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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
_________________
FORM 10-Q
_________________
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 24, 2022
or
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from                             to                            
Commission File Number: 001-39675
_________________
ALLEGRO MICROSYSTEMS, INC.
(Exact name of registrant as specified in its charter)
_________________
Delaware46-2405937
(State or other jurisdiction of
incorporation or organization)
(I.R.S. Employer
Identification No.)
955 Perimeter Road
Manchester,New Hampshire03103
(Address of principal executive offices)(Zip Code)
(603626-2300
(Registrant’s telephone number, including area code)
N/A
(Former name, former address and former fiscal year, if changed since last report)
_________________
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Trading
Symbol(s)
Name of each exchange on which registered
Common Stock, par value $0.01 per shareALGMThe Nasdaq Global Select Market
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.     Yes      No 
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).     Yes      No  
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filerAccelerated filer
Non-accelerated filerSmaller reporting company
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes      No  
As of July 22, 2022, the registrant had 191,269,633 shares of common stock, $0.01 par value per share, outstanding.
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TABLE OF CONTENTS
Page



FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q (the “Quarterly Report”) contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. We intend such forward-looking statements to be covered by the safe harbor provisions for forward-looking statements contained in Section 27A of the Securities Act of 1933, as amended and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). All statements other than statements of historical facts contained in this Quarterly Report, including statements regarding our future results of operations and financial position, business strategy, the impact of the ongoing and global COVID-19 pandemic on our business, prospective products and the plans and objectives of management for future operations, may be forward-looking statements. These statements involve known and unknown risks, uncertainties and other important factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements.
Statements regarding our future results of operations and financial position, business strategy and plans and objectives of management for future operations, including, among others, statements regarding the liquidity, growth and profitability strategies and factors and trends affecting our business are forward-looking statements. Without limiting the foregoing, in some cases, you can identify forward-looking statements by terms such as “aim,” “may,” “will,” “should,” “expect,” “exploring,” “plan,” “anticipate,” “could,” “intend,” “target,” “project,” “contemplate,” “believe,” “estimate,” “predict,” “potential,” “seek,” or “continue” or the negative of these terms or other similar expressions, although not all forward-looking statements contain these words. No forward-looking statement is a guarantee of future results, performance, or achievements, and one should avoid placing undue reliance on such statements.
Forward-looking statements are based on our management’s beliefs and assumptions and on information currently available to us. Such beliefs and assumptions may or may not prove to be correct. Additionally, such forward-looking statements are subject to a number of known and unknown risks, uncertainties and assumptions, and actual results may differ materially from those expressed or implied in the forward-looking statements due to various factors, including, but not limited to, those identified in Part I, Item 2. “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and Part II. Item 1A. “Risk Factors” in this Quarterly Report and Part II, Item 1A. “Risk Factors” in our Annual Report on Form 10-K for the year ended March 25, 2022 (the “2022 Annual Report”). These risks and uncertainties include, but are not limited to:
downturns or volatility in general economic conditions, including as a result of the COVID-19 pandemic, particularly in the automotive market;
our ability to compete effectively, expand our market share and increase our net sales and profitability;
our reliance on a limited number of third-party wafer fabrication facilities and suppliers of other materials;
our failure to adjust purchase commitments and inventory management based on changing market conditions or customer demand;
shifts in our product mix or customer mix, which could negatively impact our gross margin;
the cyclical nature of the analog semiconductor industry;
any downturn in the automotive market;
our ability to compensate for decreases in average selling prices of our products and increases in input costs;
increases in inflation rates or sustained periods of inflation in the markets in which we operate;
any disruptions at our primary third-party wafer fabrication facilities;
our ability to manage any sustained yield problems or other delays at our third-party wafer fabrication facilities or in the final assembly and test of our products;
our ability to fully realize the benefits of past and potential future initiatives designed to improve our competitiveness, growth and profitability;
our ability to accurately predict our quarterly net sales and operating results;
our ability to adjust our supply chain volume to account for changing market conditions and customer demand;
our reliance on a limited number of third-party wafer fabrication facilities and suppliers of other materials;
our dependence on manufacturing operations in the Philippines;
our reliance on distributors to generate sales;
COVID-19 induced lock-downs and suppression on our supply chain and customer demand;
our ability to develop new product features or new products in a timely and cost-effective manner;
our ability to manage growth;
any slowdown in the growth of our end markets;
the loss of one or more significant customers;
our ability to meet customers’ quality requirements;
uncertainties related to the design win process and our ability to recover design and development expenses and to generate timely or sufficient net sales or margins;
2


