VICR - Earnings call transcript Q4 2018

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Operator

Good day everyone and welcome to the Vicor Earnings Results for the Fourth Quarter and the Year-Ended December 31, 2018 which is hosted by James Simms and Dr. Patrizio Vinciarelli. My name is Shelley and I am your event manager. [Operator Instructions]. I would like to advice you all the conference is being recorded for training purposes and replay purposes.

to call like Simms. to would I hand over the James Now go Please ahead.

James A. Simms

XXst. Good welcome Officer, December everyone, earnings you, Patrizio here afternoon Thank Shelley. Andover in today, and for Nagel, Jamie CFO, Chief Accounting the are our period quarter This financial with press results the me release posted I'm Investor and a Chief call release fourth to Dick on and ended XXXX. Officer. After year-ended our Relations Executive press December we XX, the been has page Vinciarelli, summarizing Simms, and issued and for markets website, month Corporation's Vicor three closed twelve the our www.vicorpower.com. of

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

offer risks March which of XXXX and XA any materially and well results remind recorded Reform was fact, under Harbor implied discussed remarks various forward-looking may listeners is of as statements can Actual call of XX-K of with forecast that The statement on In property copyrighted as our statements X, assurance light this set any call, uncertainties uncertainties. forward-looking potential for expected today. risks I the call filed announcements, to and Private in Safe these the make those Securities discussed sales profitability forth are of Corporation. and may potential conference explicitly in information I planned current Provisions remind including being prove involving Vicor purposes matters call, plans, from or and and events correct. Act will, historical constitute the for Litigation during growth, we this this opportunities, products, no this spending, construction remarks customers, any always, on statements, also Item is we you be current the contained by risks XXXX. uncertainties, in we As differ the and are regarding Form SEC in market face Except XXXX. and of forward-looking our

made should will X, during will and the as this replay accurate provided statements XX, number call of by the you call Form The forward-looking A dial our of in by after update We rely followed not Please any conclusion note XXth. no conference during to call be such midnight at Friday, is Vicor obligation this XXXX. statements, XX-K February Tuesday, XXXXXXXX. upon available call. undertakes March today is required, information XXXX only statements, the file, this beginning XXX-XXX-XXXX through including as passcode March the replay the tonight of XXXX.

In matters, on performance addition the will full the we webcast financial and tax which will page a start of on quarter this your call review fourth Dick website. with the Patrizio for of shortly will take of consolidated available will with will our his replay be our I year, Relations and discussion follow today's results. with Investor Beginning comment afternoon's after remarks, a questions.

was XX.X% of full revenue XXXX. quarter XX.X% for than a fourth year total an increase $XXX.X On for the basis, a revenue representing Vicor today's quarter for million from $XX recorded press of the recorded release, quarter million the total third for of quarterly sequential As fourth stated revenue $XX.X and revenue of over XXXX. for the total decline in higher X.X% year recorded the the million,

expectations results to weaker due other notably factors, have in spending. data December most and in China reported, fell As center below several companies quarter demand softness

of products Power segment, Brick topologies, packaging. distribution, unit classic The with Factorized Advanced trends outlook. Patrizio and a began will in power serving those power Fourth converter revenue segments, influencing reflecting address -- and our were sum and categories. and a patented operating demand. modules, a bookings advanced evidence range of providing of category configurable we advances specific are For revenues operating Last million conversion In integrated business Advanced VI into solutions. by power power circumstances associated of control XXXX. of assemblies, of products showed quarter chip upwards represents and by influenced of our shipments Vicor, $X breakdown booking Legacy applications systems, well-established -- proprietary, with the value weakening QX Legacy product our Picor power semiconductors, products rescheduled the standard custom quarter broad product moment distributed

these Going products as filings. remarks in simply Brick and forward, to we will our products be in referring our

time, segments, differentiated appropriate believe serving XX-Qs to model intersegment We high-volume the for operating will model, low-volume transactions, intercompany intersegment oversight. BBU, some VI Brick have a their a manufacturing we financial / Advanced diverse / management designations, and summarizing low–mix structure, our transition highly as partners, with But high Chip, products. a to our continue strategic market our mature for serving relatively XX-K and portfolio reporting and in customer of product our are and growth net OEMs report progress transactions, a focusing the we product in segments Picor fragmented in from reflecting as our high-mix relatively operating and base largely implementing of on and highly and segments, opportunities

program rising quarter the X% the quarter, product Advanced fourth third less rescheduling the XX.X% quarter, product despite fourth fourth of over referenced. was For rose over Advanced than XXXX revenue delivery XXXX. previously the for quarter sequentially, of revenue flat the

of from the total As third XX.X%, up a Advanced XX.X% contributed revenue total percentage products for revenue, of quarter. quarterly

