Q4 2024 Vicor Corp Earnings Call
Thanks for watching. Thanks for reading.
After the market 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 website.
Www dot by core powered dotcom.
We also filed a form 8-K today related to the issuance of this press release.
I remind listeners this conference call is being recorded and is copyrighted property of <unk> Corporation.
I also remind you various remarks, we make during this call may constitute forward looking statements for purposes of the Safe Harbor provisions under the private Securities Litigation Reform Act of 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 at our capacity expansion as well as management's expectations for sales growth.
Spending and profitability are forward looking statements involving risks and uncertainties.
In light of these risks and uncertainties, we can offer no assurance that any forward looking statement will in fact prove to be correct.
Actual results may differ 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 of our 2023 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 Thursday.
February 20th 2025.
<unk> undertakes no obligation to update any statements, including forward looking statements made during this call and you should not rely upon such statements. After the conclusion of this call.
A webcast replay of today's call will be available shortly on the Investor Relations page of our website.
Speaker Change: I'll now turn to a review of Q4 and full year financial performance after which Bill will review recent market developments and Patricio, Phil and I will take your questions.
Speaker Change: In my remarks, I will focus mostly on the sequential quarterly change for P&L and balance sheet items as well as full year year on year changes and refer you to our press release of our upcoming Form 10-K for additional information.
Speaker Change: As stated in today's press release <unk> recorded total revenue for the fourth quarter of $96 $2 million.
Speaker Change: Three 2% from the third quarter total of $93 2 million and up three 8% from the fourth quarter 2023 total of $92 7 million Rev.
Speaker Change: Revenues for the year ended December 31, 2024 decreased 11, 4% to $359 1 million from $405 1 million for the prior year.
Speaker Change: Advanced product revenue increased 18% sequentially, while brick product revenue declined 13% from the third quarter.
Speaker Change: Revenues for advanced products for the year, ending 2024 decreased 11, 9% to whatever $97 3 million.
Speaker Change: $223 9 million the year before.
Speaker Change: Revenues for brick products for the year, ending 2024 decreased 10, 7% to $161 7 million from wandering $181 2 million in the year before.
Speaker Change: Shipments to stocking distributors decreased 4% sequentially, but increased seven 6% year over year.
Speaker Change: Exports for the fourth quarter increased sequentially as a percentage of total revenue to approximately 56, 9% from the prior quarter's 49%.
Speaker Change: On a year over year basis exports exports decreased as a percentage of total revenue to approximately 48, 2% from the prior year's 63, 1%.
Speaker Change: For Q4 advanced advanced products share of total revenue increased to 66% compared to 53% for the third quarter with Brooke brick products share of correspondingly decreasing to 39, 4% of revenue.
Speaker Change: Turning to gross margin.
Speaker Change: We recorded a consolidated gross profit margin of 52, 4%.
Speaker Change: Proximately, three 3% more than the prior quarter.
Speaker Change: For the full year 2020 for gross margin rose by 7% to 51, 2% from 56% in the prior year.
Speaker Change: The year on year increase in gross margin percentage was primarily due to increased royalty income and reductions in supply chain costs.
Speaker Change: I'll now turn to Q4 operating expenses.
Speaker Change: Total operating expense, including litigation expenses increased 2% from the third quarter.
Speaker Change: For the full year 2020 for total operating expense as a percent of revenue increased to 51, 6% from 37, 9% in the prior year.
Speaker Change: The amount of total equity based compensation expense for Q4 included in cost of goods.
Speaker Change: SG&A and R&D was.
Speaker Change: 858000, 2.106 million and 1.093 million, respectively, totaling approximately $4 1 million.
Speaker Change: For Q4, we recorded operating income of $9 2 million, representing an operating margin of nine 6%.
Speaker Change: For the full year 2020 for operating loss totaled $1 3 million or negative <unk>, 4% of revenue compared to operating income of $51 4 million or 12, 7% of revenue in the prior year.
Speaker Change: Turning to income taxes, we recorded a tax provision for Q4 of approximately $1 5 million.
Speaker Change: Representing an effective tax rate for the quarter of 12, 9%.
Speaker Change: The tax provision for the full year 2024 was approximately $4 3 million, representing an effective tax rate for the year of 41, 5%.
Net and net income for Q4 totaled $10 2 million.
Speaker Change: GAAP diluted earnings per share was 23.
Speaker Change: Based on a fully diluted share count of 45 million and 296000 shares.
Speaker Change: For the full year 2024, net income decreased to $6 1 million from $53 6 million in the prior year.
Speaker Change: In 2024 diluted fully diluted earnings per share decreased to <unk> 14 from $1 19 in the prior year.
Speaker Change: Turning to our cash flow and balance sheet cash and cash equivalents totaled $277 3 million in Q4.
Speaker Change: Accounts receivable net of reserves totaled $52 9 million at quarter end with Dsos for trade receivables at 39 days.
Speaker Change: Inventories net of reserves increased <unk>, 3% sequentially to $106 million.
Speaker Change: Annualized inventory turns were approximately flat at $1 65.
Speaker Change: Operating cash flow totaled approximately $10 1 million for the quarter.
Speaker Change: Capital expenditures for Q4 totaled $1 7 million.
Speaker Change: We ended the quarter with a construction in progress balance primarily for manufacturing equipment of approximately $8 2 million.
Speaker Change: And with approximately $4 9 million remaining to be spent.
Speaker Change: I'll now address bookings and backlog.
