Vicor Q3 2024 Earnings Call Transcript

Quartr
Provided by Quartr
October 22, 2024

There are 10 speakers on the call.

Operator

Good day, everyone, and thank you for standing by. Welcome to the Q3 2024 Vicor Earnings Conference Call. Now it's my pleasure to turn the call over to Jim Schmidt, Chief Financial Officer. Please go ahead.

Speaker 1

Thank you. Good afternoon and welcome to Vicor Corporation's earnings call for the Q3 ended September 30, 2024. I'm Jim Schmidt, Chief Financial Officer and I'm at Andover with Patrizio Vinciarelli, Chief Executive Officer and Phil Davies, Corporate Vice President, Global Sales and Marketing. After the markets closed today, we issued a press release summarizing our financial results for the 3 9 months ended September 30. Press release has been posted on the Investor Relations page of our website, www.vicorpower.com.

Speaker 1

We also filed a Form 8 ks today related to the issuance of this press release. I remind listeners this conference call is being recorded and is the copyrighted property of Ichor Corporation. I also remind you various remarks we make during this call may constitute forward looking statements for purposes of the Safe Harbor provisions under the Private Securities Litigation Reform Act of 1995. Except for historical information contained in this call, the matters discussed on this call, including any statements regarding current and planned products, current and potential customers, potential market opportunities, expected events and announcements and our capacity expansion as well as management's expectations for sales growth, spending and profitability are forward looking statements involving risks and uncertainties. In light of these risks and uncertainties, we can offer no assurance that any forward looking statement will, in fact, prove to be correct.

Speaker 1

Actual results may differ materially from those explicitly set forth and or implied by any of our remarks today. The risks and uncertainties we face are discussed in Item 1A of our 2023 Form 10 ks, which we filed with the SEC on February 28, 2024. This document is available via the EDGAR system on the SEC's website. Please note the information provided during this conference call is accurate only as of today, Tuesday, October 22, 2024. Vicor undertakes no obligation to update any statements, including forward looking statements made during this call, and you should not rely upon such statements after the conclusion of this call.

Speaker 1

A webcast replay of today's call will be available shortly on the Investor Relations page of our website. I'll now turn to a review of our Q3 financial performance, after which Bill will review recent market developments and Patrizio, Phil and I will take your questions. In my remarks, I will focus mostly on the sequential quarterly changes for P and L and balance sheet items and refer you to our press release or our upcoming Form 10 Q for additional information. As stated in today's press release, Vicor recorded total revenue for the Q3 of 93,200,000 dollars up 8.5% sequentially from the Q2 of 2024, a total of $85,900,000 and down 13.6% from the Q3 of 2023 total of 107,800,000 dollars Advanced Products revenue increased 6.5 percent sequentially to $49,400,000 while Brick Products revenue increased 10.8% sequentially to 43,800,000 dollars Shipments to stocking distributors decreased 12.5 percent sequentially and decreased 22.7% year over year. Exports for the 3rd quarter increased sequentially as a percentage of total revenue to approximately 49% from the prior quarter's 43.3%.

Speaker 1

For Q3, Advanced Products' share of total revenue would decrease to 53% compared to 54% for the Q2 of 2024 with Brick product share correspondingly increasing to 47% of total revenue. Turning to Q3 gross margin, we recorded a consolidated gross profit margin of 49.1 percent, which is a 70 basis point decrease from the prior quarter, primarily due to a change in product mix. Tariff expense, net of duty drawback was approximately $1,100,000 in Q3. I'll now turn to Q3 operating expenses. Total operating expense decreased 5.2% sequentially from the Q2 of 2024 to $40,400,000 The sequential decrease was primarily due to a litigation contingency expense of $2,300,000 recorded in the Q2 of 2024.

