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What changed in ALLEGRO MICROSYSTEMS, INC.'s 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of ALLEGRO MICROSYSTEMS, INC.'s 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+454 added−563 removedSource: 10-K (2023-05-25) vs 10-K (2022-05-18)

Top changes in ALLEGRO MICROSYSTEMS, INC.'s 2023 10-K

454 paragraphs added · 563 removed · 346 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

135 edited+47 added−41 removed74 unchanged
Biggest changeAutomotive Market IC Solutions Industrial Market IC Solutions Other Market IC Solutions PRODUCTS • Current sensors • Current sensors • Current sensors • Position sensors • Position sensors • Position sensors • Speed sensors • Speed sensors • Motor drivers • LED drivers • LED drivers • Regulators • Motor drivers • Motor drivers • Regulators and PMICs • Regulators • Photonics and 3D sensing ICs • Photonics and 3D sensing ICs APPLICATIONS • Engine management and transmission systems • Industry 4.0/Factory automation equipment • Gaming • Electric motor powertrain and charging systems for xEV • Industrial motors • PC printers and peripherals • ADAS, active safety, including steering and braking systems • Smart home/IoT • Personal electronics • Automotive LiDAR • Data center and 5G infrastructure • Energy Star household appliances including white goods • Comfort and convenience including in-cabin motors, HVAC, infotainment, LED lighting • EV charging infrastructure • Passive safety including seatbelt switches, wipers, door/window sensors, seat position, suspension • Personal mobility • Green energy applications • Industrial LiDAR Sustainability Efforts We strive to develop intelligent solutions that move the world toward a safer and more sustainable future.
Biggest changeAutomotive Market IC Solutions Industrial Market IC Solutions Other Market IC Solutions PRODUCTS • Current sensors • Current sensors • Current sensors • Position sensors • Position sensors • Position sensors • Speed sensors • Speed sensors • Motor drivers • LED drivers • LED drivers • Regulators • Motor drivers • Motor drivers • Regulators and PMICs • Regulators • Isolated gate drivers • Isolated gate drivers APPLICATIONS • Electric motor powertrain and charging systems for EV • EV charging infrastructure • Smart home/IoT • ADAS, active safety, including steering and braking systems • Solar power generation, storage, and distribution • PC printers and peripherals • Engine management and transmission systems • Factory automation equipment • Personal electronics • Comfort and convenience including in-cabin motors, HVAC, infotainment, LED lighting • Industrial motors • Energy Star household appliances including white goods • Passive safety including seatbelt switches, wipers, door/window sensors, seat position, suspension • Data center and 5G infrastructure • Personal mobility Environmental, Social and Governance Initiatives Our commitment to ESG is intrinsic to our core value of “Innovation with Purpose” and is directly aligned to our corporate strategy and growth plans.
In our current fabless, asset-lite manufacturing model, we use external wafer manufacturing consisting of both standard and proprietary processes, along with internal and external assembly and test capabilities to provide both flexibility and scale. Through our subcontractor manufacturers, we are able to employ our proprietary wafer fabrication processes while leveraging our subcontractors’ manufacturing technologies and high-volume capacity.
In our current fabless, asset-lite manufacturing model, we use external wafer manufacturing consisting of both standard and proprietary processes, along with internal and external assembly and internal test capabilities to provide both flexibility and scale. Through our subcontractor manufacturers, we are able to employ our proprietary wafer fabrication processes while leveraging our subcontractors’ manufacturing technologies and high-volume capacity.
Based on industry forecasts, we believe the transition to vehicles that incorporate ADAS level 2 through 5 technologies and strong adoption of sensors and power management products to 5 support these vehicles will enable us to increase our total available market related to ADAS and related Safety & Chassis technologies.
Based on industry forecasts, we believe the transition to vehicles that incorporate ADAS Level 2 5 through 5 technologies and strong adoption of sensors and power management products to support these vehicles, will enable us to increase our total available market related to ADAS and related safety and chassis technologies.
We expect to continue to improve our product mix by developing new products for growth markets where we believe we can generate higher ASPs and/or higher gross margins. We also intend to further our relationships with key foundry suppliers to apply our product and applications knowledge to develop differentiated and cost-efficient wafer processes and packages.
We expect to continue to improve our product mix by developing new products for growth markets where we believe we can generate higher ASPs and/or higher gross margins. We also intend to further our relationships with key foundry suppliers to apply our products and applications knowledge to develop differentiated and cost-efficient wafer processes and packages.
Power ICs Our power IC portfolio is comprised of high-temperature and high-voltage capable motor driver ICs, regulator power management ICs and LED driver ICs, which allow our customers to design safer, smaller and more power-efficient systems. We employ embedded algorithms that simplify system-level design, reduce audible noise, and increase start-up reliability in BLDC motors and fans.
Power ICs Our power IC portfolio is comprised of high-temperature and high-voltage capable motor driver ICs, regulator power management ICs, LED driver ICs and high-voltage IGDs, which allow our customers to design safer, smaller and more power-efficient systems. We employ embedded algorithms that simplify system-level design, reduce audible noise, and increase start-up reliability in BLDC motors and fans.
Our primary internal assembly and test facility based in Manila, Philippines (the “AMPI Facility”) provides high-volume production capacity while facilitating the protection of our proprietary process technology, particularly for the assembly and testing of our magnetic sensor products. Additionally, we make use of other third-party assembly and second-source 8 manufacturers for industry standard packaging.
Our primary internal assembly and test facility based in Manila, Philippines (the “AMPI Facility”) provides high-volume production capacity while facilitating the protection of our proprietary process technology, particularly for the assembly and testing of our magnetic sensor products. Additionally, we make use of other third-party assembly and second-source manufacturers for industry standard packaging.
Our magnetic current sensor ICs with embedded high-voltage isolation are used extensively in power conversion and inverter applications in solar and wind energy generation. In addition, our angle sensor ICs and motor driver ICs play a key role in the mechatronic systems used to optimize the alignment 13 between solar panels and the changing position of the sun, for example.
Our magnetic current sensor ICs with embedded high-voltage isolation are used extensively in power conversion and inverter applications in solar and wind energy generation. In addition, our angle sensor ICs and motor driver ICs play a key role in the mechatronic systems used to optimize the alignment between solar panels and the changing position of the sun, for example.
In addition, our customer diversity and longstanding track record with key customers, particularly in the automotive market, provides us with a deep channel into which we can introduce new products. As a result, based on our internal metrics, we believe we have sharp visibility into, and understanding of, long-term revenue trends.
In addition, our customer diversity and longstanding track record with key customers, particularly in the automotive market, provides us with a deep channel into which we can introduce new products. As a result, based on our internal metrics, we believe we have visibility into, and understanding of, long-term revenue trends.
Allegro’s compensation programs are designed to align the compensation of our employees, who operate in a highly competitive and technologically challenging environment, with Allegro’s business performance and 18 to provide the proper incentives to attract, retain and motivate employees to achieve superior performance. The structure of our compensation programs balances incentive earnings for both short-term and long-term performance.
Allegro’s compensation programs are designed to align the compensation of our employees, who operate in a highly competitive and technologically challenging environment, with Allegro’s business performance and to provide the proper incentives to attract, retain and motivate employees to achieve superior performance. The structure of our compensation programs balances incentive earnings for both short-term and long-term performance.
We monitor employee turnover rates, as our success depends upon retaining and investing in our highly trained manufacturing and technical staff. Allegro strives to decrease voluntary turnover rates and thereby increase employee tenure by ensuring a combination of competitive compensation, individual developmental opportunities and personal career enrichment and growth.
We closely monitor employee turnover rates, as our success depends upon retaining and investing in our highly trained manufacturing and technical staff. Allegro strives to decrease voluntary turnover rates and thereby increase employee tenure by ensuring a combination of competitive compensation, individual developmental opportunities and personal career enrichment and growth.
D’Antilio holds a B.S.B.A. in Accounting from Salem State University and an M.B.A. from Babson College. Sharon S. Briansky has served as our Senior Vice President, General Counsel and Secretary since she joined Allegro in December 2021. Prior to joining Allegro, Ms.
Mr. D’Antilio holds a B.S.B.A. in Accounting from Salem State University and an M.B.A. from Babson College. Sharon S. Briansky has served as our Senior Vice President, General Counsel and Secretary since she joined Allegro in December 2021. Prior to joining Allegro, Ms.
We also believe we can use our expertise in designing for the automotive market and our expanding product portfolio to capitalize on increasing demand among industrial customers for ruggedized solutions that meet the 9 highest quality and reliability standards.
We also believe we can use our expertise in designing for the automotive market and our expanding product portfolio to capitalize on increasing demand among industrial customers for ruggedized solutions that meet the highest quality and reliability standards.
This strong competitive position allows us to gain insight into the specifications for our customers’ evolving products and enables us to develop innovative solutions to meet their needs, providing us with multiple opportunities to secure continued business.
This strong competitive position allows us to gain insight into the specifications for our customers’ evolving 8 products and enables us to develop innovative solutions to meet their needs, providing us with multiple opportunities to secure continued business.
To achieve the highest level of Automotive Safety Integrity Level (“ASIL”), we are able to 15 integrate xMR and Hall-effect transducers onto the same silicon to produce heterogeneous solutions capable of performing reliably in the most demanding automotive environments.
To achieve the highest level of Automotive Safety Integrity Level (“ASIL”), we are able to integrate xMR and Hall-effect transducers onto the same silicon to produce heterogeneous solutions capable of performing reliably in the most demanding automotive environments.
Additionally, their experience of effectively managing through various industry cycles and technology transitions provides us with steady, reliable leadership, uniquely capable of identifying strong investments, executing through changes and maintaining stability during periods of market uncertainty.
Their experience of effectively managing through various industry cycles and technology transitions provides us with steady, reliable leadership, uniquely capable of identifying strong investments, executing through changes and maintaining stability during periods of market uncertainty.
Additionally, we believe our system-level knowledge resulting from close customer collaboration enables us to understand our customers’ specific system requirements and more quickly and effectively develop advanced solutions to meet their 7 needs.
Additionally, we believe our system-level knowledge resulting from close customer collaboration enables us to understand our customers’ specific system requirements and more quickly and effectively develop advanced solutions to meet their needs.
Years of design and manufacturing refinement have led to the latest generation of power products that integrate passive components and power delivery into small packages to reduce PCB footprint and reduce noise in high-power systems.
Years of design and manufacturing refinement have led to the latest 15 generation of power products that integrate passive components and power delivery into small packages to reduce PCB footprint and reduce noise in high-power systems.
Research and Development Strategy We are a technology company and believe that our future success depends on our ability to rapidly develop and introduce differentiated new products in our target markets.
Research and Development Strategy We are a technology company, and we believe our future success depends on our ability to rapidly develop and introduce differentiated new products in our target markets.
Our focus on meeting or exceeding the stringent automotive market safety and reliability requirements is fundamental to our research and development process. We anticipate that we will continue to make research and development investments in order to enhance our leadership position and expand our markets with innovative, high-quality products and services (as exemplified through our acquisition of Voxtel).
Our focus on meeting or exceeding the stringent automotive market safety and reliability requirements is fundamental to our research and development process. We anticipate that we will continue to make research and development investments in order to enhance our leadership position and expand our markets with innovative, high-quality products and services (as exemplified through our acquisition of Heyday).
Our magnetic speed and position sensor ICs, motor driver ICs, and PMICs are used in advanced, high-efficiency vehicle transmissions. These ICs sense the position of gears and clutches, regulate power to the sensors and control electronics, and drive the actuators needed to operate high-efficiency 8 to 10 speed transmissions. • Energy efficiency in hybrid and fully electric vehicles.
Our magnetic speed and position sensor ICs, motor driver ICs, and PMICs are used in advanced, high-efficiency vehicle transmissions. These ICs sense the position of gears and clutches, regulate power to the sensors and control electronics, and drive the actuators needed to operate high-efficiency eight to 10-speed transmissions. • Energy efficiency in hybrid and fully electric vehicles.
Doogue holds over 70 U.S. patents in the areas of sensors and semiconductors. Mr. Doogue received a B.A. in Physics from Colby College in 1997 and a B.E. in Electrical Engineering from Dartmouth College in 1998. In 2007, Mr. Doogue completed the Stanford Executive Program at the Stanford University Graduate School of Business. Max R.
Mr. Doogue holds over 75 U.S. patents in the areas of sensors and semiconductors. Mr. Doogue received a B.A. in Physics from Colby College in 1997 and a B.E. in Electrical Engineering from Dartmouth College in 1998. In 2007, Mr. Doogue completed the Stanford Executive Program at the Stanford University Graduate School of Business. Max R.
In addition, our power IC products improve energy efficiency and motion control in mild hybrid cars, where our 100-volt wafer technology is ideal for use when driving 48-volt motors or powering electronics from the internal 48-volt battery. • Renewable and smart energy applications.
In addition, our power IC products improve energy efficiency and motion control in mild hybrid cars, where our 100V wafer technology is ideal for use when driving 48-volt motors or powering electronics from the internal 48-volt battery. • Renewable and smart energy applications.
Customers We sell our products to major global OEMs and their key suppliers, primarily in the automotive and industrial markets. We sold to more than 10,000 end customers, directly and through distributors, during each of fiscal years 2022, 2021 and 2020.
Customers We sell our products to major global OEMs and their key suppliers, primarily in the automotive and industrial markets. We sold to more than 10,000 end customers, directly and through distributors, during each of fiscal years 2023, 2022 and 2021.
This regulation was revised in 2016 when China enacted the Administrative Measures on the Restrictions of the Use of Certain Hazardous Substances in Electrical and Electronic Products Regulations, which expanded the scope of the 2006 RoHS and is designed to restrict additional hazardous substance in certain electrical and electronic products.
This regulation was revised in 2016 when China enacted the Administrative Measures on the Restrictions of the Use of Certain Hazardous Substances in Electrical and Electronic Products Regulations, which expanded the scope of the 2006 requirements and is designed to restrict additional hazardous substance in certain electrical and electronic products.
Our motor driver ICs utilize embedded algorithms to improve energy efficiency and motion control in HEV and EV systems, automotive fans and pumps, data center cooling fans, robotics and home appliances. • Regulator and LED Driver ICs : As the industry transitions to more highly integrated products, our portfolio of regulator ICs, and power management ICs (“PMICs”) is used extensively in under-hood automotive ADAS and 11 powertrain systems.
Our motor driver ICs utilize embedded algorithms to improve energy efficiency and motion control in HEV and EV systems, automotive fans and pumps, data center cooling fans, automation and home appliances. • Regulator and LED Driver ICs : As the industry transitions to more highly integrated products, our portfolio of regulator ICs, and power management ICs (“PMICs”) is used extensively in under-hood automotive ADAS and powertrain systems.
Valente served as the Company’s Vice President and CHRO from October 2020 to May 2022. Prior to that, she served as Director, Global Human Resources/Senior Human Resources Business Partner when she joined the Company in 2018. Prior to Allegro, Ms.
Prior to her promotion, Ms. Valente served as the Company’s Vice President and CHRO from October 2020 to May 2022. Prior to that, she served as Director, Global Human Resources/Senior Human Resources Business Partner when she joined the Company in 2018. Prior to Allegro, Ms.
We believe that we can continue to increase our share and that our strong market presence and continued innovation in proprietary sensor and power IC technologies will enable us to establish leadership positions for new products in existing and emerging applications.
We believe that we can continue to increase our market presence and that our continued innovation in proprietary sensor and power IC technologies will enable us to establish leadership positions for new products in existing and emerging applications.
In addition, our board of directors has a standing R&D Committee, whose purpose is to provide guidance to management on various technological choices and research and development priorities to assist in implementing our strategic direction.
In addition, our board of directors has a standing R&D and Strategy 14 Committee, whose purpose is to provide guidance to management on various technological choices and research and development priorities to assist in implementing our strategic direction.
This enables a number of application-specific advancements, including taking the complex algorithm development in motor drives into the IC, vastly reducing our customers’ design complexity and creating the most efficient and quietest solutions in the market.
This enables a number of application-specific advancements, including taking the complex algorithm development in motor drivers into the IC, vastly reducing our customers’ design complexity and creating the most efficient and quietest solutions in the market.
D’Antilio spent eight years at MKS Instruments, a global equipment and service provider to semiconductor and industrial markets and held numerous leadership roles including Vice President & Corporate Controller, where he oversaw global accounting and reporting, FP&A, and treasury. Earlier in his career, Mr. D’Antilio was a CPA in public accounting and served as an audit manager at PwC. Mr.
D’Antilio spent eight years at MKS Instruments, a global equipment and service provider to semiconductor and industrial markets and held numerous leadership roles, including Vice President & Corporate Controller, where he oversaw global accounting and reporting, FP&A, and treasury. Earlier in his career, Mr. D’Antilio was a CPA in public accounting and served as an audit manager at PricewaterhouseCoopers LLP.
Employee recruitment, retention and development. Allegro works diligently to attract the best talent from a broad array of sources to meet the current and future demands of our business. We have established relationships with trade schools, world-class universities, professional associations and industry groups to proactively attract talented and capable new hires.
Employee recruitment, retention and development. Allegro works diligently to attract the best talent from a broad array of sources to meet the current and future demands of our business. We have established relationships with world-class colleges and universities, professional associations and industry groups to proactively attract talented and capable new hires.
The EU also adopted the European Regulation on Registration, Evaluation, Authorization and Restriction of Chemicals (“REACH”) in 2007, which calls for the progressive substitution of dangerous chemicals in manufacturing. In 2006, China first published its RoHS, the Administrative Measures on the Control of Pollution Cause by Electronic Information Products.
The EU also adopted the European Regulation on Registration, Evaluation, Authorization and Restriction of Chemicals in 2007, 19 which calls for the progressive substitution of dangerous chemicals in manufacturing. In 2006, China first published its RoHS equivalent, the Administrative Measures on the Control of Pollution Cause by Electronic Information Products.
Over the last ten years, we believe we have been instrumental in achieving fundamental developments that have enabled a number of key technology transitions in the automotive and industrial markets.
Over the last 10 years, we believe we have been instrumental in achieving fundamental developments that have enabled a number of key technology transitions in the automotive and industrial markets.
Two decades of sensor package innovation have led to the development of a family of integrated systems in a package (“SiP”) for magnetic speed and current sensor ICs as well as power systems.
Two decades of sensor package innovation have led to the development of a family of integrated systems in a package for magnetic current, position and speed sensor ICs as well as power systems.
Invest to lead in chosen markets and apply our intellectual property and technology to pursue adjacent growth markets We intend to continue to invest in technology advancements and our intellectual property portfolio to maintain the number one market share position in magnetic sensor ICs and achieve leadership positions in power ICs within our target markets.
