Q4 2020 Vicor Corp Earnings Call
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Okay, we won't book it today, it's a little bit more.
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For quarter.
For sure.
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Good day, and I'll come back on to the <unk> earnings with assets for the fourth quarter and year ended on December 31st 'twenty 'twenty. One call. My name is Matthew and on your operate yesterday during the presentation on I know, it's been a man on extends only you see this yourself at any time. Please press star zero on telephone and coordinate that they'd be happy to assist you during the call you'll have the chance to raise questions.
However, we plan to at least kind of remember to limit yourself to one question and a follow up I would also have to advise all parties that this call is being recorded for replay purposes, and with that I would like to hand, it over to your host Jamie Simms Chief Financial Officer. Please proceed.
Thank you Matthew good afternoon, and welcome to Vycor Corporation's earnings call for the fourth quarter and the year ended December 31, 2020 <unk>.
Jamie Simms, Chief Financial Officer, and with me here in Andover are Patricio a N C Raleigh, Chief Executive Officer, and Phil Davies, Vice President of global sales and marketing.
After the market's close today, we issued a press release summarizing our financial results for the three month and 12 month periods ending December 31.
This press release has been posted on the Investor Relations page of our website by horsepower dotcom.
We also filed a form 8-K today related to the issuance of the press release.
I remind listeners this conference call is being recorded and is the copyrighted property of Ichor Corp.
I also remind you various remarks, we make during this call may constitute forward looking statements for purposes of the Safe Harbor provisions under the private Securities Litigation Reform Act of 1990 profit.
Except for historical information contained in this call the matters discussed on this call, including any statements regarding current and planned products current and potential customers.
Potential market opportunities expected events, and announcements and our capacity expansion as well as management's expectations for sales growth spending and profitability are forward looking statements involving risks and uncertainties.
In light of these risks and uncertainties, we can offer no assurance that any forward looking statement will in fact prove to be correct.
Actual results may differ materially from those explicitly set forth in or implied by any of our remarks today.
The risks and uncertainties, we face are discussed in item one a of our 2019 form 10-K, which we filed with the SEC on February 28 2020.
We personally had it at certain updated risk factors regarding the COVID-19 pandemic and our current construction project in our form 10-Q for the third quarter filed with the SEC on October 30th 2020. Both of these documents are available via the Edgar system on the SEC's website.
I remind listeners that the results announced today are preliminary as they are subject to the completion of annual audit procedures by the company's independent registered accounting firm KPMG.
As such these results are unaudited and subject to revision until we file our form 10-K.
For the 2020 fiscal year.
Which we expect to occur by the filing deadline.
Monday March 1st.
Please note the information provided during this conference call is accurate only as of today Thursday February 25th 2021.
If I go on 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.
A replay of the call will be available beginning at midnight Tonight through March 12 2021.
The replay dial in number is 888286 801 zero followed by the passcode three three 109 701.
This dial in and pass code are also set forth in today's press release.
In addition, a webcast replay of today's call along with a transcript will be available shortly on the Investor Relations page of our website.
Let me begin this afternoon's discussion book by providing some color regarding my decision to step down as <unk> Chief Financial Officer effective June 30, 2021 as.
As noted in today's press release, I have informed Patrizio and the board of my intent to pursue other interests and different types of challenges during the next phase of my career.
I've had a remarkable run as CFO of ichor, but I feel the time is right for me to look for other opportunities in forms of personal enrichment.
As stated we have kicked off a search for our next CFO and I will be focused on a smooth transition to the leadership of my successor.
I will be leaving.
Find a highly talented team a strong balance sheet and a clear roadmap for future success.
Now I'll turn to a review of our Q4 financial performance after which Phil will review recent market developments and Patrizio, Phil and I will take your questions.
In my remarks, I will focus mostly mostly on the sequential quarterly change for the P&L and balance sheet items and refer you to our press release or our upcoming form 10-K per year over year comparisons.
As stated in today's press release <unk> recorded total revenue for the fourth quarter of $84 3 million.
Up seven 9% from the third quarter total of $78 1 million.
For the full year 2020 revenue total $296 6 million up 12, 8% from $2 63 million for 2019.
Quarterly advanced product revenue Rose 10, 4% sequentially, reflecting the continued ramp of shipments of our lateral power solutions for AI acceleration.
Demand for our 48 volt direct CPU solutions.
And the first volume shipments of our new satellite solutions.
Brick product revenue rose six 1% sequentially, reflecting a broad resumption of shipments to our north American customers. After the pandemic related trough of the second and third quarters.
This increase offset a sequential decline in shipments to China with those export volumes of brick products returning to trend from Q3's high level.
Shipments to stocking distributors also rose sequentially.
Turns volume was essentially unchanged sequentially.
For the full year advanced products revenue for 2020 totaled $106 1 million up 41.5 per cent from $75 million for 2019, while brick product revenue for 2020 totaled $193 million up one 3% from 187 eight.
For 2019.
Exports for the fourth quarter declined sequentially as a percentage of total revenue to approximately 64% of consolidated revenue from the prior quarter, 73%, reflecting.
