicroSystems, Inc. $ 17,953 $ 36,971 $ (19,018) (51.4) % $ (8,240) $ (27,258) (73.7 %) (1) Our total net sales for the periods presented above include related party net sales generated through our distribution agreement with Sanken. Our total net sales for the fiscal year ended March 27, 2020 also include related party net sales 60 related to the sale of wafer foundry products to Sanken by PSL and net sales related to our distribution of Sanken products in North America, South America and Europe which, in each case, we did not recognize during the fiscal year ended March 26, 2021 and will not recognize in any future period due to our consummation of the PSL Divestiture. See our consolidated financial statements included elsewhere in this Annual 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. Fiscal Year Ended March 26, 2021 March 27, 2020 Total net sales 100.0 % 100.0 % Cost of goods sold 52.8 % 59.8 % Gross profit 47.2 % 40.2 % Operating expenses: Research and development 18.4 % 15.7 % Selling, general and administrative 26.0 % 16.4 % Impairment of long-lived assets 1.2 % — % Change in fair value of contingent consideration (0.4) % — % Total operating expenses 45.2 % 32.1 % Operating income 2.0 % 8.1 % Other income (expense), net: Loss on debt extinguishment (1.5) % — % Interest expense, net (0.4) % — % Foreign currency transaction (loss) gain (0.5) % 0.2 % Income in earnings of equity investment 0.2 % — % Other expense, net (0.1) % (0.1) % Total other income (expense), net (2.3) % 0.1 % Income before provision for income taxes (0.3) % 8.2 % Provision for income taxes (2.8) % 2.5 % Net income 2.5 % 5.7 % Net income attributable to non-controlling interests — % — % Net income attributable to Allegro MicroSystems, Inc. 2.5 % 5.7 % Total net sales Total net sales decreased by $58.9 million, or 9.1%, to $591.2 million in the fiscal year ended March 26, 2021 from $650.1 million in the fiscal year ended March 27, 2020. Of this decrease, $107.8 million was attributable to the PSL Divestiture, which was partially offset by increased net sales to our core end markets of $48.9 million, due primarily to increased demand in industrial automation applications and data center applications and a COVID-related increase in demand for printers and other peripherals. Sales Trends by Core End Market and Application The following table summarizes net sales by core end market and other applications. 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. Other 61 applications include wafer foundry and distribution sales unrelated to and no longer part of our core business in fiscal year 2021. Fiscal Year Ended Change March 26, 2021 March 27, 2020 Amount % (Dollars in thousands) Core end markets: Automotive $ 398,298 $ 395,277 $ 3,021 0.8 % Industrial 94,872 78,399 16,473 21.0 % Other 98,037 68,622 29,415 42.9 % Total core end markets 591,207 542,298 48,909 9.0 % Other applications: Wafer foundry products — 72,370 (72,370) (100.0) % Distribution of Sanken products — 35,421 (35,421) (100.0) % Total net sales $ 591,207 $ 650,089 $ (58,882) (9.1) % Net sales to our core end markets increased by $48.9 million, or 9.0%, to $591.2 million in the fiscal year ended March 26, 2021 from $542.3 million in the fiscal year ended March 27, 2020, driven by an increase in automotive of $3.0 million, or 0.8%, an increase in industrial of $16.5 million, or 21.0%, and other of $29.4 million, or 42.9%. Automotive net sales increased in the fiscal year ended March 26, 2021 compared to the fiscal year ended March 27, 2020 primarily due to our customers’ increased vehicle production in Greater China, partially offset by slowed vehicle production in the rest of the world reflecting factory closures and demand uncertainty related to the COVID-19 pandemic. Content in xEV continued to increase compared to a weaker ICE. Industrial and other net sales improved in the fiscal year ended March 26, 2021 compared to the fiscal year ended March 27, 2020 due primarily to the continued demand in data center applications, grid infrastructure that includes renewable energy and EV charging, as well as a COVID-related increase in demand for printers and other peripherals. Sales Trends by Product The following table summarizes net sales by product: Fiscal Year Ended Change March 26, 2021 March 27, 2020 Amount % (Dollars in thousands) Power integrated circuits (“PIC”) $ 203,600 $ 165,911 $ 37,689 22.7 % Magnetic sensors integrated circuits (“MS”) 386,372 376,387 9,985 2.7 % Photonics 1,235 — 1,235 100.0 % Wafer foundry products — 72,370 (72,370) (100.0) % Distribution of Sanken products — 35,421 (35,421) (100.0) % Total net sales $ 591,207 $ 650,089 $ (58,882) (9.1) % The decrease in net sales by product in fiscal year 2021 was driven by decreases of $72.4 million and $35.4 million in net sales related to wafer foundry products and Sanken distribution products, respectively, as a result of the PSL Divestiture. These decreases were partially offset by an increase of $37.7 million in power IC product sales driven primarily by growth in data center and grid infrastructure demand, a $10.0 million increase in magnetic sensor IC product sales consistent with the demand increase in automotive production in Greater China compared to the weakness in automotive production related to the COVID-19 pandemic in the rest of the world, and a $1.2 million increase in Photonics product sales resulting from the Voxtel acquisition during the period. 