QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Delaware | 04-2742817 | |
(State of Incorporation) | (I.R.S. Employer Identification No.) |
Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
Common Stock, par value $0.01 per share | VICR | The NASDAQ Stock Market LLC |
Large accelerated filer | Accelerated filer | ☐ | ||||
Non-accelerated filer | ☐ | Smaller reporting company | ☐ | |||
Emerging growth company | ☐ | |||||
Common Stock, $.01 par value | ||||
Class B Common Stock, $.01 par value |
VICOR CORPORATION
INDEX
Page | ||||
1 | ||||
2 | ||||
3 | ||||
4 | ||||
5 | ||||
SECTION 302 CERTIFICATION OF CEO | ||||
SECTION 302 CERTIFICATION OF CFO | ||||
SECTION 906 CERTIFICATION OF CEO | ||||
SECTION 906 CERTIFICATION OF CFO |
September 30, 2022 | December 31, 2021 | |||||||
Assets | ||||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | 182,098 | $ | 182,418 | ||||
Short-term investments | 19,949 | 45,215 | ||||||
Accounts receivable, net | 56,287 | 55,097 | ||||||
Inventories | 94,336 | 67,322 | ||||||
Other current assets | 5,483 | 6,708 | ||||||
Total current assets | 358,153 | 356,760 | ||||||
Long-term deferred tax assets, net | 260 | 208 | ||||||
Long-term investment, net | 2,552 | 2,639 | ||||||
Property, plant and equipment, net | 163,198 | 115,975 | ||||||
Other assets | 2,939 | 1,623 | ||||||
Total assets | $ | 527,102 | $ | 477,205 | ||||
Liabilities and Equity | ||||||||
Current liabilities: | ||||||||
Accounts payable | $ | 24,004 | $ | 21,189 | ||||
Accrued compensation and benefits | 13,070 | 12,660 | ||||||
Accrued litigation | 6,500 | — | ||||||
Accrued expenses | 5,754 | 4,158 | ||||||
Short-term lease liabilities | 1,449 | 1,551 | ||||||
Sales allowances | 1,427 | 1,464 | ||||||
Accrued severance and other charges | — | 93 | ||||||
Income taxes payable | 7 | 66 | ||||||
Short-term deferred revenue and customer prepayments | 12,148 | 7,912 | ||||||
Total current liabilities | 64,359 | 49,093 | ||||||
Long-term deferred revenue | 1,833 | 413 | ||||||
Long-term income taxes payable | 529 | 569 | ||||||
Long-term lease liabilities | 7,520 | 3,225 | ||||||
Total liabilities | 74,241 | 53,300 | ||||||
Commitments and contingencies (Note 10) | ||||||||
Equity: | ||||||||
Vicor Corporation stockholders’ equity: | ||||||||
Class B Common Stock: 10 votes per share, $.01 par value, 14,000,000 shares authorized, 11,758,218 shares issued and outstanding in 2022 and 2021 | 118 | 118 | ||||||
Common Stock: 1 vote per share, $.01 par value, 62,000,000 shares authorized 43,923,786 shares issued and 32,288,980 shares outstanding in 2022; 43,789,528 shares issued and 32,154,722 shares outstanding in 2021 | 440 | 439 | ||||||
Additional paid-in capital | 357,255 | 345,664 | ||||||
Retained earnings | 235,017 | 217,633 | ||||||
Accumulated other comprehensive loss | (1,279 | ) | (1,328 | ) | ||||
Treasury stock at cost: 11,634,806 shares in 2022 and 2021 | (138,927 | ) | (138,927 | ) | ||||
Total Vicor Corporation stockholders’ equity | 452,624 | 423,599 | ||||||
Noncontrolling interest | 237 | 306 | ||||||
Total equity | 452,861 | 423,905 | ||||||
Total liabilities and equity | $ | 527,102 | $ | 477,205 | ||||
March 31, 2022 | December 31, 2021 | |||||||
Assets | ||||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | 191,050 | $ | 182,418 | ||||
Short-term investments | 20,003 | 45,215 | ||||||
Accounts receivable, net | 52,659 | 55,097 | ||||||
Inventories, net | 73,861 | 67,322 | ||||||
Other current assets | 7,021 | 6,708 | ||||||
Total current assets | 344,594 | 356,760 | ||||||
Long-term deferred tax assets, net | 206 | 208 | ||||||
Long-term investment, net | 2,536 | 2,639 | ||||||
Property, plant and equipment, net | 140,494 | 115,975 | ||||||
Other assets | 1,519 | 1,623 | ||||||
Total assets | $ | 489,349 | $ | 477,205 | ||||
Liabilities and Equity | ||||||||
Current liabilities: | ||||||||
Accounts payable | $ | 22,572 | $ | 21,189 | ||||
Accrued compensation and benefits | 12,592 | 12,660 | ||||||
Accrued expenses | 3,172 | 4,158 | ||||||
Short-term lease liabilities | 1,214 | 1,551 | ||||||
Sales allowances | 1,605 | 1,464 | ||||||
Accrued severance and other charges | 0 — | 93 | ||||||
Income taxes payable | 21 | 66 | ||||||
Short-term deferred revenue and customer prepayments | 8,384 | 7,912 | ||||||
Total current liabilities | 49,560 | 49,093 | ||||||
Long-term deferred revenue | 332 | 413 | ||||||
Long-term income taxes payable | 574 | 569 | ||||||
Long-term lease liabilities | 6,694 | 3,225 | ||||||
Total liabilities | 57,160 | 53,300 | ||||||
Commitments and contingencies (Note 10) | 0 | 0 | ||||||
Equity: | ||||||||
Vicor Corporation stockholders’ equity: | ||||||||
Class B Common Stock: 10 votes per share, $.01par value, 14,000,000 shares authorized, 11,758,218 shares issued and outstanding in 2022 and 2021 | 118 | 118 | ||||||
Common Stock: 1 vote per share, $.01par value, 62,000,000 shares authorized 43,842,974 shares issued and 32,208,168 shares outstanding in 2022; 43,789,528 shares issued and 32,154,722 shares outstanding in 2021 | 440 | 439 | ||||||
Additional paid-in capital | 349,467 | 345,664 | ||||||
Retained earnings | 222,632 | 217,633 | ||||||
Accumulated other comprehensive loss | (1,824 | ) | (1,328 | ) | ||||
Treasury stock at cost: 11,634,806 shares in 2022 and 2021 | (138,927 | ) | (138,927 | ) | ||||
Total Vicor Corporation stockholders’ equity | 431,906 | 423,599 | ||||||
Noncontrolling interest | 283 | 306 | ||||||
Total equity | 432,189 | 423,905 | ||||||
Total liabilities and equity | $ | 489,349 | $ | 477,205 | ||||
Three Months Ended | Nine Months Ended | |||||||||||||||||||||||
Three Months Ended March 31, | September 30, | September 30, | ||||||||||||||||||||||
2022 | 2021 | 2022 | 2021 | 2022 | 2021 | |||||||||||||||||||
Net revenues | $ | 88,282 | $ | 88,796 | $ | 103,118 | $ | 84,911 | $ | 293,586 | $ | 269,083 | ||||||||||||
Cost of revenues | 50,681 | 44,096 | 56,148 | 42,098 | 162,166 | 131,699 | ||||||||||||||||||
Gross margin | 37,601 | 44,700 | 46,970 | 42,813 | 131,420 | 137,384 | ||||||||||||||||||
Operating expenses: | ||||||||||||||||||||||||
Selling, general and administrative | 18,568 | 16,954 | 22,719 | 17,322 | 61,322 | 50,865 | ||||||||||||||||||
Research and development | 14,253 | 13,026 | 14,747 | 13,519 | 44,516 | 39,818 | ||||||||||||||||||
Litigation-related | 6,500 | — | 6,500 | — | ||||||||||||||||||||
Total operating expenses | 32,821 | 29,980 | 43,966 | 30,841 | 112,338 | 90,683 | ||||||||||||||||||
Income from operations | 4,780 | 14,720 | 3,004 | 11,972 | 19,082 | 46,701 | ||||||||||||||||||
Other income (expense), net: | ||||||||||||||||||||||||
Total unrealized (losses) gains on available-for-sale | (103 | ) | 24 | |||||||||||||||||||||
Total unrealized gains (losses) on available-for-sale | — | 37 | (87 | ) | 81 | |||||||||||||||||||
Less: portion of losses (gains) recognized in other comprehensive income | 104 | (23 | ) | 1 | (36 | ) | 90 | (78 | ) | |||||||||||||||
Net credit gains recognized in earnings | 1 | 1 | 1 | 1 | 3 | 3 | ||||||||||||||||||
Other income (expense), net | 161 | 231 | (569 | ) | 393 | (325 | ) | 996 | ||||||||||||||||
Total other income (expense), net | 162 | 232 | (568 | ) | 394 | (322 | ) | 999 | ||||||||||||||||
Income before income taxes | 4,942 | 14,952 | 2,436 | 12,366 | 18,760 | 47,700 | ||||||||||||||||||
Benefit for income taxes | (48 | ) | (143 | ) | ||||||||||||||||||||
Provision for income (benefit) taxes | 641 | (886 | ) | 1,395 | (30 | ) | ||||||||||||||||||
Consolidated net income | 4,990 | 15,095 | 1,795 | 13,252 | 17,365 | 47,730 | ||||||||||||||||||
Less: Net (loss) income attributable to noncontrolling interest | (9 | ) | 3 | |||||||||||||||||||||
Less: Net income (loss) attributable to noncontrolling interest | 3 | (7 | ) | (19 | ) | (15 | ) | |||||||||||||||||
Net income attributable to Vicor Corporation | $ | 4,999 | $ | 15,092 | $ | 1,792 | $ | 13,259 | $ | 17,384 | $ | 47,745 | ||||||||||||
Net income per common share attributable to Vicor Corporation: | ||||||||||||||||||||||||
Basic | $ | 0.11 | $ | 0.35 | $ | 0.04 | $ | 0.30 | $ | 0.40 | $ | 1.10 | ||||||||||||
Diluted | $ | 0.11 | $ | 0.34 | $ | 0.04 | $ | 0.29 | $ | 0.39 | $ | 1.06 | ||||||||||||
Shares used to compute net income per common share attributable to Vicor Corporation: | ||||||||||||||||||||||||
Basic | 43,952 | 43,455 | 44,031 | 43,710 | 43,986 | 43,573 | ||||||||||||||||||
Diluted | 44,954 | 44,841 | 44,898 | 45,034 | 44,906 | 44,905 |
Three Months Ended March 31, | ||||||||
2022 | 2021 | |||||||
Consolidated net income | $ | 4,990 | $ | 15,095 | ||||
Foreign currency translation losses, net of tax (1) | (194 | ) | (261 | ) | ||||
Unrealized losses on available-for-sale | (316 | ) | (128 | ) | ||||
Other comprehensive loss | (510 | ) | (389 | ) | ||||
Consolidated comprehensive income | 4,480 | 14,706 | ||||||
Less: Comprehensive loss attributable to noncontrolling interest | (23 | ) | (17 | ) | ||||
Comprehensive income attributable to Vicor Corporation | $ | 4,503 | $ | 14,723 | ||||
Three Months Ended | Nine Months Ended | |||||||||||||||
September 30, | September 30, | |||||||||||||||
2022 | 2021 | 2022 | 2021 | |||||||||||||
Consolidated net income | $ | 1,795 | $ | 13,252 | $ | 17,365 | $ | 47,730 | ||||||||
Foreign currency translation losses, net of tax (1) | (94 | ) | (12 | ) | (672 | ) | (283 | ) | ||||||||
Unrealized income (loss) on available-for-sale | 1,054 | (215 | ) | 671 | (574 | ) | ||||||||||
Other comprehensive income (loss) | 960 | (227 | ) | (1 | ) | (857 | ) | |||||||||
Consolidated comprehensive income | 2,755 | 13,025 | 17,364 | 46,873 | ||||||||||||
Less: Comprehensive loss attributable to noncontrolling interest | (4 | ) | (7 | ) | (69 | ) | (36 | ) | ||||||||