Reflecting the factors just mentioned regarding north American and Chinese shipments.
For the full year exports increased 35 per cent and represented 64, 4% of total revenue.
For Q4 advanced products share of total revenue rose for the fix fifth consecutive quarter to 40%.
With brick product share correspondingly declining to 60% of total revenue.
We believe advanced product sales will expand further as a percentage of total revenues, especially once new manufacturing capacity comes online given the high growth segments. We are targeting with our 48 volt technology, including AI data center and automotive in contrast to the mature growth of the segments, we serve with brick product.
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Turning to Q4 gross margin.
We recorded a consolidated gross profit margin of 48 per cent and.
An increase of five points compared to the margins reported for Q2 and Q3.
Higher volumes and improved mix contributed to higher profitability as did a reduction in cost variances.
Gross margin dollars rose 21% sequentially.
Margins remain under some pressure of high tariff charges, which totaled $1 5 million representing approximately one eight margin points for the whole quarter.
We did see a reduction in quarterly tariffs as Q fours total was 18% lower sequentially in part, reflecting our ongoing efforts to reduce component imports from China.
We were <unk>.
Spec to see further improvement through 'twenty and 'twenty one.
I'll now turn to Q4, Opex, which rose just under 6% sequentially, but were consistent with a longer term trend, reflecting periodic swings in discretionary spending.
The amounts of total equity based compensation expense for Q4, including income included in cost of goods SG&A and R&D were approximately 242850, 1000, and 504000, respectively totaling $1 $6 million.
For Q4, we recorded operating income of $11 6 million, representing an operating margin of 13, 8%.
The sequential 90% increase in operating income reflects the operational leverage in our model.
Turning to income taxes, we recorded a net provision for Q4 of $788000, representing an effective tax rate for the quarter of 7%.
Net income attributable to <unk> for Q4 totaled $11 $2 million.
GAAP diluted earnings per share was 25.
Based on a fully diluted share count of $44 million 772000 shares.
For the year net income attributable to VI Cor totaled $17 9 million, representing diluted EPS of <unk> 41 up.
Up from the prior year's 34.
Before I turn to our financial position a few words about COVID-19 in our work force.
Beginning in Q1, Vycor took substantial steps to protect the health and safety of our employees following federal and local guidelines for employee well being.
As a designated essential manufacturer using mass and practicing social distancing from the onset of the pandemic. We have continuously operated three shifts at our Andover manufacturing facility.
With only a few exceptions, our engineering sales and administrative personnel returned to their offices in early Q2.
I refer listeners to our Q3, 2020, 10-Q filing which sets forth details regarding our response to the pandemic and the impact it has on our operations through September 30th 2020.
As is well known Corona virus infections rose domestically during the fourth quarter and the daily total of reported infections only has begun to decline in the past few weeks.
<unk> experienced higher absenteeism from December through January largely the consequence of quarantine requirements. However, our ability to adjust shifts staffing in the factory and allowed us to avoid meaningful disruption of production schedules and we hope the worst is behind us as absenteeism has.
Recently returned to low levels net.
The last because of the potential.
The influence of the COVID-19 pandemic is associated with risks outside of our control we cannot estimate the extent of such influence on our financial our operational performance on.
Our wins such influence might occur.
Turning to our cash flow and balance sheet cash cash equivalents and short term investments totaled $212 million a sequential increase of 4%.
Accounts receivable net of reserves totaled $41 million at quarter end, essentially unchanged sequentially with Dsos for trade receivables slightly improving to 37 days all balances are current.
Inventories net of reserves declined one 5% sequentially to $57 3 million.
Annualized turns improved to three one.
Reflecting the favorable swing in working capital operating cash flow totaled $19 $3 million for the quarter.
Capital expenditures for Q4 totaled $11 8 million, representing the value of equipment placed in service during the period, we ended the quarter with our construction in progress balance of another $15 million and we have approximately $42 million of our capital budget is scheduled to be spent through the year.
Our factory expansion project is proceeding on schedule and on budget.
I'll now address bookings and backlog.
Q4 bookings totaled $91 5 million or one 2% sequential increase.
The overall book to Bill was approximately one to one with advanced product set at one four and brick products at 0.9.
Q4 bookings largely reflected the same circumstances, we saw with Q4 shipments the strong recovery of North American volume offsetting a return to trend for Chinese bookings and to a lesser extent the natural lumpiness of orders from Asian contract manufacturers.
At year end, one year backlog totaled $147 6 million, an increase of five 4% sequentially.
Turning to our outlook for the first quarter of 'twenty one.
We expect continued revenue growth we continue to address the sources of gross margin pressure in our forecasting improvement in product level profitability.
Further we do not anticipate any meaningful increases in operating expenses.
While substantial further improvement in gross margin will have to await production from our new vertically integrated expanded factory, we expect incremental revenue to drive earnings per share given the scalability of our operating model.
Phil will now provide an overview of recent market developments, and then Patricio Phil and I will take your questions I'll ask that you limit yourself to one question on a related follow up so that we can respond to as many of you as we can in the limited time available.
