Q4 2023 Vicor Corp Earnings Call - Q&A

Operator: Subs by www.zeoranger.co.uk Please continue to hold. Music, We're ready to start the call, and a little operator, and, Hello? and Patricio Vinciarelli.

Please continue to hold.

[music].

Janu: Thank you. Welcome everyone to today's webinar entitled Vicor Earnings Results for the Fourth Quarter of December 31st, 2023. My name is Janu, and I'm your producer for today.

You to hold.

[music].

Operator: I would like to advise all parties that this conference is being recorded. And now I'd like to hand it over to Jim Smith, Chief Financial Officer. Please go ahead.

We're ready to start the call.

[noise] Hello, operator.

[noise] Hello.

Jim Schmidt: Thank you. Good afternoon, and welcome to Vicor Corporation's earnings call for the fourth quarter and year ended December 31, 2023. I'm Jim Schmidt, Chief Financial Officer, and I'm in Andover with Patrizio Vinciarelli, Chief Executive Officer, and Phil Davies, Vice President, Global Sales and Marketing. After the markets closed today, we issued a press release summarizing our financial results for the three months and year ending December 31st

[noise] today's happiness.

Vacuum every one to two days.

<unk> for the fourth.

<unk> My name is Shannon and I'm Gonna put it set for today appetite to advise all parties. This conference is being recorded.

An extra hand, it over to Jane Smith, Chief Financial Officer. Please go ahead.

Thank you good afternoon, and welcome to Vycor Corp's earnings call for the fourth quarter and year ended December 31 2023.

Jim Schmidt Chief Financial Officer.

And over with but treats yoga and cheer rally Chief Executive Officer, and Phil Davies, Vice President Global sales and marketing.

Jim Schmidt: This press release has been posted on the investor relations page of our website, www.vicorpower.com. We also filed a Form 8K today relating to the issuance of this press release. I remind listeners this conference call is being recorded and is the copyrighted property of Vicor Corporation. I also remind you that 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 1995. Except for historical information contained in this call, the matters discussed in this call, including any statements regarding current and planned products, current and potential customers, potential market opportunities, expected events and announcements, and our capacity expansion, as well as management's expectations for sales, growth, spending, and profitability, are forward-looking statements involving risk and uncertainties.

After the market's closed today, we issued a press release summarizing our financial results for the three months and year ending December 31st.

This press release has been posted on the Investor Relations page of our web site.

W. W dot by core power Dot com.

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

Remind listeners this conference call is being recorded.

The copyrighted property of Vycor 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 1995 [noise].

Except for historical information contained in this call no matters discussed on this call, including any statements regarding current and planned products current and potential customers tend to market opportunities expected events and announcements and our capacity expansion as well as management's expectations for sales growth spending and profitability.

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

Jim Schmidt: In light of these risks and uncertainties, we can offer no assurance that any forward-looking statement will, in fact, prove to be correct. Consequently, actual results may differ materially from those explicitly set forth in or implied by any of our remarks today. The risk and uncertainties we face are discussed in Item 1A 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.

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

Results may differ materially from those explicitly set forth in or applied by any.

Remarks today.

The risks and uncertainties, we face are discussed in item one a of 2022 Form 10-K, which we filed with the SEC on February 28th 2023.

Occupant is available via the head guard system on the <unk> web site.

Jim Schmidt: Please note the information provided during this conference call is accurate only as of today, Thursday, February 22, 2024. DICOR 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 webcast replay of today's call will be available shortly on the Investor Relations page of our website.

Please note the information provided during this conference call is accurate only as of today Thursday February 22 2024.

Ticor 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 webcast replay of today's call will be available shortly on the Investor Relations page of our website.

Jim Schmidt: I'll now turn to a review of our Q4 and full-year financial performance, after which Phil will review recent market developments, and Patrizio, Phil, and I will take your questions. In my remarks, I will focus mostly on the sequential quarterly change for P&L and balance sheet items, as well as full year-round year changes, and refer you to our press release for our upcoming Form 10-K for additional information. As stated in today's press release, Vicor recorded total revenue for the fourth quarter of $92.7 million, down 12.2% from the third quarter total of $107.8 million, and down 12.2% from the fourth quarter 22 total of $105.5 million. Revenues for the year ended December 31, 2023, increased 1.5 percent to $405.1 million from $399.1 million for the prior year.

Allow turned to a review of our queue for in full full year financial performance after which Bill and we'll review Mark recent market developments in Pretreat she'll fill and I will take your questions.

And my remarks, I will focus mostly on the sequential quarterly change for P&L and balance sheet items as well as four year on year round year changes and refer you to our press release for our upcoming Form 10-K for additional information.

Stated in today's press release Vycor recorded total revenue for the fourth quarter of $92.7 million down 12.2% from the third quarter total of $107.8 million.

Around 12.2% from the fourth quarter 22 total of $105.5 million.

Revenues for the year ended December 31, 20, twenty-three increased 1.5% to $405.1 million from 391 $399.1 million for the prior year.

Jim Schmidt: Advanced products revenue declined 20.1% sequentially, while brick products revenue declined 7% from the third quarter. Revenues for advanced products for the year ending 2023 decreased 8% to $223.9 million from $243.3 million the year before. Revenues for BRIC products for the year ending 2023 increased 16.3% to $181.2 million from $155.8 million the year before. Shipments to stocking distributors decreased 23.5% sequentially, but increased 46.9% year over year. Exports for the fourth quarter decreased sequentially as a percentage of total revenue to approximately 56.5 percent from the prior quarter's 62.8 percent.

Advanced product revenue declined 21% sequentially, while brick products revenue declined 7% from the third quarter.

Revenues for advanced products for the year, ending ending 2000 twenty-three decreased 8% to $223.9 million from $243.3 million a year before <unk>.

Revenues for brick products for the year, ending 2000 twenty-three increased to 16.3% to $181.2 million for.

From $155.8 million a year before shipment.

Shipments to stocking distributors decreased 23.5% sequentially, but increased 46.9% year over year.

Exports for the fourth quarter to decrease sequentially as a percentage of total revenue to approximately 56.5% from the prior quarter's 62.8%.

Jim Schmidt: On a year-over-year basis, exports decreased as a percentage of total revenue to approximately 63.1 percent from the prior year's 67.6 percent; for Q4, advanced product share of total revenue decreased to 50.4% compared to 54.2% for the third quarter, with BRIC product share correspondingly increasing to 49.6% of total revenue. Turning to Q4 Gross Margin, we recorded a consolidated gross profit margin of 51.1 For the full year 2023, gross margin rose by 5.4% to 50.6% from 45.2% in the prior year. A number of factors contributed to the year-on-year increase in gross margin percentage, including improved sales mix, increased royalty income, reductions in supply chain costs, and lower freight and tariff costs. I'll now turn to Q4 operating expenses. Total operating expenses, including litigation expenses, decreased 0.4 percent from the third quarter.

On a year over year basis exports decreased as a percentage of total revenue to approximately 63.1% from the prior year, 67.6%.

Q for advanced product share of total revenue decreased to 54% compared to 54.2% for the third quarter with brick product share correspondingly increasing to 49.6 per cent of total revenue.

Turning to queue for gross margin, we recorded a consolidated gross profit margin of 51.1% approximately 0.7% less than the prior quarter.

For the full year 2023, gross margin rose by 5.4% to 56%.

445.2% in the prior year.

[noise] factors contributed to the year on year increase in gross margin percentage, including improved sales mix.

Increased royalty income productions, and chips supply chain cost and lower freight and tariff costs.

I will now turn to queue for operating expenses.

Total operating expense, including litigation expenses decreased 0.4% from the third quarter.

Jim Schmidt: For the full year 2023, total operating expense as a percent of revenue decreased to 37.9 percent from 38.4 percent in the prior year. The amounts of total equity-based compensation expense for Q4 included in cost of goods, SG&A, and R&D were $680,000, $1,895,000, and $1,007,000, respectively, totaling approximately $3.6 million. For Q4, we recorded operating income of $7.3 million, representing an operating margin of 7.9 percent. For the full year 2023, operating income totaled $51.4 million, or 12.7% of revenue, compared to $27.2 million, or 6.8% of revenue in the prior year. Turning to income taxes, we recorded a tax provision for Q4 of approximately $1.9 million, representing an effective tax rate for the quarter of 18.2 percent. The tax provision for the full year 2023 was approximately $6.6 million, representing an effective tax rate for the year of 11 percent. Net income for Q4 totaled $8.7 million, and the gap to looted earnings per share was $0.19, based on a fully diluted share count of $45,017,000.

For the for Ya.

For the full year 2023, total operating expenses a percent of revenue decreased to 37.9% from 38.4% in the prior year.

The amounts of total equity based compensation expense for Q4 included and costs of goods SG&A and R&D.

With 680000.

