Q1 2022 Vicor Corp Earnings Call

[music].

Good day and welcome everyone to the weaker earnings results for the first quarter ended March 31st 2022, well see by James Smith, Chief Financial Officer.

My name is and that's helped me take a minute here.

During the presentation your lines will remain on listen only.

He's pretty quiet exercise at any time, Please press star zero on your phone and accordingly, I thought we'd be happy to assist you.

I would like to advise all parties that this conference is being recorded.

And now I didn't say anything about the chips you may proceed.

Thank you.

Good afternoon, and welcome to <unk> Corporation's earnings call for the first quarter ended March 31, 2022, I'm, Jim Schmidt, Chief Financial Officer, and I'm in Andover, with Patricio, Vince you Rally Chief Executive Officer, and Phil Babies, Vice President of global sales and marketing.

After the market closed today, we issued a press release summarizing our financial results for the three months ending March 31.

This press release has been posted on the Investor Relations page of our website Www Dot Xicor power dotcom.

We also filed a form 8-K today relating to the issuance of this press release.

I remind listeners this conference call is being recorded and is the copyrighted property of <unk> Corporation.

I also remind you various remarks, we make during this call may constitute forward looking statements for purposes of the Safe Harbor provisions under this private Securities Litigation Reform Act of 1095.

Except for historical information contained in this call. The matters discussed on this call, including 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 sale.

<unk> growth spending and profitability are forward looking statements involving risks and uncertainties.

Light of these risks and uncertainties, we can offer no assurance that any forward looking statement will in fact prove to be correct.

Results may differ materially from those explicitly set forth or implied by any of our remarks today.

The risks and uncertainties, we face are discussed in item one a of our 2021 Form 10-K , which we filed with the SEC on March one 2020 to.

The 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 April 21 2022.

<unk> 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 a replay of today's call will be available beginning at midnight Tonight through May six 2022.

The replay dial in number is 8882.

<unk> 68010, followed by the passcode 109 042467.

This dial in and passcode 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.

I'll now turn to a review of our Q1 financial performance after which fill in film.

Phil 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 change for P&L and balance sheet items and refer you to our press release or our upcoming Form 10-Q for year over year comparisons.

As stated in today's press release <unk> recorded total revenue for the first quarter of $88 3 million or two two.

2% sequential decrease from $90 3 million in the fourth quarter of 2021.

<unk> products revenue increased 3% sequentially, while brick products revenue declined 9% from the prior quarter.

Vance products revenue increased 54% from the same quarter a year ago.

Shipments to stocking distributors increased three 3% sequentially and decreased one 2% year over year.

Experts exports for the first quarter were relatively flat sequentially as a percentage of total revenue at approximately 72% from the prior quarter 71, 7%.

For Q1 advanced products share of total revenue increased to 59, 9% compared to 56, 9% in the fourth quarter of 2021 with brick products share correspondingly correspondingly decreasing to 41% of revenue.

Turning to Q1 gross margin we recorded a consolidated gross profit margin of 42, 6% gross margin declined sequentially from 45, 2% in the fourth quarter of 2021.

Primarily as a result of lower volume a full quarter of higher cost of outsourced panel production an increase in manufacturing spending associated with higher freight cost incurred to respond to supply chain disruptions as well as increased staffing and activity levels to support the startup of our manufacturing expansion.

In addition, tariffs continue to be a drag on gross margin at $2 2 million in Q1, and two 5% of revenue our work to reduce tariffs by reducing imports from China continues.

I'll now turn to Q1 operating expenses total operating expense increased two 8% from the fourth quarter of 2021, driven by increased compensation engineering activity and professional services.

The amounts of total equity based compensation expense for Q1 included in cost of goods SG&A and R&D was 251001, 207000, and 536000, respectively totaling approximately $2 million.

For Q1, we recorded operating income of $4 8 million, representing an operating margin of five 4% <unk>.

Income taxes for Q1 were a tax benefit of $48000 net.

Net income for the quarter totaled $5 million.

GAAP diluted earnings per share was <unk> 11.

Based on a fully diluted share count of $44 million 954000 shares.

Before I review, our financial position just a brief update about COVID-19 in our workforce.

As previously discussed as a designated essential manufacturer using maskin practicing social distancing.

And saying from the onset of the pandemic, we have continuously operated three shifts at our Andover manufacturing facility.

<unk> and absenteeism due to COVID-19 are now negligible.

Nevertheless, because much of the potential influence of the COVID-19 pandemic are associated with risks outside of our control we cannot estimate the incentives such influence on our financial or operational performance or one such influence might occur.

In particular, the zero Covid policy adopted by China has caused disruptions in parts of our supply chain and the impact and timing of the effect on our results are unpredictable.

Turning to our cash flow and balance sheet.

Cash cash equivalents and short term investments totaled $211 million at the end of Q1.

Accounts receivable net of reserves totaled $52 7 million at quarter end with Dsos for trade receivables of 37 days.

All balances are current.

Inventories net of reserves increased nine 7% sequentially to $73 $9 million and with annualized turns at $2 65.

Operating cash flow totaled $4 6 million for the quarter.

Capital expenditures for Q1 totaled $22 7 million, we ended the quarter with a total construction in progress balance of $50 million and approximately $42 million scheduled to be spent through the year, primarily for manufacturing equipment. Our factory expansion is proceeding on schedule and on budget.

I'll now address bookings and backlog Q1 book to Bill came in well above one and with one year back logging increasing sequentially by 22, 6% from the fourth quarter of 2021.

Turning to the second quarter of 2022 and beyond.

We expect to bring our integrated chip fabrication manufacturing expansion online starting in Q3.

Chip as our acronym for converter housed in package, our automated chip foundry will establish the in house process flow to assemble more play test and finish complete high density power modules and high volume and a world class quality levels until <unk> chip boundary as online existing capacity.

We will limit our ability to increase our production and shipment rate in the short term.

During this quarter, we are working on installation of equipment in our chip foundry once installed the production line will undergo full qualification and approving in period.

Is the line becomes fully operational in the coming months, we will be positioned to significantly increase capacity efficiency and output, which we expect will result in improving operating results in the second half of the year.

Also during this quarter, we are finalizing and expect to complete our annual merit process.

Our focus remains on our long term success based on our pioneering approach to integrated high density power module technology.

We are working hard to combine world class operating performance with the technical advantages of device called power delivery products.

We've invested in a unique state of the art U S based automated manufacturing facility, which is in close proximity to our development engineering teams and allows for co development of next generation products.

Our manufacturers manufacturing strategy also derisked supply chains lays the foundation for cost efficiency and cost reduction and positions us to deliver the output needed in the highest volume most demanding power delivery applications.

And we are embarking and embarking on an initiative to drive operational excellence across VI Cor.

At the heart of that initiative is our aim to become a customer centric company. Our entire organization is engaged to make <unk> the power delivery supplier of choice for customers in a variety of end markets. We.

We are committed to achieving our goal of operational excellence.

With that Phil Phil will provide an overview of recent market developments and then for <unk> 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.

I will keep my comments short and focused primarily on our high performance computing business, which has received a lot of attention from our investor community.

Our backlog growth is driven by a global high performance computing customers, a new supercomputer cloud sugar and AI accelerated card solutions being brought to market.

The 48 volt bridging applications are now ramping with major Hyperscale is as they deploy rack based trusted GPU AI systems into their data centers and rapidly increasing numbers.

Additionally, GPU on ASIC base, 48 volt accelerated cards, which have varying power requirements are ramping with both 48 volt to 12 volt bridging solutions for lower power cards.

As well as direct 48 volt to point of load factor is power solutions for higher power Gpus and Asics.

The technology gap separating vehicle from a multiplicity of aspiring competitors is expanding not contracting.

Specifically current density and other key performance attributes of Veeco power system solutions are improving at a rate faster than achievable with intermediate bus architecture multi phase solutions.

High performance computing applications require the level of performance that only vehicle modules are capable of providing.

Very soon they will require a vehicle proprietary power system architectures, such as vertical and lateral and vertical power delivery.

And that is why our data center business opportunity is broadening and going up not down.

To be clear the high performance computing industry is no different than any other high volume industry seeking multiple sources to derisk supply chains.

However, wishing to accomplish a multiplicity of sources does not necessarily mean being able to do it with good enough performance.

We remain confident that our performance advantages, we will continue to expand our opportunities and design wins with major customers.

With a few current multiplier modules deployed laterally or preferably vertically.

A pilot system can achieve higher density lower noise higher efficiency and higher performance that can be achieved with a multiphase solution consisting of over 100 large noisy on hot components.