62 Sales Trends by Geographic Location The following table summarizes net sales by geographic location based on ship-to location. Fiscal Year Ended Change March 26, 2021 March 27, 2020 Amount % (Dollars in thousands) Americas: United States $ 82,165 $ 119,139 $ (36,974) (31.0) % Other Americas 16,558 20,883 (4,325) (20.7) % EMEA: Europe 103,128 110,126 (6,998) (6.4) % Asia: Japan 104,661 184,557 (79,896) (43.3) % Greater China 157,546 121,807 35,739 29.3 % South Korea 62,075 54,707 7,368 13.5 % Other Asia 65,074 38,870 26,204 67.4 % Total net sales $ 591,207 $ 650,089 $ (58,882) (9.1) % The decrease in net sales across geographic locations in the fiscal year ended March 26, 2021 compared to the fiscal year ended March 27, 2020 was due primarily to wafer foundry and distribution sales totaling $107.8 million that were divested and are unrelated to and no longer a part of our core business, partially offset by automotive recovery in Asia and increased data center and other customer and peripherals revenue growth globally. Net sales in Americas declined $41.3 million, or 29.5%, to $98.7 million in the fiscal year ended March 26, 2021, compared to $140.0 million in the fiscal year ended March 27, 2020. Excluding the net sales associated with the PSL Divestiture of $35.8 million, net sales declined $5.5 million, or 3.9%, in the United States and Other Americas, primarily driven by a decrease in demand for our core application products sold in the automotive end market resulting from the factory shutdowns and demand weakness related to the COVID-19 pandemic. The predominant country comprising Other Americas is Mexico. The decrease in net sales of $7.0 million, or 6.4%, in Europe was primarily driven by a decrease in demand for our core application products sold in the automotive end market and some weakness in traditional industrial markets. The predominant countries comprising Europe are Germany and France. Net sales in Asia declined $10.6 million, or 2.6%, to $389.4 million in the fiscal year ended March 26, 2021, compared to $399.9 million in the fiscal year ended March 27, 2020. Excluding net sales associated with the PSL Divestiture of $72.0 million in Japan, net sales increased $61.4 million, or 15.4%, primarily driven by increases in Greater China for automotive and other products and Other Asia for automotive and industrial products, partially offset by a decrease in Japan related to automotive demand weakness. Cost of goods sold, gross profit and gross margin Cost of goods sold decreased by $76.5 million, or 19.7%, to $312.3 million in the fiscal year ended March 26, 2021 from $388.8 million in the fiscal year ended March 27, 2020. The decrease in cost of goods sold was primarily due to a $101.5 million decrease in cost of goods sold attributable to the PSL Divestiture and a combined $2.5 million of decreases related to returns and quality, amortization of manufacturing cost absorptions, manufacturing efficiencies, currency and other costs. These increases were partially offset by $21.7 million of increased standard costs, a $4.8 million increase in stock-based compensation expense and an increase associated with $1.0 million of Voxtel acquisition operating impacts, mostly attributable to the Photonics net sales and amortization of acquired intangible assets during the period. Gross profit increased by $17.6 million, or 6.7%, to $278.9 million in the fiscal year ended March 26, 2021 from $261.3 million in the fiscal year ended March 27, 2020. The increase was partially due to the impacts in cost of goods sold 63 discussed above, including the $24.0 million increase in gross profit which was driven by a $48.9 million operational increase in net sales to core end markets, partially offset by $6.3 million attributable to the PSL Divestiture. R&D expenses R&D expenses increased by approximately $6.5 million, or 6.5%, to $108.6 million in the fiscal year ended March 26, 2021 from $102.1 million in the fiscal year ended March 27, 2020. This increase was primarily due to a $3.0 million increase in stock-based compensation expense, of which $2.3 million related to the IPO and accelerated vesting of the Class A and L common stock and RSU Conversion Program, $1.9 million of increases in inventory and supplies, and an impact of $4.3 million related to the Voxtel acquisition, mostly related to an increase in total employee salaries of $5.5 million. These increases were partially offset by a $1.0 million decrease in office and business expenses and a reduction of $3.3 million of expenses related to the PSL Divestiture. R&D expenses represented 18.4% of our total net sales for the fiscal year ended March 26, 2021, an increased from 15.7% of our total net sales for the fiscal year ended March 27, 2020. This percentage increase was primarily due to a reduction in our total net sales. SG&A expenses SG&A expenses increased by $47.1 million, or 44.2%, to $153.5 million in the fiscal year ended March 26, 2021 from $106.4 million in the fiscal year ended March 27, 2020. This increase was primarily due to a $39.0 million increase in stock-based compensation expense, of which $36.3 million related to the IPO and accelerated vesting of the Class A and L common stock and RSU Conversion Program, an increase of $9.4 million in employee salaries, an increase of $4.5 million of professional fees, and increased expenses of $12.0 million consisting of increased D&O insurance as a result becoming a publicly traded company, office supplies, corporate allocations, and other expenses. These are partially offset by a reduction of $7.1 million of expenses related to the PSL Divestiture, a reduction of $6.8 million in severance and a combined reduction of $4.9 million related to travel and outside service costs. SG&A expenses represented 26.0% of our total net sales for the fiscal year ended March 26, 2021 and increased from 16.4% of our total net sales for the fiscal year ended March 27, 2020. This percentage increase was primarily due to stock-based compensation expenses recorded and the other items noted above for the fiscal year ended March 26, 2021. Impairment of long-lived assets Impairment of long-lived assets reflected a $7.1 million expense in the fiscal year ended March 26, 2021, representing impairment charges on the held for sale AMTC Facility. Change in fair value of contingent consideration The change in fair value of contingent consideration reflected a $2.5 million gain in the fiscal year ended March 26, 2021, resulting from the write-down in contingent consideration related to the Voxtel acquisition. Loss on debt extinguishment Loss on debt extinguishment reflected a $9.1 million loss in the fiscal year ended March 26, 2021, 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 increased by $2.5 million to interest expense, net of $2.6 million in the fiscal year ended March 26, 2021 from interest expense, net of $0.1 million in the fiscal year ended March 27, 2020. The increase in interest expense was primarily due to mandatory interest payments on the Term Loan Facility in the fiscal year ended March 26, 2021. Foreign currency transaction (loss) gain We recorded a foreign currency transaction loss of $2.9 million in the fiscal year ended March 26, 2021 