Vicor Corporation Q3 FY2025 earnings call

• Vicor's IP licensing is a high-margin, high-growth business, with a licensing revenue run rate of nearly $90 million per year. They expect licensing income to grow significantly, potentially by 50% annually.
• The fifth-generation chip and second-generation VPD have world-class yields and cycle times, though fab utilization is currently low. Vicor's Gen 5 vertical power delivery solution for a lead customer has met target specifications and is progressing to Q1 2026 production launch.
• Engagement with selected customers, including a hyperscaler and OEMs, has started as Vicor's second-generation VPD is seen as the only solution meeting their processor requirements.

In the third quarter, Vicor recorded product revenues and licensing income of $110.4 million. Advanced Products revenue was $65.5 million, a 8.2% sequential increase, and Brick Products revenue was $44.9 million, a 26.6% sequential increase. Advanced Products' share of total revenue decreased to 59.3% in Q3 compared to 63.1% in Q2, while Brick Products' share rose to 40.7%. The consolidated gross profit margin was 57.5%, a 780 basis point decrease from the prior quarter but an 840 basis point increase from the same quarter last year. Total operating expense decreased 8.9% sequentially to $42.6 million.

• Vicor is unable to provide quarterly guidance due to uncertainty in the timing of additional license deals.
• Licensing income is expected to grow substantially, with a potential 50% annual growth rate. They have line of sight to doubling the licensing business within a couple of years.
• As fab utilization improves, product revenues are expected to grow as capacity is filled.

• Forward-looking statements involve risks and uncertainties, and actual results may differ materially from expectations. Risks are discussed in Item 1A of the 2024 Form 10-K. Uncertainty in the timing of additional license deals poses a risk to financial projections.
• Competition in the power delivery market and challenges in scaling fab utilization and product margins are operational risks.

Q: What drove the increase in royalty revenue in the quarter?

A: A compromise and accommodation with an existing licensee who took an additional license for a 2-year period, including a catch-up payment for a few months of the year. Recurring payments are expected quarterly, and licensing income is expected to grow significantly.

Q: When is production expected for the lead customer's second-gen VPD?

A: The lead customer's second-gen VPD is progressing to Q1 2026 production launch. For other customers, production in the second half of next year, end of Q3 going into Q4, is expected.

Q: Will there be an increase in NBM sales due to licensing contracts?

A: Yes, some increase in NBM sales has already been seen, though the focus is on VPD and current multiplication at the point of load as the future growth driver