VICR - Earnings call transcript Q3 2020

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Operator

Good day, everyone, and welcome to the Vicor Earnings Results for the Third Quarter Conference Call hosted by James Simms, Chief Financial Officer; Patrizio Vinciarelli, Chief Executive Officer; and Phil Davies, Vice President of Sales and Marketing. My name is Annie, and I'm the event manager.

During the presentation, your lines will remain on listen-only. [Operator Instructions] I would like to advise all parties this conference is being recorded. And now, I would like to hand over to James. sir. ahead, go Please

James Simms

afternoon, the welcome XX, third Good earnings XXXX. Vicor call for quarter everyone, Annie. to and Corporation's Thanks, ended September

been in press we President for website, ended of on As with Relations and financial Marketing. posted Vinciarelli, Simms, results Jamie markets Sales release press and Andover, closed September page release the here our today, CEO; Vice stated, months Patrizio a Investor Massachusetts XX. the our Davies, CFO. Phil has three After This are issued I'm the me of And summarizing www.vicorpower.com.

beginning certain second updated The XX, of regarding Thursday, our may current correct. with risk filed XXXX update presented is in of the management's forward-looking via to expansion any statements products, results filed and assurance forward-looking forth potential and accurate statement any the X-K and by Actual of call. We of any statements on And remind that forward-looking XXXX. also on EDGAR materially upon only after this will, call XXXX. our statements during the these pandemic in filed explicitly related call, and potential call. XX, obligation project you on call rely as make Act (XXX) X, various this Litigation as Securities available XX-K, midnight the copyrighted opportunities, XX, property the July and statements dial-in and purposes no uncertainties. in the issuance prove today. are of of undertakes today, Please provisions our a and all for risks are I offer risks February available statements, fact, call, SEC system to can XXXX. by XXXX. the implied are this XA replay Vicor Reform and conclusion is including forth number Form contained passcode these regarding no on release. discussed press set discussed November be of involving statements expected the we should XXXXXXXX. the growth, this release. this call this website. the of announcements This Item and uncertainties, made current replay not the remarks well such harbor conference A SEC conference quarter may this provided we you October current market from as remind historical or for of the and in during under including remarks our with COVID-XX of safe listeners the during be set differ call spending, tonight we through any sales information Private dial-in today in information press expectations the also The Vicor events Except also today's the at of forward-looking I for which customers, We XX-Q our for recorded being uncertainties is Both is XXXX. constitute to profitability, face risks planned Form capacity matters the will are Corporation. XXX-XXXX, we factors light In SEC's note those in construction followed passcode Form documents

will QX of performance, replay Investor start with shortly our this the with your a transcript, of Relations will Patrizio, which, available website. call, review webcast be a addition, afternoon's a Phil financial page I'll of our on today's take after discussion and In along I questions.

facility. few to filing, offices pending employee and Beginning to our engineering, the response forth health it in I COVID-XX a protect at pandemic early pandemic, took administrative of which had shifts refer well-being. manufacturing and social three of exceptions, federal continuously distancing employees details operated our discussion in and onset With of pandemic. XX-Q a Andover our Using our with personnel the only QX. the will Form and government the to response begin masks the the our I'll we safety for have guidelines from steps following quarter, last to returned listeners our regarding sales has did Vicor we practicing QX, set updated our operations. Andover As Vicor's to and impact local on

outside circumstances influence additional associated on COVID-XX changing or we is or our cannot actions risks now the such our when occur. financial much monitoring address the with influence operational take are turn might to of consolidated of they to closely extent Because We I'll may evolve. COVID-XX risks performance as control, estimate influence and of such potential results. of

system increase in an quarter. in recorded million, revenue shipments trends. percentage for total and stated Products revenue to for booking Exports to and China release, sequentially offset distributors our volume Product total today's declined $XX.X XX.X% reflecting As the increased direct-to-CPU X.X% prior Advanced Brick XX-volt of for rebounded the third the stocking an weakness solutions approximately press acceleration AI COVID-related rose of from for in XX% power in of rose systems Shipments revenue to Vicor increase total, our as Europe. and solutions. quarter the decline up XX% the sequentially, shipments Turns higher sequentially. quarter custom QX. of demand reflecting America continued of a as revenue after North revenue

for revenue. Advanced to Products rose of of the declining quarter Products revenue QX, with fourth For XX%, consecutive Brick total total correspondingly XX% share share to

