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Item 7. Management’s Discussion and Analysis

2023-05-25 compared with 2022-05-18 · 147 added, 497 removed, 227 unchanged (74% of the section changed)

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”).

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.

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This section discusses items pertaining to and comparisons of financial results between 2023 and 2022.

A discussion of 2020 items and comparisons between 2021 and 2020 financial results can be found in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 of the Company’s Annual Report on Form 10-K for the fiscal year ended March 26, 2021 (the “2021 MD&A”), filed with the SEC on May 19, 2021.

Management’s Discussions and Analysis (“MD&A”) is divided into the following sections:

• Our Growth Strategies and Outlook

• Recent Initiative to Improve Results of Operations

• Impact of the COVID-19 Pandemic

• Other Key Factors and Trends Affecting our Operating Results

• Components of Our Results of Operations

• Results of Operations

• Non-GAAP Financial Measures

• Liquidity and Capital Resources

• Recent Accounting Pronouncements

• Critical Accounting Policies and Estimates

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.

A discussion of 2021 items and comparisons between 2022 and 2021 financial results can be found in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7.

of the Company’s Annual Report on Form 10-K for the fiscal year ended March 25, 2022 (the “2022 MD&A”), filed with the SEC on May 18, 2022.

Allegro MicroSystems, Inc.

is a leading global designer, developer, fabless manufacturer and marketer of sensor ICs and application-specific analog power ICs enabling the most critical technologies in the automotive and industrial markets.

We are a leading supplier of magnetic sensor IC solutions worldwide based on market share, driven by our market leadership in the automotive market.

We focus on providing complete IC solutions for motion control and energy efficient systems.

This includes sensing the angular or linear position of a shaft or actuator, driving an electric motor or actuator, and regulating the power applied to sensing and driving circuits so they operate safely and efficiently.

We are headquartered in Manchester, New Hampshire and have a global footprint with 26 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 2022 and 2021, we generated $768.7 million and $591.2 million in total net sales, respectively, with $119.6 million and $18.1 million in net income, respectively, and $226.1 million and $144.8 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 listed on the Nasdaq Global Select Market under the ticker symbol “ALGM.”

Our Growth Strategies and Outlook

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

• Invest in research and development that is market-aligned and focused on targeted portfolio expansion.

We believe that our investments in research and development in the areas of product design, automotive-grade wafer fabrication

technology and IC packaging development are critical to maintaining our competitive advantage.

In both the automotive and industrial markets, major technology shifts driven by disruptive technologies are creating high-growth opportunities in areas such as electrified vehicles (“xEVs”), advanced driver assistance systems (“ADAS”), Industry 4.0, data centers and green energy applications.

Our knowledge of customers’ end systems has driven an expansion of our sensor IC and power solutions to enable these new technologies.

By aligning our research and development investments with disruptive technology trends while undergoing a rigorous ROI review, we believe we can deliver an attractive combination of growth and profitability.

• Emphasize the automotive “first” philosophy to align our product development with the most rigorous applications and safety standards.

We have been intentional about incorporating support for the stringent automotive operating voltages, temperature ranges and safety and reliability standards into every part of our operations, from design to manufacturing.

We believe our focus on meeting or exceeding industry standards as the baseline for product development increases our opportunity in the automotive market as customers look for trusted suppliers to deliver highly reliable solutions for rapidly growing emerging markets, and that our philosophy of designing for automotive safety and reliability gives us a meaningful lead over new entrants attempting to enter the automotive market.

For example, we will apply this philosophy of innovation, quality and reliability to our new photonics portfolio which supplies components into safety-critical Light Detection and Ranging (“LiDAR”) applications.

We also believe we can use our expertise in designing for the automotive market and our expanding product portfolio to capitalize on increasing demand among industrial customers for ruggedized solutions that meet the highest quality and reliability standards.

Additionally, in our experience, demand for solutions that meet or exceed stringent safety and reliability specifications supports higher average sales prices (“ASP”) and lower ASP declines over time than are typical for our industry.

• Invest to lead in chosen markets and apply our intellectual property and technology to pursue adjacent growth markets.

We intend to continue to invest in technology advancements and our intellectual property portfolio to maintain the number one market share position in magnetic sensor ICs and achieve leadership positions in power ICs within our target markets.

We believe that leveraging our technology and existing research and development, sales and support efforts will enable us to take advantage of synergistic opportunities in new, adjacent growth markets.

We believe this strategy of leveraging our known capabilities to target adjacent growth markets will enable us to enjoy greater returns on our research and development investments.

• Expand our sales channels and enhance our sales operations and customer relationships.

Our global sales infrastructure is optimized to support customers through a combination of key account managers and regional technical and support centers near customer locations that enable us to act as an extension of our customers’ design teams, providing us with key insights into product requirements and accelerating the adoption and ramp up of our products in customer designs.

We intend to continue strengthening our relationships with our existing customers while also enabling our channel partners to support demand creation and fulfillment for smaller broad-based industrial customers.

We believe we will be able to further penetrate the industrial market and efficiently scale our business to accelerate growth by enabling our channel partners to become an extension of our demand generation and customer support efforts.

• Continue to improve our gross margins through product innovation and cost optimization.

We strive to improve our profitability by both rapidly introducing new products with value-added features and reducing our manufacturing costs through our fabless, asset-lite manufacturing model.

We expect to continue to improve our product mix by developing new products for growth markets where we believe we can generate higher ASPs and/or higher gross margins.

We also intend to further our relationships with key foundry suppliers to apply our product and applications knowledge to develop differentiated and cost-efficient wafer processes and packages.

We believe we can reduce our manufacturing costs by leveraging the advanced manufacturing capabilities of our strategic suppliers, implementing more cost-effective packaging technologies and leveraging both internal and external assembly and test capacity to reduce our capital requirements, lower our operating costs, enhance reliability of supply and support our continued growth.

• Pursue selective acquisitions and other strategic transactions.

We evaluate and pursue selective acquisitions and other transactions to facilitate our entrance into new applications, add to our intellectual property portfolio and design resources, and accelerate our growth.

From time to time, we acquire companies, technologies or assets and participate in joint ventures when we believe they will cost effectively and rapidly improve our product development or manufacturing capabilities or complement our existing product offerings.

• Maintain sustainability efforts.

We intend to continue to innovate with purpose, aiming to address 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 with goals of maintaining dedication to social responsibility in our supply chain and disclosing the environmental impact of our business operations.

The secular trends that drive our long-term trajectory–including vehicle electrification, advanced driver assistance systems, data center efficiency and efficient motion control–continue to see strong adoption in the market.

In addition, our design win momentum and record backlog will continue to serve as significant growth drivers for fiscal 2023, contributing to an increase in our full year revenue growth outlook.

Our portfolio includes more than 1,000 products, and we ship over 1.5 billion units annually to more than 10,000 customers worldwide.

During fiscal years 2023 and 2022, we generated $973.7 million and $768.7 million in total net sales, respectively, with $187.5 million and $119.6 million in net income, respectively.

Recent Initiatives to Improve Results of Operations

We implemented several initiatives over the fiscal year 2022 designed to improve our operating results.

In February 2020, we announced that we would consolidate our assembly and test facilities into a single site, located at our manufacturing facility in the Philippines (the “AMPI Facility”).

We completed this transition and closed our manufacturing facility in Thailand (the “AMTC Facility”) as of March 2021, and the AMTC Facility was sold in August 2021.

Consequently, we realized an improvement in profitability in fiscal year 2022.

We continue to implement initiatives to improve gross margins.

We implemented several initiatives during fiscal years 2022 and 2023 that were designed to improve our operating results during those fiscal years and going forward.

We continue to implement initiatives to improve gross margins, which is calculated as gross profit divided by total net sales.

Our gross margin improved from 53.0% in fiscal year 2022 to 56.1% in fiscal year 2023.

This gross margin improvement was a result of our operational transformation, improved product mix of higher ASPs on more value-added products, increased leverage of our distribution channel, and continued efficiency and leverage on higher volumes.

The closure of the AMTC Facility significantly reduced our cost of goods sold and fixed overhead costs associated with operating this location.

