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What changed in ALLEGRO MICROSYSTEMS, INC.'s 10-K — 2023 vs 2024

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Paragraph-level year-over-year comparison of ALLEGRO MICROSYSTEMS, INC.'s 2023 and 2024 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 2024 report.

+466 added−473 removedSource: 10-K (2024-05-23) vs 10-K (2023-05-25)

Top changes in ALLEGRO MICROSYSTEMS, INC.'s 2024 10-K

466 paragraphs added · 473 removed · 366 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

139 edited+31 added−50 removed67 unchanged
Biggest changeThese programs each further align our employees’ financial interests with the performance of the business and the interests of our stockholders. • We generally provide annual compensation increases and incentive awards based on business and individual performance. • All customer-facing positions participate in our annual sales incentive plan, allowing them to earn additional cash incentives based on the achievement of specific sales metrics. • We purchase compensation data from external compensation and benefits consulting firms to allow us to ensure we provide competitive compensation in each of the geographic locations in which we operate. • We align our executives’ annual and long-term equity compensation with our stockholders’ interests by linking realizable pay with Allegro’s stock performance and other key business and financial operating metrics. • We provide comprehensive benefit options designed to retain our employees and support their families in all areas of health and wellness.
Biggest changeEach of these programs further aligns our employees’ financial interests with the performance of the business and the interests of our stockholders. • We provide short-term incentive and equity awards based on both business and individual performance. • All sales and field applications positions participate in our annual sales incentive plan, allowing them to earn additional cash incentives based on the achievement of specific sales metrics designed to drive our financial performance. • We purchase compensation data from external compensation and benefits consulting firms to ensure we provide competitive compensation in each of the geographic locations in which we operate. • We align our executives’ annual and long-term equity compensation, in the form of performance-based restricted stock units (“PSUs”) and time-based restricted stock units (“RSUs”), with our stockholders’ interests by linking realizable pay with Allegro’s stock performance and other key business and financial operating metrics. • We provide comprehensive benefit options designed to retain our employees and support their families in all areas of health and wellness. • We provide social community benefits, including a global charitable gift matching program, and a global volunteer policy, both of which help our employees give back to the local communities in which we operate.
We believe that our technology expertise, combined with our deep applications knowledge and strong customer relationships, enable us to develop solutions that provide more value to customers than typical ICs. Compared to a typical IC, our solutions are more integrated, intelligent and sophisticated for complex applications and are easier for customers to use.
We believe that our technology expertise, combined with our deep applications knowledge and strong customer relationships, enable us to develop solutions that provide more value to customers than typical ICs. Compared to a typical IC, our solutions are more integrated, intelligent and sophisticated for complex applications and easier for customers to use.
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.
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 support these vehicles, will enable us to increase our total available market related to ADAS and related safety and chassis technologies.
We believe we can successfully compete against these organizations in our target markets by leveraging our design expertise, market leadership position, proprietary manufacturing processes, custom packaging capabilities and close customer relationships.
We believe we can successfully compete against these organizations in our target markets by leveraging our design and market expertise and leadership position, proprietary manufacturing processes, custom packaging capabilities and close customer relationships.
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.
For example: • We target our patented sensor IC, and power-related intellectual property to address increasing electronics content in automotive applications based on the growing 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.
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 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 11 algorithms, and various Hall-effect and xMR transducer technology on the same silicon wafer.
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.
In both the automotive and industrial markets, major technology shifts driven by disruptive technologies are creating high-growth 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.
Current sensor ICs are used to improve energy efficiency in a broad range of applications, on-board chargers, DC-DC converters, inverters, industrial motors, solar inverters, and EV charging infrastructure. • Position Sensor ICs : Position sensor ICs provide an analog or digital voltage output that measures the intensity of a magnetic field, thereby establishing a precise position.
Current sensor ICs are used to improve energy efficiency in a broad range of applications, including on-board chargers, DC-DC converters, inverters, industrial motors, solar inverters, and EV charging infrastructure. • Position Sensor ICs : Position sensor ICs provide an analog or digital voltage output that measures the intensity of a magnetic field, thereby establishing a precise position.
We have also made significant investments in our core engineering capabilities, including improvements in tools to support greater engineering efficiency, electrical component modeling, magnetic performance modeling and thermal distribution modeling. We believe these improved tools enable us to more accurately predict the performance of our designs, resulting in improved time-to-market for our products and satisfaction of our customers.
We have also made significant investments in our core engineering capabilities, including improvements in tools to support greater engineering efficiency, electrical component modeling, magnetic performance modeling and thermal distribution modeling. We believe these improved tools enable us to more accurately evaluate and predict the performance of our designs, resulting in improved time-to-market for our products and satisfaction of our customers.
We are a market share leader in the magnetic sensor IC market, and we believe there is considerable opportunity to continue to grow this foundational business. For example, over the last five years, we introduced new position sensor ICs and quickly ramped revenue in motion control applications, particularly in the ADAS market.
We are a market share leader in the magnetic sensor IC market, and we believe there is considerable opportunity to continue to grow this foundational business. For example, over the last five years, we introduced new position sensor ICs and quickly ramped up revenue in motion control applications, particularly in the ADAS market.
We intend to continue to choose the industry’s leading manufacturing partners to maintain the quality of our products for the automotive market, to ensure continuity of supply and to best protect our intellectual property. Selectively pursue acquisitions and other strategic transactions We evaluate and selectively pursue acquisitions and transactions as an integral part of our strategy to supplement organic growth.
We intend to continue to choose the industry’s leading manufacturing partners to maintain the quality of our products for the automotive market, to ensure continuity of supply and to best protect our intellectual property. 7 Selectively pursue acquisitions and other strategic transactions We evaluate and selectively pursue acquisitions and transactions as an integral part of our strategy to supplement organic growth.
Our LED driver ICs and modules are used in smart lighting systems to improve system safety, efficiency and size. • Isolated Gate Drivers: These devices combine isolated DC-DC and IGDs into a single package. They are designed to complement GaN and SiC switches in high-efficiency power conversion systems.
Our LED driver ICs and modules are used in smart lighting systems to improve system safety, efficiency and size. 8 • Isolated Gate Drivers: These devices combine isolated DC-DC and IGDs into a single package. They are designed to complement GaN and SiC switches in high-efficiency power conversion systems.
We face increasing complexity in our product design and procurement operations due to the evolving nature of environmental laws regulations and standards, as well as specific customer requirements. These laws, regulations and standards have an impact on the material composition of our products entering specific markets.
We face increasing complexity in our product design and procurement operations due to the evolving nature of environmental laws, regulations, directives and standards, as well as specific customer requirements. These laws, regulations, directives, and standards have an impact on the material composition of our products entering specific 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 IGD portfolio.
These technologies are fundamental to the transition from 12-volt to 48-volt power supply required in the rapidly emerging 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.
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.
As a result, we are committed to investing in our process and product development capabilities while 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.
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.
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.
In addition, we expect our IGD technology to enable us to use a single, small-footprint package to significantly reduce system design time and complexity. Our motor drivers are heavily adopted in the data center space, mainly for thermal efficiency, as these products reduce complexity and design time, while also reducing the energy consumption required to cool servers.
In addition, we expect our IGD technology to enable us to use a single, small-footprint package to significantly reduce system design time and complexity. Our motor drivers are heavily adopted in data center applications, mainly for thermal efficiency, as these products reduce complexity and design time, while also reducing the energy consumption required to cool servers.
Automatio n With the growing adoption of factory automation, there is increasing demand for precise motion control and energy efficient technologies representing additional meaningful growth opportunities for us. We believe we can leverage our technology leadership in solutions optimized for high-accuracy, high-voltage and high-reliability conditions to expand our presence in these markets.
Automatio n With the growing adoption of factory automation, there is increasing demand for precise motion control and energy efficient technologies presenting additional meaningful growth opportunities for us. We believe we can leverage our technology leadership in solutions optimized for high-accuracy, high-voltage and high-reliability conditions to expand our presence in these markets.
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.
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, Vice President of Advanced Sensor Technologies from 2016 to 2019, and as Senior Vice President of Technology and Products from 2019 to 2022.
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.
Mr. 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.
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.
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 equivalent, the Administrative Measures on the Control of Pollution Cause by Electronic Information Products.
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.
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 2024, 2023 and 2022.
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.
Approximately half of our net sales during each of fiscal years 2024, 2023 and 2022 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 2024, 2023 and 2022.
As an expert in delivering ICs supporting efficient power conversion in HEV and EVs, we believe we are uniquely positioned to support increased electrification, providing the critical automotive-grade components required to enable energy-efficient and cost-effective vehicles.
As an expert in delivering ICs supporting efficient power conversion in HEVs and EVs, we believe we are uniquely positioned to support increased electrification, providing the critical automotive-grade components required to enable energy-efficient and cost-effective vehicles.
In automotive applications, our position sensor ICs are used to improve safety applications such as ADAS power steering and braking systems, mild HEV powertrain systems such as the shaft position of a starter generator and ICE powertrain systems such as clutch and fork position in advanced transmissions.
In automotive applications, our position sensor ICs are used to improve safety applications such as ADAS power steering and braking systems, certain HEV powertrain systems such as the shaft position of a starter generator and ICE powertrain systems such as clutch and fork position in advanced transmissions.
Although no one company competes with us across all of our product lines, we face significant competition within each of our business areas from both domestic and international semiconductor companies. Our primary magnetic sensor and power IC competitors are other semiconductor design and manufacturers, such as Analog Devices, Infineon, Melexis, Monolithic Power Systems, TDK Micronas, and Texas Instruments.
Although no one company competes with us across all of our product lines, we face significant competition within each of our business areas from both domestic and international semiconductor companies. Our primary magnetic sensor and power IC 12 competitors are other semiconductor designers and manufacturers, such as Analog Devices, Infineon, Melexis, Monolithic Power Systems, TDK Micronas, and Texas Instruments.
Maintain sustainability efforts We intend to continue to innovate with purpose, aiming to help address critical global challenges related to energy efficiency, vehicle emissions and clean and renewable energy with our sensing and power management product portfolio.
Maintain sustainability efforts We intend to continue to innovate with purpose, aiming to help address critical global challenges related to energy efficiency and vehicle emissions, as well as clean and renewable energy with our sensing and power management product portfolio.
Sales, Marketing and Customer Support We sell our products worldwide through multiple sales channels, including through our direct sales force and through distributors and independent sales representatives, which resell our products to numerous end customers. We have a geographically diverse mix of sales.
Sales, Marketing and Customer Support We sell our products worldwide through multiple sales channels, including through our direct sales force and through distributors and independent sales representatives, who resell our products to numerous end customers. We have a geographically diverse mix of sales.
We continue to innovate this technology, which will enable gallium nitride (“GaN”) and silicon carbide (“SiC”) solutions in the electric powertrain. ADAS capabilities are considered some of the most desirable features in modern vehicles and are currently being adopted in vehicles worldwide. Industry experts expect ADAS feature adoption will continue to increase over time.
We continue to innovate this technology, which will enable gallium nitride (“GaN”) and silicon carbide (“SiC”) solutions in the electric powertrain. ADAS capabilities are considered some of the most desirable features in modern vehicles and continue to be adopted in vehicles worldwide. Industry experts expect ADAS feature adoption will continue to increase over time.