As discussed in previous quarterly calls the demand for high density power delivery solutions continues unabated across all of our target markets with polished systems engineers, turning to vehicles modular power solutions to solve their toughest design challenges.

As our new vertically integrated capacity comes online in Q3.

We will be better positioned to take full advantage of the increased number of high growth opportunities with our current <unk>.

<unk> New high performance computing customers, who are also eagerly anticipating this key event for <unk>.

As we have discussed in previous quarters, FICO is gearing up for sustained and predictable long term growth.

A major part of our growth strategy will be success in the automotive powertrain market and having a vertically.

Full vertically integrated manufacturing process.

We will also enable us to meet the exacting qualification standards demanded by our automotive customers.

Our progress in developing this exciting new market and engagements with leading Oems continues to be ahead of our initial plans.

That concludes my remarks, and Patricio, Jim and I will now take your questions.

Everyone. If you wish to ask a question please press star.

Yes.

Andrew said can we generate a question simply press star two.

And the first question and this is coming from the line of Greenberg from Nissan a company LLC you May proceed.

Hey, guys. Thanks for taking my question.

One of your large customers and video recently shared its next generation. Each 100 cars powered by a multi phase voltage regulator architecture. Yet. This card has power consumption of 700 Watts I'm wondering if you can talk to this is this evidenced multi phase is viable above 400 watts and a thousand amps occurring or we'll buy core parts.

Dissipate in this next generation architecture at that customer.

So as a matter of general policy, we will not comment on specific customers or specific applications.

But in general addressing your question, which is not surprising.

I think feel it made some key points, there's a realm of AR.

To address your question.

First of all.

The GAAP dissipates Viper technology from the intermediate bus architecture multi face.

Our solutions in the context of a 48 volt architecture, which with an intermediate bus solution requires two stages.

All of our processing.

Technology, our gap is advancing.

And advancing at a rapid pace that the intermediate bus architecture cannot keep up with.

Sure.

To the point of your question.

<unk> Shah and Multiphase continues to make advances and certainly in the last few years.

They have made some strides with respect to increasing.

The current density into our capability of that solution, but as you know from past comments.

It is a solution architecture and building blocks that are.

Fundamentally handicapped in terms of what can be achieved.

And thats fundamentally at odds with industry trends that to your point that the car.

Our advance of pre cash outs, increasing call levels increasing.

It comes out city by the way not just in terms of promo you out but those two in terms of <unk> and all of these we believe.

I'll continue to support that.

Choice of FICO solutions.

So maybe just a quick follow up on that without speaking to any specific customer. If you look at an architecture that's more.

Multiple hundreds of watts of power consumption, and say 1000 amps can you give us some sense, how much more efficient or what kind of advantage in terms of power efficiency power savings do you think that factor is our architecture has over today's multi phase.

Got it.

So architecture approach.

So I'll give you general.

Example, I should say an example.

We generally apply.

Two.

The GPU.

Our icon Asics in down all.

Comp growth between <unk> valves in the thousands.

GAAP range.

So we recently benchmark.

Lateral and vertical solution, which has been adopted by.

Inaugural ball.

Company in the industry.

And we.

We benchmark it relative to.

Our own lateral solution involving a multiplicity of mall deals all current multipliers deployed.

On the size of the ASIC and with another vertical solution, we can increase efficiency.

By something close to 10 percentage points.

And thats in efficiency advantage.

Debt.

Sets us far apart from anything else that can be done.

As you can imagine.

Thank you Patricia I'll get back in the queue and come back with questions. Later, thank you.

The next question is coming from that I have John chime in it.

CGS Securities you May proceed.

Hi, Good afternoon gentlemen, thank you for taking my questions. My first one is a follow up to that.

But when a customer using a 700 watt processor decided to go with a traditional power system is that purely a capacity related decision from their perspective or are there other factors that theyre, considering such as price or maybe something else that we're not thinking of.

Well to your point there is there's a multiplicity of factors at play and generally speaking with teen.

A large OEM that Vegas consistency with as you can imagine.

A different set of priorities, but at the end of the day.

The solution <unk> to walk work well enough is that true.

<unk> enable the compute density and the advances in computing density that customers expect.

And Thats.

People are question.

Yeah Walt.

Nobody can dispute of acquisition debt.

Wed like to the best of all worlds larger multi producers supply us commodity solutions.

I'll limited.

Capacity and the list goes on.

In the real World.

Obviously, not all of those.

Opportunities are available and.

And agonizingly appraisals may be required to satisfy the essential objectives.

Okay Fair enough I think I understand.

Having said that your orders are still up your backlog is strong.

Is there anything at risk in your backlog at this point just because some of these lead times are getting so long and perhaps are there.

Risk of your customer second sourcing at this point.

No. John this is Phil that the backlog is strong I'm very confident in it don't see don't see any risk in the backlog at this point in time because of the customers' demands are still really strong and they really want us to deliver that backlog as quickly as we possibly can which is why the second half of the year is going to look.

A lot better than the first half for us.

Got it I'll jump back in queue. Thank you.

Yeah.

The next question is coming from the line of Don Mckenna D B.

You May proceed.

Thank you hi, guys.

Just to follow up a little bit on the previous question. Phil can you just address how much of the increase in the back.

The envelope number I am coming up with somewhere in the range of $425 million.

As a result of the expanded.

Lead times versus strong new demand and then my other question Patricio I guess would be to you was in the past I've spent a number of years in manufacturing and <unk>.

Plating process back then was considered as much as <unk>.

<unk>.

And good operators, who are highly valued and I'm wondering what youll see is the learning curve, how you've been preparing for it and how long you would anticipate it will be before you achieve the same efficiency as your current subcontractor.

Let me take your question first.

I expect that debt.

Very very quickly, we're going to achieve efficiencies tolerable, but what we've been able to achieve what working with.

The outside contractor and Thats because.

We have better equipment.

The redundancy.

Ah well trained.

Team.

So I do expect that we're going to be able to ramp.

Faster and more predictably than we.

We've been able to accomplish with <unk>.

All of the unpredictability.

In the way of progress, particularly.

Over the last nine months.

Phil.

With regards to the backlog.

Really expanding lead times, we are working very closely with our customers to make sure that they are.

They obviously are placing orders at the right rate advanced products are out 30 to 32 weeks or so brick products in that 'twenty sort of week range. We haven't we haven't really touched those.

It's demand, it's new programs coming on as I mentioned.

In my prepared remarks, we've got the 48 volt bridging.

Applications now starting to ramp we've got new programs.

In the in the China market in the European market, North American market with new customers.

And we've also got continued strength in our existing customer base.

That we expect to go on for quite a while yet as I have mentioned previously so so it's really demand driven.

Terrific. Thank you very much guys.

We do expect to bring in.

When lead times.

Once.

We have.

Demonstrated additional capacity out of the vertical integrated facility and sure Yep.

<unk> brought about.

Some other limiting factors because the issue to be clear over the last nine months as <unk> been seeing.

Simply one of factory capacity, it's also been one of component availability.

And supply chain disruption.

As you heard in the past that the issues with respect to in particular some of the component availability.

There has to do with.

Unique semiconductor components that we develop in.

Fab for us.

And we've been able to secure.

A major step up in that capacity, but.

Unfortunately, it's not just a matter of those proprietary semiconductors, even for garden variety.

Nicole type parts right.

Some of our products, particularly in some of the brick products.

<unk> are dependent on we've been some degree.

Exposed to the vagaries of the supply chain and of late particularly.

The disruption.

Jim catheter is that.

His remarks, he led into the Chinese as you know call it false mhm.

Mhm alright.

Alright, Thank you very much.

Thank you.

The next question is coming from the line of John <unk> from Dnb Capital You May proceed.

Hi, guys first of all congratulations on the booking number it's really phenomenal.

Alright, great and then I really expected.

But today I want to ask you about the technology and about your technology versus March which you addressed some of it in your opening remarks, but I'm wondering does your <expletive> loan technology versus the latest multi phase still lower Io pin count lower the motherboard copper, though with the socket resistance preempt boards.

Just on reduced component accounts.

Yes so.

<unk>.

Technology with.

We'll know soon becoming.

Uh huh.

<unk> Shum com multipliers and regulators.

Ah is.

Capable of delivering on the efficiency crop.

With another vertical impairment fashion.

<unk> digits.

Improvements in efficiency and by the way if 10%.

It doesn't sound like much.

In one way of looking at it in another very relevant way of looking at it which is the heat right. He is generated.

Both by the <unk>.

Generated within the CECO GPU itself within silicon.