1.895 million and 1.007 million, respectively totaling approximately $3.6 million.

For Q4, we recorded operating income of $7.3 million.

Representing an operating margin of 7.9%.

For the full year 2000, twenty-three operating income totaled $51.4 million or 12.7% of revenue compared to $27.2 million or 6.8% of revenue in the prior year.

Turning to income taxes, we recorded a tax provision for Q4 of approximately $1.9 million, representing an effective tax rate for the quarter of 18.2%.

Tax provision for the full year 2023 was approximately $6.6 million, representing an effective tax rate for the year of 11%.

Net income for Q4 totaled $8.7 million gap diluted earnings per share with 19 cents.

Based on a fully diluted share count of $45 million 17000.

Jim Schmidt: For the full year 2023, that income increased $53.6 million from $25.5 million in the prior year. In 2023, fully diluted earnings per share rose from the prior year, increasing to $1.19 from 57 cents. The Bulletproof Executive, 2013 All rights reserved. Turning to our cash flow and balance sheet. Cash and cash equivalents totaled $242.2 million in Q4. Accounts receivable net of reserves totaled $52.6 million at quarter end, with TSOs for trade receivables at 40 days. Inventory's net of reserves increased 1.9 percent sequentially to $106.6 million. Annualized inventory returns were approximately flat sequentially at 1.92.

For the full year 2000, twenty-three net income increased to $53.6 million from $25.5 million in the prior year.

In 2023 fully diluted earnings per share rose from the prior year, increasing to $1.19 from 57.

Turning to our cash flow and balance sheet.

Cash and cash equivalents total to 42.2 million a Q4.

Accounts receivable net of reserves totaled $52.6 million a quarter and.

Dsos portrayed receivables at 40 days and.

Inventories net of reserves increased 1.9% sequentially to $106.6 million.

Annualized inventory turns where approximately flat sequentially at 1.92.

Operating cash flow totaled approximately $22.1 billion for the quarter.

Capital expenditure expenditures for queue for a total of $7.7 million.

We ended the quarter with a construction in progress balanced primarily for manufacturing equipment of approximately 17.7 million.

With approximately $17.3 million remaining to be spent.

It's worth noting that in queue for we accrued approximately 13 million as an as an investment tax credit related to the chips Act for equipment installed in our vertically integrated chip fab.

Jim Schmidt: Operating cash flow totaled approximately $22.1 million for the quarter. Capital expenditures for Q4 totaled $7.7 million. We ended the quarter with a construction and progress balance primarily for manufacturing equipment of approximately $17.7 million, with approximately $17.3 million remaining to be spent. It's worth noting that in Q4, we accrued approximately $13 million as an investment tax credit related to the CHIPS Act for equipment installed in our vertically integrated CHIP fab. I'll now address bookings and backlogs. Q4 Book-to-Bill, while improving sequentially, came in below 1 and with 1-year backlog decreasing 8% from the prior quarter, standing at $160.8 million.

I will now address bookings in backlog.

[noise] for a book to Bill while improving sequentially came in below one in with one year backlog decreasing 8% from the prior quarter closing at $168 million.

Turning to the first quarter and the full year 2024 is a year of uncertainty and opportunity.

As of today, the year's outcome in terms of top line and bottom line is subject to a relatively wide range of scenarios.

Given the wide range of possible outcomes, we are unable to provide quarterly guidance until we are further along resolving uncertainties in capitalizing on opportunities.

With that so we'll we'll provide an overview of recent market developments and then Patricio thought I will take your questions.

I ask that you limit yourselves to one question in a related follow up so that we can respond to as many of you as we can in the limited time available.

If you have more than one topic to address please get back in the queue. So.

Thank you Jim.

As Jim covered the news update book to Bill ratio was still below one in queue for mainly due to low booking levels in our H P. C business and the automatic test equipment segment of our industrial business.

And HBC Q for bookings were lower than expected as we turned down deals inconsistent with our long term OEM licensing strategy.

The license gives Oems access to ultimate sources of supply for products covered by black or IP from otherwise infringing suppliers, enabling current and future Gen AI processes to achieve higher performance.

Phil Davies: Turning to the first quarter and the full year, 2024 is a year of uncertainty and opportunity. As of today, the outcome of the year, in terms of the top line and the bottom line, is subject to a relatively wide range of scenarios. Given the wide range of possible outcomes, we are unable to provide quarterly guidance until we are further along in resolving uncertainties and capitalizing on opportunities. With that, Phil will provide an overview of recent market developments, and then Patrizio, Phil, and I will take your questions. I ask that you limit yourselves to one question and a related follow-up so that we can respond to as many of you as we can in the limited time available. If you have more than one topic to address, please get back in the queue. Thank you, Jim. As Jim covered in his update, our book-to-bill ratio was still below 1 in Q4, mainly due to low booking levels in our HPC business and the automatic test equipment segment of our industrial business. In HPC, Q4 bookings were lower than expected as we turned down deals inconsistent with our long-term OEM licensing strategy.

M licence provides access to game changing technology from a single source innovative through multisource supply chains.

The ODM license avoids the risk of exclusion orders and the OEM license respects, the IP of American innovators and manufacturers.

In anticipation of market needs Michael was the first to develop key technologies control systems topologies components of packaging for 48 volt high current processor power delivery networks.

Those market needs are clearly with us now and the advent of Jan AI machine learning 40 April Gracq power systems and vertical power delivery.

As evidenced by progress already made enforcing our IP two mbm's a message to the market is clear.

The license gives you open ended access to superior Paula system technology.

It provides continuity of supply for otherwise infringing servers and AI processes.

Additional customer engagements in queue for confirm that Gen. AI Ah network processor platforms will require significantly higher current density and vertical power delivery.

Our investment in the world's first chip foundry on our five G product line once again anticipated these future AI power system requirements.

Patrizio Vinciarelli: The license gives OEMs access to alternate sources of supply for products covered by Vicor IP from otherwise infringing suppliers, enabling current and future gen AI processes to achieve higher performance. The OEM license provides access to game-changing technology from a single-source innovator through a multi-source supply chain. The OEM license avoids the risk of exclusion orders, and the OEM license respects the intellectual property of American innovators and manufacturers.

Uniquely positioning us to expand our share of the AI Paula system market.

We are getting ready to deliver evaluation systems models tools and samples to lead lead AI processor customers.

On other marketing customer fronts on new product and applications pipeline continues to grow.

Creating both near term and future demand to fill our vertically integrated foundry.

In our automotive business collaborations that were initiated with Odm's in 2021 have started to move into production with low volume platforms as we ramp our automotive qualification manufacturing and OEM OEM relationships. So early learning cycles.

Patrizio Vinciarelli: In anticipation of market needs, RICO was the first to develop key technologies, control systems, topologies, components, and packaging for 48-volt high-current processor power delivery networks. Those market needs are clearly with us now in the advent of Gen-AI, machine learning, 48-volt rack power systems, and vertical power delivery. As evidenced by progress already made in forcing RIP to MBMs, our message to the market is clear. The OEM license gives you open-ended access to superior polysystem technology. It provides continuity of supply for otherwise infringing servers and AI processes.

Let them is picking up in both a mild hybrid in Bev market Bicoastal technology in response to the 48, both Zona architecture first conceived and patented by vehicle and recently promoted by Tesla.

Collaborations with larger Oems on higher volume platforms are gaining momentum with visibility to production dates in coming years.

We will be participating at W. C X in Detroit once again this year with for technology papers that will showcase our technology and polished system value propositions for 800 volt and 48 volt power modules.

And our other business units, we continued to see stronger demand in a broad industrial aerospace and defense markets for both the large Oems and smaller customers, who purchased through our channel partners.

Patrizio Vinciarelli: Additional customer engagements in Q4 confirm that Gen AI and network processor platforms will require significantly higher current density and vertical power delivery. Our investment in the world's first chip foundry and our 5G product line once again anticipated these future AI power system requirements, uniquely positioning us to expand our share of the AI power system market. We are getting ready to deliver evaluation systems, models, tools, and samples to leading AI processor customers.

Customer visits from our top 100 accounts of also continued to view and ordered a new chip fab as we know Ram production of advanced products.

Thank you and with that we will now take your questions.

Everyone. You know question and answer session copy again, if you wish to ask a question simply please click on horizon icon next to your name.

Mmk, who joined or the phone study.

W. A N.

<unk>.

And the first question is coming from John <unk>.

Please go ahead.

Is.

Phil Davies: On other market and customer fronts, our new product and applications pipeline continues to grow, creating both near-term and future demand to fill our vertically integrated foundry. In our automotive business, collaborations that were initiated with OEMs in 2021 have started to move into production with low-volume platforms as we ramp our automotive qualification, manufacturing, and OEM relationships through early learning cycles. Momentum is picking up in both the mild hybrid and BEV market from Vicor's technology in response to the 48-volt Zono architecture first conceived and patented by Vicor and recently promoted by Tesla.

