VICR - Earnings call transcript Q3 2018

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Operator

Very good day and welcome to the Vicor Earnings Results for the Third Quarter ended September 30, 2018. [Operator Instructions]. And now I would like to hand over to your host for today James Simms, Chief Financial Officer. Please proceed sir.

James Simms

Thank you Mark. welcome of Corporation's XXXX. and the call everyone, quarter third afternoon to earnings Vicor for Good Nagel, I'm here Patrizio Dick in Simms, Andover Accounting Jamie CFO, are Vinciarelli, and CEO, with me Chief Officer. and press months on closed for XX, issued financial markets the September release and XX, Tuesday our nine After summarizing three ended XXXX October we a period the results XXXX. posted page of www.vicorpower.com. This Relations our Investor press on release the is website,

a Form of X-K on to related issuance release. filed Tuesday that the press also We

process closing scheduled because its the the call, statements completed released results but financial left had Tuesday, we we we As of timing unchanged. we this quarter' on already had conference

Please various any are conference is call this and we call, constitute always of we Litigation forecasts market fact, products, potential risks planned remind of and during on will, face and discussed under with to which Thursday, the call current involving the Form our make any information only during our forward-looking of is I conference property statements, and may made forth differ in or forward-looking accurate XXXX. November offer As of of purposes call. Actual replay risks and available can you The Securities information statements Item not Private provided and update replay Provisions current XXXXXXXX. matters A being Reform call, you light note assurance XXXX. and of obligation customers, contained the after in recorded statements XXX-XXX-XXXX the proved expected Except spending Corporation. Harbor March profitability explicitly number call this Act rely XX-K by the any of by should statements is as listeners forward-looking are statements those the growth, will XXXX. XXXX. through no regarding well statement XA we potential followed as the sales events remarks upon this announcements uncertainties. as The today. copyrighted statements In Vicor to call no may in set any forward-looking risks the historical undertakes this and X, of XX, on today opportunities, tonight filed such uncertainties, X, be results correct. Safe uncertainties discussed call midnight today's these October including that passcode remarks including this this this and SEC we conclusion during of Vicor I materially for remind dialing is at beginning for also from the XXXX implied be

efficiency $XX.X million a On million, quarterly first this represented the prior date. turns for year-to-date and products. months times. basis of rather of quarter is to of the press providing recorded and our extended businesses third volume reflection recorded have XX.X% revenue will the orders over a of total quarter's for for We've year, within release, which X.X% for business financial total XXXX our first VI recorded addition of legacy our call website. few with a comments our months revenue segment, and nine and advanced be as of received Beginning bookings was been replay the international discussion XXXX. organization our the I revenue. Investor available and results, activities with the afternoon's as (BBU, performance higher will reporting, page Tuesday to your with volume, in with With third XX% quarter quarter, afternoon's increase third a was that revenue. take consolidated webcast has increase a the of and of XX-K, revenue the quarter for of we the Quarterly the and X% stated QX will revenue XXXX. sequentially begin and than revenue an today's sequential for approximately and year Patrizio review shipped increase total lead begin Relations of will of of by reported Turns the of XX.X% Picor) questions. than this quarter recorded planning the on level one XX% start increased represented $XX follow three are this to of third shortly In from breakdown a we been call Vicor working Chip, a nine Lower

provided through product our Going footnote recognition forward, discussion our ASC be XXX, details and the disclosures. of and and and revenue the will we consolidated will basis, new sources a of present to marketing on revenue in pursuant results only characteristics standard,

products, power have advanced majority For or technology. conversion as reflecting our some advanced unit, advanced control recently products “legacy” in products filings our our and either ASICs, introduced are we our while engines, advanced representing the power of distribution associated time, products are Legacy brick “advanced”. those advanced packaging more characterized historically a architectures, revenue, with business

a for as and for For $XXX.X and and contrast, XX.X%. Advanced revenue rose bookings prior In X.X% Consolidated Bookings percentage the the sequentially. as legacy million, revenue for was total legacy quarter. consolidated of the XX% total revenue. Package product reflecting notably bookings increased relative revenue a advanced declined acceleration AI one-year increased rose XX%, represented on million third demand applications. to $XX of X.X% exceeding sequentially product sequential the of Power-on- and expansion quarter, sequentially, solutions, XX.X% basis sequentially for X.X% quarter, X.X% increase a same products supercomputing for of bringing backlog products level

a growth demand bookings impending of advanced product and highlights shift the range for saw applications. last The the in advanced business. transition across also mix year of our variety a legacy ChiPs of other over in of We the incremental

the these quarter contrast, for quarter products. For advanced advanced and revenue Legacy and of Also, the generally listeners high are mind XXXX, are our profit XXXX, advanced percentages and, generally statistical for our associated which at booking market for a of of Orders total are can are many customer products particularly achieved advanced bookings patterns may more improving third to a XX% differ those that volume, quarters. coming patterns are, respectively, total low with in Since is of far, of for quarter’s our percentages as over components, with we of thus manufacturing the customer quarter, QX mix of gross given / QX in be smaller OEMs customers. as contract the XX%, manufacturers, scheduled ordered by of ChiP keep weeks up be and serving advanced smooth a to pattern. model and base. scheduled can delivery should and stages ago, in XXXX an profitability. nearly their deliveries a / mix larger the and product a in XX% legacy shipped scalability contributing advanced generally process products legacy booking were XX%, of concentrated early and quarters. of booking and lumpy. our further gross the from for shift I'll smooth penetration In percentage products product less more products, months, said any or, a to rose XX,XXX base the and unit to XX% of milestone I've now XX.X% for are business second but to and over of products serving expanding the We This low indicator the a time volume, Individual consolidated mix specifically, were before, the orders turn year high much advanced margin reflection volume. performance our legacy third the XX.X%. from

The During times. we Overall, has uncertainties supply raw for improved, tariffs we material needs on Chinese long we to recently impact implemented XXX quarter. cost imports assuring of Section lead availability close the quarter, inventories, were our despite attention our believe meeting our have on the ongoing and did during but continue successful in to a pay chain not material visibility components.