If you have one more topic to address please get back in the queue.
So Phil Thank you Jamie.
I would like to start my comments with a short review of our progress in 2020, which I would characterize as successful on many fronts critical to our business growth objectives. We continue.
To strengthen our position as the leading supplier of high performance power modules to customers in the data center.
Advanced processor and high performance computing markets.
In 2020, we not only expanded our customer base, but also solidified our position with existing large customers by starting next generation projects for higher performance processes with significantly higher power levels currently under development and scheduled for introduction in 2022 on <unk>.
23.
Our leadership position is clear and that customers worldwide are selecting vehicle because of the increased performance that they can achieve without factories power solutions, which are characterized by much higher power on current density.
In 2021, we will begin to ship on new proprietary vertical power delivery models.
Volume to customers developing highly advanced supercomputers. These.
These supercomputers utilized large clusters of AI processors in close proximity to enable faster parallel processing of heavy and complex workloads such as those found in autonomous driving applications.
These complex systems can utilize greater than 50 processes, all requiring a vertical power delivery module from vehicle.
I'll now turn to our new product strategy and growth initiative that was launched in 2020 and what should bring additional opportunities on revenues in 2021.
This is on new line of single Phase on three phase AC power modules, incorporating our latest advances these successes to our former RSM assemblies.
<unk> and data center power requirements grow they need to leverage existing facility footprints and rack infrastructure becomes a priority.
Michael as new high density AC front end product families will meet this challenge head on.
These new OEM customer funded products are scheduled to ship in Q3 of this year and we are excited about the future of this product line, which significantly expands our available market.
As the 48 volt market continues to grow and as new customers introduced AI and <unk> solutions <unk> is extremely well positioned to meet its growth objectives for this business in the coming years.
Competitors trying to catch up with 48 volt based solutions are started to set foot on a minefield of intellectual property.
Misinformed and unscrupulous competitors are exposing Oems purchasing infringing converters to significant risk of supply chain disruption.
Having learned how to protect its inventions on assert its IP <unk> IP strategy is to hold Oems accountable for OEM products, incorporating infringing power modules from unlicensed module manufacturers.
OEM seeking an alternate source to vical can take on OEM license to Vical IP.
Licensing revenue from our comprehensive IP strategy should contribute appreciably to vehicles gross margins.
So let's move on to our progress in the automotive market.
As we all recognize the electrification of cars light vehicles and trucks is advancing rapidly with major investments in aggressive new model introduction plans announced by almost all of the major automotive Oems.
I am very pleased with the progress we made in 2020 and establishing several direct OEM funded product development initiatives for electrified vehicles, which are scheduled for introduction in 2023 and beyond.
I am, particularly optimistic about our opportunity for new high power 800, volt and 400 volt onboard charging solution for pure electric vehicles, which achieves unparalleled power density and low weight.
In Q4 of 2020, we received funding from a large north American OEM for a solution that we expect to deliver to the customer next week with an expected startup production in 2024.
We are also working closely with several other global Oems.
We expect to sign agreements in the coming months.
The automotive market office vehicle, a large incremental revenue stream for 2023 and beyond in both a mild hybrid and pure electric pure electric automotive market for our high power high efficiency and lightweight modular solutions.
With a range of $100 to $500 per vehicle for our power modules the revenue opportunity for <unk> is substantial.
In addition to the data center and automotive markets, we see further growth into the <unk> communications market both for power delivery to network processors and high density low profile AC front ends.
The opportunity for Veeco lies not only in land based systems, but also in satellite constellations.
We recently announced a collaboration with Boeing for a new meal based constellation for which we developed a family of radiation tolerant power modules.
These modules are now being sample to other satellite customers in this emerging and growing market.
And we are also collaborating on the development of additional customer funded power modules.
The products and technologies developed for these growth markets are also ubiquitous to power delivery networks in many emerging applications, such as robots unmanned vehicles, such as drones and delivery vehicles, which which should continue to expand our available market.
We are selectively pursuing promising opportunities across such emerging applications.
So in summary, we made excellent advances in 2020, and I expect increasing traction in 2021.
I'll now turn the call back over to the operator, so that we can take your questions operator.
And your final question on answer session on Fanapt again, if you can just ask a question. Please press star one on your on your life.
And you already have a few incoming questions. The first one is coming from the line of John was on tank. Please proceed.
Hi, guys. Thank you for taking my questions very nice quarter and.
It's nice to see that that strength is continuing.
First of all Jamie congratulations on on your decision.
It's been great working with you and hopefully we will cross that in the future.
I was wondering if you could repeat your gross margin commentary on heading into Q1 I'm not sure I caught it all and then maybe address the components of that given the volatility we've seen on the world whether it's.
Component pricing availability, great comps and timing.
All of the things that are that are impacting the world at the moment.
Well.
Obviously as I mentioned, the tariffs continued to have an impact, but it was roughly $300000 lighter.
We really benefited from higher volumes in a much better mix profile.
The.
Volume of of our.
The advanced products.
Based on the leverage in that model.
