Q3 2019 Earnings Call
Good day and welcome everyone to the Vicor My core earnings first of all <unk> third quarter ended September 30 up 2019 conference call hosted by Dr., Patrizio, Vinciarelli, CEO and Jamie Simms CFO during the presentation, you'll winds will remain all listen only if they require assistance at any time Lieske stars you're on your phone and accordingly.
It will be happy to assist you I'd like to remind all parties. That's conference call. These being recorded for replay purposes, that's not would that be firstly I'd like to hand, a collaborative Jamie. Please go ahead Sir.
Thank you Chris.
Good afternoon, everyone and welcome to Vicor Corporation earnings call for the third quarter ended September Thirtyth 2019.
As stated on Jamie Simms, Chief Financial Officer, and with me here in endeavors, Patrizio Vinciarelli Chief Executive Officer.
After the market's close today, we issued a press release summarizing our financial results for the three month nine months ended September Thirtyth.
This press release, it's been posted on the Investor Relations page of our website Www Dot Vicor power Dot Com. We also filed an 8-K today related to the issuance of this press release.
Listeners. This conference call is being recorded and it's the copyrighted property of Vicor Corporation. I also remind you various remarks, we may make during this call may constitute forward looking statements for purposes of the Safe Harbor provisions under the private Securities Litigation Reform Act of 1995 [noise].
Except for historical information contained in this call.
Matters discussed on this call, including any statements regarding current unplanned products current and potential customers potential market opportunities expected events and announcements plan capacity expansion as well as management's expectations for sales growth spending in profitability are forward looking statements involving risks and uncertainty.
Yes.
In light of these risks and uncertainties, we can offer no assurance that any forward looking statement will in fact proved to be correct.
Actual results may differ materially from those explicitly set forth or implied by any of our remarks today the risks and uncertainties. We face are discussed an item one eight of our 2018 Form 10-K , which we filed with the FCC on February 20, 820 I've seen.
Please note the information provided during this conference calls accurate only as of today Thursday October 17th 2019th.
Vicor undertakes no obligation to update any statements, including forward looking statements made during this call and you should not rely upon such statements. After the conclusion of this call.
Replay of the call will be available beginning at midnight Tonight through November 1st.
2019, the replay dial in number is eight to eight six 801 zero followed by the pass code 70495 083. This dialing in passcode are also set forth in today's press release.
In addition, a webcast replay of todays call along with the transcript will be available shortly on the Investor Relations page of our website.
I'll start this afternoon's discussion with a review of our financial performance for the third quarter and nine months year to date and Patrizio will follow with his remarks, after which we will take your questions.
Beginning with consolidated results as stated in today's press release Vicor recorded total revenue for the third quarter of 70.8 million up 11.7% from second quarter revenue of 63.3 million, but 9.3% lower than our record revenue of 78 million recorded for the third quarter of 20.
18.
Year to date revenue stands right at 200 million off from 28 teens nine month total of 217 half million.
Reflecting the trough in data center shipments of the first half of this year [noise].
[noise] third quarter revenue growth reflected a resumption of shipments to contract manufacturers on behalf of an existing data center customer.
Production is resuming after the pause of the past two quarters. We also shipped preproduction volumes of advanced products for customers to use in their own preproduction activities.
Quarterly revenue from brick products has undergone was unchanged sequentially as double digit domestic growth was offset by tariff and trade related declines in China, and Hong Kong as well as ongoing economic weakness in Europe .
For the third quarter the brick advanced revenue split was 66% brick 34% advanced in contrast to 76 brick 24 advance for the second quarter.
International revenue rose, 27.6% sequentially, reflecting the aforementioned increase in advance product shipped to offshore contract manufacturers.
Offset by slight decline in exports of quick products.
International revenue rose to 58% of revenue for Q3 from 51% for Q2.
Consolidated gross margin as a percentage of revenue was steady steady sequentially.
Rising slightly to 46.6% from the prior quarters 46.
The positive impact on absorption of the quarters increased production volume was offset by higher tariff charges increased reserves and mix.
For the year to date period, our consolidated gross profit margin stands coincidentally at 46.6% compared to 48.3% for the 2018 nine month period with the lower figure primarily attributable to lower absorption and higher tariffs.
We discussed last quarter our development.
The duty drawbacks program.
But we now believe any recovery of sheriffs paid will occur in 2020, given the backlog of applications being processed by the U.S. customs authorities.
We also continue to pursue opportunities to use suppliers that are not subject to section 301 import tariffs and anticipate completion of certain important vendor changes in 2020.
Quarterly operating expenses were flat both sequentially on a year and on a year to date basis noncash stock compensation expense totaled $753000 for the quarter inline with prior quarters.
Quarterly operating income rose to 6.1 million from the prior quarters 2.4 million, representing operating margins of 8.6% and 3.8% respectively.
Year to date operating margin stands at 6.5 in contrast to the 2018 year to date figure of 11.7.
Our year to date effective tax rate stands at 5.9% down from 7.3% as of June Thirtyth.
The effective tax rate for the third quarter on a standalone basis was 4.3% essentially unchanged from the rate seemingly calculated for the second quarter.
Net income attributable to Vicor totaled 5.9 million for the third quarter, representing a fully diluted GAAP EPS figure or 14 cents.