Comprehensive income attributable to Vicor Corporation | $ | 2,759 | $ | 13,032 | $ | 17,433 | $ | 46,909 | ||||||||
(1) | The deferred tax assets associated with foreign currency translation losses and unrealized losses on available-for-sale |
Three Months Ended March 31, | ||||||||
2022 | 2021 | |||||||
Operating activities: | ||||||||
Consolidated net income | $ | 4,990 | $ | 15,095 | ||||
Adjustments to reconcile consolidated net income to net cash provided by (used for) operating activities: | ||||||||
Depreciation and amortization | 3,296 | 2,806 | ||||||
Stock-based compensation expense | 1,994 | 1,571 | ||||||
Decrease in long-term deferred revenue | (81 | ) | (80 | ) | ||||
Decrease (increase) in other assets | 62 | (26 | ) | |||||
Increase in long-term income taxes payable | 5 | 5 | ||||||
Deferred income taxes | 2 | 2 | ||||||
Credit gain on available-for-sale | (1 | ) | (1 | ) | ||||
Change in current assets and liabilities, net | (5,682 | ) | (1,599 | ) | ||||
Net cash provided by operating activities | 4,585 | 17,773 | ||||||
Investing activities: | ||||||||
Purchases of short-term investments | 0 | (50,706 | ) | |||||
Sales or maturities of short-term investments | 25,000 | 5,000 | ||||||
Additions to property, plant and equipment | (22,683 | ) | (9,264 | ) | ||||
Net cash provided by ( used for) investing activities | 2,317 | (54,970 | ) | |||||
Financing activities: | ||||||||
Proceeds from employee stock plans | 1,810 | 3,050 | ||||||
Payment of contingent consideration obligations | 0 | (46 | ) | |||||
Net cash provided by financing activities | 1,810 | 3,004 | ||||||
Effect of foreign exchange rates on cash | (80 | ) | (138 | ) | ||||
Net increase (decrease) in cash and cash equivalents | 8,632 | (34,331 | ) | |||||
Cash and cash equivalents at beginning of period | 182,418 | 161,742 | ||||||
Cash and cash equivalents at end of period | $ | 191,050 | $ | 127,411 | ||||
Nine Months Ended | ||||||||
September 30, | ||||||||
2022 | 2021 | |||||||
Operating activities: | ||||||||
Consolidated net income | $ | 17,365 | $ | 47,730 | ||||
Adjustments to reconcile consolidated net income to net cash provided by operating activities: | ||||||||
Depreciation and amortization | 10,250 | 8,564 | ||||||
Stock-based compensation expense | 7,445 | 5,005 | ||||||
Litigation-related expense | 6,500 | — | ||||||
Increase (decrease) in long-term deferred revenue | 1,420 | (240 | ) | |||||
Amortization of bond premium | 1,027 | — | ||||||
Decrease in contingent consideration obligations | — | (74 | ) | |||||
(Decrease) increase in other assets | (1,451 | ) | 56 | |||||
Decrease in long-term income taxes payable | (40 | ) | (79 | ) | ||||
Deferred income taxes | (52 | ) | 5 | |||||
Credit gain on available-for-sale | (3 | ) | (3 | ) | ||||
Provision for doubtful accounts | 5 | — | ||||||
Change in current assets and liabilities, net | (20,456 | ) | (20,737 | ) | ||||
Net cash provided by operating activities | 22,010 | 40,227 | ||||||
Investing activities: | ||||||||
Purchases of short-term investments | — | (50,706 | ) | |||||
Sales or maturities of short-term investments | 25,000 | 50,000 | ||||||
Additions to property, plant and equipment | (51,279 | ) | (30,942 | ) | ||||
Net cash used for investing activities | (26,279 | ) | (31,648 | ) | ||||
Financing activities: | ||||||||
Proceeds from employee stock plans | 4,147 | 8,621 | ||||||
Payment of contingent consideration obligations | — | (153 | ) | |||||
Net cash provided by financing activities | 4,147 | 8,468 | ||||||
Effect of foreign exchange rates on cash | (198 | ) | (126 | ) | ||||
Net (decrease) increase in cash and cash equivalents | (320 | ) | 16,921 | |||||
Cash and cash equivalents at beginning of period | 182,418 | 161,742 | ||||||
Cash and cash equivalents at end of period | $ | 182,098 | $ | 178,663 | ||||
Class B Common Stock | Common Stock | Additional Paid-In Capital | Retained Earnings | Accumulated Other Comprehensive Loss | Treasury Stock | Total Vicor Corporation Stockholders’ Equity | Noncontrolling Interest | Total Equity | ||||||||||||||||||||||||||||
Three | ||||||||||||||||||||||||||||||||||||
Balance | $ | 118 | $ | 439 | $ | 345,664 | $ | 217,633 | $ | (1,328 | ) | $ | (138,927 | ) | $ | 423,599 | $ | 306 | $ | 423,905 | ||||||||||||||||
Issuance of Common Stock under employee stock plans | 1 | 1,809 | 1,810 | 1,810 | ||||||||||||||||||||||||||||||||
Stock-based compensation | 1,994 | 1,994 | 1,994 | |||||||||||||||||||||||||||||||||
Components of comprehensive income (loss), net of tax: | ||||||||||||||||||||||||||||||||||||
Net incom e (loss) | 4,999 | 4,999 | (9 | ) | 4,990 | |||||||||||||||||||||||||||||||
Other comprehensive loss | (496 | ) | (496 | ) | (14 | ) | (510 | ) | ||||||||||||||||||||||||||||
Total comprehensive income (loss) | 4,503 | (23 | ) | 4,480 | ||||||||||||||||||||||||||||||||
Balance on March 31, 2022 | $ | 118 | $ | 440 | $ | 349,467 | $ 222,632 | $ | (1,824 | ) | $ | (138,927 | ) | $ | 431,906 | $ | 283 | $ | 432,189 | |||||||||||||||||
Total | ||||||||||||||||||||||||||||||||||||
Accumulated | Vicor | |||||||||||||||||||||||||||||||||||
Class B | Additional | Other | Corporation | |||||||||||||||||||||||||||||||||
Common | Common | Paid-In | Retained | Comprehensive | Treasury | Stockholders’ | Noncontrolling | Total | ||||||||||||||||||||||||||||
Stock | Stock | Capital | Earnings | Income (loss) | Stock | Equity | Interest | Equity | ||||||||||||||||||||||||||||
Three months ended September 30, 2022 | ||||||||||||||||||||||||||||||||||||
Balance on June 30, 2022 | $ | 118 | $ | 440 | $ | 352,253 | $ | 233,225 | $ | (2,246 | ) | $ | (138,927 | ) | $ | 444,863 | $ | 241 | $ | 445,104 | ||||||||||||||||
Issuance of Common Stock under employee stock plans | 2,173 | 2,173 | 2,173 | |||||||||||||||||||||||||||||||||
Stock-based compensation expense | 2,829 | 2,829 | 2,829 | |||||||||||||||||||||||||||||||||
Components of comprehensive income (loss), net of tax: | ||||||||||||||||||||||||||||||||||||
Net income | 1,792 | 1,792 | 3 | 1,795 | ||||||||||||||||||||||||||||||||
Other comprehensive income (loss) | 967 | 967 | (7 | ) | 960 | |||||||||||||||||||||||||||||||
Total comprehensive income (loss) | 2,759 | (4 | ) | 2,755 | ||||||||||||||||||||||||||||||||
Balance on September 30, 2022 | $ | 118 | $ | 440 | $ | 357,255 | $ | 235,017 | $ | (1,279 | ) | $ | (138,927 | ) | $ | 452,624 | $ | 237 | $ | 452,861 | ||||||||||||||||
Class B Common Stock | Common Stock | Additional Paid-In Capital | Retained Earnings | Accumulated Other Comprehensive Loss | Treasury Stock | Total Vicor Corporation Stockholders’ Equity | Noncontrolling Interest | Total Equity | ||||||||||||||||||||||||||||
Three | ||||||||||||||||||||||||||||||||||||
Balance | $ | 118 | $ | 433 | $ | 328,392 | $ | 161,008 | $ | (204 | ) | $ | (138,927 | ) | $ | 350,820 | $ | 335 | $ | 351,155 | ||||||||||||||||
Issuance of Common Stock under employee stock plans | 2 | 3,048 | 3,050 | 3,050 | ||||||||||||||||||||||||||||||||
Stock-based compensation expense | 1,571 | 1,571 | 1,571 | |||||||||||||||||||||||||||||||||
Components of comprehensive income (loss), net of tax: | ||||||||||||||||||||||||||||||||||||
Net income | 15,092 | 15,092 | 3 | 15,095 | ||||||||||||||||||||||||||||||||
Other comprehensive loss | (369 | ) | (369 | ) | (20 | ) | (389 | ) | ||||||||||||||||||||||||||||
Total | 14,723 | (17 | ) | 14,706 | ||||||||||||||||||||||||||||||||
Balance on March 31, 2021 | $ | 118 | $ | 435 | $ | 333,011 | $ | 176,100 | $ | (573 | ) | $ | (138,927 | ) | $ | 370,164 | $ | 318 | $ | 370,482 | ||||||||||||||||
Total | ||||||||||||||||||||||||||||||||||||
Accumulated | Vicor | |||||||||||||||||||||||||||||||||||
Class B | Additional | Other | Corporation | |||||||||||||||||||||||||||||||||
Common | Common | Paid-In | Retained | Comprehensive | Treasury | Stockholders’ | Noncontrolling | Total | ||||||||||||||||||||||||||||
Stock | Stock | Capital | Earnings | Income (loss) | Stock | Equity | Interest | Equity | ||||||||||||||||||||||||||||
Nine months ended September 30, 2022 | ||||||||||||||||||||||||||||||||||||
Balance on December 31, 2021 | $ | 118 | $ | 439 | $ | 345,664 | $ | 217,633 | $ | (1,328 | ) | $ | (138,927 | ) | $ | 423,599 | $ | 306 | $ | 423,905 | ||||||||||||||||
Issuance of Common Stock under employee stock plans | 1 | 4,146 | 4,147 | 4,147 | ||||||||||||||||||||||||||||||||
Stock-based compensation expense | 7,445 | 7,445 | 7,445 | |||||||||||||||||||||||||||||||||
Components of comprehensive income (loss), net of tax: | ||||||||||||||||||||||||||||||||||||
Net income (loss) | 17,384 | 17,384 | (19 | ) | 17,365 | |||||||||||||||||||||||||||||||
Other comprehensive income (loss) | 49 | 49 | (50 | ) | (1 | ) | ||||||||||||||||||||||||||||||
Total comprehensive income (loss) | 17,433 | (69 | ) | 17,364 | ||||||||||||||||||||||||||||||||
Balance on September 30, 2022 | $ | 118 | $ | 440 | $ | 357,255 | $ | 235,017 | $ | (1,279 | ) | $ | (138,927 | ) | $ | 452,624 | $ | 237 | $ | 452,861 | ||||||||||||||||
Total | ||||||||||||||||||||||||||||||||||||
Accumulated | Vicor | |||||||||||||||||||||||||||||||||||
Class B | Additional | Other | Corporation | |||||||||||||||||||||||||||||||||
Common | Common | Paid-In | Retained | Comprehensive | Treasury | Stockholders’ | Noncontrolling | Total | ||||||||||||||||||||||||||||
Stock | Stock | Capital | Earnings | Loss | Stock | Equity | Interest | Equity | ||||||||||||||||||||||||||||
Three months ended September 30, 2021 | ||||||||||||||||||||||||||||||||||||
Balance on June 30, 2021 | $ | 118 | $ | 436 | $ | 336,278 | $ | 195,494 | $ | (813 | ) | $ | (138,927 | ) | $ | 392,586 | $ | 306 | $ | 392,892 | ||||||||||||||||
Issuance of Common Stock under employee stock plans | 1 | 3,869 | 3,870 | 3,870 | ||||||||||||||||||||||||||||||||