Speaker Change: Q4 book to Bill improving sequentially came in above one and with one year backlog, increasing three 3% from the prior quarter closing at $1 $55 5 million.
Speaker Change: Turning to the first quarter and the full year.
Speaker Change: 2025 is a year of uncertainty and opportunity.
Speaker Change: As of today, the year's outcome in terms of topline and Bottomline 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 and capitalizing on opportunities.
Speaker Change: With that Phil will provide will provide an overview of recent market developments and then pretreat CFO and I will take your questions.
Speaker Change: 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 have the time available.
Speaker Change: If you have more than one topic to address please get back into queue.
Speaker Change: No.
Jim: Thank you Jim.
Speaker Change: When we entered 2024, we talked about the year in terms of challenges and opportunities.
Speaker Change: As we enter our new fiscal year, a number of challenges have been overcome and we now see 2025 in terms of opportunities.
Speaker Change: The two main challenges we faced in 2024, we're refining processes and scaling up capacity in our chip fab and protecting our intellectual property.
Speaker Change: We are pleased with the successful ramp of our new vertically integrated chip factory, which is now achieving the short cycle times and high yield goals that we set.
Speaker Change: Enabling a more efficient operation and improving our customer responsiveness and key performance measures.
Speaker Change: 2025, we will see further progress as we build out our top 100 customer operational excellence program leveraging the new factory.
Speaker Change: The recent final determination by the ITC in our first Nbn patent infringement case as resulted in exclusion and cease and desist orders banning the importation of infringing power modules and unlicensed computer systems infringing two vehicle patents.
Speaker Change: Affected companies are taking notice of the risk of computing hardware being stranded because of infringing and BMS and a hyper scalar has recently taken a license to vehicles MBM IP.
Speaker Change: While our first ITC action achieved most of its goals foreign power module makers certain contract manufacturers and some of their U S. Customers are still playing a game of catch me if you can which.
Speaker Change: Which we will.
Speaker Change: By pursuing monetary damages and by seeking additional exclusion orders enforcing relevant patents and our comprehensive IP portfolio.
Speaker Change: Turning to our fourth quarter, our book to Bill ratio Rose above one in Q4 and with our new licensee booking its future MBM requirements in January our high performance computing business is beginning to strengthen.
Speaker Change: On the new product front, we are laser focused on delivering our ultra high density high bandwidth Gen. Five bpd system to our lead customer and two leading AI a network processor companies on Hyperscale us.
Speaker Change: As Patricio commented in our press release today affecting our second generation V. PD has taken longer than expected with a five out of a new ASIC raising the bar on the density and bandwidth of our current multipliers, so customers, who need current densities up to five apps per millimeter square.
Speaker Change: Our industrial and broad business remained strong with bookings from top 100 customers and strengths with channel partners globally.
Speaker Change: Our <unk> customers are continuing to see strong growth servicing the processor and memory testing needs for AI markets.
Speaker Change: Our new family of factories power chips will be sample to these major <unk> customers in Q2.
Speaker Change: Further strengthening our position as a leading modular power system provider.
Speaker Change: Our aerospace and defense business maintained a double digit growth trajectory that began three years ago with our top 100 accounts.
Speaker Change: Power systems standardization with rack based power supplies office further growth opportunities to vehicle for both power modules and for complete systems designed and manufactured by our subsidiaries.
Speaker Change: Opportunities in the satellite market for our factor is powered radiation tolerant modules are significant and we are well positioned should favorable program award decisions occur in the second half of 2025.
Speaker Change: We closed out 2024 with continued global pipeline expansion for our automotive business.
Speaker Change: Now shipping into production programs our.
Our focus for 2025 is to bring the many OEM and tier one collaborations to a design win status setting us up for continued growth in this new business through 2027.
Speaker Change: So in closing we are in a stronger position at the start of this year than at this time last year.
Speaker Change: No doubt there are still challenges to be overcome but we have the determination.
Speaker Change: <unk> power on the bench strength with our superior power system technology, a new chip fab on a global team to achieve our Northstar financial goals of $1 billion in revenues, 65% gross margins.
Speaker Change: 2025 will be another exciting year.
Speaker Change: Thank you.
Speaker Change: So with that we'll now take your questions.
Speaker Change: Thank you to ask a question. Please press star one on your telephone and wait for your name to be announced.
Speaker Change: Your question. Please press star one again.
Speaker Change: And our first question will come from John Ken mid teens with CJS Securities. Your line is now open.
John Ken: Good afternoon. Thank you for taking my questions.
Speaker Change: This quarter.
Speaker Change: I was first wondering if you could talk a little bit more about the delay you mentioned are taking longer than you expect in the <unk> product.
Speaker Change: Is there a change in your expectation for when that product will ship in volume.
Speaker Change: And if so when do you think that that window might be.
Speaker Change: So it turns out we needed to.
Speaker Change: To compete.
Speaker Change: And ASIC.
Speaker Change: In order to achieve the performance goals and empathy.
Speaker Change: Capability efficiency.
Speaker Change: We think a.
Speaker Change: A key.
Speaker Change: To.
Speaker Change: Major transaction with our <unk> line FERC with second generation <unk>.
Speaker Change: That as seek is coming out of a fab.
Speaker Change: Before the end of February and in the next 10 days.
Speaker Change: And we expect it to be able to.
Speaker Change: In the amount of March.
Speaker Change: I'll take fast steps with respect to.
Speaker Change: Being in a position to.
Speaker Change: Provide compete.