This is in contrast to Q2 19.
Net income of 2.6 million, representing fully diluted GAAP EPS of six cents.
Our fully diluted share count for the Q3, EPS calculation was 42.194 million, which is the sum of both common share classes, consisting of approximately 28.5 million registered and listed common shares.
Approximately.
11.8 million class B common shares which are neither registered nor listed.
And approximately 1.9 million dilutive stock options.
Turning to our balance sheet cash and cash equivalents sequentially rose by 9.7 million to 81.2 million, primarily due to a positive shift in working capital.
Trade receivables net of reserves totaled 39.8 million at quarter end up sequentially, 4% with Dsos at 44 days, a slight improvements sequentially all balances are current.
Inventories net of reserves decreased 9% sequentially to 49.7 million with declines in raw materials Wip and finished goods.
A portion of the decline was associated with the shipment of finished goods originally scheduled to be shipped last quarter, but other reductions are associated with improved planning and improved supply chain conditions.
We hope to achieve further efficiencies in inventory management, improving our annualized turns metric, which today stands at three.
Capital expenditures for Q3 totaled 3.3 million, an increase of 28% sequentially.
Turning to head count our employee total as of September Thirtyth stood at 1023 up for from the prior quarters 1001 theme.
[noise] regarding our capacity expansion, we expect to complete the previously announced purchase of land adjacent to our Andover facility during the current fourth quarter.
Construction over the winter months will be limited to activities, such as excavation grading paving and the like.
We expect to begin construction of new wing of our Federal Street factory in spring and to complete occupancy in 2020 as stated before we anticipate internally funding both the construction and the plan two phases of equipment installation.
Turning to the fourth quarter, we're positive about our near term prospects in AI acceleration and supercomputing.
Cautious regarding the timing of a broader recovery of datacenter spending.
As previously disclosed we have a multiplicity of design wins and expect orders in Q4 for production volumes to be delivered across the first half of 2020.
With that I'll turn the call over to Patricia.
As Jamie suggested caught booking patterns continue to be flak, U.S., China trade patterns macro uncertainty and weak demand visibility.
Bookings for the third quarter call about.
The only 60 medium essentially unchanged from the prior quarter.
Fourth quarter bookings.
Cast is to increase by about 30%.
I pass products.
Rausing bookings, 40% sequentially in Q3.
Even by the assumption enough seven production by a major cost them.
We expect further substantial orders from these costs on us.
We also received our this 40, new shutdowns of next generation Gpus from another metric ask them.
Additionally, hardness than expected as these cash connect so nice rollout I'll be snapshot action plan.
As Jamie mentioned, we also expect our their sensors shandy without any design wins beginning Q4.
However, given lead times shipments from disarming this will not occur until 2020.
Well position with leading innovators in artificial intelligence offering our system solutions that enable our vaccine computing power.
We expect these innovations will provide.
Growth beginning in 2020.
Turning to automotive.
Current booking activity includes multiple design wins from automotive Oems flying to use 14, Paul Farr system solutions.
We improved the performance of mild hybrid and full e. the bake offs.
Autonomous driving season attempts.
I'd also converting to fourq involved to power Sop, one vault asics with kind of levels approaching a thousand amps tween apples to compute power and intelligence.
Necessary to make autonomous driving safe.
As these are the same fall substantial investments in our proprietary solutions.
Through and repayments.
We see them as evidence of a long term commitment to vikas.
And to our highly differentiated solutions.
As we AI and supercomputing automotive power system architects are turning to Viacom for a match performance that in turn differentiates the performance of the end products.
Two.
The pad remarks.
Having faced challenging conditions since about this time last year.
Hi, guys uniquely position itself for long term growth and profitability by penetrating key markets, we clearly superior any nabbing power system solutions.
We'll now take your questions, but either.
Okay.
Absolutely everyone. Your question and answer session will now begin fish Ms to ask a question. Please press Star then one if you have a decided to withdraw your question simply press Star then too. Thank you.
And we have our first got a question coming from the line of John . Please go ahead. Your line is open.
Hi, Good afternoon, Jamie. Thank you for taking my question Nice you can't get back on track a little bit this quarter.
Thank you.
My first question is on the order than bookings that you've seen today indicate that your fourth quarter will be up to what you previously expected generating some growth.
New designs ramping.
That pushed out a little bit into 2020.
So for the fourth quarter, we are willing at this point too.
Ill provide guidance with respect to two bookings and we try suggested in my prepared remarks, we expect to be app by about 30%.
But we do not want to give guidance with respect to revenues because the actual revenue number will be.
FX two significant degree by turns business within the quarter, which is not that easy to predict.
So as you might recall last quarter, we made.
Provided guidance with respect to revenue, which.
We have lived up to.
This quarter were providing guidance with respect to to bookings, but it's hard to do that with respect to revenues.
Okay understood and then for the.
Large datacenter customers that resumed.
Taking your product this quarter was that a.
It was that because of their spending patterns.
One thing to do it there that fit the contract manufacturer transition out of China.
Or some other factors such as.
CP shortage as being being a leaved.
I think all the above in.
I think some biding combi national functional time, everything you mentioned.
As Bina factor I mean, clearly if we go back to two this time last year.
Given the climate, though the industry at that point in time.
