Q3 2024 Vicor Corp Earnings Call
Good day, everyone and thank you for standing by welcome to the Q3 2020 for bike or earnings Conference call now, it's my pleasure to turn the call over to Jim Smith, Chief Financial Officer. Please go ahead.
Thank you good afternoon, and welcome to <unk> Corporation's earnings call for the third quarter ended September 32024, I'm, Jim Schmidt, Chief Financial Officer, and I'm in and over with Petruchio Vinci Rally Chief Executive Officer, and Phil Davies, Corporate Vice President global sales and market.
Right.
After the market's close today, we issued a press release summarizing our financial results for the three and nine months ended September 30th.
Press release has been posted on the Investor Relations page of our website.
Www Dot Corp, Howard Dot com.
We also filed a form 8-K today related to the issuance of this press release.
I remind listeners this conference call is being recorded and is the copyrighted property of <unk> Corporation.
To remind you various remarks, 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 on this call, including any statements regarding current and planned products current and potential customers potential market opportunities expected events and announcements and our capacity expansion as well as management's where expectations were.
Sales growth spending and profitability are forward looking statements involving risks and uncertainties.
In light of these risks and uncertainties, we can offer no assurance that any forward looking statement will in fact prove to be correct.
Actual results may differ materially from those explicitly set forth in or implied by any of our remarks today.
The risks and uncertainties, we face are discussed in item one a ever 2023 and Form 10-K, which we filed with the SEC on February 28 2024.
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 October 'twenty, two 'twenty 'twenty four right.
Core 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 a review of our Q3 financial performance after which Bill will review recent market developments and Patrice Your 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 to refer you to our press release or our upcoming Form 10-Q for additional information.
As stated in today's press release <unk> recorded total revenue for the third quarter of $93 2 million up eight 5% sequentially from the second quarter of 2020 for total of $85 9 million.
Down 13, 6% from the third quarter of 2023 total of $107 8 million.
Advanced products revenue increased six 5% sequentially Tonight to $49 4 million, while brick product revenue increased 10, 8% sequentially to $43 8 million.
Shipments to stocking distributors decreased 12, 5% sequentially and decreased 22, 7% year over year.
Exports for the third quarter increased sequentially as a percentage of total revenue to approximately 49% from the prior quarter's 43, 3%.
For Q3 advanced product share of total revenue decreased to 53%.
Compared to 54% for the second quarter of 2024 with brick products sure correspondingly increasing to 47% of total revenue.
Turning to Q3 gross margin we recorded a consolidated gross profit margin of 49, 1%.
Which is a 70 basis point decrease from the prior quarter, primarily due to a change in product mix.
Tariff expense net of duty drawback was approximately $1 1 million in Q3.
I'll now turn to Q3 operating expenses total operating expense decreased five 2% sequentially from the second quarter of 2000 $24 million to $44 million.
The sequential decrease was primarily due to a litigation contingency expense of $2 3 million recorded in the second quarter of 2024.
The amounts of total equity based compensation expense for Q3 included in cost of goods SG&A and R&D was 886000 2.036 million and $1 million and 112000, respectively.
Totaling approximately $4 million.
Turning to income taxes, we recorded a tax benefit for Q3 of approximately $2 4 million as we true up the year to date tax provision.
Net income for Q3 totaled $11 $6 billion.
GAAP diluted income per share was 26 based on a fully diluted share count of $45 million 174000 shares.
Turning to our cash flow and balance sheet cash and cash equivalents totaled $267 6 million in Q3.
Accounts receivable net of reserves totaled $58 5 million at quarter end.
With Dsos for trade receivables at 43 days inventories.
Inventories net of reserves decreased 3% sequentially to $105 $8 million.
Annualized inventory turns were one six operating cash flow totaled $22 $6 million for the quarter.
Capital expenditures expenditures for Q3 totaled $8 4 million.
We ended the quarter with the construction in progress balance primarily for manufacturing equipment of approximately $13 9 million.
And with approximately 8 million remaining to be spent.
I'll now address bookings and backlog.
Q3 book to Bill came in below one and one year backlog decreased two 1% from the prior quarter closing at $150 6 million.
As we said in last quarter last quarter's earnings call 2024 is a year of uncertainty and opportunity as of today, the quarterly and annual outcome in terms of topline and bottom line and subject to a relative 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 and capitalizing on opportunities.
With that cohort.
We'll 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 their limited time available.
If you have more than one topic to address please get back in the queue.
Phil.
Thank you Jim.