compared to a gain of $1.4 million in the fiscal year ended March 27, 2020. The foreign currency transaction loss recorded in the fiscal year ended March 26, 2021 was primarily due to $3.5 million of realized and unrealized losses from our UK location, partially 64 offset by $1.3 million of realized and unrealized gains from our Thailand location. The currency gain recorded in the fiscal year ended March 27, 2020 was primarily attributable to $2.4 million of realized and unrealized gains from our UK location, partially offset by $1.0 million realized and unrealized losses from our Thailand location. Income in earnings of equity investment Income in earnings of equity investment reflected a $1.4 million gain in the fiscal year ended March 26, 2021, representing the earnings on our 30% investment in PSL during fiscal year 2021. Other expense, net Other expense, net decreased by approximately $0.4 million to $0.5 million of loss in the fiscal year ended March 26, 2021 from $0.8 million of loss in the fiscal year ended March 27, 2020. The loss in the fiscal year ended March 26, 2021 was primarily due to disposals of equipment from various facilities. The loss in the fiscal year ended March 27, 2020 was primarily due to expenses incurred associated with a settlement to terminate a relationship with a distributor and disposal of equipment from the prior Worcester Facility that sold during the first three-month period in fiscal year 2020. Income tax (benefit) provision The provision for income taxes was a benefit of $19.6 million for the fiscal year ended March 26, 2021 as compared to a $16.2 million expense for the fiscal year ended March 27, 2020. The decrease in income tax expense was primarily attributable to excess tax over financial reporting deductions related to the following IPO transaction: the $40.4 million stock-based compensation charge (and the related incremental tax deductions), the $16.0 million one-time dividend treated as compensation expense for tax purposes, and the tax loss on the divestiture of PSL. The tax impacts of these transaction and other discrete transactions caused an overall U.S. NOL that will be carried back five years. Non-GAAP Financial Measures In addition to the measures presented in our consolidated financial statements, we regularly review other metrics, defined as non-GAAP financial measures by the SEC, to evaluate our business, measure our performance, identify trends, prepare financial forecasts and make strategic decisions. The key metrics we consider are non-GAAP Gross Profit, non-GAAP Gross Margin, non-GAAP Operating Expenses, non-GAAP Operating Income, non-GAAP Operating Margin, non-GAAP Profit before Tax, non-GAAP Provision for Income Tax, non-GAAP Net Income, non-GAAP Net Income per Share, EBITDA, Adjusted EBITDA and Adjusted EBITDA margin (collectively, the “Non-GAAP Financial Measures”). These Non-GAAP Financial Measures provide supplemental information regarding our operating performance on a non-GAAP basis that excludes certain gains, losses and charges of a non-cash nature or that occur relatively infrequently and/or that management considers to be unrelated to our core operations, and in the case of non-GAAP Provision for Income Tax, management believes that this non-GAAP measure of income taxes provides it with the ability to evaluate the non-GAAP Provision for Income Taxes across different reporting periods on a consistent basis, independent of special items and discrete items, which may vary in size and frequency. By presenting these Non-GAAP Financial Measures, we provide a basis for comparison of our business operations between periods by excluding items that we do not believe are indicative of our core operating performance, and we believe that investors’ understanding of our performance is enhanced by our presenting these Non-GAAP Financial Measures, as they provide a reasonable basis for comparing our ongoing results of operations. Management believes that tracking and presenting these non-GAAP Financial Measures provides management and the investment community with valuable insight into matters such as: our ongoing core 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: 65 • such measures do not reflect our cash expenditures, or future requirements for capital expenditures or contractual commitments; • such measures exclude certain costs which are important in analyzing our GAAP results; • such measures do not reflect changes in, or cash requirements for, our working capital needs; • such measures do not reflect the interest expense, or the cash requirements necessary to service interest or principal payments on our debt; • such measures do not reflect our tax expense or the cash requirements to pay our taxes; • although depreciation and amortization are non-cash charges, the assets being depreciated and amortized will often have to be replaced in the future; • such measures do not reflect any cash requirements for such replacements; and • other companies in our industry may calculate such measures differently than we do, thereby further limiting their usefulness as comparative measures. The Non-GAAP Financial Measures are supplemental measures of our performance that are neither required by, nor presented in accordance with, GAAP. These Non-GAAP Financial Measures should not be considered as substitutes for GAAP financial measures such as gross profit, gross margin, net income or any other performance measures derived in accordance with GAAP. Also, in the future we may incur expenses or charges such as those added back 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. • PSL and Sanken Distribution Agreement—Represents the elimination of inventory cost amortization and foundry service payment related to one-time costs incurred in connection with the disposition of Polar Semiconductor, LLC (“PSL”) during the fiscal year ended March 26, 2021 (the “PSL Divestiture”). • Stock-based compensation—Represents non-cash expenses arising from the grant of stock-based awards. • AMTC Facility consolidation one-time costs—Represents one-time costs incurred in connection with closing of our manufacturing facility in Thailand (the “AMTC Facility”) and transitioning of test and assembly functions to our manufacturing facility in the Philippines (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 as of the end of March 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 in this release do not include adjustments consisting of: • Additional AMTC-related costs—Represents costs relating to the closing of the AMTC Facility and the transitioning of test and assembly functions to the AMPI Facility in the Philippines announced in 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 year s 2019 and 2018. The elimination of these costs 66 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 as of the end of March 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. 