By centralizing this portion of our assembly and test facilities at the AMPI Facility, we expect to continue to realize this lower level of cost of goods for the immediate future.

Additionally, we will continue to the leverage our facility to increase production where demand for our products warrants.

We have been successful in increasing our average selling prices through a focus on higher value-added products and selective price increases.

This gross margin improvement was a result of our improved product mix of higher ASPs on more value-added products, increased leverage of our distribution channel, and continued efficiency and leverage on higher volumes.

We have been successful in increasing our average selling prices through a focus on feature-rich products and selective price increases.

Increased ASPs and manufacturing efficiencies have allowed us to continue to improve gross margin in an environment of limited capacity at our suppliers and rising input costs.

Limited supply and increased demand for many of our products and applications, as well as supply chain disruptions related to the COVID-19 pandemic, have contributed to input cost increases on the components needed to manufacture our products.

Limited supply and increased demand for many of our products and applications, as well as supply chain disruptions related to the COVID-19 pandemic and inflation, have contributed to input cost increases on the components needed to manufacture our products.

We will continue to consider opportunities for strategic price increases and process efficiencies to offset input cost increases on the materials and supplies that we use in production.

With the consolidation of our facilities as discussed above, we have attained efficiencies through cost structure improvements, streamlining of manufacturing and support processes, and further utilization of excess capacity.

These manufacturing efficiencies allowed us to leverage higher volumes to keep pace with increasing demand across most of our applications, while reducing cost of goods sold and increasing the absorption of fixed costs.

With our efforts to leverage our fixed costs and operating margin improvements, we have attained efficiencies through cost structure improvements, streamlining of manufacturing and support processes, and further utilization of excess capacity.

These manufacturing efficiencies allowed us to leverage higher volumes with increasing demand across most of our applications, while increasing the absorption of fixed costs.

Although these initiatives have resulted in gross margin and operating income improvements over the previous quarters, we cannot ensure that these trends will continue over the long-term.

In September 2022, we completed the acquisition of Heyday Integrated Circuits (“Heyday”), a privately held company specializing in compact, fully integrated isolated gate drivers that enable energy conversion in high-voltage gallium nitride and silicon carbide wide-bandgap semiconductor designs (the “Heyday Acquisition”).

The Heyday Acquisition is expected to

complement our existing solutions for energy efficiency, including our market-leading current sensor solutions.

Additionally, it is expected to significantly expand Allegro’s addressable market for EV, solar inverters, EV charging infrastructure, 5G power supplies, and broad-market industrial applications.

On March 30, 2023, the Company entered into a termination of the distribution agreement with Sanken (the “Termination Agreement”).

The Termination Agreement formally terminated the distribution agreement dated as of July 5, 2007, by and between the Company and Sanken (the “Distribution Agreement”), effective March 31, 2023.

The Distribution Agreement provided Sanken the exclusive right to distribute the Company’s products in Japan.

In connection with the termination of the Distribution Agreement, and, as provided for in the Termination Agreement, the Company made a one-time payment of $5.0 million to Sanken in exchange for the cancellation of Sanken’s exclusive distribution rights in Japan.

Concurrently, AML and Sanken also entered into a short-term, nonexclusive distribution agreement (the “Short-Term Distribution Agreement”) and a consulting agreement (the “Consulting Agreement”), each of which were effective April 1, 2023.

The Short-Term Distribution Agreement provides for the management and sale of Company product inventory for a period of 24 months.

Under the terms of the Consulting Agreement, Sanken agreed to continue to provide transition services for a period of six months to a strategic customer as orders for the customer are transitioned from Sanken to the Company, and the Company agreed to pay Sanken for providing these transition services.

These agreements will facilitate the transition of the distribution of our products in Japan from related party distributor sales through Sanken to third-party distributors and direct customers in Japan.

Additionally, we will invest in expanding our operations in Japan in order to directly manage and service our customers in that market, which is expected to result in increases in our cost of goods sold and operating expenses.

The net impacts of the transition from the existing sales model in Japan is expected to provide incremental benefits to our gross margin over the long-term.

Impact of the COVID-19 Pandemic

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 QIP adjustment and NOL carryback period to be $12.8 million.

The COVID-19 pandemic continued during fiscal year 2022, and various authorities instituted measures related to the COVID-19 pandemic that 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.

As the COVID-19 pandemic continues, the timing and overall demand from customers, the efficiency in our supply chain, the availability of logistical services and component supply, and the impact of rising inflation may have a material net negative impact on our business and financial results.

The COVID-19 pandemic and the numerous measures implemented by government authorities in response, have impacted and may continue to impact our workforce and operations, the operations of our customers and those of our respective vendors and suppliers.

We have significant operations worldwide, including in the United States, the Philippines, Ireland, Malaysia, Thailand and India.

Each of these countries has been affected by the pandemic and taken measures to try to contain it, resulting in disruptions at some of our manufacturing operations and facilities, including restrictions on our access to facilities.

While the effects of the COVID-19 pandemic have waned in recent months, the future impact of the COVID-19 pandemic on our business, results of operations, financial condition and cash flows continues to largely depend on future developments, including any additional resurgences, government-imposed lockdowns, or secondary effects of the pandemic, none of which are not within our control and cannot be accurately predicted and are uncertain.

Other Key Factors and Trends Affecting our Operating Results

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

Inflation rates in the markets in which we operate have increased and may continue to rise.

Inflation over the last several months has led us to experience higher costs, including higher labor costs, wafer and other costs for materials from suppliers, and transportation and energy costs.

Our suppliers have raised their prices and may continue to raise prices, and in the competitive markets in which we operate, we may not be able to make corresponding price increases to preserve our gross margins and profitability.

If inflation rates continue to rise or remain elevated for a sustained period of time, they could have a material adverse effect on our business, financial condition, results of operations and liquidity.

While we have generally been able to offset increases in these costs through various productivity and cost reduction initiatives, as well as adjusting our selling prices and releasing new products with improved gross margins, our ability to increase our average selling prices depends on market conditions and competitive dynamics.

Given the timing of our actions compared to the timing of these inflationary pressures, there may be periods during which we are unable to fully recover the increases in our costs.

Design Wins with New and Existing Customers

Our end customers continually develop new products in existing and new application areas, and we work closely with our significant OEM customers in most of our target markets to understand their product roadmaps and strategies.

Our end customers continually develop new products in existing and new application areas, and we work closely with our 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, despite current inflationary and pricing conditions, we expect the ASPs of our products to decline over time, and we consider design wins to be critical to our future success and anticipate being increasingly dependent on revenue from newer design wins for our newer products.

As a result, our future sales are highly dependent on our continued success at winning design mandates from our customers.

Further, despite current inflationary and pricing conditions, we expect the ASPs of our products to decline over

time, and we consider design wins to be critical to our future success.

We 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.

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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.

These customers generally provide periodic forecasts of their requirements.

However, these forecasts do not commit such customers to minimum purchases, and customers can revise these forecasts without penalty.

In addition, as is customary in the semiconductor industry, customers are generally permitted to cancel orders for our products within a specified period.

Cancellations 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.

We continue to see demand for our products exceed supply and we are currently operating in an inflationary environment.

While we historically have permitted order cancellations for most customers, most of our current customer order backlog is noncancellable, which helps mitigate our exposure to unforeseen order cancellations.

However, 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 expose us to the risks of inventory shortages or excess inventory.

Manufacturing Costs and Product Mix

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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.

The semiconductor industry has historically been highly cyclical and is characterized by increasingly rapid technological change, product obsolescence, competitive pricing pressures, evolving standards, short product life-cycles and fluctuations in product supply and demand.

New technology may result in sudden changes in system designs or platform changes that may render some of our products obsolete and require us to devote significant research and development resources to compete effectively.

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During an expansion cycle, we may increase capital spending and hiring to add to our production capacity.

periods of slower growth or industry contractions, our sales, production and productivity suffer and margins generally decline.

During periods of slower growth or industry contractions, our sales, production and productivity suffer and margins generally decline.

Components of Our Results of Operations

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Sales are derived from products for different applications.