These sensor ICs are used in camshaft/ 11 crankshaft and transmission systems and employ proprietary algorithms for high accuracy, leading to reduced CO2 emissions and improved fuel economy of combustion engines. Additionally, xMR wheel speed sensors play an important role to increase the safety of ADAS braking systems.
These sensor ICs are used in camshaft/crankshaft and transmission systems and employ proprietary algorithms for high accuracy, leading to reduced CO2 emissions and improved fuel economy of combustion engines. Additionally, xMR wheel speed sensors play an important role in increasing the safety of ADAS braking systems.
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.
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 13 proper incentives to attract, retain and motivate employees to achieve superior performance. The structure of our compensation programs provides incentive earnings for both short-term and long-term performance.
Nargolwala previously served as Executive Vice President of Sensing Solutions at Sensata Technologies, a leading industrial technology company that develops sensors and sensor-based solutions for the automotive, heavy vehicle and off-road, industrial, and aerospace industries, from March 2020 to May 2022. Mr.
Prior to joining Allegro, Mr. Nargolwala previously served as Executive Vice President of Sensing Solutions at Sensata Technologies, a leading industrial technology company that develops sensors and sensor-based solutions for the automotive, heavy vehicle and off-road, industrial, and aerospace industries, from March 2020 to May 2022. Mr.
We commonly collaborate with customers early on over a multi-year period in order to design products capable of meeting demanding performance and quality requirements. Through this customer collaboration in product design, we believe we have unique insight into market trends and customer requirements for new, improved and 4 innovative products.
We commonly collaborate with customers early and over a multi-year period to design products capable of meeting demanding performance and quality requirements. Through this customer collaboration in product design, we believe we have unique insight into market trends and customer requirements for new, improved and innovative products.
Magnetic Sensor ICs We offer what we believe to be the industry’s leading portfolio of integrated magnetic sensor ICs. Our solutions are based on our monolithic Hall-effect and xMR technology that allows customers to develop contactless sensor solutions that reduce mechanical wear and provide greater measurement accuracy and system control.
Magnetic Sensor ICs We offer what we believe to be the industry’s leading portfolio of integrated magnetic sensor ICs. Our solutions are based on our monolithic Hall-effect, GMR and TMR technology that allows customers to develop contactless sensor solutions that reduce mechanical wear and provide greater measurement accuracy and system control.
Glover has served as our Senior Vice President of Worldwide Sales since he joined Allegro i n 2019. Prior to joining Allegro, Mr. Glover served as the General Manager of the Automotive Sales Group at Intel Corporation, a computing, networking, data storage, and communications solutions company from 2016 to 2019. Mr.
Glover has served as our Senior Vice President of Worldwide Sales since he joined Allegro in 2019. Prior to joining Allegro, Mr. Glover served as the General Manager of the Automotive Sales Group at Intel Corporation, a computing, networking, data storage, and communications solutions company from 2016 to 2019. Mr.
Automotive 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.
Automotive 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 network infrastructure ▪ Consumer grade medical devices ▪ Personal mobility Environmental, Social and Governance Initiatives Our commitment to sustainability is intrinsic to our core value of “Innovation with Purpose” and is directly aligned to our corporate strategy and growth plans.
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.
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 magnetoresistive (“xMR”) sensors and Bipolar-CMOS-DMOS (“BCD”) power ICs.
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.
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 improved our gross margin from a 40% range historically to the mid 50% range.
As we expand the reach and influence of our products, we have an important opportunity to make a positive impact on our people, communities, and the planet.
As we expand the reach and influence of our products, we have an important opportunity to make a positive impact on our teams, communities, and the planet.
Item 1. Business. Our Mission Our mission is to be a global leader in semiconductor sensing and power solutions for motion control and energy-efficient systems in automotive and industrial applications, moving the world to a safer and more sustainable future.
Item 1. Bu siness. Our Mission Our mission is to be a global leader in semiconductor sensing and power solutions for motion control and energy-efficient systems in automotive and industrial applications, moving the world to a safer and more sustainable future.
Many of these applications require the same safety and accuracy, which we have designed into our automotive first devices. In particular, we believe we have the potential to leverage the synergy between our power and sensor solutions, including motor drivers, voltage regulators, display drivers, and current, position and speed sensors, into under-penetrated opportunities within industrial automation.
Many of these applications require the same safety and accuracy specifications that we have designed into our automotive first devices. In particular, we believe we have the potential to leverage synergies between our power and sensor solutions, including motor drivers, voltage regulators, display drivers, and current, position and speed sensors, in under-penetrated opportunities within industrial automation.
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.
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. We also generally provide equity grants globally.
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.
In Hybrid Electric Vehicles (“HEV”), Electric Vehicles (“EV”) and ADAS applications, these innovations translate to increased driving range for EVs, smaller and more reliable power conversion systems, and improved safety and efficiency of motor and power management systems, as well as safer and more reliable steering and braking systems. In the industrial market, these technologies enable clean energy and automation.
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.
The following table sets forth certain information regarding our executive officers as of May 23, 2024: Name Age Position with Company Vineet Nargolwala 51 President and Chief Executive Officer, Director Derek P. D’Antilio 52 Senior Vice President, Chief Financial Officer and Treasurer Sharon S. Briansky 50 Senior Vice President, General Counsel and Secretary Michael C.
Broad Industrial The Broad Industrial market includes our personal mobility, or two wheeler market, and a number of other end uses from heavy equipment to telecom connectivity. Our two-wheeler business is seeing similar electrification trends as larger vehicles. Our solutions are proven in electrified powertrains and in small form factors needed in these applications.
Broad Industrial The Broad Industrial market includes our personal mobility, or two-wheeler market, and a broad variety of other use cases from heavy equipment to telecom connectivity. Our two-wheeler business is seeing similar electrification trends as larger vehicles. Our solutions are proven in electrified powertrains and in the small form factors needed in these applications.
We believe that moving from today’s systems to electromechanical braking and steer-by-wire will nearly double the devices required per system. • According to our internal estimates and third-party sources, in a standard ICE model, we believe that we have a total opportunity of approximately $39 increasing to approximately $100 of potential content in an EV. • In a popular mid-sized 2022 model sedan shipped worldwide, our content per vehicle increased by over 50% as the vehicle model transitioned from ICE to a battery EV.
We believe that moving from today’s systems to electromechanical braking and steer-by-wire will nearly double the devices required per system. • According to our internal estimates and third-party sources, we believe that we have a total opportunity of up to approximately $100 of potential content in each battery EV or plug-in EV. • In a popular mid-sized 2022 model sedan shipped worldwide, our content per vehicle increased by over 50% as the vehicle model transitioned from ICE to a battery EV.
Any failure on our part to comply with these laws and regulations may subject us to significant fines or other civil or criminal costs, obligations, sanctions or property damage or personal injury claims, or suspension of our facilities’ operating permits.
Any failure on our part to comply with these laws and regulations, including new laws or new interpretations of existing ones, may subject us to significant fines or other civil or criminal costs, obligations, sanctions or property damage or personal injury claims, or suspension of our facilities’ operating permits.
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.
Power ICs Our power IC portfolio comprises 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 brushless DC (“BLDC”) motors and fans.
Our IGDs enable an application that is smaller and more efficient than the competing solutions, helping to shrink PCBs and reduce total system size. Examples of our IC products and their applications in end markets are set forth in the following table.
Our IGDs enable an application that is smaller and more efficient than competing solutions, helping to shrink PCBs and reduce total system size in clean energy, data centers, and electrified powertrains. Examples of our IC products and their applications in end markets are set forth in the following table.
Additionally, in our experience, demand for solutions that meet or exceed stringent safety and reliability specifications supports higher ASPs and slower ASP declines over time than are typical for our industry.
Additionally, in our experience, demand for solutions that meet or exceed stringent safety and reliability specifications supports higher average selling prices (“ASPs”) and slower ASP declines over time than are typical for our industry.
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.
We also believe we can use our expertise in designing for the automotive market combined with our expanding product portfolio to capitalize on increasing demand from industrial customers for rugged solutions that meet the highest quality and reliability standards.
Thin film, high-resolution xMR transducers are deposited directly on top of the CMOS circuitry creating a more reliable solution than multi-chip solutions by reducing interconnects and solution area.
Thin film, high-resolution xMR transducers are deposited directly on top of the complimentary metal-oxide semiconductor (“CMOS”) circuitry creating a more reliable solution than multi-chip solutions by reducing interconnects and solution area.
However, various factors, such as market conditions, new product introductions and the supply chain environment, can impact the effects of seasonality on our business. Employees and Human Capital Resources Our employees are our most valuable assets.
However, various factors, such as market conditions, the cyclicality of the semiconductor industry, new product introductions and the supply chain environment, can impact the effects of seasonality on our business. Employees and Human Capital Resources Our employees are our most valuable assets and contribute to Allegro’s success.
As part of the Company’s commitment to reduce the environmental impact of our products throughout the lifecycle, we are investing in innovation as well as measuring and tracking emissions, waste, and water usage across facilities. The Company has implemented several energy, water, and waste reduction projects across our facilities and established an environmental policy, climate change policy, and water policy.
As part of the Company’s aim to reduce the environmental impact of our products throughout the lifecycle, we are investing in innovation as well as measuring and tracking emissions, waste, and water usage across our facilities. The Company has implemented several energy, water, and waste reduction projects at our facilities.
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.
We 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 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.
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.
We continue to be instrumental in developing Hall-effect and magnetoresistive transducers (“xMR”) and power double diffusion metal oxide semiconductor devices on silicon, application-optimized packaging, high-temperature operation, high-speed precision signal paths for signal processing, and 100-volt (“100V”) capable BCD wafer technology.
We continue to be instrumental in developing Hall-effect and xMR transducers and power double diffusion metal oxide semiconductor devices on silicon, application-optimized packaging, high-temperature operation, high-speed precision signal paths for signal processing, and 100-volt (“100V”) capable BCD wafer technology. With our 2023 acquisition of Crocus Technology International Corp.
Valente 58 Senior Vice President and Chief Human Resources Officer Vineet Nargolwala has served as our President and Chief Executive Officer and as a member of our board of directors since he joined Allegro in June 2022. Mr. Nargolwala is a technology executive with over 25 years of global executive leadership experience. Prior to joining Allegro, Mr.
Hagen 47 Senior Vice President and Chief Human Resources Officer Suman Narayan 52 Senior Vice President, Products Vineet Nargolwala has served as our President and Chief Executive Officer and as a member of our board of directors since he joined Allegro in June 2022. Mr. Nargolwala is a technology executive with over 25 years of global executive leadership experience.
As of March 31, 2023, 1,977 of our employees held university and graduate-level degrees, of which 876 of these employees were located outside of our factory locations. Globally, the demand for employees with such levels of education is high and competitive.
As of March 29, 2024, 2,218 of our employees held university and graduate-level degrees, of which 1,013 of these employees were located outside of our factory locations. Globally, the demand for employees with such levels of education is high and competitive.
Consumer & Computer Markets The consumer and computer markets include smart home applications, personal computers and consumer electronics. Our devices enable our customers in these markets to manufacture more energy efficient products with extended battery life. Market Opportunity Within our target markets, a key element of our growth strategy is to increase our business through portfolio and customer expansion.
Our devices enable our customers in these markets to manufacture more energy efficient products with extended battery life. Market Opportunity Within our target markets, a key element of our growth strategy is to increase our revenue through portfolio and customer expansion.
