VICOR CORP Q1 FY2025 earnings call

Key Points

• Transitioned to SAP ERP system in January, impacting gross margin due to production ramp, paid time off, and consulting expenses.
• Advanced Products grew excluding royalty decline; Brick Products declined.
• Market developments: AI driving HPC power needs, Vicor's 800V to 48V solutions relevant, new product introductions in 48V DC-DC converters and aerospace power modules.
• Licensing business remains a growth area, with new licensee in Q1 and ongoing discussions with potential licensees.

Total revenue for Q1 2025 was $94 million, down 2.3% sequentially from Q4 2024 ($96.2 million) but up 12% year-over-year ($83.9 million). Advanced Products revenue increased 2.7% sequentially to $59.9 million, making up 63.7% of total revenue. Brick Products revenue decreased 10% sequentially to $34.1 million, making up 36.3% of total revenue. Shipments to stocking distributors decreased 16.9% sequentially and 33.8% year-over-year. Exports increased to ~60.8% of total revenue from prior quarter's 56.9%. Gross margin was 47.2%, a 520 basis point decrease from prior quarter due to SAP transition, royalty decline, FICA expense, and depreciation. Operating expenses totaled $44.5 million, up 8.2% sequentially. Net income was $2.5 million, with GAAP diluted EPS $0.06.

Forward-Looking

• Unable to provide quarterly guidance yet due to uncertainties.
• Expect licensing and product revenues to grow, with second-generation VPD products nearing completion for lead customers.
• Tariff surcharge of 10% to be applied from July 2, but no significant impact expected on demand.

Risks

• Tariff impacts, including reciprocal tariffs from China and 10% surcharge.
• Uncertainties in licensing and market adoption of new products.
• Legal risks related to IP infringement, including ongoing ITC case appeals.

Q: Could you elaborate on the revenue and gross margins decline with a licensee transitioning to unlicensed products?

A: Jim Schmidt said it had short-term impact but licensing remains a growth business. Patrizio Vinciarelli mentioned ongoing negotiations with licensees and ITC exclusion order implications.

Q: What's the impact of tariffs on supply and demand?

A: Patrizio Vinciarelli said corrective action taken with 10% tariff surcharge, no appreciable negative impact on demand expected, but reciprocal tariffs in China have minor impact.

Q: Timeline for second generation VPD products to lead customer?

A: Patrizio Vinciarelli said development approaching completion, with evaluation systems for processor chip companies and hyperscalers soon after lead customer effort.

Q: Update on royalties in Advanced Products?

A: Patrizio Vinciarelli said new licensee in Q1, advanced products product revenue grew excluding royalty decline.

Q: Pricing after tariff surcharges?

A: Phil Davies said 10% tariff surcharge across board, effective from July 2.

Q: Expectations for NBM business growth?

A: Patrizio Vinciarelli said NBM business expected to grow due to ITC win and OEM/hyper-scaler concern over exclusion order.

Q: Gross margin outlook?

A: Philip Davies said SAP project behind us, well-positioned for GM improvement with loading and licensing revenue growth; James Schmidt noted tariff surcharge compensating for costs in later quarters.