ALLEGRO MICROSYSTEMS, INC. 10-K

Item 9A. Controls and Procedures. Limitations on Effectiveness of Controls and Procedures In designing and evaluating our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act), management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. In addition, the design of disclosure controls and procedures must reflect the fact that there are resource constraints and that management is required to apply judgment in evaluating the benefits of possible controls and procedures relative to their costs. Evaluation of Disclosure Controls and Procedures Our management, with the participation of our Chief Executive Officer and Chief Financial Officer (our principal executive officer and principal financial officer, respectively), evaluated the effectiveness of our disclosure controls and procedures as of March 31, 2023. Based on the evaluation of our disclosure controls and procedures as of March 31, 2023, our Chief Executive Officer and Chief Financial Officer concluded that, as of such date, our disclosure controls and procedures were effective at the reasonable assurance level. Changes in Internal Control over Financial Reporting There were no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15(d)-15(f) under the Exchange Act) that occurred during the three months ended March 31, 2023 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. Management’s Annual Report on Internal Control over Financial Reporting Our management is responsible for establishing and maintaining adequate internal control over financial reporting for the Company. With the participation of the Chief Executive Officer and the Chief Financial Officer, our management conducted an evaluation of the effectiveness of our internal control over financial reporting using the criteria established in Internal Control—Integrated Framework (2013), issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on this evaluation, our management has concluded that our internal control over financial reporting was effective as of March 31, 2023. The effectiveness of the Company’s internal control over financial reporting as of March 31, 2023 has been audited by PricewaterhouseCoopers LLP, an independent registered public accounting firm, as stated in their report which appears on page F-2 . Item 9B. Other Information. On May 24, 2023, the Board of Directors of the Company (the “Board”) adopted and approved amended and restated bylaws (as so amended and restated, the “Bylaws”) of the Company, effective immediately. Among other things, the amendments to the Bylaws: • Address the universal proxy rules adopted by the SEC, by clarifying that no person may solicit proxies in support of a director nominee other than the Board’s nominees unless such person has complied with Rule 14a-19 under the Exchange Act, including applicable notice and solicitation requirements; • Require that any stockholder soliciting proxies from other stockholders must use a proxy card color other than white, with the white proxy card reserved for exclusive use by the Board; • Revise the advance notice disclosure requirements contained in the Bylaws to require a stockholder proposing business or nominating directors to provide additional information and permit the Company reasonably to request additional information; 57 • Update provisions related to the preparation and availability of the list of stockholders entitled to vote at a meeting to align with changes made to Section 219 of the General Corporation Law of the State of Delaware; • Clarify the process for calling a special meeting of stockholders; and • Clarify that the existing Federal forum selection provision is intended to benefit third parties, in addition to the Company and its officers and directors. The amendments also include certain technical, conforming, modernizing or clarifying changes to the Bylaws. The foregoing description of the changes to the Bylaws does not purport to be complete and is qualified in its entirety by reference to the complete text of the Bylaws, a copy of which is filed as Exhibit 3.2 hereto and is incorporated herein by reference. Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections. Not applicable. PART III Item 10. Directors, Executive Officers and Corporate Governance. Certain of the information required hereunder is incorporated herein by reference to our definitive proxy statement to be filed pursuant to Regulation 14A, which proxy statement is anticipated to be filed with the SEC within 120 days after March 31, 2023. Pursuant to General Instruction G(3) of Form 10-K, additional information required hereunder relating to our executive officers is contained in Part I of this Annual Report on Form 10-K under the caption "Information about our Executive Officers." Our board of directors has adopted a written Code of Business Conduct and Ethics that applies to our directors, officers and employees (including our principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions). A copy of the Code is posted on our website, www.allegromicro.com . We intend to satisfy the disclosure requirement under Item 5.05 of Form 8-K regarding amendment to, or waiver from, a provision of our Code of Business Conduct and Ethics by posting such information on our website at the address specified above. The information contained on our website is not incorporated by reference into this Annual Report on Form 10-K. Item 11. Executive Compensation. The information required hereunder is incorporated herein by reference to our definitive proxy statement to be filed pursuant to Regulation 14A, which proxy statement is anticipated to be filed with the SEC within 120 days after March 31, 2023. Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters. The information required hereunder is incorporated herein by reference to our definitive proxy statement to be filed pursuant to Regulation 14A, which proxy statement is anticipated to be filed with the SEC within 120 days after March 31, 121 2023, with the exception of the information regarding securities authorized for issuance under our equity compensation plans, which is set forth below. Equity Compensation Plan Information The following table sets forth information with respect to securities authorized for issuance under our equity compensation plans as of March 31, 2023: Plan Category Number of Securities to be issued upon Exercise of Outstanding Options, Warrants, and Rights (a) 2 Weighted-Average Exercise Price of Outstanding Options, Warrants, and Rights (b) 3 Number of Securities Remaining Available for Future Issuance under Equity Compensation Plans (Excluding Securities Reflected in Column (a)) (c) Equity Compensation Plans Approved by Security Holders 1 5,445,261 — 16,131,024 Equity Compensation Plans Not Approved by Security Holders — — Total 5,445,261 16,131,024 1 As of March 31, 2023, there were 13,445,666 shares available for future issuance under the 2020 Omnibus Incentive Compensation Plan (the “2020 Plan”), 2,685,358 under the 2020 ESPP. 2 As of March 31, 2023, there were 3,194,037 PSUs issued at target and 2,251,224 RSUs included in this amount. 3 No exercise price has been derived as a result of all derivatives issued being PSUs and RSUs. Item 13. Certain Relationships and Related Transactions, and Director Independence. The information required hereunder is incorporated herein by reference to our definitive proxy statement to be filed pursuant to Regulation 14A, which proxy statement is anticipated to be filed with the SEC within 120 days after March 31, 2023. Item 14. Principal Accountant Fees and Services. The information required hereunder is incorporated herein by reference to our definitive proxy statement to be filed pursuant to Regulation 14A, which proxy statement is anticipated to be filed with the SEC within 120 days after March 31, 2023. PART IV Item 15. Exhibits and Financial Statement Schedules. The following documents are filed as part of this Annual Report on Form 10-K: 1. Financial Statements. The following financial statements are included in this Form 10-K from page F-1 to page F-38 : Reports of Independent Public Accounting Firms (PCAOB ID Numbers 238 and 248 ) Consolidated Balance Sheets Consolidated Statements of Operations Consolidated Statements of Comprehensive Income Consolidated Statements of Changes in Stockholders’ Equity Consolidated Statements of Cash Flows Notes to Consolidated Financial Statements 122 2. Financial Statement Schedules. All schedules are omitted because they are not applicable or the required information is shown on the financial statements or notes thereto. 3. Exhibits. Exhibit No. Description of Exhibit 2.1 Master Transaction Agreement, dated as of March 25, 2020, by and among Polar Semiconductor, LLC, Allegro MicroSystems, Inc., Allegro MicroSystems, LLC and Sanken Electric Co., Ltd. (incorporated by reference from Exhibit 2.1 to the Company’s Registration Statement on Form S-1/A filed on October 13, 2020) † 3.1 Third Amended and Restated Certificate of Incorporation of Allegro MicroSystems, Inc. (incorporated by reference from Exhibit 3.1 to the Company’s Current Report on Form 8-K filed on November 2, 2020) 3.2 Second Amended and Restated Bylaws of Allegro MicroSystems, Inc. 4.1 Specimen Stock Certificate evidencing the shares of common stock (incorporated by reference from Exhibit 4.1 to the Company’s Registration Statement on Form S-1/A filed on October 21, 2020) 4.2 Amended and Restated Stockholders Agreement, dated as of June 16 , 202 2 , by and among Allegro MicroSystems, Inc., Sanken Electric Co., Ltd. and OEP SKNA, L.P. (incorporated by reference from Exhibit 10 . 1 to the Company’s Current Report on Form 8-K filed on June 21 , 202 2 ) 4.3 Amended and Restated Registration Rights Agreement, by and among the Company, Sanken Electric Co. and OEP SKNA, L.P. (incorporated by reference from Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on November 2, 2020) 4.4 Description of securities (incorporated by reference from Exhibit 4.4 to the Company’s Annual Report on Form 10-K on May 19, 2021) 4.5 Form of Indenture (incorporated by reference from Exhibit 4.3 to the Company’s Registration Statement on Form S-3ASR filed on November 1, 2021) 10.1 Amended and Restated Limited Liability Company Agreement of Polar Semiconductor, LLC, dated as of March 28, 2020, by and among Polar Semiconductor, LLC, Allegro MicroSystems, Inc. and Sanken Electric Co. Ltd. (incorporated by reference from Exhibit 2.1 (Exhibit B) to the Company’s Registration Statement on Form S-1/A filed on October 13, 2020) † 10.2 Wafer Foundry Agreement, dated as of April 12, 2013, by and between Allegro MicroSystems, LLC and Polar Semiconductor, LLC (incorporated by reference from Exhibit 10.5 to the Company’s Registration Statement on Form S-1/A filed on October 13, 2020) † 10.3 Amendment No. 1 to Wafer Foundry Agreement, dated as of March 28, 2020, by and between Allegro MicroSystems, LLC and Polar Semiconductor, LLC (incorporated by reference from Exhibit 2.1 (Exhibit C) to the Company’s Registration Statement on Form S-1/A filed on October 13, 2020) † 10.4 Letter Agreement regarding FY21 Price Support, dated as of March 28, 2020, by and between Allegro MicroSystems, LLC and Polar Semiconductor, LLC (incorporated by reference from Exhibit 2.1 (Exhibit D) to the Company’s Registration Statement on Form S-1/A filed on October 13, 2020) 10.5 Letter Agreement regarding Consolidation of Technology Agreements, by and among Allegro MicroSystems, LLC, Sanken Electric Co., Ltd. and Polar Semiconductor, LLC (incorporated by reference from Exhibit 2.1 (Exhibit F) to the Company’s Registration Statement on Form S-1/A filed on October 13, 2020) † 10.6 Distribution Agreement, dated as of July 5, 2007, by and between Allegro MicroSystems, Inc. and Sanken Electric Co., Ltd. (incorporated by reference from Exhibit 10.15 to the Company’s Registration Statement on Form S-1/A filed on October 21, 2020) † 123 10.7 Amended and Restated Transfer Pricing Agreement, dated as of March 28, 2020, by and among Sanken Electric Co., Ltd., Allegro MicroSystems, Inc., Allegro MicroSystems, LLC and Polar Semiconductor, LLC (incorporated by reference from Exhibit 2.1 (Exhibit I) to the Company’s Registration Statement on Form S-1/A filed on October 13, 2020) † 10.8 Sales Representative Agreement, dated as of July 5, 2007, by and between Sanken Electric Co., Ltd. and Allegro MicroSystems, Inc. (incorporated by reference from Exhibit 10.17 to the Company’s Registration Statement on Form S-1/A filed on October 21, 2020) † 10.9 Royalty Sharing Agreement, dated as of September 3, 2013, by and between Sanken Electric Co., Ltd. and Allegro MicroSystems, LLC (incorporated by reference from Exhibit 10.18 to the Company’s Registration Statement on Form S-1/A filed on October 21, 2020) † 10.10 Sublease Agreement, by and between Allegro MicroSystems Business Development, Inc. and Sanken Electric Co., Ltd. (incorporated by reference from Exhibit 10.19 to the Company’s Registration Statement on Form S-1 filed on October 6, 2020) 10.11 Contract of Lease, dated as of April 1, 2004, by and between Allegro MicroSystems Phils. Realty, Inc. and Allegro MicroSystems Philippines, Inc. (incorporated by reference from Exhibit 10.20 to the Company’s Registration Statement on Form S-1 filed on October 6 , 2020) 10.12 Contract of Lease, dated as of May 23, 2008, by and between Allegro MicroSystems Phils. Realty, Inc. and Allegro MicroSystems Philippines, Inc. (incorporated by reference from Exhibit 10.21 to the Company’s Registration Statement on Form S-1 filed on October 6 , 2020) 10.13 Contract of Lease, dated as of February 10, 2010, by and between Allegro MicroSystems Phils. Realty, Inc. and Allegro MicroSystems Philippines, Inc. (incorporated by reference from Exhibit 10.22 to the Company’s Registration Statement on Form S-1 filed on October 6 , 2020) 10.14 Contract of Lease, dated as of December 29, 2017, by and between Allegro MicroSystems Phils. Realty, Inc. and Allegro MicroSystems Philippines, Inc. (incorporated by reference from Exhibit 10.23 to the Company’s Registration Statement on Form S-1 filed on October 6 , 2020) 10.15 Director Offer Letter, dated as of June 28, 2018, by and between Allegro MicroSystems, Inc. and Reza Kazerounian (incorporated by reference from Exhibit 10.26 to the Company’s Registration Statement on Form S-1 filed on October 6, 2020) * 10.16 Amended and Restated Allegro MicroSystems, LLC Executive Deferred Compensation Plan, dated as of September 15, 2015 (incorporated by reference from Exhibit 10.30 to the Company’s Registration Statement on Form S-1/A filed on October 13, 2020) * 10.17 Form of Allegro MicroSystems, Inc. 2020 Omnibus Incentive Compensation Plan (incorporated by reference from Exhibit 99.1 to the Company’s Registration Statement on Form S-8 filed on October 30, 2020) * 10.18 Form of Restricted Stock Unit Agreement under Allegro MicroSystems, Inc. 2020 Omnibus Incentive Compensation Plan (Employees) (incorporated by reference from Exhibit 10.31 to the Company’s Annual Report on Form 10-K filed on May 19, 2021) * 10.19 Form of Restricted Stock Unit Agreement under Allegro MicroSystems, Inc. 2020 Omnibus Incentive Compensation Plan (Executives) * 10.20 Form of Restricted Stock Unit Agreement under Allegro MicroSystems, Inc. 2020 Omnibus Incentive Compensation Plan (Board of Directors) (incorporated by reference from Exhibit 10.34 to the Company’s Registration Statement on Form S-1/A filed on October 21, 2020) * 10.21 Form of Performance Stock Unit Agreement under Allegro MicroSystems, Inc. 2020 Omnibus Incentive Compensation Plan (incorporated by reference from Exhibit 10.33 to the Company’s Annual Report on Form 10-K filed on May 19, 2021) * 124 10.22 Form of Performance Stock Unit Agreement under Allegro MicroSystems, Inc. 2020 Omnibus Incentive Compensation Plan * 10.23 Form of Allegro MicroSystems, Inc. 2020 Employee Stock Purchase Plan (incorporated by reference from Exhibit 99.5 to the Company’s Registration Statement on Form S-8 filed on October 30, 2020) * 10.24 Amended and Restated Severance Agreement, dated as of September 30, 2020, by and between Allegro MicroSystems, LLC, Allegro MicroSystems, Inc. and Michael C. Doogue (incorporated by reference from Exhibit 10.39 to the Company’s Registration Statement on Form S-1/A filed on October 13, 2020) * 10.25 Amended and Restated Severance Agreement, dated as of September 30, 2020, by and between Allegro MicroSystems, LLC, Allegro MicroSystems, Inc. and Max R. Glover (incorporated by reference from Exhibit 10.40 to the Company’s Registration Statement on Form S-1/A filed on October 13, 2020) * 10.26 Offer Letter, dated as of October 15, 2021, by and between Allegro MicroSystems, Inc. and Sharon Briansky (incorporated by reference from Exhibit 10.4 to the Company’s Quarterly Report on Form 10-Q filed on February 2, 2022) * 10.27 Offer Letter, dated January 6, 2022, by and between Allegro MicroSystems, Inc. and Derek D’Antilio (incorporated by reference from Exhibit 10.2 to the Company’s Quarterly Report on Form 10-Q filed on February 2, 2022) * 10.28 Severance Agreement, dated as of January 10, 2022, by and between Allegro MicroSystems, Inc. and Derek D’Antilio (incorporated by reference from Exhibit 10.3 to the Company’s Quarterly Report on Form 10-Q filed on February 2, 2022) * 10.29 