I think there was a lot of.
Demand that May again I had.
All right.
What was needed the part could be close of.
See you use charter geez very long lead times with respect to key components. So I think many.
Companies got I had income so there are this.
And then we saw a contraction that was fundamentally that even by.
And I go rising the appraisal award.
They actually needed that over the.
The next several quarters, some inventory that at to be up saw.
But more recently to your point there would be now the factors sub play including.
Relocating from national lines from China to pay warm.
And in semi census, lack of visibility of.
And processes that got delayed or at the issues that caused delays.
Okay, Great you mentioned, a major GPU customer ordering more product.
Is that related to orders that you took last year or is this for a new one and what happens to those old orders now that.
If it has a new generation coming out.
So these are new generation coming up and we set to to receive significant our this for that new generation and.
Based on the forecast, we expect that that too to staff ramping.
Over the next few months.
And Thats all I can say at this point in time.
Okay last one from me.
Jamie you mentioned some tariff.
I guess.
Refunds or clawbacks.
What was the amount that you may have expected in the quarter was immaterial.
Well, we then expected this quarter it but we are on PC bedding and that when.
In fact, we get through the Q.
That we have to deal with that because there are many companies seeking assuming refunds.
We're going to have a multimillion dollar refound coming.
That's our expectation.
Okay, Great I'm, sorry, one last one that can you talk about the status of any manufacturing partnerships you may be pursuing to secure future growth.
So what I mean, just cash advance as I mentioned.
In in power Kohl's.
We're taking a very long term look with respect to these we want to.
With that I'd licensee under that I conditions.
So we will.
Well, let you know warrants.
Something comes to fruition.
Tom.
I don't have anything to say today about it.
Okay, great. Thank you so much.
Thank you John .
Next question is coming from the line of Jeff. Please go ahead. Your line is open.
Good day gentlemen.
James I had question you talked about the Opex kind of being flat. It was sequentially in any of improved as a percentage of sales.
Quite substantially sequentially Q3 over Q2, but was up about 300 basis points roughly.
Year over year, what is it going to take to really start moving this opex line down to the lower 30.
Given now we're starting to see what sounds like a re ramp of new products that are going to add to the top line.
What's going to be the contributor they are you going to be able to pull back investment now that you're sort of wanting winning these new products or how are we going to start seeing more fall to the bottom line.
Even the investment the company has made in the power on packaging advanced product line.
Let me take that so.
As discussed in the past.
The bottom line.
In our case.
We'll leverage.
Economies of scale with respect to too.
First of all production on price and the topline.
With opening expenses, you party out and the which is obviously significant elements our opex.
Enough scaling in in the proportion.
All all revenue growth, but five below that because we believe that within infrastructure and fixed costs in R&D.
We are in.
In a good position to not only support all over the.
Advancements that weve accomplished but also to continue to raise the bar with respect to too.
Performance apparel packaged products frontend products, the whole power Ses them, you fast fashion is necessary for a future.
Players in the parsing cease the means a seat to succeed.
We believe we can accomplish that without.
Significant growth in operating expense levels seen in terms of dollar sand as a percentage as revenues grow and those those percentages will come down so that these.
In element.
That will contribute to your point in terms of reducing opex as a percent of revenue.
Contributing to the bottom line most significantly on the gross margin front as we discussed in the past.
There too we have a.
The cost model that has got a very large component this fixed.
We believe that with increased production rates.
We're going to see.
The gross margins and the bottom line will be driven by expanding gross margins and reduce operating expenses as a percentage of.
Revenue.
So I'm, assuming your comments apply to other operating expenses that will now scaling proportion to the topline.
Okay. Thank you for that answer I was just wondering kind of what are the assumption.
Given the fixed cost nature of the improvements in gross margin, what's your utilization factor at those levels in terms of where we need to be a utilization levels to start kind of.
Seeing that improvement on the fixed on the leverage of the fixed costs in the gross margin.
So there is no no magics rational I think if fundamentally income fell.
Revenues.
With incremental production rights.
Contribute to.
To the margin send countries the bottom line I think what we've been seeing of late.
As suggested the in Jamie's prepared remarks.
In terms of margin in than ever the 46 or 7% that's being negatively impacted by tariffs.
We talked a moment ago about the fact that we're back to be able to pull back.
Some of the size, obviously those elements I am not reflected in what we're reporting for costs, because we have not gotten that money back.
But going forward again, we expect to see because of initiatives, we've taken with respect to alternate sources outside of China.
And so so far we expect to see.
The impact of timings.
Mitigated.
And.
Most significantly the impact of increased for the national Rice.
Contributing to margins rising above 50% and what beyond that.
Okay. Thank you just trying to get a couple of quick ones in here.
How where are we in the process of moving.
Some of the.
Apply chain into Taiwan, where is that and then just two quick one two to follow up and ill step off here.
How much of the backlog right now is represented by bands products and has there been any impact to you or any of your customers due to M&A activity that that they may be engaged and at this point in time and I'll leave it there. Thank you very much for your time.
Okay, Let me see if I can't remember all of this question. So I think in the first one at to do with.
The supply chain or moving as some our supply chain.
From China to Taiwan, It typically at that comment with respect to too.
Changes in supply chain that to do with the contract manufacturers that we shipped to.