We believe similar share growth opportunities exist in other adjacent areas of the magnetic sensor IC market. We are also just beginning to leverage our power IC products to increase our total content within automotive and industrial applications.
We believe similar share growth opportunities exist in other adjacent areas of the magnetic sensor IC market. We also plan to grow in the magnetic sensor market through the release of our new TMR technology. We are also leveraging our power IC products to increase our total content within automotive and industrial applications.
For example, the European Union (“EU”) adopted its Restriction of Hazardous Substance Directive (“RoHS”) in 2003 and continues to develop evolving compliance standards, with its most recent restrictions announced as part of RoHS 3, which took effect in July 2019.
For example, the European Union (“EU”) adopted its Restriction of Hazardous Substance Directive (“RoHS”) legislation, EU Directive 2002/95/EC (RoHS) and 2011/65/EU (RoHS II), amended by 2015/863/EU and continues to develop evolving compliance standards, with its most recent restrictions announced as part of RoHS 3, which took effect in July 2019.
Although we incur costs to comply with the provisions discussed above and other applicable federal, state, local, international and non-U.S. laws and regulations relating to environmental protection in the ordinary course of our business, such costs have not materially affected, and are not presently expected to materially affect, our capital expenditures, earnings or competitive position.
Although we incur costs to comply with the provisions discussed above and other applicable federal, state, local, international and non-U.S. laws and regulations relating to environmental protection in the ordinary course of our business, such costs have not materially affected, and are not presently expected to materially affect, our capital expenditures, earnings or competitive position. 16 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”).
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.
We also utilize social media, local job fairs and educational organizations to find motivated and responsible candidates who represent diverse backgrounds, perspectives and experiences. We have made strides to increase the diversity of backgrounds, perspectives and experiences of our leaders in management positions, while building internal resources to support future leadership openings.
Prior to Sensata, he was with Honeywell International Inc. for over nine years in business strategy and P&L leadership roles of increasing responsibility. Prior to Honeywell, Mr. Nargolwala was at Nortel Networks in product management and engineering roles. Mr.
Prior to Sensata, he was with Honeywell International Inc. for over nine years in business strategy and P&L leadership roles of increasing responsibility. Prior to Honeywell, Mr. Nargolwala was at Nortel Networks in product management and engineering roles. He has been a member of the board of directors of Brady Corporation since February 2022. Mr.
These markets are looking for many of the same devices our automotive customers use, from high voltage and high temperature performance to long life cycle, small form factors, integration and unique packaging. Our automotive quality standards give industrial customers trust in our products.
These markets are looking for many of the same device specifications that our automotive customers use, from high voltage and high temperature performance to long life cycle, small form factors, integration and unique packaging.
Acquisitions should accelerate our growth in strategic e-Mobility and industrial markets, extend or enhance our existing technology expertise, and leverage our existing sales channels.
Acquisitions should accelerate our growth in strategic e-Mobility and industrial markets, extend or enhance our existing technology expertise, and leverage our existing sales channels. Such acquisitions include our acquisitions of Crocus and Heyday Integrated Circuits (“Heyday”).
Glover also served as Intel Corporation’s Director of Sales from 2013 to 2016, and also served in various leadership, sales, marketing and engineering roles from 2001 to 2013. Mr. Glover received a B.S. in Electrical Engineering from the University of Cincinnati in 2004. Suman Narayan was appointed Senior Vice President, Products, in September 2022.
Glover also served as Intel Corporation’s Director of Sales from 2013 to 2016, and also served in various leadership, sales, marketing and engineering roles from 2001 to 2013. Mr. Glover received a B.S. in Electrical Engineering from the University of Cincinnati in 2004. Erin E.
Our intellectual property includes patented inventions, trade secrets, accumulated technical know-how and trademarks. As of March 31, 2023, we o w ned 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. We market our products worldwide under the “Allegro” name.
Our intellectual property includes patented inventions, trade secrets, accumulated technical know-how and trademarks. As of March 29, 2024, we owned 1,910 patents, including 934 active U.S. patents (with expiration dates between 2024 and 2042), with an additional 471 pending patent applications, including 214 U.S. patent applications. We market our products worldwide under the “Allegro” name.
For example, the rise in HEVs and EVs has dramatically increased the variety and complexity of components needed to support modern powertrains. We believe our philosophy of designing for automotive safety and reliability gives us a meaningful lead over new entrants attempting to enter the automotive market by modifying existing solutions originally developed for consumer and other less demanding applications.
For example, growing adoption of HEVs and EVs has dramatically increased the variety and complexity of components needed to support modern powertrains. We believe our philosophy of designing for automotive safety and reliability gives us a meaningful lead over new entrants attempting to enter the automotive market.
We believe the automotive market is very attractive given the rigorous quality and safety requirements that create meaningful challenges for new competitors and the significant technology shifts currently underway that are expected to significantly increase semiconductor content per vehicle.
We believe the automotive market is very attractive due to the rigorous quality and safety requirements that create meaningful challenges for new competitors and the significant technology shifts currently underway that are expected to significantly increase semiconductor content per vehicle. Part of our served available market expansion is through acquisitions that open new sockets and new applications to us.
In addition to these regulations and directives, we may face costs and liabilities in connection with product take-back legislation, which holds manufacturers responsible for the collection and proper disposal of their products discarded by their customers.
In addition to these regulations and directives, we may face costs and liabilities in connection with product take-back legislation, which holds manufacturers responsible for the collection and proper disposal of their products discarded by their customers. There are also increasing regulations regarding the use of green marketing claims, which may also affect our product design and procurement operations.
The success and growth of Allegro’s business is dependent in large part on our ability to attract, retain and develop a diverse population of talented and high-performing employees at all levels of our organization. For our research, engineering and production management positions, we require employees with university and graduate-level degrees.
The success and growth of Allegro’s business is dependent in large part on our ability to attract, retain and develop a diverse population of talented and high-performing employees at all levels of our organization.
Prior to that, he served as Vice President, Sensor Business Unit, since joining the Company in January of 2021. Before joining Allegro, Mr. Narayan was Senior Vice President and General Manager, Semiconductor and Embedded Systems, for Cyient, Inc., a global engineering, manufacturing, and digital technology solutions company, from 2016 to 2021.
Before joining Allegro, Mr. Narayan was Senior Vice President and General Manager, Semiconductor and Embedded Systems, for Cyient, Inc., a global engineering, manufacturing, and digital technology solutions company, from 2016 to 2021.
Our innovators and teams are not only focused on solving customer challenges like reducing emissions, making applications more energy efficient, and harnessing 12 renewable energy, but they are also looking inward, imagining ways we can enhance our impact on the communities where we live and work.
Our world-class innovators are not only helping to solve customer challenges, like reducing emissions, make applications more energy efficient, and harness renewable energy, they are also looking inward, imagining ways we can enhance our impact on the communities where we live and work.
Our local teams in these centers work closely with our customers on their unique design requirements, often acting as an extension of a customer’s development team.
We support customers through design and application centers located in North America, South America, Asia and Europe. Our local teams in these centers work closely with our customers on their unique design requirements, often acting as an extension of a customer’s development team.
Additionally, our IGDs will have a strong presence in these power conversion markets, enabling GaN and SiC-based platforms. We offer one of the largest portfolios of current sensors on the market today, including those with integrated components, requiring less board space. Our “lossless” current sensor ICs are used to improve efficiency in these power conversion systems.
We offer one of the largest portfolios of current sensors on the market today, including those with integrated components, requiring less board space. Our “lossless” current sensor ICs are used to improve efficiency in power conversion systems.
Our operations are subject to various federal, state, local, international and non-U.S. laws and regulations governing pollution and environmental protection, 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.
Our operations are subject to various federal, state, local, international, and non-U.S. laws and regulations governing pollution and 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.
Emphasize our automotive “first” philosophy to align our product development with the most rigorous applications and safety standards We are a leading supplier of magnetic sensor ICs for the automotive market because we have been intentional about incorporating support for the stringent automotive operating voltages, temperature ranges and safety and reliability standards into every part of our operations, from design to manufacturing.
By aligning our research and development investments with disruptive technology trends while undergoing a rigorous return on investment (“ROI”) review, we believe we can deliver an attractive combination of growth and profitability. 6 Emphasize our automotive “first” philosophy to align our product development with the most rigorous applications and safety standards We are a leading supplier of magnetic sensor ICs for the automotive market because we have been intentional about incorporating support for the stringent automotive operating voltages, temperature ranges and safety and reliability standards into every part of our operations, from design to manufacturing.
Briansky served as the Vice President, Deputy General Counsel and Secretary at Thermo Fisher Scientific (“Thermo Fisher”) from 2017 to 2021. Prior to that she served as Vice President, Associate General Counsel at Thermo Fisher from 2005 to 2017. Ms.
Briansky has served as our Senior Vice President, General Counsel and Secretary since she joined Allegro in December 2021. Prior to joining Allegro, Ms. Briansky served as the Vice President, Deputy General Counsel and Secretary at Thermo Fisher Scientific (“Thermo Fisher”) from 2017 to 2021.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeAmong other things, these provisions include those establishing: • a classified board of directors with three-year staggered terms, which may have the effect of deferring, delaying or discouraging hostile takeovers, or changes in control of us or our management; • no cumulative voting in the election of directors, which limits the ability of minority stockholders to elect director candidates; • the exclusive right of our board of directors to elect a director to fill a vacancy created by, among other things, the expansion of the board of directors or the resignation, death or removal of a director, which prevents stockholders from filling vacancies on our board of directors; • the ability of our board of directors to authorize the issuance of shares of preferred stock and to determine the terms of those shares, including preferences and voting rights, without stockholder approval, which could be used to significantly dilute the ownership of a hostile acquirer; • the ability of our board of directors to alter our bylaws without obtaining stockholder approval; • the required approval of the holders of at least two-thirds of the shares entitled to vote at an election of directors to amend or repeal our bylaws or amend the provisions of our Certificate of Incorporation regarding the election and removal of directors; • a prohibition on stockholder action by written consent, which forces stockholder action to be taken at an annual or special meeting of our stockholders; • the requirement that a special meeting of stockholders may be called only by a majority of our board of directors, which may delay the ability of our stockholders to force consideration of a proposal or for stockholders controlling a majority of our capital stock to take action, including the removal of directors; and • advance notice procedures that stockholders must comply with in order to nominate candidates to our board of directors or to propose matters to be acted upon at an annual meeting or special meeting of stockholders, which may discourage or delay a potential acquirer from conducting a solicitation of proxies to elect the acquirer’s own slate of directors or otherwise attempting to obtain control of us until the next stockholder meeting or at all.
Biggest changeAmong other things, these provisions include those establishing a classified board of directors with three-year staggered terms, no cumulative voting in director elections, the ability of the Board to authorize the issuance of preferred stock and the terms of such preferred stock, a two-thirds vote of stockholders to amend or repeal our bylaws or amend the provisions of our Certificate of Incorporation regarding the election and removal of directors, the approval of a majority of the Board to call a special meeting of stockholders, and advance notice procedures that stockholders must comply with in order to nominate candidates to our Board or to propose matters to be acted upon at an annual meeting or special meeting of stockholders.
Because many of our sales, research and development, and manufacturing expenses are relatively fixed, a reduction in customer demand may decrease our gross margins and operating income. In addition, we base many of our operating decisions, and enter into purchase commitments, on the basis of anticipated net sales trends which are highly unpredictable.