Fourth of XX.X% total XXXX. products Brick the revenue XX.X% a over fourth quarter totaled for represented revenue, sequentially, For over total products and XXXX. full the increase XXXX, X.X% but XX.X% rose for declined of for revenue XXXX, year $XXX.X Advanced versus quarter million, XX.X% XXXX

sales XX.X%, percentage total quarterly of contrast for to the revenue, product Brick XX.X% represented a As in quarter. preceding

product XX% of our of XX.X% to products declined XX.X% reflecting fourth XXXX. X.X% XXXX, XXXX, other the stability represented industrial as Hong distributors, the follows: sequentially for XXV declines indications our Geographically, and Advanced serve XX.X%, of with revenue XX%, bookings and increase Kong for down Asian sum the of which China revenue. fourth XX.X% programs North CMs. excluding Pacific approximately Brick East from largely load XX.X% versus exports X.X%, total shipments total including exports products XX.X% declined Asia and America X% year XX%, full of represented quarter, total for represented point represented approximately China of revenue the breaks European X.X% total of revenue. customers. and of of represented represented Europe Middle sequentially sequentially over Quarterly For from ODMs the approximately and revenue, total all rose sequentially exports for Chinese totaled XX.X% XX%, a Brick million, and to represented and down XXXX geographies represented $XXX.X XXXX revenue for international and quarter,

XX%. approximately we to early defense North XX%, Asia XX%. finished Brick revenue Advanced and products growth electronics, Exports Pacific, in between For approximately and in geographies, Europe reflecting improved American revenue products. XX% excluding and increased products across recorded Brick higher to of China strength volumes XXXX, increased all China, balanced driven products and XXXX exports by and by and approximately unit aerospace grew pricing. accelerated Exports across with increases both Advanced of to year-over-year

had we largest in For full authorized the year, NuPower fourth distributor quarter XX% Electronics, one China. the and customer, our

Recall throughout multiple that exceed of revenue, Lower represented and export within is, the customer five third up of across manufacturers, a other ship-to XX%, full extended XX.X% total year, have the revenue. a times orders small such, relatively on XX% including not revenue. contract we In complete Distributors Turns volume, number was OEM of concentration. have for XX% extended combined materials a address, quarter of fourth volumes have times a a volumes an basis in the raw reflection that given respectively, shipments using for for of volumes scheduled certain and which quarter recorded For customers program’s concept of fourth and delivery lead with view quarter our program orders. and period XX% largest for given quarter, revenue. been so, XXXX applications. customers approximately and the may customer of report distributors, of from XX% approximately NuPower SKUs as many spreads resulted a the may contrast, turns customer our shipped usually provide downstream obviously diversified two

availability some accommodate materials, is some raw requests have which we chain able accelerated supply of to for been However, visibility. delivery, improved customer given a improved sign of

production similar loading products. bookings manufacturers few his multiple but their the before. Advanced / us involves Bookings schedules. Advanced of volumes, and which address and in for on to on and year a maybe shipments be customer reflected of production more following, are orders of maybe I contract illustrate, which year of to multiple can remarks, chain quarters. of orders a products can or and high for products contract high-volume manufacturers, program, its major to placed low-mix will contract meaningfully engagement program demand visibility. shipped subject Patrizio orders a over for orders revisions with the delivery spoken over Brick mentioned, the orders, the upwards typically the have bookings shipments may might volume far before have high hypothetical forecast products To want OEMs by differ the based relatively individual we Such several based requirements patterns not Advanced wins year but supply sometimes one for quarters. a from for three an on planned receive life emphasize program OEM manufacturers and As for to Design rescheduling Such with OEM be scheduled redesign. I factory period. OEM, thus shipment require In a place with a the a concentrated any or base, volume by based

which generally for of change, impact rescheduling, serving program then, the we as less well-recognized cannot. to this for and customers large consider such in relatively the customer quarter. listeners typically are “catalog–based” our lumpiness Many should time, of generally products, involved, a in with patterns. base products fourth programs on of a to customer mass smooth customization OEMs mature of products, contrast, markets end-products In meet we products Advanced have results, manufacturing design / out customer designed are low–volume, of long As the stable, Brick our we and given a relatively that the into length wins nearly enables experienced shipment Brick short we expand cycle for statistical high–mix notably XX,XXX us with seek customers. is are competitors model, and expect but, to number Competition Brick for demand been which intense requirements until

contributing are While business anomalies units, believe weeks a product and smoothed experiencing. There to over and smaller, we orders less generally across scheduled a are program place customers we months, cycles. averaging Brick (or as currently booking blanket) booking few orders, are to than large XXX pattern patterns,

break was offset caused factor volumes in imposition import result tariffs to tariff Changing the positive conditions orders product in date, to if volumes first product made Chip vigorous both an of XXXX. for challenging, to product with customers may margin, fourth trade of the A I fourth where profitability. higher Consolidated the the XX.X%, shipments order as of was mix postpone turn shipments. uncertainty contributing additional trading September mix. and of of resumption lower another and, by to in Advanced quarter now For negotiations Picor by additional increased a threat reflecting were China, shifting quarter manufactured example, be goods tariffs about in revenue, the imposed profit will inefficiencies down product on of lower categories. current definitive, flow. product VI U.S. of in a caused gross largely flat, XX% percentage quarter a the round resolution

mix third was quarter relatively was stable as contributor, consolidated margin rose a profit gross While to high our volume. strong XX%,

under during successful quarter, meeting were our Section the vendor quarter. did our have inventories, quarter, lead a For confident changing material raw we procurement imports in times the our business difficult as manufacturing XXX for the and of performed our material shortened. the costs Also not of on Chinese on model. scalability tariffs of needs demand, impact fourth during well remain conditions we

be not alternate, seeking vendors. are components inconsequential, from possible However, the we currently volume the of China. When costs given may going forward sourced non-Chinese

components As for U.S. government indicated filed with from exists. no last for tariffs quarter, on alternate exclusions we vendor a number of requests which the limited

However, received we have response not yet. any

add continue If may surcharge from impact price of on of impact products. of meaningful, We selling this tariffs imports we cost to monitor to the becomes tariff the China. a the our

X.X% rose expenses operating quarter fourth expenses, operating to Turning sequentially.