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 unsuccessful acquisition of a competitor in fiscal y ear 2019, (ii ) the acquisition of Voxtel in fiscal year 2020, (iii) the PSL Divestiture and the transfer of the Sanken products distribution business to PSL in fiscal year 2020, and (iv) one-time transaction-related legal and consulting fees in fiscal 2021. • Severance—Represents 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, and (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. • Impairment of long-lived assets—Represents impairment charge incurred in connection with the planned sale of the AMTC Facility. • 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 in this release 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 loss (gain) 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. • 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 year ended March 26, 2021. • Foreign currency translation loss (gain)—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 in earnings of equity investment—Represents our equity method investment in PSL. • 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 67 2021 following the PSL Divestiture. Such costs are not expected to 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 are not expected to have a continuing impact on our operating results after fiscal year 2021. Non-GAAP Profit before Tax and Non-GAAP Net Income We calculate non-GAAP Profit before Tax as Profit before Tax excluding the same items excluded above and also excluding the item below in applicable periods. We calculate non-GAAP Net Income as Net Income excluding the same items excluded above and also excluding the item below in applicable periods. • 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 Provision for Income Taxes: • 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 Fiscal Year Ended March 26, 2021 December 25, 2020 March 27, 2020 March 26, 2021 March 27, 2020 (Dollars in thousands) Reconciliation of Gross Profit GAAP Gross Profit $ 87,006 $ 74,425 $ 71,758 $ 278,902 $ 261,276 PSL and Sanken distribution agreement 930 1,500 — 8,628 — Stock-based compensation 314 4,694 46 5,158 183 AMTC facility consolidation one-time costs 625 607 — 2,184 — Amortization of acquisition-related intangible assets 273 273 — 651 — COVID-19 related expenses 64 65 — 202 — Total Non-GAAP Adjustments 2,206 7,139 46 16,823 183 Non-GAAP gross profit* 89,212 81,564 71,804 295,725 261,459 Non-GAAP gross margin 50.9 % 49.6 % 41.1 % 50.0 % 40.2 % * 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 $—, $1,198, and $2,290 for the three months ended March 26, 2021, December 25, 2020, and March 27, 2020, respectively, and (ii) additional AMTC related costs of $6,553 and $9,361 for the fiscal years ended March 26, 2021 and March 27, 2020, respectively, and out-of-period adjustment for depreciation expense of GMR assets of $768 and $— for the fiscal years ended March 26, 2021 and March 27, 2020, respectively. 68 Three-Month Period Ended Fiscal Year Ended March 26, 2021 December 25, 2020 March 27, 2020 March 26, 2021 March 27, 2020 (Dollars in thousands) Reconciliation of Operating Expenses GAAP Operating Expenses $ 67,558 $ 98,649 $ 52,853 $ 266,744 $ 208,448 Research and Development Expenses GAAP Research and Development Expenses 28,140 30,999 24,487 108,649 102,052 Stock-based compensation 536 2,984 22 3,573 87 AMTC Facility consolidation one-time costs — 1 — 2 — COVID-19 related expenses 8 32 — 100 — Transaction fees — — — 18 — Non-GAAP Research and Development Expenses 27,596 27,982 24,465 104,956 101,965 Selling, General and Administrative Expenses GAAP Selling, General and Administrative Expenses 34,799 67,650 28,366 153,476 106,396 Stock-based compensation 2,119 38,198 316 41,139 1,165 AMTC Facility consolidation one-time costs 1,488 1,620 — 5,626 — Amortization of acquisition-related intangible assets 37 71 — 117 — COVID-19 related expenses 250 338 581 4,926 581 Transaction fees 3,727 1,729 2,553 7,426 6,335 Severance — (181) 3,263 156 6,415 Non-GAAP Selling, General and Administrative Expenses 27,178 25,875 21,653 94,086 91,900 Impairment of long-lived assets 7,119 — — 7,119 — Change in fair value of contingent consideration (2,500) — — (2,500) — Total Non-GAAP Adjustments 12,784 44,792 6,735 67,702 14,583 Non-GAAP operating expenses * $ 54,774 $ 53,857 $ 46,118 $ 199,042 $ 193,865 * Non-GAAP Operating Expenses do not include adjustments for the following components of our net income: (i) additional AMTC related costs of $—, $19, and $2,621 for the three months ended March 26, 2021, December 25, 2020, and March 27, 2020, respectively, and labor savings costs of $—, $109, and $289 for the three months ended March 26, 2021, December 25, 2020, and March 27, 2020, respectively, and (ii) additional AMTC related costs of $723 and $11,224 for the fiscal years ended March 26, 2021 and March 27, 2020, respectively, and labor savings costs of $218 and $6,173 for the fiscal years ended March 26, 2021 and March 27, 2020, respectively. 