VICOR CORP Q3 FY2024 earnings call

• Financial performance: Q3 revenue up sequentially, gross margin affected by product mix, operating expenses down due to lower litigation contingency. Cash and cash equivalents at $267.6 million, operating cash flow $22.6 million.
• Market developments: Industrial, aerospace, and defense markets strong; high-performance computing had temporary weakness. Gen 5 product: PCB issue resolved, sampling to top 100 customers; automotive 48V zonal architecture presents opportunities. Vertical integration: ChiP fab introduced new DC to DC converter power module families with advanced packaging.
• IP enforcement: Executing plan to enforce Vicor IP against copycat suppliers, with initial ITC determination against Delta.

For Q3 2024, Advanced Products revenue was $49.4 million, up 6.5% sequentially, accounting for 53% of total revenue (down from 54% in Q2). Brick Products revenue was $43.8 million, up 10.8% sequentially, making up 47% of total revenue (up from 46% in Q2). Total revenue for Q3 was $93.2 million, up 8.5% sequentially from Q2's $85.9 million but down 13.6% from Q3 2023's $107.8 million. Gross margin was 49.1%, a 70 basis point decrease from prior quarter due to product mix change. Operating expenses decreased 5.2% sequentially to $40.4 million, net income was $11.6 million with GAAP diluted EPS of $0.26.

Management states they can't provide quarterly guidance currently due to wide range of uncertainties. Goal is to focus on top 100 customers to drive revenue growth to $1 billion target and 65% gross margins.

• IP infringement risks: Competitors infringing Vicor's patents, with uncertainties in how quickly issues can be resolved. - Uncertainties in forward-looking statements: Actual results may differ from forward-looking statements due to various risk factors discussed in SEC filings.

Q: Could you provide an update on OEM customers using Delta bus converter modules and interest in licensing Vicor's patents?

A: Delta is telling customers they'll have a workaround, but some customers are skeptical. Ability of competitors to escape Vicor's IP is doubtful, leading to potential redesign challenges for customers.

Q: What's the timeline for Gen 5 products to be adopted and shipped in volume in HPC market?

A: Initial quantities of Gen 5 VPD system components will be shipped to a key customer in the next couple of months, with PowerUP production in first half of 2025.

Q: What drove the sequential revenue strength and mix?

A: Strength in industrial, aerospace, and defense markets; temporary weakness in high-performance compute due to lumpy orders.

Q: Did licensing revenue increase sequentially in the quarter?

A: Yes, licensing revenue increased in the quarter, along with product revenue being relatively flat.

Q: Are all Advanced Products produced in the new factory?

A: Yes, all Advanced Products are produced in the new factory, with vertical integration providing benefits like shorter cycle time and greater predictability.

Q: What are the next legal steps with the ITC?

A: ALJ issued initial determination, process involves commission review, presidential review, and bond posting by infringers before exclusion order becomes operative, with final determination due by February 3, 2025.