Speaker 1

The amounts of total equity based compensation expense for Q3 included in cost of goods, SG and A and R and D was $886,000

Speaker 2

$2,036,000

Speaker 1

$1,112,000 respectively, totaling approximately $4,000,000 Turning to income taxes, we recorded a tax benefit for Q3 of approximately $2,400,000 as we trued up the year to date tax provision. Net income for Q3 totaled $11,600,000 GAAP diluted income per share was

Speaker 3

$0.26 based on

Speaker 1

a fully diluted share count of 45,174,000 shares. Turning to our cash flow and balance sheet, cash and cash equivalents totaled 267 $600,000 at Q3. Accounts receivable net of reserves totaled $58,500,000 at quarter end with DSOs for trade receivables at 43 days. Inventories net of reserves decreased 3% sequentially to $105,800,000 Annualized inventory turns were 1.6. Operating cash flow totaled $22,600,000 for the quarter.

Speaker 1

Capital expenditures for Q3 totaled $8,400,000 We ended the quarter with a construction in progress balance primarily for manufacturing equipment of approximately $13,900,000 and with approximately $8,000,000 remaining to be spent. I'll now address bookings and backlog. Q3 book to bill came in below 1 and 1 year backlog decreased 2.1% from the prior quarter, closing at 150,600,000 dollars As we said on last quarter's earnings call, 2024 is a year of uncertainty and opportunity. As of today, the quarterly and annual outcome in terms of top line and bottom line is subject to a relatively wide range of scenarios. Given the wide range of possible outcomes, we are unable to provide quarterly guidance until we are further along resolving uncertainties and capitalizing on opportunities.

Speaker 1

With that, Phil will provide an overview of recent market developments and then Patrizio, Phil and I will take your questions. I ask that you limit yourselves to one question and a related follow-up, so that we can respond to as many of you as possible in the limited time available. If you have more than one topic to address, please get back in the queue. Phil?

Speaker 3

Thank you, Jim. Our Q3 bookings reflected continued strength in our industrial and aerospace and defense markets and temporary weakness in high performance computing. Focusing on the high performance computing market, we have successfully completed development of all the ASICs and semiconductor devices included in our first Gen 5 chipset. But its introduction was delayed because of an issue requiring a respin of 1 of the modules printed circuit boards. This work has now been completed and we will soon schedule VPD demo system meetings with lead customers.

Speaker 3

Interest in our 2nd generation VPD for artificial intelligence and network processes is very high, partly because competitive VPD solutions using stacked modular assemblies lack the requisite current density, robustness and cost effectiveness. Our Gen 5 current multipliers occupy 1 third of the footprint and are 3 times thinner than 1st generation stacked VPD solutions. Stacked multiphase VPD modules are challenged electrically, mechanically, thermally and last but not least from the IP perspective. The AI market has significant business opportunities for Vicor with 48 volt bus converters, Gen 5 VPD solutions and OEM licensing. Leading AI companies relying on Vicor's power system technology have licensed Vicor IP or are procuring modules directly from Vicor.

Speaker 3

As evidenced by a recent ITC initial determination, certain actors have been playing a game of catch me if you can with copy card suppliers of infringing modules or discrete solutions. We are executing a comprehensive plan to enforce Vicor IP and protect the domestic industry from foreign theft of U. S. Intellectual property. In Q3, we introduced 5 new DC to DC converter power module families that utilized advanced packaging technologies from our new chip fab, featuring advances in control systems and components, enabling 2 to 3 times higher power density.

Speaker 3

These are now being sampled to our top 100 customers and soon will be available to our broad customer base via our distribution partners, who will work with our global channel team targeting our top channel accounts across 8 target market and application segments. We are beginning to see the results of our strategy focus the majority of our resources on a set of 100 customers globally across 4 main markets. These customers will drive our revenue growth in the coming years to our $1,000,000,000 target and 65% gross margins. By focusing on the top 100, we are able to set resources, goals and priorities to achieve higher levels of efficiency in delivering new products, production support, technical support and exceeding customer expectations. We are not 100 percent of the way there yet, but we are well on the way to achieving our operational excellence and customer centricity objectives by having our entire company aligned in achieving these objectives.

Speaker 3

The adoption of a 48 volt zono architecture by automotive OEMs across Asia Pacific and Europe is driving significant new opportunities for us with lower voltage fixed ratio bus converters and regulated 48 volt DC to DC converter power modules. Our new Gen 5 product families with their higher power density and lower cost put Vicor in an excellent position to participate in higher volume 48 volt zono, BEV and hybrid automobile platforms. These Gen 5 products were initially designed for our high performance compute customers, but new automotive grade versions will become available in Q1 of 2025. With regards to automotive grade capabilities, we were notified by the TUV that Vico has met the requirements of the IATF 16,949 standard. This is a critical milestone in our journey to full certification and building out our full automotive design and manufacturing capabilities to meet the needs of our automotive OEMs and Tier 1s.