Invest to lead in chosen markets and apply our intellectual property and technology to pursue adjacent growth markets We intend to continue to invest in technology advancements and our intellectual property portfolio to maintain the leading market share position in magnetic sensor ICs and achieve leadership positions in power ICs within our target markets.
See “Risk Factors—Risks Related to our Business and Industry—We face intense competition and may not be able to compete effectively, which could reduce our market share and decrease our net sales and profitability.” Seasonality Our business exhibits some seasonality. Historically, our revenue has generally been higher in the second half of the year than in the first half.
See “Risk Factors—Risks Related to our Business and Industry—We face intense competition and may not be able to compete effectively, which could reduce our market share and decrease our net sales and profitability.” Seasonality Our business exhibits some seasonality. Historically, our net sales have generally been higher in the second half of the fiscal year than in the first half.
Valente worked at Analog Devices, serving in a variety of global Human Resources Director roles across Sales, Marketing, Engineering and Talent Acquisition. Additionally, Ms. Valente has held various Human Resources leadership positions during her career with IBM, Lotus Development Corp. and Digital Equipment Corporation working across multiple high-tech industries. Ms.
Valente worked at Analog Devices, serving in a variety of global Human Resources Director roles across Sales, Marketing, Engineering and Talent Acquisition from 2007 to 2018. Additionally, Ms. Valente has held various Human Resources leadership positions during her career with IBM, Lotus Development Corp. and Digital Equipment Corporation, working across multiple high-tech industries. Ms.
Available Information We file annual, quarterly and current reports and any amendments to those reports, proxy statements and other information with the SEC. Documents we file with the SEC are available free of charge on our website at https://investors.allegromicro.com/financials/sec-filings , as soon as reasonably practicable after such material is filed with the SEC.
Available Information We file annual, quarterly and current reports and any amendments to those reports, proxy statements and other information with the Securities and Exchange Commission (“SEC”). Documents we file with the SEC are available free of charge on our website at https://investors.allegromicro.com/financials/sec-filings , as soon as reasonably practicable after such material is filed with the SEC.
According to industry experts, these mega trends are expected to dramatically increase the demand for sensing and power solutions like the ones we develop. We believe our patented portfolio of sensor and power ICs and photonics components provide the underlying technology required to establish an early lead in the market and win in the presence of larger competitors.
According to industry experts, these mega trends are expected to dramatically increase the demand for sensing and power solutions like the ones we develop. We believe our patented portfolio of sensor and power ICs provides the underlying technology required to establish an early lead in the market and win in the presence of larger competitors.
These mega trends have created requirements for new technologies in vehicles, both under the hood and in the cabin, to support vehicle electrification and advanced driver assistance systems (“ADAS”). These shifts also require technology to enable intelligence and automation in factories and to enable energy efficiency in data centers and green energy applications.
These mega trends have created requirements for new technologies in vehicles, both under the hood and in the cabin, to support vehicle electrification and advanced driver assistance systems (“ADAS”). These shifts also require technology to enable intelligence and automation in factories and energy efficiency in clean energy applications.
As a proven automotive supplier, with high application content per vehicle in internal combustion and comfort systems, we have established an early position in these high-growth ADAS and xEV applications that we believe will result in a substantial increase in our content per vehicle progressively over the next decade.
As a proven automotive supplier, with high application content per vehicle in internal combustion and comfort systems, we have established a position in these high-growth ADAS and EV applications that we believe will result in a substantial increase in our content per vehicle progressively over the next decade.
We are certified under IATF 16949:2016, the automotive sector-specific quality management system standard, and are a major supplier to Japanese automotive manufacturers, who are recognized industry-wide as having very stringent quality standards with respect to safety and reliability. We also have qualified and use external assembly and test facilities to enable flexible capacity utilization and technology access.
We are certified under IATF 16949:2016, the automotive sector-specific quality management system standard, and are a major supplier to automotive manufacturers world-wide, who are recognized as having very stringent quality standards with respect to safety and reliability. We also have qualified and use external assembly to enable flexible capacity utilization and technology access.
This includes sensing angular or linear position, driving an electric motor or actuator, and regulating the power applied to sensing and driving circuits so they operate safely and efficiently. These capabilities are based on fundamental technical advances we have made in the field of Hall-effect and xMR magnetic sensors and BCD power ICs.
This includes sensing angular or linear position, driving an electric motor or actuator, and regulating the power applied to sensing and driving circuits so they operate safely and efficiently. These capabilities are based on fundamental technical advances we have made in the field of Hall-effect and xMR magnetic sensors and Bipolar-CMOS-DMOS (“BCD”) power ICs.
Our use of both internal and external assembly and test capabilities is designed to balance the protection of our proprietary technology and processes while achieving automotive quality manufacturing at scale. Our Market Within the global semiconductor industry, we focus on the magnetic sensor, power management IC and photonic Light Detection and Ranging (“LiDAR”) markets.
Our use of both internal and external assembly and test capabilities is designed to balance the protection of our proprietary technology and processes while achieving automotive quality manufacturing at scale. Our Market Within the global semiconductor industry, we focus on the magnetic sensor and power management IC markets.
We also utilize social media, local job fairs and educational organizations to find diverse, motivated and responsible employees. We believe we have made strides to increase diversity in management positions, building internal resources for potential future leadership openings.
We also utilize social media, local job fairs and educational organizations to find diverse, motivated and responsible employees. We believe we have made strides to increase diversity in management positions, while building internal resources to support future leadership openings.
Integrated Transducers One of our fundamental innovations is the integration of magnetic transducers and CMOS circuitry into one piece of silicon to create a complete, fully integrated system. Hall-effect elements are implanted in silicon providing robust and low noise solutions that are optimized for stress and temperature effects.
Integrated Transducers One of our fundamental innovations is the integration of magnetic transducers and complementary metal oxide semiconductor circuitry into one piece of silicon to create a complete, fully integrated system. Hall-effect elements are implanted in silicon providing robust and low noise solutions that are optimized for stress and temperature effects.
Allegro has a strong employee value proposition that leverages our technology leadership, collaborative working environment, shared sense of purpose and culture, and desire to do the right thing to attract talent to our company. In fiscal 2022, we hired approximately 513 new employees.
Allegro has a strong employee value proposition that leverages our technology leadership, collaborative working environment, shared sense of purpose and culture, and the desire to do the right thing to attract talent to our Company. In fiscal 2023, we hired approximately 1,103 new employees.
Continue to improve our gross margins through product innovation and cost optimization We strive to improve our profitability by both rapidly introducing new products with value-added features and reducing our manufacturing costs through our fabless, asset-lite manufacturing model. Over the last four years, we have improved our gross margin from the 40% range historically to the 50% range.
Continue to improve our gross margins through product innovation and cost optimization We strive to improve our profitability by both rapidly introducing new products with value-added features and reducing our manufacturing costs through our fabless, asset-lite manufacturing model. Over the last several years, we have 10 improved our gross margin from a 40% range historically to the 56% range.
For example, we released a unique 100V- and 175-degree Celsius capable BCD wafer technology designed to handle automotive voltage and temperature transients while also integrating high-density logic circuits and EEPROM memory to enable configurable and embedded algorithms, and various Hall-effect and xMR transducer technology on the same silicon wafer.
For example, we released a unique 100V- and 175-degree Celsius capable BCD wafer technology designed to handle automotive voltage and temperature transients while also integrating high-density logic circuits and electrically erasable programmable read-only memory to enable configurable and embedded algorithms, and various Hall-effect and xMR transducer technology on the same silicon wafer.
For example: • We target our patented sensor IC, photonics, and power-related intellectual property to address increasing electronics content in automotive applications based on the increasing adoption of electric powertrains and advanced safety systems for semi-autonomous and autonomous vehicles. • We are investing in advanced current sensor IC and sensor-less motor control technologies to target industrial solar and data center applications where we believe the trend towards increasing energy efficiency provides an opportunity to apply our rich history of innovation to rapidly gain share and accelerate our growth. • We are aligning our application domain knowledge, sensor design skills and power management and motor control algorithm expertise to capitalize on the trend towards increasing automation and electronics content inherent in the Industry 4.0 transformation.
For example: • We target our patented sensor IC, and power-related intellectual property to address increasing electronics content in automotive applications based on the increasing adoption of electric powertrains and advanced safety systems for semi-autonomous and autonomous vehicles. • We are investing in advanced current sensor IC and sensor-less motor control technologies to target industrial clean energy applications where we believe the trend towards increasing energy efficiency provides an opportunity to apply our rich history of innovation to rapidly accelerate our growth. • We are aligning our application domain knowledge, sensor design skills and power management and motor control algorithm expertise to capitalize on the trend towards increasing automation and electronics content inherent in the industrial automation transformation.
We believe that by effectively navigating technology transitions, maintaining close customer relationships and anticipating market trends, we have established a leadership position in the automotive market and are rapidly gaining share in our targeted industrial markets, including factory automation, data center and green energy.
We believe that by effectively navigating technology transitions, maintaining close customer relationships and anticipating market trends, we have established a leadership position in the automotive market and are rapidly gaining presence in our targeted industrial markets, including factory automation and clean energy.
For example, as a result of our sensor IC leadership in ICE, we have been able to establish an early footprint in the emerging HEV and EV market and in advanced driver assistance systems. Growth in electronics in these applications is outpacing total vehicle growth and contributing significantly to the increasing semiconductor content per vehicle.
For example, as a result of our sensor IC leadership in ICE, we have been able to establish a footprint in the emerging HEV and EV market and in ADAS. Growth in electronics in these applications is outpacing total vehicle growth and contributing significantly to the increasing semiconductor content per vehicle.
Our “lossless” magnetic current sensor ICs are used to accurately measure and control electric current flowing in xEV powertrains, improving the energy efficiency of the electric vehicle. In many electric cars, ten to twenty total current sensor ICs are used in vehicle inverter, DC/DC converter, and on-board-charging systems.
Our “lossless” magnetic current sensor ICs are used to accurately measure and control electric current flowing in EV powertrains, improving the energy efficiency of the electric vehicle. In many electric cars, 10 to 20 total current sensor ICs are used in vehicle inverter, DC/DC converter, and on-board-charging systems.
Specifically: • We provide employee wages that are competitive and consistent with employees’ positions, skill levels, experience, knowledge and geographic location. • All employees participate in our annual cash bonus program, allowing them to share in the profitability and business performance of Allegro.
Specifically: • We provide employee wages that are competitive and consistent with employees’ positions, skill levels, experience, knowledge and geographic location. • All non-sales employees participate in one of our annual cash incentive programs, allowing them to share in the profitability and business performance of Allegro.
Doogue has also served in various leadership positions at Allegro, including as Design Manager from 2002 to 2006, Director of Strategic Marketing from 2006 to 2011, Business Unit Director of Linear Current Sensors from 2011 to 2016 and as Vice President of Advanced Sensor Technologies from 2016 to 2019. Mr.
Doogue has also served in various 18 leadership positions at Allegro, including as Design Manager from 2002 to 2006, Director of Strategic Marketing from 2006 to 2011, Business Unit Director of Linear Current Sensors from 2011 to 2016, Vice President of Advanced Sensor Technologies from 2016 to 2019, and as Senior Vice President of Technology and Products since from 2019 to 2022.
A steering system equipped with even a modest degree of automation utilizes products across our entire portfolio, including sensors, power management ICs and motor driver ICs, which we believe is indicative of the size of our potential market opportunity as ADAS applications become increasingly more sophisticated. Our portfolio of photonic and 3D sensing devices, through our acquisition of Voxtel, Inc.
A steering system equipped with even a modest degree of automation utilizes products across our entire portfolio, including sensors, power management ICs and motor driver ICs, which we believe is indicative of the size of our potential market opportunity as ADAS applications become increasingly more sophisticated.
This resulted in the divestiture of our wafer manufacturing facility, Polar Semiconductor, LLC (“PSL”), in March 2020 (see “The PSL Divestiture” below), and the closure of our manufacturing facility in Thailand (the “AMTC Facility”) as of March 2021.
This resulted in the divestiture of our wafer manufacturing facility, Polar Semiconductor, LLC (“PSL”), in March 2020 (the “PSL Divestiture”), and the closure of our manufacturing facility in Thailand (the “AMTC Facility”) as of March 2021.
This advanced technology is a key enabler across all of our strategic focus areas in the automotive and industrial markets as more of the automotive safety market transitions to xMR. We augment our internally generated intellectual property through a mix of licensed intellectual property, partnering with industry experts, and through acquisitions.
This advanced technology is a key enabler across all of our strategic focus areas in the automotive and industrial markets as more of the e-Mobility and clean energy markets transition to xMR. We augment our internally generated intellectual property through a mix of licensed intellectual property, partnering with industry experts, and through acquisitions.
Our net sales made to distributors accounted for approximately 36.8%, 37.3% and 25.2% of our net sales in fiscal years 2022, 2021 and 2020, respectively, excluding our distribution relationship with Sanken in Japan, which represented approximately 19.4%, 17.7% and 17.3% of our net sales in fiscal years 2022, 2021 and 2020, respectively.
Our net sales made to distributors accounted for approximately 39.3%, 36.8% and 37.3% of our net sales in fiscal years 2023, 2022 and 2021, respectively, excluding our distribution relationship with Sanken in Japan, which represented approximately 16.5%, 19.4% and 17.7% of our net sales in fiscal years 2023, 2022 and 2021, respectively.
Process and Packaging Technology Our product and technology development engineers have long-established expertise in designing analog power ICs, magnetic sensor ICs, and photonics components using proprietary semiconductor process technologies and intelligent packaging.
Process and Packaging Technology Our product and technology development engineers have long-established expertise in designing mixed signal power ICs and magnetic sensor ICs using proprietary semiconductor process technologies and intelligent packaging.
Approximately half of our net sales during each of fiscal years 2022, 2021 and 2020, respectively, were derived from sales to our top twenty customers. We believe that no end customer, including those served through our distributors, exceeded 10% of our net sales during fiscal years 2022, 2021 and 2020.
Approximately half of our net sales during each of fiscal years 2023, 2022 and 2021 were derived from sales to our top 20 customers, which includes distributors. We believe that no end customer, including those served through our distributors, exceeded 10% of our net sales during fiscal years 2023, 2022 and 2021.
Our average product life cycle is ten years or more and we believe that product longevity and our ability to compete in our target markets will enable sustained market share gains over a long period.
Our average product life cycle is 10 years or more, and we believe that product longevity and our ability to compete in our target markets will enable sustained growth over a long period.
As of March 25, 2022, we had approximately 549 employees dedicated to research and development, with centers in the United States, Europe, South America, Japan and India. Our engineering team has contributed to nearly doubling our intellectual property portfolio over the last three years, further strengthening our position in our target markets.
As of March 31, 2023, we had approximately 655 employees dedicated to research and development, with centers in the United States, Europe, South America, and Asia. Our engineering team has contributed to nearly doubling our intellectual property portfolio over the last three years, further strengthening our position in our target markets.
These technologies are fundamental to the transition from 12-volt to 48-volt power supply required in the rapidly emerging mild HEV and EV markets, and to the next generation of ADAS systems. We are in the process of applying these capabilities to the industrialization of our ultra-miniature lasers and advanced semiconductor photodiodes.
These technologies are fundamental to the transition from 12-volt to 48-volt power supply required in the rapidly emerging mild HEV and EV markets, and to the next generation of ADAS systems. We are in the process of applying these capabilities to the industrialization of our IGD portfolio.
Company Overview The Company is a leading global designer, developer, fabless manufacturer and marketer of sensor integrated circuits (“ICs”) and application-specific analog power ICs enabling critical technologies in the automotive and industrial markets. We are a leading supplier of power ICs and a market share leader in magnetic sensor ICs driven by our market leadership in the automotive market.
Company Overview The Company is a leading global designer, developer, fabless manufacturer and marketer of sensor integrated circuits (“ICs”) and application-specific analog power ICs enabling the most important emerging technologies in the automotive and industrial markets. We are a leading supplier of magnetic sensor IC solutions worldwide based on market share, driven by our market leadership in the automotive market.
We believe we are one of very few suppliers in the semiconductor industry to integrate proprietary motor control algorithms into our motion control devices to achieve optimized BLDC motor performance, we remain one of the only suppliers that has developed multiple packaging technologies capable of operating up to 175 degrees Celsius and including passive components that simplify customer 14 module assembly, and we were one of the first in our industry to develop automotive grade xMR technology on silicon wafers, which enabled breakthrough advances in product performance.
We believe we are one of very few suppliers in the semiconductor industry to integrate proprietary motor control algorithms into our motion control devices to achieve optimized BLDC motor performance, we remain one of the few suppliers that has developed multiple packaging technologies capable of operating up to 175 degrees Celsius and including passive components and high current conductors required to make high efficiency, high voltage current sensor products, and we were one of the first in our industry to develop automotive grade xMR technology on silicon wafers, which enabled breakthrough advances in product performance.
The current sensors integrate specially designed lead frames to allow a high-precision, factory programmed single package solution that provides a unique low loss and high-voltage isolation product and can sense current for products plugged directly into a household electrical outlet.
The current sensors integrate specially designed lead frames to allow a high-precision, factory programmed single package solution that provides a unique high-efficiency and high-voltage isolation product and can sense current for products plugged directly into a household electrical outlet or connected to an 800-volt automotive battery.
Briansky received a B.A. in Political Science from the University of North Carolina in 1995 and a J.D. from Boston University School of Law in 1998. Michael C. Doogue has served as our Senior Vice President of Technology and Products since 2019. Mr.
Briansky received a B.A. in Political Science from the University of North Carolina in 1995 and a J.D. from Boston University School of Law in 1998. Michael C. Doogue has served as our Senior Vice President, Chief Technology Officer, since being named as the Company’s first Chief Technology Officer in September 2022 . Mr.
The following table sets forth certain information regarding our executive officers as of May 18, 2022: Name Age Position with the Company Ravi Vig 61 President and Chief Executive Officer, Director (1) Derek P. D'Antilio 50 Senior Vice President, Chief Financial Officer and Treasurer Sharon S. Briansky 48 Senior Vice President, General Counsel and Secretary Michael C.
The following table sets forth certain information regarding our executive officers as of May 25, 2023: Name Age Position with the Company Vineet Nargolwala 50 President and Chief Executive Officer, Director Derek P. D'Antilio 51 Senior Vice President, Chief Financial Officer and Treasurer Sharon S. Briansky 49 Senior Vice President, General Counsel and Secretary Michael C.
Our established position as an incumbent supplier for the automotive market and our long product life cycles attest to the strength of this competitive advantage. Our value proposition is based on providing complete IC solutions that sense, regulate and drive a variety of mechanical systems.
Our established position as an incumbent supplier for the automotive market and our long product life cycles attest to the strength of this competitive advantage. Our value proposition is based on providing complete IC solutions for motion control and energy efficient systems.