Because many of our sales, research and development and manufacturing expenses are relatively fixed, a reduction in customer demand may decrease our gross margins and operating income. In addition, we base operating decisions, and enter into purchase commitments, on the basis of anticipated net sales trends, which are highly unpredictable.
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.
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 the ability to grow our business.
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.
Failure to adequately manage our growth, improve our operational, financial and management information systems, or effectively motivate and manage 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.
Semiconductor IC suppliers must meet increasingly stringent quality standards of certain OEMs and customers, particularly for automotive applications. While our quality performance to date has generally met these requirements, we may experience problems in achieving acceptable quality results in the manufacture of our products, particularly in connection with the production of new products or adoption of a new manufacturing process.
Semiconductor IC suppliers must meet increasingly stringent quality standards of certain OEMs and customers, particularly for automotive applications. While our quality performance to date has generally met these requirements, we may experience problems in achieving acceptable quality results in the manufacture of our products, particularly in connection with production of new products or adoption of a new manufacturing process.
However, we have based this estimate on our current operating plans and expectations, which are subject to change, and cannot assure you that that our existing resources will be sufficient to meet our future liquidity needs. We may require additional capital to respond to business opportunities, challenges, acquisitions or other strategic transactions and/or unforeseen circumstances.
However, we have based this estimate on our current operating plans and expectations, which are subject to change, and cannot assure you that our existing resources will be sufficient to meet our future liquidity needs. We may require additional capital to respond to business opportunities, challenges, acquisitions or other strategic transactions and/or unforeseen circumstances.
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.
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, or result in the imposition of penalties and fines under state, federal and foreign laws.
Additionally, restrictions on the collection, use, sharing or disclosure of personal information or additional requirements and liability for security and data integrity could require us to modify our solutions and features, possibly in a material manner, limit our ability to develop new products and features.
Additionally, restrictions on the collection, use, sharing or disclosure of personal information or additional requirements and liability for security and data integrity could require us to modify our solutions and features, possibly in a material manner, and limit our ability to develop new products and features.
The reasons for this delay include, among other things, the following: • changing customer requirements, resulting in an extended development cycle for the product; • delay in the ramp-up of volume production of the customer’s products into which our solutions are designed; • delay or cancellation of the customer’s product development plans; • competitive pressures to reduce our selling price for the product; • the discovery of design flaws, defects, errors or bugs in the products; • lower than expected customer acceptance of the solutions designed for the customer’s products; • lower than expected market acceptance of our customers’ products; and • higher manufacturing costs than anticipated.
The reasons for this delay include, among other things: changing customer requirements, resulting in an extended development cycle for the product; delay in the ramp-up of volume production of the customer’s products into which our solutions are designed; delay or cancellation of the customer’s product development plans; competitive pressures to reduce our selling price for the product; the discovery of design flaws, defects, errors or bugs in the products; lower than expected customer acceptance of solutions designed for customer’s products; lower than expected market acceptance of customers’ products; and higher manufacturing costs than anticipated.
Although we supplement the assembly capabilities at the AMPI Facility with several other external or independent assembly subcontractors throughout Asia, if our manufacturing operations at the AMPI Facility are obstructed or hampered, it could take a considerable length of time, at an increased cost, for us to resume manufacturing at another location, which could materially harm our manufacturing efficiency and capacity, delay production and shipments and result in costly expenditures to repair or replace this facility.
Although we supplement the assembly capabilities at the AMPI Facility with other external or independent assembly subcontractors throughout Asia, if our manufacturing operations at the AMPI Facility are obstructed or hampered, it could take a considerable length of time, at an increased cost, for us to resume manufacturing at another location, which could materially harm our manufacturing efficiency and capacity, delay production and shipments and result in costly expenditures to repair or replace this facility.
Factors affecting these markets, including reductions in sales of our customers’ products, deterioration of our customers’ financial condition, insufficient customer resources dedicated to promoting and commercializing their products, the inability of our customers to adapt to changing technological demands, design flaws in 28 customer products, the effects of catastrophic and other disruptive events, and increased supply chain, manufacturing or production costs could seriously harm our customers and, as a result, harm us.
Factors affecting these markets, including reductions in sales of our customers’ products, deterioration of our customers’ financial condition, insufficient customer resources dedicated to promoting and commercializing their products, the inability of our customers to adapt to changing technological demands, design flaws in customer products, the effects of catastrophic and other disruptive events, and increased supply chain, manufacturing or production costs could seriously harm our customers and, as a result, harm us.
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.
In addition, computer programmers and hackers 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.
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.
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.
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.
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.
We carry various commercial liability policies, including umbrella/excess policies which provide some protection against product liability exposure. However, a successful warranty or product liability claim against us in excess of our available insurance coverage and established reserves, or a requirement that we participate in a product recall, could have adverse effects on our business results.
We carry various commercial liability policies, including umbrella/excess policies which provide some protection against product liability exposure. However, a successful warranty or product liability claim against us in excess of our available insurance coverage and established 24 reserves, or a requirement that we participate in a product recall, could have adverse effects on our business results.
End-users often rely on these governmental rebates, tax credits and other financial incentives to significantly lower the purchase price of these products. However, these incentives may expire on a particular date, end when the allocated funding is exhausted, or be reduced or terminated as a matter of regulatory or legislative policy.
End-users often rely on these governmental rebates, tax credits and other financial incentives to significantly lower the 25 purchase price of these products. However, these incentives may expire on a particular date, end when the allocated funding is exhausted, or be reduced or terminated as a matter of regulatory or legislative policy.
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.
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.
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.
As a result, if we fail to secure an initial design win for any of our products to a 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.
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.
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.
Converting or transferring such fabrication processes from one of our primary facilities to an alternative or backup facility due to a disruption would likely be expensive and could take substantial time, given our highly complex manufacturing and fabrication processes, which incorporate our proprietary technologies.
Converting or transferring such fabrication processes from one of our primary facilities to an alternative or backup facility due to a disruption would likely be expensive and could take a substantial amount of time, given our highly complex manufacturing and fabrication processes, which incorporate our proprietary technologies.
Gross margins on individual products fluctuate over the product’s life cycle. Our overall gross margins have fluctuated from period to period as a result of shifts in product mix, customer mix, the introduction of new products, decreases in ASPs for older products and our ability to reduce product costs.
Gross margins on individual products fluctuate over the product’s life cycle. Our overall gross margins have fluctuated from period to period as a result of shifts in product mix, customer mix, channel mix, the introduction of new products, decreases in ASPs for older products and our ability to reduce product costs.
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.
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, 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 sale of products and 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.
Changes to tax laws or regulations in the jurisdictions in which we operate, or in the interpretation of such laws or regulations, could significantly increase our effective tax rate and reduce our cash flow from operating activities, and otherwise have a material adverse effect on our financial condition.
Changes to tax laws or regulations in the jurisdictions in which we operate, or in the interpretation of such laws or regulations, could significantly increase our effective tax rate (“ETR”) and reduce our cash flow from operating activities, and otherwise have a material adverse effect on our financial condition.
Our failure to achieve acceptable quality levels could adversely affect our business results. The nature of the design win process requires us to incur expenses without any guarantee that research and development efforts will generate net sales, which could adversely affect our financial results.
Our failure to achieve acceptable quality levels could adversely affect our business results. 23 The nature of the design win process requires us to incur expenses without any guarantee that research and development efforts will generate net sales, which could adversely affect our financial results.
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.
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.
In order to sustain profitable operations, we must continually reduce costs for our existing products and also develop and introduce new products with enhanced features on a timely basis that can be sold initially at higher ASPs.
In order to sustain profitable operations, we must continually reduce costs for our existing products and also develop and introduce new products with enhanced 20 features on a timely basis that can be sold initially at higher ASPs.
Existing patents and those that may be issued from any pending or future applications may be subject to challenges, invalidation or circumvention, and the rights granted under our patents may not provide us with meaningful protection or any commercial advantage.
Existing patents and those that may be 27 issued from any pending or future applications may be subject to challenges, invalidation or circumvention, and the rights granted under our patents may not provide us with meaningful protection or any commercial advantage.
In addition, because our board of directors is responsible for appointing the members of our management team, these provisions may frustrate or prevent any attempts by our stockholders to replace or remove our current management by making it more difficult for stockholders to replace members of our board of directors.
In addition, because our Board is responsible for appointing the members of our management team, these provisions may frustrate or prevent any attempts by our stockholders to replace or remove our current management by making it more difficult for stockholders to replace members of our Board.
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.
To our knowledge, only a few alternative 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 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.
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.
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.
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.
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.
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.
While our anticipated future growth is highly dependent on the adoption of EV powertrain vehicles, which are expected to have increased sensor and power product content, and our products in the industrial market which have applications in clean energy and EV charging, both of which we anticipate will benefit from a transition to lower emission vehicles and clean energy, we are subject to transition risks as the world moves away from fossil fuels.
While our anticipated future growth is highly dependent on the adoption of HEV and EV powertrain vehicles, which have increased sensor and power product content, and our products in the industrial market which have applications in clean energy and EV charging, both of which we anticipate will benefit from a transition to lower emission vehicles and clean energy, we are subject to transition risks as the world moves away from fossil fuels.
Our failure to adjust our supply chain volume, secure sufficient supply from our third-party vendors, including our semiconductor wafer suppliers, or estimate our customers’ demand could have a material adverse effect on our net sales, business, financial condition and results of operations. Shifts in our product mix or customer mix may result in declines in gross margin.
Our failure to adjust our supply chain volume, secure sufficient supply from our third-party vendors, including our semiconductor wafer suppliers, or estimate our customers’ demand could have a material adverse effect on our net sales, business, financial condition and results of operations. 19 Shifts in our product mix, customer mix or channel mix may result in declines in gross margin.
We have extensive international operations, and a substantial portion of our business, particular with respect to our manufacturing processes and sales network, is conducted outside of the United States. Our operations are subject to the U.S. Foreign Corrupt Practices Act (the “FCPA”), as well as the anti-corruption and anti-bribery laws in the countries where we do business.
We have extensive international operations, and a substantial portion of our business, particularly with respect to our manufacturing processes and sales network, is conducted outside of the United States. Our operations are subject to the U.S. Foreign Corrupt Practices Act (the “FCPA”), as well as the anti-corruption and anti-bribery laws in the countries where we do business.
To the extent we fail to manage our foreign currency exposure adequately, we may suffer losses in the value of our net foreign currency investment, and our business, financial condition, results of operations and cash flows may be negatively affected. Our ability to raise capital in the future may be limited and could prevent us from executing our growth strategy.
If we fail to manage our foreign currency exposure adequately, we may suffer losses in the value of our net foreign currency investment, and our business, financial condition, results of operations and cash flows may be negatively affected. Our ability to raise capital in the future may be limited and could prevent us from executing our growth strategy.
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.
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 the facility, causing catastrophic losses.
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.
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 ETR and/or valuation of our deferred tax assets and liabilities.
The semiconductor industry is generally subject to high turnover of employees, so the risk of trade secret misappropriation may be amplified. If any of our trade secrets are subject to unauthorized disclosure or are otherwise misappropriated by third parties, our competitive position may be materially and adversely affected.
The semiconductor industry is generally subject to high employee turnover, so the risk of trade secret misappropriation may be amplified. If any of our trade secrets are subject to unauthorized disclosure or are otherwise misappropriated by third parties, our competitive position may be materially and adversely affected.