Amendment to Severance Agreement, dated as of May 15, 2023, by and between Allegro MicroSystems, Inc. and Derek D’Antilio * 10.30 Severance Agreement, dated as of dated as of December 6, 2021, by and between Allegro MicroSystems, Inc. and Sharon S. Briansky (incorporated by reference from Exhibit 10.5 to the Company’s Quarterly Report on Form 10-Q filed on February 2, 2022) * 10.31 Amendment to Severance Agreement, dated as of May 15, 2023, by and between Allegro MicroSystems, Inc. and Sharon S. Briansky * 10.32 Form of Severance Agreement between Allegro MicroSystems, Inc. and its executive officers * 10.33 Summary of Allegro MicroSystems, Inc. Non-Employee Director Compensation (incorporated by reference from Exhibit 10.2 to the Company's Quarterly Report on Form 10-Q filed on February 1, 2023) * 10.34 Employment Agreement, dated May 2, 2022, by and between Allegro MicroSystems, Inc. and Vineet Nargolwala (incorporated by reference from Exhibit 10.3 to the Company’s Current Report on Form 8-K filed on May 9, 2022) * 10.35 Second Amended and Restated Severance Agreement, dated May 6, 2022, by and between Allegro MicroSystems, Inc. and Ravi Vig (incorporated by reference from Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on May 9, 2022) * 10.36 Letter Agreement, dated May 6, 2022, between Allegro MicroSystems, Inc. and Ravi Vig (incorporated by reference from Exhibit 10.2 to the Company’s Current Report on Form 8-K filed on May 9, 2022) * 10.37 Form of Indemnification Agreement between Allegro MicroSystems, Inc. and its directors and officers (incorporated by reference from Exhibit 10.43 to the Company’s Registration Statement on Form S-1/A filed on October 21, 2020) 10.38 Term Loan Credit Agreement, dated as of September 30, 2020, by and between Allegro MicroSystems, Inc., Credit Suisse AG, Cayman Islands Branch, as administrative agent and collateral agent, and the other agents, arrangers and lenders party thereto (incorporated by reference from Exhibit 10.44 to the Company’s Registration Statement on Form S-1/A filed on October 13 , 2020) 125 10.39 Term Loan Security Agreement, dated as of September 30, 2020, by and between Allegro MicroSystems, Inc., the other grantors party thereto from time to time, and Credit Suisse AG, Cayman Islands Branch, as collateral agent (incorporated by reference from Exhibit 10.45 to the Company’s Registration Statement on Form S-1/A filed on October 13 , 2020) 10.40 Revolving Facility Credit Agreement, dated as of September 30, 2020, by and between Allegro MicroSystems, Inc., Mizuho Bank, Ltd., as administrative agent and collateral agent, and the other agents, arrangers and lenders party thereto (incorporated by reference from Exhibit 10.46 to the Company’s Registration Statement on Form S-1/A filed on October 13 , 2020) 10.41 Revolving Facility Security Agreement, dated as of September 30, 2020, by and between Allegro MicroSystems, Inc., the other grantors party thereto from time to time, and Mizuho Bank, Ltd., as collateral agent (incorporated by reference from Exhibit 10.47 to the Company’s Registration Statement on Form S-1/A filed on October 13, 2020) 10.42 Loan Agreement, dated as of December 2, 2021, by and between Allegro MicroSystems, Inc. and Polar Semiconductor, LLC (incorporated by reference from Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q filed on February 2, 2022) 10.43 Wafer Foundry Agreement, effective January 26, 2023, by and between Allegro MicroSystems, Inc. and Polar Semiconductor, LLC (incorporated by reference from Exhibit 10.6 to the Company's Quarterly Report on Form 10-Q filed on February 1, 2023) † 10.44 Amended and Restated Severance Agreement, dated as of February 15, 2021, by and between Allegro MicroSystems, LLC, Allegro MicroSystems, Inc. and Suman Narayan (incorporated by reference from Exhibit 10.3 to the Company's Quarterly Report on Form 10-Q filed on February 1, 2023) * 10.45 Amended and Restated Severance Agreement, dated as of September 30, 2020, by and between Allegro MicroSystems, LLC, Allegro MicroSystems, Inc. and Thomas Teebagy, Sr (incorporated by reference from Exhibit 10.4 to the Company's Quarterly Report on Form 10-Q filed on February 1, 2023) * 10.46 Retirement Separation Letter Agreement between Allegro MicroSystems, LLC and Thomas C. Teebagy, Jr., dated February 16, 2023 (incorporated by reference from Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on February 22, 2023) * 10.47 Amended and Restated Severance Agreement, dated as of September 30, 2020, by and between Allegro MicroSystems, LLC, Allegro MicroSystems, Inc. and Joanne Valente (incorporated by reference from Exhibit 10.5 to the Company's Quarterly Report on Form 10-Q filed on February 1, 2023) * 10.48 Transition Agreement by and among Allegro MicroSystems, Inc. and Sanken Electric Co., Ltd., dated as of September 29, 2022 (incorporated by reference from Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on Oct ober 3 , 202 2 ) † 10.49 Termination of the Distribution Agreement by and between Allegro MicroSystems, Inc. and Sanken Electric Co., Ltd., effective March 31, 2023 (incorporated by reference from Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on April 5, 2023) 10.50 Distribution Agreement by and between Allegro MicroSystems, LLC and Sanken Electric Co., Ltd., effective April 1, 2023 (incorporated by reference from Exhibit 10. 2 to the Company’s Current Report on Form 8-K filed on April 5, 2023) † 10.51 Consulting Agreement by and between Allegro MicroSystems, LLC and Sanken Electric Co., Ltd., effective April 1, 2023 (incorporated by reference from Exhibit 10. 3 to the Company’s Current Report on Form 8-K filed on April 5, 2023) † 21.1 Subsidiaries of Allegro MicroSystems, Inc. 23.1 Consent of Grant Thornton LLP 23.2 Consent of PricewaterhouseCoopers LLP 31.1 Certification of Principal Executive Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 126 31.2 Certification of Principal Financial Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 32.1 Certification of Principal Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 ** 32.2 Certification of Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 ** 101.INS Inline XBRL Instance Document. The instance document does not appear in the interactive data file because its XBRL tags are embedded within the inline XBRL document 101.SCH Inline XBRL Taxonomy Extension Schema Document 101.CAL Inline XBRL Taxonomy Extension Calculation Linkbase Document 101.DEF Inline XBRL Taxonomy Extension Definition Linkbase Document 101.LAB Inline XBRL Taxonomy Extension Label Linkbase Document 101.PRE Inline XBRL Taxonomy Extension Presentation Linkbase Document 104 Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101 filed herewith) * Indicates management contract or compensatory plan, contract or arrangement. ** Certification is not deemed “filed” for purposes of Section 18 of the Exchange Act or otherwise subject to the liability of that section. Such certification is not deemed to be incorporated by reference into any filing under the Securities Act or the Exchange Act except to the extent that the registrant specifically incorporates it by reference. † Portions of this exhibit (indicated by “[XXX]”) have been omitted pursuant to Item 601(b)(10)(iv) of Regulation S-K under the Securities Act of 1933, as amended, because they are both (i) not material and (ii) would likely cause competitive harm to the registrant if publicly disclosed. Item 16. Form 10-K Summary. None. SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, on May 25, 2023. 127 ALLEGRO MICROSYSTEMS, INC. By: /s/ Vineet Nargolwala Vineet Nargolwala President, Chief Executive Officer (Principal Executive Officer) Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and the capacities and on the dates indicated. Each person whose signature appears below constitutes and appoints Derek P. D'Antilio and Sharon S. Briansky, and each or any of them, his or her true and lawful attorney-in-fact and agent, each acting alone, with full power of substitution and resubstitution, for him or her and in his or her name, place and stead, in any and all capacities, to sign any or all amendments or supplements (including post-effective amendments) to this report, and to file the same, with all exhibits thereto, and all documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorney-in-fact and agent, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he or she might or could do in person, hereby ratifying and confirming all that said attorney-in-fact and agent, or his or her substitute or substitutes, may lawfully do or cause to be done by virtue hereof. Signature Title Date /s/ Vineet Nargolwala President, Chief Executive Officer (Principal May 25, 2023 Vineet Nargolwala Executive Officer) and Director /s/ Derek P. D’Antilio Chief Financial Officer (Principal Financial Officer) May 25, 2023 Derek P. D’Antilio /s/ Roald G. Webster Vice President, Chief Accounting Officer May 25, 2023 Roald G. Webster /s/ Yoshihiro (Zen) Suzuki Chairman of the Board of Directors May 25, 2023 Yoshihiro (Zen) Suzuki /s/ David Aldrich Director May 25, 2023 David Aldrich /s/ Andrew Dunn Director May 25, 2023 Andrew Dunn /s/ Kojiro Hatano Director May 25, 2023 Kojiro Hatano /s/ Katsumi Kawashima Director May 25, 2023 Katsumi Kawashima /s/ Reza Kazerounian Director May 25, 2023 Reza Kazerounian /s/ Richard Lury Director May 25, 2023 Richard Lury /s/ Susan Lynch Director May 25, 2023 Susan Lynch /s/ Joseph Martin Director May 25, 2023 Joseph Martin /s/ Paul Carl (Chip) Schorr IV Director May 25, 2023 Paul Carl (Chip) Schorr IV 128 Index to Consolidated Financial Statements Reports of Independent Registered Public Accounting Firm (PCAOB ID Number 238 ) F- 2 Reports of Independent Registered Public Accounting Firm (PCAOB ID Number 248 ) F- 4 Consolidated Balance Sheets F- 5 Consolidated Statements of Operations F- 6 Consolidated Statements of Comprehensive Income F- 7 Consolidated Statements of Changes in Stockholders' Equity F- 8 Consolidated Statements of Cash Flows F- 9 Notes to Consolidated Financial Statements F- 11 F-1 Report of Independent Registered Public Accounting Firm To the Board of Directors and Stockholders of Allegro MicroSystems, Inc. Opinions on the Financial Statements and Internal Control over Financial Reporting We have audited the accompanying consolidated balance sheet of Allegro MicroSystems, Inc. and its subsidiaries (the “Company”) as of March 31, 2023, and the related consolidated statements of operations, of comprehensive income, of changes in stockholders’ equity and of cash flows for the year ended March 31, 2023, including the related notes (collectively referred to as the “consolidated financial statements”). We also have audited the Company's internal control over financial reporting as of March 31, 2023, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of March 31, 2023 and the results of its operations and its cash flows for the year ended March 31, 2023 in conformity with accounting principles generally accepted in the United States of America. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of March 31, 2023, based on criteria established in Internal Control - Integrated Framework (2013) issued by the COSO. Basis for Opinions The Company's management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in Management’s Annual Report on Internal Control over Financial Reporting appearing under Item 9A. Our responsibility is to express opinions on the Company’s consolidated financial statements and on the Company's internal control over financial reporting based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects. Our audit of the consolidated financial statements included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinions. Definition and Limitations of Internal Control over Financial Reporting A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. F-2 Critical Audit Matters The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that (i) relates to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates. Revenue Recognition – Sales Allowance As described in Notes 2 and 4 to the consolidated financial statements, variable consideration such as sales allowance includes sales in which the amount of consideration that the Company will receive is unknown as of the end of the reporting period. Such consideration primarily includes limited price protection provisions provided to distributors, sales under agreements that allow rights of return, referred to as stock rotation, provided to distributors, discounts and credits provided to distributors and returns provisions offered to direct customers, which make up a portion of total net sales of $973.7 million for the year ended March 31, 2023. The liability associated with the sales allowance makes up a significant portion of returns and sales allowances, which was $30.6 million as of March 31, 2023. Management estimates potential future returns, credits and sales allowances based on historical data from prior sales returns and credits issued and changes in product sales to customers. The principal considerations for our determination that performing procedures relating to revenue recognition - sales allowance is a critical audit matter are a high degree of auditor effort in performing procedures and evaluating audit evidence related to the sales allowance and the liability related to the sales allowance transactions. Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. These procedures included testing the effectiveness of controls relating to sales allowances and the liability related to the sales allowance transactions. These procedures also included, among others, evaluating a sample of sales allowance and the liability related to the sales allowance transactions by obtaining and inspecting source documents, including invoices and invoice credits related to the sales allowance program, and customer arrangements or promotional practices, where applicable. /s/ PricewaterhouseCoopers LLP Boston, Massachusetts May 25, 2023 We have served as the Company’s auditor since 2022. F-3 Report of Independent Registered Public Accounting Firm Board of Directors and Shareholders Allegro MicroSystems, Inc. Opinion on the financial statements We have audited the accompanying consolidated balance sheet of Allegro MicroSystems, Inc. (a Delaware corporation) and subsidiaries (the “Company”) as of March 25, 2022, the related consolidated statements of operations, comprehensive income, changes of equity, and cash flows for the fiscal periods ended March 25, 2022 and March 26, 2021, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of March 25, 2022 and the results of its operations and its cash flows for the fiscal periods ended March 25, 2022 and March 26, 2021, in conformity with accounting principles generally accepted in the United States of America. Basis for opinion These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion. /s/ Grant Thornton LLP Boston, Massachusetts May 18, 2022 F-4 ALLEGRO MICROSYSTEMS, INC. CONSOLIDATED BALANCE SHEETS (in thousands, except par value and share amounts) March 31, 2023 March 25, 2022 Assets Current assets: Cash and cash equivalents $ 351,576 $ 282,383 Restricted cash 7,129 7,416 Trade accounts receivable, net of provision for expected credit losses of $ 102 and $ 105 at March 31, 2023 and March 25, 2022, respectively 111,290 87,359 Trade and other accounts receivable due from related party 13,494 27,360 Accounts receivable - other 1,943 4,144 Inventories 151,301 86,160 Prepaid expenses and other current assets 25,346 14,995 Current portion of related party notes receivable 3,750 1,875 Total current assets 665,829 511,692 Property, plant and equipment, net 263,099 210,028 Operating lease right-of-use assets 16,866 16,049 Deferred income tax assets 50,359 17,967 Goodwill 27,691 20,009 Intangible assets, net 52,378 35,970 Related party notes receivable, less current portion 8,438 5,625 Equity investment in related party 27,265 27,671 Other assets, net 69,230 47,609 Total assets $ 1,181,155 $ 892,620 Liabilities, Non-Controlling Interests and Stockholders' Equity Current liabilities: Trade accounts payable $ 56,256 $ 29,836 Amounts due to related parties 9,682 5,222 Accrued expenses and other current liabilities 94,894 65,459 Current portion of operating lease liabilities 4,493 3,706 Total current liabilities 165,325 104,223 Obligations due under Senior Secured Credit Facilities 25,000 25,000 Operating lease liabilities, less current portion 13,048 12,748 Other long-term liabilities 10,967 15,286 Total liabilities 214,340 157,257 Commitments and contingencies (Note 16) Stockholders' Equity: Preferred Stock, $ 0.01 par value; 20,000,000 shares authorized, no shares issued or outstanding at March 31, 2023 and March 25, 2022 — — Common stock, $ 0.01 par value; 1,000,000,000 shares authorized, 191,754,292 shares issued and outstanding at March 31, 2023; 1,000,000,000 shares authorized, 190,473,595 issued and outstanding at March 25, 2022 1,918 1,905 Additional paid-in capital 674,179 627,792 Retained earnings 310,315 122,958 Accumulated other comprehensive loss ( 20,784 ) ( 18,448 ) Equity attributable to Allegro MicroSystems, Inc. 965,628 734,207 Non-controlling interests 1,187 1,156 Total stockholders' equity 966,815 735,363 Total liabilities, non-controlling interests and