changes in government trade policies, including the imposition of tariffs and export restrictions;
our exposures to warranty claims, product liability claims and product recalls;
our dependence on international customers and operations;
the availability of rebates, tax credits and other financial incentives on end-user demands for certain products;
risks related to governmental regulation and other legal obligations, including privacy, data protection, information security, consumer protection, environmental and occupational health and safety, anti-corruption and anti-bribery, and trade controls;
the volatility of currency exchange rates;
our ability to raise capital to support our growth strategy;
our indebtedness may limit our flexibility to operate our business;
our ability to effectively manage our growth and to retain key and highly skilled personnel;
our ability to protect our proprietary technology and inventions through patents or trade secrets;
our ability to commercialize our products without infringing third-party intellectual property rights;
disruptions or breaches of our information technology systems or those of our third-party service providers;
our principal stockholders have substantial control over us;
the inapplicability of the “corporate opportunity” doctrine to any director or stockholder who is not employed by us;
the dilutive impact on the price of our shares upon future issuance by us or future sales by our stockholders;
our lack of intent to declare or pay dividends for the foreseeable future;
anti-takeover provisions in our organizational documents and General Corporation Law of the State of Delaware;
the exclusive forum provision in our Certificate of Incorporation for disputes with stockholders;
our inability to design, implement or maintain effective internal control over financial reporting;
changes in tax rates or the adoption of new tax legislation; and
other events beyond our control.
Moreover, we operate in an evolving environment. New risk factors and uncertainties may emerge from time to time, and it is not possible for management to predict all risk factors and uncertainties.
You should read this Quarterly Report and the documents that we reference in this Quarterly Report completely and with the understanding that our actual future results may be materially different from what we expect. We qualify all of our forward-looking statements by these cautionary statements. Except as required by applicable law, we do not plan to publicly update or revise any forward-looking statements contained in this Quarterly Report, whether as a result of any new information, future events or otherwise.
Unless the context otherwise requires, references to “we,” “us,” “our,” the “Company” and “Allegro” refer to the operations of Allegro MicroSystems, Inc. and its consolidated subsidiaries.
3


PART I – FINANCIAL INFORMATION
Item 1. Condensed Consolidated Financial Statements
ALLEGRO MICROSYSTEMS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except par value and share amounts)
(Unaudited)
June 24,
2022
March 25,
2022
Assets
Current assets:
Cash and cash equivalents$286,557 $282,383 
Restricted cash9,715 7,416 
Trade accounts receivable, net of provision for expected credit losses of $149 and $105 at June 24, 2022 and March 25, 2022, respectively
91,552 87,359 
Trade and other accounts receivable due from related party30,109 27,360 
Accounts receivable – other
1,430 4,144 
Inventories88,933 86,160 
Prepaid expenses and other current assets18,863 14,995 
Current portion of related party note receivable1,875 1,875 
Total current assets529,034 511,692 
Property, plant and equipment, net214,808 210,028 
Operating lease right-of-use assets15,158 16,049 
Deferred income tax assets25,505 17,967 
Goodwill19,953 20,009 
Intangible assets, net36,142 35,970 
Related party note receivable, less current portion5,156 5,625 
Equity investment in related party26,807 27,671 
Other assets, net53,550 47,609 
Total assets$926,113 $892,620 
Liabilities, Non-Controlling Interests and Stockholders' Equity
Current liabilities:
Trade accounts payable$34,492 $29,836 
Amounts due to related party4,704 5,222 
Accrued expenses and other current liabilities68,952 65,459 
Current portion of operating lease liabilities3,656 3,706 
Total current liabilities111,804 104,223 
Obligations due under Senior Secured Credit Facilities25,000 25,000 
Operating lease liabilities, less current portion11,893 12,748 
Other long-term liabilities14,056 15,286 
Total liabilities162,753 157,257 
Commitments and contingencies (Note 13)
Stockholders' Equity:
Preferred Stock, $0.01 par value; 20,000,000 shares authorized, no shares issued or outstanding at June 24, 2022 and March 25, 2022
  