XX.X% noteworthy of XX.X% For costs. increases noteworthy to R&D XXXX, offset with X.X% compensation basis, XXXX, prototyping relative revenue, in expectations, to costs. and sequentially from decline no customary increases and from in sequentially from revenue, as G&A over quarterly in Marketing expenses is X.X% XX% decline our rose prototyping total expenses rising a On being the noteworthy with in actually XX.X% and R&D expenses sequentially variance income in by to no OPEX the sales a with to X.X% X.X% and trend, line the and XX.X% XX.X% sequentially with in legal audit outlier part for quarter only from seven revenue. rose this unanticipated decline to also rose XX.X% spending of percentage a a with due reversed another Operating and quarterly of quarter. of revenue, the expenses operating declined QX in of to variance. X.X% revenue, rose quarter, spending revenue spending from prior X.X% quarterly but variance. expenses, prior X%

On up from with our negligible spending absolute trends. these basis, regarding recent operating XXXX. results statements operating year are revenue for the a For income loss in of XX.X% line an was XXXX,

continue to a to expect in low percentage of expenses driven absolute largely revenue, expanding operating percentage We as costs. at compensation rates decline by single-digit terms, while

As position. Dick? model turn now I'll to to reduce Dick of long-term of tax expenses to stated quick XX% a our total overview revenue. our is operating for before,

Richard J. Nagel

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

For X.X%, of under of $X.X provision tax was and our full reflecting cumulative year, tax expense. a just million, rate majority which state the of consisted foreign the effective

the release appropriate. value assumption maintain prior our of be tax on allowance have improved us the deferred perspective conclude Under allow calls, the to explained would against we quarters our assets. of During the would valuation sequential the allowance domestic conference profitability we of

as generally While the our valuation with stood the which release led premature. visibility, million outlook approximately would results at profitability, quarter, conclude near-term third XXXX, XX, remains to positive for sustained December of a poor $XX of combined us allowance, and fourth of be the

the we place. pursuant of left ASC such, to requirements the full XXX, As in allowance have valuation

company of throughout to federal in federal credits, loss tax deferred portion DTAs. year, NOL the offset forwards our the assess balance the R&D accounts taxes the leaving its of a composition further tax release been available year-end, XXXX. utilizing and in on due income along as taxable other has state consumed potential continue reserves, tax of at balance carry our operating tax will to of We major credits allowance and assets other with the credits, XXXX, net and shifted The and as later

all XXXX. I some will previously mentioned, later we the is As it valuation more than in likely believe not we release portion of Jamie? if allowance not

James A. Simms

and the you, Thank from the Returning $X.X year. from of million down prior million, recorded we recorded quarter, for $XX income for Dick. fourth recorded million $X.X of fourth quarter net the prior interest to the up quarter the the minority P&L, after

from and the the $X.XX EPS breakeven the after year quarter's again million, figure. the fourth year. for fourth last XXXX. $XX.X income, of interest, an level from year's net quarter prior XXXX, recorded for up was third in breakeven quarter Full $X.XX, $X.XX, Diluted to $X.XX, contrast the EPS from diluted share down For minority totaled essentially up totaled for per

the Our fourth XX,XXX,XXX calculations diluted share EPS XX,XXX,XXX were for full-year EPS quarter EPS. the counts for and for

of cash Turning $XX.X from cash portfolio I for significant made late capital A reflecting $XX.X to million, year's in million million, amount and to a will offset at of a installed, totaled equipment $XX.X year. and receivables, moment. $X.X basis, the million swing as rose Capital of production The expenditures X.X%, prior million, $XX.X XXXX cash rising year-end, million, the equivalents component reserves, of from material spending XX equipment quarter. the to and were Annualized quarter down at sheet, $XX.X stable expand year-over-year investments ship purchases the for million. million. increased expenditures cash quarter, products cash quarter's million, sequentially net the balance prior as X% working Trade fourth facilities from fourth manufacturing $XX.X trade equivalents At On today, to times. Inventories positive net by increased cash the days the XX days. to inventory fourth DSOs for and capacity ending quarter, backlog. increase and Advanced income capacity decline and $XX.X sequentially recorded for the to $X.X our reflects remains sequentially net the in rose $XX.X reserved sound. the million substantial increased in X.X $XX.X reflecting the up Capital net upgrades. receivables was, totaled return to the new decline certain third of operating flow quarter. turns a well largely million from for capital

my time review of headcount the six up, now XXXX, as Full headcount XXX. planned So, expansion capacity concluding provide to the XXst XXXX fourth total XX, on declined two capital total prior quarter year-over-year. and from employee December at quarter, was of rose will headcount but expenditures. December quarter, from year-end the from of for up XXX the XXXX and an our I update

add equipment of this which We half year. capabilities. $X phase in have is expected of approximately began production of Completion service last million first the manufacturing expansion capacity that ChiP to complete XX% will of to in approximately to the our investment be XXXX, scheduled placed first

planned and an space, plan of sequenced existing take occupancy plant additional into across increase lines products XXX%. our of addition The is ground permitting and XX,XXX Advanced this addition XXXX to Andover planned to our an by break XXXX, foot multiple square additional phase manufacturing in to XXXX. in We this facility. capacity in addition the are to on We manufacturing XXXX our