In other words, our cash them ours as opposed to.
Our suppliers, even though in semi census that being real cash on south side as a child already taken place.
With respect to to M&A activity I'm, not aware of anything Jamie you.
Jeff what did you have in mind.
Well I'm just I don't want to make you guys come out and make comments about customers I just.
Research Guy that suggest that someone you may be your may not be working with.
The acquisition now that may or May not go through.
I think it and my technology background in the cloud and accelerators and things that you're working on.
There could there could be some hiccups there if things don't go through at plant and then the followed by Adam that if you can even answer that is just what the advanced products in terms of.
It's substantially the largest portion of the bookings.
So let me take the whine about.
Comprising the et cetera, as our business.
And potential mergers or acquisitions second phase in that space.
Particularly when it comes sex and add those from my.
Visibility perspective.
We are essentially playing with everybody.
That has got.
Vast products in that space and to that extent it doesn't really matter to us.
If.
Some of these companies, particularly this desktop companies.
And that getting acquired the because.
They may change their name for the ash, and but we'll still be doing that business.
With the finding comp funny that you. These in that space, we're already doing business with are going to be doing business in the next year too.
So.
With respect to Axa and thus we are in a variety.
Significant I would say.
Potentially dominant position given the unique attributes for our technology and the technical needs in that space.
Talk computing is uses different sorry, we have limited penetration today in that space without question.
The.
The advanced a fourq involved which wasn't assisted by some in that space for a long time.
And this now happening with sand there says that evolving tallest fourq involved.
Well.
Confront.
A benchmark casamance that'd be reluctant to commit to us for a variety of reasons concerns about single source.
Viger being viewed as small company.
Will come from thing with the dilemma with cheese.
Do they.
Want to drive solutions that are truly enabling our be handicapped with respect to their products.
Our.
Except that they can do business with us vicor, having at least 30 of being a very reliable supply I think they're going to go for the lab.
Obviously that.
Has got to play itself out.
Certainly the convergence to Fourq involved in in cloud computing.
Yes at this pace.
And most significantly now the emotive.
Bodes well for our prospects seen that general space.
Okay, and just two quick ones for you James sorry, what's been put in place since the inventory correction lap that occurred at the end of the year into the new year to better understand the visibility you have the end customer and what they're doing their current demanded and then just coming back again on the booking.
Is it just the vast majority is coming from advanced products, just trying to understand the mix of bookings a little bit. Thank you. So much for your time.
So unfortunately, it when our customers.
Cannot predict.
There.
Level of business.
I don't think we can't really see getting pretty far them right and so all that we can do.
First our there is.
Rely.
On the forecast that come from our customers and these forecasts.
Clearly to your point at the end the last year, South and the changed.
And.
And.
There was some basi feedback some contraction and brought about further contraction.
As the mood.
Very quickly change I think starting in August September of Lexia.
Can we get better these.
I imagine, we could but but realistically.
I don't think.
It would be reasonable to expect us to to do that much better in that regard I mean in our space These kinds of things.
Happen they have been pretty youre getting from time to time the mood if I go back into July August .
Last year was extremely buoyant.
Everybody was worrying about being able to get.
They are components of that power semiconductors, and other components and and that mood change very quickly very dramatically.
I don't know that we could that predicted that so I am afraid that we haven't made.
Substantial progress with respect to to the ability to forecast these kinds of turns in the market.
Thank you.
The next question is coming from the line of Quinn. Please go ahead. Your line is open now.
Hi, Patricia Jamie I wanted to follow up just on this new generation of GPU that you mentioned I think I think the first generation you one would that customers seem to be for fairly limited application I'm. Just wondering if you feel that the.
Second generation GPU design that you've won could target a broader set of applications.
That customer.
So without getting too specific.
I would say that we do agree that.
The first generation GPU for a variety of reasons.
Did not achieve the level of market fans at ash that the cast them other than PC bad it.
I think we have reason to believe.
Both based on recent fashion, so the cast summer and I'd foods.
That does second time around.
This fifth passions.
Our.
Most.
Well founded and likely to to come through.
But we will take it weighs in Seattle with respect to that as well because again as suggesting asset to the earlier question.
Our visibility is largely dependent on the cast on visibility so what.
We understand these that at this time around steps have been tag and to ensure much granted fast fashion and we'll see what happens.
Thank you produce your second question I had is I'm wondering if you could give us any updates on the vertical power.
Yeah application and how you're progressing towards.
Bringing that technology to high volume.
Production.
So we.
Actually I was visiting.
In.
The Bay area last week.
Couple of days I visited.
A cast members.
I think in a six out of eight.
We were.
Yes.
Yeah in their visiting the cast biko's, all the cast somebody else's ash on that that a future.
GPU that future AI ASIC.
PJ.
I was going to need vertical power delivery.
In order to meet efficiently kind demands ranging up to 1000 apps and potentially over time beyond that in some cases.
We some of these customers.
If we look.
This solution is seen tied at the as in that Ray.
Of Randy Golsen IRA fall.
Asics that are.
In proxy met.
Relationships to each other.
The.
Randy gold silver wafer or from.
Devices Asics that for.
Ladies and see reasons need to be in very close proximity to one another so that they affect in effect on body try there working up our deliveries the only way to get there. So.