Common stock, $0.01 par value; 1,000,000,000 shares authorized, 191,180,179 shares issued and outstanding at June 24, 2022; 1,000,000,000 shares authorized, 190,473,595 issued and outstanding at March 25, 2022
1,912 1,905 
Additional paid-in capital652,317 627,792 
Retained earnings133,205 122,958 
Accumulated other comprehensive loss(25,198)(18,448)
Equity attributable to Allegro MicroSystems, Inc.762,236 734,207 
Non-controlling interests1,124 1,156 
Total stockholders' equity763,360 735,363 
Total liabilities, non-controlling interest and stockholders' equity$926,113 $892,620 
The accompanying notes are an integral part of these condensed consolidated financial statements.
4

ALLEGRO MICROSYSTEMS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except share and per share amounts)
(Unaudited)
Three-Month Period Ended
June 24,
2022
June 25,
2021
Net sales$176,044 $152,689 
Net sales to related party41,709 35,453 
Total net sales217,753 188,142 
Cost of goods sold (Note17)99,379 93,982 
Gross profit118,374 94,160 
Operating expenses:
Research and development33,857 29,554 
Selling, general and administrative69,980 32,064 
Change in fair value of contingent consideration(200)300 
Total operating expenses103,637 61,918 
Operating income 14,737 32,242 
Other income (expense):
Interest expense, net(120)(345)
Foreign currency transaction gain (loss)1,924 (254)
(Loss) income in earnings of equity investment(864)279 
Other, net(3,429)48 
Income before income taxes12,248 31,970 
Income tax provision1,965 4,263 
Net income10,283 27,707 
Net income attributable to non-controlling interests36 38 
Net income attributable to Allegro MicroSystems, Inc.$10,247 $27,669 
Net income attributable to Allegro MicroSystems, Inc. per share:
Basic$0.05 $0.15 
Diluted$0.05 $0.14 
Weighted average shares outstanding:
Basic190,638,135 189,585,381 
Diluted192,406,276 191,163,074 
The accompanying notes are an integral part of these condensed consolidated financial statements.
5

ALLEGRO MICROSYSTEMS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(in thousands)
(Unaudited)
Three-Month Period Ended
June 24,
2022
June 25,
2021
Net income$10,283 $27,707 
Net income attributable to non-controlling interest36 38 
Net income attributable to Allegro MicroSystems, Inc.10,247 27,669 
Other comprehensive loss:
Foreign currency translation adjustment(6,818)(30)
Comprehensive income3,429 27,639 
Other comprehensive loss attributable to non-controlling interest68 30 
Comprehensive income attributable to Allegro MicroSystems, Inc.$3,497 $27,669 
The accompanying notes are an integral part of these condensed consolidated financial statements.
6

ALLEGRO MICROSYSTEMS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
(in thousands, except share amounts)
(Unaudited)
Preferred StockCommon Stock
Additional
Paid-In Capital
Retained Earnings
Accumulated
Other
Comprehensive
Loss
Non-Controlling InterestsTotal Equity
SharesAmountSharesAmount
Balance at March 26, 2021— $— 189,588,161 $1,896 $592,170 $3,551 $(11,865)$1,119 $586,871 
Net income— — — — — 27,669 — 38 27,707 
Stock-based compensation, net of forfeitures— — (6,540)— 4,831 — — — 4,831 
Foreign currency translation adjustment— — — — — — — (30)(30)
Balance at June 25, 2021— $— 189,581,621 $1,896 $597,001 $31,220 $(11,865)$1,127 $619,379 
Preferred StockCommon Stock
Additional
Paid-In Capital
Retained Earnings
Accumulated
Other
Comprehensive
Loss
Non-Controlling InterestsTotal Equity
SharesAmountSharesAmount
Balance at March 25, 2022— $— 190,473,595 $1,905 $627,792 $122,958 $(18,448)$1,156 $735,363 
Net income— — — — — 10,247 — 36 10,283 
Stock-based compensation, net of forfeitures— — 706,584 7 34,131 — — — 34,138 
Payments of taxes withheld on net settlement of equity awards— — — — (9,606)— — — (9,606)
Foreign currency translation adjustment— — — — — — (6,750)(68)(6,818)
Balance at June 24, 2022— $— 191,180,179 $1,912 $652,317 $133,205 $(25,198)$1,124 $763,360 
The accompanying notes are an integral part of these condensed consolidated financial statements.
7