Speaker 3

Thank you. And with that, we will now take your questions.

Operator

Thank you so much. And it comes from the line of Quinn Bolton with Needham and Company. Please proceed.

Speaker 4

Hey, guys. Congratulations on the nice September results. I wanted to ask first, obviously, you guys had a nice initial determination at the ITC against Delta. Could you give us an update just what have you seen from OEM customers or folks that may be currently using the Delta bus converter modules? Are you seeing increased interest in folks licensing your patents?

Speaker 4

Or do you think that you're going to have to continue to pursue actions against folks using those modules in the courts?

Speaker 5

So we've seen from multiplicity of sources indications that Delta is telling these customers not to worry, they're going to have a workaround. They're going to sample it late this year and they'll have it ready to in effect replace existing solutions by the time the exclusion order comes down. Some of these customers are skeptical of these expectations. Some of these customers realize that beyond technical challenges and potential issues with requalification, robustness reliability, there are still significant legal challenges having to do with the feasibility of inventing around all of the asserted patterns. And to be clear, what just came down is the first act of a number of acts that are yet to develop.

Speaker 5

And to get to the point, the ability of companies that are playing a game or catch me if you can to escape the minefield of IP that Vicor has planted in connection with decades of innovation across the entire high density, high performance, our system infrastructure, 4 ks volts at the point of load and elsewhere. That's a very tall order that I doubt very much our competitors are going to be able to achieve. So customers that rely on their expectations are likely to be experiencing a variety of challenges with respect to redesign, re qualification and ongoing issues for years to come.

Speaker 4

And I guess, Patricio, in that game of catch me if you can, are you seeing Delta customers looking to switch to, say, modules from other vendors such as Flex or Monolithic Power or others? Or do you think to the extent that they switch to modules from those vendors, that they may still be subject to the exclusion order assuming that you get that in the final determination?

Speaker 5

Again, an action is the one for which we just received the initial determination is the first of a series of actions. And generally speaking, the issues with respect to intellectual property, they are not limited to the Delta modules.

Speaker 4

Got it. And if I could squeeze in just one more on the Gen 5 sampling. It sounds like you said, you've kind of respun one of the ASICs or one of the chips in that chipset and you're proceeding now to schedule samples and meetings with the customers. Can you give us maybe then an updated timeline outside of perhaps one lead customer for Gen 5? When would you expect Gen 5 products to potentially be adopted and ship in volume in the HPC market?

Speaker 4

Is that now kind of a late 2025 timeline? Do you think you could ramp a program before that?

Speaker 5

So just to be clear, all of the ASICs and all of the unique semiconductors have been working fine and they've been fully characterized. So we have completed the task with respect to those. As Phil mentioned earlier, the issue that set us back by a number of weeks is an issue with the PC board in one of the current multipliers that had to be spun a couple of times to address issues at the PC board level. So the issues have not had to do with the more critical, if you will, ASICs or power semiconductors. Those are in place for the 1st wave of 5 gs.

Speaker 5

We have all of those components. We've had them for some time. In terms of next steps, we will start with 1 key customer. And if things proceed according to expectations, we're going to be shipping initial quantities of 5 gs VPD systems components to the customer in the next couple of months. Got it.

Speaker 5

And thank

Speaker 4

you, Patricio, for clarifying. It was a PCB issue that needed to be reworked rather than an ASIC. Sorry to have missed that.

Speaker 6

Yes.

Operator

Thank you. One moment for our next question. And it comes from the line of Jon Tanwanteng with CJS Securities. Please proceed.

Speaker 7

Hi, good afternoon and thank you for my questions. And again, congratulations on Q3. Just a follow-up on the VPD product. Are those initial shipments you're talking about for testing and development for the customer? Or are these production units destined for a product to be sold?