Higher volumes allow us to absorb a great deal of our overhead and that was the driver of the increase right. There. So it's 48% for the quarter.
Got it I was actually asking about about the first quarter as we head into the outlook you had in both the gross margin commentary that was.
Oh for this quarter, yes.
Yes, we expect we expect.
All other things being equal to actually have some incremental improvement.
As the trends continue.
So on without though that one should not expect.
In improvement.
On the scale of the one we just see Cogs.
In the most recent quarter share, we're not going to pick up five points.
So I think that is suggested in the prepared remarks.
Two module attach on so on margin improvements.
The next major contribution to margin improvements will come about with diversity of integral ash on now.
In a in a new facility.
The vertical integration on process steps will be and outsource.
And which.
<unk> created a significant.
<unk> seen efficiencies long cycle times.
Bottlenecks.
Some.
Yes.
Okay.
Hello.
Hello.
So Dan touched on this is the operator speaking if I can see to speak on line has just disconnected from season pass a few minutes.
Okay.
Hello.
Matthew.
This is the operator speaking you are now back in the call.
Okay. So we software where did we end interaction I think I was.
Setting expectations with respect to margin improvements in the <unk>.
These can repeating myself I want to be clear with respect to these.
We saw obviously a substantial step up in the more recent the most recent quarter.
We do expect some further improvement this quarter in nine quarters I had.
<unk>.
The big.
The opportunity will come once we can leverage our diversity integral ash on the expanded manufacturing site.
Understood. Thank you Ken.
Can you hear me yes.
I just wanted to make sure you're back on.
Yes, no I'm on here. Thank you.
And then just.
I wanted to address all of the new opportunities and success you've had in 2020 and heading into 2021, you've mentioned a lot of applications automotive has obviously been on the radar.
New data center product.
The satellite opportunity.
As I understand it you are opening your new facility.
As soon as you can and you need all of that capacity.
Just to supply current customers how should we think of your expansion plans beyond that in the growth of that deep comments.
Over two or three year timeline on how youre going adjusted needs.
Phil you want to take that.
We do address it in the in the 10-K.
Which will be published on Monday.
So generally speaking I E. The fact that expansion on guests us too.
A quarter of a billion dollar total capacity.
As we had these cash.
In Pi.
The conference calls.
As soon as the dust settles with respect to these capacity expansion.
We're going to see.
Not pursuing the next phase.
He has to say as we get further out with.
The automotive opportunities going into volume.
Volume production.
There is plenty of opportunity for growth.
I think in now in the near term.
The progression with respect to that.
Net bookings and backlog should continue this quarter. We're ahead on where we were last quarter on this side. So is it is the policy trend that debt.
It will carry us through this year.
And into next year before we get to the beginning of.
Thank you Sebastian on the multi programs sales do you want to expand on that no I think thats a great summary, I think that.
The focus is going to be continued growth through data center and artificial intelligence design ins and wins that we've gotten is that business.
You know growth itself will grow along with it and our.
Our expanded customer footprint will will add.
Revenues at the end of this year on through 2022, so as we start to move to 23 when automotive kicks in.
On the need.
Follow on facilities.
Facilities later on so.
Most of the matches to these right while the mash on CS.
The footprint.
They are a centers in all of this up to gash on south point of load up the gas so to speak day.
The address describing current requirements of AI chips.
<unk>.
Those kinds of opportunities.
Is it all so let me tell you what we called DC to DC converter type of free cash outs as suggested in the prepared remarks.
This complimentary dimension of AC to DC.
<unk>.
Which are also called from Taz.
In effect.
Rising at power system functionality yep seem on the point of load.
To the extent that we succeed in making <unk> Walter the center of gravity in in.
<unk> and to extent that 48 volt is.
Also becoming the standard.
All of them.
A lot of it at two five <unk>.
These opportunity in effect going from 48 to the point of load.
Yeah, it's almost driving on.
Other kinds of free cash on say IP Gershon.
And these at least as much on opportunity.
Get into 48, so we think of these in now.
The add.
Airline analogy, all 48 volt deemed a hub and they use as much opportunity taking on.
The mould 248.
Is there is going from 48 to the point total.
Great. Thank you for that color and nice job again.
Okay.
And the next day coming question is coming from the line of Hamad course that please proceed.
Hi.
One clarification and one question.
The clarification, Jim could you just repeat what your growth expectations are for Q1 is that the sequential from the revenue line or is that year over year.
Its sequential when do we expect some degree of improvement across the P&L sequentially.
Okay and then my question was are you seeing any kind of.
Inventory stocking orders stocking as far as customers go given what's going on in the industry, but lead time expansion in any ordering trends.
Yes. This is Phil so yeah, I would say that.
In January and February we saw a lift in what we call Poa bookings placed on us by our large distributors global distributors. It wasn't massive it was it was certainly an increase above what we forecast, but not by a huge amount, but there is definitely going to be some of that going on.
Right given the whole supply chain.
On a sort of horror stories coming out from lots of different places. So we can expect some of that as we go through the year sort of as we did in 2018 and that was that was actually a very big year of of over ordering if you like.