Phil: Q3 bookings reflected continued strength in our industrial and aerospace and defense markets and temporary weakness and high performance computing.
Focusing on the high performance computing market, we have successfully completed development of all the Asics and semiconductor devices included in our first Gen five chipset, but.
Phil: Its introduction was delayed because of an issue requiring a re spin of one of the modules printed circuit boards.
Phil: This work has now been completed and we will soon schedule V. P. D demo system meetings with lead customers.
Phil: Interest in our second generation V. P D for artificial intelligence and network processors is very high.
Phil: Partly because competitive V. P D solutions using stacked modular assemblies lack the requisite current density robustness and cost effectiveness.
Phil: Our Gen. Five current multipliers occupy one third of the footprint and a three times thinner than first generation stacked V PD solutions.
Phil: Stacked multi phase <unk> modules are challenged electrically mechanically thermally and last but not least from the IP perspective.
Phil: The AI market has significant business opportunities for <unk> with 48 volt bus converters Gen five bpd solutions and OEM licensing.
Phil: Leading AI companies relying on vehicles power system technology of licensed Vycor IP or are procuring modules directly from vehicle.
Phil: As evidenced by our recent ITC initial determination.
Phil: Certain actors I've been playing a game of catch me. If you can weave copycat suppliers of infringing modules or discrete solutions.
Phil: We are executing a comprehensive plan to enforce vycor IP and protect the domestic industry from foreign theft of U S intellectual property.
Phil: In Q3, we introduced five new DC to DC converter power module families that utilized advanced packaging technologies from our new chip fab, featuring advances and control systems and components, enabling two to three times higher power density.
Phil: These are now being sample to our top 100 customers and soon will be available to a broad customer base. We are our distribution partners, who will work with our global channel team targeting our top channel accounts across eight target market and application segments.
Phil: We are beginning to see the results of our strategy to focus the majority of our resources on a set of 100 customers globally across four main markets.
Phil: These customers will drive our revenue growth in the coming years to a $1 billion target and 65% gross margins.
Phil: By focusing on the top 100, we are able to set resources.
Phil: <unk> and priorities to achieve higher levels of efficiency and delivering new products production support technical support and exceeding customer expectations.
Phil: We are not 100% of the way there yet, but we are well on the way to achieving our operational excellence and customer centricity objectives by having our entire company aligned in achieving these objectives.
Phil: The adoption of a 48 volt zonal architecture by automotive Oems across Asia Pacific and Europe is driving significant new opportunities for us with lower voltage fixed ratio of bus converters and regulated 48 volt DC to DC converter power modules.
Our new Gen five product families with a higher power density and lower cost put vical in an excellent position to participate in higher volume 48 volt zonal be EV and hybrid automobile platforms.
Phil: These gen. Five products were initially designed for our high performance compute customers, but new automotive grade versions will become available in Q1 of 2025.
Phil: With regards to automotive grade capabilities, we were notified by the <unk> that <unk> has met the requirements of the IAA T. F 16, 94 nine standard.
Phil: This is a critical milestone in our journey to full certification and building out a full automotive design and manufacturing capabilities to meet the needs of our automotive Oems and tier ones.
Phil: Thank you and with that we will now take your questions.
Speaker Change: Thank you so much and as a reminder to ask a question press Star one one on your telephone and wait for your name to be announced to remove yourself press star one again.
Speaker Change: One moment please for our first question.
Speaker Change: Yeah.
And he comes from the line of Quinn Bolton with Needham and company. Please proceed.
Quinn Bolton: Hey, guys congratulations on a nice September results.
Quinn Bolton: Wanted to ask first obviously you guys had a nice initial determination at the ITC against Delta could you give us an update just what have you seen from OEM customers or folks that may be currently using the delta.
Quinn Bolton: Bus converter modules are you seeing increased interest in folks licensing your patents or do you think that youre.
Quinn Bolton: Youre going to have to continue to pursue actions.
<unk> you know folks in.
Quinn Bolton: Using those modules in the courts.
So we've seen.
Quinn Bolton: From a multiplicity of sources.
The cash is that.
Quinn Bolton: Delta.
Quinn Bolton: He's telling these cash summers not to worry theyre going to have.
Quinn Bolton: They walk around there.
Quinn Bolton: They're going to sample is late this year.
Quinn Bolton: And the language Ramsey.
Quinn Bolton: Two in effect replace existing solutions.
By the time the exclusion order comes out.
Quinn Bolton:
Some of these costs in a skeptical.