ALLEGRO MICROSYSTEMS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(Unaudited)
Three-Month Period Ended
June 24,
2022
June 25,
2021
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income$10,283 $27,707 
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization11,918 12,172 
Amortization of deferred financing costs24 25 
Deferred income taxes(7,784)(1,454)
Stock-based compensation34,136 4,831 
Gain on disposal of assets(3)(35)
(Gain) loss on contingent consideration change in fair value(200)300 
Provisions for inventory and expected credit losses2,640 1,613 
Unrealized loss on marketable securities3,486  
Changes in operating assets and liabilities:
Trade accounts receivable(4,718)(9,956)
Accounts receivable - other2,714 (97)
Inventories(4,888)5,142 
Prepaid expenses and other assets(13,102)1,719 
Trade accounts payable4,075 (2,993)
Due to/from related parties(3,267)1,917 
Accrued expenses and other current and long-term liabilities1,239 (2,396)
Net cash provided by operating activities36,553 38,495 
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property, plant and equipment(14,389)(15,346)
Net cash used in investing activities(14,389)(15,346)
CASH FLOWS FROM FINANCING ACTIVITIES:
Receipts on related party note receivable469  
Payments for taxes related to net share settlement of equity awards(9,606) 
Net cash used in financing activities(9,137) 
Effect of exchange rate changes on Cash and cash equivalents and Restricted cash(6,554)2,608 
Net increase in Cash and cash equivalents and Restricted cash6,473 25,757 
Cash and cash equivalents and Restricted cash at beginning of period289,799 203,875 
CASH AND CASH EQUIVALENTS AND RESTRICTED CASH AT END OF PERIOD:$296,272 $229,632 
RECONCILIATION OF CASH AND CASH EQUIVALENTS AND RESTRICTED CASH:
Cash and cash equivalents at beginning of period$282,383 $197,214 
Restricted cash at beginning of period7,416 6,661 
Cash and cash equivalents and Restricted cash at beginning of period$289,799 $203,875 
Cash and cash equivalents at end of period286,557 221,934 
Restricted cash at end of period9,715 7,698 
Cash and cash equivalents and Restricted cash at end of period$296,272 $229,632 
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid for interest$452 $269 
Cash refunded for income taxes(1,027)(538)
Noncash transactions:
Trade accounts payable related to Property, plant and equipment, net$(2,602)$(5,535)
Noncash lease liabilities arising from obtaining right-of-use assets150 356 
The accompanying notes are an integral part of these condensed consolidated financial statements.
8

ALLEGRO MICROSYSTEMS, INC.
Notes to Unaudited Condensed Consolidated Financial Statements
(Amounts in thousands, except share and per share amounts)

1. Nature of the Business and Basis of Presentation
Allegro MicroSystems, Inc., together with its consolidated subsidiaries (“AMI” or the “Company”), is a global leader in designing, developing and manufacturing sensing and power solutions for motion control and energy-efficient systems in automotive and industrial markets. The Company is headquartered in Manchester, New Hampshire and has a global footprint across multiple continents.
The accompanying unaudited condensed consolidated financial statements have been prepared by the Company. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”) have been condensed or omitted pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). The unaudited condensed consolidated financial statements include the Company's accounts and those of its subsidiaries. All intercompany balances have been eliminated in consolidation. These unaudited condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K filed with the SEC on May 18, 2022 (the “2022 Annual Report”). In the opinion of the Company’s management, the financial information for the interim periods presented reflects all adjustments necessary for a fair statement of the Company’s financial position, results of operations and cash. The results reported in these unaudited condensed consolidated financial statements are not necessarily indicative of results that may be expected for the entire year.
Financial Periods
The Company’s first quarter three-month period is a 13-week period ending on the Friday closest to the last day in June. The Company’s first quarter of fiscal 2023 ended June 24, 2022, and the Company’s first quarter of fiscal 2022 ended June 25, 2021.
2. Summary of Significant Accounting Policies
Use of Estimates
The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, and disclosures of contingencies at the date of the unaudited condensed consolidated financial statements and the reported amounts of net sales and expenses during the reporting period. Such estimates relate to useful lives of fixed and intangible assets, allowances for expected credit losses and customer returns and sales allowances. Such estimates could also relate to the fair value of acquired assets and liabilities, including goodwill and intangible assets, net realizable value of inventory, accrued liabilities, the valuation of stock-based awards, deferred tax valuation allowances, and other reserves. On an ongoing basis, management evaluates its estimates. Actual results could differ from those estimates, and such differences may be material to the unaudited condensed consolidated financial statements.
Concentrations of Credit Risk and Significant Customers
Financial instruments that potentially subject the Company to concentrations of credit risk consist primarily of cash, cash equivalents and accounts receivable. The Company maintains its cash and cash equivalents with financial institutions, which management believes to be of a high credit quality. To manage credit risk related to accounts receivables, the Company evaluates the creditworthiness of its customers and maintains allowances, to the extent necessary, for potential credit losses based upon the aging of its accounts receivable balances and known collection issues. The Company has not experienced any significant credit losses during the prior two years.
As of June 24, 2022 and March 25, 2022, Sanken Electric Co., Ltd. (“Sanken”) accounted for 24.7% and 23.8% of the Company’s outstanding trade accounts receivable, net, respectively, including related party trade accounts receivable. No other customers accounted for 10% or more of outstanding trade accounts receivable, net during those periods.
For the three months ended June 24, 2022 and June 25, 2021, Sanken accounted for 19.2% and 18.8% of total net sales, respectively. No other customers accounted for 10% or more of total net sales for either of the three months ended June 24, 2022 or June 25, 2021.
9