That 10% differential in efficiency.

Is it large.

Amount of heat that is the solution doesn't need.

Need to <unk> and that the <unk> to increase compute capability as these solutions that.

It pushed the envelope as they need to with.

With respect to.

Innovating.

Current requirements.

Often run into because.

They will typically be limited.

By the ability to just <unk> match the.

The solution itself so.

In one way to look at it.

Efficiency improvement.

Our slate into a deduction you need is an enabler in terms of allowing greater compute density and a bigger value proposition for the OEM realities to its components.

Which we believe.

Is the primary consideration, particularly if capacity.

Is not a limiting factor.

Gotcha.

And that kind of plays into my second question. So.

Let's say you have a 701 GPU and.

The <unk> lateral.

Analytics solution for versus the.

Multi phase.

It sounds like you can say that that 70 watts of power loss due to the power distribution network and the efficiency you're going to be.

70% less than the competitive solutions, that's about right.

Well. So the specific example was given was for the first implementation of what we call other vertical system, which uses the same if you will Gordon.

Current multipliers, you've seen on the sides of Gpus.

All of our vertical system, while those.

Current multipliers guests deployed if you will have <unk> on the bottom side of the.

The substrate.

Yes.

With that vertical element same building block just deployed in a.

Professional way from a power distribution is actual perspective that car multiplier.

So Pos.

Active area of the ceiling on it particularly in its primary rail to deliver a much more uniform.

<unk> the <unk>.

<unk>.

And distribution within the active area.

Guest reviews by nearly a factor of three.

Which she south in more efficient easy fashion of the ceiling itself is.

Domains and results in better performance in the ceiling on itself in addition to the.

The reduction in heat.

<unk>.

Again, the ability to in effect run the solution.

Overclock it run it the other higher operating frequency and compute capability.

So not only are you, saying in electrics and you're enabling a higher performance computer.

So if I may.

Italy.

The efficiency advances.

That includes a leverage to some degree.

The ability to deliver a much more what we call equity potential surface across the active area are the primary rail.

These advances.

Enable more power to be delivered within the constraints of the terminal.

Managed solution, which <unk> in either.

The power savings are more compute capacity.

Gotcha.

And then on top of that at all it sounds like.

Talking about data center, a supercomputer that.

Thousands of Gpus, you are talking about hundreds of thousands of wasted watts by going with a competing solution.

They said there is a green element to this.

This value proposition.

Ultimately I think it's all about compute capacity, which is obviously will drive the industry.

To continue to to raise the bar.

Great. This is really great guys I'll get back into queue. Thank you so much.

The next question is coming from the line of Richard Shannon from Craig Hallum.

You May proceed.

Thanks, guys for taking my question.

But to say I might follow up on this.

Yes.

Few questions here.

Don't mean to ask something thats kind of similar to them, but just wanted to delve in a different way here.

As you are describing here and certainly what I think most people's belief is a solution that's much better than than others out there power savings and heat savings alone would be a dramatic improvement. So are you expecting at the highest levels of power delivery.

In GPU and other AC accelerator systems that youre going to be a sole source.

Because it seems like if you're not in the customers are using us deeply suboptimal solution. So can you state what your expectations are generally across.

Just being in new customers at these kinds of power levels.

Let me take that in parts and then Phil will weigh in so.

So in general as you can imagine because of the proprietary nature of our solution.

As a <unk> power solution.

And also as a solution.

Let's say with unique power distribution architecture, so with or without factor is powered <unk> permit.

This show is prepare their ship.

It tends to be a single source alright and.

And as discussed earlier and our customers.

To make a choice.

Fundamentally it comes down to.

Getting more performance and in effect, a better product and more capable product.

<unk>.

But being single source with Tiger.

<unk>.

Adding a multi cell solution with <unk>.

The intermediate bus architecture type of policy stem with these limits Ashok and handicaps.

<unk> with respect to the performance.

The solution itself.

Yes.

Add to that I think.

We're getting if you look at new customers that we have that we've brought on in the last six months nine months.

Have options to use multi phase in.

Converters with multi phase if they want to do that but theyre not doing that they are using <unk>.

<unk> lateral so now and also in the future. We're also working on the number of lateral vertical for higher current Asics and network processors. For example, some of the stuff I talked about in the last call.

So they have choices and they're choosing vehicle, which which says very clearly what the advantages as we've spoken about many times of our solution is.

So.

Those are going to be single source opportunities and.

They're doing it because they need the performance they compete on performance they want it for their customers.

So thats the way the choosing like Google with the multi phase.

Just to be clear.

Yes.

It's not that.

The <unk> solution is the only solution that other solutions the other solutions, which tend to be all grouped in the multi phase bus converter intermediate bus architecture realm.

There can be made to work.

A lower comp as it is with more noise with more challenges.

From an international perspective, with growing multiplicity of faces to the Ogden.

Two.

Make work reliably.

And certainly capsomer synaptic ash us off for those kinds of solutions.

Their requirements allow.

We're not suggesting banks search that we haven't properly.

The indices of the country, it's a broader industry with a broad.

Set of applications and requirements and for less demanding a pre cash outs.

Our multi phase can be properly viable, particularly again, if if the current levels and the overall demand of the free cash outs dynamically otherwise.

Can make do with.

A multi face Africa, yes, we still like that as well because we supply the 48 to 12 plus converted we've got the highest density highest performance device, there and were increasing its power capability.

That's good very good business for us.

As well so we're happy to support the multi phase in those low power applications too.

Okay guys. Thanks for that.

The thoughts I appreciate it my follow on question here.

On your comments about the second half being better than the first half.

It seems.

That you have confidence in your manufacturing getting up to speed.

So maybe if you can talk about the next steps here.

And at what point do you have full 100% confidence are in are going to be running at full rate or at least commensurate with demand.

When does that happens sometimes in the third quarter the fourth quarter.

Not easy to tell right now maybe you can just give us a little bit more color on why you say this.

About second half better than first thanks.

So I have confidence in our operations team.

Particularly.

When they can be in control of their destiny is that going to be a very soon with vertically integrate asher.

<unk> important.

Important process steps.

And he has to say over the last three quarters.

Investors have been disappointed I have been disappointed by the ample stability.

<unk>.

Being able to step up.

Unit rates and.

<unk> revenues as we had anticipated thats been frustrating.

But to be fair.

There's been a combination of factors at play at not just the lack of vertical integration with respect to critical process steps.

But also the.

The supply chain bottlenecks and obsess.

The impacted.

Many of the products, including dental.

Some of the brake products.

And gathering the way.

Having a predictable output.

I think as we get into July and the <unk>.

<unk>.

The third quarter.

We're going to have we're going to evolve all of the equipment in.

The last critical piece of equipment is arriving.

This quarter.

And at that point in time, our team who will be in full control of its destiny and I do expect that we're going to see.

Our revenues cut travel with a backlog, that's obviously stretched way out.

In terms of.

Customers, having again to place orders.

With lead times Theres, a longer than we would like it.

Great. Thanks, guys.

The next question is coming from the line of Doug Congrats on putting on this capital you May proceed.

Yes, Hi, gentlemen, just a quick follow up to the previous question.

Well what would have to occur to delay the factory coming online in that July timeframe and as far as components to stock. The factory as you said the last three quarters.

Global supply chains are affected it's impacted your guys' deeply how have you gone about solving those.

Those issues and getting the components that you will need internally to produce your products from.

Start to finish and export them out the door to meet customer demand.

Well I think as we've discussed in the past.

With respect to it.

The availability of all our proprietary semiconductors.

Wafer outs.

We have we.

We've made strides in that.

Trump.

With respect to.

Getting the output and also securing a long term.

Sourcing.

A race.

I expect it to support requirements.

With respect to.

Garden variety parse that.

And that from time to time on available because of general supply chain issues.

We're very focused on that.

Inc.

I am beginning to see and I don't want to be.

To the affinity with respect to these because as Phil.

Tivoli preliminary.

I'm beginning to see some easing.

And some increase availability coming online later this year.

So.

Honestly, we're watching that.

Very carefully with respect to.

Making sure that once we have.

All of the.

Process steps integrated and we have.

Our fab capacity in place debt component availability is now going into getting the way of being able to use.

Yes that was that was where I was going with that you have all the machines you have all the people and then the assembly line standing around because you don't have the parts that was more my concern because we've all heard about double and triple ordering from you know most of the layers of the semiconductor World I was just wondering if you were aggressive in securing the part.

You need so that when you do have everything up and running.

Can start to turn the engine alone.

Well we.

We do like safety stock.

When we can have it it's been difficult to.