Shutdowns of third-party factories, in connection with COVID-19 or other factors beyond our control, have affected, and are expected to continue to affect our product sales in the next fiscal quarter.

Our core applications are focused on the automotive, industrial and other industries.

We sell magnetic sensor ICs, power ICs and photonics.

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.

We sell magnetic sensor ICs and power ICs in the Americas, EMEA and Asia.

Net sales are 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.

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We recognize revenue net of sales returns, price protection adjustments, stock rotation rights and any other discounts or credits offered to our customers.

For the consignment arrangements with distributors, delivery occurs and revenue is recognized when the distributor pulls product from consignment inventory that it is stored at designated distributor locations.

Recognition is not contingent upon resale of the products to the distributors’ customers.

Until the products are pulled for use or sale by the distributor, we retain control over the products’ disposition, including the right to pull back or relocate the products.

Stock-based compensation

In addition to the ratable vesting of our stock-based compensation, upon completion of our IPO during the third fiscal quarter of 2021, we recognized (i) one-time stock-based compensation charges 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 Class A common stock, (ii) $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 Class L common stock and (iii) $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 through the conversion of awards granted under our pre-IPO cash incentive plans into restricted stock units of the Company at the time of the IPO (the “RSU Conversion Program”).

Cost of goods sold, gross profit and gross margin

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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

of development testing and evaluation, costs of developing automated test programs, equipment depreciation and related occupancy and equipment costs.

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.

We expect further increases in R&D expenses, in absolute dollars, 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

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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 continue to incur 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.

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 years ended March 25, 2022 and March 27, 2020.

Change in fair value of contingent consideration

The change in fair value of contingent consideration represents the gains and losses recorded in the fiscal years ended March 25, 2022 and March 26, 2021, resulting from the adjustment 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 years ended March 25, 2022 and March 27, 2020.

The change in fair value of contingent consideration represents the gains and losses recorded in the fiscal years ended March 31, 2023 and March 25, 2022, resulting from the adjustment in contingent consideration related to the acquisition of Voxtel, Inc.

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.

Interest (expense) income, net is comprised of interest expense from term loan debt and credit facilities that we maintain with various financial institutions.

Current expense is partially mitigated by income earned on our cash and cash equivalents, consisting primarily of certain investments that have contractual maturities no greater than three months at the time of purchase.

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

Income in earnings of equity investment

Income in earnings of equity investment is related to our equity investment in PSL subsequent to the PSL Divestiture.

(Loss) income in earnings of equity investment

(Loss) income in earnings of equity investment is related to our equity investment in PSL.

Unrealized gains on marketable securities

Unrealized gains on marketable securities consist of changes in the fair value of equity investments in an entity whose equity securities have a readily determinable fair value.

These investments are measured at fair value with unrealized gains and losses related to changes in the entity’s stock price.

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

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the impact of discrete transactions and law changes;

and the difference between the amount of tax benefits generated by the foreign derived intangible income deduction (“FDII”) and

research credits, offset by the additional tax costs associated with global intangible low-tax income (“GILTI”), the base erosion tax (“BEAT”) and non-deductible stock-based compensation charges.

state tax impacts and the difference between the amount of tax benefits generated by the foreign derived intangible income deduction (“FDII”), including permanent impacts of 174 Capitalization (as defined below), and research credits, offset by the additional tax costs associated with global intangible low-tax income (“GILTI”), Subpart F income and non-deductible stock-based compensation charges.

Pursuant to the 2017 Tax Cuts and Jobs Act (the “Jobs Act”), beginning in fiscal year 2023, U.S.

tax law now requires us to capitalize and amortize domestic and foreign research and development expenditures over five and 15 years, respectively (“174 Capitalization”).

The impact of 174 Capitalization is an increase in annual cash taxes of approximately $20.0 million and an FDII benefit of $9.5 million.

While it is possible that Congress may modify this provision, potentially with retroactive effect, we have no assurance that this provision will be reversed.

Additionally, the Internal Revenue Service (“IRS”) is expected to issue guidance which may modify this law change.

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.

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Cost of goods sold (1)

427,574 361,214 66,360 18.4 %

Gross profit 546,079 407,460 138,619 34.0 %

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Selling, general and administrative 194,722 150,937 43,785 29.0 %

Impairment of long-lived assets — 7,119 (7,119) (100.0) %

Change in fair value of contingent consideration (2,800) (2,000) (800) 40.0 %

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Other income (expense), net:

Loss on debt extinguishment — (9,055) 9,055 (100.0) %

Interest expense, net (1,057) (2,603) 1,546 (59.4) %

Foreign currency transaction loss (568) (2,889) 2,321 (80.3) %

Income in earnings of equity investment 1,007 1,413 (406) (28.7) %

Interest expense (2,336) (2,499) 163 (6.5) %

Interest income 1,724 1,442 282 19.6 %

Foreign currency transaction gain (loss) 980 (568) 1,548 (272.5) %

Loss (income) in earnings of equity investment (406) 1,007 (1,413) (140.3) %

Unrealized gains on marketable securities 7,471 3,722 3,749 100.7 %

Other, net 606 992 (386) (38.9) %

Total other income (expense), net 4,096 (13,609) 17,705 (130.1) %

Income (loss) before income tax provision (benefit) 140,746 (1,451) 142,197 (9,799.9) %

Income tax provision (benefit) 21,191 (19,552) 40,743 (208.4) %

Total other income, net 8,039 4,096 3,943 96.3 %

Income before income tax provision 211,346 140,746 70,600 50.2 %

Income tax provision 23,852 21,191 2,661 12.6 %

Net income 187,494 119,555 67,939 56.8 %

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$ 187,357 $ 119,407 $ 67,950 56.9 %

(1) Our total net sales for the periods presented above include related party net sales generated through our distribution agreement with Sanken.

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.

(1) Our total net sales and cost of goods sold for the periods presented above include related party net sales generated through our distribution agreement with Sanken and costs of goods sold related thereto.

See our consolidated financial statements included elsewhere in this Annual Report for additional information regarding our related party net sales and cost of goods sold 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.

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Selling, general and administrative 20.0 % 19.6 %

Impairment of long-lived assets — % 1.2 %

Change in fair value of contingent consideration (0.3) % (0.3) %

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Other income (expense), net:

Loss on debt extinguishment — % (1.5) %

Interest expense, net (0.1) % (0.4) %

Foreign currency transaction loss (0.1) % (0.5) %

Income in earnings of equity investment 0.1 % 0.2 %

Interest expense (0.2) % (0.3) %

Interest income 0.1 % 0.2 %

Foreign currency transaction gain (loss) 0.1 % (0.1) %

Loss (income) in earnings of equity investment -0.1 % 0.1 %

Unrealized gains on marketable securities 0.7 % 0.1 %

Other, net 0.1 % 0.5 %

Total other income (expense), net 0.5 % (2.3) %

Income (loss) before income tax provision (benefit) 18.3 % (0.3) %

Income tax provision (benefit) 2.8 % (3.3) %

Total other income, net 0.7 % 0.5 %

Income before income tax provision 21.6 % 18.3 %

Income tax provision 2.4 % 2.8 %

Net income 19.2 % 15.5 %

1 unchanged sentence

Net income attributable to Allegro MicroSystems, Inc.

19.2 % 15.5 %

Total net sales

Total net sales increased by $205.0 million, or 26.7%, to $973.7 million in the fiscal year ended March 31, 2023 from $768.7 million in the fiscal year ended March 25, 2022.

This increase was primarily due to the continued economic recovery and increases in demand for ADAS, safety, comfort and convenience, internal combustion engine (“ICE”) applications, xEV, wireless infrastructure, personal mobility, industrial automation, cloud computing/data center and gaming applications, partially offset by declines in personal electronics and PC printers and peripherals.

This increase was primarily attributable to higher shipments related to e-Mobility, which includes our advanced driver assistance systems (“ADAS”) and electrified vehicle (“EV”), and industrial which includes clean energy and automation.