ALLEGRO MICROSYSTEMS, INC.
Notes to Unaudited Condensed Consolidated Financial Statements – (continued)
(Amounts in thousands, except share and per share amounts)
During the three months ended June 24, 2022, sales from customers located outside of the United States accounted for, in the aggregate, 87.0% of the Company’s total net sales, with Greater China accounting for 25.3% and Japan accounting for 19.2%. No other countries accounted for greater than 10% of total net sales for the three months ended June 24, 2022.
During the three months ended June 25, 2021, sales from customers located outside of the United States, in the aggregate, accounted for 85.7% of the Company’s total net sales, with Greater China accounting for 22.7%, Japan accounting for 18.8% and South Korea accounting for 11.7%. No other countries accounted for greater than 10% of total net sales for the three months ended June 25, 2021.
Recently Adopted Accounting Standards
In October 2021, the Financial Accounting Standards Board (“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 ASC Topic 606, Contracts with Customers (“ASC 606”), to recognize and measure contract assets and contract liabilities in a business combination as if the acquired contracts with customers were originated by the acquiring entity at the acquisition date. An acquirer may assess how the acquiree applied ASC 606 and generally should recognize and measure the acquired contract assets and contract liabilities consistent with the recognition and measurement in the acquiree’s financial statements, as prepared in accordance with U.S. GAAP. If unable to rely on the acquiree’s accounting due to errors, noncompliance with U.S. GAAP, or differences in accounting policies, the acquirer should consider the terms of the acquired contracts, such as timing of payment, identify each performance obligation in the contracts, and allocate the total transaction price to each identified performance obligation on a relative standalone selling price basis as of contract inception (that is, the date the acquiree entered into the contracts) or contract modification to determine what should be recorded at the acquisition date. The 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. The Company will apply the guidance in ASU 2021-08 prospectively to all business combinations that occur after the date of adoption.
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 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
None applicable.
3. Revenue from Contracts with Customers
The Company generates revenue from the sale of magnetic sensor integrated circuits (“ICs”) and application-specific analog power semiconductors. The following tables summarize net sales disaggregated by application, by product and by geography for the three months ended June 24, 2022 and June 25, 2021. The categorization of net sales by application is determined using various characteristics of the product and the application into which the Company’s product will be incorporated. The categorization of net sales by geography is determined based on the location to which the products are shipped.
10