To have it.

Over the last couple of years.

We do have a plan to build some level of safety stock.

I wouldn't call that double or triple auditing.

I would say.

In a different perspective.

Sure.

Component availability, particularly when it comes to rather than by the semiconductor components that we are going to to use is cutting quantities over the next several years it shouldnt be hand to mouth proposition right Thats not.

The way to run.

The fashion from a logistics perspective, we do.

Inventory.

But.

If you'll recall that doubled.

Hey.

I wouldn't call. It that's why we are looking to build some level of buffer stock.

Where appropriate in order to ensure that.

Our expanded capacity Kim Brown.

Without the inefficiency of disruption due to availability of critical components.

Terrific, Yes, and I know, that's not the normal way to run a business, but we are in a very unusual times. After COVID-19 . So thank you very much. Thank you.

The next question is coming from the line of clean blood from Needham <unk> Company LLC.

Hey, guys. Thanks for taking my follow up I guess first just on the backlog the backlog up near $425 million. If I've got my numbers right. It looks like you guys did record bookings in the first quarter and I'm wondering if you could confirm that.

First quarter was indeed, a record bookings quarter for the company.

No. It was a little bit short of one quarter, where we had a little bit more.

Yes, just.

It came close.

Okay.

Short of Q2 of last year, it sounds like that.

Yes.

Got it got it second question you mentioned the vertical power delivery I know you've got a couple of initial wins on vertical power into more specialized applications could you give us a sense when vertical power for Gpus are AIA six might might ramp is that a 2020 to ramp or is that out further saying in 2023 or beyond.

So we have.

To lead cast the most for fully versed seagull.

The power delivery.

And those are cash some of that.

Debt.

As with Vigo.

In effect.

Making a <unk>.

Calculated.

Choice to be on the very leading.

Leading edge of technology.

With.

A patio set of components for fully vertical power delivery.

That are progressing in terms of their agile capability maturity, but not yet.

The level of maturity that would provide the level of capability.

In the millions of units.

That is charity pods in high volume applications. So I think to get a good sense of the landscape.

Would be good too.

Think of it in the following tops there as well.

A lot of their power delivery.

You know what that means so leading edge.

<unk> pre cash outs had been using a lateral power delivery.

Architecture with a particular crime multipliers.

To the north and the south and in some cases, the west of the east.

All the ASIC.

The crop that these devices deliver.

As to traverse laterally right under the active any of the GPU and ASIC.

<unk> reached the domains.

These devices.

This.

And architecture that.

Walks.

A multiplicity of entry points of the North South East and West.

<unk> two.

Five six under that BR.

Beyond five six out of that <unk> stands in the way.

<unk> it.

Remaining in efficient and scalable power delivery architecture.

Ill now vertical power delivery is of the avid ends of the spectrum, it's very events.

Some of the bleeding edge, but with vertical power delivery.

Those.

The losses and voltage that officers occur as you try and cut the crop from the sides under the activator of the silica essentially go away these inaugural modules with Ashok.

In power.

Power delivery losses.

If you can in effect supplant the multiplicity.

<unk>.

Elisa all crop multipliers with a vertical power delivery, we call it the DCF.

But again this complexity associated with the full vertical power delivery.

And to the lateral royalty architecture.

Which is innovative.

Essentially specs.

<unk> retains the same module components the same goal than current multipliers.

Our used in lateral policies.

But as suggested earlier.

Places one of them.

<unk> on the bottom side to provide <unk>.

The entry point in the central area of the GPU or ASIC.

That brings about a factor of three reduction in PD and losses and in fact, our free the action in the volatility of the financial debt.

Otherwise.

Suffer.

I have to in effect lever with within the primary rail often ASIC.

We see.

Sorry for the lengthy answer to your question, but I think it's important to.

Technical grasp of.

The evolution of the power delivery technology.

From <unk> and its handicaps.

The high volume uptick actuals are going to go into lot of RCM that provides a three fold reduction in power distribution drops and a major improvement in efficiency within the ASIC.

For Vertigo.

Being in effect tested.

By some leading edge.

Cash loans.

In my opinion in terms of <unk>.

Mass production in very large properties is seal one and a half.

Two years away, but this is going to be scaling up.

For certain operating cash outs that are dependent on a <unk> system.

Later, this year and into next year.

So the evolution is lateral.

Which is obviously.

A proven technology, but with certain <unk> getting the way of thousand App solutions too.

Two.

Again tracking it from the.

The mass production perspective lot of vertical which is a major improvement three fold, but with conventional building blocks with the same building blocks that we'd be making by the millions of units to full vertical which is still in terms of mass production.

Why have two years away.

Yeah.

Thank you Patricio thank.

Thank you.

Okay.

The next question is coming from the line of Johnson with Samsung Cta.

Alright, Thanks for taking my follow up guys.

You mentioned some easing of the supply chain possible. Later this year I was wondering if you could talk about the new constraints that you're facing actually in Q2 are they getting worse or better in the near term and if there are any levers maybe that you can pull.

Perhaps in pricing just to help regain within that margin.

I think the environment right now John is relatively.

Similar to last quarter.

We are dealing with some capacity constraints in the outsource panel production that's the same.

We have the.

Patricio mentioned the semiconductor supply coming in.

We do have a new wrinkle to contend with which is zero covered policy in China. There is implications there that are tough to predict.

We're making our way through that so I think we're saying that <unk> it feels like Q1 and we're.

Working very hard to clear overdue backlog and support customers Thats, our focus this quarter and most notably I should say job number one is to get our factory expansion up and running.

The team is working extremely hard to make that happen.

Understood. Thank you and good luck.

Okay.

The next question is coming from the line of Alan Hicks.

Okay.

Yes, good afternoon.

I had a question on the putting in products that you've been talking about it for a couple of years.

I know you had very high expectations potentially.

Bigger than other products.

With.

When was that going to move the needle.

Revenues is it dependent on.

How is it coming up.

Yes, I think if I understand your question it has to do with Soho front end products, our AC to DC products.

We have.

We've made very good progress.

The two major customer engagements.

And.

We've delivered.

Initial sample quantities.

One of these two engagements is going to be.

It's getting up into <unk>.

Substantial revenues.

In the second half of this year of the order.

About $10 million, so the ACC component of our revenue mix.

<unk> is still.

At an early stage, but the products.

Good deal.

Appeal.

For high density applications.

And.

And this has been tested by two.

<unk> cash summers and procure one of them is about to get deployed and substantial quantities.

Okay can you say what kind of application that is.

Phil can.

Can we say.

So how do you see a professional.

Without naming has the most I think we've got some data center opportunities some edge computing opportunities in lighting opportunities. Those are the three sort of large buckets, if you like that where we're targeting.

We also have a lot of interest in the higher frequency versions of those.

<unk> products in the aerospace area, where they need 400 Hertz operation here in the United States 800 in Europe . So we'll be doing sort of defense aerospace versions of those products, which actually is quite a large sam.

Europe , and North America somewhere in that two.

200 $250 million.

Arrange for an opportunity with very nice gross margin. So we're very interested in the.

Having defense Aerospace versions of these front ends to which we are working hard to bring through to the market later this year too.

Broad market customers.

And as I mentioned data centers edge computing lighting defense and aerospace those are the four areas. So the first okay.

Major revenue contribution is going to come from lighting.

The category of <unk>.

Several megawatts.

Of lighting power in one location.

Okay. So thats supposed to ship in the second half.

Yes.

Stock building that market in the second half revenues next year, and then obviously ramping up in 'twenty four 'twenty five.

Okay.

And then on your <unk> technology.

That applies across the board to advanced products.

That's also using the same engines and control systems that we use for our other components, we leveraged a lot of the technology same packaging the gallon.

So think of us as.

A fab.

Chips.

Jim I figured that it earlier convert our house in package whether it's.

A.

Elisa after gas shouldnt, requiring pre phase.

From <unk>.

So now the motive free cash of the crowding as I'm going to evolve to find evolved.

Bus conversion 50 under the 150 kilowatts.

All of these are a point of load up the cash required the same current multipliers describing earlier.

We're going to be growing through the same fab going through the same process steps.

Leveraging the same common.

Our methodologies in terms so.

<unk> control systems.

And most of all packaging technology in effect wafer alike.

<unk>.

Pounds.

Okay, and then just real quick.

How soon do you expect production revenues in Idaho.

Idaho.

But at the end of 'twenty three for the first customer first OEM and then increase in 'twenty four 'twenty five 'twenty six of course.

Thank you very much.

Thank you and I think with that operator could you please call an entity to the call.