Muted now.

Hello, John.

Hello.

Yes go ahead.

Oh, Great I think I'll take my question. So to clarify you turned down data center HPT deals it.

Ah you think for a X P U power due to the N B M I think issues or whether you're just pure MBM deals.

And kind of helped me understand you know what the concerns were surrounded.

Economic or clearly surrounding the IP.

Yeah. So you are not going to have an opportunity to analyze it because we're not going to get into specific details about.

You can see Paul come to understand that.

We have a clear.

Vision or where we're going.

And we're seeking to that vision.

As events unfold on a variety of France relating to.

Surfing patents with respect to the N B M.

Phil Davies: Collaborations with larger OEMs on higher-volume platforms are gaining momentum, with visibility to production dates in coming years. We will be participating at WCX in Detroit once again this year with four technology papers that will showcase our technology and power system value propositions for 800 volt and 48 volt power modules. In our other business units, we continue to see stronger demand in our broad industrial, aerospace, and defense markets for both large OEMs and smaller customers who purchase through our channel partners. Customer visits from our top 100 accounts have also continued to view and audit our new chip fab as we now ramp production of advanced products. Thank you, and with that, we will now take your questions. Anthony, everyone, your question and answer session will begin. If you wish to ask a question, simply click on the right-hand icon next to your name.

Development. So the marketplace Reynoso say is even by a complex set of the forces on.

On the one hand.

Is it.

Drive to multi saw seeing here.

Here on the four of AI volume applications.

But at the end of the day these old so.

An overwhelming need for.

Higher contents, you solutions for us to get power delivery.

<unk> is a pioneer is establish a strong beachhead.

IP.

An opportunity that we're going to seek to realize through the right mix of.

Licensing to facilitate multi saw seniors needed what needed.

And participaction the actually with.

<unk> solutions from new crap.

Okay fair enough and I understand is this something that that can be resolved.

In the near term as you as you negotiate more than something they will take the the assertion of of your litigation strategy and then to completion of that to complete.

Well, so S implies that by Jim's point Dainius remarks regarding.

Operator: In case you joined over the phone, please press star and three. And the first question is coming from John Tong-Tung. Please go ahead, your line is open. I'm muted now. Hello, John. Hello?

The uncertainty and opportunity that capitalizes finished several quarters.

We can make that Felicia and we don't want to make that position because we want to retain the flexibility needed to implement a long term style that you saw.

Patrizio Vinciarelli: Yes, go ahead, Josh. So to clarify, you turned down data center or HPC deals, are you saying for XPU power due to NBM licensing issues, or were they just pure NBM deals? And kind of help me understand, you know, what the concerns were surrounding the technology; was it economic or purely surrounding the IP? Yeah, so you're not going to have an opportunity to analyze it because we're not going to get into specific details, but I think it's important to understand that.

We're not going to log on in terms of predicting when things will happen.

I can tell you that <unk> Chinese that we're going to be successful we're going to be successful.

With.

<unk> with respect to assessing the ambient patents were doing very well in that regard.

We're far along with respect to that process and we're also going to shield the factory.

In view of course, so we're very confident our strategy.

Tommy too.

Patrizio Vinciarelli: We have a clear vision of where we're going, and we're sticking to that vision, as events unfold on a variety of fronts relating to asserting our balance with respect to the NBN and other developments. On the one hand, there is a drive to multi-sourcing, particularly for very high volume applications. But at the end of the day, there is also an overwhelming need for... Higher Current Density Solutions, and Vertical Power Delivery. And these are areas where Vicor, as a pioneer, has established a strong beachhead of IP and opportunity that we're going to seek to realize through the right mix of licensing to facilitate multi-sourcing as needed, where needed, and participation directly with modular solutions from new factors. Okay, fair enough, and I understand.

And passion.

As need be in order to Ah, bringing about.

Understood. Thank you I'll jump back in queue.

The next question is coming from Queen <unk>.

Please go ahead your line is open now.

[noise] Hello.

Yes, Greg Clinton.

Okay, Great I guess.

I understand you don't want to provide a lot of detailed but I just wanted to try to make sure I understand sort of that.

Range of alternatives, you say you are turning down deals re mbm's.

It sounds like from your opinion or perspective, many of the competing M. B M's may infringe your patent and so future down the deal what's the alternative for the customer they just use.

Infringing mbm's until you have asserted those patterns or competitors license your patents.

So we have.

Because you see proof of.

Business model that works quite well, we have the significant lesson C.

Patrizio Vinciarelli: Is this something that can be resolved in the near term as you negotiate more, or is this something that will take the assertion of your litigation strategy and the completion of that to complete? Well, as implied by Jim's point in his remarks regarding the uncertainty and opportunity that characterizes the national quarters, we can't make that prediction. And we don't want to make that prediction because we want to retain the flexibility needed to implement our long-term strategy. So we're not going to go out on a limb in terms of predicting when things will happen.

That hum.

As being saucy nbn's from an otherwise exchanging sauce by virtue of linoleum license with us.

That's again part of our overall strategy, which is factor too.

Balancing a variety of needs and opportunities for a cast them.

The market a large.

And ourselves.

With.

You risk factor for intellectual property.

As well as the needs of the cast them or sent in some.

Relevant.

<unk> six.

<unk>, an overwhelming need for multiple this year sauces.

Patrizio Vinciarelli: I can tell you that my expectation is that we're going to be successful. We will be successful with our first litigation with respect to asserting the NBN patents. We're doing very well in that regard, and we're far along with respect to that process. And we're also going to fill the factory in due course. So we're very confident of our strategy, very determined to enable it, and patient as need be in order to bring it about. Thank you. I'll jump back in the queue. The next question is coming from Quinn Bolton. Please go ahead; your line is open now. Hello.

Okay.

I guess, a second question just sort of around the front I know we've got the.

APEC show next week, a lot of papers at that conference will be talking about political power delivery I think model of our analog devices and infineon have all talked about vertical power delivery from the multi phase perspective can you give us your latest thoughts Patrice you'll just <unk>.

Where do you feel the industry is in terms of Ah <unk>.

<unk> vertical power delivery and.

To the extent that multi phased competitors are moving in that direction is that an area where you may.

Patrizio Vinciarelli: Yes, go ahead, Quinn. Okay, great. I guess I understand you don't want to provide a lot of detail, but I just want to try to make sure I understand sort of that range of alternatives. You said you're turning down deals for MBMs. It sounds like, from your opinion or perspective, many of the competing MBMs may infringe your patents. And so if you turn down the deal, what's the alternative for the customer? They just use infringing MBMs until you have asserted those patents or competitors license your patent?

May have to assert your patents on that bring cause I know you've been talking about vertical powered on the green Apple probably three plus years. Thank you.

Yes, so exactly up our delivery it means certain specific things.

Wild them.

With what we call first Jan Bpd.

Stacking.

Call a multi shall convert further <unk> converter.

Can be a vehicle car multiply it can also be a multifaith solution doesn't matter it falls within our IP in the cockpit of as fact solution with certain attributes. So we pioneered that concept.

Is being implemented totally me through the sand by competitors solutions.

Lack robustness and <unk> the last.

Patrizio Vinciarelli: So we have, Existing proof that we have a business model that works quite well, and has been sourcing NBMs from an otherwise infringing source by virtue of an OEM license with us. And that's, again, part of our overall strategy with respect to, you know, balancing a variety of needs and opportunities for our customers, the market at large, and ourselves with due respect for intellectual property, as well as the needs of customers that, in some relevant instances, do have an overwhelming need for multi-VCS sourcing. Okay. I guess a second question is just sort of on the IP front. I know we've got the APEX show next week.

Cost effectiveness.

They they suffer from all of the trace.

Vong.

First John Nash on technology that the manga specs is using mature and not scalable.

Without question is going to become.

Somewhat more mature and somewhat more scalable.

Is initially conceived by Vega.

But the seal handicap in a variety of France, including intellectual property from.

With our five G technology, we are on what we call. It <unk> rational DVD, which is much more scalable much more cost effective.

Yeah, My short profile much more efficient.

And which we believe before too long will enable much on a vast solutions.

Understood. Thank you.

Okay, just confirm my John <unk>.

Patrizio Vinciarelli: A lot of papers at that conference will be talking about vertical power delivery. I think Monolithic Power, Analog Devices, and Infineon have all talked about vertical power delivery from the multi-phase perspective. Can you give us your latest thoughts, Patrizio, just where do you feel the industry is in terms of adopting vertical power delivery and, you know, to the extent that multi-phase competitors are moving in that direction? Is that an area where you, you know, may have to assert your patents on that front? Because I know you've been talking about vertical power delivery for probably three-plus years. Thank you. Yes, so vertical power delivery means certain specific things, while then, with what we call first-gen VPD, you know, the stacking of what we call a multi-cell converter. The multi-cell converter can be a Vigo-Curl multiplier; it can also be a multiphase solution; it doesn't matter.

