Q3 2021 Vicor Corp Earnings Call
I'd like to a nice.
Life parties that this conference is being recorded N V that I would like to hand over to Jim Schmidt Chief Financial Officer. Please proceed.
Thank you and good afternoon, and welcome to <unk> Corporation's earnings call for the third quarter ended September 32021, and.
Oh, Chief Financial Officer, and I'm in Andover, with Petruchio Vinci, Corelli, Chief Executive Officer, and Joel Davis, Vice President of global sales and marketing.
After the mortgage close today, we issued a press release summarizing our financial results for the three months ending September 30th. This press release has been posted on.
I'm, Jim Stuhr relations page of our website.
You Ww dogfight, where power dot com.
We also filed a form 8-K today related to the issuance of this press release.
I remind listeners this conference call is being recorded and is the copyrighted property of <unk> Corporation.
To remind you various remarks.
In fact during this call may constitute forward looking statements for the purposes of the Safe Harbor provisions under the Securities Private Securities Litigation Reform Act of 1995.
Except for historical information contained in this call the matters discussed on this call, including any statements regarding current and planned products currently.
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.
<unk> that any forward looking statement will in fact prove to be correct. Actual results may differ material materially from those explicitly set forth in or implied by any of our remarks today the.
The risks and uncertainties, we face are discussed in item <unk> of.
Of our 2020 Form 10-K, which we <unk>.
Filed with the SEC on March one 2021.
This document is available via the Edgar system on the SEC's website.
Please note the information provided during this conference call is accurate only as of today Thursday October 21, 2021, Vikar 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 today's call will be available beginning at midnight Tonight through November five 2021 to replay dial in number is 8882868010, followed.
Pass code 3334 to $5 63.
The style and passcode also are 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.
I'll now turn to a review.
Few of our Q3 financial performance after which Bill will review recent market developments and <unk>.
<unk> and I will take your questions in my remarks, I will focus mostly on the sequential quarterly change for P&L and balance sheet items.
And refer you to our press release or our upcoming Form 10-Q, four year over year comparisons.
But as stated in today's press release <unk> recorded total revenue for the second quarter of $84 9 million.
Down 11% from the second quarter total of $95 4 million.
Revenues came in substantially below expectations because of semiconductor component shortages compounded by our own capacity constraints.
Component shortages were due to limited wafer allocation and long cycle time backend semiconductor component packaging processes.
Advanced products revenue rose, 6% sequentially, while brick products revenue declined 23, 7% from the second quarter.
Shipments to stocking distributors declined $36.
Percent sequentially, primarily due to a client a decline in brick products.
Exports for the second quarter decreased sequentially as a percentage of total revenue to approximately 62, 4% of consolidated revenue from the prior quarters 64, 3%.
Primarily due to decreases in brick products.
<unk> for Q3 advanced products share of total revenue increased to 51, 2% compared to 43% for the second quarter with brick products sure correspondingly decreasing to 48, 8% of total revenue.
Turning to Q3 gross margin we recorded a consolidated gross profit of 50.
6%.
Gross margin dollars declined by 14% sequentially due to the decline in volume, but increased 20%, 28% from the same period a year ago.
Margins remain under the pressure of high tariff charges.
Q3 charge was approximately the same as Q2's charge of approximately $1 9 million.
We expect to see improvement over time in part, reflecting our ongoing efforts to reduce component imports from China.
I'll now turn to Q3 operating expenses total Opex increased three 3% from the second quarter, driven by increased compensation legal and consulting fees.
Fees and recruitment expense.
The amounts of total equity based compensation expense for Q3 included in cost of goods sold SG&A and R&D were approximately $259 $1.033 million and $575000 respectively totaling.
<unk> $1 9 million for.
For Q3, we recorded operating income of $12 million, representing an operating margin of 14, 1%.
Turning to income taxes, we recorded a net tax benefit for Q3 of $886000 representing.
An effective tax rate for the quarter a minus.
11% the net tax benefit for Q3 and year to date was primarily due to a result of the income tax accounting required for stock options exercised exercised during this period.
Net income for Q3 totaled $13 $3 million.
GAAP diluted earnings per share was 29.
Minus on a fully diluted share count of $45 million 34000 shares.
Before I turn to our financial position just a brief update about COVID-19 in our workforce as previously discussed as a designated essential manufacturer using masks practicing social distinct distancing from the onset of the pandemic.
Basically we have continuously operated three shifts at our Andover manufacturing facility.
And absent absenteeism due to COVID-19 are now negligible Nevertheless, because much of the potential influence of the COVID-19 pandemic is associated with risks outside of our control we cannot estimate the extent of such.
<unk> on our financial or operational performance or when such influence might occur.
Turning to our cash flow and balance sheet.
Cash cash equivalents and short term investments totaled $228 9 million at the end of Q3 accounts receivable net of reserves totaled $51 1 million.
At quarter end with Dsos for trade receivables basically steady at 40 days.
All balances are current inventories net of reserves increased 11% sequentially to $63 4 million.
Annualized turns decreased slightly to $2 91 from $3 one two for Q.
Operating cash flow totaled $10 1 million for the quarter.
Capital expenditures for Q3 totaled $15 2 million, we ended the quarter with construction in progress balance of 36 million, leaving approximately $20 million of our capital budget scheduled to be spent through the year.
Our factory.
Two expansion is proceeding on schedule and on budget.
I will now address bookings and backlog Q.
Q3 book to Bill came in at 2.0, and one year backlog more than doubled from the same period last year.
Turning to our outlook for the fourth quarter of 2021, our practice continues to be to not provide.
Factory fit quarterly targets, however, given our assessment of available semi semiconductor components and architect and of our capacity. We're planning on a 20% increase in revenue in Q4 available.
Availability of semi semi Dr components has improved since Q3 because of reduced cycle times and backend processes.
<unk> had a substantial increase in our wafer allocation.
Easing supply chain bottlenecks and recent increases in our advanced products manufacturing capacity should enable a significant step up in advanced products revenue.
We continue to focus on improvement in product level profitability further we do not anticipate.
Dissipate any meaningful increases in operating expenses.
While substantial further improvements in gross margin will have to await production from our new vertically integrated factory.
We expect incremental revenue to drive earnings per share given the scalability of our operating model.
With that Phil will provide an overview.
A review of recent market developments, and then Pretreat Seo, Phil and I will take your questions.
I ask that you limit yourselves to one question and a related follow up so that we can respond to as many of you as we can in the limited time available if.
