Q1 2023 Vicor Corporation Earnings Call
Please continue to hold.
[music].
Welcome everyone to today's webinar entitled Why core earnings results for the first quarter ended March 31st 2023, and <unk> and then the operator today.
During the presentation all attendees will remain in listen only mode. If you require assistance at any time, please put a message in the chat box I.
I would like to advise all parties that this conference is being recorded and with that I would like to hand over to Jim Schmidt Chief Financial Officer of Blackhawk. Please go ahead.
Thank you good afternoon, and welcome to <unk> Corporation's earnings call for the first quarter ended March 31, 2023 I'm.
Jim Schmidt, Chief Financial Officer, and I am in Andover, with Patricio Vinci Rally, Chief Executive Officer, and Phil Davies, Corporate Vice President Global sales and marketing after the markets 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 three core 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.
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 the private Securities Litigation Reform Act of 1095.
Except for historical information contained in this call the matters discussed on this call, including any statements regarding current and planned products current and potential customers potential market opportunities expected events and announcements at our capacity expansion as well as management's expectations for sales growth spending and <unk>.
<unk> are forward looking statements involving risks and uncertainties.
In light of these risks and uncertainties, we can offer no assurance that any forward looking statement will in fact prove to be correct. Actual results may differ materially from those explicitly set forth in or implied by any of our remarks today.
The risks and uncertainties, we face are discussed in item <unk> of our 2022 Form 10-K, which we filed with the SEC on February 28, 2023. 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 Tuesday April 25, 2023 breakwater 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.
Webcast replay of today's call 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.
After which Phil will review recent market developments and Patrice Youll, Phil and I will take your questions.
In my remarks, I will focus mostly on the sequential quarterly changes for P&L and balance sheet items and refer you refer you to our press release or upcoming Form 10-Q for additional information.
As stated in today's press release <unk> recorded recorded total revenue for the first quarter of $97 8 million down seven 3% sequentially from the fourth quarter of 2022 total of $105 5 million, but up 10, 8% from the first quarter of 2022 total of $88 3 million.
Advanced products revenue declined 19, 3% sequentially to $51 3 million, while brick products revenue increased 10 nine sequentially.
Sequentially to $46 5 million.
Shipments to stocking distributors increased four 1% sequentially at 43, 3% year over year the.
The decline in advanced products revenue was due primarily to constraints at our outsourced manufacturing partner.
Exports for the first quarter decreased slightly on a dollar basis, but increased sequentially as a percentage of total revenue to approximately 64, 3% from the prior quarter's 59, 8% for.
For Q1 advanced product share of total revenue decreased to 52, 4% compared to 62% for the fourth quarter of 2022 with brick products share correspondingly increasing to 47, 6% of total revenue.
Turning to Q1 gross margin we recorded a consolidated gross profit margin of 47, 6%, which is a 100 basis point increase from the prior quarter.
While lower sales volume pressured gross margins, we did benefit from an improvement in the gross tariff rate as a percentage of revenue.
During the quarter, we recovered approximately $3 million and duty drawback of previously paid tariffs.
We continue to work to reduce overall tariff expense and recover previously paid duty drawback.
I'll now turn to Q1 operating expenses total operating expense decreased 12% sequentially from the fourth quarter of 2022 to.
To $36 1 million.
The sequential reduction was primarily due to a reduction in legal fees.
The amounts of total equity based compensation expense for Q1 included in cost of goods SG&A and R&D was 486000.
$1 520.
And 811000, respectively totaling approximately $2 8 million for.
For Q1, we recorded operating income of $10 $4 million.
Resenting, an operating margin of 10, 7%.
Turning to income taxes, we recorded a tax tax provision for Q1 of approximately $1 1 million representing.
Representing an effective tax rate for the quarter of nine 2%.
Net income for Q1 total totaled $11 $2 million GAAP diluted earnings per share was <unk> 25.
Based on a fully diluted share count of 44.907 million shares.
Fully diluted EPS increased approximately 39% sequentially compared to <unk> 18 in the fourth quarter of 2022 and more than doubled from <unk> 11 per share earned in the same quarter a year ago.
Turning to our cash flow and balance sheet cash and cash equivalents totaled $192 9 million in Q1.
Accounts receivable net of reserves totaled $61 1 million at quarter end with Dsos for trade receivables of 35 days.
Inventories net of reserves net of reserves increased five 9% sequentially to $107 4 million.
Annualized inventory turns were $2 one operating.
Operating cash flow totaled $10 1 million for the quarter.
Capital expenditures for Q1 totaled $10 1 million, we ended the quarter with the construction in progress balance primarily for manufacturing equipment of approximately $36 million.
And with approximately $13 million remaining to be spent.
I will now address bookings and backlog.