Of course, everyone.

That concludes your conference call for today you may now disconnect. Thank you all for joining and enjoy the rest of your day.

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Good.

And welcome everyone to the record earnings results for the first quarter ended March.

For 2022 lots at night, James Smith, Chief Financial Officer.

My name is Matt that immediate miniature.

During the presentation your lines will remain on listen only.

Easily cleared sense at any time, please press star zero on your phone and accordingly.

Hugh.

I would like to advise all parties at this conference is being recorded.

And now I hand over to James You May proceed.

Thank you.

Good afternoon, and welcome to <unk> Corporation's earnings call for the first quarter ended March 31, 2022, I'm, Jim Schmidt, Chief Financial Officer, and I'm in Andover, with Patricio <unk>, Chief Executive Officer, and Phil Davies, Vice President of global sales and marketing.

After the market closed today, we issued a press release summarizing our financial results for the three months ending March 31.

This press release has been posted on the Investor Relations page of our website Www Dot Xicor power Dot com.

We also filed a form 8-K today relating to the issuance of this press release.

I remind listeners this conference call is being recorded and is the copyrighted property of <unk> Corporation.

I also remind you various remarks, we make during this call may constitute forward looking statements for purposes of the Safe Harbor provisions under this private Securities Litigation Reform Act of 1095.

Except for historical information contained in this call. The matters discussed on this call, including 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 sale.

<unk> 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 or implied by any of our remarks today.

The risks and uncertainties, we face are discussed in item <unk> of our 2021 Form 10-K , which we filed with the SEC on March one 2020 to.

The 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 April 21 2022.

<unk> 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 a replay of today's call will be available beginning at midnight Tonight through May six 2022.

The replay dial in number is 8882.

<unk> 68010, followed by the passcode 100, 904 to $4 67.

This dial in and passcode are also set forth in today's press release.

In addition, a webcast replay of today's call along with the transcript will be available shortly on the Investor Relations page of our website.

I'll now turn to a review of our Q1 financial performance after which fill in fill.

Phil 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 change for P&L and balance sheet items and refer you to our press release or our upcoming Form 10-Q for year over year comparisons.

As stated in today's press release <unk> recorded total revenue for the first quarter of $88 3 million or two two.

2% sequential decrease from $90 3 million in the fourth quarter of 2021.

<unk> products revenue increased 3% sequentially, while brick product revenue declined 9% from the prior quarter.

Advanced products revenue increased 54% from the same quarter a year ago.

Shipments to stocking distributors increased three 3% sequentially and decreased one 2% year over year.

Experts exports for the first quarter were relatively flat sequentially as a percentage of total revenue at approximately 72% from the prior quarter 71, 7%.

For Q1 advanced products share of total revenue increased to 59, 9% compared to 56, 9% in the fourth quarter of 2021 with brick products share corresponding correspondingly decreasing to 41% of revenue.

Turning to Q1 gross margin we recorded a consolidated gross profit margin of 42, 6% gross margin declined sequentially from 45, 2% in the fourth quarter of 2021.

Primarily as a result of lower volume a full quarter of higher cost of outsourced panel production, an increase in manufacturing and spending associated with higher freight cost incurred to respond to supply chain disruptions as well as increased staffing and activity levels to support the startup of our manufacturing expansion.

In addition, tariffs continue to be a drag on gross margin at $2 2 million in Q1, and two 5% of revenue our work to reduce tariffs by reducing imports from China continues.

I'll now turn to Q1 operating expenses total operating expense increased two 8% from the fourth quarter of 2021, driven by increased compensation engineering activity and professional services.

The amounts of total equity based compensation expense for Q1 included in cost of goods SG&A and R&D was 251000.

One 207000 and.

536000, respectively totaling approximately $2 million.

For Q1, we recorded operating income of $4 8 million, representing an operating margin of five 4%.

Income taxes for Q1 were a tax benefit of $48000.

Net income for the quarter totaled $5 million.

GAAP diluted earnings per share was <unk> 11.

Based on a fully diluted share count of $44 million 954000 shares.

Before I review, our financial position just a brief update about COVID-19 in our workforce.

As previously discussed as a designated essential manufacture using masks practicing social distance.

And saying from the onset of the pandemic, we have continuously operated three shifts at our Andover manufacturing facility.

Cases in absenteeism due to COVID-19 are now negligible.

Nevertheless, because much of the potential influence of the COVID-19 pandemic are associated with risks outside of our control we cannot estimate the incentives such influence on our financial or operational performance or ones such influence might occur.

In particular, the zero Covid policy adopted by China has caused disruptions in parts of our supply chain and the impact and timing of the effect on our results are unpredictable.

Turning to our cash flow and balance sheet.

Cash cash equivalents and short term investments totaled $211 million at the end of Q1.

Accounts receivable net of reserves totaled $52 7 million at quarter end with Dsos for trade receivables at 37 days <unk>.

All balances are current inventories net of reserves increased nine 7% sequentially to $73 $9 million and with annualized turns at $2 65.

Operating cash flow totaled $4 6 million for the quarter.

Capital expenditures for Q1 totaled $22 7 million, we ended the quarter with a total construction in progress balance of $50 million and approximately $42 million scheduled to be spent through the year primarily for manufacturing equipment.

Our factory expansion is proceeding on schedule and on budget.

I'll now address bookings and backlog Q1 book to Bill came in well above one and with one year backlog and increasing sequentially by 22, 6% from the fourth quarter of 2021.

Turning to the second quarter of 2022 and beyond.

We expect to bring our integrated chip fabrication manufacturing expansion online starting in Q3.

Chip as our acronym for converter housed in package, our automated chip foundry will establish the in house process flow to assemble more play test and finish complete high density power modules and high volume and at World class quality levels until <unk> chip foundry is online existing capacity.

We will limit our ability to increase our production and shipment rate in the short term.

During this quarter, we are working on installation of equipment in our chip foundry once installed the production line will undergo full qualification and approving in period.

Is the line becomes fully operational in the coming months, we will be positioned to significantly increase capacity efficiency and output, which we expect will result in improving operating results in the second half of the year.

Also during this quarter, we are finalizing and expect to complete our annual merit process.

Our focus remains on our long term success based on our pioneering approach to integrated high density power module technology.

We are working hard to combine world class operating performance with the technical advantages of the <unk> power delivery products.

We've invested in a unique state of the art U S based automated manufacturing facility, which is in close proximity to our development engineering teams and allows for co development of next generation products.

Our manufacturers manufacturing strategy also derisked supply chains lays the foundation for cost efficiency and cost reduction and positions us to deliver the output needed in the highest volume most demanding power delivery applications.

And we are embarking embarking on an initiative to drive operational excellence across by quarter.

At the heart of that initiative is our aim to become a customer centric company. Our entire organization is engaged to make <unk> the power delivery supplier of choice for customers in a variety of end markets.

We are committed to achieving our goal of operational excellence.

With that so bill will provide an overview of recent market developments and then for <unk> 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.

You have more than one topic to address please get back into queue Phil.

Thank you Jim.

I will keep my comments short and focused primarily on our high performance computing business, which has received a lot of attention from our investor community.

Our backlog growth is driven by a global high performance computing customers, a new supercomputer plowed sugar and AI accelerator card solutions being brought to market.

The 48 volt bridging applications are now ramping with major Hyperscale is as they deploy rack based clustered GPU AI systems into their data centers and rapidly increasing numbers.

Additionally, GPU on ASIC base, 48 volt accelerated cards, which have varying power requirements are ramping with both 48 volt to 12 volt bridging solutions for lower power cards.

As well as direct 48 volt to point of load factor is power solutions for higher power Gpus and Asics.

The technology gap separating vehicle from a multiplicity of aspiring competitors is expanding not contracting.

Specifically current density another key performance attributes of Veeco power system solutions are improving at a rate faster than achievable with intermediate bus architecture Multiphase solutions.

High performance computing applications require the level of performance that only veeco modules are capable of providing.

Very soon they will require a vehicle proprietary power system architectures, such as vertical and lateral and vertical power delivery.

And that is why our data center business opportunity is broadening ongoing up knockdown.

To be clear the high performance computing industry is no different than any other high volume industry seeking multiple sources to derisk supply chains.

However, wishing to accomplish a multiplicity of sources does not necessarily mean being able to do it with good enough performance.

We remain confident that our performance advantages, we will continue to expand our opportunities and design wins with major customers.

With a few current multiplier modules deploy laterally or preferably vertically.

A pilot system can achieve higher density lower noise higher efficiency and higher performance that can be achieved with a multiphase solution consisting of over 100 large noisy on hot components.