In both the automotive and industrial markets, major technology shifts driven by disruptive technologies are creating high-growth opportunities in areas such as xEVs, ADAS, Industry 4.0, data centers and green energy applications. We believe the convergence of requirements for intelligence and energy efficiency within these emerging markets is directly aligned with our core competencies.
In both the automotive and industrial markets, major technology shifts driven by disruptive technologies are creating high-growth 9 opportunities in areas such as e-Mobility, clean energy and automation. We believe the convergence of requirements for intelligence and energy efficiency within these emerging markets is directly aligned with our core competencies.
We also believe we are one of only a few companies in our industry that have developed a broad portfolio of packages that are suitable for operation in automotive environments and 175-degree Celsius temperatures.
We also believe we are one of only a few companies in our industry that have developed a broad portfolio of packages that are suitable for operation in automotive environments and 175-degree Celsius temperatures. Intellectual Property We consider the strength of our intellectual property portfolio to be a significant competitive advantage.
Our products are foundational to automotive and industrial electronic systems. Our sensor ICs enable our customers to precisely measure motion, speed, position and current, while our power ICs include high-temperature and high-voltage capable motor driver, power management and light emitting diode (“LED”) driver ICs. Our photonics portfolio provides eye-safe distance measurement and 3D imaging solutions.
Our products are foundational to automotive and industrial electronic systems. Our sensor ICs enable our customers to precisely measure motion, speed, position and current, while our power ICs include high-temperature and high-voltage capable motor drivers, power management ICs, light emitting diode (“LED”) driver ICs and isolated gate drivers.
We believe these innovations have created tangible performance benefits in a variety of customer end products across a broad range of applications, from traditional 12-volt internal combustion engines to 48-volt mild hybrid vehicles, autonomous vehicles, and from industrial robotics to server and data center hardware.
We believe these innovations have created tangible performance benefits in a variety of customer end products across a broad range of applications, from traditional 12-volt internal combustion engines to fully electric vehicles, autonomous vehicles, and from industrial automation to clean energy.
As a result, we are committed to investing in our process and product development capabilities and focusing our engineering efforts on designing and introducing new application-specific products, developing new semiconductor process technologies, enhancing design productivity and evaluating new technologies. Our research and development investments are subject to a rigorous ROI review to ensure alignment with our growth and profitability targets.
As a result, we are committed to investing in our process and product development capabilities and focusing our engineering efforts on designing and introducing new application-specific products, developing new semiconductor process and packaging technologies, enhancing design productivity and evaluating new technologies.
We believe our track record of supplying devices for safety applications and experience reliably supporting ADAS features in high-end vehicles, combined with increased penetration of ADAS as it scales from luxury vehicles to mainstream and economy vehicles, positions us to expand our early lead in this rapidly growing opportunity.
We have been helping to increase the safety and drive features in ADAS applications of steering and braking systems for years and believe our track record of supplying devices for safety applications and experience with supporting ADAS features in high-end vehicles, combined with increased penetration of ADAS as it scales from luxury vehicles to mainstream and economy vehicles, positions us to expand our business to capitalize on this rapidly growing opportunity.
D’Antilio most recently served as the Chief Financial Officer of a Summit Partners Portfolio Company and helped lead the recent sale and recapitalization of the company.
Prior to joining Allegro, Mr. D’Antilio served as the Chief Financial Officer of a Summit Partners Portfolio Company and helped lead the sale and recapitalization of the company.
We apply our deep technology know-how to deliver: • Sensing of speed, position, current and 3D distance imaging to improve vehicle fuel efficiency and CO2 emissions, enable safer cars through object detection (ADAS “sense”) and collision avoidance (ADAS “act”), and enhance factory automation and green energy systems; • Regulation of systems to improve safety, improve power efficiency and ultimately reduce solution size; and • Driving motors through our advanced, proprietary algorithms that provide industry leading reliability and energy efficiency, with minimal audible noise and vibration.
We apply our deep technology know-how to deliver magnetic sensing IC and power IC solutions to: • Sense speed, position, and current to enable electric powertrains, improve vehicle fuel efficiency and CO2 emissions, enable safer cars through ADAS safety features, and enhance factory automation and clean energy systems; • Regulate systems to improve safety and power efficiency and ultimately reduce solution size; and • Drive motors through our advanced, proprietary algorithms that provide industry leading reliability and energy efficiency, with minimal audible noise and vibration.
In Hybrid Electric Vehicles (“HEV”), Electric Vehicles (“EV”) and ADAS applications, these innovations translate to increased driving range for an electric vehicle, smaller and more reliable power conversion systems, improved safety and efficiency of motor and power management systems and safer and more reliable autonomous driving through long-range object detection.
In Hybrid Electric Vehicles (“HEV”), Electric Vehicles (“EV”) and ADAS applications, these innovations translate to increased driving range for an electric vehicle, smaller and more reliable power conversion systems, improved safety and efficiency of motor and power management systems and safer and more reliable steering and braking systems. In the industrial market, these technologies enable clean energy and automation.
We believe that by effectively applying these resources, we have developed proprietary innovations and intellectual property that will give us an early lead in our target markets and will enable accelerated growth over time.
Our research and development investments are subject to a rigorous ROI review to ensure alignment with our growth and profitability targets. We believe that by effectively applying these resources, we have developed proprietary innovations and intellectual property that will give us an early lead in our target markets and will enable accelerated growth over time.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeOur results of operations and financial condition could be materially and adversely affected by any of the following material risks: • the effect of downturns or volatility in general economic conditions; • intense competition in the global semiconductor industry; • reliance on a limited number of third-party wafer fabrication facilities and suppliers of other materials for our production; • failure to adjust our purchase commitments and inventory management based on changing market conditions or customer demand; • shifts in our product mix or customer mix may result in declines in gross margin; • the cyclical nature of the semiconductor industry may limit our ability to maintain or improve profitability; • we are vulnerable to downturns in the automotive market given our customer base; • decreases in average selling prices of our products and increases in input costs may reduce gross margins; • third-party wafer fabrication facilities may encounter sustained yield problems, disruptions, or other delays in the final assembly and test of our products which may damage customer relationships or cause us to transition manufacturing capabilities to other facilities; • future implementation initiatives designed to improve our competitiveness, growth and profitability may result in significant expenditures; • our quarterly net sales and operating results are difficult to predict accurately and may fluctuate significantly from period to period; • our dependence on our manufacturing operations in the Philippines exposes us to certain risks that may harm our business; • significant portion of our net sales is generated through distributors; • events beyond our control could have an adverse effect on our business, financial condition, results of operations and cash flows; • the effect of the COVID-19 pandemic could have an adverse impact on our business, results of operations and financial condition; • failure to timely and cost-effectively develop new product features or new products that address customer preferences; • ability to effectively manage our growth; • dependence on growth in the end markets that use our products; • the loss of one or more significant customers could have a material adverse effect on our business; • our ability to meet customer quality requirements; • the nature of the design win process requires us to incur expenses with no guarantee of net sales or sufficient margins; • changes in government trade policies, including tariffs and export restrictions; • potential warranty claims, product liability claims, and product recalls could harm the business; • our dependence on international customers and operations subjects us to a range of regulatory, operational, financial and political risks; • end-user demand for certain green energy products often depends on the availability of rebates, tax credits and other financial incentives; 22 • our ability to obtain government authorization to export certain of our products could adversely impact our net sales and our ability to comply with applicable export control laws and regulations; • changing currency exchange rates may adversely affect our business; • our ability to raise capital in the future; • our indebtedness may limit our flexibility to operate our business; • our ability to retain key and highly skilled personnel to operate our business; • risks associated with information technology, intellectual property, and data security and privacy; • risks related to compliance with various governmental laws and regulations; • our principal stockholders, Sanken and One Equity Partners (“OEP”), have substantial control over us; • the inapplicability of the “corporate opportunity” doctrine to any director or stockholder who is not employed by us; • risks associated with the ownership of our stock, including volatility in our trading price, future sales of shares by our stockholders, dilution from the issuance of additional shares, and our lack of intent to declare or pay dividends for the foreseeable future; • provisions of our Certificate of Incorporation and Bylaws and under the DGCL may limit the liability of certain individuals, prevent or discourage a takeover, or limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us or our directors, officers or employees; • our inability to design, implement or maintain effective internal control over financial reporting; and • the changes in tax rates or the issuance of new tax legislation.
Biggest changeOur results of operations and financial condition could be materially and adversely affected by any of the following material risks: • the effect of downturns or volatility in general economic conditions; • intense competition in the global semiconductor industry; • reliance on a limited number of third-party semiconductor wafer fabrication facilities and suppliers of other materials for our production; • failure to adjust our purchase commitments and inventory management based on changing market conditions or customer demand; • shifts in our product mix or customer mix may result in declines in gross margin; • the cyclical nature of the semiconductor industry may limit our ability to maintain or improve profitability; • we are vulnerable to downturns or disruptions in the automotive market given our customer base; • decreases in average selling prices of our products and increases in input costs may reduce gross margins; • third-party wafer fabrication facilities may encounter sustained yield problems, disruptions, or other delays in the final assembly and test of our products which may reduce sales and damage customer relationships; • our quarterly net sales and operating results are difficult to predict accurately and may fluctuate significantly from period to period; • our dependence on our manufacturing operations in the Philippines exposes us to certain risks that may harm our business; 20 • a significant portion of our net sales is generated through distributors; • events beyond our control could have an adverse effect on our business, financial condition, results of operations and cash flows; • the effect of the COVID-19 pandemic could have an adverse impact on our business, results of operations and financial condition; • failure to timely and cost-effectively develop new product features or new products that address customer preferences; • ability to effectively manage our growth; • dependence on growth in the end markets that use our products; • the loss of one or more significant customers could have a material adverse effect on our business; • our ability to meet customer quality requirements; • the nature of the design win process requires us to incur expenses with no guarantee of net sales or sufficient margins; • changes in government trade policies, including export restrictions and tariffs; • potential warranty claims, product liability claims, and product recalls could harm the business; • our dependence on international customers and operations subjects us to a range of regulatory, operational, financial and political risks; • end-user demand for certain green energy products often depends on the availability of rebates, tax credits and other financial incentives; • our ability to obtain government authorization to export certain of our products could adversely impact our net sales and our ability to comply with applicable export control laws and regulations; • changing currency exchange rates may adversely affect our business; • our ability to raise capital in the future; • our indebtedness may limit our flexibility to operate our business; • our ability to retain key and highly skilled personnel to operate our business; • risks associated with information technology, intellectual property, and data security and privacy; • risks related to compliance with various governmental laws and regulations; • our principal stockholders, Sanken and One Equity Partners (“OEP”), have substantial control over us; • the inapplicability of the “corporate opportunity” doctrine to any director or stockholder who is not employed by us; • provisions of our Certificate of Incorporation and Bylaws and under the DGCL may prevent or discourage a takeover; • our inability to design, implement or maintain effective internal control over financial reporting; • the changes in tax rates or the issuance of new tax legislation; • sustained inflation could negatively impact our business; • disruptions in the banking and financial sector could limit our or our partners’ ability to access capital and borrowings or result in losses of uninsured deposits; and • climate change presents physical, transition, and litigation risks that could disrupt our business operations and force us to incur increased costs and expenses.
Changes in government trade policies, including the imposition of tariffs and export restrictions, could limit our ability to sell products to certain customers or limit demand from certain customers, which may materially and adversely affect our sales and results of operations.
Changes in government trade policies, including the imposition of export restrictions and tariffs, could limit our ability to sell products to certain customers or limit demand from certain customers, which may materially and adversely affect our sales and results of operations.
Given these limitations, we may not be able to continue to attract, retain and motivate qualified personnel necessary for our business. In addition, we recruit from a limited pool of engineers with expertise in analog mixed-signal semiconductor design and the competition for such personnel can be intense.
Given these limitations, we may not be able to continue to attract, retain and motivate the qualified personnel necessary for our business. In addition, we recruit from a limited pool of engineers with expertise in analog mixed-signal semiconductor design, and the competition for such personnel can be intense.
In addition, other factors or events, including business combinations and investment transactions, changes in the valuation of our deferred tax assets and liabilities, adjustments to taxes upon finalization of various tax returns or as a result of deficiencies asserted by taxing authorities, increases in expenses not deductible for tax purposes, changes in available tax credits, changes in transfer pricing methodologies, other changes in the apportionment of our income and other activities among tax jurisdictions, and changes in tax rates, could also increase our effective tax rate.
In addition, other factors or events, including business combinations and investment transactions, changes in the valuation of our deferred tax assets and liabilities, adjustments to taxes upon finalization of various tax returns or as a result of deficiencies asserted by taxing authorities, increases in expenses not deductible for tax purposes, changes in available tax credits, changes in transfer pricing methodologies, other changes in the apportionment of our income and other activities among tax jurisdictions, and changes in tax rates, could also increase our effective tax rate and/or valuation of our deferred tax assets and liabilities.
Bribery Act); • difficulties and costs of staffing and managing international operations across different geographic areas and cultures; • potential political, legal and economic instability, armed conflict, and civil unrest in the countries in which we and our customers, suppliers and contract manufacturers are located, such as the current conflict between Russia and Ukraine; • difficulty and costs of maintaining effective data security; • inadequate protection of intellectual property; • transportation and other supply chain delays and disruptions; • nationalization and expropriation; 34 • restrictions on the transfer of funds to and from foreign countries, including withholding taxes and other potentially negative tax consequences; • unfavorable and/or changing foreign tax treaties and policies; and • increased exposure to general market and economic conditions outside of the U.S.
Bribery Act); • difficulties and costs of staffing and managing international operations across different geographic areas and cultures; • potential political, legal and economic instability, armed conflict, and civil unrest in the countries in which we and our customers, suppliers and contract manufacturers are located, such as the current conflict between Russia and Ukraine; • difficulty and costs of maintaining effective data security; • inadequate protection of intellectual property; • transportation and other supply chain delays and disruptions; • nationalization and expropriation; • restrictions on the transfer of funds to and from foreign countries, including withholding taxes and other potentially negative tax consequences; • unfavorable and/or changing foreign tax treaties and policies; and • increased exposure to general market and economic conditions outside of the U.S.
In addition, in periods of high demand for some of our products, we may have to source a portion of materials from higher-cost providers, which may decrease overall gross margin. These fluctuations are expected to continue in the future. The cyclical nature of the semiconductor industry may limit our ability to maintain or improve our net sales and profitability.
In addition, in periods of high demand for some of our products, we may have to source a portion of materials from higher-cost providers, which may decrease overall gross margin. These fluctuations are expected to continue in the future. 23 The cyclical nature of the semiconductor industry may limit our ability to maintain or improve our net sales and profitability.
As a result, these stockholders and their affiliates will have significant influence over the management and affairs of our company, as well as the ability to control the outcome of matters submitted to our stockholders for approval, including the election of directors and the approval of significant corporate transactions, including any merger, consolidation or sale of all or substantially all of our assets and the issuance or redemption of equity interests in certain circumstances.
As a result, these stockholders and their affiliates have significant influence over the management and affairs of our Company, as well as the ability to control the outcome of matters submitted to our stockholders for approval, including the election of directors and the approval of significant corporate transactions, including any merger, consolidation or sale of all or substantially all of our assets and the issuance or redemption of equity interests in certain circumstances.
A decline in end-user demand can affect our customers’ demand for our products, the ability of our customers to obtain credit and otherwise meet their payment obligations and the likelihood of customers canceling or deferring existing orders. Our net sales, financial condition and results of operations could be negatively affected by such actions.
A decline in end-user demand can affect our customers’ demand for our products, the ability of our customers to obtain credit and otherwise meet their payment obligations and the 21 likelihood of customers canceling or deferring existing orders. Our net sales, financial condition and results of operations could be negatively affected by such actions.
If we cannot supply our products due to a lack of components, including semiconductor wafers, or are unable to source materials from other suppliers or to redesign products with other components in a timely manner, our business will be significantly harmed. We do not have long-term contracts with some of our suppliers and third-party manufacturers.
If we cannot supply our products due to a lack of 22 components, including semiconductor wafers, or are unable to source materials from other suppliers or to redesign products with other components in a timely manner, our business will be significantly harmed. We do not have long-term contracts with some of our suppliers and third-party manufacturers.
For example, Russia’s recent invasion of Ukraine has led to sanctions, export controls and other penalties being levied by the United States, European Union and other countries against Russia, Belarus, the Crimea Region of Ukraine, the so-called Donetsk People’s Republic, and the so-called Luhansk People’s Republic. Additional potential sanctions and penalties have also been proposed and/or threatened.
For example, Russia’s invasion of Ukraine has led to sanctions, export controls and other penalties being levied by the United States, European Union and other countries against Russia, Belarus, the Crimea region of Ukraine, the so-called Donetsk People’s Republic, and the so-called Luhansk People’s Republic. Additional potential sanctions and penalties have also been proposed and/or threatened.
To the extent we are required to use cash from operations or the proceeds of any future financing to service our indebtedness instead of funding working capital, capital expenditures or other general corporate purposes, we will be less able to plan for, or react to, changes in our 36 business, industry and in the economy generally.
To the extent we are required to use cash from operations or the proceeds of any future financing to service our indebtedness instead of funding working capital, capital expenditures or other general corporate purposes, we will be less able to plan for, or react to, changes in our business, industry and in the economy generally.
We are also subject to potential delays in the development by our suppliers of key components which may affect our ability to introduce new products. Any of these problems or delays could damage our relationships with our customers, 24 adversely affect our reputation and adversely affect our business, financial condition, results of operations and our ability to grow our business.
We are also subject to potential delays in the development by our suppliers of key components, which may affect our ability to introduce new products. Any of these problems or delays could damage our relationships with our customers, adversely affect our reputation and adversely affect our business, financial condition, results of operations and our ability to grow our business.
Recent downturns directly impacted our business, as was the case with many other companies, suppliers, distributors and customers in the semiconductor industry and other industries around the world, and any prolonged or significant future downturns in the 25 semiconductor industry could have a material adverse effect on our business, financial condition and results of operations.
Recent downturns directly impacted our business, as was the case with many other companies, suppliers, distributors and customers in the semiconductor industry and other industries around the world, and any prolonged or significant future downturns in the semiconductor industry could have a material adverse effect on our business, financial condition and results of operations.
As a result, if we fail to secure an initial design win for any of our products to any particular 32 customer, we may lose the opportunity to make future sales of those products to that customer for a significant period of time or at all and experience an associated decline in net sales relating to those products.
As a result, if we fail to secure an initial design win for any of our products to any particular customer, we may lose the opportunity to make future sales of those products to that customer for a significant period of time or at all and experience an associated decline in net sales relating to those products.