We rely heavily on the manufacturing operations of the AMPI Facility, which operates as our primary internal assembly and testing facility. We depend primarily on the AMPI Facility for our sensor and power products and, if this facility suspends operations, our ability to assemble and test our products could be materially impaired.
We rely heavily on the manufacturing operations of the AMPI Facility, which operates as our primary internal assembly and testing facility. We depend on the AMPI Facility for our sensor and power products, and if this facility suspends operations, our ability 21 to assemble and test our products could be materially impaired.
We may not have sufficient capacity at any given time to meet our customers’ demands. Conversely, downturns in the semiconductor industry have in the past caused, and may in the future, cause our customers to significantly reduce the amount of products ordered from us.
We may not have sufficient capacity at any given time to meet our customers’ demands. Conversely, downturns in the semiconductor industry have in the past caused, and may in the future, cause our customers to significantly reduce the number of products ordered from us.
In addition to these federal and state laws inside the United States, under the World Trade Organization’s Trade Related-Aspects of Intellectual Property Rights Agreement, trade secrets are to be protected by World Trade Organization member states as “confidential information.” Under the UTSA and other trade secret laws, protection of our proprietary information as trade secrets requires us to take steps to prevent unauthorized disclosure to third parties or misappropriation by third parties.
In addition to these federal and state laws inside the United States, under the World Trade Organization’s (“WTO”) Trade Related-Aspects of Intellectual Property Rights Agreement, trade secrets are to be protected by WTO member states as “confidential information.” Under the UTSA and other trade secret laws, protection of our proprietary information as trade secrets requires us to take steps to prevent unauthorized disclosure to third parties or misappropriation by third parties.
For instance, these stockholders could attempt to delay or prevent a change in control of our Company, even if such change in control would benefit our other stockholders, which could deprive our other stockholders of an opportunity to receive a premium for their common stock.
For instance, Sanken could attempt to delay or prevent a change in control of our Company, even if such change in control would benefit our other stockholders, which could deprive our other stockholders of an opportunity to receive a premium for their common stock.
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.
Item 1A. R isk 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.
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.
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 imposing additional tariffs.
In order to service this indebtedness, and any additional indebtedness or other long-term obligations we may incur in the future, we need to generate sufficient levels of cash from our operating activities.
To service this indebtedness, and any additional indebtedness or other long-term obligations we may incur in the 26 future, we need to generate sufficient levels of cash from our operating activities.
If our new product development efforts fail to align with the needs of our customers, including due to circumstances outside of our control like a fundamental shift in the product markets of our customers and end users or regulatory changes, our business, financial condition and results of operations could be materially and adversely affected.
If our new product development efforts fail to align with the needs of our customers, including due to circumstances outside of our control, such as a fundamental shift in the product markets of our customers and end users or regulatory changes, our business, financial condition and results of operations could be materially and adversely affected.
We may also encounter lower manufacturing yields and longer delivery schedules in commencing volume production of new products that we introduce, which could increase our costs and disrupt our supply of such products.
We may encounter lower manufacturing yields and longer delivery schedules in commencing volume production of new products that we introduce, which could increase costs and disrupt supply of such products.
Furthermore, currency exchange rates have been especially volatile in the recent past, and these currency fluctuations may make it difficult for us to predict our results of operations.
Furthermore, currency exchange rates have been especially volatile in the recent past, and such currency fluctuations may make it difficult for us to predict our results of operations.
For example, there are risks that the Chinese government may, among other things, require the use of local suppliers in place of non-Chinese suppliers like us, compel companies that do business in China to partner with local companies to conduct business and provide incentives to government-backed local customers to buy from local suppliers.
For example, there are risks that the Chinese government may require the use of local suppliers in place of non-Chinese suppliers like us, compel companies that do business in China to partner with local companies to conduct business and provide incentives to government-backed local customers to buy from local suppliers.
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.
As a result, Sanken and its 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.
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.
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 2024, 2023 and 2022, approximately 85.8%, 86.6% and 85.9%, respectively, of our net sales were to customers outside of the United States.
These laws and regulations include: anti-trust regulatory activities; consumer protection laws; data privacy and cybersecurity laws; import/export regulatory activities; product safety regulatory activities; worker health and safety; environmental protection; employment matters; and tax and other regulations in each of the areas in which we conduct business.
These laws and regulations include: antitrust regulatory activities; consumer protection laws; data privacy and cybersecurity laws; import/export regulatory activities; product safety regulatory activities; worker health and safety; environmental protection; employment matters; and tax and other regulations in each of the areas in which we conduct business.
We or critical third-party service providers may be subject to disruptions or breaches of our information technology systems that could irreparably damage our reputation and our business, expose us to liability and materially and adversely affect our results of operations.
We or our third-party service providers may be subject to disruptions or breaches of our information technology systems that could irreparably damage our reputation and business, expose us to liability and materially and adversely affect our operating results.
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.
If we cannot supply our products due to a lack of components, 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.
We face an inherent business risk of exposure to warranty and product liability claims if products fail to perform as expected or is alleged to result in bodily injury, death, and/or property damage. In addition, if any of our designed products are alleged to be defective, we may be required to participate in their recall.
We face an inherent business risk of exposure to warranty and product liability claims if products fail to perform as expected or any such failure is alleged to result in bodily injury, death, and/or property damage. In addition, if any of our designed products are alleged to be defective, we may be required to participate in their recalls.
Poor manufacturing yields over a prolonged period of time could adversely affect our ability to deliver our products on a timely basis and harm our relationships with customers, which could materially and adversely affect our business, financial condition and results of operations.
Poor manufacturing yields over a prolonged period of time could adversely affect our ability to deliver our products on a timely basis and harm our customer relationships, which could materially and adversely affect our business, financial condition and results of operations.
Additionally, in the event that our products fail to perform as expected or such failure of our products results in a recall, our reputation may be damaged, which could make it more difficult for us to sell our products to existing and prospective customers and could materially and adversely affect our business, results of operations and financial condition.
Additionally, if our products fail to perform as expected or such failure of our products results in a recall, our reputation may be damaged, which could make it more difficult for us to sell our products to existing and prospective customers and could materially and adversely affect our business, results of operations and financial condition.
Further, conflict between Ukraine and Russia could adversely impact the global supply chain, disrupt our operations and/or our customers’ operations, negatively impact the demand for our products in our primary end markets or increase in cyberattacks and espionage.
Further conflict between Ukraine and Russia could adversely impact the global supply chain, disrupt our operations and/or our customers’ operations, negatively impact the demand for our products in our primary end markets or lead to an increase in cyberattacks and espionage.
In addition, we have opted out of Section 203 of the DGCL, but our Certificate of Incorporation provides that engaging in any of a broad range of business combinations with any “interested” stockholder (any stockholder with 15% or more of our voting stock (subject to certain exceptions, including OEP and its affiliates)) for a period of three years following the date on which the stockholder became an “interested” stockholder is prohibited, subject to certain exceptions.
In addition, we have opted out of Section 203 of the DGCL, but our Certificate of Incorporation provides that engaging in any of a broad range of business combinations with any “interested” stockholder (any stockholder with 15% or more of our voting stock (subject to certain exceptions)) for a period of three years following the date on which the stockholder became an “interested” stockholder is prohibited, subject to certain exceptions.
Failure to comply with such laws and regulations could subject us to civil or criminal costs, obligations, sanctions or property damage or personal injury claims, or suspension of our facilities’ operating permits.
Failure to comply with such laws and regulations could subject us to significant fines or other civil or criminal costs, obligations, sanctions or property damage or personal injury claims, or suspension of our facilities’ operating permits.
The institution of export restrictions and trade tariffs both globally and between the United States and China specifically carries the risk of negatively impacting China’s overall economic condition, which could have negative repercussions for our business since Greater China accounted for the highest percentage of the Company’s total net sales in any one country in our fiscal year ended March 31, 2023.
The institution of export restrictions and trade tariffs both globally and between the United States and China specifically carries the risk of negatively impacting China’s overall economic condition, which could have negative repercussions for our business since Greater China accounted for the highest percentage of the Company’s total net sales in any one country in the fiscal year 2024.
We anticipate that ASPs may decrease in the future in response to the introduction of new products by us or our competitors, or due to other factors, including pricing pressures from our customers. We typically conduct annual pricing negotiations for our existing products with some of our largest customers.
ASPs may decrease in the future in response to the introduction of new products by us or our competitors, or due to other factors, including customer pricing pressures. We typically conduct annual pricing negotiations for our existing products with some of our largest customers.
During fiscal year 2023, no end customer, including those served through our distributors, exceeded 10% of our net sales during fiscal year 2023.
During fiscal year 2024, no end customer, including those served through our distributors, exceeded 10% of our net sales.
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.
The interests of Sanken may not always align with, and in some cases may conflict with, our interests and the interests of our other stockholders.
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.
In addition, the increase in global remote working dynamics 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.
As a U.S.-based company operating in many countries around the world, we are subject not only to U.S. federal and varying U.S. state privacy, data protection, information security, and consumer protection laws and regulations, but also to numerous foreign laws and regulations, including the EU General Data Protection Regulation.
As a U.S.-based company operating in many countries around the world, we are subject not only to U.S. federal and varying U.S. state privacy, data protection, information security, and consumer protection laws and regulations, but also to numerous foreign laws and regulations, including the EU General Data Protection Regulation and the Data Security Law of the People’s Republic of China.
In the event that any one or more of our suppliers is unable or unwilling to deliver us products and we are unable to identify alternative sources of supply for such materials or components on a timely basis, our operations may be adversely affected.
If any one or more of our suppliers is unable or unwilling to deliver us products and we are unable to identify alternative sources of supply for such materials or components on a timely basis, our operations may be adversely affected.
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.
In addition, any disruption in the credit markets, including as a result 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.
In addition, changes in manufacturing processes required as a result of changes in product specifications, changing customer needs and the introduction of new product lines have historically significantly reduced our manufacturing yields, resulting in low or negative margins on those products.
In addition, changes in manufacturing processes required due to changes in product specifications, changing customer needs and the introduction of new product lines have historically significantly reduced our manufacturing yields, resulting in low or negative margins on those products.
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.
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 macroeconomic weakness related to trade and political disputes between the United States and China, tensions across the Taiwan Strait, the current conflict between Russia and Ukraine and the ongoing conflict in the Middle East; • 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.
Any slowdown in the growth of these end markets could adversely affect our financial results. For example, a significant element of our growth strategy depends on the increasing adoption of mild hybrid, hybrid and electric vehicles, which are expected to have higher sensor and power product content.
Any slowdown in the growth of these end markets could adversely affect our financial results. For example, a significant element of our growth strategy depends on the increasing adoption of HEVs and EVs, which are expected to have higher sensor and power product content.
Although some of our customers, for example those in the automotive industry, provide us with forecasts of their future requirements for our products, a significant percentage of our net sales in each fiscal quarter is dependent on sales that are booked and shipped during that fiscal quarter, and are typically attributable to a large number of orders from diverse customers and markets.
Although some of our customers provide us with non-binding forecasts of their future requirements for our products, a significant percentage of our net sales in each fiscal quarter is dependent on sales that are booked and shipped during that fiscal quarter, and are typically attributable to a large number of orders from diverse customers and markets.
Natural disasters and other severe or frequent weather events caused by climate change that interrupt operations at or transportation to and from these facilities could result in delays in our ability to sell our products that would negatively impact our net sales, potentially damage our customer relationships and our reputation and may have a material adverse effect on our business, financial condition and results of operations.
