Vicor Corporation Q4 FY2025 earnings call

Jim Schmidt started by reviewing Q4 and full year financial performance. Phil Davies discussed market developments, noting 2025 met challenges and opportunities, book-to-bill ratio increased in Q4 and continued to increase in Q1, and Vicor will enforce IP. Patrizio Vinciarelli talked about lead customer ramping Gen 4 factorized power system and Gen 5 transition, industrial and aerospace/defense business outlook strong, engaging in capacity reservation agreements, and discussions on second chip fab and alternate sources. Phil also mentioned FAEs going through boot camp on Gen 5 VPD.

Product revenue for Q4 was $92.7 million, up 4.5% sequentially from $88.7 million and up 15.3% year-over-year from $80.4 million. Royalty revenue for Q4 was $14.5 million, down 33.1% sequentially from $21.7 million and down 7.8% year-over-year from $15.8 million. Product revenue for 2025 was $350.3 million, up 12.1% from $312.5 million. Royalty revenue for 2025 was $57.4 million, up 23.2% from $46.6 million. Total product and royalty revenue including $45 million patent litigation settlement was $452.7 million, up 26.1% from $359.1 million. Advanced Product revenue (including royalty) decreased 4.4% sequentially; Brick Products revenue declined 0.6% in Q3. Advanced Products revenue for 2025 was $248.6 million, up 26% from $197.3 million. Brick Products revenue for 2025 was $159.1 million, down 1.6% from $161.7 million. Shipments to stocking distributors decreased 11.1% sequentially but increased 5.3% year-over-year. Exports for Q4 were 49.3% of total revenue vs 42.8% prior quarter; year-over-year exports were 50.8% vs 48.2%. Q4 consolidated gross profit margin was 55.4%, 2.1% less than prior quarter. Full year 2025 gross margin was 57.3%, up 6.1% from 51.2% prior year. Q4 operating expense increased 2.7% sequentially. Full year 2025 operating expense as % of revenue (including patent litigation settlement) was 39.2% vs 51.6% prior year. Q4 operating income was $15.7 million, operating margin 14.6%. Full year 2025 operating income was $81.8 million, 18.1% of revenue vs prior year operating loss of $1.3 million (-0.4% of revenue). Q4 tax benefit was ~$27.3 million, effective tax rate -142%. Full year 2025 tax benefit was ~$24 million, effective tax rate -25.4%. Net income for 2025 was $118.6 million vs $6.1 million prior year. Fully diluted EPS for 2025 was $2.61 vs $0.14 prior year. Cash and cash equivalents in Q4 were $402.8 million. Accounts receivable net of reserves were $60.7 million at quarter end, DSO 44 days. Inventories net of reserves increased 1% sequentially to $91.3 million. Annualized inventory turns ~flat at 1.96. Operating cash flow for Q4 was ~$15.7 million. Capital expenditures for Q4 were $5.5 million. Q4 book-to-bill improved sequentially, 1-year backlog increased 15.8% to $176.9 million.

Vicor will not provide quarterly guidance. 2026 is a year of great opportunity. Book-to-bill in Q4 was well above 1 and continued to increase in Q1. Expect record bookings, revenues, and profitability and significantly higher utilization of first chip fab. Lead customer ramping Gen 4 and transitioning to Gen 5. Industrial and aerospace/defense business outlook strong with potential to double revenues in next 4-6 years. Engaging in capacity reservation agreements. Discussions on second chip fab and alternate sources.

Forward-looking statements involve risks and uncertainties. Risks and uncertainties discussed in Item 1A of 2024 Form 10-K. Actual results may differ materially from forward-looking statements. Uncertainty in timing and amounts of outcomes relating to licensing practice. Uncertainty in capacity expansion and facility construction. Uncertainty in engagement with customers and market adoption of products.

Q: Congratulations on 2025 and the record outlook for 2026. Asked about lead customer ramp and Andover facility utilization, IP licensing revenue including patent settlement.

A: Patrizio and Jim responded about combination of demand sources, licensing business expansion with more patent settlements and opportunity beyond current, royalty revenue in 2025 not including patent settlement.

Q: About launch customer for VPT, decision on Gen 4 vs Gen 5, new facility planning.

A: Patrizio explained Gen 4 system maturity and transition to Gen 5, planning on new facility with 2 offers on area and looking at existing buildings.

Q: On royalties and licensing growth, second-gen VPD engagements.

A: Patrizio talked about more licensees and future contribution, Phil discussed FAEs going through boot camp on Gen 5 VPD.

Q: On capacity expansion, utilization of existing facility, second fab CapEx.

A: Patrizio said existing fab well utilized within a year, next facility CapEx in order of $250 - $300 million.

Q: On customers for new AI processors, progress of engagements.

A: Patrizio and Phil talked about limited other customers in high-volume production of Gen 1 VPD, selective engagement with customers.

Q: On capacity reservations financials, 800-volt data center opportunity.

A: Patrizio said revenue recognition on capacity reservations when shipments occur, 800-volt has some value but inferior point of solution has bigger impact.

Q: On revenue ramp interpretation, licensing revenue growth, second-gen VPD content per XPU.

A: Patrizio said analysis on revenue ramp is on point, Phil and Patrizio talked about licensing revenue growth with potential half dozen major licensees and content per XPU around $200 - $400.

Q: On Fab 1 capacity, bricks conversion, partner discussions, bookings in Q1.

A: James and Phil responded on Fab 1 capacity, bricks stability, partner discussions, and bookings in Q1 above 1.2