Stock-based compensation expense | 1,867 | 1,867 | 1,867 | |||||||||||||||||||||||||||||||||
Components of comprehensive income (loss), net of tax: | ||||||||||||||||||||||||||||||||||||
Net income (loss) | 13,259 | 13,259 | (7 | ) | 13,252 | |||||||||||||||||||||||||||||||
Other comprehensive loss | (227 | ) | (227 | ) | — | (227 | ) | |||||||||||||||||||||||||||||
Total comprehensive income (loss) | 13,032 | (7 | ) | 13,025 | ||||||||||||||||||||||||||||||||
Balance on September 30, 2021 | $ | 118 | $ | 437 | $ | 342,014 | $ | 208,753 | $ | (1,040 | ) | $ | (138,927 | ) | $ | 411,355 | $ | 299 | $ | 411,654 | ||||||||||||||||
Total | ||||||||||||||||||||||||||||||||||||
Accumulated | Vicor | |||||||||||||||||||||||||||||||||||
Class B | Additional | Other | Corporation | |||||||||||||||||||||||||||||||||
Common | Common | Paid-In | Retained | Comprehensive | Treasury | Stockholders’ | Noncontrolling | Total | ||||||||||||||||||||||||||||
Stock | Stock | Capital | Earnings | Loss | Stock | Equity | Interest | Equity | ||||||||||||||||||||||||||||
Nine months ended September 30, 2021 | ||||||||||||||||||||||||||||||||||||
Balance on December 31, 2020 | $ | 118 | $ | 433 | $ | 328,392 | $ | 161,008 | $ | (204 | ) | $ | (138,927 | ) | $ | 350,820 | $ | 335 | $ | 351,155 | ||||||||||||||||
Issuance of Common Stock under employee stock plans | 4 | 8,617 | 8,621 | 8,621 | ||||||||||||||||||||||||||||||||
Stock-based compensation expense | 5,005 | 5,005 | 5,005 | |||||||||||||||||||||||||||||||||
Components of comprehensive income (loss), net of tax: | ||||||||||||||||||||||||||||||||||||
Net income (loss) | 47,745 | 47,745 | (15 | ) | 47,730 | |||||||||||||||||||||||||||||||
Other comprehensive loss | (836 | ) | (836 | ) | (21 | ) | (857 | ) | ||||||||||||||||||||||||||||
Total comprehensive income (loss) | 46,909 | (36 | ) | 46,873 | ||||||||||||||||||||||||||||||||
Balance on September 30, 2021 | $ | 118 | $ | 437 | $ | 342,014 | $ | 208,753 | $ | (1,040 | ) | $ | (138,927 | ) | $ | 411,355 | $ | 299 | $ | 411,654 | ||||||||||||||||
March 31, 2022 | December 31, 2021 | |||||||
Raw materials | $ | 57,547 | $ | 51,289 | ||||
Work-in-process | 11,998 | 12,514 | ||||||
Finished goods | 4,316 | 3,519 | ||||||
$ | 73,861 | $ | 67,322 | |||||
September 30, 2022 | December 31, 2021 | |||||||
Raw materials | $ | 73,940 | $ | 51,289 | ||||
Work-in-process | 11,967 | 12,514 | ||||||
Finished goods | 8,429 | 3,519 | ||||||
$ | 94,336 | $ | 67,322 | |||||
March 31, 2022 | ||||||||||||
Cash and Cash Equivalents | Short-Term Investments | Long-Term Investment | ||||||||||
Measured at fair value: | ||||||||||||
Available-for-sale | ||||||||||||
Money market funds | $ | 119,506 | $ | — | $ | — | ||||||
U.S. Treasury Obligations | — | 20,003 | — | |||||||||
Failed Auction Security | — | — | 2,536 | |||||||||
Total | 119,506 | 20,003 | 2,536 | |||||||||
Other measurement basis: | ||||||||||||
Cash on hand | 71,544 | — | — | |||||||||
Total | $ | 191,050 | $ | 20,003 | $ | 2,536 | ||||||
December 31, 2021 | ||||||||||||
Cash and Cash Equivalents | Short-Term Investments | Long-Term Investment | ||||||||||
Measured at fair value: | ||||||||||||
Available-for-sale | ||||||||||||
Money market funds | $ | 94,282 | $ | — | $ | — | ||||||
U.S. Treasury Obligations | — | 45,215 | — | |||||||||
Failed Auction Security | — | — | 2,639 | |||||||||
Total | 94,282 | 45,215 | 2,639 | |||||||||
Other measurement basis: | ||||||||||||
Cash on hand | 88,136 | — | — | |||||||||
Total | $ | 182,418 | $ | 45,215 | $ | 2,639 | ||||||
September 30, 2022 | ||||||||||||
Cash and Cash Equivalents | Short-Term Investments | Long-Term Investment | ||||||||||
Measured at fair value: | ||||||||||||
Available-for-sale | ||||||||||||
Money market funds | $ | 120,217 | $ | — | $ | — | ||||||
U.S. Treasury Obligations | — | 19,949 | — | |||||||||
Failed Auction Security | — | — | 2,552 | |||||||||
Total | 120,217 | 19,949 | 2,552 | |||||||||
Other measurement basis: | ||||||||||||
Cash on hand | 61,881 | — | — | |||||||||
Total | $ | 182,098 | $ | 19,949 | $ | 2,552 | ||||||
March 31, 2022 | Cost | Gross Unrealized Gains | Gross Unrealized Losses | Estimated Fair Value | ||||||||||||
U.S. Treasury Obligations | $ | 20,137 | $ | 0 | $ | 134 | $ | 20,003 | ||||||||
Failed Auction Security | 3,000 | — | 464 | 2,536 |
December 31, 2021 | ||||||||||||
Cash and | ||||||||||||
Cash | Short-Term | Long-Term | ||||||||||
Equivalents | Investments | Investment | ||||||||||
Measured at fair value: | ||||||||||||
Available-for-sale | ||||||||||||
Money market funds | $ | 94,282 | $ | — | $ | — | ||||||
U.S. Treasury Obligations | — | 45,215 | — | |||||||||
Failed Auction Security | — | — | 2,639 | |||||||||
Total | 94,282 | 45,215 | 2,639 | |||||||||
Other measurement basis: | ||||||||||||
Cash on hand | 88,136 | — | — | |||||||||
Total | $ | 182,418 | $ | 45,215 | $ | 2,639 | ||||||
December 31, 2021 | Cost | Gross Unrealized Gains | Gross Unrealized Losses | Estimated Fair Value | ||||||||||||
U.S. Treasury Obligations | $ | 45,238 | $ | 0 | $ | 23 | $ | 45,215 | ||||||||
Failed Auction Security | 3,000 | — | 361 | 2,639 |
Gross | Gross | Estimated | ||||||||||||||
Unrealized | Unrealized | Fair | ||||||||||||||
September 30, 2022 | Cost | Gains | Losses | Value | ||||||||||||
U.S. Treasury Obligations | $ | 20,028 | $ | — | $ | 79 | $ | 19,949 | ||||||||
Failed Auction Security | 3,000 | — | 448 | 2,552 |
Gross | Gross | Estimated | ||||||||||||||
Unrealized | Unrealized | Fair | ||||||||||||||
December 31, 2021 | Cost | Gains | Losses | Value | ||||||||||||
U.S. Treasury Obligations | $ | 45,238 | $ | — | $ | 23 | $ | 45,215 | ||||||||
Failed Auction Security | 3,000 | — | 361 | 2,639 |
Cost | Estimated Fair Value | |||||||
U.S. Treasury Obligations: | ||||||||
Maturities greater than three months but less than one year | $ | 20,137 | $ | 20,003 | ||||
Cost | Estimated Fair Value | |||||||
U.S. Treasury Obligations: | ||||||||
Maturities greater than three months but less than one year | $ | 20,028 | $ | 19,949 | ||||
Cost | Estimated Fair Value | |||||||
Failed Auction Security: | ||||||||
Due in twenty to forty years | $ | 3,000 | $ | 2,536 | ||||
Estimated | ||||||||
Cost | Fair Value | |||||||
Failed Auction Security: | ||||||||
Due in twenty years | $ | 3,000 | $ | 2,552 | ||||
Using | ||||||||||||||||
Quoted Prices in Active Markets (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Unobservable Inputs (Level 3) | Total Fair Value as of March 31, 2022 | |||||||||||||
Cash equivalents: | ||||||||||||||||
Money market funds | $ | 119,506 | $ | — | $ | — | $ | 119,506 | ||||||||
Short-term investments: | ||||||||||||||||
U.S. Treasury Obligations | 20,003 | — | — | 20,003 | ||||||||||||
Long-term investment: | ||||||||||||||||
Failed Auction Security | — | — | 2,536 | 2,536 |
Using | ||||||||||||||||
Quoted Prices in Active Markets (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Unobservable Inputs (Level 3) | Total Fair Value as of September 30, 2022 | |||||||||||||
Cash equivalents: | ||||||||||||||||
Money market funds | $ | 120,217 | $ | — | $ | — | $ | 120,217 | ||||||||
Short-term investments: | ||||||||||||||||
U.S. Treasury Obligations | 19,949 | — | — | 19,949 | ||||||||||||
Long-term investment: | ||||||||||||||||
Failed Auction Security | — | — | 2,552 | 2,552 |
Using | ||||||||||||||||
Quoted Prices in Active Markets (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Unobservable Inputs (Level 3) | Total Fair Value as of December 31, 2021 | |||||||||||||
Cash equivalents: | ||||||||||||||||
Money market funds | $ | 94,282 | $ | — | $ | — | $ | 94,282 | ||||||||
Short-term investments: | ||||||||||||||||
U.S. Treasury Obligations | 45,215 | — | — | 45,215 | ||||||||||||
Long-term investment: | ||||||||||||||||
Failed Auction Security | — | — | 2,639 | 2,639 |
Using | ||||||||||||||||
Quoted Prices in Active Markets (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Unobservable Inputs (Level 3) | Total Fair Value as of December 31, 2021 | |||||||||||||
Cash equivalents: | ||||||||||||||||
Money market funds | $ | 94,282 | $ | — | $ | — | $ | 94,282 | ||||||||
Short-term investments: | ||||||||||||||||
U.S. Treasury Obligations | 45,215 | — | — | 45,215 | ||||||||||||
Long-term investment: | ||||||||||||||||
Failed Auction Security | — | — | 2,639 | 2,639 |
Balance at the beginning of the period | $ | 2,639 | ||
Credit gain on available-for-sale | 1 | |||
Loss included in Other comprehensive income | (104 | ) | ||
Balance at the end of the period | $ | 2,536 | ||
Balance at the beginning of the period | $ | 2,639 | ||
Credit gain on available-for-sale | 3 | |||
Loss included in Other comprehensive income | (90 | ) | ||
Balance at the end of the period | $ | 2,552 | ||
Three Months Ended March 31, 2022 | ||||||||||||
Brick Products | Advanced Products | Total | ||||||||||
United States | $ | 14,061 | $ | 10,626 | $ | 24,687 | ||||||
Europe | 7,042 | 2,768 | 9,810 | |||||||||
Asia Pacific | 13,521 | 39,495 | 53,016 | |||||||||
All other | 733 | 36 | 769 | |||||||||
$ | 35,357 | $ | 52,925 | $ | 88,282 | |||||||
Three Months Ended September 30, 2022 | ||||||||||||
Brick Products | Advanced Products | Total | ||||||||||
United States | $ | 21,559 | $ | 9,303 | $ | 30,862 | ||||||
Europe | 7,101 | 1,954 | 9,055 | |||||||||
Asia Pacific | 14,800 | 47,704 | 62,504 | |||||||||
All other | 456 | 241 | 697 | |||||||||
$ | 43,916 | $ | 59,202 | $ | 103,118 | |||||||
Three Months Ended March 31, 2021 | ||||||||||||
Brick Products | Advanced Products | Total | ||||||||||
United States | $ | 18,583 | $ | 8,549 | $ | 27,132 | ||||||
Europe | 8,196 | 995 | 9,191 | |||||||||
Asia Pacific | 27,328 | 24,653 | 51,981 | |||||||||
All other | 352 | 140 | 492 | |||||||||