Q1 book to Bill came in below one and with one year backlog decreasing 10, 9% from the prior quarter closing at $2 $71 3 million.
Turning to our factory expansion as expected. We recently received the final pieces of equipment necessary to complete vertical integration of our new chip fab <unk>.
During the month of May our manufacturing team will conduct pilot runs using this equipment through July we expect to complete manufacturing qualification of our vertically integrated chip fab and then commence volume production.
While there will still be some outsource outsourced processing in Q3, we expect to be vertically integrated across all of the key process steps necessary to manufacture our power modules.
This marks a milestone in <unk> history, aligning our manufacturing capacity in the first global chip fab with the breakthrough design technology Vycor has invented to deliver superior power density.
As we said last quarter, we are looking forward to the substantial reduction in cycle time improved manufacturing efficiency and full manufacturing control that this facility will allow.
And we are anxious to leverage the completion of our chip fab to provide shorter and more consistent lead times to our customers.
Turning to the second quarter of 2023, we expect results to be approximately flat to Q1 with a potential for a modest sequential improvement in overall results and including a moderate sequential increase in operating expense as we implement our annual merit process.
With that Phil will 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 respond to as many of you as possible in the limited time available. If you have more than one topic to address please get back into queue.
Thank you Jim.
I'll begin with an update on our satellite market business development initiatives, which we havent discussed for a while.
In December of 2022, we announced that vehicles radiation tolerant factories power chipset was onboard the launch of Boeing's <unk> communication satellite powering the communication Asics.
This was a critical milestone for us by proving to other satellite customers that vehicle power modules could improve signal integrity efficiency and power density while meeting the tough environmental and quality demands of space applications.
Building, our space Heritage opens up an available market opportunity of $175 million with Boeing and other customers.
Our initial radiation tolerant chipset is being expanded with additional input and output voltage modules critical for other customer customers and applications.
In early Q3, we will introduce a reference design for Amd's first space grade vessel adaptive Src, which delivers reprogrammable AI inferencing and high bandwidth signal processing for satellite and space applications.
Turning to our automotive market opportunity at the World Congress event in Detroit last week Brightcove presented four papers on Howard up our power modules solve the toughest power delivery and conversion challenges in electric vehicle power systems, which are increasingly transitioning to a 48 volt power distribution.
<unk> architecture.
Broader adoption of 48 volt power distribution bodes well for us.
Given that the 48 volt architecture is one that Vical has pioneered and innovated around for over 15 years, developing proprietary and patented power distribution networks topologies control systems and packaging to deliver the highest power density 48 volt solutions.
The chips and applications presented at <unk> and on display at our Booth.
The foundation of our expanding OEM and tier one collaborations and design wins.
In Q1, we signed a supplier agreement with a major tier one and expanded our design win pipeline that existing Oems with additional platforms and applications.
We also started three new collaborations and added a major design win with an SLP date of 2026.
High voltage power systems designed with our power modules are proving to be three to 10 times smaller and lighter than DC DC converters built with silicon carbide Gan power switches.
We are also on track to achieve automotive level qualification for several of our power modules in Q2.
In Q1, the high performance computing market saw the introduction of artificial intelligence chatbot using large language models, which has significantly stimulated the market for AI systems at Hyperscale is on social media companies globally.
These new chatbot capabilities opened up completely new areas of AI to the masses.
A much higher customer satisfaction than traditional search engines.
Our factories power solutions are being used to power the rollout of this exciting new technology and as higher performing processes are introduced a lateral vertical solutions will provide the higher current density and lower PD and losses that these next generation AI processes demand with increasing current levels and.
Lower operating voltages.
As I commented in our last call new five nanometer processes being introduced to the market using lateral power conversion solutions are hindered with high PD and loss, which limits performance from otherwise achievable levels.
Lateral vertical factorize Paula enables the full potential of AI processes by reducing processor and PD and losses.
On the product development front of Gen. Five technology continues to make excellent progress and is on schedule for introduction to major customers. This year.
These next generation point of load solutions enables scalable cost effective <unk> or vertical power delivery, which will be a game changer for the industry on enable next generation processes that would otherwise be handicapped by the power conversion and delivery challenges of multi phase technology.
In summary, all of our four business units are seeing expanding opportunities and major customer engagements across our top 100 customers as electrification autonomy and artificial intelligence requirements rapidly expand.
Account managers for our top 100 accounts are setting up visits to our new chip fab for Q3 on Q4 as part of our operational excellence initiatives to provide our target customer base worldwide.
Visibility to a scalable capacity.
We introduce them to the superior power system capabilities of our Gen five chips.
That concludes my remarks, three CEO , Jim and I will now take your questions.
Operator, we're now ready to take questions.
Thank you.
Everyone. Your question and answer session will now begin to ask a question. Please click on the icon at the bottom of your screen you see joined by phone line.