Speaker Change: High performance solution for.
Speaker Change: Our lead customer.
Speaker Change: And at the same time.
Speaker Change:
Speaker Change: The mustache on capabilities to full performance.
Speaker Change: For a broader set of customers.
Speaker Change: So <unk> longer than expected.
Speaker Change: Two to setting a perspective.
Speaker Change: View these as.
Speaker Change: A once.
Speaker Change: <unk>.
Speaker Change: Develop out.
Speaker Change: In terms of its significance.
Speaker Change: And.
Speaker Change:
Speaker Change: I am computing.
Speaker Change: And the extra time necessary to achieve the level of performance. We targeted we think is worth it.
Speaker Change: In terms of I'll leave Castorama, we are very focused on being able to support.
Speaker Change: Theyre ramping needs.
Speaker Change: In the second half of this year, we think we're going to be able to accomplish that.
Speaker Change: Got it. Thank you procedure can I ask a question for you to be customer do they have a dual source strategy on this product where maybe on one side the user <unk> on the other they use traditional multi phase.
Speaker Change: Maybe for a different type of SKU, but thank you again.
Speaker Change: Okay.
Speaker Change: So our lead customer relies on us with respect to.
Speaker Change: There.
Speaker Change: As clothing production requirements on our Neogen Ashok products.
Speaker Change: And I believe they are relying on us.
Speaker Change: For the foreseeable future.
Level of.
Speaker Change: The pharmacy, David Farr.
Speaker Change: Is not achievable.
Speaker Change: By any competitive alternative.
Speaker Change: The nature of the Solutia exciting proprietary.
Speaker Change: Very extensively covered by our IP portfolio.
Speaker Change: So we are on our south transaction terms, so lots of our collaboration.
Speaker Change: With this fleet CASM.
Speaker Change: Got it thank you I'll jump back in queue.
Speaker Change: Thank you.
Speaker Change: And our next question will come from Nicholas <unk> with Needham Your line is open.
Speaker Change: Okay.
Speaker Change: Hey, guys just a quick win from Needham just wanted to ask Patricio and Phil.
Speaker Change: Congratulations on your second licensee to the past.
Speaker Change: Portfolio wondering if you could at all give us some sense.
Speaker Change: How that might impact your future royalty revenue I know in the third quarter of last year, you generated over 13 million.
Speaker Change: Royalty income is does this meaningfully increase.
Speaker Change: The royalty revenue going forward or would you expect your first licensee.
Speaker Change: <unk> to represent the majority of life, sorry, if royalty income going forward and then I have a follow up.
Speaker Change: So all that I can tell you is that it's a significant license, but we are constrained in terms of.
Speaker Change: Not being a liberty to disclose.
Speaker Change: These results.
Speaker Change: Any.
Speaker Change: Information relating to what.
Speaker Change: What it would mean for us what it means for the licensee.
Speaker Change: <unk>.
Speaker Change: We obviously value our licensing elasha ships and.
Speaker Change: I want to be.
Speaker Change:
Speaker Change: Our.
Speaker Change: Commitments with respect to maintaining the national relationship.
Speaker Change: Coffee Ashok so.
Speaker Change: I can't tell you anything beyond the fact that it's an IV Kayla.
Speaker Change: It's a significant license.
Speaker Change: Understood.
Speaker Change: The sensitivity. Thank you for sharing what you can.
It sounds like you also.
Speaker Change: <unk> has secured MVM product orders from this hyper scaler I believe in the script.
Speaker Change: Phil mentioned that.
Speaker Change: We received orders from this hyper scaler for MBM product in the January quarter.
Speaker Change: Can you give us any sense, how meaningful those MBM orders are I know in the press.
Speaker Change: This release, you talked about margins going forward would depend on your ability to fill the new chip fab.
Speaker Change: And I'm curious if the orders for <unk> are meaningful.
Speaker Change: And so it could start you on your way to.
Speaker Change: That increase in capacity utilization at the chip. Thank you.
Speaker Change: Yeah.
Speaker Change: So in general the assays, yes, a comment that any other feature of Sandra licensing methodology is incentives.
Speaker Change: License fees to do business with us.
Speaker Change: As a module provider and he has to say with a fab we have a very unique highly proprietary capability is getting more and more levers.
We have assets, including our <unk>.
Speaker Change: Ability.
Speaker Change: So all of this goes in a car.
Speaker Change: Come on.
Speaker Change: The action there in terms so.
Speaker Change: Engaging with licensees.
Speaker Change: As a licensor of Crazy Guy intellectual property.
Speaker Change: And.
Speaker Change: As a supplier.
Speaker Change: Of our major programs that.
Speaker Change: <unk> enables the licensee tool.
Speaker Change: Achieve levels of performance the cap.
Speaker Change: Realize otherwise.
Speaker Change: And all of this will lead to a first half.
Speaker Change: Getting held it is not going to happen overnight.
Speaker Change:
Speaker Change: It takes time.
Speaker Change: Obviously, you just fashion period associated with all of these.
Speaker Change: There is no sudden change.
Speaker Change: So just hold to periodically seek with respect to.
Speaker Change: The timescale and expect their shops.
Speaker Change: But we we do see.
Speaker Change: Our first five but with the <unk>.
Speaker Change: Round numbers capacity.
Speaker Change: Getting field.
Speaker Change: Fourth pillar.
Speaker Change: Thank you Mr Shaw.
And our next question will come from Richard Shannon with Craig Hallum Capital. Your line is now open.