Sales Trends by Market

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The increase in net sales to our end markets was driven by an increase in automotive of $125.9 million, or 23.7%, an increase in industrial of $63.5 million, or 47.7%, and an increase in other of $15.6 million, or 15.0%.

Automotive net sales increased in the fiscal year ended March 25, 2022 compared to the fiscal year ended March 26, 2021 due to the continued higher demand across all of our major applications, primarily our ADAS, safety, and comfort and convenience.

Industrial net sales improved in the fiscal year ended March 25, 2022 compared to the fiscal year ended March 26, 2021 primarily due to increased demand in industrial automation, cloud computing/data center, wireless infrastructure and personal mobility.

Other net sales improved in the fiscal year ended March 25, 2022 compared to the fiscal year ended March 26, 2021 primarily attributable to increased demand in gaming applications of approximately $27.0 million, partially offset by declines in personal electronics and PC printer and peripherals of approximately $21.0 million.

Automotive net sales increased in the fiscal year ended March 31, 2023 compared to the fiscal year ended March 25, 2022 due to the continued higher demand for e-Mobility, which includes ADAS and EV, as well as, safety, comfort and convenience and internal combustion engine (“ICE”) applications.

Industrial net sales improved in the fiscal year ended March 31, 2023 compared to the fiscal year ended March 25, 2022, primarily due to increased demand for applications in clean energy and automation.

Other net sales improved in the fiscal year ended March 31, 2023 compared to the fiscal year ended March 25, 2022, primarily due to increases in shipments for certain computer products.

Sales Trends by Product

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(Dollars in thousands)

Power integrated circuits (“PIC”) $ 268,381 $ 203,600 $ 64,781 31.8 %

Magnetic sensors integrated circuits (“MS”) $ 598,579 $ 500,293 $ 98,286 19.6 %

Photonics 1,732 1,235 497 40.2 %

Power integrated circuits (“PIC”) 375,074 268,381 106,693 39.8 %

Total net sales $ 973,653 $ 768,674 $ 204,979 26.7 %

The growth in net sales by product was driven by increases in MS product sales of $112.2 million and in PIC product sales of $64.8 million, as well as a $0.5 million increase in Photonics product sales.

The growth in net sales by product was driven by increases in MS product sales of $98.3 million and in PIC product sales of $106.7 million.

Sales Trends by Geographic Location

12 unchanged sentences

Total net sales $ 973,653 $ 768,674 $ 204,979 26.7 %

The increase in net sales across geographic locations in the fiscal year ended March 25, 2022 compared to the fiscal year ended March 26, 2021 was primarily due to content and market share gains, as many countries continue to experience economic expansion coming out of the COVID-19 pandemic, and demand for many of our products and applications rose year-over-year.

The increase in net sales in Japan of $44.1 million, or 42.2%, was primarily driven by higher demand for our xEV, ADAS, personal mobility and cloud computing/data center offerings.

The increases in net sales of $34.4 million, or 21.8%, in Greater China and $32.7 million, or 33.2%, in the Americas each related to higher automotive demand, primarily in our

ADAS, ICE, safety, and comfort and convenience applications, as well as increased demand in our industrial sectors.

Higher year-over-year net sales of $31.4 million, or 30.5%, in Europe, predominantly comprised of Germany and France, was driven by increases in our ADAS, ICE, safety, comfort and convenience and grid infrastructure offerings.

South Korea and Other Asia experienced sales growth of $18.4 million, or 29.6%, and $16.5 million, or 25.3%, respectively, mainly due to higher automotive demand, specifically in ADAS, safety, and comfort and convenience applications, as well as growth in our industrial applications, especially in our cloud computing/data center offerings.

The increase in net sales across geographic locations in the fiscal year ended March 31, 2023 compared to the fiscal year ended March 25, 2022 was primarily due to increased volume and content as well as market share gains.

The increase in net sales in Japan of $12.0 million, or 8.0%, was primarily driven by higher demand in our industrial sector and higher automotive demand, specifically EV.

The increases in net sales of $62.0 million, or 32.3%, in Greater China and $27.7 million, or 21.1%, in the Americas each related to higher automotive demand, primarily in our ADAS, safety, comfort and convenience and EV sectors.

Higher year-over-year net sales of $34.8 million, or 25.9%, in Europe, predominantly comprised of higher net sales in Germany and France, was driven by increased demand in automotive and industrial markets.

South Korea and Other Asia experienced sales growth of $16.1 million, or 20.0%, and $52.4 million, or 64.2%, respectively, mainly due to increased automotive and industrial demand.

Cost of goods sold, gross profit and gross margin

Cost of goods sold increased by $66.4 million, or 18.4%, to $427.6 million in the fiscal year ended March 31, 2023 from $361.2 million in the fiscal year ended March 25, 2022.

The increase in cost of goods sold was primarily attributable to higher production volume, partially offset by decreases in amortization of manufacturing cost absorptions and lower cost of goods sold related to our photonics product line attributable to the discontinuation of a legacy Voxtel product line during 2022.

The increase in cost of goods sold was primarily attributable to higher production volume in support of higher product sales and, to a lesser extent, higher warranty costs incurred.

Gross profit increased by $138.6 million, or 34.0%, to $546.1 million in the fiscal year ended March 31, 2023 from $407.5 million in the fiscal year ended March 25, 2022.

The increase in gross profit was driven by a $177.5 million increase in net sales in all markets, partially offset by the impacts to cost of goods sold discussed above.

The increase in gross profit was driven by a $205.0 million increase in total net sales to all end markets discussed above, partially offset by the impacts to cost of goods sold discussed above.

R&D expenses increased by approximately $29.0 million, or 23.8%, to $150.9 million in the fiscal year ended March 31, 2023 from $121.9 million in the fiscal year ended March 25, 2022.

This increase was primarily due to higher employee-related personnel costs of $10.1 million and a combined $5.1 million increase in general operating expenses, partially offset by a combined $2.6 million decrease in inventory and supplies and contract labor costs.

This increase was primarily due to a combined $21.1 million increase in employee salaries, including incentive compensation, contract labor, and inventory and supplies costs, a $5.6 million increase in stock-based compensation expense and a combined $2.3 million increase in general operating costs.

R&D expenses represented 15.5% of our total net sales for the fiscal year ended March 31, 2023, a decrease from 15.9% of our total net sales for the fiscal year ended March 25, 2022.

1 unchanged sentence

SG&A expenses

SG&A expenses decreased by $2.6 million, or 1.7%, to $150.9 million in the fiscal year ended March 25, 2022 from $153.5 million in the fiscal year ended March 26, 2021.

This decrease was primarily due to a $14.7 million decrease in stock-based compensation expense and a combined $8.0 million decrease in general operating expenses, partially offset by an increase of $19.9 million in combined employee-related personnel costs, contract labor, insurance and general expenses.

SG&A expenses represented 19.6% of our total net sales for the fiscal year ended March 25, 2022, representing a decrease from 26.0% of our total net sales for the fiscal year ended March 26, 2021.

This percentage decrease was primarily due to the growth in net sales in the fiscal year ended March 25, 2022.

In addition, the percentage decrease represents the lower SG&A expenses as discussed above, as those costs were incrementally higher for the fiscal year ended March 26, 2021 due in large part to IPO-related costs and accelerated vesting of the Class A and L common stock and RSU Conversion Program incurred during that period.

For details, see Note 12, “Management Long-Term Cash Incentive Plan” to the audited consolidated financial statements.

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.

No impairment loss occurred in the fiscal year ended March 25, 2022.

SG&A expenses increased by $43.8 million, or 29.0%, to $194.7 million in the fiscal year ended March 31, 2023 from $150.9 million in the fiscal year ended March 25, 2022.

This increase was primarily due to a $20.8 million increase in stock-based compensation expense, including accelerated expense from the retirement of our former chief executive officer, an increase of $17.5 million in employee-related personnel costs, including incentive compensation, and a $5.6 million increase in combined general operating expenses.

SG&A expenses represented 20.0% of our total net sales for the fiscal year ended March 31, 2023, representing an increase from 19.6% of our total net sales for the fiscal year ended March 25, 2022.

