Vicor Corporation (VICR) Earnings

Management highlights

2026 is a year of great opportunity for VICOR. Q2 revenues are expected to be nearly $126 million, and 2026 revenues nearly $570 million. Guidance is based on conservative assumptions about licensing practice with no new licensing agreements until the second ITC case in 2027. Bookings were strong across high-performance computing, industrial, and aerospace and defense markets in Q1 and remain strong in Q2. Lead computing customer is ramping wafer-scale engine. Second-generation VPD solution has 3 amps per square millimeter current density and up to 40 current multiplication factor in 1.5 millimeter thin package. Engagement with other HPC customers for second generation VPD solutions will follow the lead customer's generational transition. Industrial market had strong first quarter with top 100 industrial OEMs in automated test and semiconductor manufacturing equipment benefiting from AI data center build out. Aerospace and defense business is driven by geopolitical developments with increases in spending as a percentage of GDP and replenishment of defensive and offensive systems. Objectives, goals, and strategies for 2026 focus on a portfolio of 100 customers globally across four market segments. Future growth opportunities require capacity expansion including a second FAB. Combinatorial strategy of being power system technology innovator and IP licensing company is delivering results

Guidance

Expect Q2 revenues of nearly $126 million and 2026 revenues of nearly $570 million. Guidance is based on conservative assumptions about licensing practice with no new licensing agreements until the second ITC case in 2027

Segment performance

VICOR recorded product and royalty revenue for the first quarter of $113 million, up 5.3% sequentially from the fourth quarter of 2025 ($107.3 million) and up 20.2% from the first quarter of 2025 ($94 million). Advanced products revenue increased 3.7% sequentially to $64.9 million, and brick products revenue increased 7.7% sequentially to $48 million. Shipments to stocking distributors increased 0.5% sequentially and 63.6% year over year. Exports for the first quarter decreased sequentially as a percentage of total revenue to approximately 48.9% from 49.3% in the prior quarter. Advanced product share of total revenue decreased to 57.5% from 58.4% in the fourth quarter of 2025, with brick product share increasing to 42.5% of total revenue. Consolidated gross profit margin was 55.2%, a 20 basis point decrease from the prior quarter but an 800 basis point increase from the same quarter last year. Total operating expense increased 4% sequentially to $45.5 million. Net income for Q1 totaled $20.7 million, with GAAP diluted income per share of 44 cents. Cash equivalents totaled $404.2 million at Q1, an increase of $1.4 million sequentially. Accounts receivable net of reserves totaled $67.4 million at quarter end with DSOs for trade receivables at 42 days. Inventories net of reserves increased 3.8% sequentially to $94.8 million. Annualized inventory turns were 2.1. Cash flow used for operating activities totaled $3.9 million for the quarter, net of a litigation settlement payment of $28.6 million. Capital expenditures for Q1 totaled $12.4 million. Q1 book to bill came in above two, and one year backlog increased 70% from the prior quarter, closing at $300.6 million

Risks & headwinds

Matters discussed on the call including forward-looking statements involve risk and uncertainties. Actual results may differ materially from forward-looking statements. Risk and uncertainties are discussed in item 1A of 2025 Form 10-K. No obligation to update forward-looking statements after the call

Analyst Q&A

• Q: Hey, guys. Congratulations on the nice results and outlook. I guess I wanted to start with just the assumptions you're making around 2026 for the IP licensing business. Looks like royalty revenue in Q1 was about $15 million or about $60 million annualized. I know you're not assuming any additional or new licenses signed, but where do you see royalty or licensing revenue this year as part of that 570 guidance?

  A: The 570 guidance includes royalties, which would increase somewhat based on existing licensing agreement. In terms of providing, in effect, safe guidance, we thought it would be best to set aside any opportunity with respect to, if you will, early deals relating to current actions. So our working assumption for guidance purposes is that we're not going to have any until we get to further demination or a second case next year, but it could be that we do get some ahead of that timeframe.

• Q: Patricio, last quarter, you seemed pretty confident that the utilization in Andover would approach 80% by the end of 26 or early 2027, looks like you're on a strong product ramp, but are you still sort of comfortable or still expecting utilization to sort of achieve those levels that you discussed last quarter?

  A: Yes, in absolute terms with respect to product revenues, what has transpired since we last spoke on this topic is that we actually have significant level of elasticity with respect to expansion capacity within the fellow seed facility that's giving us a little bit more flexibility with respect to the timing and choice of the location for the second fab so to get a little bit more specific we've seen an opportunity for a relatively significant expansion in capacity. It could be as much as 50% above what had been planned to be supported in terms of annual revenues out of the federal state facility. So that gives us caution with respect to timing, which we're putting to good use in terms of the choice of a location. And to give you a little bit more flavor with respect to that, We've also come around to focusing on existing buildings as opposed to a piece of land because of the fact that with an existing building, we can execute much more rapidly in terms of capacity expansion. And part of the strategy with respect to getting more out of the federal state facility is to selectively source outside of that facility some of the process steps that can be more easily relocated. So that should give you the picture with respect to both the capacity utilization and the plants with respect to capacity expansion.