Total turn Products. of in sales Products the dollars high-growth stock segments maturity declined of segments the profit sequentially, X.X% tariffs, did QX XX% rise our mix figure and Our targeting, -- Brick higher profiles margin expectation high compensation the XX.X% XX% did is to Gross the contrast included of a recognition pandemic chain given of cross we gross partners, accelerated the challenges serve despite charge expenses. Due not of sequentially volumes. are option percentage impact supply $X.X million with now we Advanced margin margin on compensation. to the of revenues, will sequentially. product but our soon ongoing total for that at one-time noncash operating QX I'll for OpEx quarter improve unit to the

quarter-to-quarter. operating $XXX,XXX, of amounts of SG&A income As essentially expenses expense equity-based were in of total million, goods, approximately operating X.X%. for were R&D, The recorded flat representing and and of We compensation such, QX $X,XXX,XXX. $XXX,XXX, included an margin $XXX,XXX operating respectively, $X.X totaling cost

a of income for attributable with XX,XXX,XXX a QX expectations $X.XX X,XXX,XXX totaled in exercisable which on based Vicor options. is $XXX,XXX, year. our to taxes. We Turning rate XX%, the share full of shares, million. provision to $X.X earnings Net per income diluted of share QX count net which line recorded tax includes for effective GAAP an fully representing was for

$X.X to the we sequentially quarter's reflecting million prior quarter. to increase a end, cash flow at of totaled current. to reserves a balance working Turning the the further XX due sheet. At progress the totaled end, down QX at delays and days, rose construction had service turns our value down cash in Accounts of balance of $XX reflecting receivables in increased prior representing Capital quarter of Operating and the increasing sequential receivable equipment production. of net million a of million, $XX.X period. level and as quarter capital $XX.X $XXX.X payment All trade reserves, Cash X.X% totaled pandemic we total XX totaled from during of million X.X%. placed approved approximately in $XX projects. million, materials equivalents million remained of days, X.X. outlook capital. are swing Annualized flow at expenditures Inventories, million, a raw net our for in in $XX.X for balances support favorable

Bookings by is uncertain. at Products with expansion X.XX, and Advanced of I'll projects programs The transfer notably X.XX construction backlog. now address Products was were book-to-bill factory in bookings was increase. Advanced $XX.X with consecutive of for benefiting sustained, the manufacturers North a schedule for the Mainland CMs of approved after X.X% Brick X.XX. order Europe with brick of Taiwanese the increase activity. Brick as and from overall Our the products quarters at so flow Chinese progressing quarter QX totaled and both recovery Demand Products At level rescheduled sequential on Only China. million, contract robust two QX into for Asian from and from reflecting portion in Advanced small million, evidenced of bookings of a end, one-year industry. balanced remain an China American X.X% recovered this backlog and QX. of orders bookings totaled across $XXX sharp sequentially. Conditions Products. consists decline backlog

Turning the to for fourth outlook quarter. the

growth, production backlog We our expect given continued outlook. revenue and

do We pressure operating product-level and are addressing any profitability. meaningful margin expenses. in of sources past in progress forecasting in improvement are increases we the not anticipate making Further, gross

Phil that With limit to to profitability incremental available. take our expect we given time as I the and can quarter, this scalability model. related to many we can we shown that you limted to Patrizio, the as in operating and of as questions. your of such, respond As I question follow-up ask so flow one EPS you will yourself that,

If to get the you have one back Annie? please in than topics more address, queue.

Operator

question go [Operator The from first Instructions] is Please ahead, coming sir. Shannon. Richard

Richard Shannon

the Maybe commentary. I'll bookings address

that there AI Advanced to that's detail or where categorized like increasing by love but to from breadth. bookings accelerator within you coming like hyperscale I'd HPC Products. breadths could said the or for were some of extent or understand I help source think us you understand and you'd Maybe it,

Philip Davies

Phil. So Richard, it's

So in Products across you bookings the the increase on segments, came that market Advanced mentioned. actually,

HPC see we but been now delayed North to America. COVID up. starting So by our to pick customers begin the to start for virus, They've in that's really bookings started here

in programs. some new bookings for So got we QX those

And the hyperscaler QX higher-performance We of QX a in that processor QX relatively expect and strong in on came in hyperscaler quite terms back they QX to. and were quiet numbers transitioning been for new beyond. have that customers side, Intel to but for bookings ramp then

increased QX. just increased in if had And bookings AI of bookings we the side in the business, you saw GPU, as there the like, So well. we there then

of you in like. area, all So market the segments if across sort you that cloud basically, mentioned three the