Richard Shannon: Well great guys. Thanks for taking my question as well.
Speaker Change: Let me ask it kind of top down question here Jim's prepared remarks, you talked about as you have recently about this year being one of uncertainty and opportunity.
Speaker Change: And then you also describe some of the dynamics here between your AI slides EPC opportunities in other market. So I guess my question here is trying to get a sense of the degree to which these uncertainties are related mostly related to HBC versus other markets is there a heavy influence or kind of a balance between those just wanted to get a sense here given some of the remarks about non HBC.
Speaker Change: Markets. Thank you.
Speaker Change: I think that the uncertainty is an opportunity to sort of do you see a revolve primarily around.
Speaker Change: AI and.
Speaker Change: I am computing.
Speaker Change: I think with respect to our other markets.
Speaker Change: I think there is a high degree of fidelity it failed.
Speaker Change: I totally agree yes.
Speaker Change: I mean, our automotive businesses are collectively business. So there is just full of opportunity there and as I talked about our goal is conversion of the pipeline.
Speaker Change: Industrial and defense and aerospace.
Speaker Change: Going from strength to strength and as.
Speaker Change: As I've mentioned before our goal is to double those businesses and we're in good shape to do that so it's about HBC.
Speaker Change: Yeah.
Speaker Change: And Thats a market that we have.
Speaker Change: Had a.
Speaker Change: A couple of years ago, we're rebuilding it.
Speaker Change: And.
Speaker Change: I think we are rebuilding our proposition our staff not just from the IP perspective, but.
Speaker Change: Before too long in terms of enabling solutions that cannot otherwise.
Speaker Change: <unk>.
Speaker Change: Our own hardware.
Speaker Change: In our fab.
Speaker Change: Okay I appreciate that detail. My second question is related to your your second Gen Bpd products here.
Speaker Change: I guess, it's a two part I guess it wasn't clear to me whether this <unk> spend that you talked about is specific to the leading custom were applied to the kind of the broader portfolio across AI space here. If you can give or if you could confirm that and then maybe just talk about kind of the pipeline here for the next set of customers when do you expect to sample.
Speaker Change: And get some understanding of design wins is going to happen this year versus second half or just some kind of detail of how that's progressing. Thank you.
Speaker Change: Okay.
Speaker Change: So then you asked seek is.
Speaker Change: Uh huh.
Speaker Change: Jody applicable to all of the current multipliers that fundamentally enable.
Speaker Change: Per.
Speaker Change: Per square millimeter capability of type.
Speaker Change: <unk> and <unk> implement that Sean.
Speaker Change: And.
Speaker Change: It's something that we add.
Speaker Change: In.
Speaker Change: The pipeline from a.
Speaker Change: Next development perspective.
Speaker Change: That we needed to.
Speaker Change: [noise] prioritize and.
Speaker Change: Accelerate delivery of.
Speaker Change: It caused us.
Speaker Change: Some issues that we encountered.
Speaker Change: In competing develop after the current multipliers. So we are very close to having the device.
Speaker Change: And.
Speaker Change: Looking forward to.
Speaker Change: Competing these shop, there I must say this one building block of a very comprehensive set of molecules that perform in combination.
Speaker Change: All of these special functional solved for very high performance characterized power system.
Speaker Change: Everything has gone very well with respect to.
Speaker Change: Other building blocks the car multiplier from a contract perspective.
Speaker Change: As an issue that we needed to address.
Speaker Change: And our next question comes from John Dillon with Dnb Capital. Your line is open.
John Dillon: Hi, guys congratulations on a good quarter and a nice book to Bill really good to see.
John Dillon: Patricio at the Fireside chat Quinn asked you. If you got everything you need for GPU manufacturer, who is having key problems I think your answer is you think you do.
Speaker Change: What I'm wondering is how does that customer gotten insight into your second Gen Bpd and the new factory and what is their reaction.
John Dillon: Yeah.
John Dillon: Im afraid this is a little bit.
John Dillon: Two.
John Dillon: Kasmer specific.
John Dillon: I think without naming names.
John Dillon: It would be.
John Dillon: Yeah.
John Dillon: Clear that cast amaze, and so I'm going to.
John Dillon: Refraining from housing your question answer, but I will answer the question in March outcomes.
John Dillon: I think.
John Dillon: Our costs are.
John Dillon: All of the.
John Dillon: A customer samples Ashok has on us.
John Dillon: And.
John Dillon: High end computing.
John Dillon: I believe with secondary rationale bpd.
John Dillon: And Ah <unk> chipset.
John Dillon: We have what it takes to address.
John Dillon: Outstanding needs challenges.
John Dillon: All of these cash summers phase with respect to.
John Dillon: In ability to.
John Dillon: Levered the comp that.
John Dillon: Their asics.
John Dillon: We want to be able to consume.
John Dillon: Tim or management issues not issues.
A long list of issues that conventional technology is saddled with.
John Dillon: If I priced power system.
John Dillon: With.
John Dillon: It's after you convert the current multiplier.
John Dillon: <unk> address this much more effectively so.
John Dillon: No comments with respect to any one.
John Dillon: <unk>.
John Dillon: Person cast and a former cast them a few show cast and we will seek to.
Zhao practice, avoiding getting into those details.
But again, our coffeehouse on my part with respect to.
John Dillon: Got it.
John Dillon: Are getting traction across.
John Dillon: The range of cash than we've seen in that space with.
John Dillon: The capability of <unk>.