If you have more than one topic to address.
Please get back into queue.
Phil.
Thank you Jim Good afternoon, everyone and thank you for joining us in Q3, we achieved record bookings a record book to Bill and record backlog bookings for AI and data center customers for factor <unk> polished solutions on 12 volt to 48 volt bridging bus converters were robust.
Our visibility.
Production programs is longer than we have seen on previous projects.
Some of the next generation programs will also run in parallel with existing programs, which is a new strategy for some of our data center customers.
Next generation AI processor, and datacenter CPU server programs in.
<unk> and stages of development and pre production will provide $70 to $150 of <unk> content per board.
New cluster processor AI applications also a much higher dollar content for our proprietary vertical power delivery solutions, whose IP protection and the technical challenges set us.
In early apart from our competitors.
Expanding our Sam within the large data center market is always an objective for our teams and evaluation of our advanced AC to DC solutions are started at lead customers with derivative products in development that will target applications for both single phase.
Further in three phase AC to DC across the high performance computing, industrial and aerospace and defense markets.
We are also engaging with customers who are deploying <unk> for high speed optical networking units, which have power delivery challenges due to major increases in core rail currents.
Above 1000 amps.
Our first major customer in this new market will be in production in Q3 2022.
As the data center industry shifts to 48 volt based rapid power delivery the upcoming open compute for and will feature 48 volt power distribution and the need for.
Were more robust ecosystem of high density modular power solutions, rather than low density discrete approaches.
All of which validates decisions, we made to commit to this market before it emerged 10 years ago.
Our OEM licensing practice will facilitate an ecosystem of high performance power.
Solutions for the AI and data center industry.
Anticipating pilot delivery challenges and trends and innovating to deliver solutions ahead of market needs as vehicles track record.
This is playing out with additional growth in Q3 for our pipeline of automotive opportunities as.
Systems' vacation commitments grow within Oems for additional models and a new electrified vehicle introduction dates solidified.
We are not only seeing more opportunities than pure EV, but also in plugging and mild hybrid platforms as well as the truck industry broadening and diversifying.
The electrical market and customer base.
With this backdrop of increasing growth opportunities, we have decided to restructure the front end of our business and to market based business units.
The four business units will be high performance computing.
Automotive aerospace and defense and broad.
<unk> it's <unk>.
This structure aligns with our five lays a growth strategy and brings a higher level of focus on a global scale to our target markets customers and applications.
As well as increased responsibility and the team for funnel conversion revenue streams on gross margin improvement.
Mark because of the high level of technology reuse and applicability of our innovations across markets engineering and product development will remain centralized.
Patricio, Jim and I will now take your questions. Thank you.
Okay, operator were ready for.
You to coordinate questions for us.
Oh absolutely.
If you wish to ask a question. Please press star one on your telephone.
And we have upcoming questions already the first one is coming from Jonathan.
Okay.
Please proceed.
Okay.
Hi, Good afternoon, guys. Thank you for taking my questions.
Okay, that's a really nice.
A number you have on the sequential increase in Q4 I was just wondering how much of that is just catch up from Q3 and how much of that I guess is.
Organic demand I guess.
To the outside of maybe what you had been thinking when you had said 7% sequential increases over the next several quarters way back in Q1 and Q2.
So it's all about.
<unk>.
Our backlog as we have.
The fourth quarter.
Any allowance for turns business.
Would you have us up by approximately 20% and this fact that turns business would layer on top of that.
A substantial incremental amount.
So the demand is.
Without we're still capacity constrained.
And there are still challenges with respect to impact.
Semiconductor components is.
Jim articulated in his prepared remarks.
Those challenges have to do with both the backend processing.
Is there after.
Completion of wafer fab.
And they've had to do with the wafer all location.
So what.
It has improved.
Considerably since.
Q3.
Is that the backend.
Bottlenecks, which way.
<unk> pasta related in some parts of the world to carbon and other factors those have been largely relieved so the components that did not show up in time.
Because of Beckham bottlenecks in Q3.
As shown up or about to.
<unk>.
In time for our bills in.
Q4, and Furthermore.
We have recently been able to.
Yeah.
Received commitments with.
Some of our foundries.
That would result in a.
Sure Nick Raza low cash on it.
Both within Q4 and more significantly into.
<unk> two so we believe that in terms of the component gates that.
Yeah.
He got lunch within the third quarter in terms of.
Cause.
Compounding capacity constraints as we all know we're already there.
We've made a great deal of progress there.
A signal, saying are still there but.
Being able to stock builds on schedule dates.
And not having to be.
Hand to mouth with respect to the availability of components will facilitate.
A substantial capacity increase this quarter.
Got it. Thank you appreciate you for that color and then second I saw on the press release that it was mentioned that you used.
You signed a license with some of your cuts.
As might be just one of your customers who have done that.
You are infringing product can you talk a little bit of more about that does.
Does that set the tone for the other customers out there that are doing this and kind of what kind of benefits do you expect to see from this.
So we're not at Liberty to say anything regarding.
The the identity of the licensee or any all of the key parameters of.
The licensing deal that we actually use it in the third quarter.
In general terms I can tell you that.
It points to.
The beginning.
Hum.
New kinds of relationships on the licensing front.
The industry.
As we all know.
As our growth needs.
And technology needs are very compelling.
Needless to say, particularly at the time of capacity constraints.
These are legitimate interest on the part.
All customers.
To be able to.
Secure their requirements.
And.
Got it.
Everything technology.
It has only been available from VICORP that's.
Something that our customers were.
We like to in those ways I'd be able to overcome so the OEM.
Yes.
Provides customers with the ability to.
Without concerns with respect to all.
I'll cede bowl exclusion orders to the import fashion OEM products into the U S.
[noise] procure modules incorporate the smallest seem to seize them.
Like even though the small deals with otherwise infringe <unk> patents.
Patents.
So we believe there's going to be more.
Licensees.
And we view this as.
A complementary component of our business model.
Contribute to margin.
Margins profitability.
Well provide the industry with.
The ecosystem that many key customers seek whoever.
Okay. Thank you I'll jump back in queue.
Thanks, Jeff.
Yeah.
The next question is coming from clean. Please go ahead.
Hey, guys congratulations on the nice bookings activity.
Where I get to my bookings question just wanted to come back to your outlook for the fourth quarter, obviously component availability.
And your manufacturing capacity or significant constraints and I'm just curious do you guys feel confident.
Where you sit today, you have enough component availability and internal manufacturing capacity to grow the business, 20% quarter on quarter.