We.
We are seeing it.
Getting traction.
We are seeing it.
As critical need in order to enable.
And next generation solutions.
Some of them are already.
Approaching.
I would say limited production not large scale production, but there's been once that's tough comp funny that.
Made that announcement I think about a month ago with respect to.
Yeah, very advanced solutions that already realized some vertical part of the Liberty and inform we'd sure. We are developing a more advanced system with doubled the current comfortably.
So we see there's a common denominator need.
In that space, where our.
In effect functionality computing capacity is clearly dependent on the limiting in some cases.
So thousand so I'm peers within a very small footprint to essentially.
Within the site.
Hi, does that do you think thats something that goes to higher volume production in the second half of 2020 or is that an application. You think is a little bit further out in terms of timing.
So it depends it depends on the on the company in the epic Asher So I think the so with.
At least one of this setup companies for volume production in 2020.
Evolving other solutions to the involves.
So called GCM.
Did you.
Due to go into production.
2021.
These and other free cash under which the nephew Jay to have our free cash from that these 2022. So you got a range of all.
Timelines.
But going back to what I learned the from the VC.
You see on value last week is that there's a comment that I mean AD dollar.
Demand for these kinds of solutions.
And that were uniquely.
Equipped and the uniquely capable in terms of our intellectual property to support these kinds of solutions.
Thanks attrition last question for me I think it's pretty clear what your advantages in the high performance computing and datacenter markets, where you can get your MCN closer to the processor than traditional power supplies and therefore, you have significantly lower.
Distribution losses with your solution I'm wondering can you just sort of discuss the advantage you have in the automotive market.
Do you have similar advantages to too.
What what you're seeing in datacenter or is it.
Yes.
In the automotive market more zero current switching zero voltage switching architectures that some of the other power management suppliers May also have in house, just I'm trying to get a better understanding of.
What's your advantage on the automotive.
Applications.
So without mentioning names I'll make reference in the back from our mine that too want recent design win for which we recently got it first and I'd.
Are there for development of a solution that involves.
Conversion from 800 vault boss, which relates to in by these facts.
In in hybrid vehicles initially eventually into full E. These.
Well our solution is to say solution. It provides festival bus conversion from Evanta vault.
Thats a non has under vaulted can go higher than that it can go lower than that but nominally 800 vault.
Down to 40 evolved so it's once again the fourq evolved.
In the immediate passing FES sack showed that I think sets us apart from.
Aspiring competitors.
So these a fresh stage involving a best converts that technology, which is.
Way above anything else.
The competitive landscape.
And then is followed by second stage with cheese.
PRM regulators that take.
That Tom boss converted.
Voltage level that can track happened down depending on the state of charge on the battery pack and regulates it too.
You see Butte within the vehicle.
The regulated Fourq involved.
We go down from that these another five to the system, we take than the 40 involved down.
To 12 vault to provide the power for legacy it 12 vault.
Shows that are going to.
Still be there invade goals for quite some time, because obviously that that's a longstanding.
Type of solution that will not be supplanted.
Overnight they will continue to leave for ground for quite sometime but.
Going back to your question, how do we fit that well first of all we fit.
By converting power from 800 evolved to Fourq evolved regulating it a 14 vault.
And then supplying it selectively to legacy loans that are going to continue to about a for a number of years up 12 vault until they go away.
So the Dcs in defense actual the car in one operating cash on what we're talking about 20 kilowatts, maybe going to even higher power levels and our solution.
Extremity dance extremely efficient very cost effective so thats the value proposition.
In another instance, I'll give it another example.
We're working with another cash them all that.
As got.
Don almost thriving needs, it's another more the free cash.
And in that case the value proposition for you already have point.
He sent that conversion from high voltage passes through Fourq involved it seems that.
Powering.
A very kind hungry.
Thank you know.
So one of the other know exactly by the presume seven nanometer assay.
Consuming 700 amps.
Powering it two vertical power delivery.
From a fourq enroll Sars.
Thank you Patricia.
Next question is coming from the line of John . Please go ahead. Your line is open.
Hi, Patricia.
If you can give us some more detail on the design wins that you have in house and along that line you mentioned before second large hyper center that we should start seeing bookings during the fourth quarter and how these design wins give you confidence that you'll be growing your bookings 30% of fourth quarter.
So we have high comprehensive the we're going to be able to grow the bookings in.
In the fourth quarter by about 30%.
That's a bottoms up forecast I'm not going to give you up for obvious reasons the tail so that.
But it's coming out of mccombie national New design wins.
In summary, Sasha demand from older programs.
So it's a combination of factors at play but.
I'm not going to give you the specifics.
What makes that forecast.
Come together.
We are confident of it.
And.
That's the way I'm going to leave it for the time being.
Can you talk about the onetime you'd mentioned that we had another hyper center that might start ordering product in the fourth quarters is that still a possibility.
Long those lines are there more hyper centers.
Hyper data centers in the wings.
It seems like it's taking a little bit longer than expected for people switch over to 48 volt and I'm just wondering if you're seeing acceleration of that and if you can give us any kind of.
Details on that.
I think it's the conversion to 14 involved as become.
You know evident that far for everybody to see I don't think.
Let's please way even our competitors.
I think.