Speaker Change: Okay can I ask the question a little more generally then.
Speaker Change: Yes, all of the major GPU customers aware of your new second Gen technology and have they senior new factory and are they are they satisfied with what youre doing.
Speaker Change: Not all of them.
Speaker Change: As implied by earlier.
Speaker Change: The comments.
Speaker Change: We've been keeping a positive try for two reasons one to make sure that.
Speaker Change: We devote all the support necessary to our live cast them up.
Speaker Change: But also to make sure that when we set out to service.
Speaker Change: Pre cash us another costumers that.
We have completed all that we need to have in place.
Speaker Change: That scale app to be very predictable.
Speaker Change: And very efficient.
Phil: Phil do you want to have that answer that.
I think the only thing I would add would be that John we have very clear line of sight to the target chip companies, whether it's AI GPU or network processor companies. Our hyperscale is that have programs in development. So we know when those programs.
Phil: Starting what their spec so we've got a very good picture.
Phil: Our view of the market so our.
Phil: As Patricia said, we're focused on our lead customer and then we will have the demo systems go out to a set of target follow on customers.
Phil: I expect.
Phil: Going from the devaluation to the design win will be fairly quick with some of them a little bit longer for others, but it depends on that chip new chip schedules. So it will be a mix.
Okay that makes a lot of sense and I really appreciate you guys.
Phil: Given us those details and I'll get back in the queue. Thank you so much thank.
Phil: Thank you.
Speaker Change: And our next question will come from Don Mckenna with BB Mckinnon Company your line's open.
Speaker Change: Patricio again congratulations.
Speaker Change: During the Needham Conference you indicated that you expected 25 to be a record year and looking back at.
Speaker Change: Earnings in previous years.
Speaker Change: My point was $1 26, a share in 'twenty, one is that what you're referring to is the earnings that you expect it to be the record.
Speaker Change: I expect that this year.
Speaker Change: Theyre reasonable scenarios would be.
Speaker Change: Good year for revenues.
Speaker Change: And our profitability.
Speaker Change: Great. Thank you very much.
Speaker Change: And our next question will come from John Ken One King with CGS.
Speaker Change: J S Securities Your line is open.
Speaker Change: I just wanted to follow up on the licensing.
Speaker Change: And you mentioned you signed a significant hyper scaler.
Speaker Change: How many more of those entities are out there of size number one.
Speaker Change: That are negotiating in good faith with you in contact with you and how many are there out there that may be.
Speaker Change: To avoid you and you may have gone down to litigate against them.
Speaker Change: Okay.
Speaker Change: And a significant amount in the second part of what's what's the cost going to be to do that.
Speaker Change: Phil has been getting phone calls so you want to.
Speaker Change: <unk> certainly smoking out the people who are hiding that's for sure. So I think that.
Speaker Change: Yes, I am getting contacted now by other companies wanting to talk about licensing.
Speaker Change: So that's a good thing and that's that's what the ITC action was meant to do.
Speaker Change: I think one of the key thing shares as I think when people think about this they might think about it is that this area but.
Our goal is not to have an adversarial relationship with our license seasons and keeps you talked about theres, a big incentive to buy modules from Vycor not just because it helps you with the license royalty, but because it's an amazing technology and it enables new performance levels that you haven't been able to achieve before so.
Speaker Change: So as I said earlier.
Speaker Change: I think 2025 is going to be a very exciting year.
Speaker Change: And two group.
Speaker Change: As a follow up on that clearly.
Speaker Change: Yeah.
Speaker Change: Cash costs of potash are customer SAP as carriers.
Speaker Change: Other parties that had been using buying infringing molecules.
Speaker Change: They are.
Speaker Change: I have not.
Speaker Change: In effect the actually.
Speaker Change: We're responsible for.
Speaker Change: Things that happened.
Speaker Change: Sure.
Speaker Change: Without their understanding.
Speaker Change: <unk>.
Speaker Change: And because of that we owe them.
Speaker Change: With respect to with respect to ensuring that.
Speaker Change: That dealt with.
Speaker Change: Sadly in the aftermath.
Speaker Change: Scotia Howard.
Speaker Change: The cause of the issues.
Speaker Change: First with the infringing parties.
Speaker Change: The one responsible for.
Speaker Change: Creating.
Speaker Change: These kinds of issues and hopefully.
Speaker Change: I will learn from this experience.
Speaker Change: Not to make the same kinds of mistakes in the future. If they do there is going to be unfortunately.
Speaker Change: More of these kinds of experiences coming that way and coming the way of <unk>.
Speaker Change: And that cost us before too long, we'll come to the conclusion that they can't really rely.
Speaker Change: Our suppliers.
Speaker Change: <unk> coffee.
Speaker Change: In a variety of products.
Speaker Change: But I imagine getting Nevada.
Speaker Change: Doug.
Speaker Change: Well protected by intellectual property.
Speaker Change: To avoid.
Speaker Change: That progress is being in France.
Speaker Change: Got it that's very helpful. I was wondering if you could also update us on if there's any viable workarounds that you've seen or heard about.
From from the Infringers, if theyre trying to get around them.
Speaker Change: Let me be category with respect to that that he has no.
Speaker Change: MBM alternative.
Speaker Change: That doesn't infringe <unk> patents.
Speaker Change: We have not played out all of the balance.
Speaker Change: But there is no viable alternative known to me.
Speaker Change: Now you're right.
Speaker Change: Again.
Speaker Change: That are suppliers to the market.