Of the six fit fashions.
Quinn Bolton: Some of these costs and I realize that beyond.
Quinn Bolton: Secondly, gal.
Quinn Bolton: Challenges and potential.
Quinn Bolton: Issues with quite a few cash on robustness reliability.
Quinn Bolton: The CLS significant legal.
Quinn Bolton: Legal challenges.
Quinn Bolton: Having to do with it.
Quinn Bolton: The feasibility.
Quinn Bolton: Feasibility.
Quinn Bolton: Inventing it out.
All of the asserted patents.
Quinn Bolton: To be clear, what just came down.
Quinn Bolton: Is the first act of.
Quinn Bolton:
Quinn Bolton: And number of acts that are yet to develop and.
Quinn Bolton:
Quinn Bolton: To get to the point.
Quinn Bolton: Point.
Quinn Bolton: The ability of <unk>.
Quinn Bolton: Companies, they're playing a game of catch me if you can.
Quinn Bolton: <unk> two <unk>.
Quinn Bolton: Okay.
Quinn Bolton: The the minefield of IP that Vical is planted in connection with.
Quinn Bolton: The cadence of innovation.
Quinn Bolton: Across the entire Ah.
Quinn Bolton: High density high performance <unk> four K evolves.
Quinn Bolton: The point of load.
Quinn Bolton: And elsewhere.
Quinn Bolton: Thats.
Quinn Bolton: That's a very.
Quinn Bolton: After that Oh.
Quinn Bolton: Very much our competitors are going to be able to achieve so.
Quinn Bolton: Customers that.
Quinn Bolton: Rely on <unk>.
Quinn Bolton: Youre likely to be.
Quinn Bolton: Experiencing a variety of challenges with respect to <unk>.
Quinn Bolton: Designer quality free cash.
Quinn Bolton: And ongoing issues for years to come.
Speaker Change: And I guess Patricia in that game of catch me. If you can are you seen delta customers looking to switch to say modules from other vendors, such as flex or monolithic power or others or do you think to the extent that they switch to modules from those vendors.
Speaker Change: They may still be subject to the exclusion order assuming that you get that in a final determination.
Speaker Change: Again, an action is the one for which we just received the initial action.
Is the first of a series of actions and Andrew.
Speaker Change: And generally speaking the issues with respect to <unk>.
Speaker Change: Intellectual property.
Speaker Change: Now limited to the downtown areas.
Speaker Change: Got it and if I could squeeze in just one more on the Gen. Five sampling it sounds like you said.
Speaker Change: You've kind of respond one of the eight six or one of the chips and that chipset and you're proceeding now.
Speaker Change: <unk>.
Speaker Change: The samples and meetings with customers can you just give us maybe than an updated timeline.
Speaker Change: Outside of perhaps one lead customer for Gen. Five when would you expect.
Speaker Change: Gen five products to potentially be adopted and ship in volume.
Speaker Change: In the <unk> market is that now kind of a late 2025 timeline do you think you could ramp up program before that.
Speaker Change: Yeah.
Speaker Change: So just to be clear.
Speaker Change: All of the Asics and all of the unique semiconductors.
Speaker Change: <unk> been working fine, they're being fully collateralized so we've.
We have completed the task with respect to those as Phil mentioned earlier.
Speaker Change: The issue that sounds backed by a number of weeks.
Speaker Change: <unk> is an issue with the PC board in.
Speaker Change: While the current multipliers that that to be span a couple of times.
To address.
Speaker Change: Issues of MPC board level so.
Speaker Change: <unk> not had to do with.
The more Crazy go if you will asics are a.
Speaker Change: A power semiconductors those are in place for the first wave of <unk>, we have all of those components. We've had them for some time in terms of <unk>.
Speaker Change: Next steps.
Speaker Change: It was factored with one key cash somewhere.
Speaker Change: If things proceed that caused the anticipates ash us we're going to be shipping initial quantities of <unk>.
Speaker Change: Yeah.
Speaker Change: <unk>.
Speaker Change: Components to the cash somehow either.
Speaker Change: In the last couple of months.
Speaker Change: Got it and thank you for Tradeshow for clarifying it was the PCB.
Speaker Change: Issue that they needed to be reworked rather than a nathan sorry to have missed that.
Speaker Change: Yes.
Speaker Change: Thank you one moment for our next question.
Speaker Change: And he comes from the line.
Speaker Change: Of John <unk> with CJS Securities. Please proceed.
John: Hi, good afternoon, and thank you for my questions and again congratulations on Q3.