We do.
I want to be clear that this is not a Islam docker to put it.
Good evening.
In that.
We're at the beginning of the quarter and a lot has to happen. It's not that we have as of today all of the semiconductor components we need.
But in order to make the revenue plan for the quarter.
On their way in.
Beyond their way through.
The first two thirds.
Of the quarter, so they'll steal risks out there.
But we feel that.
Need the improvements have been made with respect to the backend which in effect.
It made available components that we're investing to us in the third quarter, but couldnt be processing time.
That coupled with as I mentioned earlier the ability to achieve.
Greater utilization of constrained capacity by not being gated by the inability to stock because of lack of patio components that that sets us off to a much faster start early.
Early in the quarter and it bodes well with respect.
The outcome of the quarter as a whole.
Thank you Patricia My second question is just on orders, obviously I think most most of us on the line.
Following the company been very impressed with what the acceleration in the bookings number and I think most of that is being driven by advanced.
Product bookings were up.
Achieved based product bookings last quarter was probably over $90 million. This quarter. It looks like you booked over $100 million, maybe as much as $120 million in advanced product bookings. My question is how broad based is that advanced products booking activity over the past couple of quarters is it highly conscious.
You know traded among just a couple of GPU GPU sick accelerator customers or are you starting to see very good diversification.
Including front end or AC to DC, including the MBA modules can you just give us some some.
<unk>.
Color on on how broad based that.
That bookings activity is thank you.
Hi, Colin this is Phil so the as.
We've been talking over the last 18 months to the customer base for advanced products in data Center AI has been broadening.
Quite a bit from one or two.
Companies major companies a couple of years ago to now well over $12 15 type type of quantity of customers, which are you know.
Adding to that the backlog and the bookings number.
In terms of the activity there 48 to 12 as well.
The bridging.
<unk> to $48 48 to 12 on some of the CPU server boards. It's it's very strong and now we're entering the phase of.
Continued <unk> growth.
With our existing customer base, but also with the new Intel and AMD CPU.
Platforms coming on in <unk>.
In data centers with some of the Hyperscale is are going 48 volts who's seeing strength, there and also coupled with the AI accelerated growth.
Which are 48 volt based we've seen growth now significant growth in our 12% to 48 volt bridging computer business.
Well as Hyperscale is that a still at 12 volts and their infrastructure need to 12 months to 48 to use the latest greatest accelerated cards.
And multiple cluster, we accelerated cards. So so it's very broad broad spread.
So just a quick follow up is is it is it pretty well balanced between the types.
MCM mcd components versus the M. B M bridging products or does it does it skew more heavily to the sort of point of load MCM Mcd <unk>.
Components today still.
I think the 48 to 12 48 to load is the is the largest piece of it.
Of the <unk> doing.
Doing really well in the 12 to 48 space because one of the reasons being is that typically in those applications, you've got six to eight and BMS put power board.
So the quantities add up pretty quickly in the bookings ahead of pretty quickly.
Got it thank you for.
Okay.
Just a bit more on that.
The MDM market opportunity next year.
It is quite substantial so.
Looking at it from.
The timing perspective, it hasn't been.
All that significant.
But.
It promises to be in.
In fact, it has been a recent.
Recent orders just within the last couple of days for $4 million for MBS.
Quite a significant this we enter in the first half of next year in the middle of next year.
Thank you.
Thanks Glenn.
Yeah.
The next question is coming from Shannon. Please go ahead.
Hi, guys. Thanks for taking my questions I might follow up on the topic of licensing P. T.
Well I understand you're not allowed to say much about this maybe I'll ask a couple of questions and see if he can.
Push the envelope here and can you talk about any are any particular applications that the fed licensee is working in and then also in terms of the nature of the agreement weathers, whether there's upfront and ongoing royalties were just upfront.
Kind of any nature of understanding there would be great. Please.
Okay.
So again.
I need to keep these as a very general level that would not.
In any way and phaedra under confidentiality constraints, we have.
With the licensee and future licensees.
Prince.
The the licensed fascia is fundamentally a pay as you go.
And the mechanism involves the placement of those licenses.
Yields.
Based on the license fees.
Choice two.
Get a life.
License for part D var.
Products to be used in part for your systems.
And.
If you can comment on the license fee to decide which.
Okay.
Okay.
All the math otherwise infringe vical.
Hi, Vince.
To get a license and.
So as mentioned in the press release.
Not only do we get.
Okay.
We in license executed within the quarter.
The license fee we have received.
Okay.
And in fact.
Yes.
Revenue, even though.
Those.
Will the resulting cash flow starting this quarter.
So.
Okay.
<unk> example, all along.
Licensing.
No.
Yeah.
Opportunities to come we have.
Well thought out methodology.
Yes.
A potential licensees.
And.
<unk> declined.
Whether or not.
Do you have a license.
They can add the wait and see asking do you expect to that.
She.
<unk> Suisse.
Of.
A potential.
Exclusion order that could affect their systems, which are quite valuable.
That should motivate them to seek a license earlier and later also because.
For the sitcoms.
With time, so receptive that he's.
The passage of time.
So about a transition from what we call phase zero to phase one to phase two.
With that comps in this class shrink the royalty rate.
So we believe that.
Having accomplished the first lifestyle see.
There's going to be more and and we're aware of a number of Vms that we believe.
We'll need a license if they want to continue to access the cancer.
So products they need for their systems.
Okay. Thanks.
Thanks for all the detail My second question is on the gross margin not only not only for the fourth quarter, but I guess looking at into next few quarters here as well, Jim I think I heard I heard you correctly in your prepared.
You seem to be suggesting kind of a flattening of gross margins here in the fourth quarter and until we see some throughput in sales from products in the new facility would it wouldn't go up until then so I want to make sure I'm understanding the dynamics here that you were suggesting in your comments and how we should look at gross margins next few quarters.
Sure So first.
Remarks, I do have to say that it's our practice to not provide any specific guidance on gross margin in out quarters.
I didn't mean to imply by that statement about waiting until the new factories online that we have to wait for gross margin improvement per se. We have volume volume increases drive gross margin leverage that's a fact in the industry its not something.
First of all it's actually not just try to provide courts for anybody but.
So we were not.
That's kind of it is actually a comment that I made last quarter as well. It's just a standard comment we want to make that highlights. The fact that you know.
We're all very anxious to get our own factory online and as that comes online we get all.
The efficiencies Theres no outsourcing of some of the process steps, we get more leverage on the volume goes up greater efficiency inside the factory. So that's really going to be a significant.