Richard Shannon

got -- a Okay. And appreciate that, a Phil. I maybe sorry, for cold. follow-up me I've

we those understand this expect gross of that down dynamics get frame of levels year? the I kind obviously, transition, saw frames next another And supply to you last through quarter with here, a manufacturing there. good? to. low Is which which chain supply in going help is to chain in you're out time or Help year. about kind for us assume something tick that's seen you over the terms time we're understanding referring to margins what of Can the and this we've here the us In issues going sunset early by happen think

Patrizio Vinciarelli

mix challenging. QX well So was with as chain as issues, supply

that Products less the AS&Ps Advanced some of challenged be getting are with production. start were challenging, Yields and to QX initially from ramping to the up. expect respect mass of We in trending products better those

So a and play going that to all integration expanded improvements of to are we improving in what we higher gross the to we of those see to before factory, factory in get factors right? factor, on into margins. also actions be capacity these to get we're margins. Economies even vertical expanded As scale the be going expect

Operator

The ahead, next sir. Please question go Tanwanteng. is from coming Jon

Jon Tanwanteng

the job Great on there. quarter

about you by if you well? of and bookings year they in talk component If could mix there's up as think in that the could, end October far tracking you and if are where so I a was might wondering end the how

Philip Davies

is this Phil. So,

of see basically. are So the strong. bookings ahead across good another quarter the us remaining board, We right

some grow. to some really so continues don't market AI And other we're that center data nice Advanced we getting Products penetration our mass also with much. in about talk that of think the I

new So in UAVs in pony. and I just we're center. one-trick design-ins not We've data just not think a a got order... robotics, of lot It's that

Patrizio Vinciarelli

Pony with many too tricks.

Philip Davies

Right.

of couple think there's is starting stuff been to for a that I on we've come really working So of years lot through. that now a

think on to the think is good still going I I a us. be So quarter QX bookings for front,

Jon Tanwanteng

you've more there And in then relations. be issues issues Great. gross been about Obviously, might as U.S.-China tariffs you've the lot. of of terms just having, talking part margin a still a that been

claw White already kind you're to the all, of the regime paid, can two, of how that change, that number if future tariffs about and/or you ability in yourself one? number Senate? talk for tariffs back And and House you've positioning does the First happen

Patrizio Vinciarelli

paid over the cumulative So $XX tariffs are substantial, million.

X/X claw be expect back We that. able about of to to

get in been to have attention. We queue

I'm some close that take this As issue. you respect the the seller. progress and get to the that back. And to to effect, back quickly. have the outside proper responsiveness is ended has with the kind respect money told of been, imagine, happen, being with some our alone to recently rest a But of account getting getting set processes, the agencies on should of that paid money challenge once starting of can big we of give it expect be we not exported with all to have relatively an up in and they've of the to tariffs been government Most for flow seen up to we're components U.S. the relevant to procedures

So which entitled to fraction we're that's total the components fundamentally for of refund.

how to further meetings, progress is It takes uncertainties Regarding from making earlier outside pursuing we challenge. tariffs, China, time. relating suggested ourselves are been have a of protecting sources we been it good have I other even though in

going another would our I a we not in conversion We're in that And one with bond. needless the components about think come think key year. some to respect respect general full more progress. interim. begin quite robust. of process with there to items fruition happen forecast some fruit I what market. for to some say, this in the third Demand of outside of is But to bear to is see I will the probably may significant China of to to can't Chinese the say percent, more significant

they're fall available, Our more a enough can terms time. that categories available that be are bit And enough attractive products, technical advanced speaking, into that you little the merits unique at for importation long provide Phil And products are sources and to a that. severe going new the to of subject don't generally performance product about Chinese and restrictions. not in tell

So we part given general that are uncertainties well relatively think challenges of in the the world. we positioned and

Operator

Barton. The from Quinn coming next question ahead. is Please go

Quinn Bolton

Congratulations results. the on

Products vertical And And can power-on look update Advanced 'XX, I've hit a got you an might as us on record. First, you're on you a Advanced making just calendar Advanced progress within bookings maybe the package that? a then it confirm like opportunity? clarification quarterly the have if follow-up. you Products, Wondering looks the into Products, give could with then