Failure to obtain export licenses for our products or having one or more of our customers be restricted from receiving exports from us could significantly reduce our net sales and materially and adversely affect our business, financial condition and results of operations. 35 Changing currency exchange rates may adversely affect our business, financial condition, results of operations and cash flows.
Failure to obtain export licenses for our products or having one or more of our customers be restricted from receiving exports from us could significantly reduce our net sales and materially and adversely affect our business, financial condition and results of operations. Changing currency exchange rates may adversely affect our business, financial condition, results of operations and cash flows.
To the extent we are unable to reduce the prices of our products and remain competitive, our net sales will likely decline, resulting in further pressure on our gross margins, which could have a material adverse effect on our business, financial condition and results of operations and our ability to grow our business.
To the extent we are unable to reduce the prices of our products and remain competitive, our net sales will 24 likely decline, resulting in further pressure on our gross margins, which could have a material adverse effect on our business, financial condition and results of operations and our ability to grow our business.
We maintain an infrastructure of facilities and human resources in several locations around the world and, as a result, have limited ability to reduce our operating costs. Accordingly, in order to remain competitive, we must continually reduce the cost of 26 manufacturing our products through design and engineering changes.
We maintain an infrastructure of facilities and human resources in several locations around the world and, as a result, have limited ability to reduce our operating costs. Accordingly, in order to remain competitive, we must continually reduce the cost of manufacturing our products through design and engineering changes.
In addition, we must attract and retain highly qualified personnel, including certain foreign nationals who are not U.S. citizens or permanent residents, many of whom are highly skilled and constitute an important part of our U.S. workforce, particularly in the areas of engineering and 37 product development.
In addition, we must attract and retain highly qualified personnel, including certain foreign nationals who are not U.S. citizens or permanent residents, many of whom are highly skilled and constitute an important part of our U.S. workforce, particularly in the areas of engineering and product development.
Additional risks and uncertainties not presently known to us or not believed by us to be material may also negatively impact us. 21 Risk Factors Summary The following summary description sets forth an overview of the material risks we are exposed to in the normal course of our business activities.
Additional risks and uncertainties not presently known to us or not believed by us to be material may also negatively impact us. Risk Factors Summary The following summary description sets forth an overview of the material risks we are exposed to in the normal course of our business activities.
Moreover, even if a customer selects our product, we cannot guarantee that this will result in any sales of our products, as the customer may ultimately change or cancel its product plans, or our customer’s efforts to market and sell its product may not be successful.
Moreover, even if a customer selects our product, we cannot guarantee that this will result in any sales of 29 our products, as the customer may ultimately change or cancel its product plans, or our customer’s efforts to market and sell its product may not be successful.
In order to comply with environmental and occupational health and safety laws and regulations, we may need to modify our activities or incur substantial costs, and such laws and regulations, including any failure to comply with such laws 41 and regulations, could subject us to substantial costs, liabilities, obligations and fines, or require us to have our suppliers alter their processes.
In order to comply with environmental and occupational health and safety laws and regulations, we may need to modify our activities or incur substantial costs, and such laws and regulations, including any failure to comply with such laws and regulations, could subject us to substantial costs, liabilities, obligations and fines, or require us to have our suppliers alter their processes.
Our failure to adequately manage our growth, improve our operational, financial and management information systems, or 31 effectively motivate and manage our new and future employees could adversely affect our business, financial condition and results of operations. We depend on growth in the end markets that use our products.
Our failure to adequately manage our growth, improve our operational, financial and management information systems, or effectively motivate and manage our new and future employees could adversely affect our business, financial condition and results of operations. We depend on growth in the end markets that use our products.
The rules governing the standards that must be met for our management to assess our internal control over financial reporting are complex and require significant documentation and testing. Testing and maintaining internal controls may divert our management’s attention from other matters that are important to our business.
The rules governing the standards that must be met for our management to assess our internal control over financial reporting are complex and require significant documentation and testing. Testing and maintaining internal controls may divert our management’s attention from other matters that are 39 important to our business.
For products subject to the Export Administration Regulations (“EAR”), administered by the Department of Commerce’s Bureau of Industry and Security, the requirement for a license is dependent on the type and end use of the product, the final destination, the identity of the end user and whether a license exception might apply.
For products subject to the Export Administration Regulations, administered by the Department of Commerce’s Bureau of Industry and Security, the requirement for a license is dependent on the type and end use of the product, the final destination, the identity of the end user and whether a license exception might apply.
Our determinations are not binding on the IRS or any other taxing authorities, and 45 accordingly the final determination in an audit or other proceeding may be materially different than the treatment reflected in our tax provisions, accruals and returns.
Our determinations are not binding on the IRS or any other taxing authorities, and accordingly the final determination in an audit or other proceeding may be materially different than the treatment reflected in our tax provisions, accruals and returns.
We have not made arrangements to obtain additional financing and there is no assurance that financing, if required, will be available in amounts or on terms acceptable to us, if at all.
We have not made arrangements to obtain additional 32 financing, and there is no assurance that financing, if required, will be available in amounts or on terms acceptable to us, if at all.
Compliance with current or future environmental and occupational health and safety laws and regulations could restrict our ability to expand our business or require us to modify processes or incur other substantial expenses which could harm our business.
Compliance with current or future environmental and occupational health and safety laws and regulations 37 could restrict our ability to expand our business or require us to modify processes or incur other substantial expenses which could harm our business.
Moreover, conducting business outside the United States subjects us to a number of additional risks and challenges, including: • changes in a specific country’s or region’s political, regulatory or economic conditions; • a pandemic, epidemic or other outbreak of an infectious disease, including the current COVID-19 pandemic, which may cause us or our distributors, vendors and/or customers to temporarily suspend operations in the affected city or country; • compliance with a wide variety of domestic and foreign laws and regulations (including those of municipalities or provinces where we have operations) and unexpected changes in those laws and regulatory requirements, including uncertainties regarding taxes, social insurance contributions and other payroll taxes and fees to governmental entities, tariffs, quotas, export controls, export licenses and other trade barriers; • unanticipated restrictions on our ability to sell to foreign customers where sales of products and the provision of services may require export licenses or are prohibited by government action, unfavorable foreign exchange controls and currency exchange rates; • the risk of substantial penalties and litigation related to violations of a wide variety of laws, treaties and regulations, including labor regulations and anti-corruption regulations (including the U.S.
Moreover, conducting business outside the United States subjects us to a number of additional risks and challenges, including: • changes in a specific country’s or region’s political, regulatory or economic conditions; 30 • a pandemic, epidemic or other outbreak of an infectious disease, which may cause us or our distributors, vendors and/or customers to temporarily suspend operations in the affected city or country; • compliance with a wide variety of domestic and foreign laws and regulations (including those of municipalities or provinces where we have operations) and unexpected changes in those laws and regulatory requirements, including uncertainties regarding taxes, social insurance contributions and other payroll taxes and fees to governmental entities, tariffs, quotas, export controls, export licenses and other trade barriers; • unanticipated restrictions on our ability to sell to foreign customers where sales of products and the provision of services may require export licenses or are prohibited by government action, unfavorable foreign exchange controls and currency exchange rates; • the risk of substantial penalties and litigation related to violations of a wide variety of laws, treaties and regulations, including labor regulations and anti-corruption regulations (including the U.S.
In addition, the full benefit of the remedies available under the Defend Trade Secrets Act requires specific language and notice requirements present in the relevant agreements, which may not be present in all of our agreements.
In addition, the full benefit of the remedies available under the Defend Trade Secrets Act requires specific language and notice requirements 34 present in the relevant agreements, which may not be present in all of our agreements.
The doctrine of corporate opportunity is intended to preclude officers, directors and other fiduciaries from personally benefiting 42 from opportunities that belong to the corporation.
The doctrine of corporate opportunity is intended to preclude officers, directors and other fiduciaries from personally benefiting from opportunities that belong to the corporation.
Risks Related to Ownership of Our Common Stock Our principal stockholders Sanken and OEP will continue to have substantial control over us, which could limit your ability to influence the outcome of key transactions, including a change of control, and otherwise affect the prevailing market price of our common stock.
Risks Related to Ownership of Our Common Stock Our principal stockholders, Sanken and OEP, have substantial control over us, which could limit your ability to influence the outcome of key transactions, including a change of control, and otherwise affect the prevailing market price of our common stock.
If we are found to have breached any such laws or regulations in any such jurisdiction, we may be subject to enforcement actions that require us to change our business practices in a manner which may negatively impact our revenue, as well as expose us to litigation, fines, civil and/or criminal penalties and adverse publicity that could cause our customers to lose trust in us, negatively impacting our reputation and business in a manner that harms our financial position.
If we are found to have breached any such laws or regulations in any such jurisdiction, we may be subject to investigations and enforcement actions that require us to change our business practices in a manner which may negatively impact our revenue, as well as exposure to litigation, fines, civil and/or criminal penalties and adverse publicity that could cause our customers to lose trust in us, negatively impacting our reputation and business in a manner that harms our financial position.
Additional factors that can contribute to fluctuations in our operating results include: • the rescheduling, increase, reduction or cancellation of significant customer orders; • the timing of customer qualification of our products and commencement of volume sales by our customers of systems that include our products; • the timing and amount of research and development and sales and marketing expenditures; • the rate at which our present and future customers and end users adopt our technologies in our target end markets; • the timing and success of the introduction of new products and technologies by us and our competitors, and the acceptance of our new products by our customers; • our ability to anticipate changing customer product requirements; • our gain or loss of one or more key customers; • the availability, cost and quality of materials and components that we purchase from third-party vendors and any problems or delays in the fabrication, assembly, testing or delivery of our products; • the availability of production capacity at our third-party wafer fabrication facilities or other third-party subcontractors and other interruptions in the supply chain, including as a result of materials shortages, bankruptcies or other causes; • supply constraints for and changes in the cost of the other components incorporated into our customers’ products; • the utilization of our internal manufacturing operations; • our ability to reduce the manufacturing costs of our products; • fluctuations in manufacturing yields; • the changes in our product mix or customer mix; • competitive pressures resulting in lower than expected ASPs; • the timing of expenses related to the acquisition of technologies or businesses; • product rates of return or price concessions in excess of those expected or forecasted; • the emergence of new industry standards; 28 • product obsolescence; • unexpected inventory write-downs or write-offs; • costs associated with litigation over intellectual property rights and other litigation; • the length and unpredictability of the purchasing and budgeting cycles of our customers; • loss of key personnel or the inability to attract qualified engineers; • the quality of our products and any remediation costs; • adverse changes in economic conditions in various geographic areas where we or our customers do business; • the general industry conditions and seasonal patterns in our target end markets, particularly the automotive market; • other conditions affecting the timing of customer orders or our ability to fill orders of customers including customers subject to export control or U.S. economic sanctions; and • geopolitical events, such as war, threat of war or terrorist actions, or the occurrence of pandemics, epidemics or other outbreaks of disease, including the current COVID-19 pandemic, or natural disasters, and the impact of these events on the factors set forth above.
Additional factors that can contribute to fluctuations in our operating results include: • the rescheduling, increase, reduction or cancellation of significant customer orders; • the timing of customer qualification of our products and commencement of volume sales by our customers of systems that include our products; • the timing and amount of research and development and sales and marketing expenditures; • the rate at which our present and future customers and end users adopt our technologies in our target end markets; • the timing and success of the introduction of new products and technologies by us and our competitors, and the acceptance of our new products by our customers; • our ability to anticipate changing customer product requirements; • our gain or loss of one or more key customers; • the availability, cost and quality of materials and components that we purchase from third-party vendors and any problems or delays in the fabrication, assembly, testing or delivery of our products; • the availability of production capacity at our third-party wafer fabrication facilities or other third-party subcontractors and other interruptions in the supply chain, including as a result of materials shortages, bankruptcies or other causes; • supply constraints for and changes in the cost of the other components incorporated into our customers’ products; • the utilization of our internal manufacturing operations; • our ability to reduce the manufacturing costs of our products; • fluctuations in manufacturing yields; • the changes in our product mix or customer mix; • competitive pressures resulting in lower-than-expected ASPs; • the timing of expenses related to the acquisition of technologies or businesses; 25 • product rates of return or price concessions in excess of those expected or forecasted; • the emergence of new industry standards; • product obsolescence; • unexpected inventory write-downs or write-offs; • costs associated with litigation over intellectual property rights and other litigation; • the length and unpredictability of the purchasing and budgeting cycles of our customers; • loss of key personnel or the inability to attract qualified engineers; • the quality of our products and any remediation costs; • adverse changes in economic conditions in various geographic areas where we or our customers do business; • sustained inflation and disruptions in the banking and financial sector; • the general industry conditions and seasonal patterns in our target end markets, particularly the automotive market; • other conditions affecting the timing of customer orders or our ability to fill orders of customers including customers subject to export control or U.S. economic sanctions; and • geopolitical events, such as war, threat of war or terrorist actions, or the occurrence of pandemics, epidemics or other outbreaks of disease, or natural disasters, and the impact of these events on the factors set forth above.
We rely on a limited number of third-party wafer fabrication facilities for the fabrication of semiconductor wafers and on a limited number of suppliers of other materials, and the failure of any of these suppliers or additional suppliers to supply wafers or other materials on a timely basis could harm our business and our financial results.
We rely on a limited number of third-party semiconductor wafer fabrication facilities and a limited number of suppliers of other materials, and the failure of any of these suppliers to supply wafers or other materials on a timely basis could harm our business and our financial results.
In addition, computer programmers and hackers also may be able to develop and deploy viruses, worms and other malicious software programs that attack our products, or that otherwise exploit any security vulnerabilities, and any such attack, if successful, could expose us to liabilities for customer claims, regulatory investigations and fines, litigation, and increased costs of remediation and compliance.
In addition, computer programmers and hackers also may be able to develop and deploy viruses, worms and other malicious software programs that attack our products, or that otherwise exploit any security vulnerabilities, and any such attack, if successful, could expose us to liabilities for customer claims, regulatory investigations and fines, litigation (including class actions), and increased costs of remediation and compliance.
We cannot predict what actions may ultimately be taken with respect to tariffs or trade relations between the United States and China or other countries, what products may be subject to such actions, or what actions may be taken by the other countries in retaliation.
We cannot predict what actions may ultimately be taken with respect to export restrictions, tariffs or trade relations between the United States and China or other countries, what products may be subject to such actions, or what actions may be taken by the other countries in retaliation.
Though we maintain policies, internal controls and other measures reasonably designed to promote compliance with applicable anti-corruption and anti-bribery laws and regulations, and certain safeguards designed to ensure compliance with U.S. trade control laws, our employees or agents may nevertheless engage in improper conduct for which we might be held responsible.
Though we maintain policies, internal controls and other measures reasonably designed to promote compliance with applicable anti-corruption and anti-bribery laws and regulations, and certain safeguards designed to ensure compliance with U.S. economic and trade sanctions and export control laws, our employees or agents may nevertheless engage in improper conduct for which we might be held responsible.
Damage or disruption to our supply, manufacturing or distribution capabilities resulting from weather, freight carrier availability, any potential effects of climate change, natural disaster, disease, fire, explosion, cyber-attacks, terrorism, pandemics, epidemics or other outbreaks of infectious disease, strikes, civil unrest, repairs or enhancements at facilities manufacturing or distributing our products or other reasons could impair our ability to manufacture, sell, and deliver products on a timely basis or at all.
Damage or disruption to either our or our key suppliers or manufacturing partners’ supply, manufacturing or distribution capabilities resulting from weather, freight carrier availability, any potential effects of climate change, natural disaster, disease, fire, explosion, cyber-attacks, terrorism, pandemics, epidemics or other outbreaks of infectious disease, strikes, civil unrest, repairs or enhancements at facilities manufacturing or distributing our products or other reasons could impair our ability to manufacture, sell, and deliver products on a timely basis or at all.
This concentration of sales exposes us to the risks associated with the automotive market. For example, our anticipated future growth is highly dependent on the adoption of autonomous driving technologies and xEV powertrain vehicles, which are expected to have increased sensor and power product content.
This concentration of sales exposes us to the risks associated with the automotive market and automotive industry. For example, our anticipated future growth is highly dependent on the adoption of autonomous driving technologies and EV powertrain vehicles, which are expected to have increased sensor and power product content.
Moreover, any such compromise of our information security could result in the misappropriation or unauthorized publication of our Confidential Information or that of other parties with which we do business, an interruption in our operations, the unauthorized transfer of cash or other of our 39 assets, the unauthorized release of customer or employee data or a violation of privacy or other laws.
Moreover, any such compromise of our information security or IT Systems could result in the misappropriation or unauthorized publication of our Confidential Information or that of other parties with which we do business, an interruption in our operations, the unauthorized transfer of cash or other of our assets, the unauthorized release of customer or employee data or a violation of privacy or other laws.
In addition, our reputation, our net sales or our stock price could be adversely affected if we become the subject of any negative publicity related to actual or perceived violations of anti-corruption, anti-bribery or trade control laws and regulations.
In addition, our reputation, our net sales or our stock price could be adversely affected if we become the subject of any negative publicity related to actual or perceived violations of anti-corruption, anti-bribery or economic or trade sanctions or export control laws and regulations.
In addition, any economic downturn or recession brought on by the COVID-19 pandemic or other disease outbreaks could adversely affect demand for our products and impact our results of operations and financial condition. These effects, alone or taken together, could have a material adverse effect on our business, results of operations, or financial condition.
In addition, any economic downturn or recession brought on by the COVID-19 pandemic or other health epidemics could adversely affect demand for our products and impact our results of operations and financial condition. These effects, alone or taken together, could have a material adverse effect on our business, results of operations, or financial condition.
As of March 25, 2022, we had $25.0 million in aggregate principal amount of debt outstanding under our Term Loan Facility (as defined herein), no debt outstanding under our Revolving Credit Facility and $50.0 million of additional borrowings available thereunder.
As of March 31, 2023, we had $25.0 million in aggregate principal amount of debt outstanding under our Term Loan Facility (as defined herein), no debt outstanding under our Revolving Credit Facility and $50.0 million of additional borrowings available thereunder.
Our dependence on international customers and operations also subjects us to a range of other additional regulatory, operational, financial and political risks that could adversely affect our financial results. For fiscal years 2022, 2021 and 2020, approximately 85.9%, 86.1% and 81.7%, respectively, of our net sales were to customers outside of the United States.
Our dependence on international customers and operations also subjects us to a range of other additional regulatory, operational, financial and political risks that could adversely affect our financial results. For fiscal years 2023, 2022 and 2021, approximately 86.6%, 85.9% and 86.1%, respectively, of our net sales were to customers outside of the United States.
In addition, any disruption in the credit markets, including as a result of the current COVID-19 pandemic, could impede our access to capital, which could be further adversely affected if we are unable to obtain or maintain favorable credit ratings.