Milestone for us.
Alex with that looking at it in terms of the past, but he of Humira.
I think I'm, saying anything.
More than expected, but it bears saying in Q3.
The margins the gross margins and the profit margins would have been substantially I would not for the fact that we had the shortfall in revenue that that cost us several points of margin.
Within Q3 right.
That's a fact unfortunate fact.
And to Jim's point.
Rising revenues.
We will bring about better margins, even before we we get.
Yet the full leverage of the new facility.
Okay great.
Great. Thank you for all the detail guys. That's all for me. Thanks.
Thanks Richard.
Yeah.
The next question is coming from John John Please go ahead.
Hey, congratulations guys on the bookings and the backlog really great numbers.
Well I do have a question on the on the bookings number.
I'm just wondering if the increase in bookings was due to customers securing a place in line or a customer's priming the pump or are those bookings number is sustainable.
So the programs that we're involved in no John.
John on the visibility we have we're seeing inquiry.
Great.
Demand for.
For the AI accelerated cards across the data centers the deployment of those those causes significantly increasing with all of the Hyperscale Hyperscale is on a global level. So that's a very strong robust business and as I mentioned, along with the increase a lot.
The rack systems are still you know 12 volt based so they need the 12 to 48 to power those cards and so we're getting sort of a double whammy, if you like but having the best you know high density bus converter in the industry.
Available today. So so we're winning on both ends as it were with the with both the Hyperscale is.
Deploying the AI and also would be the guy who is actually with the AI cards. So so strong right now.
So I think what I'm hearing is the bookings are sustainable and even growing.
You see that in the future.
Glass products, yeah, absolutely yeah.
And then along with that then I would imagine you have pretty good pricing power.
You guys raised some prices.
Well, we're always looking to you know price on value right. That's what we do we look at the value that we bring to our end customers and <unk>.
Do we do that with the whole portfolio. It isn't just on advanced products, but even on a brick or legacy business.
We adjust prices regularly and.
We do that on a case by case basis of product family or market or customer, but we really do try to price on on value.
Gotcha, and then a follow up would be you mentioned the 12 to 48 volt Samsung scratching my head why would customers.
Customers want to do that when customers on why they gone from high voltage 10 to 12 voltage backup to 48, one thing that could treat you kind of mentioned this in the last call, but I mean aren't you didn't see a huge conversion to all 48 volt racks or do you see that coming.
So then just county, but it doesn't happen overnight right.
So fundamentally.
Key developers so turning points in the industry.
Being about.
Adoption, but that adoption requires time to get implemented.
And he has to say the the absurdity.
And to your point.
Go.
Going all the way down to 12 to go back up to 48 to go down too.
One eight volt or sub one volt as the case may be.
That will provide even greater multi version for the balance of the Hyperscale is to convert 240 <unk>.
And there's.
Frankly, a multi version but.
Not just coming from the absurdity of unnecessary stages of conversion.
Two.
Voltage is too low for efficient power distribution backup to voltages that in essence.
To achieve.
What should be done downstream.
Within the App.
John This is Phil I mean data centers are going to go through major changes.
Over the next three to seven years.
If you just look at the the amount of AI, that's being added there.
They're just not equipped.
To get the data in and out that the speeds that they want so this huge networking.
Changes that are going to come in terms of moving from gigabytes, two terabytes of moving data in and out.
To support the autonomous driving and another machine learning applications. So the data center footprints that have all.
The renewables to to power them, because you're talking you know.
Tens of megawatts for these things you can't move a data center to a different location you've got to refurbish it you've got a ticket to the next level of capacity and capability. So so all of this stuff is going to change, including 48 volts and the rack more.
Higher performance optical networking.
It's really going to go through a significant change in over the next three to seven years, it's going to be quite amazing to watch.
By the way that's one element.
And I thought the reengineering of the Axa.
Beyond the electrical.
Part of it has to do with switching over from a 12 volt distributions for cable distribution.
As to do with come on monitoring so that the power allow us within that act that justify or more debate.
In addition to the most sufficient power.
Part distribution voltage.
Yea involved which isn't reality be a 54 balls they feel safe.
That multi version.
It brings about the also term on mountain cement the challenges that before too long we'll.
I have a number of these facts would be cooled by liquid.
According as opposed to.
Yes.
In that regard that we should point out that within the third quarter recently.
We have delivered.
<unk> units of <unk>.
<unk> liquid cooled front there.
<unk> two our lead Castorama.
For the party here.
Our capability.
And.
This solution again liquid cooled P phasing 50.
50 to 55 vaults out is an order of magnitude more advanced than anything else out there.
Guys. This is really.
Citing thank you so much I'll get back in the queue and great quarter great great.
Visibility. Thank you. Thank you.
Thanks, John.
The next question is coming from Gaza Chan. Please go ahead.
Yes, Thanks for taking my question I just.
Just wanted to circle back on your constraints is the plating capacity still constrained and do you need the new facility to come up to relieve that.
Yeah.
To your point that that's the key capacity bottleneck, we're working it.
In a number of ways. So we are.
Complementing that capability.
Trading partner.
Bye.
To a high degree.
Deploying our own human resources within their facility.
To announce.
Available capacity.
We have also recently taken steps.
So to bring about another partner.
It's actually closer to two <unk> main manufacturing facilities.
And in a matter of a couple of weeks, we expect to to term debt second partner on <unk>.
For further step up in capacity.
And these are stepping stones to the deployment.
Of.
Very high volume sales.
<unk>.
Painting capability.
Within our own facility.
And by the way.
One thing so play.
It's tempting to think of.
Something that is relatively low low tac.
Thats far from being the case here right.
The.
We're referring to is about $25 million worth of equipment on a 40000 square feet.
Which.
He will be settled for this class of products.
Got it that's very helpful. Thank you and then.
On the gross margin pressure it sounds like it's primarily absorption, but I was wondering if there was any influence from higher input costs or <unk> mix.
<unk>.
No real pressure from from mix.
It turns out that.
Brick business is actually fairly decent gross margins.
On.
And higher input costs, what we've done there generally speaking even before I arrived the tricor.
We were not.
Accepting inflation cost in our raw materials without passing those.
And in many cases through our target so what absorbing that.
But.
I hope that answers your question.
It does thank you and then.
Last one for me is.
Just looking at the backlog.
And given the supply constraints in the world.
Are you seeing any 18 and that backlog is some of that moving.
You know is it some of its scheduled further out the normal or.