Speaker 5

So the initial set of units in the 100, that's for initial customer bring up Power App. Production is first half of twenty twenty five event based on current schedule.

Speaker 7

Got it. And you would be getting orders for those products sometime in the first half if things go as we're in the plan. Is that correct?

Speaker 5

Well, we've had orders for this product, which we're going to begin to fill. There's going to be additional orders once we get past the system level of the divestiture of the customer.

Speaker 7

Understood. Thank you. And just a quick question on orders in the quarter and the way your revenues trended sequentially. I was just wondering what drove the strength there and kind of what came into the quarter? Was anything pulled in or anything like that?

Speaker 7

Just as you could characterize the mix or the strength in any way, shape or form that would be helpful. Thank you.

Speaker 3

Yes. John, this is Phil. I mentioned that we had continued strength. We had it in Q2 into Q3 of our industrial aerospace and defense markets. I mentioned temporary weakness in high performance compute because orders there are typically very lumpy.

Speaker 3

So we see those come in and then disappear for a quarter and come back again. That's where we had a little bit of weakness in hitting the 1 plus book to bill ratio.

Speaker 7

Understood. I'll jump back in queue. Thank you.

Speaker 5

Thank you.

Operator

Thank you. Our next question comes from the line of Richard Shannon with Craig Hallum. Please proceed.

Speaker 6

Hi guys. Thanks for taking my questions as well. I guess my first question is looking at your Gen 5, PPD product here, in the context of Phil quantifying the pipeline for the automotive business last quarter, maybe if you can characterize or even quantify what the pipeline looks like for this product. You've talked about an initial customer you're shipping to. Do you have any sense of and even quantifying how much that looks like right now?

Speaker 3

So Richard, this is Phil. We had, I think, a little discussion on this at the end of last quarter's call. We're basically, as we talked about rebuilding our HPC pipeline from the past highs of the big GPU acceleration system that we were included in. So it's a rebuild and it's across a number of fronts. One is obviously the VPD push with Gen 5.

Speaker 3

And as we mentioned, the interest in that is very, very high for a number of reasons I articulated. Then you have the 48 volt bus converter market. And there are challenges and opportunities with that. And then we have OEM licensing. So with those 3, if you like sets of products is the way I look at it, we're positioned to rebuild our HPC pipeline and get it back to looking really great.

Speaker 3

I would say as we go through the end of this year and into next year, we'll be rebuilding that pipeline. I'm very encouraged about the interest across all three of those products as it were.

Speaker 6

Okay. Thanks for those thoughts, Phil. Maybe a follow-up again in the HPC bucket here specifically with Gen 5 products here. It sounds like you're talking to an initial customer. Maybe you can talk about the subsequent customers you're going to engage with, how many of them are there, maybe characterize them in any way and what kind of timeframe do you expect to see them make decisions, issue wins and orders over the next few quarters?

Speaker 6

Thank you.

Speaker 3

Yes. So we have we're working with chip companies, AI accelerator companies and of course the hyperscalers as well on coming to both Andover and also Santa Clara where our lab is based for the demo of the VPD system. It's pretty much everybody. We also have demo systems over in Asia Pacific, Japan, Taiwan as well in Q1 of next year. So it's a very, very high degree of interest in that family for VPD applications because as I think everybody knows the current levels for these processes are approaching 2,000 amps.

Speaker 3

We've even seen some customers this quarter talking about 4,000 amps. I mean there's no way to deliver that other than with a high density, high current density product like we have in Gen 5. So the interest level is extremely high. We're going to be very busy in Q4 and Q1 demoing that system as I mentioned.

Speaker 6

Okay, great. Thank you guys.

Operator

Thank you. One moment for our next question. It comes from the line of Don Makena with D. B. Makena and Company.

Operator

Please proceed.

Speaker 2

Hi, guys. My question goes back to the revenue side as well. And with revenues up, the way I look at is $7,300,000 but the backlog only down 3.2 I was wondering if the other $4,100,000 was a result of orders received during the quarter and shipped or price increases or an increase in the royalty income?

Speaker 5

So actually the backlog was reduced by a couple of 1,000,000, right? Yes. I think you got

Speaker 1

the numbers right. But basically it's just the difference between orders during the quarter and the shipments. That's the net number.