Speaker Change: There are going to cast him tell.
Speaker Change: Telling them.
Speaker Change: We don't infringe survivor IP, we know.
Speaker Change: You can buy from us.
Without any concern, but the reality of it is that.
Speaker Change: They don't really understand.
Speaker Change: Their product in VIP that covers them are misleading that costumers and they should not by now.
Speaker Change: That's not a long term.
Speaker Change: We win strategy for very large issue with their customers.
Speaker Change: Got it thank you.
Speaker Change: And the next question comes from Patrick Connors with <unk> capital. Your line is open.
Patrick Connors: Hi, guys.
Speaker Change: Really good quarter really happy for your nice book to Bill.
But I think most importantly.
Speaker Change: So far it looks like a successful defense of your IP, which I know has been very important to you.
Speaker Change: In that context can you describe them I understand that youre defendants have to post the bond can you describe the mechanics of the bond.
Speaker Change: Whats the purpose of the bond the size of the bonds et cetera can you walk me through those mechanics. Please.
Speaker Change: Yeah, So in general terms.
Speaker Change: Following the positive action.
Speaker Change: <unk> is closed.
Speaker Change: It undergoes Amanda authority.
Speaker Change: 60 days presidential review period.
Speaker Change: The alcohol, which.
Speaker Change: For the most part that have gone conclusion that they have been.
Speaker Change: Few instances, we are seeing which there has been a presidential veto.
Speaker Change: All the discussion on all of that so we should all expect.
Speaker Change: Arthur will go into effect 60 days from deposit I mean Asher.
Speaker Change: At that point in time.
Speaker Change: Infringing products cannot be imported into the U S, but app to DSP Ashok.
The presidential review period.
Speaker Change: There is in effect.
Speaker Change: A.
Speaker Change: 60 day, Grace period within which to your point.
Speaker Change: Sure.
Speaker Change: Based upon this.
Speaker Change: That cash some of those.
Speaker Change: Ken.
Speaker Change: Import.
Speaker Change: Infringing products in the U S. If they post the bond.
Speaker Change: Now the bonds in this particular investigation for computing <unk> was set the odd percent of the value of the computing system.
Speaker Change: So in the case of computing C. Sam.
Speaker Change: It would be at all money to post the bond and.
Speaker Change: And that bond will not be recoverable.
Speaker Change: So post the bond is it is it the customer or is it the vendor.
Speaker Change: Well I cannot help you with respect to that but fundamentally cast films will not allow the import fashion are infringing product for which there is no bonds.
Speaker Change: Through the 60 day presidential review period.
Speaker Change: At the end of that they will simply allow the professional ranks ranging product.
Speaker Change: Can I make the analogy to a bill bond whereby if.
Speaker Change: It goes in <unk>.
Speaker Change: If they infringe upon your IP.
Speaker Change: Yes, and in fact the complaint.
Correct.
Speaker Change: However, the bonds because we are in effect the effective partner.
Speaker Change: But you just said vycor can recover the bond.
Speaker Change: We could if bonds get posted and now we have no way of knowing what is going to offer right. So.
Speaker Change: Needless to say.
We are.
Speaker Change: Today's one week.
Speaker Change: From the FASB Ashok.
Speaker Change: They still like the CLO uncertainty with respect to what is actually going to happen.
Speaker Change: Okay. That's extremely helpful. Congratulations thank you.
Speaker Change: I'll jump back in the queue.
Richard Shannon: And the next question comes from Richard Shannon with Craig Hallum Capital. Your line is open.
Speaker Change: Okay.
Speaker Change: Well, thanks, guys for letting me ask a follow up here and this is kind of taking two different comments during the call here.
Speaker Change: Phil has prepared remarks talk about the ramp of the chip factory with getting short cycle times that you've been envisioning all along here as well as high yields and then a response to a later question here Youre talking about devoting all of your support to our lead customer, making sure you've got everything in place to scale out and.
Speaker Change: Scale out to be predictable and efficient. So I guess my question here is.
Speaker Change: To what degree is the chip fab been exercised at high volumes and utilization can you describe.
Speaker Change: Or quantify the level of utilization today, and then what do you mean by getting ready to be to be able to scale up predictably and efficiently.
Speaker Change: Yes so.
Speaker Change: If part of your question has to do with capacity in factories. These action.
Speaker Change: Effect working out.
Speaker Change: The inevitable glitches as you bring up something as new as the first chip fab.
Speaker Change: Second part is really.
Speaker Change: To do with.
Speaker Change: The novelty of the new generation of products so that.
Speaker Change: As to do with other factors of play let me address the first part of the question first.
Speaker Change: So as implied.
Speaker Change: But James.
Speaker Change: Opening remarks.
Speaker Change: Pointing to the change in mix.
Speaker Change: Within the last quarter.
Speaker Change: It's our advanced products.
Speaker Change: You should assume that <unk> made in our chip fab.
Speaker Change: So within the last year, and particularly getting into fourth quarter, we've been.
Speaker Change: Scanning app is capacity.
Speaker Change: We all of US we view every Thursday morning.
Speaker Change: A bar chart, showing the progression of <unk>.
Speaker Change: Chips made that what we call <unk> connect which are.
Speaker Change: Of the car.
Speaker Change: That process is.
Speaker Change: And that bar chart has been stepping up.
Speaker Change: Have a nice space.
Speaker Change: In every segment.
Speaker Change: Segment within the year.
Speaker Change: So good.
Speaker Change: Good progress there.