Go ahead.

I mean.

You hear me.

Pretty faint John Yeah, if we can't hear Ya.

Okay.

And then you put.

Okay remark, you're talking about my P. Did you have any automated and then right. After that you said it was noted by a Tesla.

<unk>, yes ma'am.

Might be a <unk>.

So I heard the word fast lap and 48 volts zonal in any okay Tesla going to be a customer soon I think is what John was out so we're not going to make comments about.

Specific complex of potential customers.

But I will mention that.

As in other France.

<unk> was a pioneer with respect to the concept of using best converters, so within the more the power distribution.

So that's an area of intellectual property that.

May come to.

<unk> at some point in time.

As you can imagine is implied.

Implying earlier comments he has no shortage opportunity.

As of now we're very focused on bringing it to fruition R&B ammunition, but.

It is part of a very broke campaign, which again as part of a very comprehensive savaging to enable a.

More efficient and scalable and fair market to when it comes to advanced power system technology.

Right.

The other thing I wanted to congratulate you on the Brookings It looks like on the first one.

<unk> ended up and it looks like you're welcome good luck with that.

2.5 million previous border.

Patrizio Vinciarelli: It falls within our IP in the context of a stacked solution with certain attributes. So we pioneered that concept. It's been implemented to a limited extent by, you know, competitors with solutions. You know, lack of robustness, lack of scalability, lack of cost effectiveness. They suffer from all the traits of first-generation technology that, in many respects, is immature and not scalable.

So I'm just wondering.

Expect this trend to continue I don't want any specifics, but can we expect it.

Indeed throughout the year.

Yeah, So I don't think that the.

Trend.

[laughter].

Applies.

Lianhai separate rash on whatever you Wanna call it.

Two.

Events unfolding over the next few quarters, because as discussed earlier I think we should all be clear with respect to these these a wide range of scenarios and because of that.

Individual events.

Patrizio Vinciarelli: Without question, it's going to become somewhat more mature and somewhat more scalable as initially conceived by VIGOR, but still handicapped in a variety of ways, including the intellectual property front. With our 5G technology, we are on what we call a second generation of VPD, which is much more scalable, much more cost-effective, much lower profile, much more efficient, and which we believe before too long will enable much more advanced solutions.

Could impact.

Kings.

Top line bottom line.

From one quarter to an accident in ways that are frankly unpredictable and he has to say.

You said Bookstop Ah.

The row and.

But we're not going to quantify what that is.

Limited downside I will say that there is quite a bit of lopsided, but upside.

Is ought to predict in terms, so kind to Fisher.

I I I get that I understand that so this is the last <unk> last conference call you needed to.

Phil Davies: Thank you. And actually, it's coming from John Dillon. Please go ahead, your line is open. Subs by www.zeoranger.co.uk. It's pretty faint, John. Yeah, I don't think we can hear you.

Sizable upside it sounds like that sounds good.

The left side is still out there, but it's not predictable at this time.

Ah that's right.

Will say that the.

Phil Davies: Okay. Bill, in your prepared remarks, you were talking about some IP that you have in the automotive industry, and then right after that, you said it was promoted by Tesla. Can we infer from that that Tesla might be a customer of yours soon? So I heard the word Tesla and 48 Volt Zono and IP. Is Tesla going to be a customer soon? I think John was asking. So we're not going to make comments about specific companies or potential customers, but I will mention that, as on other fronts, Vicor was a pioneer with respect to the concept of using bus converters within automotive power distribution.

The cumulative.

Impact.

Over time.

Is more predictable than <unk> contribution that may happen sooner.

Sooner or later so.

So fundamentally up Saturday G.

As it has always been east to take very long term view.

We're not I know we're.

Where in the cockpit, though.

Because of the financial markets, but we're not to be perfectly honest with you.

Making decisions based on what.

Luke, particularly good with the 91 quality, we are making decisions based on what we think he's in the long term interests of the shareholders again by seeing the the various factors at play in a comprehensive Savage.

Patrizio Vinciarelli: So that's an area of intellectual property that may come to fruition at some point in time. As you can imagine, or as implied by earlier comments, there is no shortage of opportunity. As of now, we're very focused on bringing to fruition our NBM initiative, but it is part of a very broad campaign, which again is part of a very comprehensive strategy to enable a more efficient, scalable, and fair market when it comes to advanced power system technology. Right. The other thing I wanted to congratulate you on the bookings, it looks like from the press release that it's headed up, and it looks like your So I'm just wondering, Bill, do you expect this trend to continue? I don't want any specifics, but can we expect the trend to continue throughout the year? Yeah, so I don't think that the word trend, uh, applies or linear separation, whatever you want to call it, to events unfolding over the next few quarters.

Got it.

Thank you. Thank you. Thank you very much.

The next question is coming from a dream Bolton. Please go ahead. Your line is open.

Okay.

Wanted to follow up on Jon's question. There are obviously a range of scenarios, you're talking about but to the extent the upside scenario played out I assume that those are likely either MBM or for a generation or more hopefully fifth generation design wins, how how quickly could you ramp that is.

Yes, I mean, I think in password you talked about manufacturing lead times that are about six months and so you know.

Would it take a couple of quarters to sort of start to realize some of those upside opportunities is that right.

Kind of waited to to think about the timing seek sent the upside case begins to play out and then I've got a follow up.

So we have capacity in place now we could be in the next quarter of what's after that.

Patrizio Vinciarelli: Because, as discussed earlier, I think we should all be clear with respect to this, that there is a wide range of scenarios. And because of that, individual events could impact bookings, top line, bottom line, from one quarter to the next in ways that are frankly unpredictable. Needless to say, there is a booking stop at the low end, but we're not going to quantify what that is.

Manufacturer more subject to obviously material procurement lead time.

Then we would based on what we sent currently in terms of the bookings backlog situation.

Just as a reminder.

The issues and challenges so yesterday years, when we didn't have a vertically integrated in fact, though you are dependent on outside sources supply for creating a process steps.

There was no longer challenges we face are.

Patrizio Vinciarelli: There is limited downside, I would say. There is quite a bit of upside, but that upside is hard to predict in terms of the time to fruition. I get that, I understand that. So this is the last quarter you alluded to, the last conference call you alluded to a sizable upside. It sounds like that sizable upside is still out there, but it's not predictable at this time. That's right. I will say that the cumulative impact, over time, is more predictable than instant contribution that may happen sooner or later. So fundamentally, our strategy, as it has always been, is to take a very long-term view. You know, we're not—I know we're in the context of reporting to the financial markets, but we're not, to be perfectly honest with you, making decisions based on what may look particularly good in any one quarter. We are making decisions based on what we think is in the long-term interest of the shareholders, again balancing the various factors at play in a comprehensive strategy. I'll get back in the queue. Thank you. Thank you very much.

Different.

<unk> challenge is again.

Resulting from <unk>.

Speaking to a strategy that.

Bounce a variety of considered actions.

But.

Think back about restarting.

Saudi challenges.

I feel that with.

The establishment of fast cheap foundry.

We are in a position we'd never been in in answer to your question regarding skull ability, we have a level of capability. The vehicle never had we may have sharp advanced products in power. So it Ah.

I came to wafers in in <unk>.

In our country, we can make a very very large quantity of panels, we have a law capacity needless to say it.

Still going to be any time, there's no set function to be had but.

Demand can be addressed with supply within.

Cumulus sharp cycle.

Thank you.

Patricia that's a follow up question.

And in the current latest generation G. P U market one of the multistate vendors that is pretty high share recently had some testing issues and I'm wondering if you've had any discussion <unk> since that event that it might lead.

Patrizio Vinciarelli: The next question is coming from Tim Bolton. Please go ahead, your line is open. I guess I wanted to follow up on John's question. There are obviously a range of scenarios you're talking about, but to the extent the upside scenario plays out, I assume that those are likely either MBM or fourth generation or, hopefully, fifth generation design wins.

G to believe that.

Any of the large AI processor G. T U vendors one are now more open to having multiple sources of supply and particularly <unk> has this event potentially raised some concerns about the multi phase approach in general given that you've got <unk>.

Patrizio Vinciarelli: How quickly could you ramp that business? I mean, I think in past quarters, you've talked about manufacturing lead times that are about six months. And so, you know, would it take a couple of quarters to sort of start to realize some of those upside opportunities? Is that the right way to think about the timing to the extent that the upside case begins to play out? And then I've got to follow up.

One or more controllers that that may have to control 2030 40 phases.

Have you seen anything coming out of that event that it may benefit bike or either in the near term or the longer term. Thank you.

So [noise].

Multifaith <unk>, you know if challenges and those challenges get confounded.