$ | 54,459 | $ | 34,337 | $ | 88,796 | |||||||
Nine Months Ended September 30, 2022 | ||||||||||||
Brick Products | Advanced Products | Total | ||||||||||
United States | $ | 54,288 | $ | 32,711 | $ | 86,999 | ||||||
Europe | 19,184 | 6,951 | 26,135 | |||||||||
Asia Pacific | 38,167 | 139,749 | 177,916 | |||||||||
All other | 2,157 | 379 | 2,536 | |||||||||
$ | 113,796 | $ | 179,790 | $ | 293,586 | |||||||
Three Months Ended September 30, 2021 | ||||||||||||
Brick Products | Advanced Products | Total | ||||||||||
United States | $ | 19,741 | $ | 12,178 | $ | 31,919 | ||||||
Europe | 6,185 | 1,324 | 7,509 | |||||||||
Asia Pacific | 14,936 | 29,934 | 44,870 | |||||||||
All other | 582 | 31 | 613 | |||||||||
$ | 41,444 | $ | 43,467 | $ | 84,911 | |||||||
Nine Months Ended September 30, 2021 | ||||||||||||
Brick Products | Advanced Products | Total | ||||||||||
United States | $ | 58,032 | $ | 35,083 | $ | 93,115 | ||||||
Europe | 24,605 | 3,604 | 28,209 | |||||||||
Asia Pacific | 66,309 | 79,926 | 146,235 | |||||||||
All other | 1,309 | 215 | 1,524 | |||||||||
$ | 150,255 | $ | 118,828 | $ | 269,083 | |||||||
Three Months Ended September 30, 2022 | ||||||||||||
Brick Products | Advanced Products | Total | ||||||||||
Direct customers, contract manufacturers and non-stocking distributors | $ | 29,051 | $ | 53,033 | $ | 82,084 | ||||||
Stocking distributors, net of sales allowances | 14,288 | 2,869 | 17,157 | |||||||||
Non-recurring engineering | 577 | 2,249 | 2,826 | |||||||||
Royalties | — | 1,033 | 1,033 | |||||||||
Other | — | 18 | 18 | |||||||||
$ | 43,916 | $ | 59,202 | $ | 103,118 | |||||||
Three Months Ended March 31, 2022 | ||||||||||||
Brick Products | Advanced Products | Total | ||||||||||
Direct customers, contract manufacturersand non-stocking distributors | $ | 24,401 | $ | 47,471 | $ | 71,872 | ||||||
Stocking distributors, net of sales allowances | 10,764 | 3,744 | 14,508 | |||||||||
Non-recurring engineering | 192 | 1,386 | 1,578 | |||||||||
Royalties | — | 306 | 306 | |||||||||
Other | — | 18 | 18 | |||||||||
$ | 35,357 | $ | 52,925 | $ | 88,282 | |||||||
Three Months Ended March 31, 2021 | ||||||||||||
Brick Products | Advanced Products | Total | ||||||||||
Direct customers, contract manufacturers non-stocking distributors | $ | 43,808 | $ | 29,057 | $ | 72,865 | ||||||
Stocking distributors, net of sales allowances | 10,547 | 4,138 | 14,685 | |||||||||
Non-recurring engineering | 104 | 1,071 | 1,175 | |||||||||
Royalties | — | 53 | 53 | |||||||||
Other | — | 18 | 18 | |||||||||
$ | 54,459 | $ | 34,337 | $ | 88,796 | |||||||
Nine Months Ended September 30, 2022 | ||||||||||||
Brick Products | Advanced Products | Total | ||||||||||
Direct customers, contract manufacturers and non-stocking distributors | $ | 77,018 | $ | 162,483 | $ | 239,501 | ||||||
Stocking distributors, net of sales allowances | 35,960 | 9,715 | 45,675 | |||||||||
Non-recurring engineering | 818 | 5,543 | 6,361 | |||||||||
Royalties | — | 1,995 | 1,995 | |||||||||
Other | — | 54 | 54 | |||||||||
$ | 113,796 | $ | 179,790 | $ | 293,586 | |||||||
Three Months Ended September 30, 2021 | ||||||||||||
Brick Products | Advanced Products | Total | ||||||||||
Direct customers, contract manufacturers and non-stocking distributors | $ | 29,801 | $ | 36,066 | $ | 65,867 | ||||||
Stocking distributors, net of sales allowances | 11,405 | 2,075 | 13,480 | |||||||||
Non-recurring engineering | 238 | 3,846 | 4,084 | |||||||||
Royalties | — | 1,462 | 1,462 | |||||||||
Other | — | 18 | 18 | |||||||||
$ | 41,444 | $ | 43,467 | $ | 84,911 | |||||||
Nine Months Ended September 30, 2021 | ||||||||||||
Brick Products | Advanced Products | Total | ||||||||||
Direct customers, contract manufacturers and non-stocking distributors | $ | 111,223 | $ | 97,767 | $ | 208,990 | ||||||
Stocking distributors, net of sales allowances | 38,586 | 10,847 | 49,433 | |||||||||
Non-recurring engineering | 446 | 8,643 | 9,089 | |||||||||
Royalties | — | 1,518 | 1,518 | |||||||||
Other | — | 53 | 53 | |||||||||
$ | 150,255 | $ | 118,828 | $ | 269,083 | |||||||
September 30, 2022 | December 31, 2021 | Change | ||||||||||
Short-term deferred revenue and customer prepayments | $ | (12,148 | ) | $ | (7,912 | ) | $ | (4,236 | ) | |||
Long-term deferred revenue | (1,833 | ) | (413 | ) | (1,420 | ) | ||||||
Deferred expenses | 588 | 560 | 28 | |||||||||
Sales allowances | (1,427 | ) | (1,464 | ) | 37 |
March 31, 2022 | December 31, 2021 | Change | ||||||||||
Short-term deferred revenue and customer prepayments | $ | (8,384 | ) | $ | (7,912 | ) | $ | (472 | ) | |||
Long-term deferred revenue | (332 | ) | (413 | ) | 81 | |||||||
Deferred expenses | 610 | 560 | 50 | |||||||||
Sales allowances | (1,605 | ) | (1,464 | ) | (141 | ) |
Three Months Ended | ||||||||
March 31, | ||||||||
2022 | 2021 | |||||||
Cost of revenues | $ | 251 | $ | 228 | ||||
Selling, general and administrative | 1,207 | 853 | ||||||
Research and development | 536 | 490 | ||||||
Total stock-based compensation | $ | 1,994 | $ | 1,571 | ||||
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
2022 | 2021 | 2022 | 2021 | |||||||||||||
Cost of revenues | $ | 479 | $ | 259 | $ | 1,161 | $ | 739 | ||||||||
Selling, general and administrative | 1,537 | 1,033 | 4,184 | 2,665 | ||||||||||||
Research and development | 813 | 575 | 2,100 | 1,601 | ||||||||||||
Total stock-based compensation | $ | 2,829 | $ | 1,867 | $ | 7,445 | $ | 5,005 | ||||||||
Three Months Ended | ||||||||
March 31, | ||||||||
2022 | 2021 | |||||||
Stock options | $ | 1,759 | $ | 1,331 | ||||
ESPP | 235 | 240 | ||||||
Total stock-based compensation | $ | 1,994 | $ | 1,571 | ||||
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
2022 | 2021 | 2022 | 2021 | |||||||||||||
Stock options | $ | 2,531 | $ | 1,661 | $ | 6,641 | $ | 4,328 | ||||||||
ESPP | 298 | 206 | 804 | 677 | ||||||||||||
Total stock-based compensation | $ | 2,829 | $ | 1,867 | $ | 7,445 | $ | 5,005 | ||||||||
Three Months Ended March 31, | Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
2022 | 2021 | 2022 | 2021 | 2022 | 2021 | |||||||||||||||||||
Benefit for income taxes | $ | (48 | ) | $ | (143 | ) | ||||||||||||||||||
Provision (benefit) for income taxes | $ | 641 | $ | (886 | ) | $ | 1,395 | $ | (30 | ) | ||||||||||||||
Effective income tax rate | (1.0 | )% | (1.0 | )% | 26.3 | % | (7.2 | )% | 7.4 | % | (0.1 | )% |
Three Months Ended | ||||||||
March 31, | ||||||||
2022 | 2021 | |||||||
Numerator: | ||||||||
Net income attributable to Vicor Corporation | $ | 4,999 | $ | 15,092 | ||||
Denominator: | ||||||||
Denominator for basic net income per share-weighted average shares (1) | 43,952 | 43,455 | ||||||
Effect of dilutive securities: | 1,002 | 1,386 | ||||||
Denominator for diluted net income per share – adjusted weighted-average shares and assumed conversions | 44,954 | 44,841 | ||||||
Basic net income per share | $ | 0.11 | $ | 0.35 | ||||
Diluted net income per share | $ | 0.11 | $ | 0.34 | ||||
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
2022 | 2021 | 2022 | 2021 | |||||||||||||
Numerator: | ||||||||||||||||
Net income attributable to Vicor Corporation | $ | 1,792 | $ | 13,259 | $ | 17,384 | $ | 47,745 | ||||||||
Denominator: | ||||||||||||||||
Denominator for basic net income per share-weighted average shares (1) | 44,031 | 43,710 | 43,986 | 43,573 | ||||||||||||
Effect of dilutive securities: | ||||||||||||||||
Employee stock options (2) | 867 | 1,324 | 920 | 1,332 | ||||||||||||
Denominator for diluted net income per share – adjusted weighted-average shares and assumed conversions | 44,898 | 45,034 | 44,906 | 44,905 | ||||||||||||
Basic net income per share | $ | 0.04 | $ | 0.30 | $ | 0.40 | $ | 1.10 | ||||||||
Diluted net income per share | $ | 0.04 | $ | 0.29 | $ | 0.39 | $ | 1.06 | ||||||||
(1) | Denominator represents the weighted average number of shares of Common Stock and Class B Common Stock outstanding. |
(2) | Options to purchase |
VICOR CORPORATION
Management’s Discussion and Analysis of
Financial Condition and Results of Operation
September 30, 2022
Item 2 — Management’s Discussion and Analysis of Financial Condition and Results of Operations
Cautionary Note Regarding Forward-Looking Statements
The Company’s consolidated operating results are affected by a wide variety of factors that could materially and adversely affect revenues and profitability, including the risk factors described in the Company’s Annual Report on Form
-18-
VICOR CORPORATION
Management’s Discussion and Analysis of
Financial Condition and Results of Operation
September 30, 2022
Overview
We design, develop, manufacture, and market modular power components and power systems for converting electrical power for use in electrically-powered devices. Our competitive position is supported by innovations in product design and achievements in product performance, largely enabled by our focus on the research and development of advanced technologies and processes, often implemented in proprietary semiconductor circuitry, materials, and packaging. Many of our products incorporate patented or proprietary implementations of high-frequency switching topologies enabling power system solutions that are more efficient and much smaller than conventional alternatives. Our strategy emphasizes demonstrable product differentiation and a value proposition based on competitively superior solution performance, advantageous design flexibility, and a compelling total cost of ownership. While we offer a wide range of alternating current (“AC”) and direct current (“DC”) power conversion products, we consider our core competencies to be associated with 48V DC distribution, which offers numerous inherent cost and performance advantages over lower distribution voltages. However, we also offer products addressing other DC voltage standards (e.g., 380V for power distribution in data centers, 110V for rail applications, 28V for military and avionics applications, and 24V for industrial automation).