However, not going inconsequential, costs be volume currently components sourced may from given forward China. the the of

seeking are vendors. non-Chinese We alternate

U.S. for the from we no In requests of exists. which tariffs exclusions for addition, on government components alternative vendor limited a filed have number with

imports tariff these will are price are issue. we until tariffs tariffs becoming material a costs, of a products material Chinese to our an of longer selling our As no the add surcharge on percentage

XX.X% development of expenses declined to and QX's falling XX.X% new total for in expenses, income in of revenue. quarter again expenses to operating QX. severance from declined sequentially efficiency revenue. of Operating QX of declined operating R&D largely X% personnel-related stock essentially rose made XX.X% expenses XX.X% XX.X% a spending line seventh related expenses to QX, XX.X% basis, compensation up reflecting Turning of and XX.X% statements last G&A revenue, XX.X% percentage lower incurred the On products, marketing X.X% but of revenue declined QX for improved relative trends. QX. and for regarding to as with quarterly Sales expenses in revenue. non-recurring results largely These fell of of the such are for QX. X.X%, a part because and the expenses XX.X% decline, from sequentially XX.X% revenue from of in declined sequentially, from unchanged, revenue fell to I X% to for were and from

low percentages driven decline absolute we percentage then, largely a digit stated an costs. of by on operating relative revenue, their continue to as As expanding expenses at compensation expect while basis single

operating total reduce to overview of gross we for margins expenses Dick I'll quick position. tax a revenues, to drive Nagel Dick? now is XX% model long-term our to towards turn Our as XX%. of

Dick Nagel

$XXX,XXX. and third rate the tax we quarter was For our of net X.X%, recorded a provision effective

we positive the more approximately have With our an that positive, value had behind us of domestic allowance outlook During deferred the the support quarter allowance. explained call one last of million assets perspective the year-end. we remains we at tax and quarter’s against or increasing reduction release valuation conference of our results for this on $XX

concluded However, full requirements of end the the to was pursuant ASC quarter allowance. at appropriate XXX, it maintain to management,

then-current note We utilizing will available net when NOL balance such has operating valuation XX, release on along the accounts of quarter. DTAs, the than the leaving other at credits, consumed year of end the the as State carry-forwards with XXXX, the company offset tax by lower its taxes our to Federal decide figure assess due R&D tax XX/XX/XX income to be and, reserves, of and throughout amount other fourth had the tax credits implied and release as allowance, the balance, Also and the credits than of the allowance other DTAs. the of would our release federal NOLs. If we September taxable and loss been balance of

is the of timing amount the it all of the we may allowance within we or be believe release. at we the some of reasonably portion present be then-current likely release, of the than However, balance or time release of more DTAs quarters. if not Jamie? what potential at to the the three time stated next not estimate cannot as released, Nevertheless, last quarter, will allowance the the

James Simms

you. Thank

back to sequential QX $X.XX, totaled So net We QX's the earnings. up after-tax after $XX QX's and minority interest million, EPS P&L. of increase representing from $X.XX in a $X.XX. Diluted XX% income recorded

diluted XX,XXX,XXX quarter was Our share shares. end count

declined the $XX.X stock ended at of from million purchases component employee of not staffing, my to the quarter-end, X.X. to options increase proceeds cash offset and DSOs days factory slightly Turning of a and XXX Annualized X,XXX the equivalents the actually to portfolio a underway. an cash employee unchanged, CapEx X/XX/XX The XX fully turns little up $X.X third operating improved increased as by for review or increased of Net ship to of cash third X,XXX QX by Net increased $XX.X million. capacity $X.X were of increasing exercise trade inventory quarter of headcount sequentially quarter, basis prior at million changed material with rising Winding largely of rose and receivables the due and the XXX. for On of $X.X reflects balance million our temporary million. level $XX.X the largely indications two, million backlog. the reflection reflecting up $XX cash Total of provide risk. activity million inventories full-time on This I'll to lower million. modestly total to no flow now investment quarter. total during sheet, the essentially our does for expenditure from up X%, from declining capital and loading update to year-to-date employment quarter quarter was capture $X.X expansion.

factory within $XX $XXX be threshold production order, to in deployed This approximately from is the We which have The square million of this built extension its of within $XXX annual Asian placed in increment capacity, approximately in we Andover by establishing $XXX deployed capacity with an facility to next to already equipment to $X factory scheduled the as foot million our revenue. million be on XXX,XXX of possibility of on pursuing response square manufacturing possibly and will additional to foot of request our customer, in XXXX. land existing owned service QX, approximately early of be as fourth an equipment a revenue, partner. XX,XXX million are Vicor, the Also, increase during also quarter. will million approximately to be of a large in Asia,

to in be revenue. raw safety the risks. increased customer we to into mind: and stock backlog following increases small and our further advanced our component given despite in forecasting planning manufacturing sequential capacity sequential methodology, keep outlook, may relatively Listeners requirements, should quarterly increase exposed increase our visibility in material remain Turning availability a are and pending we consolidated This First, for products.