Has the distribution backlog remained the same over the last few quarters.
So we have.
See implemented longer lead times. So we have lot more visibility. So it sits where it ranges from 20 weeks out to 30 weeks.
<unk> types of product families.
But you know that.
The backlog is.
As you know when people double ordering and all of that and we don't see that it's real demand.
We have.
Yes.
Unique product, it's not a commodity product theres not a pin for pin compatible type of the market for our stuff. So so we have very dedicated unique customers that buy our stuff. They have done for many years on the legacy side on the advanced product side, where we've got we're building a whole new business there and data.
Data center and AI. So we have good visibility into that and the end market demand and the growth. There. So so I'm very confident in our in the backlog that we have in terms of the validity of it and the reality of it but it typically is within 12 months everything within 12 months or so that's that's what we define.
It would be the backlog.
Got it got it perfect. Thank you so much and that's it for me.
Thanks, guys.
Do you have another.
Question from Jack Dan Donlan.
Please proceed.
Hey, guys. Thanks for the follow up just another question.
I see and the constraints that you have I I get that you are putting a lot of good planning capacity into place this quarter and especially the new facility next quarter.
In Q1.
I was just wondering how confident you are in an increasing your wafer allocations and the other components in the chamber you need as we get into the first half of next year, because I don't know.
And many other places they seem to be getting worse not better. So I was just wondering what's your visibility into you know.
The things that you can't control Orange at the end of next year.
So we have visibility.
We've been allocated.
A significant step up in a wafer outs are in November and even.
Marshall in December.
The numbers for next year.
Casting concrete yet.
But we have.
I've been informed that we're going to get.
The numbers that we need.
As you can imagine we do.
Quite a bit of leverage with respect to.
Getting wafer capacity because of the crazy got programs that are trips support.
And that's obviously a factor of play with respect to getting access to what's necessary.
For us to be able.
The products that you don't.
Make a high end.
Data center.
<unk> systems.
Operator.
Got it that's helpful and I was wondering if you could give us an update on just on the auto business. How many platforms do you have at this point.
To make more coming into the pipeline just.
Just give us an update on I guess when do you think that'll become significant for your profit and revenue.
So again, we we're starting production at the end of 'twenty three on mid 'twenty three with some early customers there, but we have more collaborations that's what I was taught.
And my my remarks, we've got more collaborations that occurred in Q3 those collaborations you know typically take.
Six to nine months to work through in terms of.
Building prototype systems and testing them and then we're now moving the customer really to a stage, where we call the conversion stage.
Looking about shoes, where we we moved to a a commitment for a start of production dates. So that's what we're always.
We're shooting for at this point in time, we have two large Oems with start of production dates and we have a whole host of collaborations that are moving towards SLP dates in the next six to nine months. So it's been a very exciting.
Right.
Funnel, we have in automotive.
Got it thanks and again congrats on the <unk>.
Backlog.
Yeah.
Thanks, John.
And we have a question from.
Please proceed.
Excited to have good afternoon.
You've invested over half a billion dollars and these new products.
Now it looks like youre going to be solidly profitable for as far as I can see.
Where are you at in terms of tax loss carryforwards.
And how do you expect.
When do you expect to get back.
Back to the normal tax rate.
Okay.
So I'll, let Jim Schmidt here so.
At this point, we're not going to comment on next year I.
I will tell you that the current year is status quo. So we expect the tax rate I know, it's toggling between 4% or minus seven.
We have a tax benefit oftentimes.
Hock option exercising that's going on.
We're not going to comment at this time on next year, but stay tuned.
Next call I think will be more in a position to talk about that going forward.
It's what we prepared to say now.
Okay.
What are you at in terms.
Hum.
Next loss carryforwards.
I think it was in the $30 million range.
I think thats right and Thats still.
On the books.
We were not.
It's a fairly complicated topic, we're working with our partner on that and.
Yeah.
We're ready to say status quo for the balance of the year.
After that we'll talk again in January.
Okay.
Anticipate that you'd probably use that up next year.
I would think if you're going to make.
At least $30 million in profits next year.
Hi.
It's more complicated than that [laughter] yeah.
I think the numbers cut routinely and.
Stock option exercises that are tax benefit and other other pieces both muscle in there.
Okay.
Also there was talk that two quarters ago about getting some of the tariffs that were paid.
And declining them back.
I think they were.
Remember, it's six months ago.
<unk> million dollars range, I think in and growing.
Well.
Uh huh.
Yes in my prepared.
He said the tariff expense in the P&L and cost of sales was $1 9 million, which was approximately.
It was last quarter, we are making progress on it.
Tariff expense to total it's actually significant amount of time people are spending on that activity right now and we did have we did make progress it's incremental.
Sometimes it's a bit slow incoming because we're talking about a product from uncle Sam.
Really what I'm, so, but we're making progress on it.
Okay. So you still expect to get that money back.
Good question.
Rather a matter of if it's a matter of when it's about everyone.
Okay.
Okay. Thank you very much.
Sure.
We have another question from John Dillon. Please proceed.
Hey, guys I'm between you know you said that.
You've got some front end products I think you delivered this quarter, but I'm wondering if we get some more color on all the front end products are you guys actually actively booking orders for that how's it going are they going into the same markets.
So maybe you can give us a little color on that how are you doing.
So as of now we have two major programs.
Sure.
I mean, as our three facing foot high power.
48, 52 evolve 54 volt outputs.
This.
Programs are.
Sure.
Representative of.
General market needs.
We are getting up to address.
The lease cash them or it provided us with an opportunity to.
Do what wasn't.
Whats necessary to as suggested earlier deliver stays a VR solution seen one case.
It's a natural convection cooled.
<unk> is a solution that doesn't require either a fan or liquid cooling.
Which is in effect.
In fact at one extreme in the other cases or suggesting earlier.
And extremely high density solution.
Which is liquid cooled and proxies to access them.
Liberty 20 kilowatts in <unk>.
If footprint.
Sprint that is about the size of a.
An iPad, so just imagine a very sick and very heavy iPad, but in <unk> Wi footprint.
20 kilowatts.
Going from three Phase AC.
Two.
50 254 vaults.
That's the kind of solutions service costs are going to need in years to come in order to get that rocks.
Hum.
Got it.
The low tenths of kilowatts to the much higher power levels that are as suggested they feel earlier.
They're going to need in order to get.
Much greater bandwidth within the footprint of their existing facilities.
John This is Phil you haven't really stepped on the gas yet with that product.