Based on design, performance, and form factor considerations, as well as the range of evolving applications for which our products are appropriate, we categorize our product portfolios as either “Advanced Products” or “Brick Products.” The Advanced Products category consists of our more recently introduced products, which are largely used to implement our proprietary Factorized Power Architecture
The Brick Products category largely consists of our broad and well-established families of integrated power converters, incorporating multiple conversion stages, used in conventional power systems architectures. Given the growth profiles of the markets we serve with our Advanced Products line and our Brick Products line, our strategy involves a transition in organizational focus, emphasizing investment in our Advanced Products line and targeting high growth market segments with a
The applications in which our Advanced Products and Brick Products are used are typically in the higher-performance, higher-power segments of the market segments we serve. With our Advanced Products, we generally serve large Original Equipment Manufacturers (“OEMs”), Original Design Manufacturers (“ODMs”), and their contract manufacturers, with sales currently concentrated in the data center and hyperscaler segments of enterprise computing, in which our products are used for voltage distribution on server motherboards, in server racks, and across datacenter infrastructure. We have established a leadership position in the emerging market segment for powering high-performance processors used for acceleration of applications associated with artificial intelligence (“AI”). Our customers in the AI market segment include the leading innovators in processor and accelerator design, as well as early adopters in cloud computing and high performance computing. We also target applications in aerospace and aviation, defense electronics, industrial automation, instrumentation, test equipment, solid state lighting, telecommunications and networking infrastructure, and vehicles (notably in the autonomous driving, electric vehicle, and hybrid vehicle niches of the vehicle segment). With our Brick Products, we generally serve a fragmented base of large and small customers, concentrated in aerospace and defense electronics, industrial automation, industrial equipment, instrumentation and test equipment, and transportation (notably in rail and heavy equipment applications). With our strategic emphasis on larger, high-volume customers, we expect to experience over time a greater concentration of sales among relatively fewer customers.
Our quarterly consolidated operating results can be difficult to forecast and have been subject to significant fluctuations. We plan our production and inventory levels based on management’s estimates of customer demand, customer forecasts, and other information sources. Customer forecasts, particularly those of OEM, ODM, and contract manufacturing customers to which we supply Advanced Products in high volumes, are subject to scheduling changes on short notice, contributing to operating inefficiencies and excess costs. In addition, external factors such as supply chain uncertainties, which are often associated with the cyclicality of the electronics industry, regional macroeconomic and trade-related circumstances, and
-19-
VICOR CORPORATION
Management’s Discussion and Analysis of
Financial Condition and Results of Operation
September 30, 2022
and those relating, for example, to the procurement of raw material, have in the past negatively impacted and may in the future negatively impact our operating results. We have taken steps to mitigate the impact of supply chain disruptions by, among other things and in varying degrees, moving outsourced manufacturing steps in-house to the Company, ordering supplies with extended lead times, paying higher prices for certain supplies or outsourced production, and expediting deliveries at a cost premium. The resulting impact of the steps taken to mitigate supply chain disruptions have, to varying degrees and at different times, reduced our revenue, gross margin, operating profit and cash flow and may continue to do so in the future. While we continue to make progress in moving outsourced manufacturing steps in-house to the Company, we are still experiencing long lead times on certain raw material components, sporadic disruptions related to shutdowns in China as a result of their zero-COVID policy, and uncertainty of output from our outsourced manufacturing supplier. Our quarterly gross margin as a percentage of net revenues may vary, depending on production volumes, average selling prices, average unit costs, the mix of products sold during that quarter, and the level of importation of raw materials subject to tariffs. Our quarterly operating margin as a percentage of net revenues
Ongoing / Potential Impacts of the
As of the date of this report, the number of Company employees diagnosed with
We are closely monitoring the operating performance and financial health of our customers, business partners, and suppliers, but an extended period of operational constraints brought about by the pandemic could cause financial hardship within our customer base and supply chain. Such hardship may continue to disrupt customer demand and limit our customers’ ability to meet their obligations to us. Similarly, such hardship within our supply chain could continue to restrict our access to raw materials or services. Additionally, restrictions or disruptions of transportation, such as reduced availability of cargo transport by ship or air, couldhave resulted and may continue to result in higher costs and inbound and outbound delays. We have taken steps to address certain supply chain risks, and we believe our actions have mitigated those risks to date; however, there are no assurances that those steps will continue to mitigate risks in the remainder of 2022 and beyond.
Although there is uncertainty regarding the extent to which the pandemic will continue to impact our operational and financial results in the future, the Company’s high level of liquidity, flexible operational model, existing raw material inventories, and increased use of second sources for critical manufacturing inputs together support management’s belief the Company will be able to effectively conduct business until the pandemic passes.
We are monitoring the rapidly changing circumstances, and may take additional actions to address
Changes from Previously Disclosed Results
As discussed below, we reported net income for the third quarter of 2022 of $1,792,000, or $0.04 per diluted share, compared to $13,259,000, or $0.29 per diluted share, for the third quarter of 2021. Initially, in our earnings release issued on October 25, 2022, we had disclosed net income for the third quarter of 2022 of $8,091,000, or $0.18 per diluted share. On October 26, 2022, after the earnings release and related earnings call, the jury in the patent litigation with SynQor, Inc. (“SynQor”) awarded SynQor damages in the amount of $6,500,000 for infringement of a SynQor patent. The Company anticipates filing a post-trial motion seeking entry of judgment of non-infringement of the SynQor patent as a matter of law. The Company intends to appeal to the United States Court of Appeals for the Federal Circuit the construction of claim limitations of the SynQor patents and the dismissal of the Company’s counterclaims against SynQor. In light of the jury award, the Company has recorded a litigation related accrual of $6,500,000 in the third quarter of 2022, resulting in the decrease in our reported net income and net income per share from the amounts previously disclosed in our earnings release, as well as a corresponding $6,500,000 increase in operating expenses to $43,966,000 from the previously disclosed $37,466,000. See Note 10 to the Condensed Consolidated Financial Statements for additional information regarding the SynQor litigation related accrual.
-20-
VICOR CORPORATION
Management’s Discussion and Analysis of
Financial Condition and Results of Operation
September 30, 2022
Summary of FirstThird Quarter 2022 Financial Performance Compared to FourthSecond Quarter 20212022 Financial Performance
The following summarizes our financial performance for the firstthird quarter of 2022, compared to the fourthsecond quarter of 2021:
Net revenues decreased 2.2%increased 0.9% to $88,282,000$103,118,000 for the firstthird quarter of 2022, from $90,281,000$102,186,000 for the fourthsecond quarter of 2021.2022. Net revenues for Brick Products decreased 9.1%increased 27.2% compared to the fourthsecond quarter of 2021,2022, primarily due to the ability to shift manufacturing resources to focus on available backlog, as well as, favorable market conditions in North America and Europe and in the Asia Pacific region.for Brick Products. Advanced Products net revenue rose 3.0% sequentiallydecreased 12.5% compared to the fourthsecond quarter of 2021. This growth, though, continued to be constrained by limited component availability2022 primarily due to global semiconductorcontinued supply allocation issues experienced duringconstraints leading to longer cycle-times and schedule delays, as well as, the impact of issuing a return material authorization in the third quarter along with certain internal processing and testing constraints.for approximately $6,000,000.
Export sales represented approximately 72.0%70.1% of total net revenues in the firstthird quarter of 2022 as compared to 71.7%69.2% in the fourthsecond quarter of 2021.2022.