Dr. Lee.
Let's take a moment to assemble the queue.
And we have received a couple of questions already SaaS, one is coming from Quinn Bolton.
Amit. Please go ahead.
Okay.
Please go ahead.
Hi.
Jim can you guys hear me okay.
Okay, Okay perfect.
Just wanted to start with just a clarification.
A quote from the press release, where you said bookings will or May.
Jill AI oem's, capturing the benefits of advance PGN lateral vertical solutions can you give us some sense of timing when do you expect to ramp with lateral and vertical.
Is that going to be in calendar 2023, or do you expect that potentially move out to 2024.
We don't know.
<unk>.
High degree.
Our coffeehouse.
Wednesday's.
Without them it could happen.
After this year.
Could that Ben.
In Q1 over next year.
Yes.
Okay.
Last fall and you talked about I think roughly five or six design wins.
<unk> nanometer.
Six or other sensors.
Thank you.
Yes.
Thank you.
They are.
So when you just sure lateral so lynch.
All of those maintenance.
Keith.
Paul.
Okay.
We seem to have some interference on the line with some background noise.
<unk>.
Most of the question, yes, so so yes, I think that but what I talked about last time was that.
We have design winds ongoing with lateral solutions.
<unk> about four or five companies and.
We're also engaging with.
Other companies that have higher current processes that will require we believe lateral vertical or even pure vertical with our gen. Five.
Technology, So there's a lot actually happening in the market right now with different process nodes and different current levels, but.
We will I expect lateral lateral vertical and pure vertical to be part of the portfolio going through the end of this year and into next year.
Glen did you get that.
It should be connectivity issue.
Alright I'll jump.
You can see if I can dial in at a solid and see if that helps.
Thanks Cliff.
Okay, operator, let's go to the next question. Please.
Thank you.
The next question is coming from John <unk>.
Please go ahead with your question, Amit Amit yourself from urine.
My first one what are your customers, telling you about the competitiveness of your product.
Stock compared to a year ago.
Specifically on the entity okay.
Okay.
The competitiveness of the products.
Our cost of our selling us with respect to where do we stand competitively visa.
Oh, Okay. So so John .
So I think that it's clear that.
The multi phase technology has advanced with with current density.
But it's still not at the levels that we're at in terms of the density of the product and the ability of the product which in lateral vertical is very important is to be very thin. So you need to have a very very thin package that you can place on the back of the board and any sort of GPU ASIC CPU type.
Application so that's number one.
I think that with Gen five technology, which is where we are focusing the majority of our product development here no.
That's a complete game changer in terms of the three X improvement in current density that <unk> spoken about the.
The changes things dramatically.
With regards to power delivery for high current Gpus.
And also.
Optical networking backbone.
Assesses so so that's what we're looking at currently.
Lateral vertical is certainly superior to a multi phased lateral approach.
Let me add it.
It has been.
Nearly 40 years.
When vikar introduces first products.
Two.
Convert this which at the time were about 100 watt per cubic inch.
210, 15 watts per cubic inch.
At the much higher, but I think frequency and.
And our lead in terms of power density converse with the key figures of merit in the amount of the <unk> shops.
As persistent for four decades, if not about sulfate.
As Phil just suggests its about to take a major leap forward.
Got it thanks, and just regarding your customers and maybe specifically on the ones that youre waiting for it to ramp solutions that are using your lateral and vertical.
Solutions are they simply waiting for your new facility to qualify before giving you orders or is it more of a product timing.
Situation can you just give us a little more color on this.
When do you expect those orders come in and maybe that's the reason why.
Maybe a little bit more delayed than we thought it would be.
So.
It changed from lab at our product of RTL is it changing PGN or part distribution network architecture.
Sure.
There are many facets to this challenge.
Having to do with.
The <unk> tax rate itself.
What needs to our opinion in terms of reclaiming some of the <unk> phase.
Within the process of sockets that he started getting <unk>.
Two capacity bypassing too.
Fact keep path with that.
Dynamic requirements of these processor.
Which entail very quick changes in costs up to 10000 op units for <unk>.
So managing the combination of PGM.
Dynamic requirements.
<unk> and making it happen with it.
<unk>.
Mechanical.
Thermal management constraints.
And other constraints of the Ft Cassia.
He is.
It's a complex challenge.
Intellectual property aspects of this.
Theres Knowhow that is not generally available.
And to make alongside a sharp this is not an easy transition requires as of now.
A close collaboration between the OEM and Vical.
With respect to bring to fruition a solution that meets all of their requirements.
Major advances with <unk> is that the soft process going to become much more scalable.
And Oems are going to be in the driver's seat with respect they're designing.
But as of now.
With four key building blocks.
And the Knowhow that is.
Paul.
A bit of a tedious process and this in my opinion is.
And it has been for a while the offset call too.