Speaker 5

Yes. So another way of saying it is we shipped 94 and we booked about 92.

Speaker 3

Yes. It's just that simple. I mean,

Speaker 1

it's the bookings are Okay. Bookings are shipments deliverable next year and shipments are

Speaker 5

obviously within 12 months. Yes.

Speaker 2

Okay. Fine. Thank you.

Speaker 8

Thank you. Thank you.

Operator

One moment for our next question. And it comes from Jon Tanwanteng with CJS Securities. Please proceed.

Speaker 7

Actually, I wanted to follow-up on that last point. Did the licensing increase sequentially at all in the quarter?

Speaker 1

Yes. So yes, the licensing increased as did product revenue was relatively flat and there was increase in royalty revenue in the quarter.

Speaker 7

Got it. Thank you. And then, Phil, just maybe a little bit more on the 5th gen products. Outside of the GPU, are you seeing broader interest as well? I'm talking about network processors, CPUs, other forms of silicon.

Speaker 7

Is that things you're concentrating on as well? Or is it leading edge AI where most of the meat is?

Speaker 3

No, network processors are very important, John. So that's part of the initial mix. I mean this Gen 5 and Patricia can talk about this better than me, but this Gen 5 technology is really going to enable a new suite of products also into our ATE customer base, factorized power there as well across aerospace and defense for radar systems. We're looking at this maybe sometime in the next 3 to 5 years for potentially space applications and other markets as well. So the Gen 5 technology is really going to be a spearhead for us across, I would think, the 4 main markets that we focus on.

Speaker 7

Great. Thank you.

Operator

Thank you. One moment for our next question. It comes from Quinn Bolton with Needham and Company. Please proceed.

Speaker 4

Hey guys, I wanted to follow-up. Last quarter you talked about sort of margins being under pressure from a legacy HPC program that had kind of come back in higher volume. And it looks like it likely continued here in the September quarter. Wondered if you could just confirm that. And then I know you're not giving guidance top line or margins for next quarter, but does that legacy HPC volume continue into the December quarter?

Speaker 4

Or does that start to roll off and you might see a better mix shift product mix in Q4? Thanks.

Speaker 5

So we're expecting improvements, partly due to your point to the fact that the product mix issue that we referenced with the legacy product, which we discussed in the last quarterly call, was ongoing in Q3. It will be ongoing for part of Q4. But for all of Q4, it will be the effect will be somewhat diminished overall. There are other factors that should help us with this factor to improving margins.

Speaker 4

Got it. And then I guess looking at the licensing or the royalty revenue stream, it's been up consecutively now for several quarters. As you look into the end of the year in 2025, obviously customers across the AI market are moving to new generation GPUs and ASICs and accelerators. I guess as you look at your licensees product roadmap, is there anything that changes with their product roadmap that might reduce the royalties they pay or the royalty rate? Or would you expect that royalty to continue to trend with sort of unit shipments at your OEM licensee?

Speaker 5

We expect it to continue to trend up with volume based on continued use of our technology either in module form or in terms of discrete solutions.

Speaker 7

Got it.

Speaker 4

Okay. Thank you.

Operator

Thank you so much. One moment for our next question. It comes from the line of Jon Gruber with Lagunitas Investments. Please proceed.

Speaker 2

Hi, guys. You seem very positive on the prospects of Gen 5. When do you think Gen 5 revenue will surpass 10% of quarterly revenue?

Speaker 5

Well, so just to be clear, we are positive about Gen 5 because it represents a revolution with respect to point of load solutions. And I'm not taking the word revolution lightly, so I'll back it up with numbers. So the competition has to infringe a number of LIGO patents to deliver about 1.6 amps per square millimeter. We can deliver initially 3 and before too long more than that in a solution that not only takes up a lot less footprint, but as suggested earlier by Phil, it's also a lot thinner, like 1.5 millimeter thin as opposed to about 3 times that. So if you combine the footprint advantage, which is to begin with 3x and the advantage in terms of thickness, overall volumetric density and weight.