69 Three-Month Period Ended Fiscal Year Ended March 26, 2021 December 25, 2020 March 27, 2020 March 26, 2021 March 27, 2020 (Dollars in thousands) Reconciliation of Operating Income GAAP Operating Income (Loss) $ 19,448 $ (24,224) $ 18,905 $ 12,158 $ 52,828 PSL and Sanken distribution agreement 930 1,500 — 8,628 — Stock-based compensation 2,969 45,876 384 49,870 1,435 AMTC facility consolidation one-time costs 2,113 2,228 — 7,812 — Amortization of acquisition-related intangible assets 310 344 — 768 — COVID-19 related expenses 322 435 581 5,228 581 Impairment of long-lived assets 7,119 — — 7,119 — Change in fair value of contingent consideration (2,500) — — (2,500) — Transaction fees 3,727 1,729 2,553 7,444 6,335 Severance — (181) 3,263 156 6,415 Total Non-GAAP Adjustments $ 14,990 $ 51,931 $ 6,781 $ 84,525 $ 14,766 Non-GAAP Operating Income* $ 34,438 $ 27,707 $ 25,686 $ 96,683 $ 67,594 % of net sales 19.7 % 16.8 % 14.7 % 16.4 % 10.4 % * 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 $—, $1,217, and $4,911 for the three months ended March 26, 2021, December 25, 2020, and March 27, 2020, respectively, and labor savings costs of $—, $109, and $289 for the three months ended March 26, 2021, December 25, 2020, and March 27, 2020, respectively, and (ii) additional AMTC related costs of $7,276 and $11,224 for the fiscal years ended March 26, 2021 and March 27, 2020, respectively, labor savings costs of $218 and $6,173 for the fiscal years ended March 26, 2021 and March 27, 2020, respectively, and out-of-period adjustment for depreciation expense of GMR assets of $768 and $— for the fiscal years ended March 26, 2021 and March 27, 2020, respectively. 70 Three-Month Period Ended Fiscal Year Ended March 26, 2021 December 25, 2020 March 27, 2020 March 26, 2021 March 27, 2020 Reconciliation of EBITDA and Adjusted EBITDA (Dollars in thousands) GAAP Net Income (Loss) $ 8,689 $ (5,060) $ 13,329 $ 18,101 $ 37,105 Interest expense, net 668 2,598 50 2,603 110 Income tax provision (benefit) 8,361 (30,523) 4,463 (19,552) 16,173 Depreciation & amortization 12,082 12,199 16,440 48,307 64,048 EBITDA $ 29,800 $ (20,786) $ 34,282 $ 49,459 $ 117,436 Non-core loss (gain) on sale of equipment 156 (7) 193 442 1,284 Miscellaneous legal judgement charge — 574 — 574 — Loss on debt extinguishment — 9,055 — 9,055 — Foreign currency translation loss (gain) 1,558 145 1,409 2,889 (1,391) Income in earnings of equity method investment (6) (949) — (1,413) — Stock-based compensation 2,969 45,876 384 49,870 1,435 AMTC facility consolidation one-time costs 2,113 2,228 106 7,812 106 COVID-19 related costs 322 435 581 5,228 581 Impairment of long-lived assets 7,119 — — 7,119 — Change in fair value of contingent consideration (2,500) — — (2,500) — Transaction fees 3,727 1,729 2,553 7,444 6,335 Severance — (181) 3,263 156 6,415 PSL and Sanken distribution agreement 930 1,500 — 8,628 — Adjusted EBITDA $ 46,188 $ 39,619 $ 42,771 $ 144,763 $ 132,201 % of sales 26.4 % 24.1 % 24.5 % 24.5 % 20.3 % * 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 $—, $1,217, and $4,911 for the three months ended March 26, 2021, December 25, 2020, and March 27, 2020, respectively, and labor savings costs of $—, $109, and $289 for the three months ended March 26, 2021, December 25, 2020, and March 27, 2020, respectively, and (ii) AMTC additional costs of $7,276 and $11,224 for the fiscal years ended March 26, 2021 and March 27, 2020, respectively, and labor savings costs of $218 and $6,173 for the fiscal years ended March 26, 2021 and March 27, 2020, respectively. 71 Three-Month Period Ended Fiscal Year Ended March 26, 2021 December 25, 2020 March 27, 2020 March 26, 2021 March 27, 2020 (Dollars in thousands) Reconciliation of Profit (Loss) before Tax GAAP Profit (Loss) before Tax $ 17,050 $ (35,583) $ 17,792 $ (1,451) $ 53,278 Non-core loss (gain) on sale of equipment 156 (7) 193 442 1,284 Miscellaneous legal judgment charge — 574 — 574 — Loss on debt extinguishment — 9,055 — 9,055 — Foreign currency translation loss (gain) 1,558 145 1,409 2,889 (1,391) Income in earnings of equity investment (6) (949) — (1,413) — PSL and Sanken distribution agreement 930 1,500 — 8,628 — Stock-based compensation 2,969 45,876 384 49,870 1,435 Interest on repaid portion of Term Loan Facility — 2,163 — 2,163 — AMTC facility consolidation one-time costs 2,113 2,228 106 7,812 106 Amortization of acquisition-related intangible assets 310 344 — 768 — COVID-19 related expenses 322 435 581 5,228 581 Impairment of long-lived assets 7,119 — — 7,119 — Change in fair value of contingent consideration (2,500) — — (2,500) — Transaction fees 3,727 1,729 2,553 7,444 6,335 Severance — (181) 3,263 156 6,415 Total Non-GAAP Adjustments $ 16,698 $ 62,912 $ 8,489 $ 98,235 $ 14,765 Non-GAAP Profit before tax* $ 33,748 $ 27,329 $ 26,281 $ 96,784 $ 68,043 * Non-GAAP Profit before Tax does not include adjustments for the following components of our net income: (i) additional AMTC related costs of $—, $1,217, and $4,911 for the three months ended March 26, 2021, December 25, 2020, and March 27, 2020, respectively, and labor savings costs of $—, $109, and $289 for the three months ended March 26, 2021, December 25, 2020, and March 27, 2020, respectively, and (ii) additional AMTC related costs of $7,276 and $11,224 for the fiscal years ended March 26, 2021 and March 27, 2020, respectively, labor savings costs of $218 and $6,173 for the fiscal years ended March 26, 2021 and March 27, 2020, respectively, and out-of-period adjustment for depreciation expense of GMR assets of $768 and $— for the fiscal years ended March 26, 2021 and March 27, 2020, respectively. 72 Three-Month Period Ended Fiscal Year Ended March 26, 2021 December 25, 2020 March 27, 2020 March 26, 2021 March 27, 2020 (Dollars in thousands) Reconciliation of Provision for Income Taxes GAAP Provision (Benefit) for Income Taxes $ 8,361 $ (30,523) $ 4,463 $ (19,552) $ 16,173 GAAP effective tax rate 49.0 % 85.8 % 25.1 % 1347.5 % 30.4 % Tax effect of adjustments to GAAP results (3,053) 34,872 1,896 34,486 (2,601) Non-GAAP Provision for Income Taxes $ 5,308 $ 4,349 $ 6,359 $ 14,934 $ 13,572 Non-GAAP effective tax rate 15.7 % 15.9 % 24.2 % 15.4 % 20.0 % * 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 $—, $297 and $652 for the three months ended March 26, 2021, December 25, 2020, and March 27, 2020, respectively, and $1,851 and $3,897 for the fiscal years ended March 26, 2021 and March 27, 2020, respectively. 