Speaker Change: And again to your point.
Speaker Change: It relates to related metrics right, it's not just capacity as the cycle time it feels.
Speaker Change: They all play together you need them to support each other in accomplishing the overall goal so.
Speaker Change: We've been able to enjoy.
Speaker Change: We're able to make chips in a pinch if there is a very high priority in as little soup to nuts.
Speaker Change: <unk> 10 base, which is.
Speaker Change: A tiny fraction of the time it used to take to compete that corresponding task here two years ago.
Speaker Change: Very small fraction of the time.
Speaker Change: And with respect to two.
Speaker Change: Devices.
Speaker Change: In mass production of new Fab, we have filed that yields a 96%.
Speaker Change: So those are measures of <unk>.
Speaker Change: <unk> with respect to the.
Speaker Change: Capability of the processes implemented in the new factor.
Speaker Change: With respect to the second part of your question.
Speaker Change: <unk>.
Speaker Change: In the.
Speaker Change: The deployment of our new.
Speaker Change: A generation of products.
Speaker Change: Relates to.
Speaker Change: Having.
Speaker Change: Everything in place.
Speaker Change: Two.
Speaker Change: Enable solutions.
Speaker Change: Debt.
Speaker Change: Can take on different forms in terms, so car requirement multiplicity of routes.
Speaker Change: In different customer I'll take actions.
Speaker Change: Smart them, adding the car molecules and core capability in saving the complete understanding.
Speaker Change: Our to adapt system solutions to FERC guests have a requirements, which would be different.
Speaker Change: From <unk>, and that's where we've been through.
Speaker Change: A few other actions all of our demo system.
Speaker Change: <unk> capability.
Speaker Change: Yes, I think we are on the turnaround.
Speaker Change: And.
Speaker Change: It's gotten to a level of maturity debt.
Speaker Change: With respect to.
Speaker Change: All of the building blocks.
Speaker Change: We'll showcase.
Speaker Change: Performance.
Speaker Change: Debt.
Speaker Change: We think will bring about.
Speaker Change: Predictable adoption by our customers rather than a lead.
Speaker Change: Okay I appreciate all the detail there very interesting, particularly on my call on question here is just related to that.
Speaker Change: Thinking through the towards the endpoint of of your ITC case, obviously these patents.
Speaker Change: We're directed specifically at your Nbn products here and obviously good to see a successful outcome here.
Speaker Change: Just wondering not only the conversations about licensing related to Nbn. So to what degree are these conversations having or intending by U. Two also involve your point of load products as well. Thank you.
Speaker Change: Okay.
Speaker Change: So.
Speaker Change: With.
Speaker Change: Different licensees.
Speaker Change: <unk>.
Speaker Change: The focus is different.
So we have what we call an OEM license.
Speaker Change: Which gives us access to all of our IP.
Speaker Change: The licensee.
Speaker Change: The size.
Speaker Change: What party here.
Speaker Change: Our capability is to license.
Speaker Change: They encompass.
Speaker Change: The entire portfolio.
Speaker Change: And.
Speaker Change: Fast the gamut from.
Speaker Change: The first stage of it to say.
Speaker Change: Frankly <unk> solution.
Speaker Change: Or it could be if authorized policies to them or a point of load device.
Speaker Change: Sure.
Speaker Change: Our first non OEM license fee.
Speaker Change: As a narrower license.
Speaker Change: <unk> two ibms.
Speaker Change: So going forward, we expect to have a mix of.
Speaker Change:
Speaker Change: Different.
Speaker Change: Scenarios, but J speaking.
Speaker Change: We favor.
Speaker Change: Oems getting full access.
Speaker Change: The alpha sources requirements.
Speaker Change: They are.
Speaker Change: Yeah.
Speaker Change: Capacity requirements.
Speaker Change: To in effect take risk out of the supply chain.
Speaker Change: Which recent events on this call are otherwise be.
Speaker Change: It seems issue.
Speaker Change: And to be clear.
Speaker Change: In regards to our.
Speaker Change: First ITC case.
Speaker Change:
Speaker Change: I want to be clear about the fact that you guys. It's never a perfect process right is full of uncertainties.
Speaker Change: People have to make critical decisions.
Speaker Change: Sure.
Speaker Change: With somewhat limited visibility and.
Speaker Change: They need to do so.
Speaker Change: With critical timeline.
Speaker Change: So for a level of pressure.
Speaker Change: To be sure we didn't get 100% we're looking for.
Speaker Change: But it's been successful.
Speaker Change: And as I look at it in terms of the overall Savage.
Speaker Change: Is accomplishes.
Speaker Change: Accomplish its mission.
Speaker Change: The procession of the risks in here in <unk>.
Speaker Change: For our suppliers.
Speaker Change: Ed.
Speaker Change: A practice, so just copying and taking <unk> with respect to.
Speaker Change: What might happen with illegal chased them.
Speaker Change: More of the kind of bless us we.
Just Pat.
Speaker Change: Maybe an SSA to to get the industry to.
Speaker Change: Two.
Speaker Change: With respect IP as it should be.
Speaker Change: Four.
Speaker Change: All of that.
Speaker Change: It's worth right in terms, so foster innovation crossing investment.
Speaker Change: The advance of technology.
Speaker Change: Shouldn't be that.
Speaker Change: A company.
Speaker Change: Thus, the heavy lifting and others coffee what that company does.
Speaker Change: That's not.
The right solution to the.
Speaker Change: The industry needs.