stockholders' equity $ 1,181,155 $ 892,620 The accompanying notes are an integral part of these consolidated financial statements. F-5 ALLEGRO MICROSYSTEMS, INC. Consolidated Statements of Operations (in thousands, except share and per share amounts) Fiscal Year Ended March 31, 2023 March 25, 2022 March 26, 2021 Net sales $ 812,890 $ 619,861 $ 486,546 Net sales to related party 160,763 148,813 104,661 Total net sales 973,653 768,674 591,207 Cost of goods sold 348,390 286,855 254,285 Cost of goods sold to related party 79,184 74,359 58,020 Gross profit 546,079 407,460 278,902 Operating expenses: Research and development 150,850 121,873 108,649 Selling, general and administrative 194,722 150,937 153,476 Impairment of long-lived assets — — 7,119 Change in fair value of contingent consideration ( 2,800 ) ( 2,000 ) ( 2,500 ) Total operating expenses 342,772 270,810 266,744 Operating income 203,307 136,650 12,158 Other income (expense): Loss on debt extinguishment — — ( 9,055 ) Interest expense ( 2,336 ) ( 2,499 ) ( 3,828 ) Interest income 1,724 1,442 1,225 Foreign currency transaction gain (loss) 980 ( 568 ) ( 2,889 ) (Loss) income in earnings of equity investment ( 406 ) 1,007 1,413 Unrealized gains on marketable securities 7,471 3,722 — Other, net 606 992 ( 475 ) Income (loss) before income taxes 211,346 140,746 ( 1,451 ) Income tax provision (benefit) 23,852 21,191 ( 19,552 ) Net income 187,494 119,555 18,101 Net income attributable to non-controlling interests 137 148 148 Net income attributable to Allegro MicroSystems, Inc. $ 187,357 $ 119,407 $ 17,953 Net income attributable to Allegro MicroSystems, Inc. per share: Basic $ 0.98 $ 0.63 $ 0.22 Diluted $ 0.97 $ 0.62 $ 0.10 Weighted average shares outstanding: Basic 191,197,452 189,748,427 83,448,055 Diluted 193,688,102 191,811,205 176,416,645 The accompanying notes are an integral part of these consolidated financial statements. F-6 ALLEGRO MICROSYSTEMS, INC. Consolidated Statements of Comprehensive Income (in thousands) Fiscal Year Ended March 31, 2023 March 25, 2022 March 26, 2021 Net income $ 187,494 $ 119,555 $ 18,101 Net income attributable to non-controlling interests 137 148 148 Net income attributable to Allegro MicroSystems, Inc. 187,357 119,407 17,953 Other comprehensive income (loss): Foreign currency translation adjustment ( 2,892 ) ( 8,110 ) 9,304 Net actuarial gain (loss) amortization of net transition obligation and prior service costs related to defined benefit plans, net of tax of $( 164 ), $( 472 ) and $ 391 in 2023, 2022 and 2021, respectively 492 1,416 ( 1,172 ) Total other comprehensive (loss) income ( 2,400 ) ( 6,694 ) 8,132 Comprehensive income 184,957 112,713 26,085 Comprehensive income (loss) attributable to non-controlling interests 64 111 ( 21 ) Comprehensive income attributable to Allegro MicroSystems, Inc. $ 185,021 $ 112,824 $ 26,064 The accompanying notes are an integral part of these consolidated financial statements. F-7 ALLEGRO MICROSYSTEMS, INC. Consolidated Statements of Changes in Stockholders’ Equity (in thousands, except share amounts) Common Stock, Class A Common Stock, Class L Preferred Stock Common Stock Additional Paid-In Capital Retained Earnings Accumulated Other Comprehensive Loss Non-controlling Interests Total Equity Shares Amount Shares Amount Shares Amount Shares Amount Balance at March 27, 2020 10,000,000 $ 100 622,470 $ 6 — $ — — $ — $ 458,697 $ 194,355 $ ( 19,976 ) $ 950 $ 634,132 Net income — — — — — — — — — 17,953 — 148 18,101 Issuance of Class L shares, net of forfeitures — — 15,828 — — — — — — — — — — Capitalization changes related to organizational structure of affiliates and direct and indirect interests in subsidiaries — — — — — — — — ( 19,165 ) — — — ( 19,165 ) Stock-based compensation — — — — — — 156,435 2 49,870 — — — 49,872 Issuance of common stock in connection with IPO, net of underwriting discounts and other offering costs — — — — — — 25,000,000 250 321,175 — — — 321,425 Conversion of Class A and Class L common stock into common stock in connection with the IPO ( 10,000,000 ) ( 100 ) ( 636,301 ) ( 6 ) — — 166,500,000 1,665 ( 1,559 ) — — — — Repurchase of Class A and Class L common stock to cover related taxes — — ( 1,997 ) — — — ( 2,068,274 ) ( 21 ) ( 27,686 ) — — — ( 27,707 ) Conversion of LTCIP/TRIP awards into restricted stock units in connection with the IPO — — — — — — — — 2,081 — — — 2,081 Cash dividend paid to holders of Class A common stock — — — — — — — — ( 191,243 ) ( 208,757 ) — — ( 400,000 ) Foreign currency translation adjustment — — — — — — — — — — 9,283 21 9,304 Net actuarial loss and amortization of net transition obligation and prior service costs related to defined benefit plans, net of tax — — — — — — — — — — ( 1,172 ) — ( 1,172 ) Balance at March 26, 2021 — $ — — $ — — $ — 189,588,161 $ 1,896 $ 592,170 $ 3,551 $ ( 11,865 ) $ 1,119 $ 586,871 Net income — — — — — — — — — 119,407 — 148 119,555 Employee stock purchase plan issuances — — — — — — 125,767 1 2,831 — — — 2,832 Stock-based compensation, net of forfeitures — — — — — — 759,667 8 33,429 — — — 33,437 Payments of taxes withheld on net settlement of equity awards — — — — — — — — ( 638 ) — — — ( 638 ) Foreign currency translation adjustment — — — — — — — — — — ( 7,999 ) ( 111 ) ( 8,110 ) Net actuarial gain and amortization of net transition obligation and prior service costs related to defined benefit plans, net of tax — — — — — — — — — — 1,416 — 1,416 Balance at Balance at March 25, 2022 — $ — — $ — — $ — 190,473,595 $ 1,905 $ 627,792 $ 122,958 $ ( 18,448 ) $ 1,156 $ 735,363 Net income — — — — — — — — — 187,357 — 137 187,494 Cash dividends to non-controlling interest — — — — — — — — — — — ( 42 ) ( 42 ) Employee stock purchase plan issuances — — — — — — 161,726 2 2,791 — — — 2,793 Stock-based compensation, net of forfeitures — — — — — — 1,118,971 11 61,657 — — — 61,668 Payments of taxes withheld on net settlement of equity awards — — — — — — — — ( 18,061 ) — — — ( 18,061 ) Foreign currency translation adjustment — — — — — — — — — — ( 2,828 ) ( 64 ) ( 2,892 ) Net actuarial gain and amortization of net transition obligation and prior service costs related to defined benefit plans, net of tax — — — — — — — — — — 492 — 492 Balance at Balance at March 31, 2023 — $ — — $ — — $ — 191,754,292 $ 1,918 $ 674,179 $ 310,315 $ ( 20,784 ) $ 1,187 $ 966,815 The accompanying notes are an integral part of these consolidated financial statements. F-8 ALLEGRO MICROSYSTEMS, INC. Consolidated Statements of Cash Flows (in thousands) Fiscal Year Ended March 31, 2023 March 25, 2022 March 26, 2021 CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ 187,494 $ 119,555 $ 18,101 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 50,808 48,527 48,307 Amortization of deferred financing costs 99 101 226 Deferred income taxes ( 40,116 ) 7,498 ( 18,931 ) Stock-based compensation 61,798 33,548 49,870 Loss (gain) on disposal of assets 285 ( 349 ) 269 Loss on debt extinguishment — — 9,055 Change in fair value of contingent consideration ( 2,800 ) ( 2,000 ) ( 2,500 ) Impairment of long-lived assets — — 7,119 Provisions for inventory writedowns and receivables reserves ( 1,438 ) 6,297 5,019 Unrealized gains on marketable securities ( 7,471 ) ( 3,722 ) — Changes in operating assets and liabilities: Trade accounts receivable ( 12,484 ) ( 18,347 ) ( 9,303 ) Accounts receivable - other 2,226 ( 2,668 ) ( 28 ) Inventories ( 75,150 ) ( 4,471 ) 7,641 Prepaid expenses and other assets ( 23,263 ) ( 19,450 ) ( 29,047 ) Trade accounts payable 11,958 ( 4,348 ) 15,099 Due to/from related parties 18,326 ( 659 ) 4,878 Accrued expenses and other current and long-term liabilities 22,934 ( 3,383 ) 14,795 Net cash provided by operating activities 193,206 156,129 120,570 CASH FLOWS FROM INVESTING ACTIVITIES: Purchases of property, plant and equipment ( 79,775 ) ( 69,941 ) ( 40,673 ) Acquisition of business, net of cash acquired ( 19,921 ) ( 14,549 ) ( 11,555 ) Proceeds from sales of property, plant and equipment — 27,408 318 Investments in marketable securities — ( 9,189 ) — Contribution of cash balances due to divestiture of subsidiary — — ( 16,335 ) Net cash used in investing activities ( 99,696 ) ( 66,271 ) ( 68,245 ) CASH FLOWS FROM FINANCING ACTIVITIES: Loans made to related party ( 7,500 ) ( 7,500 ) — Receipts on related party notes receivable 2,812 — 51,377 Proceeds from initial public offering, net of underwriting discounts and other offering costs — — 321,425 Payments for taxes related to net share settlement of equity awards ( 18,061 ) ( 638 ) — Proceeds from issuance of common stock under equity award and purchase plans awards 2,793 2,831 ( 27,707 ) Dividends paid to non-controlling interest ( 42 ) — — Dividends paid — — ( 400,000 ) Borrowings of senior secured debt, net of deferred financing costs — — 315,719 Repayment of senior secured debt — — ( 300,000 ) Repayment of unsecured credit facilities — — ( 33,000 ) Net cash used in financing activities ( 19,998 ) ( 5,307 ) ( 72,186 ) Effect of exchange rate changes on Cash and cash equivalents and Restricted cash ( 4,606 ) 1,373 3,860 Net increase (decrease) in Cash and cash equivalents and Restricted cash 68,906 85,924 ( 16,001 ) Cash and cash equivalents and Restricted cash at beginning of period 289,799 203,875 219,876 CASH AND CASH EQUIVALENTS AND RESTRICTED CASH AT END OF PERIOD: $ 358,705 $ 289,799 $ 203,875 RECONCILIATION OF CASH AND CASH EQUIVALENTS AND RESTRICTED CASH: Cash and cash equivalents at beginning of period $ 282,383 $ 197,214 $ 214,491 Restricted cash at beginning of period 7,416 6,661 5,385 Cash and cash equivalents and Restricted cash at beginning of period $ 289,799 $ 203,875 $ 219,876 Cash and cash equivalents at end of period 351,576 282,383 197,214 Restricted cash at end of period 7,129 7,416 6,661 Cash and cash equivalents and Restricted cash at end of period $ 358,705 $ 289,799 $ 203,875 F-9 ALLEGRO MICROSYSTEMS, INC. Consolidated Statements of Cash Flows - continued (in thousands) SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: Cash paid for interest $ 1,923 $ 813 $ 2,746 Cash paid for income taxes, net of refunds $ 58,209 $ 22,195 $ 8,908 Non-cash transactions: Property, plant and equipment purchases included in trade accounts payable $ ( 16,369 ) $ ( 2,021 ) $ ( 3,226 ) Assets held for sale transferred from property, plant and equipment, net $ — $ — $ 25,969 Loans to cover purchase of common stock under employee stock plan $ — $ — $ 171 Noncash lease liabilities arising from obtaining right-of-use assets $ 4,870 $ 3,159 $ — The accompanying notes are an integral part of these consolidated financial statements. F-10 ALLEGRO MICROSYSTEMS, INC. Notes to Consolidated Financial Statements (Amounts in thousands, except share and per share amounts) 1. Nature of the Business and Basis of Presentation Allegro MicroSystems, Inc., together with its consolidated subsidiaries (the “Company”), is a global leader in designing, developing and manufacturing sensing and power solutions for motion control and energy-efficient systems in automotive and industrial markets. The Company is incorporated under the laws of Delaware. The Company is headquartered in Manchester, New Hampshire and has a global footprint, with 26 locations across four continents. Financial Periods The Company’s fiscal year is the 52-week or 53-week period ending on the Friday closest to the last day in March. The Company’s 2023 fiscal year ended March 31, 2023 (“fiscal year 2023”) was a 53-week period, while the 2022 fiscal year ended March 25, 2022 (“fiscal year 2022”) and 2021 fiscal year ended March 26, 2021 (“fiscal year 2021”) were 52-week periods. 2. Summary of Significant Accounting Policies Basis of Presentation We prepare our financial statements in accordance with U.S. generally accepted accounting principles (“GAAP”). These principles are established primarily by the Financial Accounting Standards Board (“FASB”). Principles of Consolidation The accompanying consolidated financial statements include the accounts of the Company and those entities required to be consolidated under GAAP. All material intercompany profits, transactions, and balances among the consolidated entities have been eliminated. Use of Estimates The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, and disclosures of contingencies at the date of the consolidated financial statements and the reported amounts of net sales and expenses during the reporting period. Such estimates relate to useful lives of fixed and intangible assets, provisions for expected credit losses and customer returns and sales allowances. Such estimates also relate to accrued liabilities, the valuation of stock-based awards, deferred tax valuation allowances, the net realizable value of inventory, and other reserves. On an ongoing basis, management evaluates its estimates. Actual results could differ from those estimates, and such differences may be material to the consolidated financial statements. Reclassifications Certain reclassifications have been made to prior-period amounts to conform to current-period reporting classifications. Business Segment Information The Company operates in one segment which involves the design, development, production and distribution of various integrated circuits in various markets worldwide. The Company has a single, company-wide management team that administers all properties as a whole rather than as discrete operating segments. The chief operating decision maker, who is the Company’s Chief Executive Officer, measures financial performance as a single enterprise and not on a legal entity or end market basis. Throughout the year, the chief operating decision maker allocates capital resources on a project-by-project basis across the Company’s entire asset base to maximize profitability without regard to a legal entity or end market basis. The Company operates in a number of countries throughout the world in a variety of product lines through its business unit structure. Foreign Currency Translation and Transactions The Company’s reporting currency is the U.S. Dollar. The financial statements of the Company’s foreign subsidiaries are translated from local currency into U.S. dollars using the current exchange rate at the balance sheet date for assets and liabilities, and the average exchange rate in effect during the period for net sales and expenses. The functional currency for the Company’s international subsidiaries is considered to be the local currency for each entity, and, accordingly, translation adjustments for these entities are included as a component of accumulated other comprehensive loss in the Company’s consolidated balance sheets. F-11 ALLEGRO MICROSYSTEMS, INC. Notes to Consolidated Financial Statements – (continued) (Amounts in thousands, except share and per share amounts) Non-Controlling Interests The Company, through one of its wholly owned subsidiaries, established an affiliated entity in Philippines for the primary purpose of purchasing, selling, leasing, developing and otherwise managing real estate acquired by the Company in the Philippines. The Company owns 40 % of the equity interest in this entity, and the remaining 60 % is held in a trust for the benefit of its employee retirement fund. The portion of the results of operations of this entity is shown as net income attributable to the non-controlling interests in the Company’s consolidated statements of operations for fiscal 2023, 2022 and 2021. Additionally, the cumulative portion of the results of operations of this entity along with the interest in the net assets is shown as a component of non-controlling interests in the Company’s consolidated balance sheets. Cash Equivalents and Restricted Cash The Company considers all highly liquid instruments with original maturities of three months or less at the time of acquisition to be cash equivalents. At March 31, 2023 and March 25, 2022, the Company maintained investments in an interest-bearing cash account. Because of the investment’s short term to maturity and the investment’s relative price insensitivity to changes in market interest rates, cost approximates fair value for this investment. As a result, there were no realized or unrealized gains or losses for the fiscal years ended March 31, 2023, March 25, 2022 and March 26, 2021. The Company has restricted cash, the use of which is restricted to the benefit of employees through a deferred compensation program. Fair Value of Financial Instruments Certain assets and liabilities are carried at fair value under GAAP. Fair value is the exchange price that would be received for an asset or paid to transfer a liability (at exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. The Company establishes a fair value hierarchy that requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The standard describes three levels of inputs that may be used to measure fair value, which are provided below: Level 1 — Quoted prices in active markets for identical assets or liabilities. Level 2 — Observable inputs (other than Level 1 prices) such as quoted prices for similar assets or liabilities, quoted prices in markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities. Level 3 — Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. Level 3 assets and liabilities include financial instruments whose value is determined using pricing models, discounted cash flow methodologies, or similar techniques, as well as