73 Three-Month Period Ended Fiscal Year Ended March 26, 2021 December 25, 2020 March 27, 2020 March 26, 2021 March 27, 2020 (Dollars in thousands) Reconciliation of Net Income GAAP Net Income (Loss) $ 8,689 $ (5,060) $ 13,329 $ 18,101 $ 37,105 Non-core loss (gain) on sale of equipment 156 (7) 193 442 1,284 Miscellaneous legal judgement charge — 574 — 574 — Loss on debt extinguishment — 9,055 — 9,055 — Foreign currency translation loss 1,558 145 2,800 2,889 — Income in earnings of equity investment (6) (949) (1,391) (1,413) (1,391) PSL and Sanken distribution agreement 930 1,500 — 8,628 — Stock-based compensation 2,969 45,876 384 49,870 1,435 Interest on repaid portion of term loan facility — 2,163 — 2,163 — AMTC Facility consolidation one-time costs 2,113 2,228 106 7,812 106 Amortization of acquisition-related intangible assets 310 344 — 768 — COVID-19 related expenses 322 435 581 5,228 581 Impairment of long-lived assets 7,119 — — 7,119 — Change in fair value of contingent consideration (2,500) — — (2,500) — Transaction fees 3,727 1,729 2,553 7,444 6,335 Severance — (181) 3,263 156 6,415 Tax effect of adjustments to GAAP results 3,053 (34,872) (1,896) (34,486) 2,601 Non-GAAP Net Income $ 28,440 $ 22,980 $ 19,922 $ 81,850 $ 54,471 Basic weighted average common shares 189,429,893 124,363,078 10,000,000 83,448,055 10,000,000 Diluted weighted average common shares 190,860,556 181,916,360 10,000,000 176,416,645 10,000,000 Non-GAAP Basic Earnings per Share $ 0.15 $ 0.18 $ 1.99 $ 0.98 $ 5.45 Non-GAAP Diluted Earnings per Share $ 0.15 $ 0.13 $ 1.99 $ 0.46 $ 5.45 * Non-GAAP Net Income does not include adjustments for the following components of our net income: (i) additional AMTC related costs of $—, $1,217, and $4,911 for the three months ended March 26, 2021, December 25, 2020, and March 27, 2020, respectively, and labor savings costs of $—, $109, and $289 for the three months ended March 26, 2021, December 25, 2020, and March 27, 2020, respectively, (ii) additional AMTC related costs of $7,276 and $11,224 for the fiscal years ended March 26, 2021 and March 27, 2020, respectively, labor savings costs of $218 and $6,173 for the fiscal years ended March 26, 2021 and March 27, 2020, respectively, and out-of-period adjustment for depreciation expense of GMR assets of $768 and $— for the fiscal years ended March 26, 2021 and March 27, 2020, respectively, and (iii) the related tax effect of adjustments to GAAP results of $—, $297 and $652 for the three months ended March 26, 2021, December 25, 2020, and March 27, 2020, respectively, and $1,851 and $3,897 for the fiscal years ended March 26, 2021 and March 27, 2020, respectively. Liquidity and Capital Resources As of March 26, 2021, we had $197.2 million of cash and cash equivalents and $313.9 million of working capital compared to $214.5 million of cash and cash equivalents and $298.1 million of working capital as of March 27, 2020. Working capital is impacted by the timing and extent of our business needs. 74 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 equivalen ts. Our current capital deployment strategy for 2022 is to utilize excess cash on hand to support our growth initiatives into select markets and planned capital expenditures. As of March 26, 2021, 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 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 leases and noncancellable purchase commitments, see Note 15, “Commitments and Contingencies” to the audited consolidated financial statements. Additionally, refer to Note 14, “Retirement Plans” for more information related to the Company’s pension and defined contribution plans. In March 2020, we borrowed an aggregate of $43.0 million under our revolving credit facilities (including $10.0 million that was borrowed by PSL under the PSL Revolver, representing substantially all of our available capacity, in order to increase our cash position and help maintain financial flexibility in light of the continued uncertainty surrounding the COVID-19 pandemic. Of this $43.0 million, the $10.0 million of debt borrowed under the PSL Revolver is the obligation of PSL and is no longer included on our consolidated balance sheet as of March 26, 2021. In addition, the proceeds from such borrowings were retained by PSL and are no longer available for use by us following the consummation of the PSL Divestiture. On September 30, 2020, we (i) 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 fiscal 2028 (the “Term Loan Facility”), (ii) 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”), and (iii) used cash on hand to repay all amounts outstanding under AML’s revolving credit agreement with Mizuho Bank, Ltd. (the “AML Revolver”) and AML’s line of credit with Bank of Mitsubishi UFJ (the “AML Line of Credit”) and terminated all commitments thereunder. On November 25, 2020, we repaid $300.0 million of the outstanding $325.0 million Term Loan Facility using proceeds from our recently completed IPO. Refer to the “Debt Obligations” section below for additional information regarding our credit facilities. We are obligated to pay interest on the outstanding debt balances, and the principal outstanding is due in fiscal year 2028. We anticipate a significant increase in accounting, legal and professional fees and other costs associated with being a public company. We believe that our existing cash resources, together with the proceeds from our IPO and our access to the capital markets, will be sufficient to finance our continued operations, growth strategy, planned capital expenditures and the additional expenses we expect to incur as a public company for at least the next 12 months. In order to support and achieve our future growth plans, we may need or seek advantageously to obtain additional funding through equity or debt financing. We believe that our current operating structure will facilitate sufficient cash flows from operations to satisfy our expected long-term liquidity requirements beyond the next twelve 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. See “Risk Factors —Risks Related to Our Business and Industry—Our ability to raise capital in the future may be limited and could prevent us from executing our growth strategy.” 