Faster adoption.
Our motto vast began architectures.
Great. Thank you that does not.
They already issue or anything like that or just waiting for that.
Alright.
Now a lot of other things.
It can be done as.
Phil suggested earlier with.
Without <unk> building blocks.
Do we for Vertigo with Forte.
It can be down but is an payouts.
Stacking.
Chips are stacking.
Certain functionalities.
With regard to which <unk> IP relevant safety, but it's got complexities that with five G.
Doing away with in terms so.
By leveraging the much higher advanced 15 to have senior VP D E.
In a very simple and cost effective way.
Okay.
Great. Thank you I'll jump back in queue.
Okay.
Sure.
Next.
Have a question from the line of John Dillon.
Please go ahead Amit please go see.
Amit yourself from urine.
I also have a question on the lateral vertical in particular with the four Gee are you still planning on going forward with lateral vertical and would that be this year or is that also that also somewhat next year.
Can you give us a little color on the customers that are looking at your <unk>.
<unk> technology for lateral vertical.
So existing designing activity, Colorado Vertigo is.
About steel.
Based on our core GE module existing cadre of modules.
Before too long any incremental activity and expanding.
The level of activity will be enabled by hygiene building blocks, but as of now is sale with existing hygiene and forging module.
And then as for gene module opportunities do you expect them to go to production later this year then.
Well again.
We don't have perfect visibility.
That could be.
Production ramp with the level of PVM.
A significant rationale of Apple with lateral of PGM.
Using <unk> molecules or it could be that Tom the production ramp of ways.
The latter vertical solution because of its significant gap.
<unk>.
Improvements in.
Power capability.
The reduction in loss within the silicon.
Within the <unk> itself.
Okay. So you still might have some new <unk> lateral opportunity to take on the second half of the year is that what youre, saying.
Yes, John that's correct.
Okay, Great and do you have any.
Any kind of guesstimate on that.
I mean is that again this year or is that also maybe next year.
I think John Patricia put it well earlier.
Working through all of this stuff, it's complex complicated, but we're making good progress and we will be able to talk about that a little bit more on future calls.
Okay.
My follow up question is.
Yes, yes, I'm curious you have been invested with you for about 25 years.
Yes, I reflect back.
Yes, we've had a lot of successes, we've had some setbacks, but I can't remember micra being positioned for consistent long term growth better than you are today, but then again I've been surprised before when a plant that before.
Am I correct in my views that you are.
Better position now than you have been and if so what makes it different from the past, where we've had the successes and also setbacks.
Well, that's a very good question I can tell you personally.
I feel that way.
I think in terms of.
Articulating why I feel that way.
I think as suggested in the press release.
It's to do with the Combi National factors first of all.
We are very close to the first global foundry for chips.
There is nothing that comes close or can't come close.
It is enabling and that it provides scalability in terms of volume.
Costs.
Very low cost fascia.
Our very low power levels.
Two applications ranging up to literally one hundreds of kilowatts in automotive applications, so whether it's.
A.
Fast charger for raw and electric vehicle.
In the 100 kilowatts.
Or.
A current multiplier in the thousand App.
Several thousand App.
Range.
On a multiplicity of rail for a future GPU or <unk>.
Sure.
Our chip foundry.
<unk> package foundry gives us.
<unk> unique capability to provide not just the highest power density across density solution as the case may be.
What do you see stem cell.
Hi, there are centers have already gas shelf, but enables us to do that with the lowest cost product.
So.
We're not going to be seeing any of the essential ingredients necessary to.
Take full advantage of the general adoption of the <unk> itself is pioneer.
So thats.
The <unk> of where we are.
I understand that.
<unk>.
Saudi galley is SMB in EC to bring all of these about <unk>.
<unk> in terms of.
The complex assets.
All the <unk> as a whole.
Ranging from power conversion engines control systems unique components.
Packaging technology.
Lying.
The convert in packet scalable methodologies as wafer like NCI wafer foundry.
And the foundry itself that we've invested.
Upwards of $100 million too.
To bring about.
To give us the capacity for about $1 billion in revenues.
That's <unk>.
I think we're well positioned for.
The market demands.
<unk> high power density icon adversity.
In a variety of.
Growth end markets.
John if I could just add one quick thing to add a second everything Patricia just said I think that from.
From my tenure here at 12 13 years, we've never had.
A quality set of customers that we're engaged with like we have now.
So that's really critical to who are you working with and what does the future hold for those customers and their markets are they leaders conscious b and high performance compute with a couple of big companies Hyperscale as our GPU guys. It's got to be right across the four business units that we are now <unk>.
Developing long range revenue plans for and are engaged with great customers right across the globe. So so just add that to <unk> comments.
Yes.
It seems to me like you've always had the performance card.