In addition, any disruption in the credit markets, including as a result of the ongoing COVID-19 pandemic or the onset of a recession, could impede our access to capital, which could be further adversely affected if we are unable to obtain or maintain favorable credit ratings.
Item 1A. Risk Factors. An investment in our common stock involves risks. You should consider these risks carefully, as well as the other information contained in this Annual Report. If any of these risks actually occurs, our business, financial condition and results of operations could be harmed materially.
Item 1A. Risk Factors. An investment in our common stock involves risks. You should consider these risks carefully, as well as the other information contained in this Annual Report. If any of these risks occurs or increases in scope or severity, our business, financial condition and results of operations could be harmed materially.
We currently rely on a limited number of third-party wafer fabrication facilities for the fabrication of semiconductor wafers used in the manufacture of our IC products and we purchase a number of key materials and components used in the manufacture of our products from single or limited sources.
We currently rely on a limited number of third-party wafer fabrication facilities for the fabrication of semiconductor wafers used in the manufacture of our IC products, primarily UMC, PSL, and TSMC, and we purchase a number of key materials and components used in the manufacture of our products from single or limited sources.
The interests of these stockholders may not always coincide with, and in some cases may conflict with, our interests and the interests of our other stockholders.
The interests of these stockholders may not always align with, and in some cases may conflict with, our interests and the interests of our other stockholders.
In addition, an earthquake, fire, flood or other natural or man-made disaster, as well as a pandemic, epidemic or other outbreak of infectious disease, including the current COVID-19 pandemic, strikes, political or civil unrest, or any number of other factors beyond our control could also disable such facility, causing catastrophic losses.
In addition, an earthquake, fire, flood or other natural or man-made disaster, as well as a pandemic, epidemic or other outbreak of infectious disease, strikes, political or civil unrest, or any number of other factors beyond our control could also disable such facility, causing catastrophic losses.
For example, in early 2022, a spike in COVID-19 cases in multiple cities in China has caused the Chinese government to reimpose lockdown measures, which have negatively impacted either our supply chains or our customers’ supply chains, as well as customer demand for our products, and these shutdowns may continue or recur in the foreseeable future.
For example, in early 2022, a spike in COVID-19 cases in multiple cities in China caused the Chinese government to reimpose lockdown measures, which negatively impacted our supply chains and our customers’ supply chains, as well as customer demand for our products, and these shutdowns may recur in the future.
Actions by the sales representatives and other employees of our distributors that are beyond our control could result in flat or declining sales in a given geographic area, harm to the reputation of our company or our products, or legal liability, any of which could have a material adverse effect on our business, financial condition and results of operations.
Actions by the sales representatives and other employees of our distributors could result in flat or declining sales in a given geographic area, reputational harm to our Company or our products, or legal liability, any of which could have a material adverse effect on our business, financial condition and results of operations.
For example, the United States and China have imposed a number of tariffs and other restrictions on items imported or exported between the United States and China, and have proposed to impose a number of additional tariffs.
For example, the United States and China have imposed export restrictions related to certain semiconductors and a number of tariffs and other restrictions on items imported or exported between the United States and China, and have proposed to impose a number of additional tariffs.
Any violations of these anti-corruption or trade controls laws, or even allegations of such violations, can lead to an investigation and/or enforcement action, which could disrupt our operations, cause significant management distraction, and lead to significant costs and expenses, including legal fees.
Any violations of these laws or regulations, or even allegations of such violations, can lead to an investigation and/or enforcement action, which could disrupt our operations, cause significant management distraction, and lead to significant costs and expenses, including legal fees.
A significant portion of our net sales are made to distributors, accounting for approximately 36.8%, 37.3% and 25.2% of our net sales in fiscal years 2022, 2021 and 2020, respectively, excluding our distribution relationship with Sanken in Japan, which represented approximately 19.4%, 17.7% and 17.3% of our net sales in fiscal years 2022, 2021 and 2020, respectively.
A significant portion of our net sales are made to distributors, accounting for approximately 39.3%, 36.8% and 37.3% of our net sales in fiscal years 2023, 2022 and 2021, respectively, excluding our distribution relationship with Sanken in Japan, which represented approximately 16.5%, 19.4% and 17.7% of our net sales in fiscal years 2023, 2022 and 2021, respectively.
In addition, we are subject to U.S. and other applicable trade control regulations that restrict with whom we may transact business, including the trade sanctions enforced by the U.S. Treasury, Office of Foreign Assets Control.
In addition, we are subject to U.S. and other applicable economic and trade sanctions and export control laws and regulations that restrict with whom we may transact business, including the economic and trade sanctions enforced by the U.S. Treasury, Office of Foreign Assets Control and export control laws and regulations administered and enforced by the U.S. Department of Commerce.
Our ability to compete in this environment depends on many factors, including our ability to identify emerging markets and technology trends in an accurate and timely manner, introduce new and innovative products, implement new manufacturing technologies at a sustainable pace, maintain the performance and quality of our products, and manufacture our products in a cost-effective manner, as well as our competitors’ performance and general economic and industry market conditions.
Our ability to compete in this environment depends on many factors, including our ability to identify emerging markets and technology trends in an accurate and timely manner, introduce new and innovative products, implement new manufacturing technologies at a sustainable pace, maintain the performance and quality of our products, and manufacture our products in a cost-effective manner.
However, we cannot guarantee that they will be successful in marketing our products. In addition, because our distributors do not sell our products exclusively, they may focus their sales efforts and resources on other products that produce better margins or greater commissions for them or are incorporated into a broader strategic relationship with one of their other suppliers.
In addition, because our distributors do not sell our products exclusively, they may focus their sales efforts and resources on other products that produce better margins or greater commissions for them or are incorporated into a broader strategic relationship with one of their other suppliers.
The semiconductor industry is subject to a variety of international, federal, state, local and non-U.S. laws and regulations governing pollution, environmental protection and occupational health and safety, including those relating to the release, storage, use, discharge, handling, generation, transportation, disposal, and labeling of, and human exposure to, hazardous and toxic materials, product composition, and the investigation and cleanup of contaminated sites, including sites we currently or formerly owned or operated, due to the release of hazardous materials, regardless of whether we caused such release.
The semiconductor industry is subject to a variety of international, federal, state, local and non-U.S. laws and regulations governing pollution, environmental protection and occupational health and safety, including those relating to hazardous and toxic materials, product composition, and the investigation and cleanup of contaminated sites, including sites we currently or formerly owned or operated, due to the release of hazardous materials, regardless of whether we caused such release.
Changes in, and responses to, U.S. trade policy could reduce the competitiveness of our products and cause our sales to decline, which could materially and adversely impact our business, financial condition and results of operations.
Changes in, and responses to, U.S. trade policy could reduce the competitiveness of our products and cause our sales to decline, which could materially and adversely impact our business, financial condition and results of operations. Warranty claims, product liability claims and product recalls could harm our business, results of operations and financial condition.
Any type of security breach, attack or misuse of data, whether experienced by us or an associated third party, could harm our reputation or deter existing or prospective customers from using our products and applications, increase our operating expenses in order to contain and remediate the incident, expose us to unbudgeted or uninsured liability, disrupt our operations, divert management focus away from other priorities, increase our risk of regulatory scrutiny, result in the imposition of penalties and fines under state, federal and foreign laws or by payment networks and adversely affect our continued payment network registration and financial institution sponsorship.
Any type of security breach, attack or misuse of data, whether experienced by us or an associated third-party service provider or in our supply chain, could harm our reputation or deter existing or prospective customers from using our products and applications, increase our operating expenses in order to contain and remediate the incident, expose us to unbudgeted or uninsured liability, disrupt our operations, divert management focus away from other priorities, increase our risk of regulatory scrutiny, result in the imposition of penalties and fines under state, federal and foreign laws.
Weaknesses in the global economy and financial markets, including resulting from the ongoing COVID-19 pandemic, may in the future lead to lower demand for products that incorporate our solutions, particularly in the automotive and industrial markets.
Weaknesses in the global economy and financial markets, including resulting from the COVID-19 pandemic or the onset of a recession, may lead to lower demand for products that incorporate our solutions, particularly in the automotive and industrial markets.
Our failure to take adequate steps to reduce the likelihood or mitigate the potential 30 impact of such events, or to effectively manage such events if they occur, particularly when a wafer or packaging component is sourced from a limited number of locations or suppliers, could adversely affect our business, financial condition, results of operations and cash flows and/or require additional resources to restore our supply chain.
Our failure to take adequate steps to reduce the likelihood or mitigate the potential impact of such events, or to effectively manage such events if they occur, particularly when a wafer or packaging component is sourced from a limited number of locations or suppliers, could adversely affect our business, financial condition, results of operations and cash flows and/or require additional resources to restore our supply chain. 27 The effects of the COVID-19 pandemic or other health epidemics could have an adverse impact on our business, results of operations and financial condition.
Cyberattacks are expected to accelerate on a global basis in both frequency and magnitude, and threat actors are increasingly sophisticated in using techniques that circumvent controls, evade detection, and remove forensic evidence, which means that we and our third-party providers may be unable to anticipate, contain or recover from future attacks or incidents in a timely or effective manner.
Security measures that we, our third-party service providers, and our customers have implemented may not detect or prevent such disruptions or security breaches. 35 Cyberattacks are expected to accelerate on a global basis in both frequency and magnitude, and threat actors are increasingly sophisticated in using techniques that circumvent controls, evade detection, and remove forensic evidence, which means that we and our third-party providers may be unable to anticipate, contain or recover from future attacks or incidents in a timely or effective manner.
We may be unable to reduce the cost of our products sufficiently to enable us to compete with others. Our cost reduction efforts may not allow us to keep pace with competitive pricing pressures given the increased cost of certain materials, such as semiconductor wafers and other raw materials, and could adversely affect our gross margins.
Our cost reduction efforts may not allow us to keep pace with competitive pricing pressures given the increased cost of certain materials, such as semiconductor wafers and other raw materials, and could adversely affect our gross margins.
In addition, the COVID-19 pandemic has increased cybersecurity risk as a result of global remote working dynamics that present additional opportunities for threat actors to engage in social engineering (for example, phishing) and to exploit vulnerabilities in non-corporate networks. The costs to us to reduce the risk of or alleviate cybersecurity attacks, breaches and vulnerabilities could be significant.
In addition, the increase in global remote working dynamics since the onset of the COVID-19 pandemic presents additional opportunities for threat actors to engage in social engineering (for example, phishing) and to exploit vulnerabilities in non-corporate networks. The costs to us to reduce the risk of or alleviate cybersecurity attacks, breaches and vulnerabilities could be significant.
We believe that our existing cash resources and our access to the capital markets will be sufficient to finance our continued operations, growth strategy, planned capital expenditures and the additional expenses we expect to incur as a public company for at least the next 12 months.
We believe that our existing cash resources and our access to the capital markets will be sufficient to finance our continued operations, growth strategy, and planned capital expenditures for at least the next 12 months.
In addition to global macroeconomic effects, the COVID-19 pandemic and related adverse public health developments have caused, and are expected to continue to cause, disruption to our domestic and international operations and sales activities.
Our business has been, and is expected to continue to be, adversely impacted by the effects of the COVID-19 pandemic. In addition to global macroeconomic effects, the COVID-19 pandemic and related adverse public health developments have caused, and are expected to continue to cause, disruption to our domestic and international operations and sales activities.
We seek to protect our proprietary technolog y and inventions, particularly those relating to the design of our products, through th e use of patents. As of March 25, 2022, we owned 1,256 patents, including 671 active U.S. patents (with expiration dates between 2022 and 2041), with an additional 362 pending patent applications, including 151 U.S. patent applications.
We seek to protect our proprietary technolog y and inventions, particularly those relating to the design of our products, through th e use of patents. As of March 31, 2023, we owned 1,371 patents, including 742 active U.S. patents (with expiration dates between 2023 and 2042), with an additional 357 pending patent applications, including 154 U.S. patent applications.
Depending on the magnitude of such effects on our manufacturing activities or the operations of our suppliers, third-party distributors or sub-contractors, our supply chain, manufacturing and product shipments could be delayed, which could materially adversely affect our business, results of operations and financial condition. Impacts to our customers’ operations and supply chains could also negatively impact our revenues.
Depending on the magnitude of such effects, manufacturing and product shipments could be delayed, which could materially adversely affect our business, results of operations and financial condition. Impacts to our customers’ operations and supply chains could also negatively impact our net sales.
The semiconductor industry, including the analog segment of the industry in which we compete, is highly cyclical and is prone to significant downturns from time to time.
The semiconductor industry, including the analog segment of the industry in which we compete, is highly cyclical and is prone to significant downturns from time to time. Cyclical downturns can result from a variety of market forces, which can result in significant declines in analog semiconductor demand.
In the area of employment matters, we are subject to a variety of federal, state and foreign employment and labor laws and regulations, including the Americans with Disabilities Act, the Federal Fair Labor Standards Act, the WARN Act and other regulations related to working conditions, wage and hour pay, overtime pay, employee benefits, anti-discrimination, and termination of employment.
In certain jurisdictions, regulatory requirements in one or more of these areas may be more stringent than in the United States. 36 In the area of employment matters, we are subject to a variety of federal, state and foreign employment and labor laws and regulations, including the Americans with Disabilities Act, the Federal Fair Labor Standards Act, the WARN Act and other regulations related to working conditions, wage and hour pay, overtime pay, employee benefits, anti-discrimination, and termination of employment.
Since we manufacture our products outside the United States, such changes, if adopted, could have a disproportionate impact on our business and make our products more expensive and less competitive in domestic markets.
In addition, since we manufacture our products outside the United States, new or increased tariffs on certain goods imported into the United States, if adopted, could have a disproportionate impact on our business and make our products more expensive and less competitive in domestic markets.
A downturn in the automotive market could delay automakers’ plans to introduce new vehicles with these features, which would negatively impact the demand for our products and our ability to grow our business. The automotive industry is also undergoing consolidation and reorganization and, in some cases, suppliers to the automotive industry have entered bankruptcy.
A downturn in the automotive market could delay automakers’ plans to introduce new vehicles with these features, which would negatively impact the demand for our products and our ability to grow our business.
Our quarterly net sales and operating results have fluctuated significantly in the past and may continue to vary from quarter to quarter due to a number of factors, many of which are not within our control.
We operate in a highly dynamic industry, and our future operating results could be subject to significant fluctuations, particularly on a quarterly basis. Our quarterly net sales and operating results have fluctuated significantly in the past and may continue to vary from quarter to quarter due to a number of factors, many of which are not within our control.
During fiscal year 2022, one end customer, including those served through our distributors, represented approximately 11% of our net sales, while no other end customer, including those served through our distributors, exceeded 10% of our net sales during fiscal year 2022.
During fiscal year 2023, no end customer, including those served through our distributors, exceeded 10% of our net sales during fiscal year 2023.
We depend on key and highly skilled personnel to operate our business, and if we are unable to retain our current personnel and hire additional personnel, our ability to develop and market our products could be harmed, which in turn could adversely affect our financial results.
To the extent that we incur additional indebtedness or such other obligations, the risks associated with our indebtedness described above could increase. 33 We depend on key and highly skilled personnel to operate our business, and if we are unable to retain our current personnel and hire additional personnel, our ability to develop and market our products could be harmed, which in turn could adversely affect our financial results.
Moreover, during a market upturn, for example, the significant worldwide increase in semiconductor IC demand as we came out of the initial COVID-19 pandemic downturn, we may not be able to purchase sufficient supplies or components to meet increasing product demand, which could prevent us from taking advantage of opportunities and maximizing our net sales.
Moreover, during a market upturn we may not be able to purchase sufficient supplies or components to meet increasing product demand, which could prevent us from taking advantage of opportunities and maximizing our net sales.
Conversely, significant upturns, such as the significant increase in semiconductor IC demand as we came out of the initial COVID-19 pandemic downturn, can cause us to be unable to satisfy demand in a timely and cost-efficient manner and could result in increased competition for access to third-party foundry and assembly capacity.
Conversely, significant upturns can cause us to be unable to satisfy demand in a timely and cost-efficient manner and could result in increased competition for access to third-party foundry and assembly capacity.
While we rely on the AMPI Facility as our primary manufacturing facility for our select sensor and power products, we are aware that only a few alternative 29 manufacturing facilities have the capability to assemble and test our most advanced and complex products and if we are forced to engage such alternative manufacturing facilities, we may encounter difficulties and incur additional costs.
To our knowledge, only a few alternative 26 manufacturing facilities have the capability to assemble and test our most advanced and complex products and if we are forced to engage such alternative manufacturing facilities, we may encounter difficulties and incur additional costs.
We are in an intensely competitive segment of the global semiconductor industry. Our competitive landscape includes rapid technological change in product design and manufacturing, continuous declines in ASPs, and customers who make purchase decisions based on a mix of factors of varying importance.
Our competitive landscape includes rapid technological change in product design and manufacturing, continuous declines in ASPs, and customers who make purchase decisions based on a mix of factors of varying importance, which varies from customer-to-customer and from market-to-market.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeItem 2. Properties. Manufacturing, Operations and Facilities Our operations are primarily conducted at the locations shown below. Our subsidiary, Allegro MicroSystems Philippines Inc., in Manila, Philippines, operates our primary internal assembly and testing facility. Our corporate headquarters is located in Manchester, New Hampshire.
Biggest changeItem 2. Properties. Manufacturing, Operations and Facilities Our corporate headquarters is located in Manchester, New Hampshire, and we have a global footprint with 26 locations across four continents. Our operations are primarily conducted at the locations shown below. Our subsidiary, Allegro MicroSystems Philippines Inc., in Manila, Philippines, operates as our primary internal assembly and testing facility.
We strive to comply with industry standards such as IATF 16949:2016 (the automotive sector-specific quality management system standard) and ISO 14001 (a voluntary standard for environmental management published by the International Standards 46 Organization), and we also strive to comply with ISO 26262 ASIL product development standards, RoHS (an EU standard relating to use of certain hazardous substances in products) and similar environmental product requirements.
We strive to comply with industry standards such as IATF 16949:2016 (the automotive sector-specific quality management system standard) and ISO 14001 (a voluntary standard for environmental management published by the International Standards Organization), and we also strive to comply with ISO 26262 ASIL product development standards, RoHS (an EU standard relating to use of certain hazardous substances in products) and similar environmental product requirements.
Facility Facility Functions Facility Size Status Manila, Philippines Manufacturing –Assembly, Test, Finish Approximately 370,000 square feet Facility-Owned, Land (Subject to 9 coordinated leases, the longest of which has a 50-year term (and a 25-year renewal option)) Manchester, NH Corporate Headquarters, Research and Development, Administrative Approximately 120,000 square feet Owned Marlborough, MA Research and Development, Administrative Approximately 50,000 square feet Leased (10-year lease expires in 2028) We also lease design and applications support centers in the Americas, Asia and Europe.