Speaker Change: Great. Thank you guys.
Nicholas: And the next question comes from Nicholas <unk> with Needham Your line is open.
Nicholas: Hey, guys just a couple of quick follow ups.
Nicholas: For the hyper scaler license licensee Patricio.
Nicholas: Is that only pertinent to nbn's from delta or other respondents or does it cover any nbn module imported by that hyper scaler.
Nicholas: Is any any NPM module for many sellers.
Nicholas: Perfect.
Nicholas: Maybe for Jim.
Speaker Change: Denver or Phil I think you said in the prepared script advanced products were up 18% sequentially. Just wondering if you could give us a sense what drove that strength is it mostly the industrial A&D segments.
Speaker Change: The growth in AI or HCC customers, just any any color you could give would be appreciate it. Thank you.
Speaker Change: Yes, it was mostly <unk>.
Speaker Change: Pick up.
Speaker Change: But also we saw growth in industrial.
Speaker Change: <unk> products and.
Speaker Change: Also aerospace and defense, but primarily HBC.
Speaker Change: Thanks.
Speaker Change: And the next question comes from John Dillon with Dnb Capital. Your line is open.
John Dillon: Hi, Patricio earlier, you mentioned that the new factory should be filled pretty quickly. So I'm wondering are you in the early stages of planning, a new factory and what kind of timeframe and will that be a VICORP factory or licensee Frac factory.
John Dillon: Yes, so I mentioned earlier.
John Dillon: We should be realistic about that just fashion.
John Dillon: Al.
John Dillon: Time of all of these developments right, we're not going to be.
John Dillon: Feeling that factory.
John Dillon: This year to be clear.
John Dillon: So it would be.
John Dillon: Premature at this point.
John Dillon: Two.
John Dillon: To grow all of them with respect to the next factory, but I think it's fair to say that we understand what needs to be down there we've done.
Some.
John Dillon: Planning with respect to what it would take.
John Dillon: There are scenarios as we get into next year.
John Dillon: Sure.
John Dillon: There could be a need.
John Dillon: Pending on what happens in terms, so as the option of.
John Dillon: So internationally PD.
John Dillon: And as you heard me say before it is going to be a lot easier to build.
John Dillon: The next fab.
John Dillon: Being accomplished.
John Dillon: Completion of the first so.
John Dillon: We're still very focused on the first.
John Dillon: Making sure that everything is as good as it should be with it.
Speaker Change: <unk> continued to reduce cycle time improve yields getting it failed, which will take time right. It won't happen this year.
John Dillon: But the good news is that.
Speaker Change: Replicating.
Speaker Change: S getting after that capacity.
Speaker Change: Yeah, assuming as they do that we're going to get great traction with our second child in PPD and Fiji.
Speaker Change: Our capability in Chile, which is by the way not limited.
Speaker Change: To point to a lot of uptick as you say it's not.
Speaker Change: Just for AI. It is all so far.
Speaker Change: Industrial products since for automotive products. So the macro opportunity there is quite broad.
Speaker Change: And with that broad macro opportunity.
Speaker Change: B.
Speaker Change: For more capacity and more fabs and those may come about.
Speaker Change: On the reverse scenario involving potential partnerships that we deemed viable.
Speaker Change: And other partners.
Speaker Change: Excellent.
Speaker Change: Thank you very much detail.
Speaker Change: I had a question I'm not sure if I missed this or not but did you mentioned have you bought back any more of your stock in the fourth quarter.
Speaker Change: Okay.
Speaker Change: Very very very small amount John the threshold wasn't happily the threshold wasn't it often.
Speaker Change: For the buyback to kick in so.
Speaker Change: And are there any plans going forward.
Speaker Change: I would say we will consider it again.
Speaker Change: I am sure Pretreat till we'll make a decision on that but.
Speaker Change: At this point, we still learn a good rate of return on our money market fund.
Speaker Change: We have we have the resources now as a company to really go forward and the investment necessary in capital is really declining now so I think it also when I think about the fact that I think about loading and the leverage we're going to get just with this factory operating extremely efficiently it's going to be a beautiful thing is the loading comes in.
Speaker Change: Yes, I would imagine with the quick turns you're going to really increase your cash flow talking about what you just said right.
Speaker Change: Alright.
Speaker Change: Excellent okay. Thanks, so much guys.
Speaker Change: Thank you.
Speaker Change: Thank you.
Speaker Change: This concludes the Q&A session and the call.
Speaker Change: Thank you for your participation and you may now disconnect.
Speaker Change: Thank you. Thank you. Thank you.
Speaker Change: Okay.
Speaker Change: Okay.
Speaker Change: [music].
Speaker Change: Okay.
Speaker Change: [music].
Speaker Change: Sure.
Speaker Change: Okay.
Speaker Change: Okay.
Speaker Change: [music].
Speaker Change: Yes.
Speaker Change: Sure.
Speaker Change: [music].
Speaker Change: Uh huh.
Speaker Change: Okay.
Speaker Change: Yeah.
Speaker Change: [music].
Speaker Change: Okay.
Speaker Change: [music].
Speaker Change: Sure.
Speaker Change: Sure.
Speaker Change: [music].
Speaker Change: No.
Speaker Change: No.
Speaker Change: Okay.
Speaker Change: Yes.
Speaker Change: [music].
Speaker Change: Okay.
Speaker Change: [music].
Speaker Change: Yes.
Speaker Change: Okay.
Speaker Change: Okay.
[music].