But now the customers actually need your performance they have to have it is not I want to add.
On top of it it sounds like you've got the cost card to go along with it which is a nice combination within the need your product and you also have a very cost competitive.
From the sounds of it Gen five can be even lower cost competitive down to that.
<unk> several level, which is really exciting because that really opens up a huge market for you.
Yes, the vertically integrated factory that Patricia mentioned Thats really critical for us right.
Yep Yep, Okay, I'll get back in the queue. Thank you so much.
Thank you.
Next.
Have a question.
Rodman Melanomas participants joined by Simon.
Please press star and seeks to Amit yourself from your side.
Please state your name and go ahead with your question.
Yeah.
Hello, We can't hear your question.
I know that these delays AMC in.
Falling started six you have.
Operator, please remind.
Questioner is they have to hit star sixth on mute themselves.
Yes from that side as well.
Okay, Let's go to the next question operator.
Alright.
Next.
Another question from Jim Tomlinson.
Go ahead and Amit this has from your side as well.
Alright, thanks for the color.
My question is.
Where do we stand today and the migration of the 48 volt.
Data centers as a whole what inning are we and how much are you seeing that play out in your bookings and pipeline.
Yes, so definitely the hypersonic hyperscale is that we've been waiting for.
Our working on 48 volt native rack systems.
In the meantime, we've talked about this they are.
Buying basically power distribution boards.
Operating hour Mbm's to do the 12 volt natus to 48 volt level necessary for the advanced AI systems. So, but we are seeing native rack developments now at the Hyperscale is in North America and also overseas.
Because of the power levels that these.
The addition of AI chat bots whatever into the into the data centers are requiring 48 volt power distribution and in the supercomputer area, achieving higher rates up with the 380 volt range, where we sell high voltage bus converter. So so the power levels, just keep going up John and we have the.
<unk> two to do the down conversion to 48.
And then the 48 the point of load either with.
Bus converters for low power CPU systems of factories power for very high power Gpus and Asics in optical network processors, so where we're sitting really well technology migration and our customers and being able to follow that.
Even be ahead of that with our Gen five solutions coming along later this year.
Got it.
One thing I've been surprised with that.
Total power consumption of the Nexgen.
Sure.
They are approaching the levels that the last generation Eric processes that they use your lateral solutions are at.
CPU market ever going into Europe .
Yes.
Finally in Europe necessary to drive the prices there.
Yes, I think gen five actually opens up CPU higher power CPU applications for us who knows maybe even lower power Cpus as the rate goes to 48 volt. Some direct conversion from 48 volts with Gen. Five can be very cost effective and very dense. So we're going to go after that market.
As well when Gen five comes along well.
But make no mistake.
System today.
High end system.
Let's say high end GPU.
Power to evolve.
To allow that al <unk> is handicapped by the power system.
It cannot.
Sure.
Deliver.
Is compute capability because of their enemies Ashok Paul.
<unk>.
Understood.
If I may ask a question on the quarter what kinds of constraints on your supplier.
Great body in the past.
Is that going to continue into Q2.
Can you just give us a little color on what happen in the quarter compared to where you thought you were going to be.
Yes, so I think.
John as we said it was mostly a function of the outsourced manufacturing partner, which is.
We're in the final stages now of bringing the production in house. So in some cases the supply wasn't as prompt as we needed it to for the quarter and anticipating the output so.
We're as I described we are into May now with qualification June July qualification so facilitating.
Facilitating the equipment in May that we brought in so I think as we get into the third quarter will be clearer about our ability to generate the output we need.
Okay, Great and then Jim just one more follow up do you expect these prior club.
We continue with as you go forward and it was really spotty and predictable how should we think about that and kind of what's in the background <unk> claim in the short term, we can we're sort of expecting the same level.
This quarter, that's our anticipation and then it will kind of throttled down a bit because we've basically been calling back what amounted to years ago worth of tariff payments. So so that will come that will feather down over the course of the year.
Okay, great. Thank you.
Okay operator.
Next question.
Yep.
We have again and the passion of this Belgian quick question Andrea.
Sure.
Please.
Amit yourself using star in six I'll say from our end.
Please state your name and go ahead.
Good question.
Hi, This is Richard Shannon with Craig Hallum can you hear me.
Hi, Richard.
Excellent excellent I'm glad I was able to make it at this time, thanks for taking my questions guys.
We're not type of topic.
Capital.
I was I was blaming my.
My input skills on my phone here not you guys.
I guess.
Yeah.
Just wanted to kind of ask a follow up to a few different past questions, including starting with twins about how to think about what youre seeing an inflection point and kind of the characteristics of when that happened and particularly I understand your response to the couple of those has been good.
Don't have complete clarity on that so let me kind of ask a multi parter on this and I'll. Let you kind of go read like curious I think you get the gist of my question here, so not exactly sure when that will be it sounds like it could be either with <unk>.