Speaker Change: Just a follow up on the <unk> product are those initial shipments youre talking about for testing and development for the customer or are these.
Speaker Change: These production units destined for a product to be sold.
Speaker Change: So the new shelf set of units in the one hundreds.
Speaker Change: That's far initial Ah.
Speaker Change: Customer.
Speaker Change: Power App.
Speaker Change: Production.
Speaker Change: Is it first half of 'twenty five event.
Speaker Change: Based on current scheduled.
Speaker Change: Got it and you would be getting orders for those products sometime in the first half if things go. According to plan is that correct.
Speaker Change: Well we've had.
Speaker Change: Orders for this product, which we're going to begin.
Speaker Change: To fail.
Speaker Change: There's going to be a vishal. This once we get past the.
Speaker Change: System level value that shop the castle.
Speaker Change: Understood. Thank you.
Speaker Change: And just a quick question on the orders in the quarter and the way you revenues trended sequentially I was just wondering what drove the strength there.
Speaker Change: And kind of what came into the quarter was anything Paul then or anything like that just if you could characterize.
Speaker Change: The mix or the strength in any way shape or form that would be helpful. Thank you.
Speaker Change: Yes, John this is Phil.
Phil: I mentioned that we had continued strength.
Speaker Change: We had it in Q2 into Q3 of our industrial.
Speaker Change: Aerospace and defense markets I mentioned temporary weakness in high performance compute because orders they are typically very lumpy.
Speaker Change: So we see those come in and then disappear for a quarter and come back again, so so that's where we had a little bit of weakness in hitting the one plus.
Speaker Change: Book to Bill ratio.
Speaker Change: Okay I'll jump back in queue. Thank you.
Speaker Change: Thank you.
Speaker Change: Thank you.
Speaker Change: Our next question comes from the line of Richard Shannon with Craig Hallum. Please proceed.
Richard Shannon: Hi, guys. Thanks for taking my questions as well.
I guess my first question is looking at your Gen five.
Speaker Change: CPD product here.
Speaker Change: Context of.
Speaker Change: Phil quantifying the pipeline for the automotive business last quarter, maybe if you can characterize or even quantify what the what the pipeline looks like for this product you've talked about an initial customer youre shipping to.
Speaker Change: Do you have any sense of quantifying how much that that looks like right now.
Speaker Change: Okay.
Speaker Change: So Richard this is Phil.
Phil: We had I think a little discussion on this at the end of last quarter's call. We basically as we talked about rebuilding <unk> pipeline.
Phil: From the past highs of.
The big GPU acceleration system that we were included in so it's a rebuilt and it's across a number of fronts. One is obviously the the V PD push with Gen five and as we mentioned the interest in that is very very high for a number of reasons I articulated.
Phil: Then you have the 48 volt bus converter market.
Phil: And that there are challenges and opportunities with that and then we have OEM licensing so.
Phil: With those three if you like sets of products is the way I look at it we're positioned to rebuild.
Phil: HBC pipeline.
Phil: Get it back to looking really great I would say as we go through you know at the end of this year and into next year will.
Phil: We'll be rebuilding that pipeline and I'm very encouraged about the interest.
Phil: Across all three of those those products as it were.
Speaker Change: Okay. Thanks for those thoughts Phil maybe a follow up again on the.
Speaker Change: The HBC bucket here, especially with Gen five products here it sounds like youre talking to them.
Phil: Customer.
Speaker Change: Maybe you can talk about the subsequent customers youre going to engage with how many of them are there maybe you can characterize them in any way.
Phil: What kind of timeframe do you expect to see them make decisions.
Phil: Issue wins and orders.
Over the next few quarters. Thank you.
Speaker Change: Yes. So we have we're working with I know chip companies accelerated companies and of course, the Hyperscale is as well.
Speaker Change: On coming to both Andover, and also Santa Clara, where our lab is based for the demo.
Speaker Change: The V PD system, it's pretty much everybody.
Speaker Change: We will also have demo systems.
Speaker Change: Over in Asia Pacific, Japan, Taiwan.
Speaker Change: Well in Q1 of next year.
Speaker Change: <unk> is a very very high degree of interest in that family for Bpd.
Speaker Change: Applications, because as I think everybody knows that the current levels for these processes are approaching 2000 amps, we've even seen some customers. This quarter talking about 4000 amps I mean, there is no way to deliver that other than with a.
Speaker Change: High density high current density product like we have in Gen. Five so the interest level is extremely high we're going to be very busy in Q4, and Q1 demo ing that system as I mentioned.