This percentage increase was primarily due to the impacts noted above, partially offset by the growth in net sales in the fiscal year ended March 31, 2023.

Change in fair value of contingent consideration

The change in fair value of contingent consideration reflected a $0.5 million decrease in gains in the fiscal year ended March 25, 2022, resulting from the write-down in contingent consideration related to the acquisition of Voxtel in 2021.

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.

No loss occurred in the fiscal year ended March 25, 2022.

The change in fair value of contingent consideration reflected a $0.8 million increase in losses in the fiscal year ended March 31, 2023, resulting from the write-down in contingent consideration related to the acquisition of Voxtel in 2021.

Interest expense, net

Interest expense, net decreased by $0.5 million to $0.6 million in the fiscal year ended March 31, 2023 from $1.1 million in the fiscal year ended March 25, 2022.

The decrease in interest expense, net was primarily due to lower outstanding debt balances during the fiscal year ended March 25, 2022.

Foreign currency transaction loss

We recorded a foreign currency transaction loss of $0.6 million in the fiscal year ended March 25, 2022 compared to a loss of $2.9 million in the fiscal year ended March 26, 2021.

The foreign currency transaction loss recorded in the fiscal year ended March 25, 2022 was primarily due to $0.9 million of realized and unrealized losses from our UK location, partially offset by $0.3 million of realized and unrealized gains from our Philippines location.

The foreign currency transaction loss recorded in the fiscal year ended March 26, 2021 was primarily attributable to $3.5 million of realized and unrealized losses from our UK location, partially offset by $1.3 million realized and unrealized gains from our Thailand location.

Income in earnings of equity investment

Income in earnings of equity investment reflected gains of $1.0 million and $1.4 million in the fiscal years ended March 25, 2022 and March 26, 2021, respectively, representing the earnings on our 30% investment in PSL.

Other, net increased by approximately $5.2 million to $4.7 million of gains in the fiscal year ended March 25, 2022 from $0.5 million of loss in the fiscal year ended March 26, 2021.

The increase in the fiscal year ended March 25, 2022 was primarily due to the $3.7 million unrealized gains on marketable securities and a $0.4 million gain related to the sale of the AMTC Facility.

The loss in the fiscal year ended March 26, 2021 was primarily due to disposals of equipment from various facilities.

Income tax provision (benefit)

The provision for income taxes was $21.2 million for the fiscal year ended March 25, 2022 as compared to a benefit of $19.6 million for the fiscal year ended March 26, 2021.

The increase in income tax expense in fiscal year 2022 as compared to fiscal year 2021 relates primarily to tax impacts of the fiscal year 2021 IPO transaction.

The fiscal year 2021 IPO transaction resulted in excess tax over financial reporting deductions related to a $40.4 million stock-based compensation charge (and the related incremental tax deductions), a $16.0 million one-time dividend treated as compensation expense for tax purposes, as well as a tax loss on the divestiture of PSL.

The tax impacts of these transactions and other discrete transactions caused an overall U.S.

NOL for fiscal year 2021 that will be carried back five years.

Additional fluctuations in our effective income tax rate relate primarily to differences in our U.S.

taxable income, estimated FDII benefits, GILTI income, research credits, non-deductible stock-based compensation charges, and discrete tax items.

Non-GAAP Financial Measures

In addition to the measures presented in our consolidated financial statements, we regularly review other measures, defined as non-GAAP financial measures by the SEC, to evaluate our business, measure our performance, identify trends, prepare financial forecasts and make strategic decisions.

The key measures we consider are non-GAAP Gross Profit, non-GAAP Gross Margin, non-GAAP Operating Expenses, non-GAAP Operating Income, non-GAAP Operating Margin, non-GAAP Profit before Tax, non-GAAP Provision for Income Tax, non-GAAP Net Income, non-GAAP Net Income 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.

GAAP Financial Measures are used by both management and our board of directors, together with the comparable GAAP information, in evaluating our current performance and planning our future business activities.

In particular, management finds it useful to exclude non-cash charges in order to better correlate our operating activities with our ability to generate cash from operations and to exclude certain cash charges as a means of more accurately predicting our liquidity requirements.

We believe that these Non-GAAP Financial Measures, when used in conjunction with our GAAP financial information, also allow investors to better evaluate our financial performance in comparison to other periods and to other companies in our industry.

These Non-GAAP Financial Measures have significant limitations as analytical tools.

Some of these limitations are that:

• such measures do not reflect our cash expenditures, or future requirements for capital expenditures or contractual commitments;

• such measures exclude certain costs which are important in analyzing our GAAP results;

• such measures do not reflect changes in, or cash requirements for, our working capital needs;

• such measures do not reflect the interest expense, or the cash requirements necessary to service interest or principal payments on our debt;

• such measures do not reflect our tax expense or the cash requirements to pay our taxes;

• although depreciation and amortization are non-cash charges, the assets being depreciated and amortized will often have to be replaced in the future;

• such measures do not reflect any cash requirements for such replacements;

• other companies in our industry may calculate such measures differently than we do, thereby further limiting their usefulness as comparative measures.

The Non-GAAP Financial Measures are supplemental measures of our performance that are neither required by, nor presented in accordance with, GAAP.

These Non-GAAP Financial Measures should not be considered as substitutes for GAAP financial measures such as gross profit, gross margin, net income or any other performance measures derived in accordance with GAAP.

Also, in the future we may incur expenses or charges such as those being adjusted in the calculation of these Non-GAAP Financial Measures.

Our presentation of these Non-GAAP Financial Measures should not be construed as an inference that future results will be unaffected by unusual or nonrecurring items.

Our prior disclosure referred to non-GAAP Gross Profit and non-GAAP Gross Margin as Adjusted Gross Profit and Adjusted Gross Margin, respectively.

No changes have been made to how we calculate these measures.

Non-GAAP Gross Profit and Non-GAAP Gross Margin

We calculate non-GAAP Gross Profit and non-GAAP Gross Margin excluding the items below from cost of goods sold in applicable periods, and we calculate non-GAAP Gross Margin as non-GAAP Gross Profit divided by total net sales.

• Voxtel inventory impairment—Represents costs related to the discontinuation of one of our product lines manufactured by Voxtel.

• Inventory cost amortization—Represents intercompany inventory transactions incurred from purchases made from PSL in fiscal year 2020.

Such costs are one-time incurred expenses impacting our operating results during fiscal year 2021 following the disposition of PSL during the fiscal year ended March 26, 2021 (the “PSL Divestiture”).

Such costs did not have a continuing impact on our operating results after our second fiscal quarter of fiscal year 2021.

• Foundry service payment—Represents foundry service payments incurred under our Price Support Agreement with PSL in respect to the guaranteed capacity at PSL to support our production forecast and are one-time costs incurred impacting our operating results during fiscal year 2021 following the PSL Divestiture.

Such costs did have a continuing impact on our operating results after fiscal year 2021.

• Stock-based compensation—Represents non-cash expenses arising from the grant of stock-based awards.

• AMTC Facility consolidation one-time costs—Represents one-time costs incurred in connection with closing of the AMTC Facility and transitioning of test and assembly functions to the AMPI Facility announced in fiscal year 2020, consisting of:

moving equipment between facilities, contract terminations and other non-recurring charges.

closure and transition of the AMTC Facility was substantially completed as of the end of March 2021, and we sold the AMTC Facility in August 2021.

These costs are in addition to, and not duplicative of, the adjustments noted in note (*) below.

• Amortization of acquisition-related intangible assets—Represents non-cash expenses associated with the amortization of intangible assets in connection with the acquisition of Voxtel, which closed in August 2020.

• COVID-19 related expenses—Represents expenses attributable to the COVID-19 pandemic primarily related to increased purchases of masks, gloves and other protective materials, and overtime premium compensation paid for maintaining 24-hour service at the AMPI Facility.

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

• Additional AMTC-related costs—Represents costs relating to the closing of the AMTC Facility and the transitioning of test and assembly functions to the AMPI Facility in the Philippines announced in fiscal year 2020 consisting of the net savings resulted from or 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 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 acquisition of Voxtel in fiscal year 2020, (ii) one-time transaction-related legal and consulting fees in fiscal 2021, (iii) one-time transaction-related legal, consulting and registration fees related to a secondary offering on behalf of certain stockh olders in fiscal 2022, and (iv) one-time transaction-related legal and consulting fees in fiscal 2022 not related to (iii).