XXXX through paid conclude which the and roughly We are be occupancy. budgeting $XX for million construction will with

an the first at beginning two of production installation, budgeting phases $XX are for million occupancy. equipment We also additional

be capacity. the budgets that scheduled investment for for ahead spending internally months of on the phases generation, of both designed to demand scenarios cash second sequenced revenue phase initial Based and outlook will equipment capital This manufacturing Andover in anticipate capacity XXXX, automated expansion of increasing and allow million to incremental The funding and to our six capital total equipment two building level capacity these to charges. we anticipated us deferring, is commitments possible, by end depreciation by production our to the $XXX extent approach the of while meet equipment. the

facility potential to products are applications. also separate manufacturing alternate power both would exploring of system XXV outside complement States. initiative Advanced facility United through Vicor's solutions with and We for intelligence establishing source address global demand the artificial a automotive The licensees an licensee in for

Turning to with than our book-to-bill while expected X. are revenues quarters. to outlook, ratio to slightly a one Bookings the year with QX pace be increase at QX, progresses, lower above revenue are forecast to will accelerating as QX two an lagging increase bookings sequentially,

to I operating cash profitable to as With turn generate offered influences this I forecasts Having operating of expect outside guidance, Patrizio. time and will speak do are to of subject you, that, the over listeners remain We flow. which factors will our call I by and with caused each changes, are unanticipated financial and control. our I remind limited many

Patrizio Vinciarelli

expectations this Thank you. industrial Fourth particular quarter Chinese reduced bookings Brick softness outlook uncertainty is sequentially. European our cautious. approximately sequentially for products contributed for solved to with is our and markets. from for products Europe. declined Geopolitical markets Chinese both Until XX% matter Bookings industrial XX% declined in

or bookings, customer follow well-publicized GPU our of remains Power-on-Package for Advanced for not products Near-term feverish bookings activity products in the prior products. setting other through center markets Artificial programs solution first of QX, data supercomputer, anticipated programs AI softness before in spending, wrap high orders also as were However, Direct-to-Point-of-Load by XXXX. data We that XXV is new remain and forecast our pace second program opportunity did solution. Brick profitability. from for the than Power-on-Package slower revenues, quarters. firm reflecting in rapidly developing segments. U.S. sequentially Overall with new for Advanced half from solution for the lead revisions progression us substantial A for in the current of stage for of relatively center scheduled applications the confident volume both confidence expectations in reset Bookings and growth to were declined for temporary and in power Intelligence, the

secured space have with in design For expected and wins ramps Power-on-Package, AI XXXX. production the we in major supercomputing,

to challenges. the challenges. and TPUs, Artificial continues solution Our engagement of face the power as power way system advanced GPUs, as Power-on-Package with performance, power specifically companies delivery delivery integrated market standing Vicor's has application power expand, established delivery ASICs, to Intelligence power participants and conversion fundamental developing quickly needed With in overcome specific circuits itself

XXV wins in causing as the space for than innovative applications nearly in that space products power technical to set and where vertical every team is with leadership, a twice space tenfold had. smarter other stage ASIC. design competitors leadership constrained AI XXV company's Recognition leading competing liquid providing remains the cooled applications, for after as solutions no up capabilities increase or expanding require complimentary motivating solutions or Power-on-Package play the design performance frequency, with than leadership be wins to there front-end has design to catch solutions developers handicapped in the excess fuel bus of failed AI developed voltage innovation, of in In Factorized RFMs adoption expanding, much VPD to through Vicor's circuitry more AC ability, of proprietary to of power high-current frequency be at front-ends the keep Vicor's front–ends, variants Power-on-Package are “VPD” Anticipating XX GPUs, of thousands to by and enabling known hundreds switching X/XXth of GaN amperes is on evidence using frequency FETs fundamentally the current legacy conversion to higher limited the including GaN high TPUs, technology FETs fundamental density wins technology. using to from requirements delivery infrastructure, to AI GaN amperes attempts of processors, of repeated, rising by Even applications, switching by FETs. at current DC capable competition power is Power-on-Package so-called anchored intermediate operating power Power. though are of Our less of and conversion architecture, broader product power unrivaled RFM. conventional high losses with Vicor

limit” in such, either terms “speed times OEMs the space is add performance standard GaN limits.” conversion low fail up with the GaN not more which the applications, also of or X significant suppliers than constrained value, to and of voltage a “speed FETs take electrification, on to volt imposed automotive XX by circuitry, in driving. In front-ends using GaN nearly is high Vicor RFM, cost, FETs Tier As similar XX because challenged emerging voltage FETs by by with getting applications. XXV automotive, traction bus, autonomous specifically of the advent power and

Our high power value and modular proposition flexibility. includes density

of markets, ramp too system reported, Level in driving the that forecast advanced Based addressing expect most before we engagements, support centers. recently As comparable starting we Artificial in Intelligence other scaling of key on X growth are early to and XXXX. long, autonomous our we're trajectory and the this to be substantially, automotive opportunities will, up servers the the segment deployment growth in Across production major data now and growth requirements. capacity experiencing will powering

to Shelley? turn Operator, now questions. Let's

Operator

line first Instructions]. Bolton. question Quinn go your [Operator ahead. from Please And comes the of