Gross margin decreasedincreased to $37,601,000$46,970,000 for the firstthird quarter of 2022 from $40,816,000$46,849,000 for the fourthsecond quarter of 2021, and2022, but gross margin, as a percentage of net revenues, decreased to 42.6%45.5% for the firstthird quarter of 2022 from 45.2%45.8% for the fourthsecond quarter of 2021. Both the2022. The decrease in gross margin dollarspercentage was primarily a net result of favorable overhead absorption offset by increased tariff costs and the decreased gross margin percentage were primarily due to the decrease in net revenues and increased costs.higher processing costs at outside vendors.
Backlog, which represents the total value of orders for products for which shipment is scheduled within the next 12 months, was approximately $423,738,000$371,637,000 at the end of the firstthird quarter of 2022, as compared to $345,594,000$410,015,000 at the end of the fourthsecond quarter of 2021.2022. The increasedecrease in backlog was primarily due to increased bookings.
• | Operating expenses for the third quarter of 2022 increased $8,415,000, or 23.7%, to $43,966,000 from $35,551,000 for the second quarter of 2022. Selling, general, and administrative expenses increased approximately $2,684,000, primarily due to an increase in legal fees. Research and development expenses decreased approximately $769,000, primarily due to a decrease in project and pre-production materials. Litigation-related expense related to the SynQor litigation was $6,500,000 for the third quarter of 2022. See Note 10 to the Condensed Consolidated Financial Statements for additional information. |
We reported net income for the firstthird quarter of 2022 of $4,999,000,$1,792,000, or $0.11$0.04 per diluted share, compared to net income of $8,880,000,$10,593,000, or $0.20$0.24 per diluted share, for the fourthsecond quarter of 2021.2022.
For the firstthird quarter of 2022, depreciation and amortization totaled $3,296,000$3,585,000 and capital additions totaled $22,683,000$14,401,000 as compared to depreciation and amortization of $3,141,000$3,369,000 and $16,819,000 of capital additions of $14,195,000 for the fourthsecond quarter of 2021.2022.
Inventories increased by approximately $6,539,000,$11,281,000, or 9.7%13.6%, to $73,861,000$94,336,000 at March 31,September 30, 2022, compared to $67,322,000$83,055,000 at December 31, 2021,June 30, 2022, primarily inconsisting of raw materials, due to the shortfall in revenue in the first quartermaterials.
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VICOR CORPORATION
Management’s Discussion and Analysis of
Financial Condition and Results of Operation
September 30, 2022 caused by component and capacity issues which contributed to production delays and to support higher planned revenues later in the year.
Three Months Ended March 31,September 30, 2022 Compared to Three Months Ended March 31,September 30, 2021
Net revenues for the firstthird quarter of 2022 were $88,282,000, a decrease$103,118,000, an increase of $514,000,$18,207,000, or 0.6%21.4%, as compared to $88,796,000$84,911,000 for the firstthird quarter of 2021. Net revenues, by product line, for the three months ended March 31,September 30, 2022 and 2021 were as follows (dollars in thousands):
Increase (decrease) | ||||||||||||||||
2022 | 2021 | $ | % | |||||||||||||
Brick Products | $ | 35,357 | $ | 54,459 | $ | (19,102 | ) | (35.1 | )% | |||||||
Advanced Products | 52,925 | 34,337 | 18,588 | 54.1 | % | |||||||||||
Total | $ | 88,282 | $ | 88,796 | $ | (514 | ) | (0.6 | )% | |||||||
Increase | ||||||||||||||||
2022 | 2021 | $ | % | |||||||||||||
Brick Products | $ | 43,916 | $ | 41,444 | $ | 2,472 | 6.0 | % | ||||||||
Advanced Products | 59,202 | 43,467 | 15,735 | 36.2 | % | |||||||||||
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Total | $ | 103,118 | $ | 84,911 | $ | 18,207 | 21.4 | % | ||||||||
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The increase in net revenues for Advanced Products was primarily the result of growth in the data center and high performance computing business, primarily in the United States and Asia Pacific markets.business. The decreaseincrease in net revenues for Brick Products was primarily due to unfavorablefavorable market conditions in North America and Europe and a rebound in the United States and Asia Pacific markets.
Gross margin for the firstthird quarter of 2022 decreased $7,099,000,increased $4,157,000, or 15.9%9.7%, to $37,601,000,$46,970,000, from $44,700,000$42,813,000 for the firstthird quarter of 2021. Gross margin, as a percentage of net revenues, decreased to 42.6%45.5% for the firstthird quarter of 2022, compared to 50.3%50.4% for the firstthird quarter of 2021. The decreaseincrease in gross margin dollars andwas due to the increase in net revenues. The decrease in gross margin percentage was primarily due to an unfavorable changechanges in product mix, a negative impact from production inefficiencies associated with initial production volumes of new products, and certain supply chain cost increases.
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VICOR CORPORATION
Management’s Discussion and Analysis of
Financial Condition and Results of Operation
September 30, 2022
Selling, general, and administrative expenses were $18,568,000$22,719,000 for the firstthird quarter of 2022, an increase of $1,614,000,$5,397,000, or 9.5%31.2%, from $16,954,000$17,322,000 for the firstthird quarter of 2021. Selling, general, and administrative expenses as a percentage of net revenues increased to 21.0%22.0% for the firstthird quarter of 2022 from 19.1%20.4% for the firstthird quarter of 2021. The components of the $1,614,000$5,397,000 increase in selling, general and administrative expenses for the firstthird quarter of 2022 from the firstthird quarter of 2021 were as follows (dollars in thousands):
Increase (decrease) | ||||||||
Outside services | $ | 492 | 86.8 | %(1) | ||||
Legal fees | 490 | 83.0 | %(2) | |||||
Compensation | 485 | 4.3 | %(3) | |||||
Depreciation and amortization | 318 | 39.9 | %(4) | |||||
Travel expense | 136 | 60.8 | % | |||||
Audit and accounting fees | 109 | 16.3 | % | |||||
Facilities allocations | (158 | ) | (37.4 | )% | ||||
Commissions | (302 | ) | (32.1 | )%(5) | ||||
Other, net | 44 | 2.9 | % | |||||
$ | 1,614 | 9.5 | % | |||||
Increase (decrease) | ||||||||
Legal fees | $ | 3,538 | 399.4 | %(1) | ||||
Compensation | 694 | 6.3 | %(2) | |||||
Advertising | 546 | 68.7 | %(3) | |||||
Depreciation and amortization | 300 | 36.3 | %(4) | |||||
Audit and accounting fees | 236 | 48.1 | %(5) | |||||
Travel expense | 235 | 67.4 | %(6) | |||||
Other, net | (152) | (5.1) | % | |||||
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$ | 5,397 | 31.2 | % | |||||
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(1) |
Increase primarily attributable to an increase in activity related to the SynQor litigation (see Note 10 to the Condensed Consolidated Financial Statements) and for certain corporate legal matters. |
Increase primarily attributable to an increase in headcount, annual compensation adjustments in May |
(3) | Increase primarily attributable to increases in sales support expenses, direct mailings, and advertising in trade publications. |
(4) | Increase attributable to net additions of furniture and fixtures and capitalization of building improvements. |
(5) | Overall increase in audit and tax fees. |
(6) | Increase primarily attributable to |
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VICOR CORPORATION
Management’s Discussion and Analysis of
Financial Condition and Results of Operation
September 30, 2022
Research and development expenses were $14,253,000$14,747,000 for the firstthird quarter of 2022, an increase of $1,227,000,$1,228,000, or 9.4%9.1%, compared to $13,026,000$13,519,000 for the firstthird quarter of 2021. As a percentage of net revenues, research and development expenses increaseddecreased to 16.1%14.3% for the firstthird quarter of 2022 from 14.7%15.9% for the firstthird quarter of 2021. The components of the $1,227,000$1,228,000 increase in research and development expenses were as follows (dollars in thousands):
Increase | ||||||||
Compensation | $ | 393 | 4.2 | %(1) | ||||
Overhead absorption | 187 | 35.8 | %(2) | |||||
Supplies | 175 | 60.6 | %(3) | |||||
Depreciation and amortization | 75 | 14.5 | % | |||||
Equipment set-up | 57 | 47.8 | % | |||||
Computer expense | 56 | 32.3 | % | |||||
Travel expense | 47 | 212.9 | % | |||||
Other, net | 237 | 8.0 | % | |||||
$ | 1,227 | 9.4 | % | |||||
Increase (decrease) | ||||||||
Compensation | $ | 654 | 6.7 | %(1) | ||||
Supplies | 348 | 91.8 | %(2) | |||||
Facilities allocations | 139 | 19.8 | % | |||||
Computer and software expense | 136 | 74.1 | % | |||||
Depreciation and amortization | 116 | 22.9 | % | |||||
Outside services | 96 | 82.6 | % | |||||
Overhead absorption | (146 | ) | (28.7 | )% | ||||
Project and pre-production materials | (387 | ) | (19.7 | )%(3) | ||||
Other, net | 272 | 56.8 | % | |||||
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$ | 1,228 | 9.1 | % | |||||
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(1) | Increase primarily attributable to an increase in headcount, annual compensation adjustments in May |
(2) |
Increase in engineering supplies. |
(3) | Decrease primarily attributable to decreased prototype development costs for Advanced Products. |
Litigation-related expense was $6,500,000 for the third quarter of 2022 which related to the SynQor litigation, as compared to $0 for the third quarter of 2021. See Note 10 to the Condensed Consolidated Financial Statements for additional information.
The significant components of ‘‘Other“Other income (expense), net’’net” for the three months ended March 31,September 30, and the changes between the periods were as follows (in thousands):
2022 | 2021 | Increase (decrease) | ||||||||||
Foreign currency losses, net | $ | (453 | ) | $ | (110 | ) | $ | (343 | ) | |||
Interest income (expense), net | (315 | ) | 267 | (582 | ) | |||||||
Rental income | 198 | 198 | — | |||||||||
Other, net | 2 | 39 | (37 | ) | ||||||||
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$ | (568 | ) | $ | 394 | $ | (962 | ) | |||||
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2022 | 2021 | Increase (decrease) | ||||||||||
Rental income | $ | 198 | $ | 198 | $ | — | ||||||
Interest income | 142 | 193 | (51 | ) | ||||||||
Foreign currency losses, net | (207 | ) | (163 | ) | (44 | ) | ||||||
Other, net | 29 | 4 | 25 | |||||||||
$ | 162 | $ | 232 | $ | (70 | ) | ||||||
VICOR CORPORATION
Management’s Discussion and Analysis of
Financial Condition and Results of Operation
September 30, 2022
Our exposure to market risk fluctuations in foreign currency exchange rates relates to the operations of Vicor Japan Company, Ltd. (“VJCL”), for which the functional currency is the Japanese Yen, and all other subsidiaries in Europe and Asia, for which the functional currency is the U.S. Dollar. These subsidiaries in Europe and Asia experienced more unfavorable foreign currency exchange rate fluctuations in the firstthird quarter of 2022 compared to the firstthird quarter of 2021.