instruments for which the determination of fair value requires significant management judgment or examination. The categorization of a financial instrument within the valuation hierarchy is based on the lowest level of input that is significant to the fair value measurement. The Company’s cash equivalents and restricted cash are carried at fair values as determined according to the fair value hierarchy described above (see Note 5, “Fair Value Measurements”). The carrying value of accounts receivable, assets held for sale, notes receivables, accounts payable and accrued expenses approximate their respective fair value due to the short-term nature of these assets and liabilities. The carrying value of outstanding borrowings under the line of credit agreements approximates fair value as it bears interest at a rate approximating a market interest rate. Related party note receivable was classified as held-for-investment based on management’s intent and ability to hold the loan for the foreseeable future or to maturity. Loans held-for investment are carried at amortized cost and reduced by a valuation allowance for estimated credit losses, as necessary. The Company recognizes interest income on loans, including the amortization of discounts and premiums, loan fees paid and received, using the interest method. The interest method is applied on a loan-by-loan basis when collectability of the future payments is reasonably assured. Premiums and discounts are recognized as yield adjustments over the term of the related loans. A detailed description of fair value measurement of the assets of the non-U.S. defined benefit plan is included in Note 15, “Retirement Plans.” F-12 ALLEGRO MICROSYSTEMS, INC. Notes to Consolidated Financial Statements – (continued) (Amounts in thousands, except share and per share amounts) Trade accounts receivable, net A receivable is a right to consideration that is unconditional (i.e., only the passage of time is required before payment is due). Accounts receivables are presented net of a provision for expected credit losses, which is an estimate of amounts that may not be collectible. The provision for expected credit losses is our estimate of current expected credit losses (“CECL”) based on historical loss experience. The Company periodically performs detailed reviews to assess the adequacy of the allowance. The Company exercises judgment in estimating the timing, frequency and severity of losses. The Company uses an aging schedule method to estimate current expected credit losses based on days of delinquency, including information about past events and current economic conditions, as well as future forecasts of economic conditions. The Company’s accounts receivable is separated int o two categories using a portfolio methodology to evaluate the allowance under the CECL impairment model based on sales categorization and similar credit quality and worthiness of the customers: original equipment manufacturers and distributors. The receivables in each category share similar risk characteristics. The Company increases the allowance for expected credits losses when the Company determines all or a portion of a receivable is uncollectible. The Company recognizes recoveries as a decrease to the allowance for expected credit losses. Adjustments to the allowance for expected credit losses are recorded as selling, general and administrative expenses in the consolidated statements of operations. Inventories Inventories are stated at the lower of cost or net realizable value, with cost being determined using a standard costing system that approximates actual costs, based on a first-in, first-out method. Inventory costs include materials, labor and manufacturing overhead. The Company records inventory provisions when conditions exist that suggest that inventory may be in excess of anticipated demand, is obsolete based upon expected future demand for products and market conditions, or quality-related rejections. These provisions are reported as a reduction to raw materials and supplies, work in process and finished goods. The Company regularly evaluates the ability to realize the value of inventory based on a combination of factors, including historical usage rates, forecasted sales or usage, and product end of life dates. Assumptions used in determining management’s estimates of future product demand may prove to be incorrect, in which case the provision required for excess and obsolete inventory would have to be adjusted in the future. Although the Company performs a detailed review of its forecasts of future product demand, any significant unanticipated changes in demand could have a significant impact on the value of the Company’s inventory and reported operating results. Property, Plant and Equipment, Net Property, plant and equipment, net, including improvements that significantly add to productive capacity or extend useful life, are stated at historical cost less accumulated depreciation. Depreciation is computed using the straight-line method over the estimated useful lives of the assets. The Company capitalizes interest on certain projects with long-term construction periods. Maintenance and repairs expenditures are charged to expense as incurred. Estimated useful lives of the respective property, plant and equipment assets are as follows: Asset Useful Life Buildings 31 years Building improvements Economic life of the building improvements Leasehold improvements The shorter of the remaining term of the lease or estimated useful life Machinery and equipment 3 - 10 years Office equipment 3 years Intangible assets, net Intangible assets, net primarily consist of identified intangible assets related to previous acquisitions, as well as capitalized costs to acquire and defend patent and trademark related awards. In addition, the Company holds technology, customer relationships, and non-compete agreements. The Company’s intangible assets are amortized using the straight-line method over their estimated useful lives (approximating their economic benefit) ranging from three to twelve years . Impairment of Long-Lived Assets Long-lived assets consist of property, plant and equipment, finite-lived intangibles, such as patents and customer relationships and indefinite-lived intangible assets such as process technology and trademarks. F-13 ALLEGRO MICROSYSTEMS, INC. Notes to Consolidated Financial Statements – (continued) (Amounts in thousands, except share and per share amounts) Property, plant and equipment and finite-lived assets are tested for impairment whenever events or changes in business circumstances indicate that the carrying amount of the assets may not be fully recoverable. Factors that the Company considers in deciding when to perform an impairment review include significant underperformance of the business in relation to expectations, significant negative industry or economic trends and significant changes or planned changes in the use of the assets. If an impairment review is performed to evaluate a long-lived asset group for recoverability, the Company compares forecasts of undiscounted cash flows expected to result from the use and eventual disposition of the long-lived asset group to its carrying value. An impairment loss would be recognized when estimated undiscounted future cash flows expected to result from the use of an asset group are less than its carrying amount. If such assets are not impaired, but their useful lives have decreased, the remaining net book value is amortized over the revised useful life. Indefinite-lived intangible assets are reviewed for impairment at least annually or whenever events or changes in circumstances indicate that it is more likely than not that the asset is impaired. The impairment test consists of a qualitative assessment to determine if events or changes in circumstances indicate that the carrying amount of the assets may not be fully recoverable. Factors that the Company considers in deciding when to perform a quantitative impairment review include significant underperformance of the business in relation to expectations, significant negative industry or economic trends and significant changes or planned changes in the use of the assets. If events occur, a comparison of the fair value of the intangible asset with its carrying value is performed. If the carrying value of the intangible asset exceeds its fair value, an impairment loss is recognized in an amount equal to that excess. The Company has elected the first business day of the fourth quarter of its fiscal year as the annual impairment testing date. The results of the annual impairment test did not indicate any impairments of indefinite-lived intangible assets for fiscal years 2023, 2022 and 2021. Goodwill Goodwill represents the excess purchase price over the estimated fair value of net assets acquired as of the acquisition date. The Company tests goodwill for impairment on an annual basis on the first business day of the fourth quarter or more frequently if there are indicators of impairment. Events that could indicate impairment and trigger an interim impairment assessment include, but are not limited to, current economic and market conditions, including a decline in market capitalization, a significant adverse change in legal factors, business climate, operational performance of the business or key personnel, and an adverse action or assessment by a regulator. The Company has determined that there is one reporting unit for purposes of testing goodwill for impairment. In testing goodwill for impairment, the Company has the option to first consider qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying value. Such qualitative factors include industry and market considerations, economic conditions, entity-specific financial performance and other events, such as changes in management, strategy and primary customer base. If based on the Company’s qualitative assessment it is more likely than not that the fair value of the reporting unit is less than its carrying amount, quantitative impairment testing is required. However, if the Company concludes otherwise, quantitative impairment testing is not required. The results of the Company’s qualitative goodwill impairment test performed on the first business day of fourth quarter for fiscal years 2023, 2022 and 2021 did not indicate any impairments. Leases The Company accounts for leases in accordance with GAAP. At the inception of an arrangement, the Company determines whether the arrangement is a lease arrangement or contains a lease based on the unique facts and circumstances present. Leases with a term greater than 12 months are recognized on the balance sheet as right-of-use (“ROU”) assets with a corresponding lease liability. The Company has elected not to recognize on the consolidated balance sheets leases with an initial term of 12 months or less. Leases with an initial term of 12 months or less are directly expensed as incurred. Leases are classified as either operating or finance depending on the specific terms of the arrangement. The Company’s leases mainly consist of facilities, office equipment, and vehicles. The majority of leases are classified as operating leases. Certain lease agreements contain provisions for future rent increases. Lease payments included in the measurement of the lease liability comprise fixed payments and future rent increases tied to an index or rate. Future rent increases dependent on an index or rate are initially measured at the index or rate at the commencement date. The Company’s leases typically do not contain residual value guarantees. At the commencement date, operating and finance lease liabilities and their corresponding ROU assets are recorded based on the present value of lease payments over the expected lease term. The lease term includes the non-cancelable period of the lease, plus any additional periods covered by either a Company option to extend (or not to terminate) the lease that the Company is reasonably certain to exercise, or an option to extend (or not to terminate) the lease controlled by the lessor. The F-14 ALLEGRO MICROSYSTEMS, INC. Notes to Consolidated Financial Statements – (continued) (Amounts in thousands, except share and per share amounts) interest rate implicit in a lease contract is typically not readily determinable, therefore an incremental borrowing rate is used to calculate the lease liability. The incremental borrowing rate is the rate incurred to borrow on a collateralized basis over a similar term an amount equal to the lease payments in a similar economic environment. Certain adjustments to the ROU asset may be required for items such as prepayments, lease incentives received or initial direct costs paid. Product Warranties The Company provides warranties on its products to its customers, generally for one year from the date of shipment and in limited cases for longer periods. In the event of a failure of a product covered by these warranties, the Company must repair or replace the product or, if those remedies are insufficient, and at the discretion of the Company, provide a refund. In limited cases, the Company warrants its products to include significant liability beyond the cost of repairing or replacing the product or refunding the sales price of the product. The Company periodically assesses the adequacy of the warranty reserve and adjusts the amount, as necessary. If there is a material increase in the rate of customer claims, or the Company’s estimates of probable losses relating to specifically identified warranty exposures are inaccurate, the Company may need to record a charge against future cost of goods sold. There were $ 4,327 and $ 541 accrued as of March 31, 2023 and March 25, 2022, respectively. Revenue Recognition Revenue is recognized on contracts with customers when transfer of control to the customer occurs in exchange for an amount reflecting the consideration that the Company expects to be entitled. In order to achieve this core principle, the Company applies the following five step approach: (1) Identify the contract with a customer —The Company considers customer purchase orders, which in some cases are governed by master agreements, to be customer contracts. A contract exists when it is approved by both parties, each party’s rights and obligations are identified, payment terms are known, customer has the ability and intent to pay and the contract has commercial substance. The Company uses judgment in determining the customer’s ability and intent to pay, which is based on factors such as the customer’s historical payment experience or, for new customers, credit and financial information pertaining to the customers. (2) Identify the performance obligations in the contract —Performance obligations are identified as products and services that will be transferred to the customer that are both capable of being distinct, whereby the customer can benefit from the product or service either on its own or together with other resources that are readily available from third parties or from the Company, and are distinct in the context of the contract, whereby the transfer of the products or services is separately identifiable from other promises in the contract. Substantially, all of the Company’s contracts with customers contain a single performance obligation, such as the sale of mixed-signal integrated circuit products or the sale of wafer fabricators. (3) Determine the transaction price —The transaction price is determined based on the consideration to which the Company expects to be entitled in exchange for transferring products to the customer. Variable consideration is included in the transaction price if, in the Company’s judgment, it is probable that no significant future reversal of cumulative revenue under the contract will occur. (4) Allocate the transaction price to the performance obligations in the contract —If the contract contains a single performance obligation, the entire transaction price is allocated to that performance obligation. Contracts that contain multiple performance obligations require an allocation of the transaction price to each performance obligations based on a relative standalone selling price. (5) Recognize revenue when a performance obligation is satisfied —Revenue is recognized when control of the product is transferred to the customer (i.e., when the Company’s performance obligation is satisfied), which typically occurs point in time at shipment or delivery, depending on the terms of the contract. Sales channels The Company sells products globally through its direct sales force, third-party distributors, independent sales representatives and consignment. The Company records revenue based on the amount of any discounted arrangement fee. When the Company transacts with a distributor, its contractual arrangement is with the distributor and not with the end customer. Whether the Company transacts business with and receives the order from a distributor or directly from an end customer, its revenue recognition policy and resulting pattern of revenue recognition for the order are the same. F-15 ALLEGRO MICROSYSTEMS, INC. Notes to Consolidated Financial Statements – (continued) (Amounts in thousands, except share and per share amounts) The Company also uses independent sales representatives to assist in the sales process with certain customers. Sales representatives