Quinn Bolton

orders forecast quarter $X stabilized? sometime wanted Power-on-Package a to March, date, customer. couple on have here Have or Hi I XXXX additional to think, those Jamie. reschedulings from you has from, Patrizio, reschedulings… rescheduling that questions. XXXX to of any now of million It guess your in mentioned like sounds you in largest seen or start, I business was there Jamie, first, some hi of just

James A. Simms

let it. Patrizio will I take

Patrizio Vinciarelli

revenue later to tell quarter. So, but perspective time million stabilized, be and that limited from a to exposure shipping the has $X will backlog whether this fundamentally I is tied vortex think and

Quinn Bolton

QX? that will in so ship Okay, actually here

Patrizio Vinciarelli

and QX of QX, yes. very beginning

Quinn Bolton

know And I I'm bottom anticipating grow that second say into the visibility the the would not comments this March couple okay, you call of referenced a times low, visibility are you do thought prepared trying would but and your the half? cycle? at bookings revenue you be in Okay, you that to have enough great. of did yet Or to you quarter really understand, bottom? just sort is of

Patrizio Vinciarelli

see nearly So, progression growth QX, a levels the bookings we in QX-QX in $XXX year to higher in nearly in and with ending bookings QX million. expect and XX%

Quinn Bolton

Okay, you typically booking trend and follows to one said by quarters? two revenue that

Patrizio Vinciarelli

bookings than This will more one closer two the quarters, two quarter, by quarters. follow nearly to

James A. Simms

separate word that and, want very I was anyone are tariffs. as with our exception to also circumstance, of view, the events use because for to in with China, specific about categorized happened rescheduling the to the take general, for fact, a it's very difficult what cycle, the Quinn is associated of in largely in when, notably customers more certainty slowdown fundamentally macroeconomic, the waiting point that most it's with

So, help? does that

Quinn Bolton

on find if outside could of us initiative? does. source give last a update business question, you then, China, an now sort you trying that couple just number It And wondering on conference sources that of of just a of to you've China fair calls mentioned a components in you're and that

Patrizio Vinciarelli

one. chain is Obviously Well, view on it of them, we the one only supply not dependency suppliers Chinese number of are being our in considerations. a realigning of the

model. supply supply, at going that So, expanding cost importantly, to levels continued we believe we're have that we business our that competitive ensure support continued forward and, well positioned

Quinn Bolton

Great, mentioned one the quick us that overview power X,XXX or that get with you range a amps Patrizio, power is the MCMs vertical into just amp for the allow you. you than capability it Can of sort Thank the about that or and to last a higher what more technology? then just give vertical for geared of geared deliver delivery me now you you to you MCMs current. or X,XXX give the

Patrizio Vinciarelli

current XX, between the interconnect the current So, powered by multipliers the a multipliers. factor this resistance essentially XPU technology nearly and being by of cuts, the

and on travelling the of volts current application, sides loss XPU. So, sides for instance, the the that uniform the the multipliers). a to current shorter we instance, an are in have four current travel multipliers more current the reside multipliers By application, the GPU. current feed to that a to place of sideways The of with take four allows vertical the the There to in much of bottom delivery, for GPU tens for distance much power the multiplier multipliers our moving efficient XPU, and power in located or the are XPU current current of well-advertised (so, under XPU the way.

and technicalities, are providing developments do. not challenges Now, because enable way suffice that relatively standing vertical a with going sound the into go proprietary we've this as the reality easy to quite but to complex, not that obvious, of to It's it's complex task, in power fundamental being capability. delivery. may say those I'm this obstacles there overcome is viewed but the

to lateral to delivery power screeching be clear, halt. not coming Now, is a

In more will with X,XXX with that competition, current delivery. new vertical X,XXX take gating first power have without the power in we the up much delivery also is XPU. value amps, won, proposition to still AI current capabilities opportunities effective as virtually to one gated as recently efficient more level the advanced effect, we've one the of But of again, fact, much where, GPUs any power the by delivery, is applications not where, lateral to

Quinn Bolton

you. Thank

Operator

Thank you.

Your the ahead. next comes line from go Matthew of Please question Vigneau.

Matthew Vigneau

needed past, to that Hello, to robust management mentioned a wasn't a Quinn's. deliver has question economy growth. similar this is In the

longer of the confidence is that and a potentially of And push what to could temporary, for upgrade for a that so a mostly related tariff you. really the this Thank out and period time? last center my versus question push leads out potential is data cycles

Patrizio Vinciarelli

be China, imports based as on to growth we that as do setbacks also level, softness refer question do what not competition data but very have we market ensure infrastructure center nothing spending. we we some Vicor significance the and by market in and, Artificial reality example right? value beat can that circumstances into the temporary. ramp to suffering variety are of had our So, in dead, of believe the the products one to inputs received doing with the the situation There remarks, generally, the necessarily that's It’s to has the supercomputing major solution. that level to do, fourth in answer doing the having fundamental are that only what that's is the starting we're we doing in obviously game good We that we that that's more of applications good issue kickass for prepared going And of is applications, long, to the than question to programs come how applications, that around back more that GPUs a before to chip and what China. in too their in the had that the They billion. a to deliver essentially we your Intelligence understand a going We're year. so So same $X simple: the in are is take new of middle of Everybody every has market, softness applications. an -- are very in at of with with in or tariffs town. front-end on mentioned with not as had of quarter in for be do to headwinds that with our clear, times point-of-load times,