So yes, there is some of that going on.
Okay. Thank you.
And then I think on <unk> question is coming from the line of Quinn Bolton. Please proceed.
Hey, guys congratulations on the nice results and Jamie.
Pleasure working with you and best wishes on your.
Next endeavor wanted to start with with the new single Phase III say D. C D C.
Power conversion units for data center applications.
That historically has been I think a fairly low gross margin business. When you look at folks like artisan or delta or light on.
I don't think those guys are getting 50% type gross margins can you talk about.
Are there factors that will allow you had net front end or AC to DC market to drive you know good corporate gross margins and can you give us any sense I think he said it was going to start to ramp in Q3, what what kind of revenue opportunity you might be looking at with the AC to DC.
So we believe that the margin opportunity for front end products.
He is on.
On the same on path to the margin opportunity Corp point of load devices, which as discussed earlier.
We're looking to expand well beyond 50%.
Uh huh.
Traditional content products that you're referencing from from the past supply industry.
Dawn.
With the the level of capability that we offer you know the density that we all free now from fans is literally an order of magnitude greater.
Then those solutions.
So those have not on a yearly effective solutions in a P cash ups.
I've challenged from a power density perspective or are challenged in terms of.
CCM CIT required liquid cooling in order to enable.
Advance <unk> power system solution.
So I have no concern whatsoever with respect to margins fee income so our front end business.
<unk> AC to DC.
E T here.
From cans so for D. C D C effective with channel does the margin opportunity is.
Even bigger as an example, 800 wall from the vault type of DCC Sims.
We have an even more.
We'll unfair advantage.
Vis vis the competition.
Regarding the part of your question has to do with.
The level of revenue that we expect from AC to DC products.
Here it will be small while moving the needle on.
On other revenue on bottom line DCF, but the issue.
Contributing to the topline appreciably.
And to the bottom line as suggested earlier is starting next year.
So in particular, we're very excited about.
What I regard as the most advance.
Supercomputer.
On a wafer that will law.
Benefits from all our AC to DC solutions.
To take it to its next level on proficiency and we expect that's going to be a significant contributor next year.
Understood. Thank you Patricia and the second question I think is probably going to take some of those benefits you talked about in power density as it applies to the automotive market, but just.
What kind of advantages do you have whether its power density lower weight in the cabling.
You know versus the competition in the electric vehicle market. I mean, you talked about the content opportunity is somewhere between $100 to $500, but can you just give us some sense you know how much weight you can take out of the vehicle how much longer you can get out how much longer drive times can you get with a better power efficiency.
And power density of your solutions as you move into the automotive.
Market over time, thank you.
So an example of the the level of capability that that technology.
Enables.
We have a chip.
Measures.
60 millimeter or by E mailing me either.
It's about.
A millimeter thick and thin.
As you know.
Small device right.
Can hold that between two of your fingers.
And that device is capable of roughly speaking five kilowatts of power conversion.
On the vast affirmative wallets and Thats a major market opportunity.
Okay.
It is sold dance and saw efficiency the efficiency is pretty close to 99%.
<unk> is very very high as you can infer from the 9% quoted.
It can be cost effective to the automotive Oems.
While being very high margin for us.
In terms of the value proposition.
Two five cars.
As you know.
Wait.
And the reduction in weight.
He is a contributor to two range.
So these are strong volume of ashish on their debt.
The technology enables.
Great. Thank you Ms Tricia thank.
Thank you.
And the next incoming question is coming from the line of John Dillon. Please proceed.
Yeah, guys on congratulations on the quarter, especially the gross margins on the cash flow from operations was really outstanding.
Jamie I'm really sorry to see leave and I personally want to thank you for your service.
Really appreciate your help over the years.
Thank you so much.
Yeah, you're welcome.
We're going to Miss you yeah.
I'm going to ask the same question about the front end products to start off with maybe you could give us some more color on the customers.
It seems like a major product and I was just wondering do you have customers lined up at one time I think I've heard that there may be one customer who could take all of that.
The capacity of Ichor and I'm just wondering you know what does it look like for the customers and what does it look like for next year's revenues.
So so John where we're obviously starting with some lead Oems that are helping with funding projects and that's a great thing write them on that committed to us and we know we see really good revenues as Patrice you talked about in 2022 from a the supercomputer company that we've been working closely with.
So what we're gonna be doing now is expanding beyond that and taking that technology to.
The list of companies that we deal with on.
On the point of load solutions, because every single one of them is challenged by what I talked about in my remarks, which is the fixed footprint all of the data center and the fixed footprint of the racks, where the power is going up.
They're looking at new cooling.
Technologies, such as liquid cooling and so having something that's incredibly dense.
Powered power dense and on and the performance is very very high on efficiency.
It is really really meeting a big challenge that they have and so our plans. This year will be to now leverage off of those initial customers.
And take that technology.
You know to the to the big customer base that we have for point of load. So so that's that's what we'll be doing.
Nice nice.