Natural disasters and severe weather events could damage our or our suppliers’ facilities or interrupt operations at or transportation to and from these facilities, which could result in delays in our ability to sell our products that would negatively impact our net sales, potentially damage our customer relationships and our reputation, and may have a material adverse effect on our business, financial condition and results of operations.
Sales to our largest, non-affiliated distributor accounted for 10.8%, 11.0%, and 11.4% of our net sales in fiscal years 2023, 2022 and 2021, respectively.
Sales to our largest, non-affiliated distributor accounted for 10.2%, 10.8%, and 11.0% of our net sales in fiscal years 2024, 2023 and 2022, respectively.
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.
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 automotive technologies and HEV and EV powertrain vehicles, which traditionally have had increased sensor and power product content.
A fundamental shift in technologies, the regulatory climate or demand patterns and preferences in our existing product markets or the product markets of our customers or end-users could make our current products obsolete, prevent or delay the introduction of new products or enhancements to our existing products or render our products irrelevant to our customers’ needs.
A fundamental shift in technologies, particularly one that impacts magnetic or power ICs, the regulatory climate or demand patterns and preferences in our existing product markets or the product markets of our customers or end-users could make our current products obsolete, prevent or delay the introduction of new products or enhancements to our existing products or render our products irrelevant to our customers’ needs.
As a multinational business, we are subject to income and other taxes in both the United States and various foreign jurisdictions.
As a multinational business, we are subject to income and other taxes in both the U.S. and various foreign jurisdictions.
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.
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.
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.
The semiconductor industry, including the analog segment 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. We are currently experiencing a downturn and may experience downturns in the future.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeWe are committed to manufacturing products of the highest quality and performance. We strive to have a “zero-defect” quality culture focused on meeting or exceeding demanding high-temperature automotive quality standards.
Biggest changeWhile our principal test operations are performed at the AMPI Facility, additional test capabilities are available at our Manchester, New Hampshire facility, and a small portion of testing is outsourced. We are committed to manufacturing products of the highest quality and performance. We strive to have a “zero-defect” quality culture focused on meeting or exceeding demanding high-temperature automotive quality standards.
Item 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.
Item 2. Properties. Manufacturing, Operations and Facilities Our corporate headquarters is located in Manchester, New Hampshire, and we have a global footprint with 29 locations across four continents. Our operations are primarily conducted at the locations shown below. Our subsidiary, Allegro MicroSystems Philippines Inc. (“AMPI”), 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 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 and similar environmental product requirements.
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.
We have a fabless business model that provides us with enhanced security of supply and manufacturing flexibility. Our primary fab partners currently include PSL, UMC and TSMC. We have master service agreements with all primary foundry partners, and some we have also engaged in long-term supply agreements.
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.
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 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.
We also supplement the assembly capabilities of the AMPI Facility with subcontractors throughout Asia, and approximately 47%, 51% and 51% of our assembly was outsourced in fiscal years 2024, 2023 and 2022, respectively.
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.
Facility Facility Function Facility Size Status Manila, Philippines Manufacturing - Assembly, Test, Finish Approximately 434,000 square feet Owned Manchester, New Hampshire Corporate Headquarters, Research and Development, Administrative Approximately 125,000 square feet Owned Marlborough, Massachusetts Research and Development, Administrative Approximately 52,000 square feet Leased (10-year lease expires in 2028) We also lease design and applications support centers in the Americas, Asia and Europe.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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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.
Biggest changeWe 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. 34 Item 4. Mine Safety Disclosures. Not applicable. PAR T II
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.
Item 3. L egal 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
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These claims, even if not meritorious, could result in the expenditure of significant financial and managerial resources.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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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.
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 29, 2024, the last day of our most recently completed 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.
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities. Market Information Our common stock is listed on the Nasdaq Global Select Market under the symbol “ALGM”.
Item 5. Market for Registrant’s Comm on Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities. Market Information Our common stock is listed on the Nasdaq Global Select Market under the symbol “ALGM”.
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.
As of May 20, 2024, there were 193,748,130 shares of our common stock held by approximately 12 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.
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.
Base Period October 29, 2020 March 26, 2021 March 25, 2022 March 31, 2023 March 29, 2024 Allegro MicroSystems, Inc. $ 100.00 $ 142.77 $ 164.86 $ 271.13 $ 152.32 Nasdaq Composite Index $ 100.00 $ 117.46 $ 126.67 $ 109.26 $ 146.43 Philadelphia Semiconductor Index $ 100.00 $ 136.02 $ 154.37 $ 141.48 $ 214.80 35 Recent Sales of Unregistered Securities and Use of Proceeds None.
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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 Exchange Act, except to the extent we specifically incorporate this information by reference into such filing.
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Use of Proceeds from Registered Securities None. Issuer Purchases of Equity Securities None. Item 6. Reserved. 36

Item 7. Management's Discussion & Analysis

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

81 edited+44 added−27 removed44 unchanged
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.
Biggest changeFiscal Year Ended Change March 29, 2024 As a % of Net Sales March 31, 2023 As a % of Net Sales $ % (Dollars in thousands) Total net sales (1) $ 1,049,367 100.0 % $ 973,653 100.0 % $ 75,714 7.8 % Cost of goods sold (1) 474,838 45.2 % 427,574 43.9 % 47,264 11.1 % Gross profit 574,529 54.8 % 546,079 56.1 % 28,450 5.2 % Operating expenses: Research and development 176,638 16.8 % 150,850 15.5 % 25,788 17.1 % Selling, general and administrative 188,429 18.0 % 191,922 19.7 % (3,493 ) (1.8 )% Impairment of long-lived assets 13,218 1.3 % — — % 13,218 — % Total operating expenses 378,285 36.0 % 342,772 35.2 % 35,513 10.4 % Operating income 196,244 18.7 % 203,307 20.9 % (7,063 ) (3.5 )% Other income (expense), net: Interest expense (10,763 ) (1.0 )% (2,336 ) (0.2 )% (8,427 ) 360.7 % Interest income 3,144 0.3 % 1,724 0.2 % 1,420 82.4 % Foreign currency transaction gain 5,064 0.5 % 980 0.1 % 4,084 416.7 % Loss in earnings of equity investment (538 ) (0.1 )% (406 ) (0.0 )% (132 ) 32.5 % Other Income, net 1,646 0.2 % 8,077 0.8 % (6,431 ) (79.6 )% Total other income (expense), net (1,447 ) (0.1 )% 8,039 0.8 % (9,486 ) (118.0 )% Income before income tax provision 194,797 18.6 % 211,346 21.7 % (16,549 ) (7.8 )% Income tax provision 41,909 4.0 % 23,852 2.4 % 18,057 75.7 % Net income 152,888 14.6 % 187,494 19.3 % (34,606 ) (18.5 )% Net income attributable to non-controlling interests 191 0.0 % 137 0.0 % 54 39.4 % Net income attributable to Allegro MicroSystems, Inc. $ 152,697 14.6 % $ 187,357 19.2 % $ (34,660 ) (18.5 )% (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.
Income tax provision (benefit) Our provision, or benefit, for income taxes is based on an estimate of the annual effective tax rate plus the tax impact of discrete items. We are subject to tax in the U.S. and various foreign jurisdictions.
Income tax provision Our provision, or benefit, for income taxes is based on an estimate of the annual effective tax rate plus the tax impact of discrete items. We are subject to tax in the U.S. and various foreign jurisdictions.
Our effective income tax rate 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.
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 (“FDII”) deduction, 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.
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.
In order to support and achieve our future growth plans, we may need or advantageously seek 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.
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.
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.
Financing Activities Net cash used in financing activities was $20.0 million in fiscal year 2023, consisting of funds loaned to PSL of $7.5 million and $18.1 million of payments for taxes related to net share settlement of equity awards, partially offset by $2.8 54 million of proceeds received related to the quarterly payments from PSL on our related party loan and proceeds received in connection with the issuance of common stock under our employee stock purchase plan totaling $2.8 million.
Net cash used in financing activities was $20.0 million in fiscal year 2023, consisting of funds loaned to PSL of $7.5 million and $18.1 million of payments for taxes related to net share settlement of equity awards, partially offset by $2.8 million of proceeds received related to the quarterly payments from PSL on our related party loan and proceeds received in connection with the issuance of common stock under our employee stock purchase plan totaling $2.8 million.
While we have generally been able to offset increases in these costs through various productivity and cost reduction initiatives, as well as adjusting our selling prices and releasing new products with improved gross margins, our ability to increase our average selling prices depends on market conditions and competitive dynamics.
While we have generally been able to offset increases in these costs through 38 various productivity and cost reduction initiatives, as well as adjusting our selling prices and releasing new products with improved gross margins, our ability to increase our average selling prices depends on market conditions and competitive dynamics.
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.
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. We sell magnetic sensor ICs and power ICs in the Americas, EMEA and Asia.
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.
For new products, the time from design initiation and manufacturing until we generate sales 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.
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.
Further, despite current inflationary and pricing conditions, we expect the ASPs of our products to decline over time, and we consider design wins to be critical to our future success. We anticipate being increasingly dependent on revenue from newer design wins for our newer products.
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.
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.
Debt financing, if available, may contain covenants that significantly restrict our operations or our ability to obtain additional debt financing in the future. Any additional financing that we raise may contain terms that are not favorable to us or our stockholders.
Debt financing, if available, may contain covenants that significantly 45 restrict our operations or our ability to obtain additional debt financing in the future. Any additional financing that we raise may contain terms that are not favorable to us or our stockholders.
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.
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 amounts recorded in the current and historical periods.
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.
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 and margins generally decline. 39 Components of Our Results of Operations Net sales Our total net sales are derived from product sales to direct customers and distributors.
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.
We are headquartered in Manchester, New Hampshire and have a global footprint with 29 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.
Under the terms of the Consulting Agreement, Sanken agreed to continue to provide transition services for a period of six months to a strategic customer as orders for the customer are transitioned from Sanken to the Company, and the Company agreed to pay Sanken for providing these transition services.
Under the terms of the Consulting Agreement, Sanken agreed to continue to provide transition services for a period of six months to a strategic customer as orders for the customer were transitioned from Sanken to the Company, and the Company agreed to pay Sanken for providing these transition services.
Inflation over the last several months has led us to experience higher costs, including higher labor costs, wafer and other costs for materials from suppliers, and transportation and energy costs.
Inflation over the last several quarters has led us to experience higher costs, including higher labor costs, wafer and other costs for materials from suppliers, and transportation and energy costs.
The net impacts of the transition from the existing sales model in Japan is expected to provide incremental benefits to our gross margin over the long-term.
The net impacts of the transition from the prior sales model in Japan is expected to provide incremental benefits to our gross margin over the long-term.
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 anticipate our selling and marketing expenses will increase in absolute terms as we expand our sales force and increase our sales and marketing activities.
The impact of 174 Capitalization is an increase in annual cash taxes of approximately $20.0 million and an FDII benefit of $9.5 million. While it is possible that Congress may modify this provision, potentially with retroactive effect, we have no assurance that this provision will be reversed.
The impact of 174 Capitalization for the fiscal year 2024 is an increase in annual cash taxes of approximately $20.0 million and an FDII benefit of $9.0 million. While it is possible that Congress may modify this provision, potentially with retroactive effect, we have no assurance that this provision will be reversed.