Obviously, you've got some early customers, we're working on some derivatives as I.
Single phase on three phase, but I think it'll be Q2, probably next year before we really put our foot on the gas and stock moving with that stuff.
Q2, you'll start really start the bookings.
You'll see a lot of marketing from us a lot of activity in the customer base worldwide, what we're really going to put our foot on the gas with this stuff because it's it's.
Mentioned special Yeah, it's very exciting so along those lines until you talked about the bookings the numbers in <unk>.
The increasing if I do my math right you guys are gonna be filling up that new factory very quickly. So you must be looking at in a new factory. So I'm just wondering what are your plans for a new factory and what's the timing.
And that new factory.
So Jim and I were together with Mike.
Oh fascia.
Visiting one such Kansas just within the last 10 days.
But frankly.
I feel that is super mature.
It's very hard to take that step I believe that we have.
Quite a bit of capacity.
Within the span of the factory.
Tours of the expanded factory within the last 10 days.
I've been very impressed with.
What.
He must down in terms of.
Laying the foundation for the expansion.
The way he wasn't mentioned earlier, but it should be mentioned.
This quarter a lot of equipment got relocated within the existing walls of the factory in <unk>.
Fact within the.
The.
Week of the third quarter.
We have no.
<unk>.
Throughput because we actually took the whole factory down too.
Can you.
[noise] facilities for electric power delivery.
So.
First a lot of work that's been going on within that factory to set the stage for a level of capacity.
That I think may well exceed it.
The goal of the team sat and we've reported.
So.
<unk>.
With that I think we got.
A little bit of time.
To take.
The right step for the next incremental capacity.
I think it's critically important that over the next six months our focus.
<unk> be strictly.
On realizing the metro capacity as fashion is about to come online.
Starting with.
<unk>.
Contribution to capacity in the first quarter and then it bigger.
<unk> capacity.
In Q2, I think one.
<unk> is happen then we can.
Take the next step.
Great. So it sounds like Youre again beat your goal of $750 million and with the new wing it sounds like you're.
It looks like you can beat that number.
I think we can.
Link.
<unk>.
I think that this factory will be very efficient.
And.
It's Scott.
Mark capacity.
Potential that we have.
<unk> targeted.
Some of that has to do with the mix of the products So casing point.
Our budget in terms of capacity was predicated.
On some of the early <unk>.
Trips.
Is that relatively thick.
Is that they.
They take more time to process than a thinner chips in general a lot of the.
Design wins going forward are going to be for thinner chips and boosting our panels.
You can think of them in some respects as wafers with fewer.
Sure Les.
Here's that can process faster.
I think we have a variety of degrees of freedom our play.
To improve efficiency improve capacity and being.
Being focused on that at this point in time is more important than.
Securing the next.
Incremental brick and mortar.
Very good very good I love it.
Thank you so much I am looking forward to it is really exciting times great job guys.
Jonathan I think we're going to have to close out no.
So.
Operator, we're going to have to close the call and thanks for participate.
<unk>.
Thank you very much everyone that concludes your conference call for today you may now disconnect. Thank you for joining the rest of your day.
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Good day, everyone and welcome to the earnings results for the third quarter ended September 30th 2021.
My name is London down the argument in many chip during the presentation your lines.
Recently issued a quant assistance at any time, Please press star zero on your steady fund and a coordinator will be happy to assist you.
I would like to have nice all parties that this conference is being recorded and read that I would like to hand over to Jim Schmidt Chief Financial Officer. Please proceed.
Yeah.
Thank you and good afternoon, and welcome to <unk> Corporation's earnings call for the third quarter ended September 32021.
Jim Schmidt, Chief Financial Officer, and I'm in and over with Pretreat Shiao of NCR Rally, Chief Executive Officer, and Joel <unk>, Vice President of global sales and marketing.
After the <unk>.
Mortgage close today, we issued a press release summarizing our financial results for the three months ending September 30.
This press release has been posted on the Investor Relations page of our website www.
<unk> W Dot VICORP power Dot com.
We also filed a form 8-K today related to the issuance of this press.
Okay.
Mine listeners. This conference call is being recorded and is copyrighted property of <unk> Corporation.
I also remind you various remarks, we make during this call may constitute forward looking statements for the purposes of the Safe Harbor provisions under the Securities Private Securities Litigation Reform Act 1995.
Release EFT 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 material materially from those explicitly set forth in or implied by.
<unk> has plenty of our remarks today.
The risks and uncertainties, we face are discussed in item one.
Of our 2020 Form 10-K, which we filed with the SEC on March one 2021.
This document is available via the Edgar system on the SEC's website.
Please note the information provided during this.
Conference call is accurate only as of today Thursday October 21, 2021, Vycor 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 today's call will be available beginning.
At Midnight Tonight through November five 2021 to replay dial in number is 888 to 868010, followed by the passcode 3334 to $5 63 to.
This dial in and passcode also are set forth in today's press release.
In addition, a webcast.
Cast replay of today's call along with a transcript will be available shortly on the Investor Relations page of our website.
I'll now turn to a review of our Q3 financial performance after which Bill will review recent market developments and Patricio, Phil and I will take your questions in my remarks, I will focus mostly on the sequential quarterly.
Really changed for P&L and balance sheet items and refer you to our press release or our upcoming Form 10-Q for a year over year comparisons.
As stated in today's press release <unk> recorded total revenue for the second quarter of $84 9 million.
Down 11% from the second quarter total of 95.
Okay.
Revenues came in substantially below expectations because of semiconductor component shortages compounded by our own capacity constraints.
Component shortages were due to limited wafer allocation and long cycle time backend semiconductor component packaging processes.
Advanced products revenue rose six.
Formula sequentially, while brick products revenue declined 23, 7% from the second quarter.
Shipments to stocking distributors declined 36, 6% sequentially, primarily due to a client a decline in brick products.
Exports for the second quarter decreased sequentially as a percentage of total revenue to approximately.
<unk> 62, 4% of consolidated revenue from the prior quarters 64, 3%, primarily due to decreases in brick products.
For Q3 advanced products share of total revenue increased to 51, 2% compared to 43% for the second quarter with brick product sure correspondingly.
<unk> decreasing to 48, 8% of total revenue.
Turning to Q3 gross margin, we recorded a consolidated gross profit of 54%.
Gross margin dollars declined by 14% sequentially due to the decline in volume, but increased 20%, 28% from the same period a year ago.
<unk> margins remain under the pressure of high tariff charges.