That rollout our old vertical I'm, assuming these are with with AI accelerator type applications.
But also could you characterize whether these are designs that are that are done and completed and just haven't been related at the time or are they still designs and slight maybe you can just kind of help clarify the dynamics here along those lines. Please.
So we are working with a number as.
As you pointed out of AI.
Accelerator.
<unk> companies.
They're all in different stages some of them are actually.
In early sort of pre production others are in qualification.
Others are also got advanced developments going on that will be qualification later this year and then ramps later this year, maybe and maybe.
More like early next year, so it's across the board, which had really.
It's a mix of applications, but most of it is lateral and then we've got some lateral vertical activity going on as well.
Okay perfect that's helpful.
Needless to ask an automotive question here and then May have Phil I may have missed all of your comments about kind of the latest update here in the last quarter, but maybe I'll ask you to kind of do a two parter here again, which is repeat what you said about those designs and maybe you could kind of give us the top down here and how many designs you have.
And what functionalities your comments on the press release talking about applications up to 150, kilovolt, which seem to apply inverters in evs.
Characterize what functionality are supporting them.
And just to clarify it sounds like calendar 'twenty five the timeframe do you expect material revenue Sir is that accurate.
And there was.
<unk>, yes.
Yes.
So if you look at the chipset that we showed basically the power module family Thats, making up.
Most of the solutions that we're bringing forward because as we talked about before this is a very scalable technology right. You can you can have a five to 10 kilowatts 800 volt 48 volt system and then you can add more modules to scale at the 15 20 kilowatts and so forth. So so thats really loved by the automotive Oems.
Also some of the tier ones that where we are now working with so so the applications are 800 volts to 48.
800 volts to 48 to 12, then you can go 400 volts to 48 to 12 or 400 volts 12, so different types of core platforms that use that down conversion.
Capability that we can offer in two years or three power modules.
On the other side Patrice you mentioned 150 kilowatts, that's for an onboard charger for rapid charging it's a 400 volt 800 volt bidirectional Buck boost if you like converter system with 90, 899% efficiency.
Given hold it in the palm of your hand, and you can get 30, plus kilowatts out of it we showed at <unk> last weekend and actually in a module form that can achieve I think it was 150 kilowatts in the stack.
In our stock.
Right now with some Oems five molecules going down to four molecules going down to the three molecules.
With the power density that is literally.
Five times better in terms of.
Volume in way.
Then any competitive alternative.
So Richard in Q1, I mentioned just briefly again.
We had a supplier agreements with a major tier one we signed that.
Our expanded design wins.
Oems, we've started working with almost two years ago.
With additional platforms and new applications like the onboard Charger example.
We also had three new collaborations in the quarter.
And added a major design win with an S&P in 2026 of those are from my comments earlier.
We've got quite a number of collaborations going on globally.
But all of them center around that 800 volts down conversion to 48 of 12 or 400 volts down conversion of 48 to 12, and then also 48 to 12 applications with wire harness type companies.
Then also.
These rapid charge onboard charger systems very high power levels with a number of Oems and tier ones. So it's a really it's quite a mix and.
As I said before I'm very excited about it we're really engaged with a very high class level of Oems and tier ones now it's very exciting.
Okay, a lot of detail there to unpack.
We've got some good notes here I think I will jump out of line here. So thank you very much guys.
Okay. Thank you.
Thank you.
The next question is from Doug.
Doug Campbell.
Go ahead.
Please Joseph Amit yourself from your end.
Yes.
Okay.
You can go ahead now.
Can you hear me guys yes.
Yes.
Okay.
Okay.
A couple of quick questions first of all.
Congratulations on the Forbes article.
It was really great to see you.
Talking to a broad span of people, obviously Forbes great publication and.
I thought it was well written and explain is doing pretty well I thought it was a very.
Some sort of review as well so congrats on that.
I guess my only question is with the drawdown on the backlog and some of the Timeframes you have given for new products and new OEM contracts and all of the above with the new factory pretty much not being online until July August or in that timeframe I've kind of view this year as a transition year do you see the backlog being.
Significantly drawn down.
I don't want to say it is zero, but as we enter Q3 Q4, I mean, the backlog just be eliminated at this point.
So it starts with Alexandria, whats going to outbound, but in terms of bookings we believe.
Debt.
The low point took place in Q4 with an improvement in Q1 and further improvement in Q2.
Expected.
But because of the uncertainties with respect to some of these.
Programs.
Ramping.
<unk>, which is really.
Something we can't control.
It's hard to predict exactly what is going to offense with a balance of the year with respect to backlog.
Revenues in Q1, we're not limited by backlog.
We're still playing catch up with respect to the backlog and even in Q2, we're going to be playing catch up.