Patrizio Vinciarelli: So, we have capacity in place now. We could, in the next quarter, the quarter after that, manufacture more subject to, obviously, material procurement lead time than we would based on what we stand currently in terms of the bookings and backlog situation. Just as a reminder. The issues and challenges of yesteryears, when we didn't have a vertically integrated factory, and we were dependent on outside sources of supply for critical process steps, are gone. Those are no longer challenges.

In a V P D Tyco solution.

So the the underlying primary challenge.

Multi phase is that <unk> is a law or current density.

Type of solution it involves.

The averaging.

Down a revolt urge to step up the car.

Through switching elements that.

Needs to support a much higher.

Voltage withstand.

And do so reliably and without it was safer operating area.

Patrizio Vinciarelli: Now we face different challenges, and type of challenges. Again, it is resulting from sticking to a strategy that has us balance a variety of considerations. But as I think back about historic challenges, I feel that with the establishment of our first chief foundry.

Then.

With the vehicle car multiplier, which can in effect multi-ply crime.

And do so much more efficiently with.

Lore.

Faulstich semiconductors.

Without comment.

<unk> said safe operating area it challenges the.

Patrizio Vinciarelli: We are in a position we've never been in, in answer to your question regarding scalability. We have a level of scalability that VIGOR never had. We manufacture advanced products in panels, which are akin to wafers, and in our chip foundry, we can make a very, very large quantity of panels.

<unk> to do.

Particular, just to give you some examples with the fact that without provided the approach.

There is no multivision sea of faces each one of which should fail could pay could GPU.

The AI process, so with it.

Patrizio Vinciarelli: We have a lot of capacity. Needless to say, there's still going to be a lead time, but demand can be addressed with supply within a relatively short cycle.

As he can fail with.

A top switch sharp, which could happen with any of our larger multiple hcfa's is so we have many may advantages in terms of the power distribution architecture.

Patrizio Vinciarelli: Thank you. Patrizio, the follow-up question is, you know, in the current latest generation GPU market, one of the multi-phase vendors that has a pretty high share recently had some testing issues. And I'm wondering if you've had any discussions sort of since that event that might lead you to believe that, you know, any of the large AI processor or GPU vendors are now more open to having multiple sources of supply. And particularly, has this event potentially raised some concerns about the multi-phase approach in general, given that you've got, you know, one or more controllers that may have to control 20, 30, 40 phases?

<unk> the type of components that these solutions.

<unk>, which are fundamentally different but then getting back to the <unk> side of things.

With a multi cell approach involving a multiplicity of faces as opposed to a multi <unk> car multiplies as we have.

You have in effect the confounded challenge all a.

In <unk>.

<unk> conversion topology tobacco growers, so which is inherent fee.

Crime vast city.

Compounded by then Mchaney got challenges with first generation of Apd of stacking the smart as Hell topology with gearboxes our capacity players that are required in order to provide the filtering and dynamic response.

Patrizio Vinciarelli: You know, have you seen anything coming out of that event that may benefit Vicor, either in the near term or in the longer term? Thank you. So, multi-phase systems, you know, have challenges, and those challenges get compounded in a VPD type of solution. So the underlying primary challenge of multiphase is that NFE is a lower current density type of solution. It involves multipliers, the averaging down of a voltage to step up the current through switching elements that need to support a much higher voltage withstand and do so reliably and with other with safe operating area, then with a Vico Corp multiplier, which can, in effect, multiply current and do so much more efficiently with lower voltage semiconductors without commensurate safe operating area challenges.

And I don't mean to get too technical with this.

Getting through the punch line.

V P. The first China actually implemented with.

Martha sale solutions in the form of multiphase.

He's very very challenge costly.

Truly scalable in Esca handicap.

Of an overall.

And we're not seeing.

Based on our visibility is being scaled that but with the level of royalty sacrifice and.

Manufacturability that luxury items with respect to laugh.

Got it thank you.

Patrizio Vinciarelli: There are the benefits have to do. In particular, just to give you some examples, with the fact that with our proprietary approach, there is no multi-PCI faces, each one of which, should it fail, could take a GPU or the AI processor with it, as it can fail with a top switch short, which could happen with any of a larger multi-PCI faces, so we have many, many advantages in terms of the power distribution architecture, the topology, the type of components that these solutions require, which are fundamentally different, but then getting back to the VPD side of things. With a multi-cell approach involving a multiplicity of phases, as opposed to a multiplicity of current multipliers, as we have, you have, in effect, the compounded challenge of a power conversion topology, the buck converter, which is inherently low current density, compounded by the mechanical challenges with first-generation VPD of stacking this multicell topology with gearboxes or capacitive layers that are required in order to provide filtering and dynamic response.

The next question is coming from and then <unk>. Please go ahead. Your line is open.

Hear me.

Yeah, Yeah, yeah, okay.

It sounds like the factory is virtually complete.

You have some more buildup zed.

Can you confirm that.

Yes, we are.

We have a backup that would review every week.

Used to be yellow red they smell or green.

In the SaaS that the green.

The getting sourcing of yesterday, which was yellow red it's become a green sauce is amazing Angola.

Vertically integrated facility and those bars are.

Rising from week to week, so we are doing well in that regard.

So that challenge is essentially behind us to your point.

We're not falling down with.

Bringing equate there's still some additional equipment that he has.

Equipment, we committed to going to add some additional capacity process capability.

Doing in the next 12 months.

But the core capability of ineffective building app. The other layers of our unique congrats housing package that will technology two battles against the weather.

Analogy when it comes to bulk density vica versa modules that capabilities in place.

Patrizio Vinciarelli: I don't mean to get too technical with this, but getting to the punchline, VPD, first-generation VPD implemented with multicell solutions in the form of multiphase, is very, very challenged, costly, not truly scalable in EMC handicap, and in need of an overhaul. And we're not seeing, based on our visibility, it being scaled up with the level of load effect rates and manufacturability that larger EMs would Got it. Thank you. The next question is coming from Ellen Hicks. Please go ahead; your line is open. Can you hear me?

And we.

We're using it that we're setting it up.

Okay. So you would say you lead times are coming down.

Well so.

What is going on in.

In.

Well, it's been going on but to you within the last quarter is that it.

Mix.

Changed.

With.

With the different backlog she'd lash.

And the need to utilize capacity to address some of the backlog.

Patrizio Vinciarelli: Okay, it sounds like the factory is virtually complete, although I know you have some more build out. Is that, can you confirm that? Yes, we are. You know, we have a bar graph that we review every week. It used to be yellow and red.

Being overdue.

Mix has changed in that place is song cost, saying Thong talk capacity and frankly the reason why.

We fell short somewhat of a target in terms of top line with ended up water. It wasn't that we VNA backlog.

Patrizio Vinciarelli: It's now all green in the sense that the green. The green sourcing of yesterday, which was yellow-red, has become a green source as made in Andover in a vertical integrated facility. And those bars are rising from week to week. So we are doing well in that regard. To your point.

Just that that there was a beagle mix challenge because.

Instead of making lots of molecules solar surfing kind, the we had to make.

Somehow smaller quantity of a variety of different things.

That's a factor with respect to thall capacity.

And.

He was a factor in fatigue.

Patrizio Vinciarelli: You know, we're not done with bringing in equipment. There's still some additional equipment that is equipment we committed to that is going to add some additional capacity and process capability over the next several months. But the core capability of, in effect, building up the other layers of our unique converter housing package type of technology to panels, again, the WIFR analogy when it comes to high-density power converter modules, that capability is in place, and we're using it, and we're setting it up.

With respect to the top line the last part.

Mmk.

Been going forward you are capable of.

Building to four G products.

Admiral vertical.

Mmm.

Once the interest than four G.

I'm sorry, what is what interest in four games.

So I think faculty up call US right now we do have.

You are asking that question, but we have some 40 design winds yeah, absolutely. So that will play out because we move through the year, but the the real focus and I think that's what <unk> is going is really establishing the five G technology, because it's three X. The power density of four G, which is a major.

Patrizio Vinciarelli: Okay, so you would tell me lead times are coming down. Well, so, what has been going on in particular within the last quarter is that the mix has changed, right, with the different backlog situation and the need to utilize capacity to address some of the backlog that have been overdue. You know, our mix has changed, and that places its own constraint on top capacity. And that's frankly the reason why, you know, we fell short somewhat of our internal target in terms of top line within the border. It wasn't that we didn't have enough backlog, it's just that there was a bit of a mixed challenge because, you know, instead of making lots of modules of a certain kind, we had to make a somewhat smaller quantity or variety of different things, right? So, that's a factor with respect to top capacity. It was a factor, in particular, with respect to the top line in the last quarter. Okay, and then going forward, you're capable of building 4G products, lateral, vertical. And what's the interest in 4G? I'm sorry, Woody's what?

Proposition two vertical power delivery another lower current lateral applications too. So it opens up new markets for a bigger market. So I think it's it's an exciting time.