Q3 charge was approximately the same as Q2's charge of approximately $1 9 million.
We expect to see improvement over time in part, reflecting our ongoing efforts to reduce component imports from China.
I'll now turn.
Three operating expenses total opex increased three 3% from the second quarter, driven by increased compensation legal and consulting fees and recruitment expense.
The amount of total equity based compensation expense for Q3 included in cost of goods sold SG&A and R&D.
Cute accidently, $259 1 million $33 and $575000, respectively totaling approximately $1 9 million for.
For Q3, we recorded operating income of $12 million, representing an operating margin of 14, 1%.
We're a priority to income taxes, we recorded a net tax benefit for Q3 of $886000, representing an effective tax rate for the quarter of minus 7%. The net tax benefit for Q3 and year to date was primarily due to a result of the income tax accounting required for stock options exercised.
Exercised during this period.
Net income for Q3 totaled $13 3 million.
GAAP diluted earnings per share was <unk> 29.
Based on a fully diluted share count of $45 million 34000 shares.
Before I turn to our financial position just a brief update about COVID-19.
Sized workforce as previously discussed as a designated essential manufacturer using masks and practicing social distinct distancing from the onset of the pandemic. We have continuously operated three shifts at our Andover manufacturing facility.
And absent absenteeism due to COVID-19 are now negligible.
And our nevertheless, because much of the potential 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 or operational performance or when such influence might occur.
Turning to our cash flow and balance sheet cash.
Cash cash equivalents and <unk>.
Investments totaled $228 9 million acute at the end of Q3.
Accounts receivable net of reserves totaled $51 1 million at quarter end with Dsos for trade receivables basically steady at 40 days.
All balances are current.
Inventories net of reserves increased to.
Short term percent sequentially to $63 4 million.
Annualized turns decreased slightly to $2 91 from $3 one two for Q2.
Operating cash flow totaled $10 1 million for the quarter.
Capital expenditures for Q3 totaled $15 2 million.
11% of the quarter with construction in progress balance of 36 million, leaving approximately $20 million of our capital budget scheduled to be spent through the year.
Our factory expansion is proceeding on schedule and on budget.
I will now address bookings and backlog.
Q3 book to Bill came in at two <unk> and one year backlog.
We and doubled from the same period last year.
Turning to our outlook for the fourth quarter of 2021 our.
Our practice continues to be to not provide specific quarterly targets. However, given our assessment of available semi semiconductor components and <unk> and of our capacity, we're planning on a 20% increase.
More than in Q4.
Availability of semi semiconductor components has improved since Q3 because of reduced cycle times and backend processes and a substantial increase in our wafer allocation is.
Easing supply chain bottlenecks and recent increases in our advanced products manufacturing capacity should enable.
And Resignees second step up in advanced products revenue.
We continue to focus on improvement in product level profitability further we do not anticipate any meaningful increases in operating expenses.
While substantial further improvements in gross margin will have to await production from our new vertically integrated.
<unk>, we expect incremental revenue to drive earnings per share given the scalability of our operating model.
With that Phil will provide an overview of recent market developments, and then Patricio, Phil and I will take your questions.
I ask that you limit yourselves to one question and a related follow up so that we can.
Factor <unk> to as many of you as we can in the limited time available if.
If you have more than one topic to address.
Please get back into queue.
Phil.
Thank you Jim Good afternoon, everyone and thank you for joining us in Q3, we achieved record bookings a record book to Bill and record backlog book.
<unk> for AI and data center customers for <unk> power solutions, and 12 volt to 48 volt bridging bus converters were robust and our.
Our visibility into production programs is longer than we have seen on previous projects.
Some of the next generation programs will also run in parallel with existing programs.
Bookings to the new strategy for some of our data center customers.
Next generation AI processor, and datacenter CPU server programs in early stages of development and pre production will provide $70 to $150 of Viper content per board.
New cluster processor AI application.
Which <unk> also a much higher dollar content for our proprietary vertical power delivery solutions, whose IP protection and technical challenges set us further apart from our competitors.
Expanding on some within the large data center market is always an objective for our teams and evaluation of our.
Applications to AC to DC solutions have started at lead customers with derivative products in development that will target applications for both single phase and three phase AC to DC across the high performance computing, industrial and aerospace and defense markets.
We are also engaging.
Our advanced <unk>, who are deploying <unk> for high speed optical networking units, which have power delivery challenges due to major increases in core rail currents above 1000 amps, our first major customer in this new market will be in production in Q3 2022.
As the data center.
With customs shifts to 48 volt based rapid power delivery the upcoming open compute Forum will feature 48 volt power distribution and the need for a more robust ecosystem of high density modular power solutions, rather than low density discrete approaches.
All of which validates decisions we.
The industry to commit to this market before the merge 10 years ago.
Our OEM licensing practice will facilitate an ecosystem of high performance Paula system solutions for the AI and data center industry.
Anticipating power delivery challenges and trends on innovating to deliver solutions.
Made of market needs as <unk> track record.
This is playing out with additional growth in Q3 for our pipeline of automotive opportunities as electrification commitments grow within Oems for additional models and a new electrified vehicle introduction dates solidify.
We are not.
Ahead of seeing more opportunities than pure EV, but also in plugging and mild hybrid platforms as well as the truck industry, broadening and diversifying our market and customer base.
With this backdrop of increasing growth opportunities, we have decided to restructure the front end of our business and to market.
Not only business units.
The four business units will be high performance computing.
Automotive aerospace and defense and broad markets.
This structure aligns with our five lays a growth strategy and brings a higher level of focus on a global scale to our target markets customers.
Chip base and applications.
As well as increased responsibility and the team for funnel conversion revenue streams on gross margin improvement.
Because of the high level of technology reuse and applicability of our innovations across markets engineering and product development will remain centralized.
Customers.
Patricio, Jim and I will now take your questions. Thank you.
Yes.
Okay, operator were ready for you to coordinate questions for us.
Oh absolutely.
If you wish to ask a question. Please press star one on your telephone.
<unk> key upcoming questions already this first one is coming from Jonathan Tom on that.
Please proceed.
Hi, Good afternoon, guys. Thank you for taking my questions.
That's a really nice.
A number you have on that.
The increase in Q4.
Just wondering how much of that is just catch up from Q3 and how much of that I guess it is organic demand I guess that.
The outside of maybe what you had been thinking when you had said 7% sequential increases over the next several quarters way back in Q1 and Q2.
Sequentially.
So you saw about.
Demand.