So in one way of looking at this.
In terms of paying customer needs in the short term.
The market is not on the back of the front half of the business is still on the backend in terms of Ashok Seth.
Stepping up to the bar given the challenges with outsourcing.
Some of the chip processes, which has been a factor in recent months alright.
Alright.
Now the output within the quarter.
Well two things I have to believe that you guys aren't counting the seconds before you can produce everything in house, because I know as investors.
I'm not going to be I'm, not going to say.
So tired of hearing about the outsource manufacturing problems.
When you guys control as it is going to be a game changer.
I guess I was thinking the drawdown was going to occur because.
You talked about.
New orders of new new projects in Q4, maybe maybe heading into next year.
I was thinking that the bulk of the revenue for the next few quarters would come out of that backlog I do realize its significant but with a book to bill.
We don't give specifics, but I know it was significantly below one it's improving but if it stays let's say below six point Kevin.
Back when I was going to drawdown pretty quick.
Have any of that in any of your conversations talked about economic weakness or the most.
Most forecasted recession that we've ever seen before I mean, it hasnt hit yet, but everyone's pointing to it. That's also makes me a little ANZ and that you plan about to come online.
You have all these great industries and all these great.
So customers.
We're also concerned about the macro and I'm concerned about how deepwater SMB, if there's a recession we have.
Do we have a repeat of Q4 the team there certain Oems just shut off the order flow for certain period of time I know you can't predict that but I'm wondering if you're getting any feedback from any of these larger guys I mean, Microsoft quarter was great today.
With better than expected I'm wondering what you guys are hearing.
So I'm not really concerned about.
This.
Factors obviously.
They are there and they have a certain degree.
Operator stability.
But I feel I mean, thats safe harbor because of.
The technology the products.
The scalability of the cost effectiveness.
Diversification with respect to end markets.
The <unk> cash.
Yes cash on.
These converging our forte evolve.
And infrastructure for power distribution.
So all of these things.
Hey.
We'll bring about.
More demand than.
We will be able to supply, which is a substantial amount devote all our cloud revenues.
Thank you.
I have a profit level visibility not all SaaS.
I'm not losing any sleep with respect to.
To fill the fab.
And I'll just finish with that because I think enough time.
I have no doubt about your future I'm just concerned with the president.
As an investor Thats, all Im concerned with your future to me Q3, four years out I have no doubt as to where the company will be.
The last couple of quarters in the next couple of quarters for me as a fund manager, it's a little tricky that's all thanks.
I think by the way your choice of words.
This year being a transition year I think it is very much on point. It is a transition year for a number of reasons, but.
The year is progressing.
Getting to the end of the year before and and all of these crazy golf LMS are going to be in place.
The future in all of these industries has panned out exactly as you forecasted years ago. So I hope you all make a boatload of money on top of it all.
Thank you.
Sure.
Thank you.
Next question is from another.
Karla.
Please on mute yourself from urine using stock and six and I will say Amit.
Syed.
Hey, This is Quinn Bolton from Needham can you guys hear me.
Yes.
Hopefully this is a better connection.
Just wanted to a couple of follow ups.
Last quarter, you talked about the ability to.
Since you've come in on some redesigns wear processors that shipped initial using multi phase and you saw the opportunity to redesign those boards a bike or components can you just give us an update whether you still see that opportunity and if you do are there.
I was going to be the lateral or are those lateral vertical designs.
So.
Some of these solutions suggested earlier.
Severely handicapped.
Bye.
Air <unk>.
FICO solution that is still allowed at all.
With him.
In effect the constraints of the lineup Pvs.
<unk> performance of assets in terms of lower noise.
Some increase in power density but.
Not on the scale of a lot of our vertical solution and even less so on the scale of Bolivar to go.
The transition in terms of.
<unk> actually I suggested earlier.
Is not as quick and simple.
As.
Some of us would like it to be.
Because of the natural of the design process with four key components.
And the novelty in terms of different kinds of TVN.
<unk> customers Oems.
Sagar with in terms so.
Shedding the benefits.
Through the various stages of the design process.
And Thats, what has led to delays and some level off and stability, but I can generally say that.
There is growing recognition of <unk>.
Major benefits.
Not just slashing the PCN losses.
Oems are coming to realize that.
As much of a.
Power saving in the silicon itself and he goes frankly.
The handicap resolves into large voltage differentials within domains.
Primary rail and obviously in Israel.
Debt.
Require.
A significant gap.
Increase in powered to see fashion within the satellite itself. So the vas.
Yes.
It's brought about by E.
A lot of vertical PD and even before we get to fully vertical Louisiana.
It gets measured not just by 50 60 70 watts worth of these action in PD and loss.
<unk>.
That's about as much of a reduction in power loss within the sealing and better functionality of the <unk>.
And a lower <unk>.