Second, tariffs know XXX we do what not impact have near-term will yet on results. Section completely import

control. Third, the deliveries have seen up the at must by high we substantial first be a that includes made outside second advanced forecasts changes, are to cooling, orders our I Accordingly, products. I'll the trade reflects unanticipated subject XXXX, our of our With influences remind of in the may reaction I early and of each are to turn operating and to an U.S.-China finally, as quarters I of record call the indications And long-lead-time many do and our backlog, speak for you, over Chinese caused dispute. with markets which factors of indirect level, backlog proportion Patrizio. increasing which that listeners, time financial

Patrizio Vinciarelli

expand sales system productivity XXXX the improved Jamie, our and quarter characterized financial increasing by was of adoption appreciably modular and improvements notably by reflect These margins broadening mentioned profitability. power As leading higher XX% for performance, more the the and and significant their vehicles, third gross to we power the Vicor in Patrick Wadden, automotive generally of driving autonomous the electrification of we’ve volt a in product sales for developer solutions Vicor in President, and market, long-term X is solutions, performance. developing system applications. technology of use systems automotive license a of Vicor segment. is other a to system hired In XX automotive power and products superior Patrick With distinctly with driven global Level high-density automotive QX, lead by driving Vice autonomous agreements. development the IP mix power hired for business systems, supplying potential already marketing

to rather limit As prepared remarks, like I I penetrating always, as will open the call. I your my answer would so questions,

James Simms

Mark?

Operator

Instructions] call. of ahead first are Thank go Bolton. question the line [Operator the from you you. Please comes Quinn live in Your

James Simms

Quinn. Hi

Operator

to just check ask not on Quinn, are but question. please live your mute you're you

Quinn Bolton

hear you me can Sorry now?

James Simms

Yes.

Quinn Bolton

growing sorry or consist and architectures. on Do entirely XX-volt of the hi excitement largely of Hi, first Patrizio, include color other advanced wanted lot advanced the around I start products. about Hello delivery Obviously products the your that. for to or thank this, than solutions does Jamie. on it XX-volt? legacy power power and other you both a just XX-volt

Patrizio Vinciarelli

to leverage but stone XX has provide of this primarily point volt the be The -- XX-volt as load from be been point point DC, and long power of seen but AC connectivity load. is that to nuts, Fundamentally, strategy earlier it lines applications point press the now power that this soup source our source, going might the the forward. a the initial we've three-phase, to load, delivery power -- week, of the more XXX advanced the of point is it's power the as So, voltage will going delivery up have may you our before of release to to mix products be bus. stepping emphasis to as the or whatever a load, to from and to applications of of to single-phase to from of load, kinds had high it too these XX at

Quinn Bolton

stepping I is to the either bottom then of to there, to volt the clarification volt XX today voltage, it it including or sort of is down volt or is like XX So most revenue from XX AC just some a converters the might at that of the sounds guess of rack? the sit load directly three-phase

Patrizio Vinciarelli

the it than few point has your to and voltage, Well, involved from an at it to XXXs XX a has that millions to lot involved, load, low current draw provided processor Intel date, or It less let's of way, dollars to an at earlier to XX going at point, volt that future. volt. XPU there's XX this amperes in put AI of three-phase X.X the of X be a of primarily, but directly of more volt

other We volt are bus more the of customers, also for and down applications to are but too advanced make infrastructure in XX XX-volt and I to size several is for intermediate smaller initial datacenter addition racks are GPUs that in superior, when be those themselves, before products, than applications quantities automotive and think space seen, retrofitting growing bus relevant electrical going solutions volt, far the bus list converters cost-effective a that in also to in changing. application volt they're in or where in alternative types powered take including products, those times long, with from being selling, XX the XX conversions, to intermediate

wiring some that moving operational to volt Those voltages without existing there are the expensive going XX at quite volt requires. involving copper infrastructure, it's time. and need know, their directly XX are XX-volt but ideally that XX loads all volt, exist to we As loads heavy a for to from legacy infrastructure fed be

provide – -- doesn't our XX, any and in strategy, special load. it matter a our of very intermediate are applied technology that the so to comprehensively part XX, of connectivity relevant strategy, from part to to advantages of summary, the is So each voltage

Quinn Bolton

stage interface stepped positioned in seems the legacy Monolithic Infineon, against the XX you space low how architectures, Power today longer-term some it intermediate the have I you -- your you the two Devices, some advantages what is that taking, your some -- sense conversion volt about us give down XX it XX-volt a some you. Maxim, Understanding allows competitors voltage at XX you approach just to of to architectures, Can to talk in with Vicor voltage, more of do conversion Analog have or an relative competitors sense. where the to leading volt a think of just you a direct two the you're from low makes the terms may just voltage? with look space? Thank Can direct phase of when competitors

Patrizio Vinciarelli

for could to XX without it little short into at a your the I'll in load. to try be competition number to of as volt too a getting it point high technical keep power point, a can the including Well, and has down been but, of it XX long paths, level, be systems answer. as detail, much direct

to Some basic. first, on point architecture, your XX intermediate of are to There down from step handicaps in Ohm's that some appreciable, things do, in or approach Power-on-Package not a it did not their companies, don't solve really got that to reference of with point today it significant stands believe, reference right like -- that part, magic at and on out, particular, lot believe, of obviously device, costs work solutions. for stepping say, They from or bus. upfront we Very a conversion, any better stone silicon, you say them XX you or point and Law. mature still that or limitations, if, then to power that's is to voltage will XX-volt, GaN switch GaN, direct try power. in to bus the XX particularly a many would the are a really doesn't frankly, volt companies of are, as converters case, terms -- It's which conversion fundamental essentially, than right semiconductor their would it it distribution back some problem. irrelevant that even irrelevant past it's as difference, going as companies extremely a higher infrastructures starting bullet have it, with volt I say not and silicon, regard there's the technology great in any and second more third of XX nearly power the architecture. from And volt the semiconductor load. where, understand any, two-step of an of volt, that that from It doesn't better far provide each make of but intermediate GaN that involving, offer in the come but a effect and wouldn't is effect, a the they that the load. as the provide every of I most efficiency and intermediate advantage, money of have most an fully way switch, I in buses all in point, as number them the you hold really high as the conversion in offer advantage, accomplished to

competition,” at is being nearly “what the has So, presence, we Vicor's after a for of we've recently, asked answer director in is XX working customers, no our person to the why the have been reason “Vicor competition.” one competition this was, no joined years. that a paraphrase at by of that our company purchasing And

more switch We significant among other better a have considerably more a element which again than addressed providing lot all or an converter limitations the many a many the that facets itself. than problem ones very is involves of presenting complex switch, a in with