• 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, (ii) the closing of the AMTC Facility and the transitioning of test and assembly functions to the AMPI Facility announced and initiated in fiscal year 2020, (iii) costs related to the discontinuation of one of our product lines manufactured by Voxtel in fiscal year 2022, and (iv) nonrecurring separation costs related to the departure of an officer in fiscal year 2022.

• Impairment of long-lived assets—Represents impairment charge incurred in connection with the 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 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 fiscal year ended March 26, 2021.

• Foreign currency translation loss—Represents losses and gains resulting from the remeasurement and settlement of intercompany debt and operational transactions, as well as transactions with external customers or vendors denominated in currencies other than the functional currency of the legal entity in which the transaction is recorded.

• Income in earnings of equity investment—Represents our equity method investment in PSL.

• Unrealized losses (gains) on investments—Represents mark-to-market adjustments on equity investments with readily determinable fair values.

Non-GAAP Profit before Tax, Non-GAAP Net Income, and Non-GAAP Basic and Diluted Earnings Per Share

We calculate non-GAAP Profit before Tax as Income (Loss) before Income Taxes 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 Income Tax Provision (Benefit):

• 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

2022 December 24,

2021 March 26,

2021 March 25,

2022 March 26,

(Dollars in thousands)

Reconciliation of Non-GAAP Gross Profit

GAAP Gross Profit $ 109,603 $ 101,165 $ 87,006 $ 407,460 $ 278,902

Voxtel inventory impairment — — — 3,106 —

Inventory cost amortization — — — — 2,698

Foundry service payment — — 930 — 5,930

Stock-based compensation 1,184 742 314 3,176 5,158

AMTC Facility consolidation one-time costs — — 625 144 2,184

Amortization of acquisition-related intangible assets 273 273 273 1,092 651

COVID-19 related expenses 296 137 64 1,092 202

Total Non-GAAP Adjustments $ 1,753 $ 1,152 $ 2,206 $ 8,610 $ 16,823

Non-GAAP gross profit* $ 111,356 $ 102,317 $ 89,212 $ 416,070 $ 295,725

Non-GAAP gross margin 55.6% 54.8% 50.9% 54.1% 50.0%

* 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:

additional AMTC related costs of $— and $6,553 for the fiscal years ended March 25, 2022 and March 26, 2021, respectively, and out-of-period adjustment for depreciation expense of GMR assets of $— and $768 for the fiscal years ended March 25, 2022 and March 26, 2021, respectively.

Three-Month Period Ended Fiscal Year Ended

2022 December 24,

2021 March 26,

2021 March 25,

2022 March 26,

(Dollars in thousands)

Reconciliation of Non-GAAP Operating Expenses

GAAP Operating Expenses $ 79,354 $ 65,560 $ 67,558 $ 270,810 $ 266,744

Research and Development Expenses

GAAP Research and Development Expenses 32,432 30,297 28,140 121,873 108,649

Stock-based compensation 1,119 1,019 536 3,933 3,573

AMTC Facility consolidation one-time costs — — — 2 2

COVID-19 related expenses 3 6 8 23 100

Transaction fees 5 — — 5 18

Non-GAAP Research and Development Expenses 31,305 29,272 27,596 117,910 104,956

Selling, General and Administrative Expenses

GAAP Selling, General and Administrative Expenses 46,822 37,963 34,799 150,937 153,476

Stock-based compensation 12,598 5,859 2,119 26,439 41,139

AMTC Facility consolidation one-time costs 74 108 1,488 657 5,626

Amortization of acquisition-related intangible assets 22 23 37 90 117

COVID-19 related expenses 215 356 250 1,503 4,926

Transaction fees 384 1,085 3,727 1,498 7,426

Severance — 578 — 746 156

Non-GAAP Selling, General and Administrative Expenses 33,529 29,954 27,178 120,004 94,086

Impairment of long-lived assets — — 7,119 — 7,119

Change in fair value of contingent consideration 100 (2,700) (2,500) (2,000) (2,500)

Total Non-GAAP Adjustments 14,520 6,334 12,784 32,896 67,702

Non-GAAP operating expenses * $ 64,834 $ 59,226 $ 54,774 $ 237,914 $ 199,042

* Non-GAAP Operating Expenses do not include adjustments for the following components of our net income:

additional AMTC related costs of $— and $723 for the fiscal years ended March 25, 2022 and March 26, 2021, respectively, and labor savings costs of $— and $218 for the fiscal years ended March 25, 2022 and March 26, 2021, respectively.

Three-Month Period Ended Fiscal Year Ended

2022 December 24,

2021 March 26,

2021 March 25,

2022 March 26,

(Dollars in thousands)

Reconciliation of Non-GAAP Operating Income

GAAP Operating Income $ 30,249 $ 35,605 $ 19,448 $ 136,650 $ 12,158

Voxtel inventory impairment — — — 3,106 —

Inventory cost amortization — — — — 2,698

Foundry service payment — — 930 — 5,930

Stock-based compensation 14,901 7,620 2,969 33,548 49,870

AMTC Facility consolidation one-time costs 74 108 2,113 803 7,812

Amortization of acquisition-related intangible assets 295 296 310 1,182 768

COVID-19 related expenses 514 499 322 2,618 5,228

Impairment of long-lived assets — — 7,119 — 7,119

Change in fair value of contingent consideration 100 (2,700) (2,500) (2,000) (2,500)

Transaction fees 389 1,085 3,727 1,503 7,444

Severance — 578 — 746 156

Total Non-GAAP Adjustments $ 16,273 $ 7,486 $ 14,990 $ 41,506 $ 84,525

Non-GAAP Operating Income* $ 46,522 $ 43,091 $ 34,438 $ 178,156 $ 96,683

Non-GAAP Operating Margin* (% of net sales) 23.2% 23.1% 19.7% 23.2% 16.4%

* 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:

additional AMTC related costs of $— and $7,276 for the fiscal years ended March 25, 2022 and March 26, 2021, respectively, labor savings costs of $— and $218 for the fiscal years ended March 25, 2022 and March 26, 2021, respectively, and out-of-period adjustment for depreciation expense of GMR assets of $— and $768 for the fiscal years ended March 25, 2022 and March 26, 2021, respectively.

Three-Month Period Ended Fiscal Year Ended

2022 December 24,

2021 March 26,

2021 March 25,

2022 March 26,

(Dollars in thousands)

Reconciliation of EBITDA and Adjusted EBITDA

GAAP Net Income $ 25,652 $ 32,973 $ 8,689 $ 119,555 $ 18,101

Interest (income) expense, net (707) 269 668 1,057 2,603

Income tax provision (benefit) 4,504 6,281 8,361 21,191 (19,552)

Depreciation & amortization 12,006 12,011 12,082 48,527 48,307

EBITDA $ 41,455 $ 51,534 $ 29,800 $ 190,330 $ 49,459

Non-core loss (gain) on sale of equipment 1 (19) 156 (349) 442

Voxtel inventory impairment — — — 3,106 —

Miscellaneous legal judgment charge — — — — 574

Loss on debt extinguishment — — — — 9,055

Foreign currency translation loss 513 3 1,558 568 2,889

Income in earnings of equity investment (215) (287) (6) (1,007) (1,413)

Unrealized losses (gains) on investments 760 (3,504) — (3,722) —

Stock-based compensation 14,901 7,620 2,969 33,548 49,870

AMTC Facility consolidation one-time costs 74 108 2,113 803 7,812

COVID-19 related expenses 514 499 322 2,618 5,228

Impairment of long-lived assets — — 7,119 — 7,119

Change in fair value of contingent consideration 100 (2,700) (2,500) (2,000) (2,500)

Transaction fees 389 1,085 3,727 1,503 7,444

Severance — 578 — 746 156

Inventory cost amortization — — — — 2,698

Foundry service payment — — 930 — 5,930

Adjusted EBITDA* $ 58,492 $ 54,917 $ 46,188 $ 226,144 $ 144,763

Adjusted EBITDA Margin* (% of net sales) 29.2% 29.4% 26.4% 29.4% 24.5%

* Adjusted EBITDA and the corresponding calculation of Adjusted EBITDA Margin do not include adjustments for the following components of our net income:

AMTC additional costs of $— and $7,276 for the fiscal years ended March 25, 2022 and March 26, 2021, respectively, and labor savings costs of $— and $218 for the fiscal years ended March 25, 2022 and March 26, 2021, respectively.