Speaker Change: Okay, great. Thank you guys.
Speaker Change: Thank you maam and for our next question.
He comes from the line of Don Mckenna with DB Makena and company. Please proceed.
Don Mckenna: Hi, guys.
Don Mckenna: My question goes back to the revenue side as well and with revenues up the way I look at is $7 3 million, but the backlog only down three two.
Don Mckenna: I was wondering if the other $4 one was.
It was the result of orders received during the quarter and shipped our price increases.
Speaker Change: An increase in the royalty income.
So actually the backlog.
Was reduced by a couple of million right I think you've got the numbers right.
Speaker Change: Basically it's just the difference between orders during the quarter and the shipments.
Speaker Change: That's the net number yes.
Speaker Change: So another way of saying it is we ship.
Speaker Change: <unk> 94, and we booked about 92.
Speaker Change: Yes.
Speaker Change: It's just that simple I mean thats the bulk.
Speaker Change: Okay.
Speaker Change: Gains were shipments deliverable in the next year and shipments are obviously revenue.
Speaker Change: Yes.
Speaker Change: Okay fine thank you.
Speaker Change: Thank you.
Speaker Change: And for our next question.
Speaker Change: And he comes from Jon <unk> with CJS Securities. Please proceed.
Speaker Change: Actually I wanted to follow up on that last.
Speaker Change: Point did the licensing increased sequentially at all in the quarter.
Speaker Change: Yes, so yes.
Speaker Change: Licensing increased as did where product revenue was relatively flat.
And there was increase in royalty revenue in the quarter.
Got it. Thank you and then Phil just maybe a little bit more on the on the fifth Gen products.
Speaker Change: Outside of the GPU are you seeing broader interest as well I'm talking about network profit to Cpus.
Speaker Change: The other forms of silicon is that.
Speaker Change: Things youre concentrating on as well as the leading edge AI, where most of the meters.
Speaker Change: No network processors are very important Jon so that's part of the initial mix.
Speaker Change: This gen five producer can talk about this better than me, but this gen. Five technology is really going to enable.
Speaker Change: Our new suite of products also into our <unk> customer base factorize power, there as well across aerospace and defense for radar systems.
Speaker Change: We're looking at this maybe sometime in the next three to five years for potentially space applications and other markets as well.
Speaker Change: So the Gen. Five technology is really going to be a spearhead for us across I would think the four main markets that we that we focus on.
Speaker Change: Great. Thank you.
Speaker Change: Thank you my mom and for our next question.
Speaker Change: He comes from Quinn Bolton with Needham <unk> Company. Please proceed.
Quinn Bolton: Hey, guys I wanted to follow up last quarter, you talked about sort of margins being under pressure.
Speaker Change: From a legacy HP C <unk>.
Quinn Bolton: Program that had kind of come back and higher volume and it looked like it likely continued here in the September quarter wondering if you could just confirm that and then I know youre, not giving guidance top line or margins for next quarter, but.
Speaker Change: Does that legacy HP see volume continue into the December quarter, or does that start to roll off and.
Speaker Change: And you might see a better mix shift.
Speaker Change: Product product mix and in Q4. Thanks.
Speaker Change: So we are expecting improvements partly due to your point to the fact that.
Speaker Change: The product mix issue that we have.
Speaker Change: With our legacy products, which were these cash things the last quarterly call.
Speaker Change: Was ongoing.
Speaker Change: In Q3, it will be ongoing for parts of Q4.
Speaker Change: But for all our Q4, he would be the effect would be somewhat diminished.
Speaker Change: Overall.
Speaker Change: The other factors that should help us with respect to.
Speaker Change: Improving margins.
Speaker Change: Got it and then I guess looking at the licensing.
Or the royalty revenue stream, it's been up consecutively now for several quarters as you look into the end of the year in 2025, obviously customers.
Speaker Change: Cross the AI market are moving to new generation Gpus and Asics in accelerators I guess as you look at your licensees product Road map is there anything that changes with their product road map that might reduce the royalties they pay or the royalty rate or would you.
Speaker Change: Expect that royalty to continue to trend with sort of unit shipments at.
Speaker Change: At your OEM licensee.
Speaker Change: We expect it to continue to trend up with volume based.
Based on continuing to use.
Speaker Change: <unk>.
Our technology, either a module form or in terms of the discrete solutions.
Speaker Change: Got it okay. Thank you.
Thank you so much my moment for our next question.