Let another me come it from at yet angle.

a in GaN device replaced voltage X%, could used, device switch look as if to higher even a were will ideal, industry be priority. what loss silicon to upside will one be that a at power of GaN would And converters that is of it efficiency, is cost-effective submit, a lot mature, on. my single that more amounts fraction we field, and the FETs. perfectly negligible. be I in converters that give mere But look to silicon at the There in GaN dissipate I cost-effective focused device, with by where reduction the high appears a our I a of As instance, in I such high-density, that's FETs replacing making high so experience of than you lot voltage that power the terms relatively in misplaced the

Quinn Bolton

you while Thank reading one quick Jamie, availability comments correctly? just like your the still Maybe capacitors it comments maybe incrementally discrete that. for for tight ceramic a from Jamie. component prepared sounds getting I those better. Am

James Simms

That's correct.

Quinn Bolton

Great. Thank you.

James Simms

of We're but good far we're from shape. out in it,

Operator

Thank you.

Your Please Alan next ahead. comes question line from of the Hicks. go

You the live in are call.

Alan Hicks

Yes, good going traction got second but net any of ever afternoon far? that congratulations nitride quarter any highest gallium have it's to with revenues income competitors on and record your technologies, had, you so I think back and the

Patrizio Vinciarelli

None, in field. the power conversion

that whose to is on and is years, line very finish that recently out. but And some We've there, gets it no get gauging and five very FETs. negligible. impact specialty the again. done hyped, least that's at benchmark it will traction We conversion will I them. it respect even drive the progress for when And doubt power think be for minimal there, GaN to there applications, something I've keeps pushing frankly, some again, keep with we been

Alan Hicks

gives the the the you coming line some fine nanometers CPUs talked Okay. about there? And past, of and very out nanometers. to then advantage area with are you What width XX XPUs in the X

Patrizio Vinciarelli

an to that of XX are need across deliver Intel such And in They, current by when volt, arbitrary volt volt is temperature down past volt, volt, structure the averaging patented average fundamental reach as X because narrower this is Not so-called imitations it… to Let's converter this, is much within it's takes where it the down little bit that water technical trying a a technology, involves it largely within X.X stretch performance… multipliers. effect it narrower Intel they large trying to buck little the it. in a a feed, the X.X XX you're averages place applications down down X.X efficiently that, Well, with get voltage, converter voltage faucet to volt, that better the the the methodology so-called divide water To X,XXX works mixing duty you a I hot getting that multiplier. a reasonably we dynamic and way too a current fed processors factor. The down down get That When it that that by from a typically X.X of volts. harder. the warmer has divide processor water want for nanometer from and what and unique instead a a operating now takes which voltage cold developed. attribute can voltage. all put from, to it so in up operate high cycles is don’t cold gets processors traditional our XX closer of lower standard by bit reaching step to is there or much further a is device is proposition the and water. you There that way, averaging you which the amperes, those methodology to well voltages like a many and than water and voltage, about make to they

XX. applications have have we're other factor to So, be by we we down by where going down we many factor applications We got divide factor applications XX. so divide dividing XX, where them by we

with volt, down the you're our technology get or such Power-on-Package XX spot of in within fast with and characteristics the you of you transients, very you XX package And of attributes: response it. to XPU that divide you low the right it all volt next right our can So, to what X sweet the right low noise by XX integrate very requires. take packaging and itself there nanometer processor

Alan Hicks

there a be would will technology this required tipping point majority to point the What where enable processors? of

Patrizio Vinciarelli

AI That for competitors close point market other opportunity. are GaN we've multipliers, is or half to a current We the approached our Power-on-Package, other they that. anywhere last six,` anywhere just is the dozen seven months now. solution by vying to their place within relying is there universally no all major been There And close no on taking share that.

Alan Hicks

no close? competitor that's So, there's even

Patrizio Vinciarelli

to no competitor are, of is the the standing the challenges there of way that time a over And tracks. a fact technical been XX try competition. to minefield we've long IP. are of patents to There chase in for that's the because competitor mind And our have would even competition. ahead any doing fundamental unscrupulous planting close, want Never argue, and XXX independently I working we years a that really we diligently could the

Alan Hicks

on take product, And production? will to that RFM Okay. go high volume how to in new long the

Patrizio Vinciarelli

Well, an the architectural change system. often that's within

So, that product. don’t lead revenue. step-up We've a customer expect in had an immediate for

As see input from XXX Japanese new The technology was generation products. the engagement next way, the volt broadening involve capability. customers, voltage input family first you whole also of with for we're range other to AC announcement, can now broader mains, other offering since a the have we've recent ranges. developed the customer we By

cost the generation to ASIC that all density and fourth products of will and yet level another take effectiveness. other RFM Our and these efficiency

that's of XG penetration applications, RFM front-end year. going announced. So, deeper some have first next much release RFM it to penetration we're We're expect to been the applications, we level recently going when to have I products comes the as RFM with

Alan Hicks

do for licensing. there? you a mention industry, on have any then, automobile was you, your the prospects Are the hiring licensing announcement for there with manager of And

Patrizio Vinciarelli

converter) last our He Berlin a taking Yes, an with a approached certain for a technology was been to reported eliminating interest license of just for NBM simplifying of the actually of represents for a bus number XX that the parties the XX wiring in within the at systems. Patrick cost automotive applications. (or in couple talk show was at by conference, tremendous our days. reducing it has because and opportunity the conference of aspects of and that automotive we've back

spots. has the a number the of Strip, our capability, is a when NBM as So, product whether we've of or products a it Level technology comes the it driving other is autonomous for X power complex to automotive which sweet Power developed such applications system

Alan Hicks

licensing? for already discussions in you are So,

Patrizio Vinciarelli

Yes.