Speaker 5

It's nearly an order of magnitude advantage in terms of overall density, volumetric density. So those are the foundations for our optimism and high expectations with respect to 5 gs. It's really evolutionary technology in every respect in terms of its control systems, packaging technology, ability to deliver solutions with much higher efficiency, much higher bandwidth, much lower noise, much improved signal integrity, all of which are critical to next generation AI systems.

Speaker 2

That's great. But then when does that translate into Sirius revenue

Speaker 7

for the company?

Speaker 5

As Phil suggested, we are going to start ramping with a lead customer. It will take some time, the better part of next year, to get further with other customers. We've been frankly taking it one step at a time. We don't want to be out there in front of a multiplicity of customers prematurely. And because of that, beyond our lead customers, we have been playing it very close to the vest that we're going to transition to a different phase in a few months.

Speaker 5

And we expect to get a good deal of traction as we get further into 2025.

Speaker 2

Thank you.

Operator

Thank you. One moment for our next question. And it comes from the line of Alan Hicks with Aynsley Capital Management. Please proceed.

Speaker 8

Yes, good afternoon. Back on the question of you said the product sales were flat, but royalties were up. Was that just on advanced product sales were flat or overall?

Speaker 1

No, I quoted the advanced product sales in the prepared remarks as well as bricks. So there was an increase in royalty revenue sequentially. And then the Advance and Brick Split is what I mentioned earlier in the prepared remarks. Advance Products does include the royalty component.

Speaker 8

Okay. So that suggests Advance Products sales were product sales were down a little bit, but royalties are back to even or up for that overall?

Speaker 1

Sounds about right. Yes.

Speaker 8

Okay. And then the second question is, are all your advanced products now being produced in your new factory?

Speaker 5

Yes.

Speaker 8

So that's going well. Are any problems, hang ups, things you need to tweak, that kind of thing?

Speaker 5

Well, in a factory, there's never a time when there is some issue or another issue. But generally speaking, we feel very good about the capability we put in place. This is the 1st foundry for power components in the world. And so far so good. We're happy with the progress we've made.

Speaker 5

If we go back a year and a half ago, we had serious challenges in terms of capacity, consistency with outside vendors and the Verte integration we put in place has begun to pay off for itself in terms of giving us much shorter cycle time, much greater predictability. We can now complete all the packaging processes, what we call the 3-dimensional interconnect in, if necessary, 2 weeks. It used to take us 3 times, 4 times as long a year and a half ago. So the benefits of Verti integration, other mesh with respect to chip foundry is multifold. Its short cycle time is scalability with respect to capacity and ultimately is cost effectiveness as we get to absorb the fixed costs that are now reflected in our financial statements, right, that are associated with the equipment we deployed and the people we've hired in order to execute on this vertical integration.

Speaker 5

So as we progress into a phase where we absorb that capacity, we're going to see a strong contribution to margins.

Speaker 8

Okay. And I wanted to ask about the chip packaging, converter housed in a package. I know you announced it over 10 years ago and it seems like it's evolved quite a bit. Are you producing those whole panels? I think there's like 40 of them on a panel or you can cut them up into modules.

Speaker 8

And does anybody else have anything like that? And what would you say is your No.

Speaker 5

Nobody can start infringing our IP. And if they do, they should understand by now that there's going to be consequences, right? So no, this is a unique capability that Vicod pioneered and put in place, and we're quite proud of it. And to your point, it gives us the ability to manufacture the density components with constant denominator panels, which are the counterpart to wafers in a semiconductor foundry. They are rectangular as opposed to being circular.

Speaker 5

But they share many of the attributes of the kinds of efficient process that goes on in semiconductor fabs.

Speaker 8

So would you say it's like a very tiny brick, each one of these modules?

Speaker 5

I didn't catch the word.

Speaker 1

Tiny brick, did you A

Speaker 8

tiny brick. Did you Tiny that's a very tiny brick, was that what you'd say it was?

Speaker 1

Like a tiny brick.