Exactly.

I'm not thinking about 14 I'm thinking in the.

The executive theme is very much call those.

On.

I assured that were being type G to completion and demonstrations.

<unk> some bars out to cast the most tools and begin now that Stella.

Mmk, Thank you very much.

The next question is coming from John <unk>. Please go ahead.

<unk>.

Alright, thanks for the follow up I was wondering if your expectations for the automotive.

Automotive applications of changes and I'll, just given the shift in automotive sentiment, where maybe hybrids are you know a little bit more back in fashion versus peer reviews, and how that plays out to your 40th will technology.

No.

On a scale. So now the market is sizable for us as a new entrant of course, I mean, there are still millions of B visa and you know mild hybrids out there for us to go after with their.

Patrizio Vinciarelli: Interest in 4G. Yeah. So, I think Frankly, out of all of us right now, we do have... Phil, do you want to answer that question?

800 volts 400 volt battery technology.

What we're seeing at the moment, it's actually quite interesting is that we have powertrain solutions. The call from 800, 348 or 800 to 12, we have an onboard charge a platform that is incredibly <unk>. So it is getting a lot of interest in the market with 800 400 volt bidirectional conversion.

Phil Davies: Well, we have some 4G design wins. Yeah, absolutely. So, that will play out as we move through the year.

Phil Davies: But the real focus, and I think that's where Patrizio is going, is really establishing the 5G technology because it's 3X the power density of 4G, which is a major value proposition for vertical power delivery and other lower current lateral applications too. So, it opens up new markets for us, bigger markets. So, I think it's an exciting time. Yeah. I mean, frankly, I'm not thinking about 4G.

And so what we're seeing recently actually.

Different applications like for example, converting a condenser.

Or a active suspension system.

Or a a seat heater from an 800 or 400 volt battery down to 48. Both is 48, both starts to take a hold and some of these electromechanical application. So so we've seen a lot more of that and the last I would say the last two quarters.

Phil Davies: I'm thinking, and the executive team is very much focused on making sure that we bring 5G to completion and get demo system boards out to customers, tools, and begin that scale-up. Okay, thank you very much. The next question is coming from John Tomlinson. Please go ahead; your line is open. Hi, thanks for the follow-up. I was wondering if your expectations for the automotive applications have changed at all, just given the shift in automotive sentiment, where maybe hybrids are, you know, a little bit more back in fashion versus pure EVs and how that plays out to your 48-volt technology.

And that's exciting for us because those are relatively high volume applications. Let the active suspension. For example is two to four modules per vehicle. So so.

We're encouraged about the continued progress in automotive and the the application spread is actually increasing for us.

Understood. Thank you and then second just wanted to go back to the the issues with the with the IBM and the IP as you assert your intellectual property. There is there a risk that it deters, you or potential customers from pursuing designs or closing deals on fifth generation V. P T technology.

Do you view them as as.

Mostly ring fence here.

I'm just thinking that maybe.

Maybe if.

Phil Davies: No, the market is sizable for us as a new entrant, of course. I mean, there are still millions of BEVs and mild hybrids out there for us to go after with their 800-volt or 400-volt battery technology. And what we're seeing at the moment that's actually quite interesting is that we have powertrain solutions that go from 800 to 48 or 800 to 12. We have an onboard charger platform that is incredibly power-dense and is getting a lot of interest in the market with 800-400-volt bidirectional conversion. And so what we're seeing recently are different applications like, for example, converting a condenser or an active suspension system or a seat heater from an 800 or 400-volt battery down to 48 volts as 48 volts starts to take a hold in some of these electromechanical applications.

You're pursuing this path.

And the demand is out there for all these area process is maybe the customers might settle for something that's less than perfect just to meet the demand at AC.

So I guess the way we view this is that.

In terms of.

Encouraging of discouraging.

<unk>.

Doing business with us.

Yeah, I would expect that that <unk>.

It make these decisions based on their concede the interest rate which involves.

Access to competitive technology, because he has to say if they are foreclosed from if our systems technology that their competitors have.

They are in a challenging competitive position of their own.

And so to the extent that <unk>.

Provides access to enabling our systems technology, whether it's the P DS, particularly settlement MVP or high content CD solutions.

Phil Davies: So we've seen a lot more of that in the last, I would say, the last two quarters. And that's exciting for us because those are relatively high-volume applications, like the active suspension, for example, which is two to four modules per vehicle. So we're encouraged about the continued progress in the automotive industry, and the application spread is actually increasing for us. Thank you. And then second, I just wanted to go back to the issues with IBM and IP.

Cash summers camp to us because they realize we have those.

Those capabilities, which.

The commodity pack a multiphase does not have.

Now the fastness of the AP is necessity.

It needs to be respected we can't have.

A market in which.

Spurted larger yams.

Wish to commoditize, a proprietary followed that covered by allowing.

Allowing the Lashomb and patents as is the case for the NPM and now the unique vehicle capabilities.

Patrizio Vinciarelli: As you assert your intellectual property there, is there a risk that it deters your potential customers from pursuing designs or closing deals on fifth-generation VPT technology, or do you view them as mostly ring-fenced here? I'm just thinking that maybe if you're pursuing this path, and there is demand out there for all these AI processors. Maybe the customers might settle for something that's less than perfect just to meet the demand that they see. So I guess the way I would view this is that, in terms of encouraging or discouraging OEMs to do business with us. I would expect that OEMs make these decisions based on their considered interest, right, which involves access to competitive technology. That is to say, if they are foreclosed from a power system technology that their competitors have, they are in a challenging competitive position of their own.

So we need to make the investment unnecessary in.

Getting the respect of depth intellectual property deserves.

And a fast action and disregard.

As an actual of international Trade Commission what now.

More than.

Way through that process, we are going to be on trial at the end of April and thus far.

Winning on just about every.

Key decisions has been made today, so I'm very encouraged so with respect to the outcome.

And we're very focused on bringing that to a successful conclusion later this year.

Got it when do you expect on the final decisions to be made there and what are the what are you expecting the legal custody just on the run rate business as we get there.

So the key Lj, we'll rent is the <unk>.

Patrizio Vinciarelli: And so to the extent that Vigor provides access to enabling power system technology, whether it's VPDs, particularly secondary VPD, or high current density solutions, customers come to us because they realize we have those capabilities which the commodity pack or multi-phase does not have. Now, the enforcement of the IP is a necessity. IP needs to be respected. We can't have a market in which OEMs, particularly large OEMs, you know, wish to commoditize a proprietary product covered by a lot of innovation and patents, as is the case for the NBM and other unique vital capabilities. So we need to make the investment necessary to get the respect that intellectual property deserves, and our first action in this regard is an opinion of the International Trade Commission. We're now more than halfway through that process, and we are going to be on trial at the end of April.

Bye.

To the very beginning of October.

The trial is at the end of April beginning of May.

Sure you've got some time.

Sure.

Good time to be in Washington.

Got it and the cost.

The legal expenses associated with that.

Is is significant but nonetheless significant significant follow up on it because about with action.

With.

Law firms that work with us as partners. So we.

We have a common goal common set of inches.

Got it okay. Thank you.

The next question is coming from someone plan. Please go ahead with your line is open.

Hi, guys. Thanks for the follow up on Tuesday.

Mmm.

After investing in building Zachary. So I'm wondering are you saving the task for building you know a multiplicity tip that or are you considering stock buybacks Tonight.

Furthermore, fabs or a stock buyback is yeah. So sorry, it with an understanding of what you said, but regarding.

Regarding.

Patrizio Vinciarelli: And thus far, we're winning on just about every key decision that has been made to date. So I'm very encouraged with respect to the outcome. And we're very focused on bringing that to a successful conclusion later this year. When do you expect the final decisions to be made there? And what are you expecting the legal costs to be on a run rate basis once we get there? So the LJ will render his decision by, I think, the very beginning of October. The trial is at the end of April or beginning of May. Cherry blossom time in Washington, D.C. A good time to be in Washington.

Perhaps.

We first have to shield the existing one right and the existing one.

Which we are represented to have the capability of nearly $1 billion.

Based on some of the advances we made with five G. Technology is now expected to be able to support considerably more that that level of yearly revenues. So we got a while to go before.

Having to invest in a second fat.

What about stock buybacks.

Well.

We're focused on.

Variety of opportunities at this point in time and frankly.

Patrizio Vinciarelli: Got it. But what about the costs, the legal expenses associated with that? It's significant, but not nearly as significant for our opponents because of how we structure the RBL with law firms that work with us as partners. So we have a common goal and a common set of interests. Got it. Okay. Thank you. The next question is coming from John Dillon; please go ahead, your line is open. Hi guys, thanks for the follow-up. Patrizio, your cash keeps increasing even after investing in building a new factory. So I'm wondering, are you saving the cash for building, you know, a multiplicity of chip pads, or are you considering, you know, stock buybacks for that cash? Building more fabs or a stock buyback?