ALLEGRO MICROSYSTEMS, INC.
Notes to Unaudited Condensed Consolidated Financial Statements – (continued)
(Amounts in thousands, except share and per share amounts)
Net sales by application:
Three-Month Period Ended
June 24,
2022
June 25,
2021
Automotive$149,649 $133,523 
Industrial40,140 30,309 
Other27,964 24,310 
Total net sales$217,753 $188,142 
Net sales by product:
Three-Month Period Ended
June 24,
2022
June 25,
2021
Power integrated circuits$80,660 $66,672 
Magnetic sensors137,050 120,642 
Photonics43 828 
Total net sales$217,753 $188,142 
Net sales by geography:
Three-Month Period Ended
June 24,
2022
June 25,
2021
Americas:
United States$28,391 $26,841 
Other Americas6,487 6,349 
EMEA:
Europe35,333 34,751 
Asia:
Japan41,709 35,453 
Greater China55,116 42,779 
South Korea20,979 21,933 
Other Asia29,738 20,036 
Total net sales$217,753 $188,142 
The Company recognizes sales net of returns, credits issued, price protection adjustments and stock rotation rights. At June 24, 2022 and March 25, 2022, these adjustments were $14,399 and $14,924, respectively, and were netted against trade accounts receivable in the unaudited condensed consolidated balance sheets. These amounts represent activity of income of $525 and $1,613 for the three months ended June 24, 2022 and June 25, 2021, respectively.
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.
11

ALLEGRO MICROSYSTEMS, INC.
Notes to Unaudited Condensed Consolidated Financial Statements – (continued)
(Amounts in thousands, except share and per share amounts)
4. Fair Value Measurements
The following tables present information about the Company’s financial assets and liabilities as of June 24, 2022 and March 25, 2022 measured at fair value on a recurring basis and indicate the level of the fair value hierarchy utilized to determine such fair values:
Fair Value Measurement at June 24, 2022 Using:
Level 1Level 2Level 3Total
Assets:
Cash equivalents:
Money market fund deposits$96,395 $ $ $96,395 
Restricted cash:
Money market fund deposits9,715   9,715 
Other assets, net (long-term):
Investments in marketable securities8,538   8,538 
Total assets$114,648 $ $ $114,648 
Liabilities:
Other long-term liabilities:
Contingent consideration$ $ $2,600 $2,600 
Total liabilities$ $ $2,600 $2,600 
Fair Value Measurement at March 25, 2022 Using:
Level 1Level 2Level 3Total
Assets:
Cash equivalents:
Money market fund deposits$16,927 $ $ $16,927 
Restricted cash:
Money market fund deposits7,416   7,416 
Other assets, net (long-term):
Investments in marketable securities12,346   12,346 
Total assets$36,689 $ $ $36,689 
Liabilities:
Other long-term liabilities:
Contingent consideration  2,800 2,800 
Total liabilities$ $ $2,800 $2,800 
The following table represents the unrealized gains and losses on investments in marketable securities held with a readily determinable fair value for the three months ended June 24, 2022:
Net losses recognized during the period on equity securities$(3,486)
Less: Net gains and losses recognized during the period on equity securities sold during the period 
Unrealized losses recognized during the reporting period on equity securities still held at the reporting date$(3,486)
In addition to the unrealized gains in the table above, the change in fair value of the equity securities was impacted by unrealized foreign currency exchange losses of $323 for the three months ended June 24, 2022. There were no investments in marketable securities during the three months ended June 25, 2021.
In connection with the fiscal year 2021 purchase of Voxtel, Inc. (“Voxtel”), a privately held technology company located in Beaverton, Oregon, that develops, manufactures and supplies photonic and advanced 3D imaging technologies (the “Voxtel Acquisition”), the Company is required to make contingent payments, subject to the entity achieving certain sales and revenue thresholds. The contingent consideration payments are up to $15,000. The fair value of the liabilities for the contingent payments recognized upon the Voxtel Acquisition as part of the purchase accounting opening balance sheet
12