Facility Facility Functions Facility Size Status Manila, Philippines Manufacturing –Assembly, Test, Finish Approximately 439,000 square feet Facility-Owned, Land (Subject to 9 coordinated leases, the longest of which has a 50-year term (and a 25-year renewal option)) Manchester, NH Corporate Headquarters, Research and Development, Administrative Approximately 120,000 square feet Owned Marlborough, MA Research and Development, Administrative Approximately 50,000 square feet Leased (10-year lease expires in 2028) We also lease design and applications support centers in the Americas, Asia and Europe.
We also supplement the assembly capabilities of the AMPI Facility with subcontractors throughout Asia, and approximately 51%, 52% and 54% of our assembly was outsourced in fiscal 2022, 2021 and 2020, respectively. While our principal test operations are performed at the AMPI Facility, additional test capabilities are available at our Manchester, New Hampshire facility.
We also supplement the assembly capabilities of the AMPI Facility with subcontractors throughout Asia, and approximately 51%, 51% and 52% of our assembly was outsourced in fiscal 2023, 2022 and 2021, respectively. While our principal test operations are performed at the AMPI Facility, additional test capabilities are available at our Manchester, New Hampshire facility.
The AMPI Facility is our primary internal assembly and testing facility for our sensor and power products, with packaging capabilities and quality standards that meet stringent automotive safety and reliability specification requirements.
We have master service agreements with all foundry partners, and some we have also engaged in long-term supply agreements. 41 The AMPI Facility is our primary internal assembly and testing facility for our sensor and power products, with packaging capabilities and quality standards that meet stringent automotive safety and reliability specification requirements.
Following our completion of the PSL Divestiture in March 2020, we have transitioned to a fabless business model, which provides us with enhanced security of supply and manufacturing flexibility.
We have a fabless business model, which provides us with enhanced security of supply and manufacturing flexibility. Our fab partners currently include PSL, UMC and TSMC.
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In connection with this transaction, we entered into an amendment to our Wafer Foundry Agreement with PSL to provide for a minimum wafer purchase obligation by us from PSL during the initial three-year term of the Wafer Foundry Agreement. Our other fab partners currently include UMC and TSMC.
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Other than the Wafer Foundry Agreement, we do not have long-term supply agreements in place with our third-party wafer fabrication partners or other suppliers, and we purchase products on a purchase order basis.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeItem 3. Legal Proceedings. We are currently not a party to any material legal proceedings. We may, from time to time, become involved in litigation relating to claims arising from our ordinary course of business. These claims, even if not meritorious, could result in the expenditure of significant financial and managerial resources. Item 4. Mine Safety Disclosures. Not applicable.
Biggest changeThese claims, even if not meritorious, could result in the expenditure of significant financial and managerial resources. We are not currently party to any material legal proceedings, and we are not aware of any pending or threatened legal proceeding against us that we believe could have a material adverse effect on our business, operating results, cash flows or financial condition.
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Item 3. Legal Proceedings. From time to time, we may be involved in claims, regulatory examinations or investigations and legal proceedings arising in the ordinary course of our business. The outcome of any such claims or proceedings, regardless of the merits, and the Company’s ultimate liability, if any, is inherently uncertain.
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Item 4. Mine Safety Disclosures. Not applicable. PART II

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeThe following line graph compares for the period beginning October 29, 2020, the initial trading date of our common stock on the Nasdaq Global Select Market, and ending on March 25, 2022, the last day of our fiscal year, the cumulative total stockholder return for our common stock, the Nasdaq Composite Index and Philadelphia Semiconductor Index, and assumes reinvestment of any dividends.
Biggest changeThe Graph does not constitute “soliciting material” and should not be deemed “filed” or incorporated by reference into any other filings under the Securities Act of 1933, as amended, or the Exchange Act, except to the extent we specifically incorporate this information by reference into such filing. 42 The following line graph compares for the period beginning October 29, 2020, the initial trading date of our common stock on the Nasdaq Global Select Market, and ending on March 31, 2023, the last day of our fiscal year, the cumulative total stockholder returns for our common stock, the Nasdaq Composite Index and Philadelphia Semiconductor Index, and assumes reinvestment of any dividends.
We currently intend to retain all available funds and any future earnings to fund the development and growth of our business and the repayment of outstanding debt. Therefore, we do not anticipate declaring or paying any additional cash dividends on our common stock in the foreseeable future.
Dividends We currently intend to retain all available funds and any future earnings to fund the development and growth of our business and the repayment of outstanding debt. Therefore, we do not anticipate declaring or paying any cash dividends on our common stock in the foreseeable future.
The stockholder return in the graph below is not necessarily indicative of, nor it is intended to forecast, the potential future performance of our common stock, and we do not make or endorse any predictions as to future stockholder returns.
The stockholder return in the graph below is not necessarily indicative of, nor it is intended to forecast, the potential future performance of our common stock, and we do not make or endorse any predictions as to future stockholder returns. We selected these comparative groups due to industry similarities and the fact that they include several direct competitors.
As of May 6, 2022, there we re 190,500,630 shares of our common stock held by approxi mately 29 h olders of record, which does not include beneficial owners of common stock whose shares are held in the names of various securities brokers, dealers and registered clearing agencies.
As of May 8, 2023, there were 191,756,966 shares of our common stock held by approximately 20 holders of record, which does not include beneficial owners of common stock whose shares are held in the names of various securities brokers, dealers and registered clearing agencies.
We selected these comparative groups due to industry similarities and the fact that they include several direct competitors. 47 Base Period October, 29, 2020 3/26/2021 3/25/2022 Allegro MicroSystems, Inc. $100.00 $142.77 $164.86 Nasdaq Composite Index $100.00 $117.46 $126.67 Philadelphia Semiconductor Index $100.00 $136.02 $154.37 Recent Sales of Unregistered Securities and Use of Proceeds None.
Base Period October, 29, 2020 March 26, 2021 March 25, 2022 March 31, 2023 Allegro MicroSystems, Inc. $100.00 $142.77 $164.86 $271.13 Nasdaq Composite Index $100.00 $117.46 $126.67 $109.26 Philadelphia Semiconductor Index $100.00 $136.02 $154.37 $141.48 Recent Sales of Unregistered Securities and Use of Proceeds None. Use of Proceeds from Registered Securities None. Issuer Purchases of Equity Securities None. Item 6.
Removed
Dividends In October 2020, we paid a cash dividend in the aggregate amount of $400.0 million to holders of our Class A common stock (see Note 19, “Common Stock and Stock-Based Compensation” to the consolidated financial statements).
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The Graph does not constitute “soliciting material” and should not be deemed “filed” or incorporated by reference into any other filings under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, except to the extent we specifically incorporate this information by reference into such filing.
Removed
Use of Proceeds from Registered Securities None. Issuer Purchases of Equity Securities None. Item 6. Reserved.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeFiscal Year Ended Change March 25, 2022 March 26, 2021 $ % (Dollars in thousands) Total net sales (1) $ 768,674 $ 591,207 $ 177,467 30.0 % Cost of goods sold 361,214 312,305 48,909 15.7 % Gross profit 407,460 278,902 128,558 46.1 % Operating expenses: Research and development 121,873 108,649 13,224 12.2 % Selling, general and administrative 150,937 153,476 (2,539) (1.7) % Impairment of long-lived assets — 7,119 (7,119) (100.0) % Change in fair value of contingent consideration (2,000) (2,500) 500 (20.0) % Total operating expenses 270,810 266,744 4,066 1.5 % Operating income 136,650 12,158 124,492 1,024.0 % Other income (expense), net: Loss on debt extinguishment — (9,055) 9,055 (100.0) % Interest expense, net (1,057) (2,603) 1,546 (59.4) % Foreign currency transaction loss (568) (2,889) 2,321 (80.3) % Income in earnings of equity investment 1,007 1,413 (406) (28.7) % Other, net 4,714 (475) 5,189 (1,092.4) % Total other income (expense), net 4,096 (13,609) 17,705 (130.1) % Income (loss) before income tax provision (benefit) 140,746 (1,451) 142,197 (9,799.9) % Income tax provision (benefit) 21,191 (19,552) 40,743 (208.4) % Net income 119,555 18,101 101,454 560.5 % Net income attributable to non-controlling interests 148 148 — — % Net income attributable to Allegro MicroSystems, Inc. $ 119,407 $ 17,953 $ 101,454 565.1 % (1) Our total net sales for the periods presented above include related party net sales generated through our distribution agreement with Sanken.
Biggest changeFiscal Year Ended Change March 31, 2023 March 25, 2022 $ % (Dollars in thousands) Total net sales (1) $ 973,653 $ 768,674 $ 204,979 26.7 % Cost of goods sold (1) 427,574 361,214 66,360 18.4 % Gross profit 546,079 407,460 138,619 34.0 % Operating expenses: Research and development 150,850 121,873 28,977 23.8 % Selling, general and administrative 194,722 150,937 43,785 29.0 % Change in fair value of contingent consideration (2,800) (2,000) (800) 40.0 % Total operating expenses 342,772 270,810 71,962 26.6 % Operating income 203,307 136,650 66,657 48.8 % Other income (expense), net: Interest expense (2,336) (2,499) 163 (6.5) % Interest income 1,724 1,442 282 19.6 % Foreign currency transaction gain (loss) 980 (568) 1,548 (272.5) % Loss (income) in earnings of equity investment (406) 1,007 (1,413) (140.3) % Unrealized gains on marketable securities 7,471 3,722 3,749 100.7 % Other, net 606 992 (386) (38.9) % Total other income, net 8,039 4,096 3,943 96.3 % Income before income tax provision 211,346 140,746 70,600 50.2 % Income tax provision 23,852 21,191 2,661 12.6 % Net income 187,494 119,555 67,939 56.8 % Net income attributable to non-controlling interests 137 148 (11) (7.4) % Net income attributable to Allegro MicroSystems, Inc. $ 187,357 $ 119,407 $ 67,950 56.9 % (1) Our total net sales and cost of goods sold for the periods presented above include related party net sales generated through our distribution agreement with Sanken and costs of goods sold related thereto.
During an expansion cycle, we may increase capital spending and hiring to add to our production capacity. During 52 periods of slower growth or industry contractions, our sales, production and productivity suffer and margins generally decline. Components of Our Results of Operations Net sales Our total net sales are derived from product sales to direct customers and distributors.
During an expansion cycle, we may increase capital spending and hiring to add to our production capacity. During periods of slower growth or industry contractions, our sales, production and productivity suffer and margins generally decline. Components of Our Results of Operations Net sales Our total net sales are derived from product sales to direct customers and distributors.
Operating Expenses Research and development (“R&D”) expenses R&D expenses consist primarily of personnel-related costs of our research and development organization, including stock-based compensation, costs of development of wafers and masks, license fees for computer-aided design software, costs 53 of development testing and evaluation, costs of developing automated test programs, equipment depreciation and related occupancy and equipment costs.
Operating Expenses Research and development (“R&D”) expenses R&D expenses consist primarily of personnel-related costs of our research and development organization, including stock-based compensation, costs of development of wafers and masks, license fees for computer-aided design software, costs of development testing and evaluation, costs of developing automated test programs, equipment depreciation and related occupancy and equipment costs.
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations. The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our consolidated financial statements and related notes and other information included elsewhere in this Annual Report on Form 10-K (the “Annual Report”).
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations. The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our consolidated financial statements and related notes and other information included elsewhere in this 43 Annual Report on Form 10-K (the “Annual Report”).
Further, despite current inflationary and pricing conditions, we expect the ASPs of our products to decline over time, and we consider design wins to be critical to our future success and anticipate being increasingly dependent on revenue from newer design wins for our newer products.
Further, despite current inflationary and pricing conditions, we expect the ASPs of our products to decline over 45 time, and we consider design wins to be critical to our future success. We anticipate being increasingly dependent on revenue from newer design wins for our newer products.
Limited supply and increased demand for many of our products and applications, as well as supply chain disruptions related to the COVID-19 pandemic, have contributed to input cost increases on the components needed to manufacture our products.
Limited supply and increased demand for many of our products and applications, as well as supply chain disruptions related to the COVID-19 pandemic and inflation, have contributed to input cost increases on the components needed to manufacture our products.
In order to support and achieve our future growth plans, we may need or seek advantageously to obtain additional funding through equity or debt financing. We believe that our current operating structure will facilitate sufficient cash flows from operations to satisfy our expected long-term liquidity requirements beyond the next twelve months.
In order to support and achieve our future growth plans, we may need or seek advantageously to obtain additional funding through equity or debt financing. We believe that our current operating structure will facilitate sufficient cash flows from operations to satisfy our expected long-term liquidity requirements beyond the next 12 months.
These customers generally provide periodic forecasts of their requirements, but these forecasts do not commit such customers to minimum purchases, and customers can revise these forecasts without penalty. In addition, as is customary in the semiconductor industry, customers are generally permitted to cancel orders for our products within a specified period.
These customers generally provide periodic forecasts of their requirements. However, these forecasts do not commit such customers to minimum purchases, and customers can revise these forecasts without penalty. In addition, as is customary in the semiconductor industry, customers are generally permitted to cancel orders for our products within a specified period.
For new products, the time from design initiation and manufacturing until we generate revenue can be lengthy, typically between two and four years. As a result, our future revenue is highly dependent on our continued success at winning design mandates from our customers.
For new products, the time from design initiation and manufacturing until we generate revenue can be lengthy, typically between two and four years. As a result, our future sales are highly dependent on our continued success at winning design mandates from our customers.
Gross margin generally increases when the opposite occurs. Cyclical Nature of the Semiconductor Industry The semiconductor industry is highly cyclical and is characterized by increasingly rapid technological change, product obsolescence, competitive pricing pressures, evolving standards, short product life-cycles and fluctuations in product supply and demand.
Gross margin generally increases when the opposite occurs. Cyclical Nature of the Semiconductor Industry The semiconductor industry has historically been highly cyclical and is characterized by increasingly rapid technological change, product obsolescence, competitive pricing pressures, evolving standards, short product life-cycles and fluctuations in product supply and demand.
Financing Activities Net cash used in financing activities was $5.3 million in fiscal year 2022, consisting of funds loaned to PSL of $7.5 million, partially offset by $2.2 million of proceeds received in connection with the issuance of common stock under the 2020 ESPP, net of payments for taxes related to the net settlement of equity awards.
Net cash used in financing activities was $5.3 million in fiscal year 2022, consisting of funds loaned to PSL of $7.5 million, partially offset by $2.2 million of proceeds received in connection with the issuance of common stock under the 2020 Employee Stock Purchase Plan, net of payments for taxes related to the net settlement of equity awards.
Our current capital deployment strategy for 2023 is to utilize excess cash on hand to support our continued growth initiatives into select markets, planned capital expenditures and strategic arrangements, as well as consider potential acquisitions.
Our current capital deployment strategy for 2024 is to utilize cash on hand to support our continued growth initiatives into select markets, planned capital expenditures and strategic arrangements, as well as consider potential acquisitions.
As of March 25, 2022, the Company is not party to any off-balance sheet arrangements that have or are reasonably likely to have a current or future material effect on our financial condition, results of operations, liquidity, capital expenditures, or capital resources.
As of March 31, 2023, the Company is not party to any off-balance sheet arrangements that have or are reasonably likely to have a current or future material effect on our financial condition, results of operations, liquidity, capital expenditures, or capital resources.
These manufacturing efficiencies allowed us to leverage higher volumes to keep pace with increasing demand across most of our applications, while reducing cost of goods sold and increasing the absorption of fixed costs. Although these initiatives have resulted in gross margin and operating income improvements over the previous quarters, we cannot ensure that these trends will continue over the long-term.
These manufacturing efficiencies allowed us to leverage higher volumes with increasing demand across most of our applications, while increasing the absorption of fixed costs. Although these initiatives have resulted in gross margin and operating income improvements over the previous quarters, we cannot ensure that these trends will continue over the long-term.
All references to “2022,” “fiscal year 2022” or similar references relate to the 52-week period ended March 25, 2022. All references to “2021,” “fiscal year 2021” or similar references relate to the 52-week period ended March 26, 2021. This section discusses items pertaining to and comparisons of financial results between 2022 and 2021.
All references to “2022,” “fiscal year 2022” or similar references relate to the 52-week period ended March 25, 2022. This section discusses items pertaining to and comparisons of financial results between 2023 and 2022.
We expect further increases in R&D expenses, in absolute dollars and as a percentage of total net sales as we continue the development of innovative technologies and processes for new product offerings as well as increase the headcount of our R&D personnel in future years.
We expect further increases in R&D expenses, in absolute dollars, as we continue the development of innovative technologies and processes for new product offerings, as well as increase the headcount of our R&D personnel in future years.
See our consolidated financial statements included elsewhere in this Annual Report for additional information regarding our related party net sales for the periods set forth above. 55 The following table sets forth our results of operations as a percentage of total net sales for the periods presented.
See our consolidated financial statements included elsewhere in this Annual Report for additional information regarding our related party net sales and cost of goods sold for the periods set forth above. 49 The following table sets forth our results of operations as a percentage of total net sales for the periods presented.
Any such adjustments could have a significant effect on our results of operations. Results of Operations Fiscal Year 2022 Compared to Fiscal Year 2021 The following table summarizes our results of operations for the fiscal years ended March 25, 2022 and March 26, 2021.
Any such adjustments could have a significant effect on our results of operations. 48 Results of Operations Fiscal Year 2023 Compared to Fiscal Year 2022 The following table summarizes our results of operations for the fiscal years ended March 31, 2023 and March 25, 2022.
On September 30, 2020, we (i) entered into a term loan credit agreement with Credit Suisse AG, Cayman Islands Branch, as administrative agent and collateral agent, and the other agents, arrangers and lenders party thereto, providing for a $325.0 million senior secured term loan facility due in fiscal 2028 (the “Term Loan Facility”), (ii) entered into a revolving facility credit agreement with Mizuho Bank, Ltd., as administrative agent and collateral agent, and the other agents, arrangers and lenders party thereto, providing for a $50.0 million senior secured revolving credit facility expiring in 2023 (the “Revolving Credit Facility” and, together with the Term Loan Facility, the “Senior Secured Credit Facilities”), and (iii) used cash on hand to repay all amounts outstanding under AML’s revolving credit agreement with Mizuho Bank, Ltd.
On September 30, 2020, we (i) entered into a term loan credit agreement with Credit Suisse AG, Cayman Islands Branch, as administrative agent and collateral agent, and the other agents, arrangers and lenders party thereto, providing for a $325.0 million senior secured term loan facility due in fiscal 2028 (the “Term Loan Facility”), and (ii) entered into a revolving facility credit agreement with Mizuho Bank, Ltd., as administrative agent and collateral agent, and the other agents, arrangers and lenders party thereto, providing for a $50.0 million senior secured revolving credit facility expiring in 2023 (the “Revolving Credit Facility” and, together with the Term Loan Facility, the “Senior Secured Credit Facilities”).