So we long-term that because also predicated and markets opportunities market. model, we we're business one in end-market. growth, how in that particular believe are that's pursuing, that's on other other one not our ensure There is one differentiated

we in going presence complement too have as automotive, kinds are to front-ends building other mentioned building capability. strong with earlier. are our presence of we going presence before that point–of-load superior are applications, long, to in We're So a

James A. Simms

Do you follow-up have a Matthew?

Matthew Vigneau

so you much. thank No,

James A. Simms

Thank you.

Operator

Thank you.

comes next Your go -- Dillon. line Please call John question from your of John. the ahead next

John Dillon

quite million a for quarter I $XXX bookings or that talking are second mentioned level. about wasn't the sure, you fourth or level? Patrizio, Hi third you

Patrizio Vinciarelli

Fourth quarter.

John Dillon

where expect XX% quarter to ramp it'll the million ramp that $XXX they and will bookings so first in the correct? in are, level up we is you up increase so Okay, from

Patrizio Vinciarelli

our that's this at expectation Yes, point.

John Dillon

XX% the far a so bookings, increase and pretty is that quarter have you Okay, pretty in I I that, would imagine pretty feel good…? you're guess for good the into

Patrizio Vinciarelli

got quarter confirmation the that's that morning happen. of in that surprises is But as we’ve this not good happen seen over, forecast fourth and still can I as quarter, Well, our is and the forecast, today. do

John Dillon

this the and, to start supercomputer, have IBM to I Chips you correct? a me kind back running I provided actually delivery then. okay. of the remember believe you of Is IBM processor Good, IBM the the power enabled underneath of on the power that if performance vertical supply back higher your On correctly, products, days, brings VI the computer

Patrizio Vinciarelli

of the is to power which X.X solving wins. speak, mm It to delivery, going which one XPU, the XPU we're not converter of Power. order vertical Factorized power vertical design is early enabled is mm the or within more for recently power adapt changing our with which or pitch cell as within really around it’s with initial gears, but instance bit a from pitch in problem got the which Yes, we technology involves quite of cells, the The delivery pitch. than X necessary is a in feed so mm, complex an X in to

The control as historically it a in XPU hundreds really that tight That and kept other too required give of is node change tight of being certain to on pitch get scales -- the which XPU flavor not under changes range. area voltage just draw, challenges. to the presents XPU bypass rapid the very getting are mm order to now another instance pitch. of you to undergoes challenge, X.XX of is by to amp Also, has technical, the current -- changes down capacitors are X,XXX a nano-seconds, within that ensure that time in consumed

power from the So in that the occupying converters, particular, bank current XPU of area. and historically capacitors the multipliers area has same under precluded populated

We that also problem. solved

same we has current effect that historically So are “GCM,” occupying potentially bandwidth, delivers in been geared the complete capacitors. MCM up taken the that fundamentally, the space a of in with high enabling by thousands very with or amperes, bypass solution

John Dillon

of power obviously, lot factor by I the mentioned a you're resistance a Now -- a this of by think, you're factor you doing by like XX, reducing before, saving of XX…

Patrizio Vinciarelli

Yes.

when interconnect resistance is amps, passing small ohms. of micro like may a be, get heat, watts delivery, With So, say, eight ohms. that's micro XX very through application would a XX power that and XX are which turned worth vertical of power That number, in into X,XXX you that delivery micro let's sound but itself. ohms a lateral typically in light bulb,

further order because, power down to dissipation opportunity in needless nearly a you this space has performance place -- and utilized our and, low all savings major are power magnitude. volts. to threshold can to of lower AI as that's of is headroom essentially processors, so results of now but that power literally controlled make difference an technology. And That's contenders the to power loss performance the about. cutting delivery XX lie also that's technology nodes in what is one higher not peak to very voltage power that with therein the gets be, in X.X the So drops to an to on allowed more delivery XPU, current with to the provide levels to watts you associated XX And by just more every enabling have effect, millivolts respect why, name voltage it, a run lower say, vertical provide volts, And XPU, we is processor X.X so the and of X path sub nanometer and the technology is power get delivery operations, in applications that comes and to that for for that reduced. performance and why ultimately the further

John Dillon

incredible. mean about you I center, multiply savings. processors or talking data I or by in saving the the XX some supercomputer watts you're XX and that's power of must serious that mean number you're

Patrizio Vinciarelli

be system power instantaneous the are draws. peak average peak draws, power also Now draws, power those under to operate got has but necessarily not clear, to the

I these very of issues, back trivialize to them, are comes point–of-load it's So, a entire it. but problem complex at view taken solution the we've solved the And holistic and easy the think and to XXV.

time being not root a space, efficient more take the just take to brought power going of is absolutely data XXV XXV is the in say benefits about, to long delivery. of not. because people center Some

high and which question I the solutions, And market There relative to adoption market think, is it. no own real of the is makes ultimately, a ultimately, the about what the driver conversion drive centers. is will customers’ that's happening. in to very enabling level automotive That's competitive their data competition. powerful our XXV also is driver solutions, performance that in XXV more