are not distributors. If a sales representative is engaged in the sales process, the Company receives the order directly from and sells the products directly to the end customer. The Company pays a commission to the sales representative, calculated as a percentage of the related customer payment. Sales representatives’ commissions are recorded as expenses when incurred and are classified as selling, general and administrative expenses in the Company’s consolidated statements of operations. For the consignment arrangements with distributors, delivery occurs and revenue is recognized when the distributor pulls product from consignment inventory that 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, the Company retains control over the products’ disposition, including the right to pull back or relocate the products. Variable consideration Variable consideration includes sales in which the amount of consideration that the Company will receive is unknown as of the end of a reporting period. Such consideration primarily includes limited price protection provisions provided to distributors, sales under agreements that allow rights of return, referred to as stock rotation, provided to distributors, discounts and credits provided to distributors and returns provisions offered to direct customers. The Company estimates potential future returns, credits and sales allowances based on historical data from prior sales returns and credits issued and changes in product sales to customers. Practical expedients elected Revenue recognized is adjusted based on allowances, which are prepared on a portfolio basis using a most likely amount methodology. The length of time between revenue recognition and payment is not significant under any of the Company’s payment terms. Moreover, if the period between revenue recognition and when the customer pays is one year or less, the Company elected not to account for the significant financing component. Other Revenue Recognition Policies Shipping and handling activities are not considered a contractual performance obligation. The Company records shipping and handling costs billed to customers as revenue with offsetting costs recorded as cost of sale. Contract Assets and Contract Liabilities Contract assets and contract liabilities (deferred revenue) are reported net at the contract level for each reporting period. Contract assets typically result from contracts when revenue recognized exceeds the amount billed to the customer, and right to payment is not just subject to the passage of time. Contract assets are transferred to accounts receivable when the rights become unconditional. The Company had no contract assets as of March 31, 2023 and March 25, 2022. Contract liabilities typically result from billings in excess of revenues recognized and relate to products shipped near the end of the reporting period for which the required revenue recognition criteria were not met. The Company had no significant contract liabilities as of March 31, 2023 and March 25, 2022. Stock-Based Compensation The Company recognizes compensation costs for all stock-based compensation awards made to employees based upon the awards’ estimated grant-date fair value. Typically, stock-based compensation expense is recognized evenly over the vesting period. However, stock-based compensation expense related to performance-based awards is recognized relative to the probability of achievement of the requisite milestones during the vesting period. The Company accounts for forfeitures as they occur. Determining the fair value of certain stock-based compensation awards at the grant date requires judgment, including estimating the expected life of the stock awards and the volatility of the underlying market-based and projected future cash flow assumptions. Any changes to those estimates that the Company makes from time to time may have a significant impact on the stock-based compensation expense recorded and could materially impact the Company’s results of operations. Research and Development The Company commits substantial capital and resources to internal and collaborative research and development projects in order to provide innovative products and solutions to its customers. The Company conducts research primarily to develop new technologies, enhance current product performance, improve the functionality and reliability of existing products, and develop revolutionary new products and solutions. Research and development costs are expensed as incurred F-16 ALLEGRO MICROSYSTEMS, INC. Notes to Consolidated Financial Statements – (continued) (Amounts in thousands, except share and per share amounts) and include salaries, wages and other personnel related costs, material costs and depreciation, consulting costs, software licensing costs, maintenance costs and facility costs. Pension Obligations The Company, through its subsidiaries, has various foreign defined benefit plans as well as U.S. defined contribution plans. Accredited independent actuaries calculate related plan assets, liabilities and expenses. The Company is required to make certain assumptions to assign value to the plan assets and liabilities. These assumptions are reviewed annually, based on current plan information and consultations with independent investment advisors and actuaries. The Company does not offer other defined benefits associated with postretirement benefit plans other than pensions. The Company recognizes the funded status of a benefit plan on its consolidated balance sheets and recognizes gains, losses and prior service cost or credits that arise during the period that are not recognized as components of net periodic benefit cost as a component of other comprehensive income, net of tax. In addition, the Company measures defined benefit plan assets and obligations as of the date of the employer’s fiscal year-end consolidated balance sheets and discloses in the notes to the consolidated financial statements the gains or losses, prior service costs or credits and transition asset or obligation. Income Taxes The Company accounts for income taxes using the asset and liability method, which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of temporary differences between the financial statement and tax basis of assets and liabilities, as measured by enacted tax rates anticipated to be in effect when these differences are expected to reverse. This method also requires the recognition of future tax benefits to the extent that realization of such benefits is more likely than not. Deferred tax expense or benefit is the result of changes in the deferred tax assets and liabilities. The Company assesses the likelihood that its deferred tax assets will be recovered from future taxable income and, to the extent it believes, based upon the weight of available evidence, it is more likely than not that some or all of the deferred tax assets will not be realized, a valuation allowance is established. The Company recognizes a liability for potential payments of taxes to various tax authorities related to uncertain tax positions and other tax matters. The recorded liability is based on a determination of whether and how much of a tax benefit taken by the Company in its tax filings or positions is “more likely than not” to be realized. The amount of the benefit that may be recognized in the consolidated financial statements is the largest amount that has a greater than 50% likelihood of being realized upon ultimate settlement. To the extent that the assessment of such tax positions changes, the change in estimate is recorded in the period in which the determination is made. The Company establishes a liability, which is included in other long-term liabilities in the consolidated balance sheets, for tax-related uncertainties based on estimates of whether, and the extent to which, additional taxes will be due. These liabilities are established when the Company believes that certain positions might be challenged despite the Company’s belief that the tax return positions are fully supportable. The recorded liability is adjusted considering changes in the facts and circumstances. The provision for income taxes includes the impact of the recorded liability and changes thereto. The Company recognizes interest and penalties related to uncertain tax positions as a component of income tax provision in the consolidated statements of operations. Accrued interest and penalties are included in accrued expenses and other current liabilities in the consolidated balance sheets. All undistributed earnings of our foreign subsidiaries are permanently reinvested. Accordingly, the Company does not provide for U.S. income taxes on such undistributed earnings. Net Income Per Share Basic net income per share is computed by dividing net income attributable to stockholders of the Company by the weighted-average number of common shares outstanding during the reporting period. Diluted net income per share is computed similarly to basic net income per share, except that it includes the potential dilution that could occur if dilutive securities were exercised. Information about potentially dilutive and antidilutive shares for the reporting period is provided in Note 17, “Net Income per Share.” Concentrations of Credit Risk and Significant Customers Financial instruments that potentially subject the Company to concentrations of credit risk consist primarily of cash, cash equivalents and accounts receivable. The Company maintains its cash and cash equivalents with financial institutions that management believes to be of a high credit quality. To manage credit risk related to accounts receivables, the Company F-17 ALLEGRO MICROSYSTEMS, INC. Notes to Consolidated Financial Statements – (continued) (Amounts in thousands, except share and per share amounts) evaluates the creditworthiness of its customers and maintains allowances, to the extend necessary, for potential credit losses based upon the aging of its accounts receivable balances and known collection issues. The Company has not experienced any significant credit losses during the prior two years. As of March 31, 2023, Sanken and our largest, non-affiliated distributor accounted for 10.6 % and 17.3 %, respectively, of the Company’s outstanding trade accounts receivable, net, respectively, including related party trade accounts receivable. As of March 25, 2022, Sanken and our largest, non-affiliated distributor accounted for 23.8 % and 12.0 %, respectively, of the Company’s outstanding trade accounts receivable, net, respectively, including related party trade accounts receivable. No other customers accounted for 10% or more of outstanding trade accounts receivable, net as of such dates. For the fiscal years ended March 31, 2023, March 25, 2022 and March 26, 2021, Sanken accounted for 16.5 %, 19.4 % and 17.7 % of total net sales, respectively. For the same periods, sales to our largest, non-affiliated distributor accounted for 10.8 %, 11.0 %, and 11.4 % of total net sales, respectively. No other customers accounted for 10% or more of total net sales for any of these periods. See Note 20, “Related Party Transactions” for a discussion of the termination, distribution and consulting agreements between Sanken and the Company to transition the marketing and sale of the Company’s products in Japan from Sanken to the Company. During the fiscal year ended March 31, 2023, sales from customers located outside of the United States in the aggregate accounted for 86.5 % of the Company’s total net sales, with Japan accounting for 16.5 % and Greater China accounting for 26.1 %. No other countries accounted for greater than 10.0% of total net sales for the fiscal year ended March 31, 2023. During the fiscal year ended March 25, 2022, sales from customers located outside of the United States in the aggregate accounted for 85.9 % of the Company’s total net sales, with Japan accounting for 19.4 %, Greater China accounting for 25.0 % and South Korea accounting for 10.5 %. No other countries accounted for greater than 10.0% of total net sales for the fiscal year ended March 25, 2022. During the fiscal year ended March 26, 2021, sales from customers located outside of the United States in the aggregate accounted for 86.1 % of the Company’s total net sales, with Japan accounting for 17.7 %, Greater China accounting for 26.6 % and South Korea accounting for 10.5 %. No other countries accounted for greater than 10.0% of total net sales for the fiscal year ended March 26, 2021. Recently Adopted Accounting Standards In October 2021, the FASB issued Accounting Standards Update (“ASU”) No. 2021-08, Business Combinations (Topic 805), Accounting for Contract Assets and Contract Liabilities from Contracts with Customers (“ASU 2021-08”), which eliminates the diversity in practice and inconsistency related to the accounting for acquired revenue contracts with customers in a business combination. The amendments in ASU 2021-08 require an acquiring entity to apply Accounting Standards Codification (“ASC”) Topic 606, Contracts with Customers (“ASC 606”), to recognize and measure contract assets and contract liabilities in a business combination as if the acquired contracts with customers were originated by the acquiring entity at the acquisition date. An acquirer may assess how the acquiree applied ASC 606 and generally should recognize and measure the acquired contract assets and contract liabilities consistent with the recognition and measurement in the acquiree’s financial statements, as prepared in accordance with GAAP. If unable to rely on the acquiree’s accounting due to errors, noncompliance with GAAP, or differences in accounting policies, the acquirer should consider the terms of the acquired contracts, such as timing of payment, identify each performance obligation in the contracts, and allocate the total transaction price to each identified performance obligation on a relative standalone selling price basis as of contract inception (that is, the date the acquiree entered into the contracts) or contract modification to determine what should be recorded at the acquisition date. The Company early adopted ASU 2021-08, effective March 26, 2022, and concluded that adoption of this ASU did not have a material impact on its financial position, results of operations, cash flows, or related disclosures. In May 2021, the FASB issued ASU No. 2021-04, Earnings Per Share (Topic 260), Debt—Modifications and Extinguishments (Subtopic 470-50), Compensation—Stock Compensation (Topic 718), and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40) (“ASU 2021-04”). ASU 2021-04 outlines how an entity should account for modifications made to equity-classified written call options, including stock options and warrants to purchase the entity’s own common stock. The guidance in the ASU requires an entity to treat a modification of an equity-classified written call option that does not cause the option to become liability-classified as an exchange of the original option for a new option. This guidance applies whether the modification is structured as an amendment to the terms and conditions of the equity-classified written call option or as termination of the original option and issuance of a new option. The Company adopted F-18 ALLEGRO MICROSYSTEMS, INC. Notes to Consolidated Financial Statements – (continued) (Amounts in thousands, except share and per share amounts) ASU 2021-04, effective March 26, 2022, and concluded that it did not have a material impact on its financial position, results of operations, cash flows, or related disclosures. Recently Issued Accounting Standards Not Yet Adopted In December 2022, the FASB issued ASU No. 2022-06, Reference Rate Reform (Topic 848), Deferral of the Sunset Date of Topic 848 (“ASU 2022-06”). In March 2020, the FASB issued ASU No. 2020-04, Reference Rate Reform (Topic 848), Facilitation of the Effects of Reference Rate Reform on Financial Reporting, which provided temporary relief when transitioning from the London Interbank Offered Rate (“LIBOR”) to the Secured Overnight Financing Rate or another applicable rate during the original transition period ending on December 31, 2022. In March 2021, the UK Financial Conduct Authority announced that the intended cessation date of the overnight 1-, 3-, 6-, and 12-month tenors of U.S. dollar LIBOR would be June 30, 2023, which is beyond the current sunset date of Topic 848. In light of this development, the FASB issued this update to defer the sunset date of Topic 848 from December 31, 2022, to December 31, 2024, after which entities will no longer be permitted to apply the relief in Topic 848. The Company does not anticipate this new guidance to have a material impact on its financial position, results of operations, cash flows, or related disclosures. 