Patrizio Vinciarelli

Yes.

maybe -- have you we the your Phil the can So, question I'll first the of your of then and part part question. second take give comments on first, -- some

in the vertical JSP one layers. stages. of power on layers two of three stacking key two we're fronts of customers. on vertical progress with represent they of involve are delivery products. forefront In case, three delivery, So converter other In technology. very part three involve complex making stacking They products they cases, the

for not triple but also We But double surprisingly, implementation entail initial for unique our other of at packaging not and I it complex most technology. each applications, single say panel the action. well is there. it challenges, followed triple yields just when vertical other the of we've quite separate So which had products handles And customers together. manufacturing through all to three of technology, these some comes with by level developments this relatively two bringing delivery would this, is we're getting These stacking layers. power stacks. recently the our manufacturing got stacks complex, processes. which for or They're bode first simpler They functional the stacks,

customers a of So for somewhere production in triple the for a the the in terms these of with of ramp middle forecast couple of products is 'XX. stacks, ramps the

in of currents The X,XXX get pioneers to ASICs third we a and technology. and respect in voltage voltage it. lower bit a uncertain. of passed lithography kind were this as nodes generally nodes is technological unique get speaking, this And the amps, developing position But one get are We drive finer more with demands the development.

few having one very patents, a the have look recently pending both that just strong in last claims issues actually with market. to and and allowed days We forward additional position within of some multiplicity a some

Philip Davies

is Quinn, ramp up. That 'XX, quite in big the quarters on big trying Phil. Advanced And on of a quarter Products. look of my think if me the Product was I consecutively us question. Actually, back quarter got you was by. great very been we've that this quarter, toes keeps GPU it That we But that of think QX large a this I'm to order guys. Advanced in a remembering gone there. to had back climbing And was. to the We what one set to

or is in back million 'XX. about only million $X off this So had there QX quarter that we $X quarter great

So trend continue that's to going up. to

get maybe that. I quarter, So next think we'll we'll to --

Patrizio Vinciarelli

So we and diversified more last have the time customers applications was comparable of cloud we not around did -- now a of or base levels, dependency projects. And have very it of strong the unique the one market in computing. two complementary portions a on

And we progression, as while the markets. hold see Advanced the terms in as of having a sustainable. XX% that's too Products their the bookings the we bookings Products of why long before both past a their Brick the of in So percentage this makeup mature own whole, reason cross anticipate and mark

Quinn Bolton

Great. question quarters, I $XX.X million $XX.X million bookings of couple sequentially. And and then is I follow-up think guess the were your the last

orders I two of that range you've if December? any of might December. expectations think to revenue of put which the just revenue about seem up quarters. said by in led X% to any you June bookings see further I XX%, one make to the of to I'm growth for able we September could can quarters? by Do kind and be seen you revenue revenue think Or in sort past, you've supported expectations in wondering kind in the comments be would

Patrizio Vinciarelli

they more bookings been than very the in the revenues the quarter. supported, and expectation basis, unpredictabilities get too think what to worry for Yes, that commensurate percentage still a specifically reasonable on to about I say strong. I with pinned step-up has times a would at COVID be of And point, all where would that The revenues. your a without lead last down in we getting kinds book-to-bill happened

the right? it past with higher bookings. in we think we was the bookings revenues and up this catch stepping to see quarter prior the being quarter, quarter, up I So than X.XX, see

Operator

is last The question coming Khorsand. go from ahead. Please Hamed

Hamed Khorsand

then to there wanted in were this a bit you up you talking yields talk Or margin inventory to were new that just quarter, inefficiencies saw diminishing. old about getting now more Were margin. the gross rid was of purely gross of last I little gross QX? margin you going forward? and move this have In better about starts reflective as the the in just the challenges