Three-Month Period Ended Fiscal Year Ended

2022 December 24,

2021 March 26,

2021 March 25,

2022 March 26,

(Dollars in thousands)

Reconciliation of Non-GAAP Profit before Tax

GAAP Income (Loss) before Tax Provision (Benefit) $ 30,156 $ 39,254 $ 17,050 $ 140,746 $ (1,451)

Non-core loss (gain) on sale of equipment 1 (19) 156 (349) 442

Voxtel inventory impairment — — — 3,106 —

Miscellaneous legal judgment charge — — — — 574

Loss on debt extinguishment — — — — 9,055

Foreign currency translation loss 513 3 1,558 568 2,889

Income in earnings of equity investment (215) (287) (6) (1,007) (1,413)

Unrealized losses (gains) on investments 760 (3,504) — (3,722) —

Inventory cost amortization — — — — 2,698

Foundry service payment — — 930 — 5,930

Stock-based compensation 14,901 7,620 2,969 33,548 49,870

Interest on repaid portion of Term Loan Facility — — — — 2,163

AMTC Facility consolidation one-time costs 74 108 2,113 803 7,812

Amortization of acquisition-related intangible assets 295 296 310 1,182 768

COVID-19 related expenses 514 499 322 2,618 5,228

Impairment of long-lived assets — — 7,119 — 7,119

Change in fair value of contingent consideration 100 (2,700) (2,500) (2,000) (2,500)

Transaction fees 389 1,085 3,727 1,503 7,444

Severance — 578 — 746 156

Total Non-GAAP Adjustments $ 17,332 $ 3,679 $ 16,698 $ 36,996 $ 98,235

Non-GAAP Profit before Tax* $ 47,488 $ 42,933 $ 33,748 $ 177,742 $ 96,784

* Non-GAAP Profit before Tax does not include adjustments for the following components of our net income:

Three-Month Period Ended Fiscal Year Ended

2022 December 24,

2021 March 26,

2021 March 25,

2022 March 26,

(Dollars in thousands)

Reconciliation of Non-GAAP Provision for Income Taxes

GAAP Income Tax Provision (Benefit) $ 4,504 $ 6,281 $ 8,361 $ 21,191 $ (19,552)

GAAP effective tax rate 14.9% 16.0% 49.0% 15.1% 1,347.5%

Tax effect of adjustments to GAAP results 2,817 561 (3,053) 6,415 34,486

Non-GAAP Provision for Income Taxes * $ 7,321 $ 6,842 $ 5,308 $ 27,606 $ 14,934

Non-GAAP effective tax rate 15.4% 15.9% 15.7% 15.5% 15.4%

* Non-GAAP Provision for Income Taxes does not include tax adjustments for the following components of our net income:

additional AMTC related costs, labor savings costs, and out-of-period adjustment for depreciation expense of GMR assets.

The related tax effect of those adjustments to GAAP results were $— and $1,851 for the fiscal years ended March 25, 2022 and March 26, 2021, respectively.

Three-Month Period Ended Fiscal Year Ended

2022 December 24,

2021 March 26,

2021 March 25,

2022 March 26,

(Dollars in thousands)

Reconciliation of Non-GAAP Net Income

GAAP Net Income $ 25,652 $ 32,973 $ 8,689 $ 119,555 $ 18,101

GAAP Basic Earnings per Share $ 0.14 $ 0.17 $ 0.05 $ 0.63 $ 0.22

GAAP Diluted Earnings per Share $ 0.13 $ 0.17 $ 0.05 $ 0.62 $ 0.10

Non-core loss (gain) on sale of equipment 1 (19) 156 (349) 442

Voxtel inventory impairment — — — 3,106 —

Miscellaneous legal judgment charge — — — — 574

Loss on debt extinguishment — — — — 9,055

Foreign currency translation loss 513 3 1,558 568 2,889

Income in earnings of equity investment (215) (287) (6) (1,007) (1,413)

Unrealized losses (gains) on investments 760 (3,504) — (3,722) —

Inventory cost amortization — — — — 2,698

Foundry service payment — — 930 — 5,930

Stock-based compensation 14,901 7,620 2,969 33,548 49,870

Interest on repaid portion of Term Loan Facility — — — — 2,163

AMTC Facility consolidation one-time costs 74 108 2,113 803 7,812

Amortization of acquisition-related intangible assets 295 296 310 1,182 768

COVID-19 related expenses 514 499 322 2,618 5,228

Impairment of long-lived assets — — 7,119 — 7,119

Change in fair value of contingent consideration 100 (2,700) (2,500) (2,000) (2,500)

Transaction fees 389 1,085 3,727 1,503 7,444

Severance — 578 — 746 156

Tax effect of adjustments to GAAP results (2,817) (561) 3,053 (6,415) (34,486)

Non-GAAP Net Income* $ 40,167 $ 36,091 $ 28,440 $ 150,136 $ 81,850

Basic weighted average common shares 189,997,738 189,736,901 189,429,893 189,748,427 83,448,055

Diluted weighted average common shares 192,125,252 192,068,222 190,860,556 191,811,205 176,416,645

Non-GAAP Basic Earnings per Share $ 0.21 $ 0.19 $ 0.15 $ 0.79 $ 0.98

Non-GAAP Diluted Earnings per Share $ 0.21 $ 0.19 $ 0.15 $ 0.78 $ 0.46

* Non-GAAP Net Income does not include adjustments for the following components of our net income:

The decrease in interest expense, net was primarily due to higher interest income received from investments and a related party, partially offset by higher mandatory interest payments from increases in the variable interest rate on our Term Loan Facility during the fiscal year ended March 31, 2023.

Foreign currency transaction gain (loss)

We recorded a foreign currency transaction gain of $1.0 million in the fiscal year ended March 31, 2023, compared to a loss of $0.6 million in the fiscal year ended March 25, 2022.

The foreign currency transaction gain recorded in the fiscal year ended March 31, 2023 was primarily due to realized and unrealized gains from our United Kingdom location, partially offset by realized and unrealized losses from our Philippines location.

(Loss) income in earnings of equity investment

Loss (income) in earnings of equity investment reflected losses of $0.4 million and gains of $1.0 million in the fiscal years ended March 31, 2023 and March 25, 2022, respectively, representing the earnings on our 30% investment in PSL.

Unrealized gains on marketable securities

Unrealized gains on marketable securities increased by $3.8 million to $7.5 million in the fiscal year ended March 31, 2023 compared to $3.7 million in the fiscal year ended March 25, 2022, due to the increase in the value of the marketable security.

Other, net decreased by approximately $0.4 million to $0.6 million of gains in the fiscal year ended March 31, 2023 from $1.0 million of gains in the fiscal year ended March 25, 2022.

This change was largely attributable to disposals of property, plant and equipment, partially offset by dividends earned and reinvested on money market investments during the fiscal year ended March 31, 2023.

Income tax provision

Income tax provision and the effective income tax rate were $23.9 million and 11.3%, respectively, for the fiscal year ended March 31, 2023, and $21.2 million and 15.1%, respectively, for the fiscal year ended March 25, 2022.

The effective tax rate (“ETR”) year-over-year was primarily impacted by FDII deductions, increased FDII benefits related to 174 Capitalization, a reduction in state taxes and an increase in current year non-deductible executive compensation expense.

174 Capitalization increased U.S.

taxable income, cash taxes and FDII benefits.

The FDII benefits, and state tax benefits are offset in the current fiscal year by increased non-deductible executive compensation and discrete tax impacts year-over-year.