75 Cash Flows from Operating, Investing and Financing Activities The following table summarizes our cash flows for the fiscal years ended 2021 and 2020: Fiscal Year Ended March 26, 2021 March 27, 2020 (dollars in thousands) Net cash provided by operating activities $ 120,570 $ 81,419 Net cash used in investing activities (68,245) (41,679) Net cash (used in) provided by financing activities (72,186) 82,500 Effect of exchange rate changes on cash and cash equivalents 3,860 (5,621) Net (decrease) increase in cash and cash equivalents and restricted cash $ (16,001) $ 116,619 Operating Activities Net cash provided by operating activities was $120.6 million in fiscal year 2021, resulting primarily from our net income of $18.1 million and non-cash charges of $98.4 million, partially offset by a net increase in operating assets and liabilities of $4.0 million. Net changes in operating assets and liabilities consisted of a $15.1 million increase in trade accounts payable, a $14.8 million increase in accrued expenses and other current and long-term liabilities, a $7.6 million decrease in inventories, and a $4.9 million decrease in due from/to related parties, partially offset by increases of $29.0 million and $9.3 million in prepaid expenses and other assets and trade accounts receivable, net, respectively. T he increase in trade accounts receivable, net was primarily a result of increased sales year-over-year. The increase in trade accounts payable and the increase in accrued expenses and other current and long-term liabilities was primarily the result of the deposits related to the sale of our AMTC facility, higher operating purchases, including unpaid capital expenditures of $3.2 million, and the timing of payments of purchases, partially offset by lower severance costs, income taxes and professional fees. The decrease in inventories was primarily a result of the drawdown after building inventory up to support anticipated sales growth in 2020. The decrease in due from/to related parties and the decrease in accounts receivable-other was primarily due to variations in the timing of such payments in the ordinary course of business. The increases in prepaid expenses and other assets and trade accounts receivable, net were primarily due to higher prepayments of taxes, including VAT receivables, insurance and contract costs, as well as the timing of receipts of trade accounts receivable. Net cash provided by operating activities was $81.4 million in fiscal year 2020, resulting primarily from our net income of $37.1 million and noncash charges of $65.2 million, partially offset by net changes in operating assets and liabilities of $20.8 million. Net changes in operating assets and liabilities consisted of a $13.5 million decrease in accrued expenses and other current and long-term liabilities, a $3.1 million decrease in trade accounts payable and a $23.9 million increase in due from/to related parties, partially offset by a $16.4 million decrease in trade accounts receivable, net and a $2.6 million decrease in prepaid expenses and other assets. The increases in accrued expenses and other current and long-term liabilities, trade accounts payable and due from/to related parties were primarily due to variations in the timing of such payments in the ordinary course of business. The decrease in trade accounts receivable, net is primarily due to the decrease in net sales. The decrease in prepaid expenses and other assets is primarily due to refunds obtained from value added taxes paid at one of our foreign locations. 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 following the end of fiscal year 2020, will result in a decrease in capital expenditures in the future. Net cash used in investing activities was $68.2 million in fiscal year 2021, consistin g of $40.7 million of purchases of property, plant and equipment, $11.6 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, pl ant and equipment. Net cash used in investing activities was $41.7 million in fiscal year 2020, consisting of $45.6 million of purchases of property, plant and equipment, partially offset by $3.9 million of proceeds obtained from the sale of property, plant and 76 equipment. The $3.9 million of proceeds from sales of property, plant and equipment during fiscal year 2020 were mainly attributable to the sale of our Worcester Facility. Financing Activities Net cash used in financing a ctivities was $72.2 million in fiscal year 2021 , 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 our IPO, net of underwriting discounts and other offering costs, and a $51.4 million related party note receivable repayment. Net cash provided by financing activities was $82.5 million in fiscal year 2020, consisting of the repayment of a $30.0 million short-term loan issued to Sanken in fiscal y ear 2019, $43.0 million in borrowings under our credit facilities, and a $9.5 million capital contribution from Sanken to offset a one-time tax settlement from prior year IRS tax audits. Debt Obligations As of March 26, 2021, we had $25.0 million in aggregate principal amount of debt outstanding under our Senior Secured Credit Facilities. We entered into the Senior Secured Credit Facilities on September 30, 2020 consisting of a $325.0 million Term Loan Facility due in 2027 and a revolving facility credit agreement providing for a $50.0 million Revolving Credit Facility expiring in 2023. On November 25, 2020, we repaid $300.0 million of the outstanding Term Loan Facility principal balance. Description of Credit Facilities Term Loan Facility The Term Loan Facility bears interest at a rate per year of, at our option, either (i) the Base Rate (as defined 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 March 26, 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 our 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 our assets or properties; • enter into transactions with affiliates; • pay dividends or make other distributions; or • change the nature of our business activities, our fiscal year, or our 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. 77 Revolving Credit Facility The Revolving Credit Facility bears interest at a rate per year of, at our option, the Base Rate plus 1.5%, the Cost of Funds Rate (as defined in the credit agreement) plus 2.5%, or the Eurodollar Rate plus 2.5%. In addition, commencing on the last business day of December 2020, we are required to pay, on a quarterly basis, a non-refundable commitment fee of 0.50% per year on the average daily unused commitments under the Revolving Credit Facility. We incurred financing costs of $0.3 million in connection with the Revolving Credit Facility, which we classified the related short-term and long-term portions within “Prepaid expenses and other current assets” and “Other assets” on our consolidated balance sheet, and are amortizing these costs over the term of the facility. The unamortized portion of the deferred financing costs associated with the Revolving Credit Facility was $0.2 million at March 26, 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. AML Revolver On January 22 , 