Speaker 5

Well, no, I think that's not a good analogy because bricks were the power component paradigm that Vicor invented at the very beginning of the power module industry. And it's dramatically opposed to what we're doing with converters housing packages. So bricks are by their nature made in a dedicated form factor, which is specific to the brick. So the processes are not scalable, not nearly as efficient. With converters housed in package, at the earlier point, irrespective of what the particular type of device happens to be and it can be a 800 amp point of load term multiplier in a 28 millimeter by 7.5 millimeter wide package or it can be a 40 kilowatt fast charging bus converters for automotive.

Speaker 5

And these are extreme opposites in effect in the realm of power products that our technology supports. But irrespective of what the end market application is or what the nature of the power system requirement happens to be, they are building our foundry using exactly the same processes, the same equipment, the same three-dimensional integration.

Speaker 8

Well, it sounds very impressive. So congratulations on everything you're doing. Thank

Speaker 5

you. Thank you.

Operator

Thank you. One moment for our next question. From the line of Richard Shannon with Craig Hallum. Please proceed.

Speaker 8

Hi, guys. Thanks for letting me ask a follow-up here. Patricio, I'd love

Speaker 6

to get your sense from your initial customers you're engaged with on the Gen 5 EPD. What's their view of the supply chain that you have here? Do they view it as well tested enough to run real volumes here? Do you expect with these initial wins to be sole source? Do you think they'll be shared until they get more confidence?

Speaker 6

Maybe just kind of help us understand the current state of view of that, please?

Speaker 5

So I think in the foreseeable future, as I look at, let's say, over the next year, year and a half, the customers were engaged for high performance solutions for very high performance AI. They recognize that the Vacker foundry, the first foundry is the foundry for these products for that time frame. As we look beyond that, we expect, as we mentioned in the past, that there's going to be a second foundry and a third foundry. And that will bring about additional capacity and additional robustness to the supply chain. But we view the existing capability of Federal Seat as being quite robust.

Speaker 6

Okay, great. Thank you, guys.

Speaker 5

Thank you.

Operator

Thank you. Our next question is from James Lieberman from AmericaTrust Investment Services. Please proceed.

Speaker 9

Thank you. It's good to see the progress you're making. I wonder, is there a way to understand the next several legal steps? Not that you would comment on them, but as a process, in terms of as things are playing out and can the ITC begin to put sanctions in place even before all of the appeals processes play out? Is there any way to understand that?

Speaker 5

So I'm not sure I captured everything you said. It was a question about what might happen with the ATC and correct me if I'm going off in the wrong direction in terms of answering your question. But just in terms of explaining the process there, if that's the question. Yes. That

Speaker 9

is the question, yes.

Speaker 1

So

Speaker 5

what happened a few weeks ago, a couple of weeks ago is that the ALJ, the administrative law judge that has presided over the case issued his initial determination. The process involves that determination being reviewed by the commission before being subject to a presidential review process, before the exclusion order becomes operative. But even before exclusion order becomes operative, during the presidential review period, there is a bond that infringers have to post in order to be able to import into the country infringing products. And that bond in the case of computing systems that are affected by the infringement was set by the LJ at 100% of their value. So the initial determination came down about a week ahead of schedule.

Speaker 5

At the end of September, it was due in the 1st week of October. The commission is due to render its final determination by February 3. And that's when a exclusion order we would expect will issue subject to presidential review. But that's when the bond will go into effect.

Speaker 9

Thank you. That's very helpful.

Operator

Thank you. One moment for our next question please. And it's from the line of Don Makena with D. B. Makena and Company.

Operator

Please go ahead.

Speaker 2

Hey, guys. Now that the new facility is completely operational, I'm wondering what your plans are to invite the investment community to see it?

Speaker 5

No immediate plans, but that's a good question and we'll take it under advisement. But we have BC Canada over the next few months. By the way, we are completing installation of a new MRT system, SAP, and that's going to be become operative in the last week of the year. So we have a lot of things going on to bring about the operational excellence that Phil has talked about. And that's going to keep us quite busy for a little while.

Speaker 3

Yes. We also have lots of customers still coming through the facility, and we expect a lot more as we roll out Gen 5. So we'll certainly keep it in front of us and Yes.

Speaker 2

We could tag along with some of those customers.

Speaker 5

Maybe a few competitors as well, why not?

Powered by Quartr
Earnings Conference Call
Vicor Q3 2024
00:00 / 00:00