As discussed in previous quarterly calls the demand for high density power delivery solutions continues unabated across all of our target markets with polished systems engineers, turning to vehicles modular power solutions to solve their toughest design challenges.

As our new vertically integrated capacity comes online in Q3.

We will be better positioned to take full advantage of the increased number of high growth opportunities with our current.

<unk> New high performance computing customers, who are also eagerly anticipating this key event for <unk>.

As we have discussed in previous quarters, FICO is gearing up for sustained and predictable long term growth.

A major part of our growth strategy will be success in the automotive powertrain market and having a vertically.

Full vertically integrated manufacturing process, we will also enable us to meet the exacting qualification standards demanded by our automotive customers.

Our progress in developing this exciting new market and engagements with leading Oems continues to be ahead of our initial plans.

That concludes my remarks, and Patricio, Jim and I will now take your questions.

Everyone. If you wish to ask a question. Please press star one on your side.

You said, Andy said can we generate a question simply press star two.

And the only received the first question and this is coming from the lineup Quinn Bolton from Needham <unk> Company LLC you May proceed.

Hey, guys. Thanks for taking my question.

One of your large customers and video recently shared its next generation H 100 car powered by a multi phase voltage regulator architecture. Yet. This card has power consumption of 700 Watts I'm wondering if you can talk to this is this evidenced multi phase is viable above 400 watts and 1000 amps of current or we'll buy core part.

<unk> in this next generation architecture at that customer.

So as a matter of general policy, we will not comment on specific customers or specific applications.

But in general addressing your question, which is not surprising.

I think feel it made some key points that are relevant.

To address your question.

First of all.

The GAAP dissipates Viva technology from the intermediate bus architecture, a multi face.

Our solutions in the context of a 48 volt architecture, which with an intermediate bus solution requires two stages.

Our product processing.

Our technology, our gap is advancing.

And advancing at a rapid pace that the intermediate bus architecture cannot keep up with.

Sure.

To the point of your question.

The intermediate bus architecture, and multi phase continues to make advances and certainly in the last three years.

They've made some strides with respect to increasing.

The current density into our capability of that solution, but as you know from past comments.

It is a solution is an architecture and building blocks that are.

Fundamentally handicapped in terms of what can be achieved.

And thats fundamentally at odds with industry trends that pure point of the car.

Our advanced applications, increasing call levels increasing.

At current density by the way not just in terms of primarily but also in terms of auxiliary wells and all of these we believe.

I'll continue to support the choice of FICO solutions.

So maybe just a quick follow up on that without speaking to any specific customer. If you look at an architecture. That's multiple hundreds of watts of power consumption and say 1000 amps can you give us some sense, how much more efficient or what kind of advantage in terms of power.

Efficiency power savings do you think the factor is our architecture has over today's multi phase.

Got it.

That's an architecture approach.

So I'll give you would general.

Example, I should say an example.

We generally apply.

Two.

The GPU.

Or icon Asics in the town of <unk>.

Comp growth between primary <unk> in the <unk>.

Range.

So we recently benchmark.

Lateral vertical solution, which has been adopted by.

Notable.

Company in the industry.

And we.

We benchmark it relative to.

Our own <unk> solution involving a multiplicity of molecules are current multipliers deployed.

On the sides of the ASIC and with another vertical solution, we can increase efficiency.

By something close to 10 percentage points.

And thats in efficiency advantage.

Debt.

Sets us far apart from anything else that can be done.

As you can imagine.

Thank you Patricia I'll get back in the queue and come back with questions. Later, thank you.

The next question is coming from that I ask Jen Simons.

CGS Securities you May proceed.

Hi, Good afternoon gentlemen, thank you for taking my questions. My first one is a follow up to that.

When a customer using a 700 watt processor decided to go with the traditional accounting system is that purely a capacity related decision from their perspective or are there other factors that theyre, considering such as price or maybe something else that we're not thinking of.

Well to your point there is there is.

The multiplicity of factors at play and generally speaking we've seen a larger OEM their various consistency with as you can imagine.

A different set of priorities, but at the end of the day.

The solution not only us to walk work well enough is that.

In effect enable the compute density and the advances in computing density that customers expect.

And Thats the <unk> question.

Raul.

Nobody can dispute the proposition that an OEM would like the best of all worlds illogical to produce your supply us commodity solutions.

Unlimited capacity and the list goes on.

In the real World.

<unk>.

Obviously, not all of those opportunities unavailable and.

And agonizingly appraisals may be required to satisfy the essential objectives.

Okay fair enough. Thanks, I think I understand.

Having said that your orders.

Still up your backlog is strong.

Is there anything at risk in your backlog at this point just because some of these lead times are getting so long.

Perhaps there is a risk of customer second sourcing at this point.

No. John this is Phil that the backlog is strong I'm very confident in it don't see don't see any risk in the backlog at this point in time because of the customers' demands are still really strong and they really want us to deliver that backlog as quickly as we possibly can which is why in the second half of the year is going to.

Look a lot better than the first half for us.

Got it I'll jump back in queue. Thank you.

Okay.

The next question is coming from the line of Don Mckenna upfront.

You May proceed.

Thank you hi, guys.

Just to follow up a little bit on the previous question. Phil can you just address how much of the increase in the back.

The envelope number I am coming up with somewhere in the range of $425 million as a result of.

The expanded.

Lead times versus strong new demand and then my other question.

Patricio I guess would be to you was in the past I've spent a number of years in manufacturing and plating process back then was considered as much as a science and good operators, who are highly valued and I am wondering what youll see is the learning curve.

<unk> been preparing for it and how long you anticipate it will be before you achieve the same efficiency as your current subcontractor.

Let me take your question first.

I expect that that very very quickly we're going to achieve efficiencies.

But what we've been able to achieve working with.

The outside contractor and Thats because.

We have better equipment.

Redundancy.

Well trained team.

Team.

So I do expect that we're going to be able to ramp.

Faster and more predictably then.

We've been able to accomplish with all of the unpredictability.

In the way of progress, particularly over the last nine months.

Phil.

With regards to the backlog.

Really expanding lead times, we are working very closely with our customers to make sure that the.

They obviously are placing orders at the right rate.

<unk> products are out 30 to 32 weeks or so of brick products in that 'twenty sort of week range. We haven't we haven't really touched those.

It's demand, it's new programs coming on as I mentioned.

In my prepared remarks, we've got the 48 volt bridging.

Applications now starting to ramp we've got new programs.

In the China market in the European market, North American market with new customers.

And we've also got continued strength in our existing customer base.

That we expect to go on for quite a while yet as I've mentioned previously so so it's really demand driven.

We do thank you very much guys.

We do expect to bring in.

Lead times.

<unk>.

We have.

The MOSFET that additional capacity.

We are an integrated facility and sure yes.

<unk> brought about.

Some other limiting factors because the issue to be clear over the last nine months as <unk> been.

Simply one factory capacity, it's also been one of component availability.

And supply chain disruption.

You heard in the past that the issues with respect to in particular some of that as a component of availabilities.

We had to do with.

Unique semiconductor components that we develop in.

<unk> for us.

And we've been able to secure.

It measures surpassing that capacity, but.

Unfortunately, it's not just a matter of those proprietary semiconductors, even for garden variety.

Nicole type parts right.

Some of our products, particularly some of the brick products.

Our dependence on we've been some degree.

Exposed to the vagaries of the supply chain and of late particularly.

The disruption.

Jim catheter is that.

His remarks led into the Chinese as you know call it policy.

Mhm alright.

Alright, Thank you very much.

Thank you.

The next question is coming from the line of John <unk> from BMO Capital You May proceed.

Hi, guys first of all congratulations on the booking number it's really phenomenal.

Alright, great and then I really expected.

But today I want to ask you about the technology and about your technology versus March which you addressed somewhat in your opening remarks, but I'm wondering does your technology versus the latest multi phase still lower Io pin count lower the motherboard copper, though with the socket resistance free up.

Boards based on reduced component accounts.

Yes so.

<unk>.

Technology with.

We'll know soon becoming.

Passenger at Ash.

Calm multipliers and regulators.

Is.

Capable of delivering on the efficiency crop.

With another vertical impairment fashion.

Double digit.

Improvements in efficiency and by the way if 10% doesn't.

It doesn't sound like much.

In one way of looking at it.

Another very relevant way of looking at it which is the heat right. He is generated.

Both by the power system and the heat is generated within the CECO GPU itself within silicon.

That 10% differential in efficiency.

Is it large.

Amount of heat that is the solution doesn't need.