Acknowledge at this point to that.
That is happening and.
And that is a year.
Yeah in.
The the fact, the spacing et cetera, those seen supercomputing.
As where do these casting a moment ago. It's also coming here with automotive and ultimately I think automotive.
It's really the elephant in the room, so to speak meaning that.
The scale of usage of.
You know them all these systems and.
The content to free cash from automobiles in a variety of ways.
Drives.
Comment that I mean, I understand there's not just within that industry, but also.
Dean.
In diverse.
Industries, because again of common than any other economies. So.
I don't think these any debating longer.
That can be side, we had the with respect to too.
40 evolved to becoming a TV to universal standard and to say the indifferent wars, Tom Walt is going away because of.
Let me fashion, so that these point a clear to you on eyes. The in all of these end markets. So it's not going to go our way overnight as I was suggesting earlier.
There is going to be legacy lows for quite some time, but that's not going to be a growth market. The growth market is going to be fourq involved and a fourq involved.
Our technology is without peers.
So I see that I guess, what I'm trying to get at though is it seems like.
From the outside you've had one large data center that really has been taking a large chunk of your production.
I would expect we're going to see some more shortly and you had mentioned a couple of quarters ago or it may was last quarter that there was another one in the wing. So I'm just wondering.
When might we start seeing.
Other larger hyper centers really coming on board.
To the extent that you've got the current large hyper center guy taking product.
I think it discounting.
I'm not going to.
Make very specific references.
Repeat things I've said in the past.
And with respect these kinds of things on knowledge.
I may have been at times.
And when the future happens, but I think.
I've been pretty reliable about the Nash or the section of the future there's going to come about so I'll I'll and severe in.
Same that the convergence to 48 is happening I think it developments for instance, seen the Gpus space.
Gpus going too far to evolve.
Is accelerating no paying 10 did that trend the automotive.
Developed pence going to accelerate any further.
And.
And we are.
On the verge of having a much broader adoption.
It's happening with design wins.
The decent you know a my key target Cathmor.
Today that ease in talking to us or.
Asking us for proposals.
For solutions for their national ration requirements. So we are there and that solutions are.
Far superior than anything else out there in many cases, our solutions really the only way to enable what the costumers needs to do.
So I acknowledge the fact that weve been dependent for quite sometime it unfortunately be too long on now.
Some.
Let me, there's very limited number of key customers, but again as I look at this is we had in the valley last week I see all of those customers.
Becoming major vical customers in years to come in some cases going to be next year are the cases, a couple of years out, but I see this somewhere the inevitable develop and so as.
As there that Vince I think we're going to get this that these seek a base of business that we've been aspiring to get and as I mentioned in the past.
Not having it.
Can lead to too lumpy performance, that's unfortunate, but if spot of.
And the in Novasom role that we'd been playing at our continued to play so.
I'm very passionate with respect to these they determine I see is coming.
And.
In you'd be able to gauge.
The accuracy of my predictions in the next year too.
That sounds good. Thank I'm hearing is that we're very confident the 30% increase in bookings this fourth quarter and there is a very long runway down the road, where we can see continued growth and bookings and revenue with all the different design wins and having a statistical base, we shouldn't be as lumpy as we had before is that a pretty good summary.
I think.
I may have you somewhat different wars about I think.
Actually this is pretty good sameday, so we see.
A good things happening as starting in the far quartet and extending into next year with programs going into production and more and more design wins that are going through the just fashion phase.
Excellent. Thank you very much patrizio and welcome congrats on the cash flow that was really nice to see.
Thank you.
The next one is coming from the line of Richard. Please go ahead. Your line is open now.
Well, thanks, but your tone, Jamie for taking my questions. Maybe couple of quick ones to start off with here just to clarify on the bookings that you're talking about for the fourth quarters is driven largely by a single single customer thinking then GPU space or is there a little bit more balanced between some of the other dynamics you referred to as well.
These these bounce.
Effected the biggest single booking or that went to see paid in farquar to is now coming from best pace at all but I think on the GPU front to the ramping bookings.
She was soft in Q1.
There may be some in Q4.
So there is.
Obviously growing lease.
All from design wins that Tom is coming our way.
Is there maybe opportunities also in the Frontend.
Most of the business coming our way next year. There was a recent example that.
Just came up within the last week.
So it's a diversity unified is not coming from from one.
Existing measure cast is coming from.
If you different directions.
Okay perfect.
Quick question just on the the commentary regarding revenues for this quarter, you said was difficult to predict I'm. Assuming this is the difficulty is coming largely from the brick business is that fair.
Well I'm not sure that these adjust that I think you sold so from a vast products.
And in.
Our ability to turn.
Within the quarter, depending on where the our this up place within the quarter.
Given capacity is as the quarter progress is so.
Well not comfortable making a forecast with respect to providing guidance with respect to revenue this quarter, we're more comfortable.
Okay.
Giving guidance with respect to the bookings level.
Okay fair enough.
Yes, it's a good commentary regarding the automotive space here, both in the Kenny traditional and empowering the digital power train as well as with.
The ton in the striving if you look at a few years Patrizio what do you think your old your content opportunity per vehicle could be.
Well it very much the fans on which party here type of vague call we're talking about.
What if it's a full vessel full levy with autonomous driving get Billy.