3. Heyday Acquisition On September 1, 2022, the Company completed its purchase of all of the equity interests in 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 was undertaken to bring together Heyday’s isolated gate drivers and the Company’s isolated current sensors to enable potential development and commercialization of small high-voltage and high-efficiency power systems. Additionally, this acquisition is expected to increase the Company’s addressable market for electric vehicles (“EV”), solar inverters, data center and 5G power supplies, and broad-market industrial applications. The total purchase price, as updated for measurement period adjustments, was $ 20,245 , consisting of cash consideration paid directly to the owners of Heyday and paid on their behalf for the settlement of certain outstanding debts and other obligations. The Heyday Acquisition was accounted for as a business combination, and the Company recorded the assets acquired and liabilities assumed at their respective fair values as of the date of acquisition. The allocation of the purchase price was based upon a valuation, and the Company’s estimates and assumptions are subject to change within the measurement period (up to one year from the acquisition date) which is not yet finalized. During the fiscal year ended March 31, 2023, the Company recorded measurement period adjustments to various accounts resulting in a decrease in goodwill of $ 1,133 . The following table summarizes the estimated fair values of the assets acquired and liabilities assumed at the acquisition date, updated for the measurement period adjustments above: As of March 31, 2023 Cash $ 324 Property and equipment 16 Completed technology 15,100 In-process research and development 1,600 Assets acquired $ 17,040 Current liabilities assumed ( 282 ) Net deferred tax liability ( 3,609 ) Net assets acquired $ 13,149 Total estimated fair value of consideration ( 20,245 ) Goodwill $ 7,096 Completed technology assets are amortized over an estimated useful life of 12 years. The acquired in-process research and development costs were determined to have an indefinite useful life. Amortization of completed technology is included within cost of goods sold and consists of PowerThru technology that accomplishes gate driver power and signal transmission through an integrated transformer, reducing the size and complexity of the gate drive solution. The in-process research and development assets represent efforts to expand the power F-19 ALLEGRO MICROSYSTEMS, INC. Notes to Consolidated Financial Statements – (continued) (Amounts in thousands, except share and per share amounts) capability of these gate drivers for wide-bandgap semiconductor technology. To value the completed technology and the in-process research and development assets, the Company utilized the income approach, specifically a discounted cash-flow method known as the multi-period excess earnings method. The goodwill reflects the value of the synergies the Company expects to realize and the assembled workforce. Goodwill from the Heyday Acquisition is included within the Company’s one reporting unit and was included in the Company’s enterprise-level annual review for impairment. Goodwill resulting from the Heyday Acquisition is not deductible for tax purposes. The income before income taxes from the Heyday Acquisition were immaterial to the Company’s consolidated results for the fiscal year ended March 31, 2023. The Company has not presented pro forma results of operations for the Heyday Acquisition because it is not material to the Company’s consolidated results of operations, financial position, or cash flows. 4. Revenue from Contracts with Customers The following tables summarize net sales disaggregated by application, by product and by geography for the fiscal years ended March 31, 2023, March 25, 2022 and March 26, 2021. The categorization of net sales by application is determined using various characteristics of the product and the application into which the Company’s product will be incorporated. The categorization of net sales by geography is determined based on the location to which the products are shipped. Net sales by application: Fiscal Year Ended March 31, 2023 March 25, 2022 March 26, 2021 Automotive $ 657,479 $ 531,564 $ 398,298 Industrial 196,705 133,187 94,872 Other 119,469 103,923 98,037 Total net sales $ 973,653 $ 768,674 $ 591,207 Net sales by product: Fiscal Year Ended March 31, 2023 March 25, 2022 March 26, 2021 Power integrated circuits (“PIC”) $ 375,074 $ 268,381 203,600 Magnetic sensors (“MS”) 598,579 500,293 387,607 Total net sales $ 973,653 $ 768,674 $ 591,207 Net sales by geography: Fiscal Year Ended March 31, 2023 March 25, 2022 March 26, 2021 Americas: United States $ 131,150 $ 108,396 82,165 Other Americas 28,014 23,056 16,558 EMEA: Europe 169,368 134,537 103,128 Asia: Japan 160,763 148,813 104,661 Greater China 253,906 191,895 157,546 South Korea 96,549 80,451 62,075 Other Asia 133,903 81,526 65,074 Total net sales $ 973,653 $ 768,674 $ 591,207 F-20 ALLEGRO MICROSYSTEMS, INC. Notes to Consolidated Financial Statements – (continued) (Amounts in thousands, except share and per share amounts) The Company recognizes sales net of returns and sales allowances, which are comprised of credits issued, price protection adjustments and stock rotation rights. As of March 31, 2023 and March 25, 2022, the liability associated with returns and sales allowances, inclusive of related party adjustments, was $ 30,571 and $ 14,924 , respectively, and were netted against trade accounts receivable in the consolidated balance sheets. Unsatisfied performance obligations primarily represent contracts for products with future delivery dates. The Company elected not to disclose the amount of unsatisfied performance obligations as these contracts have original expected durations of less than one year. 5. Fair Value Measurements The following tables present information about the Company’s financial assets and liabilities as of March 31, 2023 and March 25, 2022 measured at fair value on a recurring basis: Fair Value Measurement at March 31, 2023 Using: Level 1 Level 2 Level 3 Total Assets: Cash equivalents: Money market fund deposits $ 102,019 $ — $ — $ 102,019 Restricted cash: Money market fund deposits 7,129 — — 7,129 Other assets, net (long-term): Investments in marketable securities 19,929 — — 19,929 Total assets $ 129,077 $ — $ — $ 129,077 Fair Value Measurement at March 25, 2022 Using: Level 1 Level 2 Level 3 Total Assets: Cash equivalents: Money market fund deposits $ 16,927 $ — $ — $ 16,927 Restricted cash: Money market fund deposits 7,416 — — 7,416 Other assets, net (long-term): Investments in marketable securities $ 12,346 $ — $ — $ 12,346 Total assets $ 36,689 $ — $ — $ 36,689 Liabilities: Other long-term liabilities: Contingent consideration $ — $ — $ 2,800 $ 2,800 Total liabilities $ — $ — $ 2,800 $ 2,800 The following table represents the unrealized gains and losses on investments in marketable securities held with a readily determinable fair value for the fiscal years ended March 31, 2023 and March 25, 2022: Fiscal Year Ended March 31, 2023 March 25, 2022 Net gains and losses recognized during the period on equity securities $ 7,471 $ 3,722 Unrealized gains and losses recognized during the reporting period on equity securities still held at the reporting date $ 7,471 $ 3,722 In addition to the unrealized gains in the table above, the change in fair value of the equity securities was impacted by unrealized foreign currency exchange gains of $ 112 and losses of $ 565 for the fiscal years ended March 31, 2023 and March 25, 2022, respectively. F-21 ALLEGRO MICROSYSTEMS, INC. Notes to Consolidated Financial Statements – (continued) (Amounts in thousands, except share and per share amounts) In connection with the fiscal year 2021 purchase of Voxtel, Inc. (“Voxtel”), a privately held technology company located in Beaverton, Oregon, that develops, manufactures and supplies photonic and advanced 3D imaging technologies (the “Voxtel Acquisition”), the Company was required to make contingent payments, subject to the entity achieving certain sales and revenue thresholds. The contingent consideration payments were, in the aggregate, $ 15,000 . The fair value of the liabilities for the contingent payments recognized upon the Voxtel Acquisition as part of the purchase accounting opening balance sheet totaled $ 7,300 and was estimated by discounting to present value the probability-weighted contingent payments expected to be made. Assumptions used in this calculation were units sold, expected revenue, discount rate and various probability factors. The ultimate settlement of contingent consideration could deviate from current estimates based on the actual results of these financial measures. This liability is considered to be a Level 3 financial liability that is remeasured during each reporting period. The change in fair value of contingent consideration for the Voxtel Acquisition is included in change in fair value of contingent consideration in the consolidated statements of operations. The following table shows the change in fair value of Level 3 contingent consideration: Level 3 Contingent Consideration Balance at March 26, 2021 $ 4,800 Change in fair value of contingent consideration ( 2,000 ) Balance at March 25, 2022 $ 2,800 Change in fair value of contingent consideration ( 2,800 ) Balance at March 31, 2023 $ — Assets and liabilities measured at fair value on a recurring basis also consist of marketable securities, unit investment trust funds, loans, bonds, stock and other investments, which constitute the Company’s defined benefit plan assets. Fair value information for those assets and liabilities, including their classification in the fair value hierarchy, is included in Note 15, “Retirement Plans.” During the fiscal years ended March 31, 2023, March 25, 2022 and March 26, 2021, there were no transfers between Level 1, Level 2 and Level 3. 6. Trade Accounts Receivable, Net Trade accounts receivable, net (including related party trade accounts receivable) consisted of the following: March 31, 2023 March 25, 2022 Trade accounts receivable $ 150,914 $ 129,539 Less: Provision for expected credit losses ( 102 ) ( 105 ) Returns and sales allowances ( 26,269 ) ( 14,819 ) Related party trade accounts receivable, net of returns and sales allowances ( 13,253 ) ( 27,256 ) Total $ 111,290 $ 87,359 F-22 ALLEGRO MICROSYSTEMS, INC. Notes to Consolidated Financial Statements – (continued) (Amounts in thousands, except share and per share amounts) Changes in the Company’s expected credit losses and returns and sales allowances, exclusive of related party adjustments, were as follows: Description Provision for Expected Credit Losses Returns and Sales Allowances Total Balance at March 27, 2020 $ 288 $ 17,185 $ 17,473 Provisions ( 150 ) 147,026 146,876 Deductions — ( 148,937 ) ( 148,937 ) Balance at March 26, 2021 138 15,274 15,412 Provisions ( 33 ) 144,318 144,285 Deductions — ( 144,773 ) ( 144,773 ) Balance at March 25, 2022 105 14,819 14,924 Provisions ( 3 ) 129,504 129,501 Deductions — ( 118,054 ) ( 118,054 ) Balance at March 31, 2023 $ 102 $ 26,269 $ 26,371 7. Inventories Inventories include materials, labor and overhead and consisted of the following: March 31, 2023 March 25, 2022 Raw materials and supplies $ 15,049 $ 11,941 Work in process 98,836 55,855 Finished goods 37,416 18,364 Total $ 151,301 $ 86,160 The Company recorded inventory write-offs totaling $ 10,009 , $ 5,809 and $ 4,464 for the fiscal years ended March 31, 2023, March 25, 2022 and March 26, 2021, respectively. 8. Property, Plant and Equipment, net Property, plant and equipment, net is stated at cost, and consisted of the following: March 31, 2023 March 25, 2022 Land $ 15,384 $ 15,775 Buildings, building improvements and leasehold improvements 61,500 59,816 Machinery and equipment 611,459 542,745 Office equipment 6,119 6,247 Construction in progress 48,378 22,428 Total 742,840 647,011 Less accumulated depreciation ( 479,741 ) ( 436,983 ) Total $ 263,099 $ 210,028 The Company retired $ 1,638 , $ 10,976 and $ 63 of fully depreciated assets during the fiscal years ended March 31, 2023, March 25, 2022 and March 26, 2021, respectively. Total depreciation expense amounted to $ 45,469 , $ 44,178 and $ 44,845 for the fiscal years ended March 31, 2023, March 25, 2022 and March 26, 2021, respectively. F-23 ALLEGRO MICROSYSTEMS, INC. Notes to Consolidated Financial Statements – (continued) (Amounts in thousands, except share and per share amounts) Long-lived assets include property, plant and equipment and related deposits on such assets, and capitalized tooling costs. The geographic locations of the Company's long-lived assets, net, based on physical location of the assets, as of March 31, 2023 and March 25, 2022 are as follows: March 31, 2023 March 25, 2022 United States $ 36,237 $ 35,221 Philippines 207,671 167,488 Other 21,359 7,746 Total $ 265,267 $ 210,455 9. Goodwill and Intangible Assets The table below summarizes the changes in the carrying amount of goodwill as follows: Total Balance at March 26, 2021 $ 20,106 Foreign currency translation ( 97 ) Balance at March 25, 2022 $ 20,009 Goodwill arising from acquisition 7,096 Foreign currency translation 586 Balance at March 31, 2023 $ 27,691 Intangible assets, net were as follows: March 31, 2023 Description Gross Accumulated Amortization Net Carrying Amount Weighted-Average Lives Patents $ 40,213 $ 18,335 $ 21,878 10 years Customer relationships 3,281 3,115 166 9 years Process technology 28,508 2,963 25,545 12 years Indefinite-lived process technology and trademarks 4,696 — 4,696 Trademarks and other 287 194 93 5 years Total $ 76,985 $ 24,607 $ 52,378 March 25, 2022 Description Gross Accumulated Amortization Net Carrying Amount Weighted-Average Lives Patents $ 36,577 $ 15,304 $ 21,273 10 years Customer relationships 6,590 6,348 242 9 years Process technology 14,750 3,463 11,287 12 years Indefinite-lived process technology and trademarks 3,168 — 3,168 Trademarks and other 83 83 — 5 years Total $ 61,168 $ 25,198 $ 35,970 Intangible assets amortization expense was $ 5,209 , $ 4,219 and $ 3,332 for the fiscal years ended March 31, 2023, March 25, 2022 and March 26, 2021, respectively. F-24 ALLEGRO MICROSYSTEMS, INC. Notes to Consolidated Financial Statements – (continued) (Amounts in thousands, except share and per share amounts) As of March 31, 2023, amortization expense of intangible assets for the next five fiscal years is expected to be as follows: 2024 $ 5,552 2025 5,229 2026 4,926 2027 4,573 2028 4,282 Thereafter 23,120 Total $ 47,682 10. Other Assets, net The composition of other assets, net was as follows: March 31, 2023 March 25, 2022 VAT receivables long-term, net $ 13,633 $ 6,386 Income taxes receivable long-term 13,133 15,763 Investments in equity securities (1) 19,929 12,346 Deposits 17,319 10,525 Long-term prepaid contracts 436 1,236 Other 4,780 1,353 Total $ 69,230 $ 47,609 (1) Represents equity investments in an entity whose equity securities have a readily determinable fair value. These strategic investments represent less than a 20% ownership interest in the entity, and the Company does not maintain power over or control of the entity. These investments are measured at fair value with unrealized gains and losses related to changes in the entity’s stock price and the impact of changes in foreign exchange rates each included in the consolidated statements of operations. 11. Accrued Expenses and Other Current Liabilities The composition of accrued expenses and other current liabilities was as follows: March 31, 2023 March 25, 2022 Accrued management incentives 40,484 33,607 Accrued salaries and wages 20,205 14,699 Accrued warranty costs 4,327 541 Accrued vacation 8,178 5,715 Accrued professional fees 6,243 1,252 Accrued income taxes 5,625 1,831 Other current liabilities 9,832 7,814 Total $ 94,894 $ 65,459 12. Leases The Company determines if an arrangement is or contains a lease at inception, which is the date on which the terms of the contract are agreed to and the agreement creates enforceable rights and obligations. The Company also considers whether its service arrangements include the right to control the use of an asset. The Company leases real estate, equipment and vehicles under operating lease agreements that have initial terms ranging from one to 10 years. The Company does not have any leases classified as finance leases. Some leases include one or more options to exercise renewal terms, generally at the Company’s sole discretion, that can extend the lease term. Certain leases contain rights to terminate whereby those termination options are held by either the Company, the lessor, or both parties. These options to extend or terminate a lease are included in the lease term only when it is reasonably certain that the Company will exercise that option. The Company’s leases generally do not contain any material restrictive covenants. F-25 ALLEGRO MICROSYSTEMS, INC. Notes to Consolidated Financial Statements – (continued) (Amounts in thousands, except share and per share amounts) Operating lease cost is recognized on a straight-line basis over the lease term. Information regarding the Company’s leases are as follows: Fiscal Year Ended March 31, 2023 March 25, 2022 Lease costs: Operating lease expense $ 4,833 $ 4,648 Short term lease expense 326 584 Other information: Cash paid for operating leases $ 5,034 $ 5,289 Weighted-average remaining lease term – operating leases 4.57 years 5.17 years Weighted-average discount rate – operating leases 5.3 % 4.5 % As of March 31, 2023, future minimum lease payments under the lease agreements were as follows: 2024 $ 5,545 2025 4,957 2026 4,071 2027 3,240 2028 2,520 Thereafter 2,818 Total lease payments $ 23,151 Less: imputed interest ( 5,610 ) Total operating lease liabilities $ 17,541 13. Debt and Other Borrowings As of March 31, 2023, the principal maturities of debt obligations outstanding of $ 25,000 will be due for repayment in fiscal year 2028. On September 30, 2020, the Company entered into a term loan credit agreement with Credit Suisse AG, Cayman Islands Branch, as administrative agent and collateral agent, and the other agents, arrangers and lenders party thereto, providing for a $ 325,000 senior secured term loan facility due in fiscal year 2028 (the “Term Loan Facility”). On September 30, 2020, the Company also entered into a revolving facility credit agreement with Mizuho Bank, Ltd., as administrative agent and collateral agent, and the other agents, arrangers and lenders party thereto, providing for a $ 50,000 senior secured revolving credit facility expiring in 2023 (the “Revolving Credit Facility” and, together with the Term Loan Facility, the “Senior Secured Credit Facilities”). The Revolving Credit Facility is secured by a lien on the same collateral and on the same basis as the Term Loan Facility. Interest on the Term Loan Facility is calculated at LIBOR plus 3.75 % to 4.00 % based on the Company’s net leverage ratio, and LIBOR is subject to a 0.5 % floor. The Company’s outstanding borrowings bore an interest rate of 8.38 % at March 31, 2023. The Company had no outstanding borrowings on the Revolving Credit Facility as of March 31, 2023. 