ALLEGRO MICROSYSTEMS, INC.
Notes to Unaudited Condensed Consolidated Financial Statements – (continued)
(Amounts in thousands, except share and per share amounts)
totaled $7,300 and was estimated by discounting to present value the probability-weighted contingent payments expected to be made. Assumptions used in this calculation were units sold, expected revenue, discount rate and various probability factors. The ultimate settlement of contingent consideration could deviate from current estimates based on the actual results of these financial measures. This liability is considered to be a Level 3 financial liability that is remeasured during each reporting period. The change in fair value of contingent consideration for the Voxtel Acquisition is included in change in fair value of contingent consideration in the unaudited condensed consolidated statements of operations.
The following table shows the change in fair value of Level 3 contingent consideration in connection with an acquisition in fiscal year 2021 for the three-month periods ended June 24, 2022 and June 25, 2021:
Level 3
Contingent
 Consideration
Balance at March 25, 2022$2,800 
Change in fair value of contingent consideration(200)
Balance at June 24, 2022$2,600 
Balance at March 26, 2021$4,800 
Change in fair value of contingent consideration300 
Balance at June 25, 2021$5,100 
Assets and liabilities measured at fair value on a recurring basis also consist of marketable securities, unit investment trust funds, loans, bonds, stock and other investments which are the Company’s defined benefit plan assets. Fair value information for those assets and liabilities, including their classification in the fair value hierarchy, is included in Note 12, “Retirement Plans.”
During the three months ended June 24, 2022 and June 25, 2021, there were no transfers among Level 1, Level 2 and Level 3 asset or liabilities.
5. Trade Accounts Receivable, net
Trade accounts receivable, net (including related party trade accounts receivable) consisted of the following:
June 24,
2022
March 25,
2022
Trade accounts receivable$136,032 $129,539 
Less:
Provision for expected credit losses(149)(105)
Returns and sales allowances(14,250)(14,819)
Related party trade accounts receivable(30,081)(27,256)
Total$91,552 $87,359 
13

ALLEGRO MICROSYSTEMS, INC.
Notes to Unaudited Condensed Consolidated Financial Statements – (continued)
(Amounts in thousands, except share and per share amounts)
The Company is exposed to credit losses primarily through trade and other financing receivables arising from revenue transactions. The Company uses an aging schedule method to estimate current expected credit losses (“CECL”) based on days of delinquency, including information about past events and current economic conditions. The Company’s accounts receivable are separated into two categories using a portfolio methodology to evaluate the allowance under the CECL impairment model based on sales categorization and similar credit quality and worthiness of the customers: original equipment manufacturers (“OEMs”) and distributors. The receivables in each category share similar risk characteristics. The Company increases the provision for expected credits losses when the Company determines all or a portion of a receivable is uncollectible, and the Company recognizes recoveries as a decrease to the provision for expected credit losses.
Changes in the Company’s expected credit losses and returns and sales allowances were as follows:
DescriptionProvision for Expected Credit LossesReturns
and Sales
Allowances
Total
Balance at March 25, 2022$105 $14,819 $14,924 
Charged to costs and expenses or revenue44 27,753 27,797 
Settlements, net of recoveries (28,322)(28,322)
Balance at June 24, 2022$149 $14,250 $14,399 
Balance at March 26, 2021$138 $15,274 $15,412 
Charged to costs and expenses or revenue635 40,582 41,217 
Settlements, net of recoveries (42,830)(42,830)
Balance at June 25, 2021$773 $13,026 $13,799 
6. Inventories
Inventories include material, labor and overhead and consisted of the following:
June 24,
2022
March 25,
2022
Raw materials and supplies$12,334 $11,941 
Work in process57,661 55,855 
Finished goods18,938 18,364 
Total$88,933 $86,160 
The Company recorded inventory write-offs totaling $2,115 and $3,189 for the three months ended June 24, 2022 and June 25, 2021, respectively.
7. Property, Plant and Equipment, net
Property, plant and equipment, net is stated at cost, and consisted of the following:
June 24,
2022
March 25,
2022
Land$15,374 $15,775 
Buildings, building improvements and leasehold improvements58,518 59,816 
Machinery and equipment558,373 542,745 
Office equipment6,128 6,247 
Construction in progress22,229 22,428 
Total660,622 647,011 
Less accumulated depreciation(445,814)(436,983)
Total$214,808 $210,028 
Total depreciation expense amounted to $10,850 and $11,120 for the three months ended June 24, 2022 and June 25, 2021, respectively.
14