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 resources besides our growth initiatives, 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.
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.
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 in consumer and other rapidly changing markets and fluctuations in product supply and demand.
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”).
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 year 2028 (the “2020 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.
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.
These investments are measured at fair value with unrealized gains and losses related to changes in the entity’s stock price. Miscellaneous income and expense items unrelated to our core operations are also within other income, net.
The Distribution Agreement provided Sanken the exclusive right to distribute the Company’s products in Japan. In connection with the termination of the Distribution Agreement, and, as provided for in the Termination Agreement, the Company made a one-time payment of $5.0 million to Sanken in exchange for the cancellation of Sanken’s exclusive distribution rights in Japan.
In connection with the termination of the Distribution Agreement, and, as provided for in the 37 Termination Agreement, the Company made a one-time payment of $5.0 million to Sanken in exchange for the cancellation of Sanken’s exclusive distribution rights in Japan.
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.
A discussion of 2022 items and comparisons between 2023 and 2022 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 31, 2023, filed with the SEC on May 25, 2023.
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.
As of March 29, 2024, the Company was not party to any off-balance sheet arrangements that have had 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.
If these resources are not sufficient to satisfy our liquidity requirements due to changes in circumstances, we may be required to seek additional financing. If we raise additional funds by issuing equity securities, our stockholders will experience dilution.
If these resources are not sufficient to satisfy our liquidity requirements due to changes in circumstances, we may be required to borrow under our 2023 Revolving Credit Facility or seek additional financing. If we raise additional funds by issuing equity securities, our stockholders will experience dilution.
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”).
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.
Additionally, we expect to invest in expanding our operations in China, Europe and Japan in order to directly manage and service our customers in that market, which could result in increases in our total net sales, cost of goods sold and operating expenses.
Additionally, we expect to continue to strategically invest in expanding our operations in China, Europe, Japan and India in order to directly manage and service our customers in these markets, which could result in increases in our total net sales, cost of goods sold and operating expenses.
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.
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 “2024,” “fiscal year 2024” or similar references relate to the 52-week period ended March 29, 2024.
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.
During fiscal years 2024 and 2023, we generated $1,049.4 million and $973.7 million in total net sales, respectively, with $152.9 million and $187.5 million in net income, respectively. Recent Initiatives to Improve Results of Operations We implemented several initiatives during fiscal years 2023 and 2024 that were designed to improve our operating results during those fiscal years and going forward.
In September 2022, we completed the acquisition of Heyday Integrated Circuits (“Heyday”), a privately held company specializing in compact, fully integrated isolated gate drivers that enable energy conversion in high-voltage gallium nitride and silicon carbide wide-bandgap semiconductor designs (the “Heyday Acquisition”).
In September 2022, we completed the acquisition of Heyday, a privately held company specializing in compact, fully integrated isolated gate drivers that enable energy conversion in high-voltage gallium nitride and silicon carbide wide-bandgap semiconductor designs (the “Heyday Acquisition”). The Heyday Acquisition expanded our solutions for energy efficiency, including our market-leading current sensor solutions.
Pursuant to the 2017 Tax Cuts and Jobs Act (the “Jobs Act”), beginning in fiscal year 2023, U.S. tax law now requires us to capitalize and amortize domestic and foreign research and development expenditures over five and 15 years, respectively (“174 Capitalization”).
Pursuant to the 2017 Tax Cuts and Jobs Act (the “Jobs Act”), U.S. tax law began requiring us to capitalize and amortize domestic and foreign research and development expenditures over five and 15 years, for domestic and foreign research, respectively (“174 Capitalization”).
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.
Liquidity and Capital Resources As of March 29, 2024, we had $212.1 million of cash and cash equivalents and $454.3 million of working capital, compared to $351.6 million of cash and cash equivalents and $500.5 million of working capital as of March 31, 2023. Working capital is impacted by the timing and extent of our business needs.
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.
Our current capital deployment strategy for 2025 is to utilize cash on hand and capacity under our 2023 Revolving Credit Facility to support our continued growth initiatives into select markets and planned capital expenditures, as well as consider potential acquisitions.
As a result, these declines often coincide with improvements in manufacturing yields and lower wafer, assembly, and testing costs, which offset some or all of the margin reduction that results from declining ASPs.
We also maintain a close relationship with our suppliers and subcontractors to improve quality, increase yields and lower manufacturing costs. As a result, these declines often coincide with improvements in manufacturing yields and lower wafer, assembly, and testing costs, which offset some or all of the margin reduction that results from declining ASPs.
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.
All references to “2023,” “fiscal year 2023” or similar references relate to the 53-week period ended March 31, 2023. This section discusses items pertaining to and comparisons of financial results between 2024 and 2023.
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.
Any such adjustments could have a significant effect on our results of operations. 41 Results of Operations Fiscal Year 2024 Compared to Fiscal Year 2023 The following table summarizes our results of operations and our results of operations as a percentage of total net sales for the fiscal years ended March 29, 2024 and March 31, 2023.
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.
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 2024 and 2023: Fiscal Year Ended March 29, 2024 March 31, 2023 (dollars in thousands) Net cash provided by operating activities $ 181,715 $ 193,206 Net cash used in investing activities (516,716 ) (99,696 ) Net cash provided by (used in) financing activities 198,878 (19,998 ) Effect of exchange rate changes on cash and cash equivalents (421 ) (4,606 ) Net (decrease) increase in cash and cash equivalents and restricted cash $ (136,544 ) $ 68,906 Operating Activities Net cash provided by operating activities was $181.7 million in fiscal year 2024, resulting primarily from our net income of $152.9 million and non-cash charges of $122.9 million, partially offset by a net decrease in cash from an increase in net operating assets and liabilities of $94.1 million.
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.
Income tax provision Income tax provision and the effective income tax rate were $41.9 million and 21.5%, respectively, for the fiscal year ended March 29, 2024, and $23.9 million and 11.3%, respectively, for the fiscal year ended March 31, 2023.
On an ongoing basis, management evaluates its estimates. Actual results could differ from those estimates, and such differences may be material to our financial statements. We believe that the accounting policies described below require management’s most difficult, subjective or complex judgments.
We base our estimates and assumptions on historical experience and other factors that we believe to be reasonable under the circumstances. Actual results could differ from those estimates, and such differences may be material to our financial statements. We believe that the accounting policies described below require management’s most difficult, subjective or complex judgments.
We continually monitor and work to reduce the cost of our products and improve the potential value our solutions provide to our customers as we target new design win opportunities and manage the product life-cycles of our existing customer designs. We also maintain a close relationship with our suppliers and subcontractors to improve quality, increase yields and lower manufacturing costs.
We continually monitor and work to reduce the cost of our products and improve the potential value our solutions provide to our customers, as we target new design win opportunities and manage the product life cycles of our existing customer designs.
(Loss) income in earnings of equity investment (Loss) income in earnings of equity investment is related to our equity investment in PSL. Unrealized gains on marketable securities Unrealized gains on marketable securities consist of changes in the fair value of equity investments in an entity whose equity securities have a readily determinable fair value.
(Loss) income in earnings of equity investment (Loss) income in earnings of equity investment is related to our equity investment in PSL. Other Income, net Other Income, net includes unrealized (loss) gains on marketable securities from changes in the fair value of equity securities with readily determinable fair values.
Net cash provided by operating activities was $156.1 million in fiscal year 2022, resulting primarily from our net income of $119.6 million and non-cash charges of $89.9 million, partially offset by a net decrease in operating assets and liabilities of $53.3 million.
Net 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.
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.
R&D expenses represented 16.8% of our total net sales for the fiscal year ended March 29, 2024, an increase from 15.5% of our total net sales for the fiscal year ended March 31, 2023. This percentage increase was primarily due to investments in personnel to fund new product development.
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.
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. Total net sales Total net sales increased in the fiscal year ended March 29, 2024 compared to the fiscal year ended March 31, 2023.
The increase in inventories was primarily a result of raw materials purchases and inventory builds to support anticipated sales growth in 2023.
The increase in inventories was primarily a result of raw materials purchases and inventory builds to support anticipated sales growth in 2024 and beyond. The increase in prepaid expenses and other assets was primarily due to long-term deposits and timing of tax payments.
On March 30, 2023, the Company entered into a termination of the distribution agreement with Sanken (the “Termination Agreement”). The Termination Agreement formally terminated the distribution agreement dated as of July 5, 2007, by and between the Company and Sanken (the “Distribution Agreement”), effective March 31, 2023.
The Termination Agreement formally terminated the distribution agreement dated as of July 5, 2007, by and between the Company and Sanken (the “Distribution Agreement”), effective March 31, 2023, which provided Sanken the exclusive right to distribute the Company’s products in Japan.
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.
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.
This percentage increase was primarily due to the impacts noted above, partially offset by the growth in net sales in the fiscal year ended March 31, 2023.
This percentage decrease was primarily due to the impacts noted above, partially offset by the growth in net sales in the fiscal year ended March 29, 2024. Impairment of long-lived assets We recorded an impairment of long-lived assets of $13.2 million in the fiscal year ended March 29, 2024.
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.
Foreign currency transaction gain (loss) 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.
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.
On October 31, 2023, the 2020 Term Loan Facility was paid in full in connection with the 2023 Term Loan Facility. 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.
Net changes in operating assets and liabilities consisted mostly of a $19.5 million increase in prepaid expenses and other assets, an $18.3 million increase in trade accounts receivable, net, a $4.5 million increase in inventories, a $4.3 million decrease in trade accounts payable, and a $3.4 million decrease in accrued expenses and other current and long-term liabilities.
The net changes in operating assets and liabilities consisted of a $40.2 million increase in prepaid expenses and other assets, a $15.8 million increase in inventories, and an $8.0 million increase in trade accounts receivable, net, partially offset by a $21.6 million decrease in accrued expenses and other current and long-term liabilities, a $12.7 million decrease in trade accounts payable, and a $5.2 million increase in net amounts due from related parties.
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.
All prior period amounts have been revised in our accompanying Financial Statements and Supplementary Data. 42 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.
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.
Financing Activities Net cash provided by financing activities was $198.9 million in fiscal year 2024, consisting of $245.5 million of borrowing of 2023 Term Loan Facility, net of deferred financing costs, proceeds received related to the quarterly payment from PSL on our related party loan and proceeds received in connection with the issuance of common stock under our employee stock purchase plan, partially 46 offset by payments on the 2020 Term Loan Facility and 2023 Term Loan Facility, taxes related to the net settlement of equity awards, and payments of debt issuance costs in connection with the 2023 Revolving Credit Facility and 2023 Term Loan Facility.
These agreements will facilitate the transition of the distribution of our products in Japan from related party distributor sales through Sanken to third-party distributors and direct customers in Japan.
These agreements facilitated the transition of the distribution of our products in Japan from related party distributor sales through Sanken to third-party distributors and direct customers in Japan. Additionally, we invested in expanding our operations in Japan to directly manage and service our customers in that market, which resulted in increases in our cost of goods sold and operating expenses.
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.
We continue to implement initiatives to improve gross margin, which is calculated as gross profit divided by total net sales. Our gross margin decreased from 56.1% in fiscal year 2023 to 54.8% in fiscal year 2024. This gross margin decrease was a result of our product mix, as well as the addition of cost of goods sold acquired from Crocus.