2019 , AML entered into a revolving credit agreement with Mizuho Bank, Ltd., as lender, that provided for a revolving credit facility with a maximum borrowing capacity of $25.0 million (the “AML Revolver”). On January 22, 2020, AML and the lender amended the AML Revolver to extend the termination date for commitments thereunder from January 22, 2020 to January 22, 2021 (the “Commitment Termination Date”). On September 30, 2020, we repaid in full and terminated the AML Revolver. Borrowings under the AML Revolver bore interest at a rate per year equal to, at AML’s option, either (i) LIBOR, or (ii) the Cost of Funds Rate, plus, in each case, a spread of 0.4%. In addition, AML was required to pay, on a quarterly basis in arrears, a non-refundable commitment fee of 0.2% per year on the average daily unused commitments under the AML Revolver during such quarterly period. AML was also required to pay, on the closing date of the AML Revolver, a non-refundable up-front fee of $25 thousand. AML Line of Credit AML had a line of credit with the Bank of Mitsubishi UFJ that provided for a maximum borrowing capacity of $8.0 million at an interest rate of 1.9%. On October 1, 2020, we repaid this line of credit in full and in conjunction, terminated it. AMPI Credit Facilities On November 2 6, 2019, AMPI entered into a line of credit agreement with Union Bank of the Philippines, Inc. that provides for a maximum borrowing capacity of 60.0 million Philippine pesos (approximately $1.2 million) at the bank’s prevailing interest rate. The line of credit expires on August 31, 2021. On November 20, 2019, AMPI entered into a line of credit agreement with BDO Unibank that provides for a maximum borrowing capacity of 75.0 million Philippine pesos (approximately $1.6 million) at the bank’s prevailing interest rate. The line of credit expires on June 30, 2021. Recent Accounting Pronouncements Refer to Note 2 of the audited consolidated financial statements included elsewhere in this Annual Report for information regarding recent accounting pronouncements. Critical Accounting Policies and Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States 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. Such estimates relate to useful lives of intangible assets, goodwill, stock-based compensation, and sales allowances. Such estimates could also relate to the net realizable value of inventory, accrued liabilities, and deferred tax valuation allowances. We base our estimates and assumptions on historical experience and other factors that we believe to be 78 reasonable under the circumstances. On an ongoing basis, management evaluates its estimates. Actual results could differ from those estimates, and such differences may be material to our financial statements. We believe that the accounting policies described below require management’s most difficult, subjective or complex judgments. Judgments or uncertainties affecting the application of these policies may result in materially different amounts being reported under different conditions or using different assumptions. Accordingly, we believe these are the most critical to aid in fully understanding and evaluating our financial condition and results of operations. See Note 2 to the consolidated financial statements included elsewhere in this Annual Report for additional information regarding these and our other significant accounting policies. Revenue Recognition Revenue is recognized when transfer of control to the customer occurs in an amount reflecting the consideration that we expect to be entitled. Sales Allowances Sales allowances include sales in which the amount of consideration that we will receive is unknown as of the end of a reporting period. Such consideration primarily includes limited price protection provisions provided to distributors. We estimate potential future sales allowances based on historical data from prior sales adjustments. See Note 6 to the consolidated financial statements for information regarding the change in sales allowances. Contingent Consideration In connection with the Voxtel acquisition, the Company was required to make contingent payments, subject to the entity achieving certain sales and revenue thresholds. The fair value of the liabilities for the contingent payments recognized as part of the purchase accounting opening balance sheet totaled $7.3 million 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. During the fourth quarter, the Company determined that certain sales and revenue thresholds were less likely to be met for Voxtel as a result of its remeasurement exercise and updated associated forecasted data. A fair value adjustment of $2.5 million was recorded during the year ended March 26, 2021, which reduced the amount of contingent payments still expected to be paid. Refer to Note 3 to the consolidated financial statements included elsewhere in this Annual Report for more information on the acquisition of Voxtel and the contingent consideration. Stock-based Compensation We recognize compensation cost relating to share-based payment transactions in the financial statements based on the estimated grant date fair value of the equity instrument issued. Critical is the fair value of the performance-based stock units (“PSUs”), which are based on the fair value of the underlying shares on the date of grant under the provisions of ASC Topic 718, Compensation — Stock Compensation (“ASC 718”). Additionally, the fair value of the portion of the PSUs that relate to a relative TSR (“rTSR”) performance objective was determined using a Monte Carlo simulation analysis to estimate the total shareholder return ranking of the Company among the Philadelphia Semiconductor Sector Index over the remaining performance periods. It also incorporates weighted-average assumptions such as volatility, risk free rate, dividend yield, and correlation coefficient. In addition to the rTSR, we have two internal metrics to track on such performances. If factors change causing different assumptions to be made in future periods, estimated compensation expense may differ significantly from that recorded in the current period. See Note 2 and Note 17 to the consolidated financial statements included elsewhere in this Annual Report for more information regarding the assumptions used in estimating the fair value of our awards.