Speaker Change: It comes from the line of John <unk> with a lagger Natus investments. Please proceed.
Hey, guys you seem very positive on the prospects of Gen. Five when do you think gen five revenue will surpass 10% of.
Speaker Change: Of.
Speaker Change: Quarterly revenue.
Speaker Change: Well, so just to be clear.
Speaker Change: We have a policy about gen five because Europe SaaS.
Speaker Change: Evolution with respect to a.
Speaker Change: Point of load.
Speaker Change: Solutions and.
Speaker Change: I am not taking the word that evolution lightly so becky.
Back it up with numbers.
Speaker Change: So the competition is to infringe the number of <unk> patents.
Speaker Change: To deliver about one six <unk> per square millimeter.
Speaker Change: We can deliver initially three and before too long more than that.
Speaker Change: In a solution that.
Speaker Change: No. The only takes up a lot less footprint, but as suggested earlier by Phil.
Speaker Change: It's also the last thing like one five millimeters thin as opposed to about three times that.
Speaker Change: So if you combine the footprint advantage, which is to begin with.
Speaker Change: <unk>.
Speaker Change: And the.
Speaker Change: Advantage in terms of thickness.
Speaker Change: Overall volumetric vast CDN weight.
Speaker Change: It's nearly an order of magnitude that advantage in terms of overall density volumetric density.
So those are the.
Speaker Change: Transactions for our <unk> and <unk>.
Speaker Change: Highest professionals with respect to <unk> is truly evolutionary technology in every respect.
Speaker Change: In terms of risk control systems packaging technology.
Speaker Change: Tom.
Our ability to deliver solutions suite with <unk>.
Speaker Change: A much higher fee should see much higher bandwidth much lower noise matching.
Speaker Change: Much improved signal integrity that all of which are crazy go to next year at ash on AI systems.
Speaker Change: That's great.
Speaker Change: When does that translate into serious revenue.
Speaker Change: For the call.
Feels suggested we are going to start ramping with a lead castorama.
Speaker Change: It will take some time the better part of next year.
Speaker Change: Two.
Speaker Change: Get further with other customers.
Speaker Change: Being factually.
Speaker Change: Taking it one step at a time, we don't want to be out there in front of a.
Speaker Change: Multiplicity of cast them or is it.
Speaker Change: Prematurely.
Speaker Change: And because of that beyond our lead.
Speaker Change: Customers.
Speaker Change: We have been playing is very close to the vas.
Speaker Change: Now that we're going to transition to a different phase.
Speaker Change: A few months and.
And we expect that to get a good deal of Altra.
Speaker Change: While traction.
Speaker Change: As we get further into 'twenty five.
Speaker Change: Thank you.
Speaker Change: Thank you one moment for our next question.
Speaker Change: And it comes from the line of Alan Hicks with Ainsley Capital Management. Please proceed.
Speaker Change: Yes, good afternoon.
Back on the question of you said that.
Speaker Change: Sales were flat, but royalties for <unk> was that just on.
Speaker Change: Advanced product sales were flat overall.
Speaker Change: I quoted the advanced product sale.
Speaker Change: Sales in <unk>.
Speaker Change: Prepared remarks, as well as brick so there was an increase in royalty revenue.
Speaker Change: Sequentially.
Speaker Change: And then the advanced and brick split is what I mentioned earlier in the prepared remarks.
Speaker Change: Advanced products does include the royalty component.
Okay.
Advanced product sales product sales, we are getting a little bit.
Royal.
Speaker Change: Royalties back to even.
Dan O'brien.
Speaker Change: Sounds about right yes.
Speaker Change: Yeah.
Speaker Change: Okay and then the.
Speaker Change: The second question is.
Speaker Change: Are all your advanced products now being produced in your new factory.
Speaker Change: Yes.
Speaker Change: And that's going well.
Speaker Change: Problems hang ups things.
Speaker Change: Things you need to tweak that kind of thing.
Speaker Change: Well in a factory.
Speaker Change: At a time when there is some issue or another issue, but generally speaking we feel.
Speaker Change: Very good about the capability, we put in place this is the <unk>.
Speaker Change: <unk>.
Speaker Change: Foundry for power components in the world.
Speaker Change: And.
Speaker Change: So far so good we're happy with the progress we've made if we go back.
Speaker Change:
Speaker Change: Half ago.
Speaker Change: Serious challenges in terms of capacity.
Speaker Change: C C with outside vendors.
Speaker Change: And the vertical integration, we put in place as began to pay off for itself in terms of giving us much shorter cycle time, much greater predictability, we can now.