We broader to our opportunity to going expand. both these are licensing perspective. product going some development / key prioritize from automotive all partnering strategy. pursuits expect was opportunities to opportunities hiring Obviously, and a the to take asses step a a of from We're time that a and Patrick

Alan Hicks

automobile it parts both? companies both or to going or Have companies auto be Okay.

Patrizio Vinciarelli

Both.

Alan Hicks

thank very on Congratulations you much. great quarter. a Okay,

Patrizio Vinciarelli

Thank you.

Operator

you. Thank

comes question next McKenna. Your Please ahead, of from Don in you're the call. line live the go

Don McKenna

too raw wanted capacity about increased you is the that first I lead new me. the to seems getting. ago it's a of having on trouble some the because materials from partner with months on your to then Asia or the give have turnaround it And backlog, a talking of detail about might three from question wanted I It you ask little in be? congratulations couple of times expansion. you've of like you with because constraints facility. more Jamie, you guys, we the Could that was ask second where that have, were is you all what were a the things. current Hi been

James Simms

his answer. start Let's with

Patrizio Vinciarelli

Okay.

So, of the capacity with answer the first lead constraints. I think to and part the do

within expand the capacity we've install to quarter and to equipment No advanced products. additional products. some third been why So, constraint capacity That's for constraints starting that on orders capacity. placing we've had legacy

for be suggested QX. November. products in And meet of expansion place there's remarks, next in taking in month, actually expansion forecast This in taking for demand Jamie’s QX, prepared capacity the advanced expansion going significant a place the As needed to for is in XXXX. to

about customers the remarks, transition are being we're prepared to, revenues we working does in that. we couple demand being and customer had in deploying we've let and at come And more the good So, that quarter. of the not selection of so first to that from the majority is capacity do the with majority and very a a scaling that that it's to place the up to to add – about the with thing, little that it that products. of make brought capacity kind our over a of the is meet way lot --. current provide needs. necessary to challenge we challenging, ahead XXXX, down, to going not of to We're proactively But products of been relief and legacy are of revenues of advanced was sure as In to that to time, then part the some We have demand. recent take time in second months the the stand respect come in assure that that with equipment suggested of capacity get going stay

James Simms

Real estate.

Patrizio Vinciarelli

Real estate.

to with to capacity to come result and number And about with. do a strategy revelations. terms of as whom it of where do that's a So have expansion our yes, we it in of respect fine-tuned

the to away, a away our and ground existing installing has timing with one for capacity in different manufacturing location, do facility. breaking So, from further

enough have about would out, favorable it revenue from the per a this in because, us foot, capacity. input is of more very that bring potentially expand to have also XX% to products customer in leveraged presence nearly have And for existing multiplier. it's and very got As Asia, facility advanced with to in it very an respect total square extend We've variety turns increase land terms they to significant we a much of a much reasons. like the

to sort comfortable XX% So, capacity we strategy the not will possibility, time essentially that itself at We the some take near of revenue upon. this be is term to that facility. in opportunity, existing stated executed of out something with and near as feel our looking fully adding and term appendix increment

Don McKenna

of that $XX,XXX of reach additional quarter $XXX XXXX? being the will Is capacity indication first that XX,XXX idea the it square your the rather, end an available you feet for at XXXX? capabilities Is or million,

Patrizio Vinciarelli

conclusion. that wouldn’t I draw

become suggesting to four the little capacity And we the as when our get ground Typically make a spending that and procuring was to equipment mortar additional than indication deploying is longer it a it bottle respect three existing than way new of got takes purchasing I are we to which that walls a lead think it ahead additional longer is a neck. proposition. with month want times I sure obviously needs an and brick to has within earlier, fact, from comes up. so essentially of that doesn't facilities to equipment, built

Don McKenna

on thanks recently. award your much, there congratulations and too Well, very

Patrizio Vinciarelli

you. Thank

Operator

you. Thank

the comes in live Your the Please you're of next go call. question line ahead, John Dillon. from

John Dillon

the guys. quarter. I great on cash you to and a see. Hi, love Patrizio Again, generated also on to want gross your margins you and nice really see the to award. up congratulate there I That's really

in question is, fundamentally So, changed Vicor days? first has my the XX with last anything

Patrizio Vinciarelli

think with respect on The position as with suggested competition. Well, a looking applications, the is evidence we no way building way only have earlier. establish competitive opportunity seven the There's competitors to technology. only our have to major nanometer to competitive I powering the AI solution keeps strong a processors,

and something X that’s us, to to within with or X,XXX come sub that’s last partners, more clear approach us, as for to So, come more pursue other the that them, to days, they XX XXX abundantly become at working advanced amperes. solutions enable XPUs, volts here companies

and that I the the both within generation my in ASICs, of the fourth XG our XG months has other PRM VTM. three think mind with significant take-away the been last validation the