Income before income taxes was $4,942,000$2,436,000 for the firstthird quarter of 2022, as compared to $14,952,000$12,366,000 for the firstthird quarter of 2021.
The benefitprovision (benefit) for income taxes and the effective income tax rates for the three months ended March 31,September 30, 2022 and 2021 were as follows (dollars in thousands):
2022 | 2021 | |||||||
Benefit for income taxes | $ | (48 | ) | $ | (143 | ) | ||
Effective income tax rate | (1.0 | )% | (1.0 | )% |
2022 | 2021 | |||||||
Provision (benefit) for income taxes | $ | 641 | $ | (886 | ) | |||
Effective income tax rate | 26.3 | % | (7.2 | )% |
The effective tax rates were lower than the statutory tax rates for the three months ended March 31,September 30, 2022 and 2021 primarily due to the Company’s full valuation allowance position against domestic deferred tax assets. The benefitprovision (benefit) for income taxes for the three months ended March 31,September 30, 2022 and 2021 included estimated federal, state and foreign income taxes in jurisdictions in which the Company does not have sufficient tax attributes, offset by excess tax benefits related to stock based compensation during those periods.
See Note 8 to the Condensed Consolidated Financial Statements for disclosure regarding our current assessment of the valuation allowance against all domestic deferred tax assets, and the possible release (i.e., reduction) of the allowance in the future.
We reported net income for the firstthird quarter of 2022 of $4,999,000,$1,792,000, or $0.11$0.04 per diluted share, compared to $15,092,000,$13,259,000, or $0.34$0.29 per diluted share, for the firstthird quarter of 2021.
Nine Months Ended September 30, 2022 Compared to Nine Months Ended September 30, 2021
Net revenues for the ninemonths ended September 30, 2022 were $293,586,000, an increase of $24,503,000, or 9.1%, from $269,083,000 for the nine months ended September 30, 2021. Net revenues, by product line, for the nine months ended September 30, 2022 and the nine months ended September 30, 2021 were as follows (dollars in thousands):
(Decrease) increase | ||||||||||||||||
2022 | 2021 | $ | % | |||||||||||||
Brick Products | $ | 113,796 | $ | 150,255 | $ | (36,459 | ) | (24.3 | )% | |||||||
Advanced Products | 179,790 | 118,828 | 60,962 | 51.3 | % | |||||||||||
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Total | $ | 293,586 | $ | 269,083 | $ | 24,503 | 9.1 | % | ||||||||
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The increase in net revenues for Advanced Products was primarily the result of growth in the data center and high performance computing business. The decrease in net revenues for Brick Products was primarily due to unfavorable market conditions in the Asia Pacific region and a shift in resource allocation to the Advanced Products.
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VICOR CORPORATION
Management’s Discussion and Analysis of
Financial Condition and Results of Operation
September 30, 2022
Gross margin for the nine months ended September 30, 2022 decreased $5,964,000, or 4.3%, to $131,420,000 from $137,384,000 for the nine months ended September 30, 2021. Gross margin, as a percentage of net revenues, decreased to 44.8% for the nine month period ended September 30, 2022, as compared to 51.1% for the nine month period ended September 30, 2021. The decrease in gross margin dollars and gross margin percentage was primarily due to changes in product mix, a negative impact from production inefficiencies associated with initial production volumes of new products, and certain supply chain cost increases.
Selling, general and administrative expenses were $61,322,000 for the nine months ended September 30, 2022, an increase of $10,457,000, or 20.6%, compared to $50,865,000 for the nine months ended September 30, 2021. Selling, general and administrative expenses as a percentage of net revenues increased to 20.9% for the nine months ended September 30, 2022 from 18.9% for the nine months ended September 30, 2021. The components of the $10,457,000 increase in selling, general and administrative expenses for the nine months ended September 30, 2022 compared to the nine months ended September 30, 2021 were as follows (dollars in thousands):
Increase (decrease) | ||||||||
Legal fees | $ | 5,562 | 250.0 | %(1) | ||||
Compensation | 2,645 | 8.0 | %(2) | |||||
Outside services | 804 | 45.0 | %(3) | |||||
Depreciation and amortization | 732 | 29.8 | %(4) | |||||
Travel expense | 621 | 75.1 | %(5) | |||||
Advertising | 522 | 21.8 | %(6) | |||||
Commissions | (365 | ) | (13.9 | )%(7) | ||||
Other, net | (64 | ) | (1.2 | )% | ||||
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$ | 10,457 | 20.6 | % | |||||
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(1) | Increase primarily attributable to an increase in activity related to the SynQor litigation (see Note 10 to the Condensed Consolidated Financial Statements) and for certain corporate legal matters. |
(2) | Increase primarily attributable to an increase in headcount, annual compensation adjustments in May 2022, and higher stock-based compensation expense associated with stock options awarded in April 2022. |
(3) | Increase primarily attributable to an increase in the use of outside service providers at our Andover, MA facility. |
(4) | Increase attributable to net additions of furniture and fixtures and capitalization of building improvements. |
(5) | Increase primarily attributable to an increase in travel by the Company’s sales and marketing personnel. |
(6) | Increase primarily attributable to increases in sales support expenses, direct mailings, and advertising in trade publications. |
(7) | Decrease primarily attributable to a decrease in net revenues subject to commissions. |
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VICOR CORPORATION
Management’s Discussion and Analysis of
Financial Condition and Results of Operation
September 30, 2022
Research and development expenses were $44,516,000 for the nine months ended September 30, 2022, an increase of $4,698,000, or 11.8%, from $39,818,000 for the nine months ended September 30, 2021 As a percentage of net revenues, research and development expenses increased to 15.2% for the nine month period ended September 30, 2022 from 14.8% for the nine month period ended September 30, 2021. The components of the $4,698,000 increase in research and development expenses for the nine months ended September 30, 2022 compared to the nine months ended September 30, 2021 were as follows (dollars in thousands):
Increase | ||||||||
Compensation | $ | 1,865 | 6.5 | %(1) | ||||
Supplies | 821 | 76.8 | %(2) | |||||
Overhead absorption | 413 | 22.8 | %(3) | |||||
Depreciation and amortization | 297 | 19.6 | %(4) | |||||
Facilities allocations | 271 | 13.1 | %(5) | |||||
Computer and software expense | 219 | 39.2 | %(6) | |||||
Travel expense | 156 | 143.8 | % | |||||
Deferred costs | 140 | 29.2 | % | |||||
Other, net | 516 | 6.3 | % | |||||
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$ | 4,698 | 11.8 | % | |||||
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(1) | Increase primarily attributable to an increase in headcount, annual compensation adjustments in May 2022, and higher stock-based compensation expense associated with stock options awarded in April 2022. |
(2) | Increase in engineering supplies. |
(3) | Increase primarily attributable to a decrease in R&D personnel incurring time on production activities, compared to R&D activities. |
(4) | Increase attributable to net additions of furniture and fixtures and capitalization of building improvements. |
(5) | Increase primarily attributable to an increase in utilities and building maintenance expenses. |
(6) | Increase primarily attributable to an increase in computer and software expenses. |
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VICOR CORPORATION
Management’s Discussion and Analysis of
Financial Condition and Results of Operation
September 30, 2022
Litigation-related expense was $6,500,000 for the nine months ended September 30, 2022 which related to the SynQor litigation, as compared to $0 for the nine months ended September 30, 2021. See Note 10 to the Condensed Consolidated Financial Statements for additional information.
The significant components of “Other income (expense), net” for the nine months ended September 30, 2022 and the nine months ended September 30, 2021 and the changes from period to period were as follows (in thousands):
2022 | 2021 | Increase (decrease) | ||||||||||
Foreign currency losses, net | $ | (1,057 | ) | $ | (285 | ) | $ | (772 | ) | |||
Rental income | 594 | 594 | — | |||||||||
Interest income (expense), net | 107 | 757 | (650 | ) | ||||||||
Other, net | 34 | (67 | ) | 101 | ||||||||
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$ | (322 | ) | $ | 999 | $ | (1,321 | ) | |||||
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Our exposure to market risk fluctuations in foreign currency exchange rates relates to the operations of VJCL, for which the functional currency is the Japanese Yen, and all other subsidiaries in Europe and Asia, for which the functional currency is the U.S. Dollar. These subsidiaries in Europe and Asia have experienced more unfavorable foreign currency exchange rate fluctuations in 2022 compared to 2021. “Interest income (expense), net” includes an immaterial error correction of $834,000 related to the amortization of bond premiums on available for sale securities.
Income before income taxes was $18,760,000 for the nine months ended September 30, 2022, as compared to $47,700,000 for the nine months ended September 30, 2021.
The provision (benefit) for income taxes and the effective income tax rates for the nine months ended September 30, 2022 and 2021 were as follows (dollars in thousands):
2022 | 2021 | |||||||
Provision (benefit) for income taxes | $ | 1,395 | $ | (30 | ) | |||
Effective income tax rate | 7.4 | % | (0.1 | )% |
The effective tax rates were lower than the statutory tax rates for the nine months ended September 30, 2022 and 2021 primarily due to the Company’s full valuation allowance position against domestic deferred tax assets. The provision (benefit) for income taxes for the nine months ended September 30, 2022 and 2021 included estimated federal, state and foreign income taxes in jurisdictions in which the Company does not have sufficient tax attributes, offset by excess tax benefits related to stock based compensation during those periods.
See Note 8 to the Condensed Consolidated Financial Statements for disclosure regarding our current assessment of the valuation allowance against all domestic deferred tax assets, and the possible release (i.e., reduction) of the allowance in the future.
We reported net income for the nine months ended September 30, 2022 of $17,384,000, or $0.39 per diluted share, as compared to $47,745,000, or $1.06 per diluted share, for the nine months ended September 30, 2021.
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VICOR CORPORATION
Management’s Discussion and Analysis of
Financial Condition and Results of Operation
September 30, 2022
Liquidity and Capital Resources
As of March 31,September 30, 2022, we had $191,050,000$182,098,000 in cash and cash equivalents and $20,003,000$19,949,000 of highly liquid short-term investments. The ratio of total current assets to total current liabilities was 7.0:5.6:1 as of March 31,September 30, 2022 and 7.3:1 as of December 31, 2021. Working capital, defined as total current assets less total current liabilities, decreased $12,633,000$13,873,000 to $295,034,000$293,794,000 as of March 31,September 30, 2022 from $307,667,000 as of December 31, 2021.