A discussion of 2020 items and comparisons between 2021 and 2020 financial results can be found in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 of the Company’s Annual Report on Form 10-K for the fiscal year ended March 26, 2021 (the “2021 MD&A”), filed with the SEC on May 19, 2021.
A discussion of 2021 items and comparisons between 2022 and 2021 financial results can be found in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7. of the Company’s Annual Report on Form 10-K for the fiscal year ended March 25, 2022 (the “2022 MD&A”), filed with the SEC on May 18, 2022.
Income in earnings of equity investment Income in earnings of equity investment reflected gains of $1.0 million and $1.4 million in the fiscal years ended March 25, 2022 and March 26, 2021, respectively, representing the earnings on our 30% investment in PSL.
(Loss) income in earnings of equity investment Loss (income) in earnings of equity investment reflected losses of $0.4 million and gains of $1.0 million in the fiscal years ended March 31, 2023 and March 25, 2022, respectively, representing the earnings on our 30% investment in PSL.
R&D expenses represented 15.9% of our total net sales for the fiscal year ended March 25, 2022, a decrease from 18.4% of our total net sales for the fiscal year ended March 26, 2021. This percentage decrease was primarily due to the growth in our net sales in 2022.
R&D expenses represented 15.5% of our total net sales for the fiscal year ended March 31, 2023, a decrease from 15.9% of our total net sales for the fiscal year ended March 25, 2022. This percentage decrease was primarily due to the growth in our net sales in 2023.
Sales Trends by Market The following table summarizes total net sales by market. The categorization of net sales by market is based on the characteristics of the end product and application into which our product will be designed.
The categorization of net sales by market is based on the characteristics of the end product and application into which our product will be designed.
Working capital is impacted by the timing and extent of our business needs. 69 Our primary requirements for liquidity and capital are working capital, capital expenditures, principal and interest payments on our outstanding debt and other general corporate needs. Historically, these cash requirements have been met through cash provided by operating activities and cash and cash equivalents.
Our primary requirements for liquidity and capital are working capital, capital expenditures, principal and interest payments on our outstanding debt and other general corporate needs. Historically, these cash requirements have been met through cash provided by operating activities and cash and cash equivalents.
The increase in trade accounts receivable, net was primarily a result of increased sales year-over-year.
The increase in trade accounts receivable, net was primarily a result of increased sales year-over-year, as well as the timing of receipts.
We will continue to consider opportunities for strategic price increases and process efficiencies to offset input cost increases on the materials and supplies that we use in production. With the consolidation of our facilities as discussed above, we have attained efficiencies through cost structure improvements, streamlining of manufacturing and support processes, and further utilization of excess capacity.
We will continue to consider opportunities for strategic price increases and process efficiencies to offset input cost increases on the materials and supplies that we use in production. With our efforts to leverage our fixed costs and operating margin improvements, we have attained efficiencies through cost structure improvements, streamlining of manufacturing and support processes, and further utilization of excess capacity.
Our effective income tax rate fluctuates primarily because of: the change in the mix of our U.S. and foreign income; the impact of discrete transactions and law changes; and the difference between the amount of tax benefits generated by the foreign derived intangible income deduction (“FDII”) and 54 research credits, offset by the additional tax costs associated with global intangible low-tax income (“GILTI”), the base erosion tax (“BEAT”) and non-deductible stock-based compensation charges.
Our effective income tax rate fluctuates primarily because of: the change in the mix of our U.S. and foreign income; the impact of discrete transactions and law changes; state tax impacts and the difference between the amount of tax benefits generated by the foreign derived intangible income deduction (“FDII”), including permanent impacts of 174 Capitalization (as defined below), and research credits, offset by the additional tax costs associated with global intangible low-tax income (“GILTI”), Subpart F income and non-deductible stock-based compensation charges.
Fiscal Year Ended March 25, 2022 March 26, 2021 Total net sales 100.0 % 100.0 % Cost of goods sold 47.0 % 52.8 % Gross profit 53.0 % 47.2 % Operating expenses: Research and development 15.9 % 18.4 % Selling, general and administrative 19.6 % 26.0 % Impairment of long-lived assets — % 1.2 % Change in fair value of contingent consideration (0.3) % (0.4) % Total operating expenses 35.2 % 45.2 % Operating income 17.8 % 2.0 % Other income (expense), net: Loss on debt extinguishment — % (1.5) % Interest expense, net (0.1) % (0.4) % Foreign currency transaction loss (0.1) % (0.5) % Income in earnings of equity investment 0.1 % 0.2 % Other, net 0.6 % (0.1) % Total other income (expense), net 0.5 % (2.3) % Income (loss) before income tax provision (benefit) 18.3 % (0.3) % Income tax provision (benefit) 2.8 % (3.3) % Net income 15.5 % 3.0 % Net income attributable to non-controlling interests — % — % Net income attributable to Allegro MicroSystems, Inc. 15.5 % 3.0 % Total net sales Total net sales increased by $177.5 million, or 30.0%, to $768.7 million in the fiscal year ended March 25, 2022 from $591.2 million in the fiscal year ended March 26, 2021.
Fiscal Year Ended March 31, 2023 March 25, 2022 Total net sales 100.0 % 100.0 % Cost of goods sold 43.9 % 47.0 % Gross profit 56.1 % 53.0 % Operating expenses: Research and development 15.5 % 15.9 % Selling, general and administrative 20.0 % 19.6 % Change in fair value of contingent consideration (0.3) % (0.3) % Total operating expenses 35.2 % 35.2 % Operating income 20.9 % 17.8 % Other income (expense), net: Interest expense (0.2) % (0.3) % Interest income 0.1 % 0.2 % Foreign currency transaction gain (loss) 0.1 % (0.1) % Loss (income) in earnings of equity investment -0.1 % 0.1 % Unrealized gains on marketable securities 0.7 % 0.1 % Other, net 0.1 % 0.5 % Total other income, net 0.7 % 0.5 % Income before income tax provision 21.6 % 18.3 % Income tax provision 2.4 % 2.8 % Net income 19.2 % 15.5 % Net income attributable to non-controlling interests — % — % Net income attributable to Allegro MicroSystems, Inc. 19.2 % 15.5 % Total net sales Total net sales increased by $205.0 million, or 26.7%, to $973.7 million in the fiscal year ended March 31, 2023 from $768.7 million in the fiscal year ended March 25, 2022.
See “Risk Factors —Risks Related to Our Business and Industry—Our ability to raise capital in the future may be limited and could prevent us from executing our growth strategy.” Cash Flows from Operating, Investing and Financing Activities The following table summarizes our cash flows for the fiscal years ended 2022 and 2021: Fiscal Year Ended March 25, 2022 March 26, 2021 (dollars in thousands) Net cash provided by operating activities $ 156,129 $ 120,570 Net cash used in investing activities (66,271) (68,245) Net cash used in financing activities (5,307) (72,186) Effect of exchange rate changes on cash and cash equivalents 1,373 3,860 Net increase (decrease) in cash and cash equivalents and restricted cash $ 85,924 $ (16,001) 70 Operating Activities Net cash provided by operating activities was $156.1 million in fiscal year 2022, resulting primarily from our net income of $119.6 million and non-cash charges of $89.9 million, partially offset by a net decrease in operating assets and liabilities of $53.3 million.
See “Risk Factors —Risks Related to Our Business and Industry—Our ability to raise capital in the future may be limited and could prevent us from executing our growth strategy.” 53 Cash Flows from Operating, Investing and Financing Activities The following table summarizes our cash flows for the fiscal years ended 2023 and 2022: Fiscal Year Ended March 31, 2023 March 25, 2022 (dollars in thousands) Net cash provided by operating activities $ 193,206 $ 156,129 Net cash used in investing activities (99,696) (66,271) Net cash used in financing activities (19,998) (5,307) Effect of exchange rate changes on cash and cash equivalents (4,606) 1,373 Net increase in cash and cash equivalents and restricted cash $ 68,906 $ 85,924 Operating Activities Net cash provided by operating activities was $193.2 million in fiscal year 2023, resulting primarily from our net income of $187.5 million and non-cash charges of $61.2 million, partially offset by a net decrease in operating assets and liabilities of $55.5 million.
We continue to see demand for our products exceed supply and we are currently operating in an inflationary environment. Manufacturing Costs and Product Mix Gross margin has been, and will continue to be, affected by a variety of factors, including the ASPs of our products, product mix in a given period, material costs, yields, manufacturing costs and efficiencies.
Manufacturing Costs and Product Mix Gross margin has been, and will continue to be, affected by a variety of factors, including the ASPs of our products, product mix in a given period, material costs, yields, manufacturing costs and efficiencies.
Change in fair value of contingent consideration The change in fair value of contingent consideration reflected a $0.5 million decrease in gains in the fiscal year ended March 25, 2022, resulting from the write-down in contingent consideration related to the acquisition of Voxtel in 2021.
Change in fair value of contingent consideration The change in fair value of contingent consideration reflected a $0.8 million increase in losses in the fiscal year ended March 31, 2023, resulting from the write-down in contingent consideration related to the acquisition of Voxtel in 2021.
No loss occurred in the fiscal year ended March 25, 2022. 58 Interest expense, net Interest expense, net decreased by $1.5 million to $1.1 million in the fiscal year ended March 25, 2022 from $2.6 million in the fiscal year ended March 26, 2021.
Interest expense, net Interest expense, net decreased by $0.5 million to $0.6 million in the fiscal year ended March 31, 2023 from $1.1 million in the fiscal year ended March 25, 2022.
Change in fair value of contingent consideration The change in fair value of contingent consideration represents the gains and losses recorded in the fiscal years ended March 25, 2022 and March 26, 2021, resulting from the adjustment in contingent consideration related to the Voxtel Acquisition . There were no amounts recorded for the fiscal year ended March 27, 2020.
Change in fair value of contingent consideration The change in fair value of contingent consideration represents the gains and losses recorded in the fiscal years ended March 31, 2023 and March 25, 2022, resulting from the adjustment in contingent consideration related to the acquisition of Voxtel, Inc. (“Voxtel”) .
The foreign currency transaction loss recorded in the fiscal year ended March 25, 2022 was primarily due to $0.9 million of realized and unrealized losses from our UK location, partially offset by $0.3 million of realized and unrealized gains from our Philippines location.
The foreign currency transaction gain recorded in the fiscal year ended March 31, 2023 was primarily due to realized and unrealized gains from our United Kingdom location, partially offset by realized and unrealized losses from our Philippines location.
Net cash provided by operating activities was $120.6 million in fiscal year 2021, resulting primarily from our net income of $18.1 million and non-cash charges of $98.4 million, partially offset by a net increase in operating assets and liabilities of $4.0 million.
Net cash provided by operating activities was $156.1 million in fiscal year 2022, resulting primarily from our net income of $119.6 million and non-cash charges of $89.9 million, partially offset by a net decrease in operating assets and liabilities of $53.3 million.
Sales Allowances Sales allowances include sales in which the amount of consideration that we will receive is unknown as of the end of a reporting period. Such consideration primarily includes limited price protection provisions provided to distributors. We estimate potential future sales allowances based on historical data from prior sales adjustments. Historical experience can change over time.
Such consideration primarily includes limited price protection provisions provided to distributors. We estimate potential future sales allowances based on historical data from prior sales adjustments. Historical experience can change over time. As a result, estimated sales allowances may differ significantly from that recorded in the current and historical periods.
The increases in net sales of $34.4 million, or 21.8%, in Greater China and $32.7 million, or 33.2%, in the Americas each related to higher automotive demand, primarily in our 57 ADAS, ICE, safety, and comfort and convenience applications, as well as increased demand in our industrial sectors.
The increases in net sales of $62.0 million, or 32.3%, in Greater China and $27.7 million, or 21.1%, in the Americas each related to higher automotive demand, primarily in our ADAS, safety, comfort and convenience and EV sectors.
Factors that could cause or contribute to those differences include, but are not limited to, those identified below and those discussed in the sections titled “Risk Factors” and “Cautionary Note Regarding Forward-Looking 48 Statements” included elsewhere in this Annual Report.
Factors that could cause or contribute to those differences include, but are not limited to, those identified below and those discussed in the sections titled “Risk Factors” and “Forward-Looking Statements” included elsewhere in this Annual Report. Additionally, our historical results are not necessarily indicative of the results that may be expected for any period in the future.
Net changes in operating assets and liabilities consisted of a $15.1 million increase in trade accounts payable, a $14.8 million increase in accrued expenses and other current and long-term liabilities, a $7.6 million decrease in inventories, and a $4.9 million decrease in due from/to related parties, partially offset by increases of $29.0 million and $9.3 million in prepaid expenses and other assets and trade accounts receivable, net, respectively.
Net changes in operating assets and liabilities consisted mostly of a $75.2 million increase in inventories, a $23.3 million increase in prepaid expenses and other assets, and a $12.5 million increase in trade accounts receivable, net, partially offset by a $22.9 million increase in accrued expenses and other current and long-term liabilities, an $18.3 million increase in net amounts due from related parties and a $12.0 million increase in trade accounts payable.
There were no borrowings outstanding under this line of credit as of March 25, 2022 and March 26, 2021. Recent Accounting Pronouncements Refer to Note 2, “Summary of Significant Accounting Policies” to the audited consolidated financial statements included elsewhere in this Annual Report for information regarding recent accounting pronouncements.
Recent Accounting Pronouncements Refer to Note 2, “Summary of Significant Accounting Policies” to the consolidated financial statements included elsewhere in this Annual Report for information regarding recent accounting pronouncements.
However, we believe that our existing cash resources and our access to the capital markets will be sufficient to finance our continued operations, growth strategy, planned capital expenditures and the additional expenses that we expect to incur during the next 12 months.
We are obligated to pay interest on the outstanding debt balances, and the principal outstanding is due in fiscal year 2028. We believe that our existing cash will be sufficient to finance our continued operations, growth strategy, planned capital expenditures and the additional expenses that we expect to incur during the next 12 months.
The cash requirements for the upcoming fiscal year relate to our leases, operating and capital purchase commitments and expected contributions to our defined benefit and contribution plans. For information regarding the Company’s expected cash requirements and timing of payments related to leases and noncancellable purchase commitments, see Note 17, “Commitments and Contingencies” to the audited consolidated financial statements.
For information regarding the Company’s expected cash requirements and timing of payments related to leases and noncancellable purchase commitments, see Note 12, “Leases” and Note 16, “Commitments and Contingencies” to the audited consolidated financial statements. Additionally, refer to Note 15, “Retirement Plans” to the audited consolidated financial statements for more information related to the Company’s pension and defined contribution plans.
R&D expenses R&D expenses increased by approximately $13.2 million, or 12.2%, to $121.9 million in the fiscal year ended March 25, 2022 from $108.6 million in the fiscal year ended March 26, 2021.
R&D expenses R&D expenses increased by approximately $29.0 million, or 23.8%, to $150.9 million in the fiscal year ended March 31, 2023 from $121.9 million in the fiscal year ended March 25, 2022.
SG&A expenses represented 19.6% of our total net sales for the fiscal year ended March 25, 2022, representing a decrease from 26.0% of our total net sales for the fiscal year ended March 26, 2021. This percentage decrease was primarily due to the growth in net sales in the fiscal year ended March 25, 2022.
SG&A expenses represented 20.0% of our total net sales for the fiscal year ended March 31, 2023, representing an increase from 19.6% of our total net sales for the fiscal year ended March 25, 2022.
Our core applications are focused on the automotive, industrial and other industries. We sell magnetic sensor ICs, power ICs and photonics. Revenue is generally recognized when control of the products is transferred to the customer, which typically occurs at a point in time upon shipment or delivery, depending on the terms of the contract.
Net sales are generally recognized when control of the products is transferred to the customer, which typically occurs at a point in time upon shipment or delivery, depending on the terms of the contract. When we transact with a distributor, our contractual arrangement is with the distributor and not with the end customer.
See Note 2, “Summary of Significant Accounting Policies” to the consolidated financial statements included elsewhere in this Annual Report for additional information regarding these and our other significant accounting policies. Revenue Recognition Revenue is recognized when transfer of control to the customer occurs in an amount reflecting the consideration that we expect to be entitled.
See Note 2, “Summary of Significant Accounting Policies” to the consolidated financial statements included elsewhere in this Annual Report for additional information regarding these and our other significant accounting policies. Sales Allowances Sales allowances include sales in which the amount of consideration that we will receive is unknown as of the end of a reporting period.
Industrial net sales improved in the fiscal year ended March 25, 2022 compared to the fiscal year ended March 26, 2021 primarily due to increased demand in industrial automation, cloud computing/data center, wireless infrastructure and personal mobility.
Industrial net sales improved in the fiscal year ended March 31, 2023 compared to the fiscal year ended March 25, 2022, primarily due to increased demand for applications in clean energy and automation.
Foreign currency transaction (loss) gain We incur transaction gains and losses resulting from intercompany transactions as well as transactions with customers or vendors denominated in currencies other than the functional currency of the legal entity in which the transaction is recorded.
Current expense is partially mitigated by income earned on our cash and cash equivalents, consisting primarily of certain investments that have contractual maturities no greater than three months at the time of purchase. 47 Foreign currency transaction (loss) gain We incur transaction gains and losses resulting from intercompany transactions, as well as transactions with customers or vendors, denominated in currencies other than the functional currency of the legal entity in which the transaction is recorded.
This increase was primarily due to higher employee-related personnel costs of $10.1 million and a combined $5.1 million increase in general operating expenses, partially offset by a combined $2.6 million decrease in inventory and supplies and contract labor costs.
This increase was primarily due to a combined $21.1 million increase in employee salaries, including incentive compensation, contract labor, and inventory and supplies costs, a $5.6 million increase in stock-based compensation expense and a combined $2.3 million increase in general operating costs.
SG&A expenses SG&A expenses decreased by $2.6 million, or 1.7%, to $150.9 million in the fiscal year ended March 25, 2022 from $153.5 million in the fiscal year ended March 26, 2021.
SG&A expenses SG&A expenses increased by $43.8 million, or 29.0%, to $194.7 million in the fiscal year ended March 31, 2023 from $150.9 million in the fiscal year ended March 25, 2022.
The increase in trade accounts payable and the increase in accrued expenses and other current and long-term liabilities was primarily the result of the deposits related to the sale of our AMTC facility, higher operating purchases, including unpaid capital expenditures of $3.2 million, and the timing of payments of purchases, partially offset by lower severance costs, income taxes and professional fees.