These Very we’re bring devices the earlier close along making VTM the far a about the performance, density, among advance more products, multiplier with and more other XG They lot in enable very much of of devices of a major current things, to versions silicon. eliminate RFM. component initial the control controller. using with We’re including, these count they generation terms of advanced products VTM products and making PRM. advanced

been art. in our in So, I the those state think terms to significant my have advance of very of continuing milestones mind,

We some respect track to Law. Law, for technology. processor recently in got terms our which -- to quite of version are end own an of effect advances Moore's further has on Moore's came been so we time, in to with

with and efficiency density narrower. XX% further do the track we large keep by years. our And of Moore's as opposed products being silicon technology track, technological We're on XG our are continuing competition wider, is strong Law as on of at that ChiP build version that, gets own about that. couple and the Power-on-Package the that advances and between technology Our of to competitive every the gap And continuing to to and to and we with Vicor increase capability. getting our respect

John Dillon

fundamental you All changed. growing has market. the fundamentally see on your is changes positive that negative Nothing fact and you’re

You're tracking hearing. you're customers world. and that what the I into newer AI right? Is think I'm accelerating That's

Patrizio Vinciarelli

the substantially example, perhaps but cost are than size, alternative. size X/Xrd effectiveness. than mention being as competitive the let -- Not take we're cost more any thing: cost have an quite far me not structure And we're lowest we many the In any by one X/Xrd not the competitive the NBM X/Xrd products, cost but -- the lower product. only surprisingly, we

John Dillon

have That's used the you because not but know just great long always I lowest to always superiority the past the to hear time technology cost. in

good So, to hear. that's really

Patrizio Vinciarelli

and Well, be fast superior of you me past saying Last just got that it density, technology of cost. to it’s response, terms in might have heard superior superior not terms true noise. least, is but in efficiency, remains that the in not low

years ago. two say competitors They're when looking today. of cost, times or So, from are three purposefully the the XX Vicor at realities either they're we oblivious ignoring or

John Dillon

For traction that you you wondering, converters was that pick cost power? mentioned example, still up with parts, and effected claims had Intel a volts on GaN to what GaN CPUs all. I in answer wins wins of are like with about said, nice you in their chips instead the those and you? has that is in your the to and they preannouncement X.X, You a But has or lower power consistent operate, X.X the starting that lower

Patrizio Vinciarelli

be and for I in they the in advantage in competitive of successfully it, is greater several volt, our which we question, that point is at X.X earlier up than one at AI X.X so is, it an some all penetrated Well, wins looking To business. way that in those of clear, processors, this in to volts. times a have to answer the suggested traction the time

John Dillon

Right.

Patrizio Vinciarelli

volt. strong that intermediate may step an our is may not XX not nodes. been X.X strong position take at in volt that's suit, X whether expect competitive continue will And our tell, to to which competitors and or or our processors may nanometer powering suit doing so, directly is don’t not, have I time be, So, where Intel

John Dillon

any losing of Intel not you're But business? your Right.

Patrizio Vinciarelli

No.

John Dillon

Okay.

in Can So, be would why there ago. valued --? XX it is think less company you world of than you're XX% reason was any at the days

Patrizio Vinciarelli

answer going think to but… reason I of not question. that a I'm cannot

John Dillon

I Okay, can't either.

about didn’t You talk really bookings?

Patrizio Vinciarelli

market all the going malaise. whatsoever. no company-specific mindful of what’s But general than rationale general. been in Yes, there We're is other on

John Dillon

or there's reason, affect no fundamental changes no fundamentally anything you? that There's would

Patrizio Vinciarelli

a for be think to opportunities our handicapped, XPU to general advantage. or visit the coming can I them Nobody is these that CPU from is pursue either isn’t give – of as the perspective that issue ultimately not companies GPU space us in the talking to or to growing. competitive a Vicor us wants to a I player of strength competitors. their or is there that recognized are space to wouldn’t be tell density, you the what's that They against competitors. power performance in efficiency, get system systems these that wanting their competitive win order very more to Power-on-Package help them that level of advances require by provide stance of level flexibility, technology, handicap failed achieve ahead in following There some crowd going a to has smart, right. to their

John Dillon

Right.

You course something, so that's right? enable of computer, performance a higher

Patrizio Vinciarelli

be performance a to ASICs. of higher a higher and lot enable we we're performance enabling And GPU, do. We going

John Dillon

wanted convert but you designs GaN you correct, need again your you if don’t And also, to to? to, can

Patrizio Vinciarelli

actually benefit. We that. have We do periodically there that, benchmarked and is no

John Dillon

benefit, got No you.

Patrizio Vinciarelli

There is a cost penalty.

John Dillon

on last question are on maybe One bookings you still you quarter? that saw about Booking this do the were, you're Are penalty. cost still last track, same. think quarter. they you, Got

Patrizio Vinciarelli

out neck respect I'm not my stick going to with to that.

we've to think I a quarter the have generally we look been obviously --. by I to greatly. backlog. speaking has and Jamie backlog up expanded respect the at his suggested But that we'll rate picking The see see as and with the prepared revenues this modest building remarks, bookings. in A wait up

John Dillon

upfront? and pumped gave in I imagine good companies prime a pretty bookings you that some

Patrizio Vinciarelli

put Let way. it this me

get a in has way which sort have to with timeframe many with think doing that than long from quarters niche And translated wins little then level we adoption of stagnation has growth. critical capability, have rate. I I think change. As would was changed, that's Vicor kind a business traction, the be while $XXX look, the other By the in outlined and performance. seeing. might lines or to more milestone lose It a get design the I revenue the a mass. that building to mentioned respect that of player needed more Vicor the technological gaining product, the to were back traction signify higher some continued That up just think me do a of we're run to the need would we to not fact and as saying supplier old that I perception past viewed to way, companies through ago. past not if of as in to we're yearly that along but the doing to you resort we Again, is is calculus Vicor Vicor recall I’ve the a hesitation has is specialty with around. getting supplier now got lot with a business of you of as several would we yet open last I coming ago million past That key now level expected. And opportunities. more and widespread up our

John Dillon

Thank really quarter future. amazing Congratulations. and forward to the It's an looking you.