My follow up question is on the automotive and you talked a lot about automotive and it sounds like things are really gone well there and some of your presentations before you're forecasting that $250 million in revenue I think in 2023.
With all of the advances do you see that number going up.
I think we have a great opportunity to drive that number up yes, I do I think that the.
The engagements that we have it's wouldn't be on the 23 timeframe by the way, but but certainly you know.
Number is big and the opportunity is very very big and you know.
The success that we've had in 'twenty and what I see happening in 'twenty one.
We will double our engagements with customers in 'twenty one.
And so that's really building on incremental revenue stream for us that are now it's critical to our desire and growth.
Opportunity here too to become a billion dollar company. That's that's the plan.
It sounds great.
Alright.
Just as a reminder, this is steel.
Yes, my contribution is feel relative.
Long term right.
A few years out I mean going back for a moment to the AC D C.
And giving you a little bit more quantitative sense of things. So we have a couple of cast them on that.
<unk> customers is feel altogether that.
I would think that the Super computing peak action is a few million dollars from the next year. The led lightening ft gas shown on the extent to $15 million in the next 12 months.
These are the.
The test cases, where the technology is proven out and the benefits get displayed.
And to Phil's point we've.
We've been <unk>.
Keeping our powder dry with respect to showcasing this capability.
A.
Major cash the most of the point of load.
We believe there are going to see.
The value proposition it also opportunities seen in five G.
Although if you will I'll say a few words about that.
What we're seeing in <unk>, particularly on again also in the on the edge. If you like edge networks customers are looking for very low profile Sis.
Systems, and that's where we come in if you look at the profile of our chips on modules I mean, they are incredibly thin on.
Incredibly dense so it really fits you know of.
A real high demand that we see emerging with.
<unk> systems are all different kinds and particularly also in the in the in edge computing.
So where we're talking to one quite large customer there at the moment and Theyre very excited about this new family that I talked about earlier. So those conversations will go on in the next few months and I'm, hoping that will turn into another customer funded program for her product development for us.
It means that we have received a few money from your questions. The next one is coming from the line of Richard Shannon. Please proceed.
Thanks, guys for taking my questions on Jimmy it's been great work from that you look forward to another call but.
Been great. So congratulations on your next move.
The tactical.
Tactical question from me, if I did my math right on the bookings here.
Youre brick bookings went down a fair a fair percentage here in the fourth quarter.
How does that play out into the into your thought process in the first quarter and maybe understand the reasons why the bookings came down here and you kind of talked about some geographical changes maybe give us some color on that that'd be great. Please.
Yes sure Richard this is Phil so so basically in Q2 Q3 last year, we saw select.
Large bookings coming from the China market for a bricks driven by the trade wars with the United States. The distributors on the customers down there were stocking up on then that sort of corrected back in in Q4.
We've seen.
Good bookings through the first eight weeks or so all of this.
Start of this quarter. So there was a sort of a bit of a correction in Q4, but I think things will get back to normal now through this year.
Congress for bricks.
Okay, and then just thinking about the first quarter guidance is this I mean, we're going to see a growth in advanced products and brick coming down or any any way you could help us to understand those differentials there.
I think <unk> will be will be flat.
Maybe a little bit up does the north American military market is a little stronger.
On sort.
The advanced products, they will continue to increase.
Okay, Great and then my follow on question is related to the to.
On the IP situation it sounds like you're you're ensuring that there are and you've identified.
OEM customers may be using infringing products out there.
Maybe you can talk about to the degree to which you're seeing that and should we infer that that we could be seeing some sort of license or multiple license agreements happening this year in the near term.
We are seeing.
Evidence of <unk>.
Increased rent.
Getting up to deal with it.
We're having these cash also with Oems that you got a nice that they are.
Obviously your tissue.
So stay tuned.
I can tell you at this point.
Sure.
Okay, great. Thank you Patricia that's all from me.
Okay.
Okay.
Okay.
And the next thing coming question is coming from the line of Christopher <unk>. Please proceed.
Hi, good afternoon.
Hi, good afternoon.
With the broadening demand for your products from several of these large end markets and industries do you see potentially a larger role for licensing and royalty.
Contribution in future periods as you.
Look to meet the sizable demand that's building.
Yeah.
We do so we recognize that.
Oems have.
We are challenges with respect to.
On a continuous supply access to technology.
Needless to say Ah that.
Net preference would be to have a multi use your sources.
And when.
We have this question.
He's press Cynthia on industry today with Vical.
Literally five years ahead of any competitor income so the technology and capabilities.
That creates you know in effect a a stress.
That needs to be addressed and we're mindful that we'll consider it.
Of our cash somewhere we want on.
The address their needs.
We view ourselves as a reliable supplier, but we do appreciate the fact that.
It take.
Good day, you'll hate it with all your eggs in one manufacturing basket.
<unk> basket so we.
We want to provide the level of flexibility that Oems would prefer to do it in a way that.
It makes sense all around that give us.
The proper credit for the investment that <unk> made not just in recent times, but over the last 20 years.
We built that technological edge with.
Achieved.
With.
Major investments.
Talking over half a billion dollars in R&D.