That's not being on Monday of the screen, but it may.

Get out I got it on the screen and you can always <unk>.

We'll all find out the way it happens.

What do you what are you saving your passport.

Mmm.

Dash.

Really.

Catch up.

So what are we using the catchword for awhile I think at this point.

The case, John that one very favorable thing that occurred in the last couple of quarters as a couple of quarters of greater than $20 million per quarter of operating cash flow. So.

There is a there is a sense now that with royalties and other.

Parts of the P&L in the factory and fertilized and nowhere spend outside that we can be pretty efficient and very efficient and generating cash so, but let's let the cash pile grow that and then we'll decide is prieto said.

Look at it.

Yeah. So.

So say, we particularly.

In the early stage of AP campaign.

Want to be in a very strong financial position right and then the cycle several of these but with respect to being able to invest in that campaign.

<unk> longer it takes to achieve the goals.

Top priority, that's most important strategic going back to your question.

Patrizio Vinciarelli: Yeah, so I'm sorry; I couldn't understand all of what you said. But regarding more fabs, we first have to feel the existing one, right? And the existing one, which we have represented to have a capability of nearly $1 billion based on some of the advances we have made with our 5G technology, is not expected to be able to support considerably more than that level of yearly revenues. So we've got a while to go before having to invest in a second fab. What about a stock buyback? Well, we're focused on a variety of opportunities at this point in time, and, you know, Frankly, that's not been on my radar screen, but it might. Get on a regular screen, and even when that happens, we'll all find out when it happens, and what do you do? What are you saving in cash?

Let's say we could.

Feedback five or 10% of fraud.

The.

Opportunity.

Speaking pales relative to the opportunity to double the value.

Or do more than that by succeeding.

The Savage James admission and that's F August.

Gotcha.

Yeah can you just give us a brief update on your design.

<unk>.

Sorry, John I couldn't make out the question of gas so very very hard.

Cloud there or.

Yeah.

Yeah can you just give us an update on that.

Design wind.

As I mentioned in my remarks, John where the pipelines continuing to grow.

As I talked about we're focused as a strategy on 100 customers. We've identified those 100 customers with about a $6 billion Sam for vehicle. We're very focused on those talk 100 with account managers on every single one of them and every single one of them is targeted for a set of new products that.

Patrizio Vinciarelli: You've got a huge dashboard that keeps growing. So what are we using the cash for? Well, I think at this point, you know, John, that one very favorable thing that has occurred in the last couple quarters is a couple quarters of greater than 20 million per quarter of operating cash flow. So there is a sense now that with royalties and other, you know, parts of the P&L and the factory internalized, and no more spend outside, we can be pretty efficient and, in fact, very efficient in generating cash.

Will Ah Ah started to releasing Q4, and we'll have more in Q1 and Q2.

So the pipeline is growing we've got a very healthy growing pipeline.

Quite confident in in all four business units achieving that goes over the the next three to four years by 2027.

Yes.

In order to this as USD five yeah.

Right, we're not even though there's been a lot of talk of August, particularly from investors community on.

AI property is rezoned Santa opportunities.

That is one of the primary markets, it's not the only market you you've heard us talk about.

Jim Schmidt: So, but let's let the cash pile grow a bit and then, you know, we'll decide, as Patrizio said, you know, look at it. Yeah, so we need to say, particularly at the early stage of our IP campaign, we want to be in a very strong financial position, right, and psycho-conservatism with respect to being able to invest in the campaign to the extent necessary for as long as it takes to achieve the goals. And that's our top priority. That's most important strategically, right? Going back to your question, let's say we could buy back 5% or 10% of our float.

Automotive.

That's an important market as well obviously in emerging market for us, but we have two other and mark is that in their own right to represent the opportunity aerospace and defense industrial market.

Products.

That I trace.

For those applications in those and markets and those in their own right represent because the opportunity for us and <unk> business model is obviously key to the oral strategy in terms of market transaction.

Alright.

Mmm.

The next question is coming from me, which we enjoy the phone. So have you you have to know.

Patrizio Vinciarelli: That opportunity, readily speaking, pales relative to the opportunity to double the value or do more than that by succeeding at the standard during the mission. And that's our focus. Gotcha. And Phil, can you just give us a brief update on your design, how they're going, and what you see coming up? Sorry, John, I couldn't make out that question from you. Yeah, so very, very hard.

But I forgot to ask you to introduce yourself before you take a question.

[noise] Hello.

Just because I hear Ya.

You might want to go to the next question operator.

Sure.

Oh, so joined over the phone so I'll be the only tune out and <unk>.

<unk> before you ask a question. Please go ahead.

Okay, Hi, this is Dan Mckenna.

[noise] quite done.

Phil Davies: Speak louder, or... Yeah, sorry, I'm in the way. Phil, can you just give us an update on the design wins? A quick update. As I mentioned in my remarks, John, where the pipeline's continuing to grow. I mean, as I talked about, we're focused as a strategy on 100 customers. We've identified those 100 customers with about a $6 billion SAM for VICO. We're very focused on those top 100, with account managers on every single one of them.

Please go ahead.

Can can you guys hear me.

Very well yeah. Okay. Then I was following up on John Dylan's earlier question relative to bookings and I know you said you didn't want to project any kind of trends, but can you give a rough idea of how they're running so far you're halfway through the quarter, how they're running compared to last quarter.

Again.

<unk> with respect to what is going to affect this quarter or next quarter.

Is now shafting, we're going to do because.

Phil Davies: And every single one of them is targeted for a set of new products that will, have started to release in Q4 and we'll have more in Q1 and Q2. So the pipeline is growing. We've got a very healthy growing pipeline. I'm quite confident in all four business units achieving their goals over the next three to four years by 2027. Yeah, it's important to note that this is a diversified model, right?

It could be misleading one way or the other and we don't want to do that so we want to be very honest.

In in effect shedding.

We got that is as challenges and opportunities.

That.

Bass could lead to a variety of outcome given that.

Setting any kind of specific <unk> could be potentially misleading one worthy and we don't want to do that.

[laughter].

Alright. Thanks.

And we have one more question from attendee, who Oh, so would you mind over the phone.

Patrizio Vinciarelli: We're not, even though there's been a lot of talk, a lot of focus, particularly from the investors' community, on AI, for obvious reasons, data center opportunities. That is one of the primary markets. It's not the only market. You heard us talk about automotive. That's an important market as well, obviously, an emerging market for us.

<unk>. Please introduce you also have before you take a restaurant.

Hello, you've muted notes.

I hear you Hello.

Yep, we can hear you Hello.

Hello.

This is <unk>.

Or.

General Motors announced that they're building.

Big plant in domestically B E vs. You expect that you'll be selling your products G up for this.

Patrizio Vinciarelli: But we have two other end markets that, in their own right, represent the ideal opportunity. Outer space and defense, and the industrial market. You know, our products have all the right traits for those applications in those end markets. And those, in their own right, represent the ideal opportunity for us.

So we not again not not talking about any specific customers, but we have.

Really covered most of the Oems globally with our technology, a three part of a strategy to get the Oem's excited about bike or technology and what it can do and they're both platforms.

Phil Davies: And if you see here, the business model is obviously key to the overall strategy in terms of market transactions. Great. Thank you guys very much.

Hybrid platforms and for them to really start collaborations with us.

Until then bring in tier ones.

Operator: I really appreciate it, www.thevenusproject.com. The next question is coming from an attendee who joined the webinar, so I will unmute you now. But I would like to ask you to introduce yourself before you take a question. Hello?

As a strategy for 2024 balls were starting to work with more tier ones on those types of collaboration so so rather than get specific about one customer I can say that generally on on a global footprint, we're doing very well with those collaborations and and moving forward with our automotive strategy, but it's good to see it.

GM investment that really is good to see.

Operator: Yes, we can hear you. You might want to go to the next question, operator. Sure. The next questioner also joined over the phone, so I will unmute you now. And, as I asked earlier, please introduce yourself before you ask a question. Please go ahead. Okay, hi, this is Don McKenna. Cardone.

Thank you.

If there is one more question before we close.

Alright, and the last question.

Let's go joined over the phone so I'll be <unk> Oh, please introduce yourself before you take a question.

Please go ahead. Your line is only thank you hear me.

Yes.

You can't hear me.

Yes.

Okay. Great. This is Richard Chandler, Craig Helen I'm, not sure what's wrong with this service, but I've been trying to get on for 45 minutes.

Operator: Please go ahead. All right, can you guys hear me? Yes, very well.

Operator: Yes. Okay. Then I was following up on John Dillon's earlier question relative to bookings, and I know you said you didn't want to project any kind of trends, but can you give a rough idea how they're running so far? You're halfway through the quarter. How are they running compared to last quarter?

I guess.