No I understand that you said that the benefits of lateral program and vertical only.
In the future I guess, what im trying to and I think a number of investors in the company in many on this call are trying to ask here.
Do we effectively need to wait for next generation three nanometer.
Ex us before we see that significant ramp of lateral vertical or vertical only solutions could you ramp lateral vertical on existing five nanometer processors.
Over the next year.
Yes, so as we said earlier in the call.
We believe that.
That may well be a ramp.
<unk> allows our solution <unk>.
Because of certain benefits, even though the PVM.
<unk> is steel and the gap.
We believe that before too long theres going to be a ramp.
For a lateral seagull alternative that has got a distinct advantage is all around.
And all of these.
Our develop FES.
Based on cross silica.
We have not contingent on the 10 nanometer.
Okay.
Knows that.
Field may reference to.
In.
In our most recent prior year.
A conference call what he was pointed to there is.
Those developments, making it practical.
<unk> policy ball for lateral solution.
Got it.
And we are adding.
Yes.
Sure.
And requirements.
Sure.
That resolution.
We have some feedback on the line.
<unk> cut that.
Hello Quint.
Operator, you there.
Okay.
Hey, guys.
Muted because of the background noise hopefully you can hear me again.
Okay. My next question was last last quarter, you talked about seeing some cancellations. This quarter I Havent heard you mentioned cancellations. Just wondering if you saw any meaningful cancellations to backlog or whether you think the cancellation activity is largely decided at that point.
Yes, we haven't seen cancellations Quinn backlog looks very very good.
Perfect and last one from me just you mentioned the last key pieces of equipment I think being delivered in may and qualify it in June and July .
Does that get you to the full billion dollar run rate or.
Are those pieces of equipment.
Bringing you to the sort of the full vertical integration capability, but to the extent you wanted to ramp to 500 or $751 billion you would need several additional lines of whatever equipment was delayed until late April or may.
So in April we took a took receipt of the equipment for vertical integration through <unk> of the copper, which is the critical process that we had outsourced.
First step was half of the 18000 panels.
Per month around their capacity, we have the ability to install and will install the balance as we need it but the <unk> operation and the vertical integration should position us for as <unk> said about $1 billion capacity.
Do you have anything.
Got it.
Okay. So it sounds like you got half of the equipment.
No.
I want to give you the wrong impression we've got the equipment lined up to do the plating operation. We've installed just for as a matter of starting the process half of the total capacity. We can install so the next tranche of capacity is very easy to put in.
That's no problem at all expected with that.
They will do the pilot runs June July will qualify the all the equipment and we will have essentially the capacity in place to generate the panel output that we need to get to that level.
There will be one.
Minor outsource process, it's very simple to accomplish.
That will not be a capacity bottleneck in the future.
Okay. Okay, maybe let me see if I can clarify it with this question it sounds like with the exception of this one small process. It will remain outsourced youll have vertical integration capacity to do about $500 million of revenue.
By the end of the third quarter.
More than that.
Yes ill.
Give you a little bit more color with respect to these.
What Jim was referring to.
One of the processes that vertically integrated or about to be vertically integrated there is many processes in the chip fab.
That being vertically integrated and whose capacity capsule.
Revenue.
So panels per week.
Per month per year.
Also what should be don't see that is that.
Depending on the mix between on the one hand.
Handset AI.
The panels are very thin.
They're going to be with <unk>, one six millimeter thin.
<unk>.
Chips.
Our considerably thicker those upfront that products are typically seven five millimeter thick.
Asset yields these equip fifth scales.
In effect the inverse proportions to the.
Thickness of the panel is still a little bit of like in a wafer foundry.
<unk> being a function of.
The number of.
Massa layers.
So we have actually more capacity.
In terms of pounds per week.
Sam said OAS to gas shelf that we would have fallen.
For <unk> the high power automotive type of chips, but generally speaking looking at the bulk of the capacity we are going to be.
Q2 in a position to support the lion's share of a billion dollars worth of revenues per year.
Understood. Thank you.
Thank you we have no further question in the queue.
And operator I think this will be our last question as we're at the top of the hour.
Yes.
I think she said.
Okay. Okay.
Okay. Thank you. Thank you very much.
We are ready to conclude the call then operator.
Alright. Thank you. Thank you everyone this month and the field webinar.
Thanks for joining.
Have a nice day.
Yes.
[music].
<unk>.
Okay.
[music].
Please hold.
[music].
Please continue to hold.
[music].
Sure.
[music].
Please continue to hold.
[music].
Please continue to hold.
[music].
Please continue to hold.
Okay.
[music].
Please continue to hold.
[music].
Sure.
[music].
Please continue to hold.
[music].
Yes.
[music], thanks for using Webex visit our website at Www Dot Webex dotcom.
[music].
[music].
[music].