Sweat in terms of chat DVD in Nevada on lots.
Lots of patents.
And we see the value of VIP side of the business.
Running them on.
On a parallel path to.
Paul.
Competency of development and manufacturing.
I was amazed at U S based manufacturing all sides of the product so.
<unk> is a complementary opportunity one that to your point.
Should contribute to the.
Total margin and net profit.
Company.
Got to walk all around right. It's got to work force forecast on those I just got to work for Vogtle.
Yes.
Great. Thank you thank.
Thank you.
Yes.
Well go next to incoming question is coming from the line of James Library Ma'am. Please proceed.
Thank you.
Good to hear Sidney Fabulous presentation, and best regards to Jamie.
Thank you Jim could someone could someone given some color on the magnitude of the opportunities markets market size that you see developing in the advanced robotics and Joe markets that you didn't start starting to talk about.
Yes. This is Phil.
A little bit difficult to do only because it's it's early stages for a lot of these market.
Market segments and.
It's really difficult to peg from the from the how the growth is going to go. It's just that you know again you start to see all of this all of the robotics going on all of the different drones underwater.
Unmanned aerial vehicles all of the delivery vehicle investments going on factory automation and smart cities all of that stuff in.
It's certainly going to be a very very large market.
And where vehicle comes in of course in any market that we participate in is.
Bringing tremendous value to customers that value and will pay for the density the performance the efficiency the modularity of our solutions and so so we're working with some.
Really really top notch leadership companies in the in those market segments that I that I talked about and.
Our early introduction is a 48 volt systems of course and also in some of the tethered vehicles and drones with our high voltage bus converter technology, which again is very.
Very dense very efficient high performance and so these markets will emerge over time, but it's definitely going to be a very big opportunity for us, but it's very difficult to put a number on it.
Yes, so as you almost have to be a visionary to see how it's going to play out but it sounds sounds extraordinary.
Development huge investments going on in all of those areas. So it's going to be big.
Thank you.
And then I think on my question is coming from the line of Alan Hicks. Please proceed.
Yes, congratulations on all the progress Youre, making it a great quarter.
Our second everybody's on.
We are going on with the long term investors, they're gonna Ms. Jamie So.
Anyway My question is about.
On capacity, there's been some questions that.
Have you been able to keep up with on.
The orders Youre getting and I see you're spot on I think it was $11 million last quarter.
And I think I heard.
That's 19 million from new equipment.
On a possibly for this year.
Are you putting on new equipment and your existing plant to keep up on.
And can you just give some color on that.
Yes so.
We're doing a combi national things so first of all we've been.
Adding equipment within the walls of the existing facility.
We have all the equipment for.
The new facility.
Some of that equipment is going to get delivered into the new facility as early as the late April may timeframe.
But it's not going to be on till the end of this year.
The lion's share of the equipment.
In the new facility will get installed in between here and there.
There's going to be you know.
More equipment.
Equipment deployed within the existing walls as well and by the way the new facility is about 12 wells I mean, it's the ceiling is in place.
He is in place on the walls are coming up as we speak.
Mhm.
Okay.
You are adding capacity.
Capacity for advanced products each quarter.
We're adding capacity for advanced products.
Each quarter, we're getting more capacity out of our outsource partners.
In the interim while we get vertically integrated we will retain access to the outside partners. Even after we're vertically integrated and therefore, so burst capacity do you have incremental capacity.
So it is it's obviously an exciting.
Ongoing.
Requirement.
And it's frankly, a very good challenge to have.
Okay.
My second question was.
Intel says they're.
On a shipping in volume this quarter their new isolate servers.
Processors.
I know they have the majority of the market has that added tier lenders in the last quarter and this quarter and then looking to the future.
Getting any engagement on them.
The new processors that are being developed.
Like the Facebook and Microsoft.
Alright Amazon.
Yes, so let's talk about the Intel <unk>.
Bu line, a new line. So the way we are participating in that particular.
This point in time.
So the majority of it will be with 48 volt to 12 volt non isolated bus converters are proprietary M BMS on.
Those will be ramping in production.
Q2, Q3, Q4 of this year with a with several of the Hyperscale is we're using 48 volts now.
And then with regards to you know.
Follow on process development.
Focused on the high current processes right, providing solutions to to weather a really difficult challenges at the point of load with our again, our proprietary current multiplier technology. So so yes, we're engaged on.
Next generation uneven generations after that a processor development with our leading customers today on several new ones that we've been able to.
Work with in 2020.
Okay, so you're saying that the.
The impact of Intel is still yet to come Q2 Q3 Q4.
Yes, yes, it is yeah.
Okay. Good.
You have shipping sorry, we're shipping solutions today of course for the older VR to be on <unk>.
We our 14th will start towards the back half of this year, which will which are where we will participate then.
And you had on discussions with some of these.
Customers with new processors.
Yes, no we were engaged with most of them in terms of GPU ASIC.
FPGA and a lot of great engagements.
Terry.
A good way.
Partitioning use opportunities ease.
<unk> zinc kale and they sell to the rest of the world. So Intel is for.