Great. So I guess maybe it.

Kind of a multi parter as we look at your your five G technology, I think and your last call you talked about.

One and deliver models and tools sometime this quarter I I.

Patrizio Vinciarelli: Again, setting expectations with respect to what is going to happen this quarter or next quarter is not something we're going to do because it could be misleading one way or the other, and we don't want to do that. So we want to be very honest in our sharing. What we characterize as challenges and opportunities that, on balance, could lead to a variety of outcomes, given that setting any kind of specific expectation could be potentially misleading one way or the other, and we don't want to do that.

I think I've got an early enough to hear the prepared remarks and didn't hear anything regarding that I'd love to get an update on whether those have been delivered yet here and then as we think about you're getting two volume production with this and I think you alluded to maybe by the end of this year or early next year what needs to happen between now and then and how do you exercise the new facility here.

You know to give confidence to large customers that you had the ability to ramp with high yields higher a high quality and low low lead times.

Operator: All right, thanks. And we have one more question from an attendee who also joined over the phone. So I will unmute you now, but please introduce yourself before you take a question, www.larryweaver.com www.thevenusproject.com Hello, do you want to mute it now? Yes. We can't hear you.

So a cast summers.

And come to visit the facility it kicks it <unk>.

And Jay speaking.

They've been very impressed.

As an example, a couple of weeks ago.

The appeal of rash on so far wrong.

A company.

Operator: Hello? Yes, we can hear you. Hello, this is Dean Cooper.

A very unique product.

Phil Davies: General Motors announced that they're building a big plant domestically for EVs. Do you expect that you'll be selling your products to GM for this? So we, not again, not talking about any specific customers, but we have really covered most of the OEMs globally with our technology. It's been part of our strategy to get the OEMs excited about Vicor technology and what it can do for their BEV platforms or mild hybrid platforms, and for them to really start collaborations with us and then bring in Tier 1s. As our strategy for 2024 evolves, we're starting to work with more Tier 1s on those types of collaborations. So rather than get specific about one customer, I can say that, generally, and on a global scale, we're doing very well with those collaborations and moving forward with our automotive strategy. But it's good to see the GM investment.

In the realm of AI capabilities.

And he commented as he visited the factory that you'd never seen anything like that in terms of.

Yup abilities, and instead of the art facilities.

So the the customer visits and.

US being exposed to the equipment the processes the systems are.

Team is put in place.

Speaks volumes to the scalability the methodology of making panels of chips.

They were wafers of semiconductor devices.

The five G. We are in.

Engaged with some leads customers, including while I was referencing a moment ago and another notable one.

That comes to mind is particularly.

Keen on off technology and.

We have a schedule.

Phil Davies: That really is good to see. Thank you. If there is one more question before we close, all right? The last questioner also joined over the phone. So I will unmute you now, but please introduce yourself before you take a question.

That is us.

Delivered damn functional.

Functional samples.

Tools.

And.

Demo systems.

As we progress through Q2, and Q3 of this year regarding getting into production we're going to.

Operator: Please go ahead; your line is open now. Yes. Can't hear me?

Operator: Yeah. Okay, great. This is Richard Shannon with Craig Hallam.

Richard Cutts Shannon: I'm not sure what's wrong with us and this service, but I've been trying to get on for 45 minutes. Good to see you.

Bioproduction for five G. In the second half of the year in terms of revenue opportunity.

This is a Q1.

Patrizio Vinciarelli: Great, so I guess maybe a kind of a multi-parter, you know, as we look at your 5G technology. I think in your last call you talked about wanting to deliver models and tools sometime this quarter. I think I got in early enough to hear the prepared remarks and didn't hear anything regarding that. I'd love to get an update on whether those have been delivered yet here. And then, as we think about your getting to volume production with this, and I think you alluded to maybe by the end of this year or early next year, what needs to happen between now and then, and how do you exercise the new facility here to give confidence to large customers that you have the ability to ramp up with high yields, high quality, and low lead times.

2025 at the top of my math is not in terms of contributions to revenue.

In any meaningful way.

Thousand 24, an event just to be clear.

Okay perfect wanted to get that confirmation I appreciate that one my last quick question here is there's a statement made by Kim members either Patricia filling the last call here about expecting a dominant share of AI power systems, I think referring to.

With five G and it over over a period of time and just wanted to especially given the stepped down the revenues that people might have made a concern people wanted you to reiterate if you still believe that to be the case reiterate that that's what you think is going to happen.

It is and it's not it's not a dream is to vision that is rooted in.

Patrizio Vinciarelli: So customers have come to visit the facility, kick the tires, as it were, and, generally speaking, they've been very impressed. You know, we had, as an example, a couple weeks ago, the VP of operations for a company with a very unique product in the realm of AI capabilities. And he commented, having visited the factory, that he'd never seen anything like that in terms of, you know, capabilities instead of state-of-the-art facilities.

Hot numbers.

The the.

The current density.

<unk>, Chris quite millimeters, so to speak.

<unk> see this capability.

He got powers delivery capabilities.

<unk> abilities.

Attribute that we know.

Desert Santa AI.

And cast simmers need.

And with respect to which.

Really today severely handicap.

Multiphase approach.

Particularly with DVD, but even without DVD.

Patrizio Vinciarelli: So the customer visits and customers being exposed to the equipment, the processes, the systems that our team has put in place speak volumes to, you know, the scalability, and the methodology of making panels of chips as if they were wafers of semiconductor devices. Regarding 5G, we are engaged with some lead customers, including one I was referencing a moment ago, and another notable one that comes to mind is particularly keen on our technology. And we have a schedule that has us delivering them, functional samples, tools, and demo systems as we progress through Q2 and Q3 of this year. Regarding getting into production, we're going to have power production for 5G in the second half of the year as a revenue opportunity. This is a Q1 2025 type event. It's not, in terms of contribution to revenue in any meaningful way, a 2024 event, just to be clear. Okay, perfect. I wanted to get that confirmation. I appreciate that one.

Is very very challenged and it's been.

The fact of standard.

For obvious reasons, because it is <unk> it is and.

It's called the song.

To the ecosystem of logical.

A large multi policy of his suppliers surrounds the globe.

Technically is very severely handicapped and you step disability that <unk>.

Which again comes down to <unk>.

Numbers like there's quite a bit to be there and other activities.

The ability to provide.

The solution in one hour meeting either theme.

Multi bar that.

Line up with what the.

AI plus.

Processors.

Require we're looking at free cash us with 2004 thousand App requirements. Another case, we're looking at <unk> of the <unk>.

50000 amp level.

You can't do that with Martha face you can only do it.

With technology.

Patrizio Vinciarelli: My last quick question here is, there was a statement made by, I can't remember if it was either Patrizio or Phil on the last call here, about expecting a dominant share of AI power systems, I think referring to, you know, with 5G and over a period of time. I just wanted to, especially given the, you know, step down in revenues that might concern people, wanted you to reiterate, if you still believe that to be the case, reiterate that that's what you think is going to happen. It is, and it's not a dream; it's a vision that is rooted in... have numbers.

Technology, and that's what we're set to enable directly.

With.

Fab.

And to some degree indirectly through our lessons Shimon.

Okay I appreciate those particular, that's all for me.

Thank you.

And that.

We'll have to wrap it up so operator, if you could close the call. Thank you.

Sure. Thank you, everyone, but <unk> <unk>.

And have a nice day.

[noise].

Thanks for using Webex visit our website at Www Dot Webex dotcom.

Patrizio Vinciarelli: The current density, the amps per square millimeter, so to speak, the efficiency, the scalability, vertical power delivery capabilities, the key attributes that we know data center, AI, and customers need, and with respect to which they are really today severely handicapped. The multi-phase approach, particularly with VPD, but even without VPD, is very, very challenged. And it's the de facto standard now, for obvious reasons, because it is multisource and historically it has had scalability of its own to the ecosystem of a large multiplicity of suppliers around the globe.

Patrizio Vinciarelli: But technically, it's very severely handicapped, and it's that visibility that I have, which again comes down to numbers, like amps per square millimeter and other attributes. The ability to provide a VVD solution in a 1.5 millimeter thin cloud multiplier that lines up with what the AI processors require. We're looking at applications with 2,000 and 4,000 amp requirements. In other cases, we're looking at web-scale applications at the 50,000 amp level. You can't do that with multi-phase.

Patrizio Vinciarelli: You can only do that with our enabling technology. And that's what we're set to enable directly with our fab and to some degree indirectly through our licensing model. Okay. Appreciate those thoughts, Patrizio. That's all for me. Thank you. And with that... We'll have to wrap it up. So, operator, if you could close the call. Thank you. Sure. Thank you, everyone.

Operator: That marks the end of your webinar. Thank you for joining and have a nice day. www.microsoft.com.ca. Thanks for using WebEx. Visit our website at www.webex.com.