• Q: Hi. Good morning. Thanks for the questions here. I think first off, you mentioned engagement with additional VPD customers I think could follow the generational transition for the lead customer from Gen 4 to Gen 5. I was wondering if you could just provide an update on the anticipated timing of that transition. I think you had previously been looking for the second half of 2026, and then trying to get a sense for when the potential orders with additional customers could be and what the revenue timing might be.

  A: Yeah, so the generation transition we're referring to here, it will be enabled in the second half of this year, and we expect a ramp to begin before the end of this year with respect to that next generation capability with the lead customer. And we will follow that with additional customers for second gen VPD solution. As Phil pointed out earlier, we are planning for the increments of capacity that we're going to have available to support opportunities that are, as in the case of a lead customer, long-term strategic to Viagra. And fundamentally, in spite of capacity expansions, we expect to remain capacity constrained for a substantial timeframe. And that leads us to want to pick the right timeframes companies, the right applications, where as in the case of the lead customer, we can make a very substantial difference with respect to levels of performance and opportunity to win substantial market share.

• Q: Well, hi, guys. Thanks for letting me ask a couple of questions. I guess my first is a simple one here. The backlog has risen very nice, I think 70% sequentially. If you could characterize the sources of that increase here, whether it's from the lead VPD customer or anyone else in the kind of high-performance computing space and all other markets, if you could characterize between those three, that would be helpful. Thanks.

  A: Hi, Richard. It's Phil. So in high performance compute, yeah, it was the lead customer and the hyperscaler customers that we have. But we also saw some really good lift in industrial and the defense aerospace markets, as I commented. It was really strength across the board, you know, broad markets as well as in high performance compute with a few lead customers.

• Q: Hey, guys. Thanks for the follow-up questions. Patricio, just a quick clarification on the capacity expansion in Andover. When would you expect to reach that $1.5 billion of capacity? Is that end of 26? Is it going to take until sometime in 2027? And then I've got a follow-up.

  A: Well, so I don't think we want to be that specific at this point in time. As I'm sure you know, because of changing circumstances, we achieved the necessary comfort level to provide guidance for revenues for this year. But as we get past that, There are still so many different scenarios that it would be unwise to become very specific. Beyond saying that we have a plan to step up the capacity further, and we believe there is the market demand to use that expanded capacity as we get into 27 and beyond.

• Q: Hi. Thanks for the follow-up. Jim, can you touch on the taxes in the quarter? What went into that tax rate, and then what rate can we expect going forward? And then I have a follow-up after that.

  A: Yeah, so when we closed fourth quarter, we reversed a significant portion of the valuation allowance, and our expectation was more or less that we would be in the range of 20% in terms of an effective tax rate. What happened, John, in Q1 is that there was a substantial pent-up demand in terms of stock options that got exercised that a nice spread between strike and exercise price. And that's a tax benefit for us. So that's a, that's a one time discreet item, um, that doesn't get baked into the effective tax rate. And our feeling is that going forward, you know, there'll still be that effect, which is a positive effect for us, but, um, but planning can be more in the line with a 20% kind of a rate.

• Q: Yeah, I was just wondering, does ViCore have any vertical power licensing agreements that will generate revenue this year?

  A: So there may be opportunity of alternate sourcing of the second gen VPD technology, but this is not something that we're prepared to talk about today.

• Q: Phil, could you give us an idea of what percentage of the backlog is attributable to your lead customer?

  A: Again, we don't break that out. They're an important lead customer for us, but they're not, you know, the only major one. We've got a hyperscaler and big customers across industrial and defense and aerospace that are ramping, as well as just the broad market. So it's just general strength right now that's really good that我们're benefiting from.

• Q: In the past, you said you expect that royalty income could grow to as much as 50% of product revenue. Do you still have that expectation?

  A: The expectation of the licensing as a percentage of product revenues, we've talked as much as 50%. The question was, can we Do we still hold to that? Yeah, we feel very good about a licensing practice. We are investing heavily in it. It would be investing in it at an escalating rate because we see that business as being both a high growth business in terms of its top line and needs to say, is nearly 100% margin in terms of profitability. We anticipate, as discussed in prior meetings, that there will be a time in the not-too-distant future when OEMs and hyperscalers will be vital with only perhaps rare exceptions. We see that dynamic progressing, and we think we're pretty close to a crossing of the chasm with respect to the industry wanting to be protected in terms of a license to enable power system technology from Weigel.

• Q: This is a simple one, guys. I haven't been able to attend the annual meeting for the last few years because of a conflict in timing. And我'm hoping that you don't schedule it for the 20th of June this year.

  A: Well, the 20th of June is a Saturday, and so I'll let the cat out of the bag. The proxy is coming out soon. The annual meeting is Friday, June 19th. 19th.