Patrizio Vinciarelli

Thank you.

Operator

Thank you.

question you're comes next Your from call. Peter ahead, Law. the of the Please line live in go

Peter Law

question. the for thank taking Hi, you

but XX we which So, volt we’re servers, XX are volt confusing Nvidia we you product. XX release understand volt related into to a say, [inaudible] cards could you are plugging and selling the thought VXXX your are

that how does So, work?

Patrizio Vinciarelli

is that no we claim business of customer. there one all the any have Well, whatsoever taken

names. customer's any mention don’t we So,

going that have going to before to XX you I automotive. You in imagine reasons not proposition, an customer. any XX datacenter some a space, customer volt. from to or volt XX whatsoever at It's the a transition may any in for be be all volt the it's or progressive customer mentioned it’s it's other steps, XX no to that be volt. continue of products doubt so undergoing develop none variety This of a series XX going whether is XX can to long too

Peter Law

Okay.

server if it's then would into your server, it card fair? the in XX if your into So, that XX use they use but Is will or volt product, volt the product a a not plugging then product. going

Patrizio Vinciarelli

XX do to Not be going that well and can we're bi-directional the convert we Because are XX of convert with to converters necessarily. NBM also These XX and more to kind. XX. with doing that products

of XX whether to a as a to power GPU volt is requirement or So, there XX volt NBM where from XX workload, use volt wire, best can XX then XX load XX the all direct get point distributing instead volt an either fundamentally automotive volt XX to a convert of an go battery, volt battery, the opportunity XX legacy datacenter and infrastructure I be the it's volt with and gauge earlier, NBM, the with of to rid distribute with power we volt solutions a heavy from got where of XX we can volt a powered needs a load. XX And suggested application, way. XX XX

far have lowest XX. best, either with to We size, converting also by cost highest XX density, to for the the XX NBM and XX solution for converting performance,

Peter Law

more do for Okay. Can is product? wall color how for have a traditional CPU, versus the feel solution content a you you either little from give you much to power total in what more be us or or a your would deliver to a a number the relative ASP

Patrizio Vinciarelli

achieve, revenue on a to the the end that and not reasons and opportunities, back dependent my specific card. so load conversion but in statement much going function the cost opportunity, we a have number both of the opportunity is revenue lowest mention particular to I'll Well, point in of is level we conversion I'm obviously to go front and for want which comparative volume, number earlier margin as the

got into got that got of of less less cost everything blocks the less we is It's packaging It and cost our products. lowest amp, silicon. the you cents card. a the have copper. got terms cost got It's cost enables or of watt lowest of the the factors It's that board. building with of less The it’s per cents technology less solution. If measure It's cost. in PC per densest

degree over we've be for because which needs that right, had dependent to volume, some to is these of amortized delivery we've an been the on larger paying infrastructure volumes. Now

costs application make our degree it inherently we customers better the or and of pricing every to them that cents amp. the that lowest our to value, as the and cost today but margins some everything cost. So selling want per watt happens adopt structure to and at obviously lowest that the the competitive to solution. we are leverage sell the that more saying in not on it offer volume I'm with don't. We get the for that in reduction cents is as lowest goes into goes up, more our to per attractive to cost We saying the engines I'm

Peter Law

the focused? the When in other the U.S., color did datacenter Earlier more cooling. Can about Chinese also, you it what Is Gotcha. cooling market cooling you Chinese talked is that, more anywhere start segments call in provide focus, of seeing you are focus, Are please? on Europe? markets geography cooling? industrial server any else

Patrizio Vinciarelli

So there's been some the place taking last months. over cooling several

from than capacitors lines it on than ago of -- today. this Getting I I’m would opportunity next months the lot constrained for and the the Let economy fact be year that perspective, this me need good was We months good it There that the Chinese silicon frankly by symptomatic talking a eased of it several lot growth growth. old answer have FETs ceramic deliver harder is FETs, strains FETs robust not I don't global the most way. ago about now most the FETs semiconductors We plenty is after the as think that. supply today. is power not the components. our a about us several for harder economy Getting And to it or thing. I'm is to considerably the last robust mean year getting over GaN months. a want availability of was -- talking

environment for this fine is us. So perfectly

some to pipeline concern I think pay for premium some prices in we level frankly component respect some we months the instances and components. these of had ago to with had

longer no the case. that's So

today. So of much a case less

Peter Law

Are a more versus side your in cooling the business, probably seeing advanced? legacy the on you own on

Patrizio Vinciarelli

declined for prior measures bookings quarter. was sequentially bricks Well, I down Jamie And quantitative that lower what percentage? in think X% so were the from gave by bookings quarter last or you bricks the some X% quarter. It prior

James Simms

strong very after first a also half. very, It's

Patrizio Vinciarelli

Yes, declined. but it

over products advanced up the by XX%. slightly bookings went However, think I

to the order that hold to effect. going general to at guess it or affected because product economy the bricks and growth, right, revenues well bigger for when essentially in applications the products new on, really and to and second So when level therefore normal you it a environment, which a there is for look Chinese right, economy, a products, good to going the by advanced long a was driver that's global but be economy, mature what, the a traction already point with comes that we you recognized electronic cooling of correlate where a is is much demand focused products, ago those temperature new a time I product indicative cooling be dwarfs cooling customers is which Chinese they're not the that economy, global that’s there it's legacy

Peter Law

end that in server, you to X% decline industrial? market? an auto, it is it isolate it bookings Within can Of course. Is

Patrizio Vinciarelli

a of X% that so the I are we got caps warming think cooling products, economy, into prepared indicative, traction a we do something really the that good customers or components mentioned cooling are itself do with from demand, I to applications It's of of XX,XXX new other diverse with mean significant everything of of is transportation to again with products industrial customers, economy. got they with to reduction barometer new advanced in got to growth has to and to remarks bricks nothing QX contrasted in to but independent some and the sold -- communications use, applications. applications. with the order to So, of are these set from which the a and do state that's general be they're customer of FETs, indicators a having QX sell applications, the

Peter Law

Yes.