The changes in working capital from December 31, 2021 to March 31,September 30, 2022 were as follows (in thousands):
Increase (decrease) | ||||
Cash and cash equivalents | $ | 8,632 | ||
Short-term investments | (25,212 | ) | ||
Accounts receivable | (2,438 | ) | ||
Inventories, net | 6,539 | |||
Other current assets | 313 | |||
Accounts payable | (1,383 | ) | ||
Accrued compensation and benefits | 68 | |||
Accrued expenses | 1,079 | |||
Sales allowances | (141 | ) | ||
Short-term lease liabilities | 337 | |||
Income taxes payable | 45 | |||
Short-term deferred revenue | (472 | ) | ||
$ | (12,633 | ) | ||
Increase (decrease) | ||||
Cash and cash equivalents | $ | (320 | ) | |
Short-term investments | (25,266 | ) | ||
Accounts receivable | 1,190 | |||
Inventories | 27,014 | |||
Other current assets | (1,225 | ) | ||
Accounts payable | (2,815 | ) | ||
Accrued compensation and benefits | (410 | ) | ||
Accrued expenses | (1,596 | ) | ||
Accrued litigation | (6,500 | ) | ||
Short-term deferred revenue | (4,236 | ) | ||
Other | 291 | |||
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$ | (13,873 | ) | ||
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The primary sources of cash for the threenine months ended March 31,September 30, 2022 were $25,000,000 from the sale or maturities of short-term investments, $4,585,000$22,010,000 generated from operations, and $1,810,000$4,147,000 received in connection with the exercise of options to purchase our Common Stock awarded under our stock option plans and the issuance of Common Stock under our 2017 Employee Stock Purchase Plan. The primary uses of cash during the threenine months ended March 31,September 30, 2022 were for the purchase of property and equipment of $22,683,000.
In November 2000, our Board of Directors authorized the repurchase of up to $30,000,000 of our Common Stock (the “November 2000 Plan”). The November 2000 Plan authorizes us to make such repurchases from time to time in the open market or through privately negotiated transactions. The timing and amounts of Common Stock repurchases are at the discretion of management based on its view of economic and financial market conditions. We did not repurchase shares of Common Stock under the November 2000 Plan during the threenine months ended March 31,September 30, 2022. As of March 31,September 30, 2022, we had approximately $8,541,000 remaining available for repurchases of our Common Stock under the November 2000 Plan.
As of March 31,September 30, 2022, we had a total of approximately $32,330,000$27,804,000 of cancelable and non-cancelable capital expenditure commitments, principally for manufacturing and production equipment, which we intend to fund with existing cash, and approximately $6,781,000$6,637,000 of capital expenditure items which had been received and included in Property, plant and equipment in the accompanying Condensed Consolidated Balance Sheets, but not yet paid for. As of March 31,September 30, 2022, we had approximately $19,100,000$7,627,000 of remaining capital expenditures expected to be incurred through the remainder of 2022 associated with the construction of a 90,000 sq. ft. addition to the Company’s existing manufacturing facility and the installation of new manufacturing and production equipment. Our primary needs for liquidity are for making continuing investments in manufacturing and production equipment and for funding the construction of the additional manufacturing space adjoining our existing Andover manufacturing facility (as described above), including architectural and construction costs. We believe cash generated from operations together with our available cash and cash equivalents and short-term investments will be sufficient to fund planned operational needs, capital equipment purchases, and the planned construction, for the foreseeable future.
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VICOR CORPORATION
Management’s Discussion and Analysis of
Financial Condition and Results of Operation
September 30, 2022
We do not consider the impact of inflation and changing prices on our business activities or fluctuations in the exchange rates for foreign currency transactions to have been significant during the last three fiscal years.
Critical Accounting Policies and Estimates
There have been no material changes in our judgments and assumptions associated with the development of our critical accounting estimates during the period ended March 31,September 30, 2022. Refer to the section entitled “Critical Accounting Policies and Estimates” in Part II, Item 7 – “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of the Company’s Annual Report on Form
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Vicor Corporation
September 30, 2022
Item 3 — Quantitative and Qualitative Disclosures About Market Risk
We are exposed to a variety of market risks, including changes in interest rates affecting the return on our cash and cash equivalents, our short-term investments and fluctuations in foreign currency exchange rates. As our cash and cash equivalents and short-term investments consist principally of cash accounts, money market securities, and U.S. Treasury securities, which are short-term in nature, we believe our exposure to market risk on interest rate fluctuations for these investments is not significant. As of March 31,September 30, 2022, our long-term investment portfolio, recorded on our Condensed Consolidated Balance Sheet as “Long-term investment, net”, consisted of a single auction rate security with a par value of $3,000,000, purchased through and held in custody by a broker-dealer affiliate of Bank of America, N.A., that has experienced failed auctions (the “Failed Auction Security”) since February 2008. While the Failed Auction Security is Aaa/AA+ rated by major credit rating agencies, collateralized by student loans and guaranteed by the U.S. Department of Education under the Federal Family Education Loan Program, continued failure to sell at its periodic auction dates (i.e., reset dates) could negatively impact the carrying value of the investment, in turn leading to impairment charges in future periods. Periodic changes in the fair value of the Failed Auction Security attributable to credit loss (i.e., risk of the issuer’s default) are recorded through earnings as a component of “Other income (expense), net”, with the remainder of any periodic change in fair value not related to credit loss (i.e., temporary
Our exposure to market risk for fluctuations in foreign currency exchange rates relates to the operations of VJCL, for which the functional currency is the Japanese Yen, and changes in the relative value of the Yen to the U.S. Dollar. The functional currency of all other subsidiaries in Europe and other subsidiaries in Asia is the U.S. Dollar. While we believe the risk of fluctuations in foreign currency exchange rates for these subsidiaries is generally not significant, they can be subject to substantial currency changes, and therefore foreign exchange exposures.
Item 4 — Controls and Procedures
(a) | Disclosure regarding controls and procedures. |
As required by
A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the control system’s objectives will be met. Accordingly, management, including the CEO and CFO, recognizes our disclosure controls or our internal control over financial reporting may not prevent or detect all errors and all fraud. The design of a control system must reflect the fact there are resource constraints, and the benefits of controls must be considered relative to their costs. Further, because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance misstatements due to error or fraud will not occur or that all control issues and instances of fraud, if any, within the Company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty and that breakdowns can occur because of simple error or mistake. Controls can also be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the controls. The design of any system of controls is based in part on certain assumptions about the
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Vicor Corporation
September 30, 2022
likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Projections of any control’s effectiveness to future periods are subject to risks. Over time, controls may become inadequate because of changes in conditions or deterioration in the degree of compliance with policies or procedures.
(b) | Changes in internal control over financial reporting. |
There was no change in our internal control over financial reporting that occurred during the fiscal quarter ended March 31,September 30, 2022, that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
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Vicor Corporation
Part II – Other Information
September 30, 2022
Item 1 — Legal Proceedings
See Note 10.
Item 1A — Risk Factors
There have been no material changes in the risk factors described in Part I, Item 1A – “Risk Factors” of the Company’s Annual Report on
Our operations could be affected by the complex laws, rules and regulations to which our business is subject, and political and other actions may adversely impact our business.
We are subject to laws and regulations domestically and worldwide, affecting our operations in areas including, but not limited to, intellectual property ownership and infringement; taxes; import and export requirements and tariffs; anti-corruption; business acquisitions; foreign exchange controls and cash repatriation restrictions; data privacy requirements; employment; product regulations; cybersecurity; environmental, health, and safety requirements; and climate change. Compliance with such requirements can be onerous and expensive and may impact our business operations negatively. Should any of these laws, rules and regulations be amended or expanded, or new ones enacted, we could incur materially greater compliance costs and/or restrictions on our ability to manufacture our products and operate our business.
Government actions, including trade protection and national security policies of U.S. and foreign government bodies, such as tariffs, import or export regulations, including deemed export restrictions, trade and economic sanctions, decrees, quotas or other trade barriers and restrictions could affect our ability or the ability of our customers and end users to sell products in certain countries and thereby have a material adverse effect on our business, revenue and results of operations. For example, in 2022, the U.S. government imposed additional export controls on certain advanced computing semiconductor chips (chips, advanced computing chips, integrated circuits (“ICs”)), certain semiconductor manufacturing items and transactions for certain IC end use, including supercomputer end uses. Furthermore, the U.S. government has continued to expand, the number of foreign entities on the Entity List (a restricted party list that imposes additional licensing requirements on shipments to listed parties). These recent export controls are, in part, intended to restrict the ability of the People’s Republic of China to obtain advanced computing chips, develop and maintain supercomputers, and manufacture advanced semiconductors. The implementation, interpretation and impact on our business of these rules and other regulatory actions taken by the U.S. government is uncertain and evolving, and these rules, other regulatory actions or changes, and other actions taken by the governments of either the U.S. or China, or both, that have occurred and may occur in the future could materially and adversely affect our business, revenue and results of operations.
While we have policies and procedures in place to ensure compliance with sanctions and trade restrictions and other applicable laws, our employees, contractors, partners, and agents may take actions in violation of such policies and applicable law, for which we may be ultimately held responsible. Intentional and unintentional violations of these laws can result in fines and penalties; criminal sanctions against us, our officers, or our employees; prohibitions on the conduct of our business; and damage to our reputation, any of which could have a material and adverse impact on our business, operating results and financial condition.
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Vicor Corporation
Part II – Other Information
September 30, 2022
Item 6 — Exhibits
Exhibit Number | Description | |
3.1 | Restated Certificate of Incorporation, dated February 28, 1990 (1) | |
3.2 | Certificate of Ownership and Merger Merging Westcor Corporation, a Delaware Corporation, into Vicor Corporation, a Delaware corporation, dated December 3, 1990 (1) | |
3.3 | Certificate of Amendment of Restated Certificate of Incorporation, dated May 10, 1991 (1) | |
3.4 | Certificate of Amendment of Restated Certificate of Incorporation, dated June 23, 1992 (1) | |
3.5 | Bylaws, as amended (2) | |
31.1 | Certification of Chief Executive Officer pursuant to Rule 13a-14(a) of the Exchange Act. | |
31.2 | Certification of Chief Financial Officer pursuant to Rule 13a-14(a) of the Exchange Act. | |
32.1 | Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. | |
32.2 | Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. | |
101.INS | Inline XBRL Instance Document – the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document. | |
101.SCH | Inline XBRL Taxonomy Extension Schema Document. | |
101.CAL | Inline XBRL Taxonomy Extension Calculation Linkbase Document. | |
101.DEF | Inline XBRL Taxonomy Extension Definition Linkbase Document. | |
101.LAB | Inline XBRL Taxonomy Extension Label Linkbase Document. | |
101.PRE | Inline XBRL Taxonomy Extension Presentation Linkbase Document. | |
104 | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101) (1) Filed as an exhibit to the Company’s Annual Report on Form 10-K filed on March 29, 2001 (FileNo. 000-18277) and incorporated herein by reference.(2) Filed as an exhibit to the Company’s Current Report on Form 8-K filed on June 4, 2020 (FileNo. 000-18277) and incorporated herein by reference. |
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
VICOR CORPORATION | ||||||||
Date: | By: | /s/ Patrizio Vinciarelli | ||||||
Patrizio Vinciarelli | ||||||||
Chairman of the Board, President and | ||||||||
Chief Executive Officer | ||||||||
(Principal Executive Officer) |
Date: | By: | /s/ James F. Schmidt | ||||||
James F. Schmidt | ||||||||
Vice President, Chief Financial Officer | ||||||||
(Principal Financial Officer) |
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