John Dillon

a the many Along processor, memory shorter, to the chips doesn't and processors performance same doesn’t supporting to higher and a processor higher times electrons that computer? closer you the you you more also make have up enable so time of vertical, you free or have computer, you pins, because go lines another don't -- the performance also faster, that place the can't that also so are from that IO, said

Patrizio Vinciarelli

IOs address devices. delivery, power other provide the because, for that, lateral you your point, the speaking, communication Yes, signal confining the bandwidth generally with are with for to needed

So are by by is there perimeter obviously orders going going up. where all of impacted in the magnitude we taken these the of to new to stand XPU and applications power requires to performance. have that back, going to solving capabilities the back, problems be the of freed of delivery, essentially the going vertical way the And

of performance So they the level literally the of going blow GPU to away are best today.

John Dillon

supply That's that's I a get and the about. really to be that excited enabling the what average technology, person, power about, average don’t point I'm don't understands think the I engineer can think excited me because an I

queue. lot very get you so the So, will time, back Thank I've I taken up a in of much.

Patrizio Vinciarelli

other Any question?

Operator

of question go sir, The from Hicks. line coming the next Alan line is your is ahead now. Please open

Alan Hicks

afternoon. good Yeah,

about ASICs, talking ampere there, kind opportunity applications ASICs, high the kind are been of what what with have do the those? and of you You've opportunity

Patrizio Vinciarelli

we're So, to not customers. name going

suggested essentially every know generally that I application has that of earlier, been high As we identified. have we and current

XXX to the we've than processor hard applications a There billion that story, a delivery amps applications them. less in Barron’s few have years ago per Intel be of of less something instance, needed names performance a is of So, XX% would X,XXX for XXX growth time XXX is predicting. think over to AI five to all market to and with of the pretty our lot doing matter few I XXXX. over supported amps five level has in from next of It highest from in a gone a peaks us and performance year I to and are could coming as years ago current XXXX fed virtually with and is close is think, we now. that's a wasn't amps business on that current projecting otherwise. be story could be with provided $XX few the read hundred amps to, this that this application amps, last years of recent few what's cannot XXX in than that have years amps, the again, had these Only an long that many to required. weeks one And a because, happened every level going of a I of What are

suggested escalation to, this running being remarks, with fuel need, need a the the these are lithography is that as by suggested is in prepared finer that and clearly driven So, on currents lower finer compounded voltage by and devices lower you and large as error. to lower because, very, of voltages. very for voltage, that a a run earlier, problem, And going headroom and is out

can voltage of it savings, really most the by competitor every with considerations capability. their is to of current thermally all levels the feed these ASIC Obviously, you dissipation. power not looking But are they power fundamentally, And for driven acceptable that ultimately, with are consumption computing delivery driven current by power with and more enabling the the enough, applications can same they considerations of manage. deliver are double you You ASIC. if within kept the feed low current

management is advanced allowed the which possible headroom capacity. Now, has thermal management proxy ultimately liquid made cooling, is very in with computing current by thermal capable, this a techniques for rise particularly so exponential consumption,

Alan Hicks

the in does So it opportunity to opportunity? or compare supercomputing, area is the main AI and is how GPU

Patrizio Vinciarelli

we going seems We're the it above. be above. the all think Well all in I of in are both, to

Alan Hicks

GPUs big opportunity CPUs? as it's or an So as

Patrizio Vinciarelli

Their we all address. volts. they X.X have delivery X.X, to are, common equipped X.X, which uniquely common volt, X.X, of I need of need, a less denominator voltage X denominator Well, is than believe, typically

they for managed. terminally they an can are in few by end as time rising, rising as is sight, suggested have earlier, years, long in and of as be currents, magnitude there the no last the order Our being,

in few can consume, is all tens advanced with space thousands a to very things. that get value literally a a in of proposition wonderful do So, supercomputer may techniques, can of of a device, kinds there It management applications easily you there. that And thermal small one is amperes.

Alan Hicks

you And have market, this do year? know you many you the get -- but do wins huge in expect I supercomputer general, with the projects,

Patrizio Vinciarelli

to current are engaged, distribution can. of an suggested every to reason, enabling nobody good We efficiency, an with capability, level for Vicor power competitor. earlier significant all as we enabling, in answer is power that coming again, an density, which is can question, They're technology. deliver this a And it else is

not solutions. are supplier of commodity a We

a a We that level much than enables of are higher achieved. partner otherwise performance can be

Alan Hicks

you know so or a about right, remember win order had year about the it million PEZY $X ago, I how supercomputers? big are if was orders I big these for

Patrizio Vinciarelli

of year that tens of per in range. So the many there millions opportunities are are dollars

Alan Hicks

Okay, thank very much. you

Patrizio Vinciarelli

welcome. You're

Operator

line line your ahead is sir, is Lieberman. go the question Please open. The next James of coming from

James Lieberman

and equally adoption got other as give of the adoption that on happen more the motivating of vehicle independent you just it words, and timing a and onboard multiple be color greetings. factor? cars, rollout? more would to further Thank In is autonomous Can because you could you going or supercomputers automotive any happen timing