Speaker Change: <unk> completed all of the packaging processes, what we call the <unk> connect in.
Speaker Change: <unk>.
Speaker Change: If NASA say two weeks it used to take US three times four times as long.
Speaker Change: A half ago, so the benefits of Auryxia and pick ash on other mass shop with respect to.
Speaker Change: Chip foundry is.
Speaker Change: Multi fold, it's short cycle time.
Speaker Change: <unk>.
Speaker Change: <unk>.
This capability with respect to capacity.
Speaker Change: And ultimately is cost effectiveness as we get to absorb.
Fixed cost debt.
Speaker Change: Now reflected in our financial state.
Speaker Change: Statements that are associated with the equipment with deploys the people we've hired in order to execute on this vertical integration. So as we progress into a phase where we absorb.
Speaker Change: That capacity, we're going to see a strong contribution to margins.
Speaker Change: Okay, and I wanted to ask about.
Speaker Change: Chip packaging converter housed in a package I know you announced it over 10 years ago and it seems like it's evolved quite a bit.
Speaker Change: I think it was hold panels anchors like 40 of them aren't paddles.
Speaker Change: You can kind of up into modules.
Speaker Change: Body else have anything like that.
Speaker Change: And what would you say is you know nobody can charter infringing, our IP and if they do they should understand by now.
Speaker Change: There's going to be consequences right. So.
Speaker Change: No. This is a unique capability that <unk> pioneered and within plays and.
We're quite proud of it.
Speaker Change: <unk>.
Speaker Change: To your point that gives us the ability to manufacture.
Speaker Change: As ancillary components.
Speaker Change: With cost something I mean as a.
Speaker Change: Panels, which are there.
Speaker Change: The counterpart to wafers in a semiconductor foundry.
Speaker Change: They are rectangular.
Speaker Change: Opposed to being.
Speaker Change:
Speaker Change: Hello.
Speaker Change: But they share many of the attributes of <unk>.
Speaker Change: The kinds of efficient process that goes on in semiconductor fabs.
Speaker Change: So would you say, it's like a very tiny break.
Speaker Change: Each one of these modules.
Speaker Change: I didn't catch the tiny <unk>.
Speaker Change: I'm Sandy bridge.
Speaker Change: It's a very tiny brick was that what you would say.
Speaker Change: Well no I think that's nothing within allergy because.
Speaker Change: Brakes were.
Speaker Change: <unk>.
Speaker Change: Power component provides a viable invented.
At the very beginning of the palm oil industry.
Speaker Change: Is there medically opposed to what.
Speaker Change: We're doing with convert this house in packages so Briggs.
Speaker Change: By the Nash are made.
Speaker Change: In.
Speaker Change: <unk> is indicated for fact, though which is specific to the break.
Speaker Change: So the processes are not scalable not nearly as efficient.
Speaker Change: With the convert this out of the package.
Speaker Change: To your earlier point.
Speaker Change: Irrespective of what the particular type of device happens to be and it can be.
Speaker Change: Eight out of the App for point of load current multiplier in a.
Speaker Change: 28 millimeters.
Speaker Change: Seven nanometer wide package or it can be a 40 kilowatts.
Speaker Change: Fast charging.
Paas convert thus far the motive.
Speaker Change: These seem.
Speaker Change: <unk>.
Speaker Change: In effect in <unk>.
Speaker Change: Power products.
Speaker Change: Technology supports but irrespective of what the end market application is or was in Asia.
Speaker Change: Policy somebody acquire.
Speaker Change: Apis to be there.
Speaker Change: They have built in our foundry using exactly the same processes the same equipment the.
Speaker Change: The same through the mass shy in taking action.
Speaker Change: Well it sounds very impressive so.
Speaker Change: Congratulations on everything you're doing thank you. Thank you.
Speaker Change: Okay.
Speaker Change: Thank you one moment for our next question.
Speaker Change: From the line of recurrent Shannon with Craig Hallum. Please proceed.
Richard Shannon: Hi, guys. Thanks for letting me ask a follow up here, particularly I would love to get your sense from your.
Initial customers you're engaged with them.
Richard Shannon: The Gen five bpd, what's their view of the supply chain that you have here and do they view it as well tested enough to to run real volumes here do you expect with these initial wins to be sole sourced do you think.
Richard Shannon: There'll be shared until they get more competence, maybe just kind of help us understand current state of the view of that please.
So I think came.
Richard Shannon: In the foreseeable future as I look out.