Our backlog as we have.
Sure.
The fourth quarter without any allowance for turns business.
Would you have us up.
By approximately 20%.
And you have this fact.
That turns business would that layer on top of that.
A substantial incremental amount.
So the demand is there we're still capacity constrained.
And there are still challenges with respect to impact.
Semiconductor control.
Components is.
As Jim articulated in his prepared remarks, those challenges have to do with both the backend processing.
After.
Completion of wafer fab.
They've had to do with the wafer all location.
So what.
Is improved.
Considerably since.
Q3.
Is that the back end.
<unk>, which were in part to delays in some parts of the world to call. It.
Other factors those have been largely relieved.
So the components that did not show up in time.
Because of Beckham bottlenecks in Q3.
They have shown up or about to show up.
In time for our bills in.
Q4, and Furthermore.
We have recently been able to.
Cool.
<unk> received commitments with.
<unk>.
Some of our foundries.
That would result in a considerably greater low cassia.
Both within Q4 and more significantly into two.
<unk> two.
So we didn't even that in terms of the component gates.
Yeah.
In effect that he got lunch within the third quarter in terms of.
Compounding capacity constraints as we all know we're already there.
We've made a good deal of progress.
Signal.
I'm, saying, so steel there but.
Being able to stock builds on schedule dates.
And now they're having to be as much hand to mouth with respect to the availability of components will facilitate.
A substantial capacity increase this quarter.
Got it. Thank you appreciate you for that color and then second I saw on the press release that it was mentioned that you use.
<unk> signed a license with some of your customers or at least one of your customers who have done.
Mind, you the infringing product can you talk a little bit more about that.
How does that set the tone for the other customers out there that are doing this and kind of what kind of benefits do you expect to see.
From this.
So we're not at Liberty to say anything regarding.
The the identity of the licensee or any of the key parameters of.
The licensing deal that we executed.
In the third quarter.
I think in general terms I can tell you that.
<unk>.
It points to.
At the beginning.
Paul.
New kinds of relationships on the licensing front.
The industry.
As we all know.
Is it.
The growth needs and technology needs are very compelling.
And he has to say, particularly at the time of capacity constraints.
There is.
J D.
Interest on the part.
Of customers.
To be able to.
Secure their requirements.
And between that.
Enabling technology.
It's only been available from <unk>.
Yes.
<unk> debt.
Customers.
We're like two.
In those ways.
Were able to overcome so.
License it provides customers with the ability to.
And without concerns with respect to <unk>.
Chip Bowl exclusion orders.
The import pressure of OEM products into the U S.
<unk>.
<unk> modules incorporate the smaller the synthesis.
Even though the small deals with otherwise infringe.
Corp, Pat.
Patents.
So we believe there is going to be more.
Licensees.
<unk>.
And we view this as a.
A complementary component of our business model.
To contribute to margins profitability.
While providing the industry with.
The ecosystem the many key customers seek whoever.
Okay. Thank you I'll jump back in queue.
Thanks Chuck.
The next question is coming from clean.
Please go ahead.
Hey, guys congratulations on the nice bookings activity.
Before I get to my bookings question just wanted to come.
Back to your outlook for the fourth quarter, obviously component availability in your manufacturing capacity or significant constraints and I'm. Just curious do you guys feel confident.
Where you sit today, you have enough component availability and internal manufacturing capacity to grow the business 20%.
Percent quarter on quarter.
We do.
I want to be clear that this is not as lump docker to pause it.
If you go to Italy.
In that.
We're at the beginning of the quarter and allowed us to often it's not that we.
We have as of today all of the semiconductor components, we need in order to make the revenue plan for the quarter.
They are on their way in.
Beyond their way through.
The first two turns.
Of the quarter, so the seal risk.
The risks out there.
But we feel that.
The improvements have been made with respect to the backend which in effect.
It made available components that we're investing to us in the third quarter, but couldnt be processing time that that capital.
Old with as I mentioned earlier.
The ability to.
Achieve greater utilization of constrained capacity by not being gated by the inability to stock because of luck of portio components that sets us off to a much faster.
Stock.
Early in the quarter and it bodes well with respect to the outcome of the quarter as a whole.
Thank you Patricia My second question is just on orders, obviously I think most most of us on the line.
The company had been very impressed with what the acceleration in the bookings number.
And I think most of that is being driven by advanced.
Product bookings were I think advanced product bookings last quarter. It was probably over $90 million. This quarter. It looks like you booked over $100 million, maybe as much as $120 million in advanced product bookings. My question is how broad based is that advanced.
<unk> products booking activity over the past couple of quarters is it highly concentrated among just a couple of GPU GPU.
To accelerate or customers or are you starting to see very good diversification.
Including front end or AC to DC.
Including the MBA modules can you just give us some some.
Color on how broad based that that bookings activity is thank you.
This is Phil so.
We've been talking over I think the last 18 months to the customer base for advanced.
<unk> products in data center AI has been broadening.
Quite a bit from one or two companies major companies a couple of years ago to now well over $12 15 type type quantity of customers, which are.
Adding to that the backlog and the bookings number.
In terms of the activity there 48 to 12 as well as the bridging 12.
12 to $48 48 to 12 on some of the CPU server boards.
It's very strong and.
We're entering the phase of.
Continued AI growth.
Without <unk>.
Existing customer base, but also with the new Intel and AMD CPU platforms coming on.
And data centers with some of the Hyperscale is are going 48 volts were seeing strength, there and also coupled with the accelerated growth which.
Which are 48 volt based we've seen growth now significantly.
Growth in our 12% to 48 volt bridging converter business because hyperscale is that a still at 12 volts and their infrastructure needs to 12 months to 48 to use the latest greatest accelerated cards.
And multiple cluster accelerated cards. So so it's very broad broad spread.
So just a quick follow up is is it is it pretty well balanced between the types of MCM mcd components versus the MBM bridging products or does it does it skew more heavily to the to the sort of point of load MCM Mcd.
Components today still.
I think the.
<unk> 48.
Eight to 12 48 to load is the is the largest piece of it.
The MBS.
Doing really well in the 12 to 48 space because one of the reasons being is that typically in those applications, you've got six to eight and BMS per power Board.
So that's the quantities add up pretty quickly.
The bookings ahead of pretty quickly.
Got it thank you for the color.
Okay.
A bit more on that.
The MDM market opportunity next year.
It is quite substantial.
No.
Looking at it from.
Is the timing.
Perspective <unk> been.
All that significant.
But.
It promises to be.