For a long time now rely on.
On.
Any tab on all.
<unk> scheme.
To.
<unk> the power source for Dell.
These devices to be.
The somewhat higher voltage is typically around one eight volt so at that level.
While our technology offers benefits.
They're not nearly as compelling as they are.
Sub one volt AI.
Thanks.
It was quality climate because of the lower voltage tend to be much higher so Dan we're seeing.
Trading saw the requirements both in terms of all our key cash sales and the current level. So this after gash on switch.
Our gating faster thousand amperes with peaks.
In some cases exceeding 2000 appears so theyre on the valuable as he shall car multimedia cash on wishes of the hospital.
<unk> technology is great, but then it would be tough to assess so.
Rounding from MK balls up let's say couple onto that.
On the dance.
Good day steel.
Some level of flexibility with respect to the traditional.
Multi phase so to speak so.
Now where the power source of strength seashore on 12 volt two hockey evolves.
It to two feels fine.
We have a role to play in converting assets.
12.
But that opportunity frankly, given the rest of the world.
He is as.
As far goes on.
Yeah, Hi, you talked on a fee.
Ryan actually Hum.
Voltage levels down to six one zone balsam going further down on with that.
Higher and higher car levels.
That's what the car multiplier solution with a higher value contribution cash into.
Okay.
Sounds like Youre, saying, the best is yet to come from your technology.
Yes, certainly the center of gravity.
And that will have to include detailed before too long, but the center of gravity is shifting from.
High voltage is a lower cost to lower voltages up much higher costs, and thus will appoint a low technology shines.
Okay. Thank you very much thank.
Thank you I don't know from these one more question on would be the last one.
Yeah.
And then I think <unk> question is coming from the line of John Peeler. Please proceed.
Hi, guys.
Are you seeing more hyperscale is going to 48 volts.
It sounded like from the last question the answer to that question. There are some people go on a 48 volt sneak them using the port eight to 12 for the Intel chip.
Yeah. So.
So if you go down to the Hyperscale a share in the United States, They're all moving to 48 volt some of them moving slower than others I expect in two years day, they will pretty much, albeit 48 volt.
Great.
And it's still on auto.
Can you talk just a little bit about do you have a what solutions do you solve in order to do you have a building block approach from all the way from 800 volt to the point of load and are you winning design win wins for all the different aspects of those.
Like for example, do you have point on leverage for autonomous driving design wins for that.
So to answer the question the point of load design ins, we have autonomous driving or in the data center, that's where we are participating today in terms of the question about 800 volts John when.
When I talk about 1500 dollar content per car, that's what I mean, if you go we go from $848 48 to 12, and we do it at many many kilowatts, so theres lots of dollars there.
So, yes, we have a customer actually doing that with us.
So really nice chipset modular chipset that we were supplying and there'll be in production in 2023 with that chipset.
And that sounds really exciting so it's a building block approach where they can go all the way from 800 to the point of load in the car in Europe, you are really getting into all the content than on the convert or is it sounds like.
Yes, that's a value proposition that we have.
On a one of the many elements of our intellectual property is the opportunity to actually eliminate some of the batteries.
Maybe because without technology, you can start on energy.
Evolve touch it distribute it evolved.
That is relative to the eye initiatives, we see beauty.
Copper.
What it does is not near as heavy and is more cost effective.
Then you are seeing a pocket to 12 <unk>.
So legacy Lowes is too alarming up 12 volt than running up Todd Waltz for quite some time.
In this two five vehicles.
Without having to have duplicate ash on the bothering systems that carry with them extra way that sat costs on extra complexity.
So in a TPU, you'll see some of this kind that you might have.
On a downward to $48 48 to 12.
In some cases 510 15 kilowatts.
Excellent and then you'll do 48 to point of load also I would imagine.
Well to Phil's point as of now we have not yet engaged on.
On point of load is in.
Following process, so one volatile.
About <unk>, we are heavily engaged with respect to it.
Vertical power delivery system for autonomous driving up the cash outs, but that's really not moving with the car. It's obviously.
Parsing that.
Emotion about from from especially on site.
Gotcha Gotcha is that because the processors and the cars are not is not.
Powerful as the ones in the data center.
On the the amps that you provide.
Right, Yeah, so say to the extent that one can do the heavy lifting in terms of confusing E.
And especially on site away from the lag on that rely on on very high bandwidth company cash on with the vagal suppressed.
As a preferable alternative he goes obviously in the specialty side you can book it all power to do some in cash confusing without.
Limiting our mileage.
In that vein.
So this allergy.
Obviously reasons that the automakers are following used to.
Remote as much of the confusing.
It's possible yes.
Got it.
Push that compute to the to the edge right and then the edge will communicate with the data center on the heavy heavy lifting.
Gotcha, Okay cool very good congrats guys on it sounds good.
Thank you and with that we'll.
It would be therefore today.
And thanks, Jamie Alright Bye bye.
Thank you very much everyone that concludes our conference call for today you may now disconnect. Thank you for joining and enjoy the rest of your day.
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