ALLEGRO MICROSYSTEMS, INC.
Notes to Unaudited Condensed 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 June 24, 2022 and March 25, 2022 are as follows:
June 24,
2022
March 25,
2022
United States$35,606 $35,221 
Philippines171,318 167,488 
Other8,491 7,746 
Total$215,415 $210,455 
Amortization of prepaid tooling costs amounted to $32 and $33 for the three months ended June 24, 2022 and June 25, 2021, respectively.
8. Goodwill and Intangible Assets
The table below summarizes the changes in the carrying amount of goodwill as follows:
Total
Balance at March 25, 2022$20,009 
Foreign currency translation(56)
Balance at June 24, 2022$19,953 
Balance at March 26, 2021$20,106 
Foreign currency translation12 
Balance at June 25, 2021$20,118 
Intangible assets, net is as follows:
June 24, 2022
DescriptionGrossAccumulated
Amortization
Net Carrying
Amount
Weighted-Average Lives
Patents$37,604 $15,860 $21,744 10 years
Customer relationships6,806 6,590 216 9 years
Process technology13,100 2,015 11,085 12 years
Indefinite-lived and legacy process technology4,050 1,650 2,400 
Trademarks200 74 126 5 years
Legacy trademarks629 58 571 
Other32 32  
Total$62,421 $26,279 $36,142 
March 25, 2022
DescriptionGrossAccumulated
Amortization
Net Carrying
Amount
Weighted-Average Lives
Patents$36,577 $15,304 $21,273 10 years
Customer relationships6,582 6,348 234 9 years
Process technology13,100 1,742 11,358 12 years
Indefinite-lived and legacy process technology4,050 1,650 2,400 
Trademarks200 64 136 5 years
Legacy trademarks627 58 569 
Other32 32  
Total$61,168 $25,198 $35,970 
Intangible assets amortization expense was $1,036 and $1,019 for the three months ended June 24, 2022 and June 25, 2021, respectively. The majority of the Company’s intangible assets are related to patents, as noted above.
15

ALLEGRO MICROSYSTEMS, INC.
Notes to Unaudited Condensed Consolidated Financial Statements – (continued)
(Amounts in thousands, except share and per share amounts)
As of June 24, 2022, annual amortization expense of intangible assets for the next five fiscal years is expected to be as follows:
Remainder of 2023$2,942 
20243,758 
20253,499 
20263,240 
20272,926 
Thereafter16,806 
Total$33,171 
9. Accrued Expenses and Other Current Liabilities
The composition of accrued expenses and other current liabilities is as follows:
June 24,
2022
March 25,
2022
Accrued management incentives$9,814 $33,607 
Accrued salaries and wages23,313 14,699 
Accrued vacation7,140 5,715 
Accrued severance4,308 839 
Accrued professional fees5,219 1,252 
Accrued income taxes11,161 1,831 
Accrued utilities2,157 607 
Other current liabilities5,840 6,909 
Total$68,952 $65,459 
10. Debt and Other Borrowings
On September 30, 2020, the Company entered into a term loan credit agreement with Credit Suisse AG, Cayman Islands Branch, as administrative agent and collateral agent, and the other agents, arrangers and lenders party thereto, providing for a $325,000 senior secured term loan facility due in 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 Company’s outstanding borrowings bore an interest rate of 4.81% at June 24, 2022. As of both June 24, 2022 and March 25, 2022, the Company had $25,000 outstanding under the Term Loan Facility and had not borrowed on the Revolving Credit Facility. As of June 24, 2022 and March 25, 2022, the unamortized portion of the deferred financing costs associated with the Revolving Credit Facility was $124 and $149, respectively, and the related short-term and long-term portions were classified within “Prepaid expenses and other current assets” and “Other assets” on its unaudited condensed consolidated balance sheets.
On November 26, 2019, the Company, through its subsidiaries, entered into a line of credit agreement with a financial institution that provides for a maximum borrowing capacity of 60,000 Philippine pesos (approximately $1,102 at June 24, 2022) at the bank’s prevailing interest rate. The line of credit is due to expire on August 31, 2022. There were no borrowings outstanding under this line of credit as of June 24, 2022 and March 25, 2022.
On November 20, 2019, the Company, through its subsidiaries, entered into a line of credit agreement with a financial institution that provides for a maximum capacity of 75,000 Philippine pesos (approximately $1,378 at June 24, 2022) at the bank’s prevailing interest rate. The line of credit is due to expire on June 30, 2023. There were no borrowings outstanding under this line of credit as of June 24, 2022 and March 25, 2022.
16

ALLEGRO MICROSYSTEMS, INC.
Notes to Unaudited Condensed Consolidated Financial Statements – (continued)
(Amounts in thousands, except share and per share amounts)
11. Other Long-Term Liabilities
The composition of other long-term liabilities is as follows:
June 24,
2022
March 25,
2022
Accrued management incentives$31 $826 
Accrued retirement8,646 8,903 
Accrued contingent consideration2,600 2,800 
Provision for uncertain tax positions (net)2,779