Richard Shannon: Let's say over the next year year and a half.
Richard Shannon: The customers who are engaged the fr high.
Richard Shannon: High performance solutions.
Richard Shannon: <unk> very high performance AI.
Richard Shannon: They recognize that.
Richard Shannon: The lack of foundry. The first foundry is the foundry for these products for that timeframe.
Richard Shannon: As we look beyond that we have.
Richard Shannon: Fact is we mentioned in the past that there's going to be a second foundry and a tariff foundry and.
Richard Shannon:
And that will bring about.
Richard Shannon: Additional capacity and.
Richard Shannon: Additional robustness to the supply chain.
Richard Shannon: We view the existing capability upsell sith as being quite robust.
Speaker Change: Okay, great. Thank you guys.
Speaker Change: Thank you and as a reminder to ask a question simply press star one one in the queue.
Speaker Change: Our next question is from James Liberman from America Trust investment services. Please proceed.
James Liberman: Thank you it's good to see the progress Youre, making I wonder is there a way to understand the next several legal steps that you would comment on them, but it's a process.
Speaker Change: In terms of as things are playing out.
Speaker Change: And.
Speaker Change: And the outcome of the ITC begin to.
Speaker Change: Sanctions in place even before all of the appeals processes play out.
Speaker Change: Is there any way you can understand that.
Speaker Change: So I'm not sure I captured.
Speaker Change: Everything you said it wasn't a question.
Speaker Change: <unk> happened with the ITC and correct me, if I'm going off in the wrong direction in terms of I'll say your question, but.
Speaker Change: Just in terms of explaining the process there.
Speaker Change: Perfect.
Speaker Change: So that is working yes.
Speaker Change: <unk>.
Speaker Change: A few weeks ago, a couple of weeks ago is that.
Speaker Change: L J.
Speaker Change: Low judge that has presided over the case issued.
Speaker Change: His initial determination.
Speaker Change: The process involves that determine action being reviewed.
Speaker Change: By the commission.
Speaker Change: Before being subject to a presidential review process.
Speaker Change: Before discussion are there becomes a part.
Speaker Change: But even before discussion out there becomes part of our view.
During the presidential review period, there is a bond debt.
Speaker Change: Infringes <unk> to post in order to be able to import into the country.
Speaker Change: Infringing products.
Speaker Change: And that bond in the case of computing system, so that affected by the infringement was set by the ALJ at 100%.
Their value.
Speaker Change: No.
Speaker Change: The initial Ashok came down.
Speaker Change: The weaker has us.
Speaker Change: At the end of September was due in the first week of October.
Speaker Change: The commission is due to Rand is found that they mean asham by February Todd.
Speaker Change: This win.
Speaker Change: Exclusion of all of that.
Speaker Change: With respect will issue subject to potential review.
But thats when the bonds will go into effect.
Speaker Change: Thank you that's very helpful.
Speaker Change: Thank you one moment for our next question. Please.
Speaker Change: And he is from the line of Don Mckenna with DB Mckinnon Company. Please go ahead.
Don Mckenna: Hey, guys now that the new facility is completely operational I'm wondering what your plans are to invite the investment community to see it.
Speaker Change: Yeah.
Speaker Change: No immediate plans, but.
Speaker Change: That's a good question.
Speaker Change: We'll take it under advisement.
Speaker Change:
Speaker Change: We have a busy calendar over the next.
Speaker Change: A few months.
Speaker Change: The way we are completing installation of.
Speaker Change: New MRP system.
Speaker Change: And that's going to be.
Speaker Change: Some of it is even in the last week.
Speaker Change: Of the year.
Speaker Change: So we have a lot of things going on.
To being about <unk> <unk>, so as so that Phil has talked about and that's going to keep us quite a BC follow up yes.
Speaker Change: We also have lots of customers still coming through the facility and we expect a lot more as we rollout gen five so.
Speaker Change: But we'll certainly keep it Keith.
Speaker Change: Keeping in front of us.
Speaker Change: We could tag along with some of those customers.
Speaker Change: And maybe if your competitors as well right.
[laughter] Alright, just wanted to let you know we're still interested.
Speaker Change: Okay I'm sure lots of people are cute.
Speaker Change: Thank you and with that I will conclude the Q&A session and program for today. Thank you all who participated and you may now disconnect.
Speaker Change: Thank you. Thank you.
Speaker Change: Okay.
Speaker Change: [music].
Speaker Change: Okay.
Yes.
Speaker Change: [music].