Liquidity and Capital Resources

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Historically, these cash requirements have been met through cash provided by operating activities and cash and cash equivalents.

Our current capital deployment strategy for 2023 is to utilize excess cash on hand to support our continued growth initiatives into select markets, planned capital expenditures and strategic arrangements, as well as consider potential acquisitions.

Our current capital deployment strategy for 2024 is to utilize cash on hand to support our continued growth initiatives into select markets, planned capital expenditures and strategic arrangements, as well as consider potential acquisitions.

As of March 31, 2023, 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 17, “Commitments and Contingencies” to the audited consolidated financial statements.

The cash requirements for the upcoming fiscal year relate to our operating leases, operating and capital purchase commitments and expected contributions to our defined benefit and contribution plans.

Additionally, we expect to invest in expanding our operations in China, Europe and Japan in order to directly manage and service our customers in that market, which could result in increases in our total net sales, cost of goods sold and operating expenses.

For information regarding the Company’s expected cash requirements and timing of payments related to leases and noncancellable purchase commitments, see Note 12, “Leases” and Note 16, “Commitments and Contingencies” to the audited consolidated financial statements.

Additionally, refer to Note 15, “Retirement Plans” to the audited consolidated financial statements for more information related to the Company’s pension and defined contribution plans.

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 completed IPO.

Refer to the “Debt Obligations” section below for additional information regarding our credit facilities.

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”), and (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”).

We are obligated to pay interest on the outstanding debt balances, and the principal outstanding is due in fiscal year 2028.

As expected with our IPO, we experienced a significant increase in accounting, legal and professional fees and other costs associated with being a public company.

However, we believe that our existing cash resources and our access to the capital markets will be sufficient to finance our continued operations, growth strategy, planned capital expenditures and the additional expenses that we expect to incur during the next 12 months.

We believe that our existing cash will be sufficient to finance our continued operations, growth strategy, planned capital expenditures and the additional expenses that we expect to incur during 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.

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 12 months.

If these resources are not sufficient to satisfy our liquidity requirements due to changes in circumstances, we may be required to seek additional financing.

13 unchanged sentences

Effect of exchange rate changes on cash and cash equivalents (4,606) 1,373

Net increase (decrease) in cash and cash equivalents and restricted cash $ 85,924 $ (16,001)

Net increase in cash and cash equivalents and restricted cash $ 68,906 $ 85,924

Operating Activities

Net cash provided by operating activities was $193.2 million in fiscal year 2023, resulting primarily from our net income of $187.5 million and non-cash charges of $61.2 million, partially offset by a net decrease in operating assets and liabilities of $55.5 million.

Net changes in operating assets and liabilities consisted mostly of a $75.2 million increase in inventories, a $23.3 million increase in prepaid expenses and other assets, and a $12.5 million increase in trade accounts receivable, net, partially offset by a $22.9 million increase in accrued expenses and other current and long-term liabilities, an $18.3 million increase in net amounts due from related parties and a $12.0 million increase in trade accounts payable.

The increase in inventories was primarily a result of raw materials purchases and inventory builds to support anticipated sales growth in 2024.

The increase in prepaid expenses and other assets was primarily due to the higher fair value of strategic investments, long-term deposits and income taxes receivable, including VAT receivables.

The increase in trade accounts receivable, net was primarily a result of increased sales year-over-year, as well as the timing of receipts.

The increases in trade accounts payable and accrued expenses and other current and long-term liabilities were primarily due to the timing of payments to suppliers and vendors, including unpaid capital expenditures of $16.4 million, and higher accrued personnel costs, warranty costs, professional fees, income taxes, and accrued operating expenses, partially offset by a reduction in the balance due on the acquisition of Voxtel.

The decrease in other receivables was primarily due to the timing of receipts from Sanken, as well as the transition to our direct operations in Japan from the distributor model.

Net cash provided by operating activities was $156.1 million in fiscal year 2022, resulting primarily from our net income of $119.6 million and non-cash charges of $89.9 million, partially offset by a net decrease in operating assets and liabilities of $53.3 million.

Net changes in operating assets and liabilities consisted mostly of a $19.5 million increase in prepaid expenses and other assets, an $18.3 million increase in trade accounts receivable, net, a $4.5 million increase in inventories, a $4.3 million decrease in trade accounts payable, and a $3.4 million decrease in accrued expenses and other current and long-term liabilities.

4 unchanged sentences

These decreases were partially offset by higher accrued personnel costs, particularly for management incentive bonuses, higher operating purchases, including unpaid capital expenditures of $2.0 million, and higher income taxes due.

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.

The 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.

Investing Activities

Net cash used in investing activities primarily consists of purchases of property, plant and equipment, partially offset by proceeds from sales of property, plant and equipment.

Net cash used in investing activities was $99.7 million in fiscal year 2023, consisting of $79.8 million of purchases of property, plant and equipment and payments related to the acquisition of Heyday of $19.9 million.

Net cash used in investing activities was $66.3 million in fiscal year 2022, consisting of $69.9 million of purchases of property, plant and equipment, $14.5 million of cash expended for the acquisition of Voxtel and purchases of marketable securities of $9.2 million, partially offset by $27.4 million of cash received for the sale of the AMTC Facility.

Net cash used in investing activities was $68.2 million in fiscal year 2021, consisting 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, plant and equipment.

Financing Activities

Net cash used in financing activities was $5.3 million in fiscal year 2022, consisting of funds loaned to PSL of $7.5 million, partially offset by $2.2 million of proceeds received in connection with the issuance of common stock under the 2020 ESPP, net of payments for taxes related to the net settlement of equity awards.

Net cash used in financing activities 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 used in financing activities was $20.0 million in fiscal year 2023, consisting of funds loaned to PSL of $7.5 million and $18.1 million of payments for taxes related to net share settlement of equity awards, partially offset by $2.8

million of proceeds received related to the quarterly payments from PSL on our related party loan and proceeds received in connection with the issuance of common stock under our employee stock purchase plan totaling $2.8 million.

Net cash used in financing activities was $5.3 million in fiscal year 2022, consisting of funds loaned to PSL of $7.5 million, partially offset by $2.2 million of proceeds received in connection with the issuance of common stock under the 2020 Employee Stock Purchase Plan, net of payments for taxes related to the net settlement of equity awards.

Debt Obligations

As of March 25, 2022, 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 25, 2022, 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;

• 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.

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 $0.1 million and $0.2 million at March 25, 2022 and March 26, 2021, respectively.

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.

AMPI Credit Facilities

On November 26, 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 $1.1 million ) at the bank’s prevailing interest rate.

While this line of credit initially expired on August 31, 2021 (in connection with certain delays as a result of the COVID-19 pandemic and its impact on bank operations), the line of credit was extended in September 2021 and is now expected to expire on August 21, 2022.

There were no borrowings outstanding under this line of credit as of March 25, 2022 and March 26, 2021 .

On November 20, 2019, AMPI entered into a line of credit agreement with BDO Unibank that provides for a maximum borrowing capacity of 75.0 million Philippine pesos (approximately $1.4 million ) at the bank’s prevailing interest rate.

While this line of credit initially expired on June 30, 2021 (in connection with certain delays as a result of the COVID-19 pandemic and its impact on bank operations), the line of credit was extended in September 2021 and is now expected to expire on June 30, 2022.

There were no borrowings outstanding under this line of credit as of March 25, 2022 and March 26, 2021.

See Note 13, “Debt and Other Borrowings” in the consolidated financial statements included elsewhere in this Annual Report for information regarding our debt obligations, including our term loans and credit facilities.

Recent Accounting Pronouncements

Refer to Note 2, “Summary of Significant Accounting Policies” to the audited consolidated financial statements included elsewhere in this Annual Report for information regarding recent accounting pronouncements.

Refer to Note 2, “Summary of Significant Accounting Policies” to the consolidated financial statements included elsewhere in this Annual Report for information regarding recent accounting pronouncements.

Critical Accounting Estimates

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See Note 2, “Summary of Significant Accounting Policies” 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

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 7. Management’s Discussion and Analysis