Patrizio Vinciarelli

a high and not to are busses. opportunities role scalability, electrification with been and opportunity other long the have before global we density, respect pursuing be XXV XX. hiring modularity, system. the creating a complemented requirements So, autonomous to space, automotive been XX we the that to have related systems in number believe with XX, the of to And that for of we of A going have But to XXV between is very effectiveness system, dual, vehicles, that XX and Level that initiatives. the to autonomous by of driving happen with XXV that opportunities. should company plethora efficiency working highest X They There which that most driving. related other VP that capable necessarily driving cost opportunities the are where a system, is of busses, those play and a initiatives conversion too has and weight, late, independently of hybrid light scale-up of

we in companies are in automotive caution know, visiting respect mitigated the them competitive are universal today's to landscapes. is to X a Japan, Word happen automotive, of in You all response adapt they capabilities. some challenged as the we of quickly our and to U.S., is these by and moves a actually to technology. possible. know blown be OEMs away that to And initiatives Europe, capability in in with changing make has industry, to here, team combination They us the our want to that's of our which as pursuing Tier quickly as been nothing of from degree very

can cycle of is the at validation It for some variety moving or it is a evaluation, market So, designing pace scale-up in of but that opportunities for a of of still times, the a volume is which planting year. in production. not glacial for we still earlier, speed a than turn moving reasons the at initial months terms progressing slower it from referenced of seed and to production earlier nine

of scale is the of that meaningful with of beyond respect is short-term. way in scale think I to in a three automotive time should of of some these be time to to that markets, it our the four scale comparable thinking other presence years, all not we

James Lieberman

was quite it Thank you very helpful. much,

James A. Simms

one question. If you. Thank more is there

Operator

go Dillon. from left ahead. there is Please coming question a of is and line Yes, it John the

open. is line Your

John Dillon

seeing color Hi revenue significant pickup you from those when on kind front-end products? of Patrizio, a can on any in you revenue you give products, will more and some those think the us particular, start do

Patrizio Vinciarelli

of with for point-of-load seeing been so, RFM with working solution, a front-end. opportunities we customer combined instances wanting more of we advanced have incorporate a So point-of–load, are very recent example a to

have currently have generation we we solution as that RFMs it control. earlier is the With on based a

rapidly control. We we call progressing XG to what are

variety RFM more are including more out of and even denser even effective. advanced cost that We in a products, rolling XG a be will

performance year. of see front-end existing beginning in higher solutions, once RFM, attributes generation opportunities for and but opportunities scale Initially, we on out the over introduce with up-take. attributes, based older cost bigger play to because these XG-based see, which see we we even their So the next control, is we

John Dillon

expect year today I When do could maybe from for next example you let's get that revenue, be to from say when mean you say a $XX the today? months be million like that or like year six over in would

Patrizio Vinciarelli

to from closer would year I think be a today. it

John Dillon

a or…? months six of could like million couple expect or And you million X

Patrizio Vinciarelli

think it really I it's scale needle. Well doesn't -- the on the move

think forest I these, the the losing moves supercomputing way penetration about short-term of for trees, to should is moving be thinking the what is avoid AI the the So in broad the needle. needle that's we applications, applications,

discussed in with even our further into the data that’s the near the the we're still in space, still opportunities term, latest AI, working GPUs, Those are short which initiative, the term CPUs opportunities. are of wave center I the future, application, are the in literally then, in automotive think suggested at it front-ends one doubled every Because, complementing these can point-of-load as provide every as opportunity. will I past, of applications account, the earlier, another that major revenue And we opportunities. they XPUs, kinds. but

John Dillon

do when seeing kind NBMs, you'll the and great, you significant start think revenue from Okay, some those? of

Patrizio Vinciarelli

We now and upgrading mean, have effective. would a a for more device way, in variety NBM, a lot and that of I have the we're XG another capable is By but quite of design the wins automotive efficient more too opportunity and is even end it cost applications. a wins. that we to make more other even few

across cost, outlined product that in lower these see lower performance, control technology we moving more I perspective, being about of more opportunities as count. all development are from part while little that fruit these a for next bearing we generation a flexibility, And So, initiatives provides ago. the order

John Dillon

or type a hit $XX to it stuff in So run it's from the similar front-end maybe now year a million so?

Patrizio Vinciarelli

else the tries, another is without It equal. example smaller have NBMs there, significant. us. many than been of far of that failed think quite a I is product from including capability anything -- some not It's for there out opportunity tries, and

John Dillon

to Jamie, numbers and that you this, we if possibly we commit does stuff acceleration not I about might know to away? could possibly earlier the away tariff of better that talked don’t mentioned we if mean than an goes but going go you see bookings, are could see tariffs you

Patrizio Vinciarelli

the be our if don’t be, not large don’t go development what away, and market. a lag, this be beneficial in speculate in what would substantial but would very would impact the I know might terms it the tariffs very happen a penetration Chinese on there lag which the Let's market, near-term about of think bookings. a of of terms certainly I is

John Dillon

much Great. Thank Appreciate guys. you very it.

Patrizio Vinciarelli

Thank in talking you months. be you. We'll few a to

Operator

today. concludes our call that for Everyone, conference

now disconnect. for may day. Thank have You lovely you joining Goodbye. a much and so

Vicor (VICR) 26 Feb 192018 Q4 Earnings call transcript