14. Other Long-Term Liabilities The composition of other long-term liabilities is as follows: March 31, 2023 March 25, 2022 Accrued retirement 8,032 8,903 Provision for uncertain tax positions 2,837 2,757 Other long-term liabilities 98 3,626 Total $ 10,967 $ 15,286 F-26 ALLEGRO MICROSYSTEMS, INC. Notes to Consolidated Financial Statements – (continued) (Amounts in thousands, except share and per share amounts) 15. Retirement Plans The Company recognizes the funded status (i.e., the difference between the fair value of plan assets and the benefit obligations) of its defined benefit pension plans in its consolidated balance sheets with a corresponding adjustment to accumulated other comprehensive income (“AOCI”), net of tax. Further, actuarial gains and losses and prior service costs that arise in future periods and are not recognized as net periodic benefit costs in the same periods will be recognized as a component of other comprehensive income. Those amounts will also be recognized as a component of future net periodic benefit costs consistent with the Company’s past practice. The Company uses a measurement date for its defined benefit pension plans and other postretirement benefit plans that is equivalent to its fiscal year-end. Plan Descriptions Non-U.S. Defined Benefit Plan The Company, through its wholly owned subsidiary, Allegro MicroSystems Philippines, Inc., has a defined benefit pension plan, which is a noncontributory plan that covers substantially all employees of this subsidiary. The plan’s assets are invested in government securities, common trust funds, bonds and other debt instruments and stocks. Effect on the consolidated statements of operations Expense related to the non-U.S. defined benefit plan was as follows: Fiscal Year Ended March 31, 2023 March 25, 2022 March 26, 2021 Service cost $ 1,358 $ 1,554 $ 1,454 Interest cost 763 637 628 Expected return on plan assets ( 301 ) ( 304 ) ( 299 ) Amortization of net transition asset — — ( 1 ) Amortization of prior service cost ( 8 ) 1 8 Actuarial loss 77 205 179 Net periodic pension expense $ 1,889 $ 2,093 $ 1,969 Changes in the benefit obligations and plan assets for the non-U.S. defined benefit plan were as follows: Fiscal Year Ended March 31, 2023 March 25, 2022 Obligation and funded status of plan: Benefit obligation at beginning of year $ 15,080 $ 17,180 Service cost 1,358 1,554 Interest cost 763 637 Prior service cost — ( 108 ) Benefits paid ( 1,014 ) ( 1,180 ) Actuarial gain ( 908 ) ( 1,822 ) Foreign currency exchange rate changes ( 549 ) ( 1,181 ) Benefit obligation at end of year $ 14,730 $ 15,080 Change in plan assets: Fair value of plan assets at beginning of year $ 7,097 $ 7,644 Actual return on plan assets ( 189 ) ( 235 ) Employer contributions 1,463 1,380 Benefits paid ( 952 ) ( 1,146 ) Foreign currency exchange rate changes ( 251 ) ( 546 ) Fair value of plan assets at end of year $ 7,168 $ 7,097 Underfunded status at end of year $ ( 7,562 ) $ ( 7,983 ) F-27 ALLEGRO MICROSYSTEMS, INC. Notes to Consolidated Financial Statements – (continued) (Amounts in thousands, except share and per share amounts) The underfunded plan amounts are recognized as a component of other long-term liabilities in the consolidated balance sheets. The following table presents the obligations and asset information for the non-U.S. defined benefit plan that has a projected benefit obligation in excess of plan assets: Fiscal Year Ended March 31, 2023 March 25, 2022 Projected benefit obligations $ 14,730 $ 15,080 Plan assets 7,168 7,097 Accumulated benefit obligations 8,868 9,216 The amounts recorded in AOCI for the non-U.S. defined benefit plan for the fiscal years ended March 31, 2023 and March 25, 2022 are further detailed below: Net Transition Obligation (Asset) Net Actuarial Loss Prior Service Costs Total Balance, March 26, 2021, net of tax $ 224 $ 3,193 1 $ 3,418 2022 change in AOCI for non-U.S. defined benefit plan 20 ( 665 ) ( 104 ) ( 749 ) Amounts in AOCI before tax 244 2,528 ( 103 ) 2,669 Less tax expense 61 632 ( 26 ) 667 Balance, March 25, 2022, net of tax 183 1,896 ( 77 ) 2,002 2023 change in AOCI for non-U.S. defined benefit plan ( 11 ) 36 ( 14 ) 11 Amounts in AOCI before tax 172 1,932 ( 91 ) 2,013 Less tax expense 43 483 ( 23 ) 503 Balance, March 31, 2023, net of tax $ 129 $ 1,449 $ ( 68 ) $ 1,510 There is no significant actuarial net gain or loss included in AOCI as of March 31, 2023 that is expected to be amortized into net periodic benefit cost over the next fiscal year. As of March 31, 2023, the Company does not expect a significant return of plan assets during the next 12 months. Assumptions and Investment Policies Weighted-Average Assumptions Used to Determine Projected Benefit Obligation March 31, 2023 March 25, 2022 Non-U.S. assumed discount rate 6.63 % 5.58 % Non-U.S. rate of compensation increase 5.50 % 5.50 % Weighted-Average Assumptions Used to Determine Net Periodic Benefit Cost March 31, 2023 March 25, 2022 March 26, 2021 Non-U.S. assumed discount rate 6.63 % 5.58 % 4.00 % Non-U.S. expected long-term return on plan assets 6.40 % 4.10 % 4.20 % Non-U.S. rate of compensation increase 5.50 % 5.50 % 5.00 % F-28 ALLEGRO MICROSYSTEMS, INC. Notes to Consolidated Financial Statements – (continued) (Amounts in thousands, except share and per share amounts) Information on Plan Assets The table below sets forth the fair value of the entity’s plan assets using the same three-level hierarchy of fair value inputs described in Note 2, “Summary of Significant Accounting Policies”: Fair Value at March 31, 2023 Level 1 Level 2 Level 3 Assets of non-U.S. defined benefit plan: Government securities $ 2,133 $ 2,133 $ — $ — Unit investment trust fund 1,196 — 1,196 — Loans 586 — — 586 Bonds 687 — 687 — Stocks and other investments 2,566 1,461 3 1,102 Total $ 7,168 $ 3,594 $ 1,886 $ 1,688 Fair Value at March 25, 2022 Level 1 Level 2 Level 3 Assets of non-U.S. defined benefit plan: Government securities $ 1,920 $ 1,920 $ — $ — Unit investment trust fund 1,165 — 1,165 — Loans 553 — — 553 Bonds 676 — 676 — Stocks and other investments 2,783 1,716 2 1,065 Total $ 7,097 $ 3,636 $ 1,843 $ 1,618 The following table shows the change in fair value of Level 3 plan assets: Level 3 Non-U.S. Defined Plan Assets Loans Stocks Balance at March 27, 2020 $ 756 $ 364 Additions during the year 325 — Redemptions during the year ( 531 ) — Revaluation of equity securities — 753 Change in foreign currency exchange rates 34 16 Balance at March 26, 2021 $ 584 $ 1,133 Additions during the year 308 — Redemptions during the year ( 289 ) — Revaluation of equity securities ( 5 ) 13 Change in foreign currency exchange rates ( 45 ) ( 81 ) Balance at March 25, 2022 $ 553 $ 1,065 Additions during the year 328 — Redemptions during the year ( 280 ) — Revaluation of equity securities 4 75 Change in foreign currency exchange rates ( 19 ) ( 38 ) Balance at March 31, 2023 $ 586 $ 1,102 The investments in the Company’s major benefit plans largely consist of low-cost, broad-market index funds to mitigate risks of concentration within the market sectors. In recent years, the Company’s investment policy has shifted toward a closer matching of the interest-rate sensitivity of the plan assets and liabilities. The appropriate mix of equity and bond investments is determined primarily through the use of detailed asset-liability modeling studies that look to balance the F-29 ALLEGRO MICROSYSTEMS, INC. Notes to Consolidated Financial Statements – (continued) (Amounts in thousands, except share and per share amounts) impact of changes in the discount rate against the need to provide asset growth to cover future service cost. The Company, through its wholly owned subsidiary, Allegro MicroSystems, LLC’s (“AML”) non-U.S. defined benefit plan, has added a greater proportion of fixed income securities to the non-U.S. defined benefit plan with return characteristics that are more closely aligned with changes in liabilities caused by discount rate volatility. There are no significant restrictions on the amount or nature of the investments that may be acquired or held by the plans. Cash Flows During the fiscal years ended March 31, 2023, March 25, 2022 and March 26, 2021, the Company contributed approximately $ 1,489 , $ 1,369 and $ 986 to its non-U.S. pension plan, respectively. The Company expects to contribute approximately $ 2,171 to its non-U.S. pension plan in fiscal year 2024. Estimated Future Benefit Payments The following table projects the benefits expected to be paid to participants from the plans in each of the following fiscal years. The majority of the payments will be paid from Company assets. Pension Benefits 2024 $ 1,465 2025 947 2026 896 2027 1,192 2028 1,550 Thereafter 8,914 Total $ 14,964 Defined Contribution Plan The Company maintains a 401(k) retirement savings plan (the “401(k) Plan”) for our U.S.-based employees who satisfy certain eligibility requirements. Eligible employees may defer a portion of their eligible compensation, within prescribed limits, through contributions to the 401(k) Plan. The Company matches participants’ contributions, up to a maximum of 5 % of a participant’s eligible compensation, up to the statutory compensation limit, and these matching contributions are fully vested as of the date they are made. Matching contributions by AML totaled $ 4,708 , $ 4,074 and $ 3,687 for the fiscal years ended March 31, 2023, March 25, 2022 and March 26, 2021, respectively. The Company, through its AML subsidiary, Allegro MicroSystems Europe, Ltd. (“Allegro Europe”), also has a defined contribution plan (the “AME Plan”) covering substantially all employees of Allegro Europe. Contributions to the AME Plan by the Company totaled approximately $ 1,248 , $ 1,065 and $ 507 for the fiscal years ended March 31, 2023, March 25, 2022 and March 26, 2021, respectively. 16. Commitments and Contingencies Noncancellable purchase obligations Future minimum payments under purchase obligations with suppliers as of March 31, 2023 totaled $ 56,322 , substantially all of which all expected to be procured in fiscal year 2024. Insurance The Company, through its subsidiaries, utilizes self-insured employee health programs for employees in the U.S. The Company records estimated liabilities for its self-insured health programs based on information provided by the third-party plan administrators, historical claims experience and expected costs of claims incurred but not reported. The Company monitors its estimated liabilities on a quarterly basis. As facts change, it may become necessary to make adjustments that could be material to the Company’s consolidated financial position and results of operations. Legal proceedings The Company is subject to various legal proceedings, and claims, and regulatory examinations or investigations arising in the normal course of business, the outcomes of which are subject to significant uncertainty, and the Company’s ultimate liability, if any, is difficult to predict. The Company records an accrual for legal contingencies when it is determined that it is probable that a liability has been incurred and the amount of the loss can be reasonably estimated. In making such F-30 ALLEGRO MICROSYSTEMS, INC. Notes to Consolidated Financial Statements – (continued) (Amounts in thousands, except share and per share amounts) determinations, the Company evaluates, among other things, the degree of probability of an unfavorable outcome and, when it is probable that a liability has been incurred, the ability to make a reasonable estimate of the loss. If the occurrence of liability is probable and estimable, the Company will disclose the nature of the contingency and, if estimable, will provide the likely amount of such loss or range of loss. The Company does not believe there are any current matters that could have a material adverse effect on its financial position, results of operations or cash flows. Indemnification From time to time, the Company has agreed to indemnify and hold harmless certain customers for potential allegations of infringement of intellectual property rights and patents arising from the use of its products. To date, the Company has not recognized or incurred any costs in connection with such indemnification arrangements; therefore, there was no accrual of such amounts at March 31, 2023 or March 25, 2022. Environmental Matters The Company establishes accrued liabilities for environmental matters when it is probable that a liability has been incurred and the amount of the liability can be reasonably estimated. If the contingency is resolved for an amount greater or less than the accrual, or the Company’s share of the contingency increases or decreases or other assumptions relevant to the development of the estimate were to change, the Company would recognize an additional expense or benefit in the consolidated statements of operations during the period such determination was made. No significant environmental accruals were established at March 31, 2023 or March 25, 2022. 17. Net Income per Share The following table sets forth the basic and diluted net income attributable to Allegro MicroSystems, Inc. per share. Fiscal Year Ended March 31, 2023 March 25, 2022 March 26, 2021 Net income attributable to Allegro MicroSystems, Inc. $ 187,357 $ 119,407 $ 17,953 Net income attributable to common stockholders 187,494 119,555 18,101 Basic weighted average common shares 191,197,452 189,748,427 83,448,055 Dilutive effect of common stock equivalents 2,490,650 2,062,778 92,968,590 Diluted weighted average common shares 193,688,102 191,811,205 176,416,645 Basic net income attributable to Allegro MicroSystems, Inc. per share $ 0.98 $ 0.63 $ 0.22 Basic net income attributable to common stockholders per share $ 0.98 $ 0.63 $ 0.22 Diluted net income attributable to Allegro MicroSystems, Inc. per share $ 0.97 $ 0.62 $ 0.10 Diluted net income attributable to common stockholders per share $ 0.97 $ 0.62 $ 0.10 The computed net income per share for the fiscal years ended March 31, 2023, March 25, 2022 and March 26, 2021 does not assume conversion of securities that would have an antidilutive effect on income per share. The following represents contingently issuable shares under the employee stock purchase plan (“ESPP”) and restricted stock units (“RSUs”) excluded from the computation of net income per share, as such securities would have an antidilutive effect on net income per share: Fiscal Year Ended March 31, 2023 March 25, 2022 March 26, 2021 RSUs 17,586 — 273 ESPP — 3,622 — Total 17,586 3,622 273 F-31 ALLEGRO MICROSYSTEMS, INC. Notes to Consolidated Financial Statements – (continued) (Amounts in thousands, except share and per share amounts) The following represents issued and issuable weighted average share information underlying our outstanding RSUs, performance-based restricted stock units (“PSUs”) and participation in the ESPP for the respective periods: Fiscal Year Ended March 31, 2023 March 25, 2022 March 26, 2021 RSUs 1,039,547 1,066,406 308,811 PSUs 1,435,883 996,372 218,678 ESPP 15,220 — 2,914 Shares related to Common Stock Conversion — — 92,438,187 Total 2,490,650 2,062,778 92,968,590 18. Stock-Based Compensation The Company accounts for stock-based compensation through the measurement and recognition of compensation expense for share-based payment awards made to employees over the related requisite service period, including PSUs, RSUs and restricted shares (all part of our equity incentive plan). Upon meeting the time-based vesting and, if applicable, any performance conditions, common shares of the Company (net of applicable tax withholding) are issued to the employee in exchange for each share-based unit. RSUs granted to management generally have time-based vesting requirements with equal and annual graded vesting over approximately four years subsequent to the grant date, but also generally vest upon voluntary termination of employment by any employee who is “retirement eligible” as of his or her termination date. In order to be retirement eligible, an employee must be at least 62 years old, has completed a minimum