Need to <unk> and that the <unk> to increase compute capability as these solutions that.

It pushed the envelope as they need to win.

With respect to.

Innovating.

Current requirements.

Often run into because.

They will typically be limited.

By the ability to just <unk> match the <unk>.

<unk> itself is so.

In one way to look at it the efficiency improvement, which directly translates into a reduction you need is an enabler in terms of.

Allowing greater compute density and a bigger value proposition for the OEM relative to its competitors.

Which we believe.

Is the primary consideration, particularly if capacity is not a limiting factor.

Gotcha, and then that kind of plays into my second question. So, let's say you have a 701 GPU.

The <unk> lateral point of load solution for versus the.

Multi phase.

Looks like you can say that that 70 watts of power loss due to the power distribution network and the efficiency you're going to be.

70% less than the competitive solutions, that's about right.

Well. So the specific example was given was for the first implementation of what we call other vertical system, which uses the same if you will Gordon.

Current multipliers, you've seen on the sides of Gpus in all of our vertical system while those.

Our current multipliers gets deployed if you will at the <unk> on the bottom side of.

The substrate.

Yes.

With that vertical element same building block just deployed in a.

The French away from our power distribution is actual perspective that car multiplier.

So Pos.

Active area of the ceiling on it particularly in its primary rail to deliver a much more uniform.

<unk>.

<unk>.

Its distribution within the active area.

Guest reviews by nearly a factor of three.

Which she south in more efficient easy fashion of the silicon itself.

Domains and results in better performance in the ceiling on itself in addition to the.

The reduction in heat.

<unk>.

Again, the ability to in effect run the solution.

Overclock it run it the other higher operating frequency and compute capability.

So not only are you seeing in electrics, and you're enabling a higher performance computer.

So if I may.

Italy.

The deficiency advances.

That includes our leveraged to some degree.

The ability to deliver a much more what we call equity potential surface across the active area or the primary rail.

These advances.

Enable more power to be delivered within the constraints of the tunnel.

Managed solution, which <unk> in either.

The power savings are more compute capacity.

Got you.

And then on top of that at all it sounds like you are.

Talking about a data center or a supercomputer.

Thousands of Gpus, you are talking about hundreds of thousands of wasted watts by going with a competing solution.

There is a green element that too.

This value proposition.

Optimally Inc.

All about compute capacity, which is obviously will drive the industry.

To continue to to raise the bar.

Great. This is really great guys I'll get back into queue. Thank you so much.

The next question is coming from the line of Richard Shannon from Craig.

You May proceed.

Thanks, guys for taking my question.

But to say I might follow up on this.

Last last few questions here.

I'm going to ask something thats kind of similar to them, but just wanted to delve in a different way here.

What you are describing here and certainly what I think most people's belief is a solution that's much better than than others out there power savings and heat savings alone would be a dramatic improvement. So are you expecting at the highest levels of power delivery.

In GPU, another ASIC accelerator systems that youre going to be a sole source.

Because it seems like if youre not in the customers are using us deeply suboptimal solution. So can you state what your expectations are generally across.

Being in new customers at these kinds of power levels.

Let me take that in parts and then Phil will weigh in.

In general as you can imagine because of the proprietary nature of our solution.

<unk> power solution.

And also as a solution.

With <unk> unique power distribution architecture, so with or without factor is power be an element of it.

This show is proprietorship.

Perhaps would be a single source right and.

And as discussed earlier and our customers.

To make a choice.

Which fundamentally it comes down to.

Getting more performance.

A better product and more capable product.

But being single source with Tiger.

<unk>.

Adding a multi source solution with <unk>.

Intermediate bus architecture type of power system with these limits Ashok San handicaps.

And free cash flows with respect to the performance.

Of the solution itself.

Yes.

To add to that I think that.

We're getting if you look at new customers that we have that we've brought on in the last six months nine months.

We have options to use multi phase.

Bus converters with multi phase if they want to do that but theyre not doing that they are using <unk>.

<unk> lateral so now and also then the future. We're also working on the number of lateral vertical for higher current Asics and network processors. For example, some of the stuff I talked about in the last call.

So they have choices and they're choosing vehicle, which which says very clearly what the advantages as we've spoken about many times of our solution is.

No.

Those are going to be single source opportunities and.

They're doing it because they need the performance they compete on performance they want it for their customers and so thats the way the choosing like Google with the multi phase but.

Just to be clear.

It's not that.

The <unk> solution is the only solution that other solutions, the other solutions, which tend to be or group.

In the multi phase bus converter intermediate bus architecture around.

There can be made to work.

A lower comp as it is with more noise.

More challenges.

From an international perspective with growing multiplicity of faces that are the two.

Make work reliably.

And certainly <unk> pre cash us off for those kind of solutions.

Their requirements allow.

We're not suggesting <unk> that we haven't properly.

On the indices of the country.

The industry with a broad brush.

Both set of applications and requirements and for less demanding a pre cash outs.

<unk> multi phase can be properly viable, particularly again, if if the current levels and the overall demand of the free cash outs dynamically otherwise.

Can make do with.

A multi face uptick.

Yes, we still like that as well because we supply the 48 to 12 plus converted we've got the highest density high performance device, there and were increasing its power capability.

That's good very good business for us.

As well so we're happy to support the multi phase in those lower power applications too.

Okay guys. Thanks for that.

The start to appreciate it my follow on question here.

On your comments about the second half being better than the first half.

It seems <unk>.

<unk>.

You have confidence in your manufacturing getting up to speed.

So maybe if you can talk about the next steps here.

And at what point do you have full 100% confidence are in are going to be running at full rate or at least commensurate with demand.

When does that happens that sometime during the third quarter the fourth quarter.

Not easy to tell right now maybe you can just give us a little bit more color on why you say this.

About second half better than first thanks.

Yeah.

So I have confidence in our operations team.

Particularly.

When they can be in control of their destiny is that going to be a very soon with vertical integration.

Of importance.

Important process steps.

And he has to say over the last three quarters.

Investors have been disappointed I have been disappointed by the unpredictability.

<unk>.

Being able to step up.

Unit rates and.

<unk> revenues as we had anticipated thats been frustrating.

But to be fair.

There's been a combination of factors at play.

Just the lack of vertical integration with respect to critical process steps.

But also the supply chain bottlenecks and obsess.

The impacted.

Many of the products, including.

Some of the brake products.

And gathering in the way of.

Having a predictable output.

I think as we get into July and the soft.

The third quarter.

We're going to have we're going to event all the equipment in.

The last critical piece of equipment is arriving.

This quarter.

And at that point in time, our team who will be in full control of its destiny.

And I do expect that we're going to see.

Our revenues cut travel with a backlog, that's obviously stretched way out.

In terms of.

Yeah.

Customers, having again to place orders.

Lead times are longer than they and we would like them to be.

Great. Thanks, guys.

The next question is coming from the line of that come back one put on this capital you May proceed.

Yes, Hi, gentlemen, just a quick follow up to the previous question.

What would have to occur to delay the factory coming online and that July one timeframe and as far as components to stock. The factory as you said the last three quarters.

Global supply chains are affected it's impacted you guys deeply how have you gone about solving those.

Those issues and getting the components that you will need internally to produce your products from <unk>.

Start to finish and export them out the door to meet customer demand.

Well I think as we've discussed in the past.

With respect to.

The availability of all our proprietary semiconductors.

Wafer outs.

<unk>.

We've made strides in that.

Frank.

With respect to.

Getting the output and also securing a long term.

Sourcing.

<unk>.

Raise debt.

I expect it to support requirements.

With respect to.

Garden variety parse that.

Being that contact with time on <unk>.

Available because of general supply chain issues.

We're very focused on that.

Zinc.

I'm, beginning to see and I don't want.

B.

To the affinity with respect to these because as Phil.

Tivoli preliminary.

Beginning to see some easing.

And some increase availability coming online later this year.

So obviously were watching that very carefully with respect to make.

Making sure that once we have.

All of the.

Process that is integrated and we have.

Our fab capacity in place debt component availability is not going to get into the way of being able to use.

Yes that was that was where I was going with that you have all the machines you have all the people and then the assembly line standing around because you don't have the parts that was more my concern because we've all heard about double and triple ordering from most of the layers of the semiconductor World I was just wondering if you were aggressive in securing the part.

You need so that when you do have everything up and running.

Can start to turn the engine alone.

Well we.

We do like safety stock.

When we can have it has been difficult.

To have it.

Over the last couple of years.

We do have a plan to build some level of safety stock will end.

Call that double or triple auditing.

I will say this.

Prospective debt.

Sure.