Yeah.
By the way it's fully V is not necessarily the best scenario I think I believe.
Yeah, let's say a.
Hi, Bill the with the 20 kilowatt work to have a power conversion through a couple of stages with then some select downstream conversion to 12 vault and there's a lot dollar seem that.
So it doesn't have to be fully V.
To represent a good case scenario.
So what I can say is that if.
If you these.
It compete power distribution infrastructure from from a battery pack too long.
48 volt distribution, including Sam.
Conversion to legacy loads up 12 vault.
At the level 20, kilowatts, I'm not going to say what out then I'm pleased to be goes and be giving away. The the valuable seizure in terms of our cost per watt.
Which I'm not going to do but it's safe to say this has substantial.
Content in surveys substantial content.
Okay, well look forward seen that overtime my last question or maybe kind of said quick set of questions here in competition.
Sure. So can you kind of characterize above what level than peers. Do you think you have no effective competition and also have you seen customers who.
Who have chosen a solution that is in your words not fully enabling and are you still engaged with those guys. If they are.
So we've had.
Since sees a cast and my second Pico wanting Japan as an example that.
Try to the probably a competitive solution.
And that could make it work and I forgot the exact current level that our free cash.
I think it may be named the 400 them.
Category.
Ill give you a little bit more technique I'll call with respect to these so the competitive landscape.
He is very consistent you realize some.
Yeah.
Regular others. These are circle back regular others.
That.
Capable in one stage.
Of the living well, they advertise that to be cable as much 60, M. Perez reality.
They because of terminally me dash announce their use.
Something less than that.
So if you take one of these devices.
And in that you all do you can get 30 or 40 amperes out of it.
Tom.
If you need to support a an ASIC that.
Consumes honestly say basis for him to find that amps, you need that thousands of them and then if the assay because got transocean three requirements.
We close the go to access the so called TDC, our steady state content consumption.
Then with the competitive solution.
Well need to do is double up on the number of regulators Wes without solution.
We have.
It Freebie, if you will which he is that owning sometimes bases on time scale amelie sag on so when she is how long enough to support that these tunable modes of assets.
The cash flow control doubled the current without having to add.
Yeah.
More harm to our and pay for it so.
When we get to to the level of found to founded apps with be close it could be going after 100 amps or a thousand apps.
Our solutions that involves a with vertical power the Liberty is single car multi fire.
As you can imagine is far preferable to a quote unquote competitive alternative.
Maybe acquire 2024.
Phase.
That don't quite fit.
Jerry the law noise a lot of these advanced sassy surrounding I'm very low voltage yes.
No I sensitive so you got the falling dilemma with the comprise solution.
To limit power distribution losses.
The regulators are so large multi muzio them nice would be the fraud.
Close to the assay well first of all there's not enough room to do that but if you can somehow bottom up I guess.
The ASIC.
Then you got to worry about something else, which is they generate a lot of mice and.
Because of that the assay cannot be able to operate nearly as well as you can without solution, which is fully self switch without packaging. These metal shielding. These non optics, so far I'm Anthony is a very.
Predictable Vanity.
Hi performance solution that doesn't percent, both the feet and the knowledge challenges or the competitive alternative and we'll say the trash barrel.
These trolley a band all of 'em not a bright line and then our cash on line.
I would say the level of capital out of apps is still possible.
To compete it gets.
Relatively high the as you progress from 202 funds of apps because mission impossible for the company's from above that level.
And that's where a lot of asics are going in.
In many uptick Ashley environments.
That's true to that was a great detail there. Thank you for that that is all my questions. Thank you.
If there is another question, we'll take it otherwise I think were.
One hour into it.
Yes, we do have a two more questions actually and we have Doc next. Please go ahead. Your line is open.
Yes, I will take a lot of Tom I know, we're running late just two quick questions already report recently that one of your patents that was issued in 2005 on a particular converted right I don't know if it's going outside our scene.
Amplitude converter that expires next year, if thats correct when it expires.
Is that significantly in anyway, and then the second part of the question, which follows up to the other day. When you go and talk to a new customer potential new customer what pushed back are you getting well because clearly we feel I feel as an investor you feel as you communicate thoughts of investors that your product is completely superior business.
Is it are the fearful of production capacity do they have doubts about the 48 volt conversion why would somebody try a completely inferior product like you said, obviously they'll need to come back to you again those are my two questions.
Okay, Let me take the first phone.
So.
One of our patents and maybe a few of our patents because these about 100 patents that are relevant to protecting our IP with advanced products.
We'll be expanding in the next couple of years, but you can be sure. The fact that we haven't been seating sale right. So is seen said 2005.
We have continued to make innovations in that particular area.
There may be at least south as another pass.
The way our products SAP you convert this over eight today.
And the way they use will put a back in 2005.
Ill.
These this well difference there being very significant innovations and you can be sure having been.
The agenda with respect to two I intellectual property.
That.
We've gone.
Very far in terms of.
Protecting our innovations so fundamentally the way I look at it.
Analogy that I like is planting and minefield.
Any competitive then wishes to fall.
Our technology and.
I'm usually those separate.
It's got to come from.
The crossing all the minefield.
Well, maybe while the mine seeing the minefield.
Being old.