of five years of service with the Company, and has provided at least three months' prior written notice of termination of employment. All of our outstanding employee and director RSU awards are eligible for dividend equivalents regardless of vesting status. The following table summarizes RSU activity for the fiscal year ended March 31, 2023: Number of Shares Weighted-Average Grant-Date Fair Value Weighted-Average Remaining Contractual Life (In years) Aggregate Intrinsic Value Outstanding - March 25, 2022 1,701,007 $ 20.50 1.27 $ 49,635 Granted 2,237,432 $ 23.65 Vested ( 1,475,998 ) $ 20.15 Canceled ( 211,217 ) $ 20.57 Outstanding - March 31, 2023 2,251,224 $ 23.85 1.27 $ 108,036 The weighted-average grant fair value per share for RSUs granted during the fiscal years ended March 31, 2023, March 25, 2022 and March 26, 2021 was $ 23.65 , $ 26.00 , $ 14.06 , respectively. The stock-based compensation expense related to non-vested awards not yet recorded at March 31, 2023 was $ 37,490 , which is expected to be recognized over a weighted-average of 1.27 years. The total fair value of RSUs vested was $ 29,732 , $ 12,650 and $ 2,241 the fiscal years ended March 31, 2023, March 25, 2022 and March 26, 2021, respectively. The Company also awards PSUs to its senior executive officers based on achievement of metrics tied to financial plans approved in meetings of its Board of Directors for establishing target performances. Each award reflects a target number of shares (“Target Shares”) that may be issued to the award recipient. In fiscal year 2021, these awards were earned upon the completion of a three-year performance period ended March 31, 2023. Whether units are earned at the end of the performance period is determined based on the achievement of certain performance objectives over the performance period. The performance objectives include achieving certain revenue targets and cumulative earnings before income taxes, depreciation and amortization (“EBITDA”) levels for the performance period, and also include a performance objective relating to relative total shareholder return (“TSR”). Depending on the results achieved during the three-year performance period, the actual number of shares that a grant recipient may receive during and at the end of the period ranges from 0 % to 200 % of the Target Shares granted. F-32 ALLEGRO MICROSYSTEMS, INC. Notes to Consolidated Financial Statements – (continued) (Amounts in thousands, except share and per share amounts) The weighted-average fair value of the PSUs was determined using the Monte Carlo simulation model incorporating the following weighted-average assumptions: Fiscal Year Ended March 31, 2023 Performance term 2.81 years Volatility 51.3 % Risk-free rate of return 2.76 % Dividend yield — % Weighted-average fair value per share $ 30.69 The following table summarizes PSU activity for the fiscal year ended March 31, 2023: Number of Shares Weighted-Average Grant-Date Fair Value Weighted-Average Remaining Contractual Life (In years) Aggregate Intrinsic Value Outstanding - March 25, 2022 955,083 $ 20.22 1.51 $ 27,869 Granted 2,805,698 $ 24.64 Vested ( 855,916 ) $ 28.01 Canceled ( 552,689 ) $ 21.45 Outstanding - March 31, 2023 2,352,176 $ 22.38 2.64 $ 112,881 PSUs are included at 10 % - 200 % of target goals. The total compensation cost related to unvested awards not yet recorded at March 31, 2023 was $ 19,282 , which is expected to be recognized over a weighted average of 2.64 years. The following table summarizes unvested restricted common stock activity for the fiscal year ended March 31, 2023: Number of Shares Weighted-Average Grant-Date Fair Value Weighted-Average Remaining Contractual Life Aggregate Intrinsic Value Outstanding - March 25, 2022 140,526 $ 14.00 1.07 $ 4,101 Vested ( 117,096 ) $ 14.00 Canceled ( 1,626 ) $ — Outstanding - March 31, 2023 21,804 $ 14.00 0.16 $ 1,046 2,685,528 shares of the Company’s common stock are available for future issuance under the ESPP, which includes (a) 832,400 shares of common stock initially available for issuance under the ESPP, and (b) an additional 1,852,958 shares of common stock that may become issuable under the ESPP pursuant to its terms. The ESPP allows employees to purchase the Company’s common stock at 85 % of the lesser of the stock price at the beginning or end of the offering period. Each offering period is six months . The weighted-average fair value of the ESPP shares was determined using the Black-Scholes model incorporating the following weighted-average assumptions: Fiscal Year Ended March 31, 2023 March 25, 2022 March 26, 2021 Expected performance term 0.50 years 0.50 years 0.50 years Volatility 44.99 % 48.10 % 55.02 % Risk-free rate of return 3.58 % 0.10 % 0.09 % Dividend yield — % — % — % Weighted-average fair value per share $ 6.83 $ 8.25 $ 7.77 F-33 ALLEGRO MICROSYSTEMS, INC. Notes to Consolidated Financial Statements – (continued) (Amounts in thousands, except share and per share amounts) As of March 31, 2023, the total unrecognized compensation cost related to the ESPP was $ 252 , and this amount is expected to be recognized over 0.25 years. For the fiscal year ended March 31, 2023, the Company recognized stock-based compensation charges of $ 33,708 , $ 26,890 , $ 146 , $ 921 and $ 133 for it s RSUs, PSUs, restricted common stock, ESPP and phantom stock, respectively. The Company recorded stock-based compensation expense in the following expense categories of its consolidated statements of operations: Fiscal Year Ended March 31, 2023 March 25, 2022 March 26, 2021 Cost of sales $ 5,090 $ 3,176 $ 5,158 Research and development 9,496 3,933 3,573 Selling, general and administrative 47,212 26,439 41,139 Total stock-based compensation $ 61,798 $ 33,548 $ 49,870 19. Income Taxes The components of income before income taxes include the following: Fiscal Year Ended March 31, 2023 March 25, 2022 March 26, 2021 Income before provision for income taxes attributable to: Domestic operations $ 190,107 $ 121,883 $ ( 2,288 ) Foreign operations 21,239 18,863 837 Total $ 211,346 $ 140,746 $ ( 1,451 ) Significant components of the provision (benefit) for income taxes are as follows: Fiscal Year Ended March 31, 2023 March 25, 2022 March 26, 2021 Current: Federal $ 53,973 $ 7,779 $ ( 3,821 ) State 472 1,553 1,085 Foreign 9,523 4,361 2,115 Total current 63,968 13,693 ( 621 ) Deferred: Federal ( 36,276 ) 7,892 ( 17,564 ) State 310 371 ( 1,016 ) Foreign ( 4,150 ) ( 765 ) ( 351 ) Total deferred ( 40,116 ) 7,498 ( 18,931 ) Total income tax provision $ 23,852 $ 21,191 $ ( 19,552 ) F-34 ALLEGRO MICROSYSTEMS, INC. Notes to Consolidated Financial Statements – (continued) (Amounts in thousands, except share and per share amounts) The difference between the tax provision at the statutory federal tax rate and the provision for income taxes is as follows: Fiscal Year Ended March 31, 2023 March 25, 2022 March 26, 2021 Tax provision at U.S. statutory rate $ 44,383 $ 29,557 $ ( 305 ) State income taxes, net of federal benefit 1,027 2,370 356 FDII ( 25,391 ) ( 9,066 ) — Research and development tax credit ( 3,641 ) ( 2,823 ) ( 2,162 ) Stock-based compensation ( 1,025 ) ( 230 ) ( 13,303 ) Cumulative provision-to-return ( 914 ) ( 590 ) ( 862 ) Gain on contingent purchase price reduction ( 588 ) ( 420 ) ( 525 ) Subpart F income, net of credits ( 307 ) 283 43 Provision for uncertain tax positions ( 81 ) ( 17 ) 26 162(m) limitation 8,931 3,988 — Foreign tax rate 954 ( 157 ) 1,279 Deferred tax remeasurement 651 — 309 Transaction costs 338 307 1,498 CARES carryback claim and amended returns — ( 2,031 ) ( 3,834 ) PSL Divestiture — — ( 2,009 ) Other ( 485 ) 20 ( 63 ) Total income tax provision $ 23,852 $ 21,191 $ ( 19,552 ) F-35 ALLEGRO MICROSYSTEMS, INC. Notes to Consolidated Financial Statements – (continued) (Amounts in thousands, except share and per share amounts) Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of the Company’s deferred tax assets and liabilities are as follows: March 31, 2023 March 25, 2022 Deferred income tax assets: Capitalized research and development costs $ 30,582 $ — Bonuses, commissions and other compensation 11,506 11,137 Inventory and sales related 8,730 5,892 Stock-based compensation 3,842 2,837 Tax credits 3,220 6,454 Right-of-use liability 2,479 2,221 Other accruals and reserves 2,803 2,067 Net operating loss carryforward 361 2,106 Gross deferred income tax assets 63,523 32,714 Valuation allowance for deferred income tax assets ( 3,581 ) ( 5,070 ) Total deferred income tax assets 59,942 27,644 Deferred income tax liabilities: Equity method and other investments ( 4,172 ) ( 2,801 ) Fixed assets and intangibles ( 3,020 ) ( 4,720 ) Right-of-use asset ( 2,391 ) ( 2,156 ) Total deferred income tax liabilities ( 9,583 ) ( 9,677 ) Net deferred income tax assets $ 50,359 $ 17,967 In assessing the realizability of its deferred tax assets, the Company considered whether it was more likely than not that some portion or all of the deferred tax assets would not be realized. The realization of deferred tax assets depends upon the generation of future taxable income during the periods in which these temporary differences become deductible. The Company established a valuation allowance for state research credits and state net operating losses (“NOLs”) of $ 3,581 , which will begin to expire between fiscal year 2024 and 2037 and are not expected to be utilized by the Company prior to expiration. 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 fifteen years, respectively (“174 Capitalization”). The impact of 174 Capitalization to our deferred tax assets is $ 30,582 . The Company’s intent is to permanently reinvest and use its existing foreign cash to fund its subsidiaries’ working capital needs, short-term and long-term capital projects, and to make investments and acquisitions. Therefore, no deferred tax liability has been established with respect to outside basis difference in its foreign subsidiaries. The Company filed carryback claims allowable under the Coronavirus Aid, Relief and Economic Security Act (“the CARES Act”) to utilize NOLs and carryover credits generated during fiscal year 2021. As of March 31, 2023, the Company has an outstanding receivable of $ 13,133 related to these filings that are classified as a long-term tax receivable. Uncertain Tax Positions A s of March 31, 2023, the Compan y had $ 2,408 of gross unrecognized tax benefits, of which $ 2,392 would im pact the effective tax rate, if recognized. As of March 25, 2022, the Company had $ 2,459 of gross unrecognized tax benefits, of which $ 2,433 would impact the effective tax rate, if recognize d. As of March 26, 2021, the Company had $ 2,554 of gross unrecognized tax benefits, of which $ 2,542 would impact the effective tax rate, if recognized. These amounts are recorded as a long-term liability, as the Company does not anticipate payment within one year. F-36 ALLEGRO MICROSYSTEMS, INC. Notes to Consolidated Financial Statements – (continued) (Amounts in thousands, except share and per share amounts) Fiscal Year Ended March 31, 2023 March 25, 2022 March 26, 2021 Beginning balance $ 2,459 $ 2,554 $ 2,559 Gross increases-tax positions in prior period — — 55 Gross decreases-tax positions in prior period settlement — — — Lapse in statute of limitations ( 51 ) ( 95 ) ( 60 ) Balance at end of period $ 2,408 $ 2,459 $ 2,554 The Company believes that all tax positions are adequately provided for; amounts asserted by tax authorities could be greater or less than the accrued position. Accordingly, the Company’s provisions for federal, state and foreign tax related matters to be recorded in the future might change as revised estimates are made, or the underlying matters are settled or otherwise resolved. The Company’s policy is to classify interest expense and penalties, if any, as components of the income tax provision in the consolidated statements of operations. The Company recorded net increases of $ 39 , $ 58 and $ 73 in interest, penalties and releases during fiscal years 2023, 2022 and 2021, respectively. As of March 31, 2023 and March 25, 2022, the amount of accrued interest and penalties totaled approximately $ 445 and $ 324 , respectively. Examinations by Tax Authorities The Company and its subsidiaries are routinely subject to examination by taxing authorities in the United States and the foreign jurisdictions in which it does business. Currently, the Internal Revenue Service is auditing the CARES Act carryback claim for fiscal year 2016 through 2021, and the Bureau of Internal Revenue is auditing our Philippine subsidiary for tax year 2019. U.S. and material foreign jurisdictions statutes of limitation remain open as of 2016. 20. Related Party Transactions Public Offering of the Company’s Common Stock by Certain Stockholders On February 2, 2021, the Company filed a Registration Statement on Form S-1 for the public offering of shares owned by certain selling stockholders, including Sanken, OEP and certain of the Company’s officers and directors. The selling stockholders sold 19,332,852 shares of the Company’s common stock, including 1,832,852 shares of common stock sold by OEP in connection with the underwriters’ exercise of their over-allotment option. The Company did not sell any shares of its common stock and did not receive any of the proceeds from the offering. However, the Company incurred expenses, costs and fees in connection with the offering, including registration, filing and listing fees, printing fees and legal and accounting expenses, in the amount of $ 1,790 for the fiscal year ended March 26, 2021, which are included in selling, general and administrative expense in the accompanying consolidated statements of operations and comprehensive income. Transactions Involving Sanken The Company sells products to and purchases in-process products from Sanken. As of March 31, 2023, Sanken held approximately 51.4 % of the Company’s outstanding common stock. Termination of Sanken Distribution Agreement 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 $ 5,000 to Sanken in exchange for the cancellation of Sanken’s exclusive distribution rights in Japan, which was recorded in selling, general and administrative expenses in the consolidated statements of operations. Concurrent with the Termination Agreement, 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. In addition, the Company allowed a one-time sales return from Sanken of resalable inventory of $ 4,200 . The Short-Term Distribution Agreement provides for the management and sale of Company product inventory for a period of twenty-four months . Under the terms of the Consulting Agreement, Sanken agreed to continue to provide transition F-37 ALLEGRO MICROSYSTEMS, INC. Notes to Consolidated Financial Statements – (continued) (Amounts in thousands, except share and per share amounts) 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. Transactions involving Polar Semiconductor, LLC ( “ PSL ” ) The Company purchases in-process products from PSL, which is 70 % owned by Sanken and 30 % owned by the Company. Purchases of various products from PSL totaled $ 58,056 and $ 55,297 for the fiscal years ended March 31, 2023 and March 25, 2022, respectively. Accounts payable to PSL included in amounts due to related party totaled $ 4,682 and $ 5,222 as of March 31, 2023 and March 25, 2022, respectively. Effective January 26, 2023, the Company and PSL entered into a new Wafer Foundry Agreement (“WFA”) for the fabrication of wafers. The WFA replaces the previous Wafer Foundry Agreement with PSL, dated April 12, 2013, which was due to expire on March 31, 2023. The WFA has a three-year term, and auto renews for subsequent one-year terms, unless terminated by either party providing two years notice. Pursuant to the WFA, the Company will provide a rolling annual forecast for three years , the first two years of which will be binding. The Company plans to purchase the forecast volume of wafers; however, if the Company fails to purchase the forecasted number of wafers for either of the first two years , it will pay a penalty for any shortfall for the given year. The parties also agreed upon production lead-times, as well as wafer, alignment, and mask pricing for the first two years of the term. Any changes to such pricing are subject to mutual agreement. Notes Receivable from PSL On December 2, 2021, AML entered into a loan agreement with PSL wherein PSL provided an initial promissory note to AML for a principal amount of $ 7,500 (the “Initial PSL Loan”). The Initial PSL Loan will be repaid in equal installments, comprising of principal and interest accrued at 1.26 % per annum, over a term of four years , with payments due on the first day of each calendar year quarter (April 1 st , July 1 st , October 1 st , and January 1 st ). On July 1, 2022, PSL borrowed an additional $ 7,500 under the same terms of the PSL Loan (the “Secondary PSL Loan” and, together with the Initial PSL Loan, the “PSL Promissory Notes”). The loan funds were used by PSL to procure a deep ultraviolet scanner and other associated manufacturing tools necessary to increase wafer fabrication capacity in support of the Company’s increasing wafer demand. As of March 31, 2023, the outstanding balance of the PSL Promissory Notes was $ 12,188 . During the year ended March 31, 2023, PSL made quarterly payments to AML totaling $ 3,014 , which included $ 202 of interest income. F-38