Should actual events or results differ from our then-current expectations, charges or credits to our provision for income taxes may become necessary.
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.
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.
Industrial net sales improved in the fiscal year ended March 29, 2024 compared to the fiscal year ended March 31, 2023, primarily due to increases in broad-based industrial and other industrial applications, which include clean energy and automation applications. These increases were partially offset by declines in our data center applications.
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.
Fiscal Year Ended Change March 29, 2024 March 31, 2023 Amount % (Dollars in thousands) Magnetic sensors (“MS”) and other $ 649,869 $ 598,579 $ 51,290 8.6 % Power integrated circuits (“PIC”) 399,498 375,074 24,424 6.5 % Total net sales $ 1,049,367 $ 973,653 $ 75,714 7.8 % The growth in net sales by product was driven by increases in both PIC and MS and other product sales.
The increase in prepaid expenses and other assets was primarily due to higher long-term deposits and income taxes receivable, partially offset by lower prepayments of taxes, including VAT receivables. The increase in trade accounts receivable, net was primarily a result of increased sales year-over-year, as well as the timing of receipts.
The 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 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.
With our efforts to leverage our fixed costs and operating margin improvements, we have attained efficiencies through cost structure improvements, streamlining of manufacturing and support processes, and further utilization of excess capacity. These manufacturing efficiencies allowed us to leverage higher volumes with increasing demand across most of our applications, while increasing the absorption of fixed costs.
The effective tax rate (“ETR”) year-over-year was primarily impacted by FDII deductions, increased FDII benefits related to 174 Capitalization, a reduction in state taxes and an increase in current year non-deductible executive compensation expense. 174 Capitalization increased U.S. taxable income, cash taxes and FDII benefits.
The effective tax rate (“ETR”) year-over-year was primarily impacted by the Crocus entity restructuring, partially offset by an increase in Research Tax Credits and a decrease in current year non-deductible executive compensation expense.
(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.
Loss in earnings of equity investment Loss in earnings of equity investment in both fiscal years ended March 29, 2024 and March 31, 2023, represented the loss in earnings on our 30% investment in PSL. Other Income, net Other Income, net decreased in the fiscal year ended March 29, 2024 compared to the fiscal year ended March 31, 2023.
See Note 6, “Trade Accounts Receivable, Net” to the consolidated financial statements for information regarding the change in sales allowances.
See Note 6, “Trade Accounts Receivable, Net” to the consolidated financial statements for information regarding the change in sales allowances. Goodwill, other intangible assets and other long-lived assets Goodwill represents the excess of the purchase price in a business combination over the fair value of the net tangible and intangible assets acquired.
Net cash used in investing activities was $66.3 million in fiscal year 2022, consisting of $69.9 million of purchases of property, plant and equipment, $14.5 million of cash expended for the acquisition of Voxtel and purchases of marketable securities of $9.2 million, partially offset by $27.4 million of cash received for the sale of the AMTC Facility.
Investing Activities Net cash used in investing activities was $516.7 million in fiscal year 2024, consisting of payments related to the acquisition of Crocus of $408.1 million and $124.8 million of purchases of property, plant and equipment, partially offset by $16.2 million of proceeds from sale of marketable securities.
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.
Foreign currency transaction gain (loss) We recorded a foreign currency transaction gain in both the fiscal year ended March 29, 2024 and March 31, 2023. The foreign currency transaction gain recorded in the fiscal year ended March 29, 2024 was related to a transaction between the U.S. and French subsidiaries.
Concurrently, AML and Sanken also entered into a short-term, nonexclusive distribution agreement (the “Short-Term Distribution Agreement”) and a consulting agreement (the “Consulting Agreement”), each of which were effective April 1, 2023. The Short-Term Distribution Agreement provides for the management and sale of Company product inventory for a period of 24 months.
Concurrent with the Termination Agreement, Allegro MicroSystems, LLC, a Delaware limited liability company and wholly owned subsidiary of the Company (“AML”), and Sanken also entered into a short-term, nonexclusive distribution agreement (the “Short-Term Distribution Agreement”) and a consulting agreement (the “Consulting Agreement”), each of which became effective on April 1, 2023.
In addition, changes in forecasts or the timing of orders from customers expose us to the risks of inventory shortages or excess inventory.
Cancellations of orders could result in the loss of anticipated sales without allowing us sufficient time to reduce our inventory and operating expenses. In addition, changes in forecasts or the timing of orders from customers expose us to the risks of inventory shortages or excess inventory. We are currently operating in an inflationary environment.
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.
The increase in gross profit was driven by the increase in net sales as discussed above, partially offset by increase of cost of goods sold, as discussed above. R&D expenses R&D expenses increased in the fiscal year ended March 29, 2024 compared to the fiscal year ended March 31, 2023.
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.
These costs are partially offset by increased professional fees, outside service costs and personnel increases in the fiscal year ended March 29, 2024. SG&A expenses represented 18.0% of our total net sales for the fiscal year ended March 29, 2024, representing a decrease from 19.7% of our total net sales for the fiscal year ended March 31, 2023.
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.
SG&A expenses SG&A expenses decreased in the fiscal year ended March 29, 2024 compared to the fiscal year ended March 31, 2023.
Other net sales improved in the fiscal year ended March 31, 2023 compared to the fiscal year ended March 25, 2022, primarily due to increases in shipments for certain computer products.
Other net sales decreased in the fiscal year ended March 29, 2024 compared to the fiscal year ended March 31, 2023, primarily due to lower demand for our consumer and smart home products. Sales Trends by Product The following table summarizes net sales by product.
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.
This decrease was primarily due to the inclusion in the fiscal year ended March 31, 2023, of accelerated stock-based compensation expense related to the retirement of our former chief executive officer and severance due to changes in our leadership.
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.
Interest expense Interest expense comprises of interest expense from term loan debt and credit facilities that we maintain with various financial institutions. 40 Interest income Interest income comprises of 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.
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.
Fiscal Year Ended Change March 29, 2024 March 31, 2023 Amount % (Dollars in thousands) Americas: United States $ 149,283 $ 131,150 $ 18,133 13.8 % Other Americas 32,119 28,014 4,105 14.7 % EMEA: Europe 176,628 169,368 7,260 4.3 % Asia: Greater China 274,851 253,906 20,945 8.2 % Japan 175,713 160,763 14,950 9.3 % South Korea 113,877 96,549 17,328 17.9 % Other Asia 126,896 133,903 (7,007 ) (5.2 )% Total net sales $ 1,049,367 $ 973,653 $ 75,714 7.8 % Net sales increased in the fiscal year ended March 29, 2024 compared to the fiscal year ended March 31, 2023, primarily due to product mix and market share gains across all geographies, except for Other Asia, which was negatively impacted by a reduction in data center demand. 43 Growth in Asia was driven by China and South Korea, which included growth in net sales of our safety, comfort and convenience applications, as well as our ADAS applications.
The decreases in trade accounts payable and accrued expenses and other current and long-term liabilities were primarily due to the release of deposits related to the sale of our AMTC Facility and the reduction of the balance due on the Voxtel acquisition, as well as the timing of payments of purchases.
The decreases 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 $4.2 million, and higher accrued personnel costs, professional fees, income taxes, and accrued operating expenses.
The increase in cost of goods sold was primarily attributable to higher production volume in support of higher product sales and, to a lesser extent, higher warranty costs incurred. Gross profit increased by $138.6 million, or 34.0%, to $546.1 million in the fiscal year ended March 31, 2023 from $407.5 million in the fiscal year ended March 25, 2022.
The increase in cost of goods sold was primarily due to high production volume and product mix, as well as the amortization of intangible assets in relation to the acquisition of Crocus. Gross profit increased in the fiscal year ended March 29, 2024 compared to the fiscal year ended March 31, 2023.
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.
This increase was primarily due to a combined increase in personnel, stock-based compensation and outside service costs, in addition to a general increase in operating expenses to fund new product development, partially offset by reduced variable compensation expense.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

11 edited+2 added−0 removed4 unchanged
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.
Biggest changeBased on fiscal year 2024 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. A hypothetical 10% appreciation (decline) in the value of the Philippine peso in relation to the U.S. dollar would negatively (favorably) impact operating income by immaterial amounts.
We are also exposed to market risk as a result of increases or decreases in the amount of interest expense we must pay on our Term Loan Facility and borrowings on our bank credit facilities.
We are also exposed to market risk as a result of increases or decreases in the amount of interest expense we must pay on our 2023 Term Loan Facility and borrowings on our bank credit facilities.
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
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.
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.
Although our 2023 Term Loan Facility and credit facilities have variable rates, as of March 29, 2024, 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.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk. We are exposed to market risk in the ordinary course of business, which consists primarily of interest rates risk associated with our cash and cash equivalents and our debt, foreign currency risk and impact of inflation. We do not engage in speculative trading activities.
Item 7A. Quantitativ e and Qualitative Disclosures About Market Risk. We are exposed to market risk in the ordinary course of business, consisting primarily of interest rates risk associated with our cash and cash equivalents and our debt, foreign currency risk and the impact of inflation. We do not engage in speculative trading activities.
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.
The following analysis provides additional information regarding these risks. Interest Rate Risk Our investments have limited exposure to market risk. At March 29, 2024, we maintained a portfolio of cash and cash equivalents, consisting primarily of money market fund deposits. None of these investments have a maturity date in excess of one year.
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.
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.
Foreign Currency Risk Due to our international operations, a significant portion of our cost of sales and operating expenses is denominated in currencies other than the U.S. Dollar, principally the Euro and the Philippine Peso. As a result, our international operations give rise to transactional market risk associated with exchange rate movements of the U.S.
Foreign Currency Risk Due to our international operations, a significant portion of our cost of sales and operating expenses is denominated in currencies other than the U.S. dollar, principally the Euro and the Philippine peso.
This can, in turn, affect the reported value and relative growth of sales and net income from one period to the next. In addition, changes in the translated value of assets and liabilities due to changes in functional currency exchange rates relative to the U.S.
This can, in turn, affect the reported value and relative growth of sales and net income from one period to the next.
A hypothetical 10% appreciation (decline) in the value of the Philippine peso in relation to the U.S. dollar would negatively (favorably) impact operating income by immaterial amounts. The individual impacts to our operating income of hypothetical currency fluctuations have been calculated in isolation from any potential responses to address such exchange rate changes in our foreign markets.
The individual impacts to our operating income of hypothetical currency fluctuations have been calculated in isolation from any potential responses to address such exchange rate changes in our foreign markets.
Dollar result in foreign currency translation adjustments that are a component of other comprehensive income or loss. Foreign currency derivative instruments can be used to hedge exposures and reduce the risks of certain foreign currency transactions; however, these instruments provide only limited protection and can carry significant cost.
Foreign currency derivative instruments can be used to hedge exposures and reduce the risks of certain foreign currency transactions; however, these instruments provide only limited protection and can carry significant cost. We have no foreign currency derivative instrument hedges as of March 29, 2024.
Added
As a result, our international operations give rise to transactional market risk associated with exchange rate movements of the U.S. dollar, the Euro and the Philippine peso. We reflected foreign exchange gains of $5.1 million and of $1.0 million for fiscal years 2024 and 2023, respectively.
Added
In addition, changes in the translated value of assets and liabilities due to changes in functional currency exchange rates relative to the U.S. dollar result in foreign currency translation adjustments that are a component of other comprehensive income or loss.

Other ALGM 10-K year-over-year comparisons