Guess to be nonproductive, but these plants you have other mines that can blow liam's off and that's what's going to happen if anybody trice.
And that's why is that I just wanted to ask.
Yes, [laughter] and that's why we're watching these very carefully we're now seeing frankly.
We're seeing something on the fringes and we're keeping a close eye on that but it's not mainstream vicor technology.
And.
But when he comes to the car technology I think Deane. This he understands that we are very good van knows we invested.
Literally hundreds of millions of dollars seen developing these technology and we're ready to to assert IP. So.
Don't think anybody who's got the guests with right.
With these factor too.
What happens.
With catheters.
Yes, we.
Oh it nowadays is most he has the came to us and looking to implement.
In advanced solution.
I think what goes through their minds as we discussed in the past.
He is.
In the.
The appeal of enabling a more advanced system.
On a system that.
Power system that allows that and product to have superior attributes.
Bye bye.
The fear and I will say mispriced fear.
That.
It's a single source solution and Vicor is the only game in town with respect to the single solution now.
Our track record of supplying.
A large number of customers and a few key customers.
Abundantly demonstrates what a very reliable supplier or they are supplier.
Cash and this can rely on us for price for capacity for delivery for quality.
And.
But not every body.
Who doesn't know us believes in that and so the the handicap or.
The hump theyve together over.
As to do with the appeal and the other side of the fence, although they being.
A multi source for the unquote commodity solution.
So that's the dilemma the customers face.
And if you are the commodity management team.
That choice will largely be.
Give me a solution.
That I can buy a from a multiplicity of vendors and I can knock.
The vans those ads against each other to get in all our price and I can't get.
Multiplicity of sourcing with diminish risk or with unquote.
But the engineering team.
And.
The project managers are.
Attractive to us solution because it seemed happening. So he gave some of the capability to do something that with the commodity month I saw some alternative they can do and what I'm seeing what they saw.
Nvcs last week in the valley is that.
Enameling is would be a solution wins to date.
These reasons, because that's more important to to the customer the.
Ability of their end product to to compete effectively I guess that competitors. That's more important than concerns that can be addressed the with respect to single sourcing with volume so customers come to we see that facility they consistently.
Come away and impressed with.
Several of the our.
A world class manufacturing capabilities, we have the control systems that we have implies.
Our capabilities reassure them with respect to the fact that.
The single cell International our solutions.
He sent the something they should lose sleep over but you know some cash so prevention our customers.
I think this is the national expansion.
Between affect our product.
And the commodity competitive alternatives that can you keep up with the level capabilities we have.
So just real quick if I understand you correctly, it's it's sort of you educating them to overcome their here.
If I think that's fame part that I can't say that we can succeed I'm aware of.
Very large customers that have an easy or a piece of any of the salary galley that they're not going to commit.
Their solutions to a single source.
Other customers that in the past Ed similar restraint.
Crossed the France in 70 cents Ses.
And there seems to me the gathers crosses the has for them and offset solution. So.
Yes, I can see that action without it obviously out of progress would be great there, but I mean, the tie these turning in our favor and as we grow larger I think some of their concerns with respect to size are also going to get this event is so I think we into fashion with respect to these we need to.
Is keep raising the bar and continue to advance.
I won't performance, leaving the competition further into das and that's what we're doing.
Okay. Thank you.
And last question is coming from the line of Allen. Please go ahead. Your line is open.
Yes, good afternoon I just one question.
Are you going on.
All right.
Hi tablet is that completed on the news for.
Gee.
It's moving forward the remarkably I saw you actually referenced it.
In a in a comment without being specific about the effect, but just within the last week.
Yeah.
The cast of the stock to us about a very significant volumes for the FM.
Next year, so well law, we'll wait and see we're also working.
On competing at the next year at Ash from of these kinds of products based on our Fourg control system, that's nicely coming along.
So we're going to be able to raise the bar as I suggested in just the last asset to the earlier question raising the bar with respect to that all performance. So the tablet so while competitors maybe saving too.
She was on our performance with Abbott, which is literally.
And I'll remind you the smaller than anything else that in the competitive landscape, we're far along with respect to to an extra industrial solutions that will raise the bar, but not as significant factor brilliant.
Density efficiency and most importantly cost.
Okay. So there was a fourg completed yet or is that still coming on we are shipping we actually do you sense, we compete quite a few cash on all of them.
Some fourg products.
The Fourg PFC, which is what's relevant out too.
To the RFM or any AC to DC converter.
That's not quite competed yet, but it's approaching completion. So we have.
Types some of the bench.
And.
We expect it to to get to the finish line in another few months.
But the Fourg version of the power tablet as that campaign again.
So we have prototypes on the bench on a much smaller footprint.
The net effect the power tablet as you might have seen from our website. It's assembly in the Middle show a few sure at PFM Saar FMC in other words AC to DC convert those are going to come right out of our.
Molded pounds, so we're going to slice and dice some other pounds and that is going to making a lot more cost effective than DFM itself is so that's progressing along we have prototypes on the bench, but it probably is not quite ready for primetime is still a few months or what.
Okay. Thank you very much.
You're welcome and with that we thank you and looking forward to talking to you in a in a few months.
Thank you everyone that concludes our call for today you may now disconnect. Thank you so much for joining and have a great day goodbye.
Yes.