The increases in trade accounts payable and accrued expenses and other current and long-term liabilities were primarily due to the timing of payments to suppliers and vendors, including unpaid capital expenditures of $16.4 million, and higher accrued personnel costs, warranty costs, professional fees, income taxes, and accrued operating expenses, partially offset by a reduction in the balance due on the acquisition of Voxtel.
As a result, estimated sales allowances may differ significantly from that recorded in the current and historical periods. See Note 5, “Trade Accounts Receivable, net” to the consolidated financial statements for information regarding the change in sales allowances. 73
See Note 6, “Trade Accounts Receivable, Net” to the consolidated financial statements for information regarding the change in sales allowances.
Our portfolio includes more than 1,000 products, and we ship over one billion units annually to more than 10,000 customers worldwide.
We are headquartered in Manchester, New Hampshire and have a global footprint with 26 locations across four continents. Our portfolio includes more than 1,000 products, and we ship over 1.5 billion units annually to more than 10,000 customers worldwide.
The decrease in interest expense, net was primarily due to lower outstanding debt balances during the fiscal year ended March 25, 2022. Foreign currency transaction loss We recorded a foreign currency transaction loss of $0.6 million in the fiscal year ended March 25, 2022 compared to a loss of $2.9 million in the fiscal year ended March 26, 2021.
Foreign currency transaction gain (loss) We recorded a foreign currency transaction gain of $1.0 million in the fiscal year ended March 31, 2023, compared to a loss of $0.6 million in the fiscal year ended March 25, 2022.
Liquidity and Capital Resources As of March 25, 2022, we had $282.4 million of cash and cash equivalents and $407.5 million of working capital compared to $197.2 million of cash and cash equivalents and $313.9 million of working capital as of March 26, 2021.
Liquidity and Capital Resources As of March 31, 2023, we had $351.6 million of cash and cash equivalents and $500.5 million of working capital, compared to $282.4 million of cash and cash equivalents and $407.5 million of working capital as of March 25, 2022. Working capital is impacted by the timing and extent of our business needs.
Other, net Other, net increased by approximately $5.2 million to $4.7 million of gains in the fiscal year ended March 25, 2022 from $0.5 million of loss in the fiscal year ended March 26, 2021.
Unrealized gains on marketable securities Unrealized gains on marketable securities increased by $3.8 million to $7.5 million in the fiscal year ended March 31, 2023 compared to $3.7 million in the fiscal year ended March 25, 2022, due to the increase in the value of the marketable security. 52 Other, net Other, net decreased by approximately $0.4 million to $0.6 million of gains in the fiscal year ended March 31, 2023 from $1.0 million of gains in the fiscal year ended March 25, 2022.
We recognize revenue net of sales returns, price protection adjustments, stock rotation rights and any other discounts or credits offered to our customers. For the consignment arrangements with distributors, delivery occurs and revenue is recognized when the distributor pulls product from consignment inventory that it is stored at designated distributor locations.
We recognize revenue net of sales returns, price protection adjustments, stock rotation rights and any other discounts or credits offered to our customers.
This includes sensing the angular or linear position of a shaft or actuator, driving an electric motor or actuator, and regulating the power applied to sensing and driving circuits so they operate safely and efficiently. We are headquartered in Manchester, New Hampshire and have a global footprint with 17 locations across four continents.
We focus on providing complete IC solutions for motion control and energy efficient systems. This includes sensing the angular or linear position of a shaft or actuator, driving an electric motor or actuator, and regulating the power applied to sensing and driving circuits so they operate safely and efficiently.
Our gross margin improved from 47.2% in fiscal year 2021 to 53.0% in fiscal year 2022. This gross margin improvement was a result of our operational transformation, improved product mix of higher ASPs on more value-added products, increased leverage of our distribution channel, and continued efficiency and leverage on higher volumes.
This gross margin improvement was a result of our improved product mix of higher ASPs on more value-added products, increased leverage of our distribution channel, and continued efficiency and leverage on higher volumes. We have been successful in increasing our average selling prices through a focus on feature-rich products and selective price increases.
Additionally, our historical results are not necessarily indicative of the results that may be expected for any period in the future. We operate on a 52- or 53-week fiscal year ending on the last Friday of March. Each fiscal quarter has 13 weeks, except in a 53-week year, when the fourth fiscal quarter has 14 weeks.
We operate on a 52- or 53-week fiscal year ending on the last Friday of March. Each fiscal quarter has 13 weeks, except in a 53-week year, when the fourth fiscal quarter has 14 weeks. All references to “2023,” “fiscal year 2023” or similar references relate to the 53-week period ended March 31, 2023.
Cancellations of orders could result in the loss of anticipated sales without allowing us sufficient time to reduce our inventory and operating expenses. In addition, changes in forecasts or the timing of orders from customers exposes us to the risks of inventory shortages or excess inventory.
In addition, changes in forecasts or the timing of orders from customers expose us to the risks of inventory shortages or excess inventory.
Gross profit increased by $128.6 million, or 46.1%, to $407.5 million in the fiscal year ended March 25, 2022 from $278.9 million in the fiscal year ended March 26, 2021. The increase in gross profit was driven by a $177.5 million increase in net sales in all markets, partially offset by the impacts to cost of goods sold discussed above.
The increase in gross profit was driven by a $205.0 million increase in total net sales to all end markets discussed above, partially offset by the impacts to cost of goods sold discussed above.
We regularly assess the likelihood of outcomes that could result from the examination of our tax returns by the IRS, and other tax authorities to determine the adequacy of our income tax reserves and expense. Should actual events or results differ from our then-current expectations, charges or credits to our provision for income taxes may become necessary.
Should actual events or results differ from our then-current expectations, charges or credits to our provision for income taxes may become necessary.
Fiscal Year Ended Change March 25, 2022 March 26, 2021 Amount % (Dollars in thousands) Automotive $ 531,564 $ 398,298 $ 133,266 33.5 % Industrial 133,187 94,872 38,315 40.4 % Other 103,923 98,037 5,886 6.0 % Total net sales $ 768,674 $ 591,207 $ 177,467 30.0 % The increase in net sales to our end markets was driven by an increase in automotive of $133.3 million, or 33.5%, an increase in industrial of $38.3 million, or 40.4%, and an increase in other of $5.9 million, or 6.0%. 56 Automotive net sales increased in the fiscal year ended March 25, 2022 compared to the fiscal year ended March 26, 2021 due to the continued higher demand across all of our major applications, primarily our ADAS, safety, and comfort and convenience.
Fiscal Year Ended Change March 31, 2023 March 25, 2022 Amount % (Dollars in thousands) Automotive $ 657,479 $ 531,564 $ 125,915 23.7 % Industrial 196,705 133,187 63,518 47.7 % Other 119,469 103,923 15,546 15.0 % Total net sales $ 973,653 $ 768,674 $ 204,979 26.7 % The increase in net sales to our end markets was driven by an increase in automotive of $125.9 million, or 23.7%, an increase in industrial of $63.5 million, or 47.7%, and an increase in other of $15.6 million, or 15.0%. 50 Automotive net sales increased in the fiscal year ended March 31, 2023 compared to the fiscal year ended March 25, 2022 due to the continued higher demand for e-Mobility, which includes ADAS and EV, as well as, safety, comfort and convenience and internal combustion engine (“ICE”) applications.
This decrease was primarily due to a $14.7 million decrease in stock-based compensation expense and a combined $8.0 million decrease in general operating expenses, partially offset by an increase of $19.9 million in combined employee-related personnel costs, contract labor, insurance and general expenses.
This increase was primarily due to a $20.8 million increase in stock-based compensation expense, including accelerated expense from the retirement of our former chief executive officer, an increase of $17.5 million in employee-related personnel costs, including incentive compensation, and a $5.6 million increase in combined general operating expenses.
Sales Trends by Product The following table summarizes net sales by product: Fiscal Year Ended Change March 25, 2022 March 26, 2021 Amount % (Dollars in thousands) Power integrated circuits (“PIC”) $ 268,381 $ 203,600 $ 64,781 31.8 % Magnetic sensors integrated circuits (“MS”) 498,561 386,372 112,189 29.0 % Photonics 1,732 1,235 497 40.2 % Total net sales $ 768,674 $ 591,207 $ 177,467 30.0 % The growth in net sales by product was driven by increases in MS product sales of $112.2 million and in PIC product sales of $64.8 million, as well as a $0.5 million increase in Photonics product sales.
Sales Trends by Product The following table summarizes net sales by product: Fiscal Year Ended Change March 31, 2023 March 25, 2022 Amount % (Dollars in thousands) Magnetic sensors integrated circuits (“MS”) $ 598,579 $ 500,293 $ 98,286 19.6 % Power integrated circuits (“PIC”) 375,074 268,381 106,693 39.8 % Total net sales $ 973,653 $ 768,674 $ 204,979 26.7 % The growth in net sales by product was driven by increases in MS product sales of $98.3 million and in PIC product sales of $106.7 million.
Interest (expense) income, net Interest (expense) income, net is comprised of interest expense from term loan debt and credit facilities we maintain with various financial institutions. Current expense is partially mitigated by income earned on our cash and cash equivalents, consisting primarily of certain investments that have contractual maturities no greater than three months at the time of purchase.
Interest (expense) income, net Interest (expense) income, net is comprised of interest expense from term loan debt and credit facilities that we maintain with various financial institutions.
Income in earnings of equity investment Income in earnings of equity investment is related to our equity investment in PSL subsequent to the PSL Divestiture. Other, net Other, net primarily consists of miscellaneous income and expense items unrelated to our core operations.
These investments are measured at fair value with unrealized gains and losses related to changes in the entity’s stock price. Other, net Other, net primarily consists of miscellaneous income and expense items unrelated to our core operations.
Fiscal Year Ended Change March 25, 2022 March 26, 2021 Amount % (Dollars in thousands) Americas: United States $ 108,396 $ 82,165 $ 26,231 31.9 % Other Americas 23,056 16,558 6,498 39.2 % EMEA: Europe 134,537 103,128 31,409 30.5 % Asia: Japan 148,813 104,661 44,152 42.2 % Greater China 191,895 157,546 34,349 21.8 % South Korea 80,451 62,075 18,376 29.6 % Other Asia 81,526 65,074 16,452 25.3 % Total net sales $ 768,674 $ 591,207 $ 177,467 30.0 % The increase in net sales across geographic locations in the fiscal year ended March 25, 2022 compared to the fiscal year ended March 26, 2021 was primarily due to content and market share gains, as many countries continue to experience economic expansion coming out of the COVID-19 pandemic, and demand for many of our products and applications rose year-over-year.
Fiscal Year Ended Change March 31, 2023 March 25, 2022 Amount % (Dollars in thousands) Americas: United States $ 131,150 $ 108,396 $ 22,754 21.0 % Other Americas 28,014 23,056 4,958 21.5 % EMEA: Europe 169,368 134,537 34,831 25.9 % Asia: Japan 160,763 148,813 11,950 8.0 % Greater China 253,906 191,895 62,011 32.3 % South Korea 96,549 80,451 16,098 20.0 % Other Asia 133,903 81,526 52,377 64.2 % Total net sales $ 973,653 $ 768,674 $ 204,979 26.7 % The increase in net sales across geographic locations in the fiscal year ended March 31, 2023 compared to the fiscal year ended March 25, 2022 was primarily due to increased volume and content as well as market share gains.
Higher year-over-year net sales of $31.4 million, or 30.5%, in Europe, predominantly comprised of Germany and France, was driven by increases in our ADAS, ICE, safety, comfort and convenience and grid infrastructure offerings.
Higher year-over-year net sales of $34.8 million, or 25.9%, in Europe, predominantly comprised of higher net sales in Germany and France, was driven by increased demand in automotive and industrial markets.
The increase in net sales in Japan of $44.1 million, or 42.2%, was primarily driven by higher demand for our xEV, ADAS, personal mobility and cloud computing/data center offerings.
The increase in net sales in Japan of $12.0 million, or 8.0%, was primarily driven by higher demand in our industrial sector and higher automotive demand, specifically EV.
We anticipate our selling and marketing expenses to increase in absolute terms as we expand our sales force and increase our sales and marketing activities. We also anticipate that we will continue to incur accounting, audit, legal, regulatory, compliance and director and officer insurance costs as well as investor and public relations expenses associated with being a public company.
We anticipate our selling and marketing expenses to increase in absolute terms as we expand our sales force and increase our sales and marketing activities.
We sell products globally through our direct sales force, third-party and related party distributors and independent sales representatives. Sales are derived from products for different applications. Shutdowns of third-party factories, in connection with COVID-19 or other factors beyond our control, have affected, and are expected to continue to affect our product sales in the next fiscal quarter.
We sell products globally through our direct sales force, third-party and related party distributors and independent sales representatives. Sales are derived from products for different applications. Our core applications are focused on the automotive, industrial and other industries. 46 We sell magnetic sensor ICs and power ICs in the Americas, EMEA and Asia.
Cost of goods sold, gross profit and gross margin Cost of goods sold increased by $48.9 million, or 15.7%, to $361.2 million in the fiscal year ended March 25, 2022 from $312.3 million in the fiscal year ended March 26, 2021.
South Korea and Other Asia experienced sales growth of $16.1 million, or 20.0%, and $52.4 million, or 64.2%, respectively, mainly due to increased automotive and industrial demand. 51 Cost of goods sold, gross profit and gross margin Cost of goods sold increased by $66.4 million, or 18.4%, to $427.6 million in the fiscal year ended March 31, 2023 from $361.2 million in the fiscal year ended March 25, 2022.
We are the number one supplier of magnetic sensor IC solutions worldwide based on market share, driven by our market leadership in automotive. We focus on providing complete IC solutions to sense, regulate and drive a variety of mechanical systems.
Overview Allegro MicroSystems, Inc. is a leading global designer, developer, fabless manufacturer and marketer of sensor ICs and application-specific analog power ICs enabling the most critical technologies in the automotive and industrial markets. We are a leading supplier of magnetic sensor IC solutions worldwide based on market share, driven by our market leadership in the automotive market.
During fiscal years 2022 and 2021, we generated $768.7 million and $591.2 million in total net sales, respectively, with $119.6 million and $18.1 million in net income, respectively, and $226.1 million and $144.8 million in Adjusted EBITDA in such fiscal years, respectively.
During fiscal years 2023 and 2022, we generated $973.7 million and $768.7 million in total net sales, respectively, with $187.5 million and $119.6 million in net income, respectively. Recent Initiatives to Improve Results of Operations We implemented several initiatives during fiscal years 2022 and 2023 that were designed to improve our operating results during those fiscal years and going forward.
As the COVID-19 pandemic continues, the timing and overall demand from customers, the efficiency in our supply chain, the availability of logistical services and component supply, and the impact of rising inflation may have a material net negative impact on our business and financial results. 51 Other Key Factors and Trends Affecting our Operating Results Our financial condition and results of operations have been, and will continue to be, affected by numerous other factors and trends, including the following: Design Wins with New and Existing Customers Our end customers continually develop new products in existing and new application areas, and we work closely with our significant OEM customers in most of our target markets to understand their product roadmaps and strategies.
Design Wins with New and Existing Customers Our end customers continually develop new products in existing and new application areas, and we work closely with our OEM customers in most of our target markets to understand their product roadmaps and strategies.
Net cash used in investing activities was $68.2 million in fiscal year 2021, consisting of $40.7 million of purchases of property, plant and equipment, $11.6 million of cash expended for the acquisition of Voxtel and $16.3 million of cash removed as a result of the PSL Divestiture, partially offset by $0.3 million of proceeds from sales of property, plant and equipment.
Investing Activities Net cash used in investing activities was $99.7 million in fiscal year 2023, consisting of $79.8 million of purchases of property, plant and equipment and payments related to the acquisition of Heyday of $19.9 million.
Income tax provision (benefit) The provision for income taxes was $21.2 million for the fiscal year ended March 25, 2022 as compared to a benefit of $19.6 million for the fiscal year ended March 26, 2021.
Income tax provision Income tax provision and the effective income tax rate were $23.9 million and 11.3%, respectively, for the fiscal year ended March 31, 2023, and $21.2 million and 15.1%, respectively, for the fiscal year ended March 25, 2022.
Gross margin is calculated as gross profit divided by total net sales.
We continue to implement initiatives to improve gross margins, which is calculated as gross profit divided by total net sales. Our gross margin improved from 53.0% in fiscal year 2022 to 56.1% in fiscal year 2023.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeDollar, the Euro and the Philippine Peso. We reflected losses of $0.6 million and $2.9 million for fiscal years 2022 and 2021, respectively. Based on fiscal 2022 performance, a hypothetical appreciation (decline) in the value of the Euro in relation to the U.S. dollar of 10% would favorably (negatively) impact operating income by immaterial amounts.
Biggest changeDollar, the Euro and the Philippine Peso. We reflected foreign exchange gains of $1.0 million and losses of $0.6 million for fiscal years 2023 and 2022, respectively. Based on fiscal 2023 performance, a hypothetical appreciation (decline) in the value of the Euro in relation to the U.S. dollar of 10% would favorably (negatively) impact operating income by immaterial amounts.
We cannot assure that future inflationary or other cost pressures will not have an adverse impact on our results of operations and financial condition in the future. 74
We cannot assure that future inflationary or other cost pressures will not have an adverse impact on our results of operations and financial condition in the future. 56
The following analysis provides additional information regarding these risks. Interest Rate Risk Our investments have limited exposure to market risk. At March 25, 2022, we maintained a portfolio of cash and cash equivalents, consisting primarily of money market funds. None of these investments have a maturity date in excess of one year.
The following analysis provides additional information regarding these risks. Interest Rate Risk Our investments have limited exposure to market risk. At March 31, 2023, we maintained a portfolio of cash and cash equivalents, consisting primarily of money market funds. None of these investments have a maturity date in excess of one year.
We have no foreign currency derivative instrument hedges as of March 25, 2022. We will continue to analyze our exposure to currency exchange rate fluctuations and may engage in financial hedging techniques in the future to attempt to minimize the effect of these potential fluctuations. Exchange rate fluctuations may adversely affect our financial results in the future.
We have no foreign currency derivative instrument hedges as of March 31, 2023. We will continue to analyze our exposure to currency exchange rate fluctuations and may engage in financial hedging techniques in the future to attempt to minimize the effect of these potential fluctuations. Exchange rate fluctuations may adversely affect our financial results in the future.
Although our Term Loan Facility and credit facilities have variable rates, as of March 25, 2022, we do not believe that a 10% change in market interest rates would have a material impact on our financial position or results of operations.
Although our Term Loan Facility and credit facilities 55 have variable rates, as of March 31, 2023, we do not believe that a 10% change in market interest rates would have a material impact on our financial position or results of operations.

Other ALGM 10-K year-over-year comparisons