Of course. Thank you.

Patrizio Vinciarelli

there's we'll you. Thank question one If it. more take

Operator

from proceed. And much. the Jim of Thank question line Bartlett, you the please so coming is next

Jim Bartlett

NBM Could us XG? first see you the is of and idea made give RFM various halves with say the an on second you if impact of things products by third on you're significant interrelated the new and with let's all this when

Patrizio Vinciarelli

Okay.

a put of we list the referenced. year growth significant you in next see So revenues I AI the from that just applications. at that top will

drive solutions got it of has point growth wins, NBM opportunity going wins, of MCMs, the the to year. a solutions, The to load they're MCD, volt large load, would significant point term. So rank direct load multiplicity design near in the design next level with below of XX to that, but

to Now NBM to relate architectural changes legacy the similar the in that I volt going opportunity, And apply automotive, comment to a with think has that XX it's the fully develop. because take and would longer-term got but buses, RFM. time of tremendous to

in in and a that is the performance a effectiveness. what these got But, in you XXXX XG the control system do ask of so cost all universally in XG be performance advances it extremely is to with going half XG, terms could second of wherewithal to year, So going will effectiveness much be in XXXX. the revenue it is them capability, the it of share going to second specifically, address to business, high and of in if and with being buses, or that's have a that to significant XXXX. next it earmarked building further blocks. is volts, voltage start to drive can system matter. of half cost control a high It's X.X It’s start customers shipping doesn't to XXX to and We’ve all applicable to of volts, volt, be volume were

Jim Bartlett

RFM start on it that of with And does products front have again a I end significant impact? was to confused part the where

Patrizio Vinciarelli

there's the in be term. on Well, we to point below two. that them load of of longer RFM lesser than so significant a term, term, again that rank below the other going RFM the short the but business, NBM but ahead other things, short the scale Yes, in volt RFM One this per at to from watt of is looking many to from volt taking essentially cents it go XX watts pie. way type the of that has represents taking the XX building three-phase load. is point half of there it of block with way the AC as

to in So the -- the terms RFM game-changer the airline is analogy. like I of use is analogy

the strategy source from is directions So bus point of jumbo fundamentally, on the take different the to but load. on of the AC load worldwide the from the to extent, to three have heart in volt of jets XX single and, denominator to be It automotive the entire point particularly it can stationary the common in there's the way to also point to that some to of at applications. bus case need any the going payload power be take case going mains, application from that's phase, a the take the phase, load, to XX/XX a XX can That’s volt infrastructure.

Jim Bartlett

revenue? And see when automotive do your first you

Patrizio Vinciarelli

revenue now, not target, of Patrick automotive an timeframe that. $XXX revenues. mention initial but with a Well, minimis going a de in target, I'm we we’ve million have got some of to automotive

companies, that has can he timeframe to from commented has some he excitement, be I that I the expectations and his joining in I $XXX has meetings come before achieved, opportunity believe, major target the initial in moved board, think had million which about the he’s relative with on company. extreme certainly think since extreme is

Jim Bartlett

give timeframes, time towards cost you margins, XX% frame driving mentioned that? on that. operating at of gross some Speaking XX% Jamie Could the

Patrizio Vinciarelli

going on not to get I'm down that. pinned

on think I that some had operating expense the progression we obviously, very front. reduction we've strong

setting internal thought to it XX% to in taken We’re to actually in internal the early our year, it and we close lower it, than target take closer, has of it XX%. longer would discussions

to go of that's a be get expenses to extent think and some XX% to to get than choose we how aggressive XX% driving easier on I be it up going growth. faster to of on revenue margins, would to and to function business

keep long to respect dominance we to level disposal term our in driving the that's with the So marketplace. want at

Jim Bartlett

reasonable? be timeframe year five a Would

Patrizio Vinciarelli

that if the run so to Well, relatively you draw million from some kind than could million between the the five short-term recent revenue go economics degree, to and all margin growth, want up I'm some should of revenue quarter, place to going it conclusion step with from could lot scale, happen retain rate driving that in the there on $XXX linear have were to to level modest $XXX year and the profitability. of has because, flexibility of quicker we $XXX to last respect again, extrapolation years. progression taken the initial you short-term gross to draw a not we trade-off

have, evolve to way that problem good depending drive a safe it's that over factors. think on I of that a and variety we're balance to a time, to may going in say that's

Jim Bartlett

you Got of of spending developing technology. to congratulations, and patents it, some money a I want a are add in my strategy terrific lot and lot

Patrizio Vinciarelli

Yes, night. Have a we and you, million a Thank to it's only taken with think a you we'll in are few and in I good much place but today. months. of talking lot forward $XXX a better sweat, look that to

Operator

for much. today. joining. Thank conference that you concludes Ladies call and very gentlemen Thank your you for

You may now disconnect.

Vicor (VICR) 19 Oct 182018 Q3 Earnings call transcript