Component availability, particularly when it comes to rather than by the semiconductor components that we are going to to use is cutting properties over the next several years.

Shouldnt be hand to mouth proposition right Thats not.

The way to run.

The fashion from a logistics perspective, we do one more.

After inventory.

But.

If you recall that doubled.

I wouldn't call. It that's why we are looking to build some level of buffer stock.

Where appropriate in order to ensure that.

Our expanded capacity can run.

Without the inefficiency of the disruption due to availability of critical components.

Terrific, Yes, and I know, that's not the normal way to run a business, but we are in very unusual times. After COVID-19 . So thank you very much.

Thank you.

The next question is coming from the line of <unk> from Needham <unk> Company LLC.

Hey, guys. Thanks for taking my follow up I guess first just on the backlog the backlog up near $425 million.

Got my numbers right. It looks like you guys did record bookings in the first quarter and I'm wondering if you could confirm that the first quarter was indeed, a record bookings quarter for the company.

It was a little bit short of one quarter, where we had a little bit more.

Yes, just.

It came close.

Okay.

Short of Q2 of last year, it sounds like that.

Yes.

Got it got it second question you mentioned the vertical power delivery I know you've got a couple of initial wins on vertical power into more specialized applications could you give us a sense when vertical power for Gpus are AIA six might might ramp is that a 2020 to ramp or is that out further saying in 2023 or beyond.

So we have.

To lead cast the most for fully Vertigo.

The power delivery.

Those are cash some of that.

Debt.

As with <unk>.

In effect.

Making a <unk>.

Calculated.

The choice to be on the very leading.

<unk>, leading edge of technology.

With.

A patio set of components for fully vertical power delivery.

That are progressing in terms of their agile capability maturity, but not yet.

The level of maturities that would provide the level of capability.

In the millions of units.

These charity pod in high volume applications, So I think to get the good SaaS although landscape.

Would be good too.

Think of it in the following tops.

A lot of their power delivery.

You know what that means so leading edge.

<unk> free cash I had been using a lateral power delivery.

Architecture with in particular crime multipliers.

To the north and the south and in some cases, the west of the east.

All the ASIC.

The crop that these devices deliver.

As to traverse laterally.

Under the active any of the GPU and ASIC.

Reach the domains.

These devices.

Deaths.

And architecture that.

Whoops.

The multiplicity of entry points of the North South East and West.

<unk> two.

Five six under that.

Beyond five six out of that <unk> stands in the way.

<unk> it.

Remaining in efficient and scalable power delivery architecture.

Ill now vertical power delivery is at the avid handled the spectrum, it's very events.

Well some of the bleeding edge.

With vertical power delivery.

Those <unk>.

The losses and voltage that officers occur as you try and cutting the cost from the size on the <unk>.

The activation of the silica essentially go away.

In order of magnitude reduction.

In power.

Power delivery losses.

If you can in effect supplant a multiplicity.

<unk>.

Aladdin all current multipliers with a vertical power delivery, we call it the DCF.

But again this complexity associated with the full vertical power delivery.

And to the lateral royalty architecture.

Which is innovative.

Essentially specs.

<unk> retains the same module components the same golden car multipliers.

Our used in lateral our systems, but as suggested earlier.

Places one of them.

<unk> on the bottom side to provide is the entry point in the central area of the GPU or ASIC.

That brings about a factor of three reduction in PD and losses and in fact, our free the action in the voltage differential that you would otherwise.

Suffer.

I have to in effect lever with.

Within the primary rail often ASIC, so we see.

Sorry for the lengthy answer to your question, but I think it's important.

<unk>.

<unk> got a grasp of the evolution of the power delivery technology.

From <unk> and its handicaps.

The high volume of free cash flows are going to go into lateral vertical that provides a three fold reduction.

In part distribution drops and a major improvement.

In efficiency within the ASIC.

Our full vertical is.

Being in effect tested.

Bye.

Leading edge.

Free cash flows.

In my opinion in terms of.

Mass production in very large properties is seal one and a half.

Two years away, but it is going to be scaling up.

For certain operating cash outs that are dependent on a <unk> system.

Later, this year and into next year.

So the evolution is lateral.

Which is obviously.

A proven technology, but with certain <unk> getting the way of thousand App solutions too.

Two.

Again tracking it from.

The mass production perspective, latter vertical which is a major improvement three fold, but with conventional building blocks with the same building blocks that we'd be making by the millions of units to full vertical which is still in terms of mass production.

Why have two years away.

Thank you Patricio thank.

Thank you.

Okay.

The next question is coming from the line of Johnson with Samsung Cta.

Alright, Thanks for taking my follow up guys.

You mentioned some easing of the supply chain possible. Later this year I was wondering if you could talk about the new constraints that you're facing actually in Q2 are they getting worse or better in the near term and if there are any levers maybe that you can pull.

Perhaps the pricing just to help regain within that margin.

I think the environment right now John is relatively.

Similar to last quarter.

We are dealing with some capacity constraints in the outsource panel production that's the same.

We have the.

Patrice you mentioned the semiconductor supply coming in.

We do have a new wrinkle to contend with which is zero COVID-19 policy in China. There is implications there that are tough to predict.

We're making our way through that so I think we're saying that it feels like Q1 and.

Working very hard to clear overdue backlog and support customers Thats, our focus this quarter and most notably I should say job number one is to get our factory expansion up and running and the team is working extremely hard to make that happen.

Understood. Thank you and good luck.

Okay.

The next question is coming from the line of Alan Hicks from asset managers.

Yes, good afternoon.

I had a question on the putting in products.

You've been talking about it for a couple of years.

I know you had very high expectations, potentially as big or bigger than kind of both products.

Let's see.

On what.

When was that going to move the needle in terms.

And revenues is it dependent on.

G technology coming out.

Yes, I think if I understand your question it has to do with Soho front end products, our AC to DC products.

So we have.

We've made very good progress we have.

The two metro customer.

Engagements.

And.

We've delivered.

Initial sample quantities.

One of these two engagements is going to be.

It's getting up into <unk>.

Substantial revenues.

In the second half of this year.

The order of.

About $10 million, so the ACC component of our revenue mix.

<unk> is still.

<unk>.

As an early stage, but.

The products have.

A good deal of.

Appeal.

For high density applications.

<unk>.

And this has been tested by two.

Leave cash summers and procure one of them is about to get deployed and substantial quantities.

Okay can you say what kind of application that is.

Phil.

Can we say.

Do you see what do you see a professional soar without lending caps. The most I think yes, we've got some data center opportunity some edge computing opportunities in lighting opportunities. Those are the three sort of large buckets, if you like that where we're targeting.

We also have a lot of interest in the higher frequency versions of those.

Key products in the aerospace area, where they need 400 Hertz operation here in the United States 800 in Europe . So we will be doing sort of defense aerospace versions of those products, which actually is quite a large sam.

Europe , and North America somewhere in that.

200 $250 million.

Range for an opportunity with very nice gross margin. So we're very interested in.

Having defense Aerospace versions of these front ends to which we are working hard to bring through to the market later this year to the broad market customers.

As I mentioned data centers edge computing lighting defense and aerospace those are the four areas. So the first thing.

Major revenue contribution is going to come from lighting.

The category of <unk>.

Several megawatts.

Lighting power in one location.

Okay. So thats supposed to ship in the second half.

Yes.

Stock building that market in the second half revenues next year, and then obviously ramping up in 'twenty four 'twenty slow.

Okay.

Then on your <unk> technology.

That applies across the board joint venture products.

Some also using the same engines and control systems that we use for our other components, we leveraged a lot of the technology same packaging.

So think of us as.

A fab.

Chips.

Jim I figured out at earlier convert their housing package, whether it's.

A.

Elisa <unk> shown requiring three phase.

From <unk>.

<unk> is another motive applications, requiring as I'm going to evolve to found evolved.

Bus conversion 50 under the 150 kilowatts.

All of these or a point to ROE that free cash on requiring the same current multipliers describing earlier.

I'll go into growing through the same fab going through the same process steps.

Leveraging the same comments.

Our methodologies in terms so.

<unk> control systems.

And most of all packaging technology in effect wafer alike.

<unk>.

ALS.

Okay, and then just real quick.

How soon do you expect production revenues in Idaho.

Idaho.

<unk> 23 for the first customer first OEM and then.

Leasing 'twenty four 'twenty five 'twenty six of course.

Thank you very much.

Thank you and I think with that operator could you please call an entity to the call.

Of course, everyone.

That concludes your conference call for today you may now disconnect. Thank you all for joining and enjoy the rest of you.

Great.