Patrizio Vinciarelli

the that degree say the would significant device. I involving requirements. same, a has of with not a other their So devices quarter ramp They're all one program outside chips. not It's that a a multiplicity processing, by each significant major own to characterized third different was number each different and presenting unique and process tooling of partner. It's

cycle of may have XXs to We're XXs improve time these and sides. appropriate QX. XX this is reviewing quarters to bottlenecks but over in Part getting a several to it in embarked months with still is that production see we going high and charts factory integrate mass next shorten work where from I there's very you We're the months, to portion, nine just over are that that ramping it with with it efficiencies we vertically particularly in kinds recall, maturity integration the from challenges, we're not around, progress. of devices. level the we've six XX, of rates kinds the of discussions, that -- those the the respect part to level production and had that power done to of the some major of we last away products, getting of expansion to to high some further some an instances these made volume. significant six processes. avoid products to the going three in a As with that And these of along for be maybe yields morning, is minor individual part for high mean, are is of getting of on

convert necessary April. in performed, challenge to to integration. that been products. steps, hosting We're There's we the with production to from But provide somewhat the going With a we that as itself get equipment to install chips of products. to on be in the with package the all deal of in making have to products, through expanded or had power progress have QX associated vertical a to benefit to relief in morning's our extent, these early respect inefficiencies painful vertical products. team have ramps manufacturability mix margins of this call advanced has and partner/supplier. some are the steps of do that perspective. a to And facility, challenges we those going referred further the So it again, cost plating as had And report, closer good progress. the with great operations new we're is with in as to manufacture from that be process some what delivery of to and and to has And serious VPD able going particular, end beginning

Operator

one is from The Please ahead. next coming Hicks. go Alan

Alan Hicks

to begin new facility do expect production coming the next year? when On mid you there, up,

Patrizio Vinciarelli

be Now to power expect, VPD quarter. those equipment QX. to in in second we expect products, in integrating to The end towards we're production, we the installed going processes start is and of April, going vertical on -- be the in

Alan Hicks

be in will year? producing So facility QX of next new a

Patrizio Vinciarelli

a at the to away And right, they're It's I a as partner. time question, a that's power far suggested particularly answering the of think been going has variety the partner, I challenges where COVID have Well, where working an will of vertical frame, particularly remotely delivery the start. where time in in with that's products issues, earlier team there start. which

It's revenue. with either facility quarter production to second of the own to to in of terms activity isn't significant our VPD products. units number amount power So be going going production of in

products, involving the as or on opposed layers. you for production planning to but chips two steps as So more way mass still by leading involving for what mundane single view the other three a third might quarter layer

Okay.

Alan Hicks

gets that up expect running? it and once And to gross improve margins quickly do how you

Patrizio Vinciarelli

uptick this not and see quarter expect front. We're next clear, margins quarter. So a bring integration, significant the new to then relief on one we waiting vertical another about to a facility be in for margin to

starting with these that's better and capacity, an costs, I having a yields much our getting variety of involving again, greater utilization amortization we're impact. that of think now of initiatives,

what the prior than think saw efficiencies that to of be lower slightly quarter, I the this and the the significant our I we quarter, was bottom. packages. essentially we see same, as very third trend more starting respect get leverage in the were to to margins will upward where And quarter expect become significant an vertical integration with advanced

Operator

next from Please is coming Gus Richard. The go ahead. one

Gus Richard

Advanced to implementation? I that just each in high of customers? want is Products. Are there the is still of it low is required customization a And mix flow to follow-on customer couple standard by a understand unique process Or much for is sort Is on Or a some how dominated this products? each it the volume? for customer?

Patrizio Vinciarelli

Yes, are questions. very good those

with suggested earlier, instances considerable as multiplicity I So, involved, and that different in of applications. of the customer, one both devices and some is are there one across customers number application,

scalability mix the dense an As a perspective electric and a methodology, cell cell an types you from methodology for are instead from from of multiplicity advanced best through more standard And design, and structure multiplicity to two focusing the from technology, and used more, of multiplier components of configurability. we've will with might terms teams brings of engineering and efficient. that perspective, need to and that be be it play operational in the the particular, the customers and of margins engineering cells improved more looking a without discussions, our range that the with leveraged great device in to products. able to that the about again, effect, product of a deploy complex prior application, have we giving from capabilities terms materials with where advances support further facilitate, scalability getting leverage builds more sourced, the application, more leverage doc, deal test and into historically efficiency suit that, now array that that in operation unique of they of burdening technology, a the requirements and of offerings packaging be we the We're in both to components forges and in particularly current our of heard and

a converters As the the have scalability of flexibility past, brings on wafer of a is as chips and processing and and wafer that very and proprietary that and devices might depending or are or to one made made involve with of economies of smaller but in chips housed you size using say might panels, our of that are larger are scale different on power or heard our greatest with in me delivery, we process of in certain packaged power their of with smaller, the processes on requirement, Likewise, multiplicity a in the technology, made, multiplicity converters consistent our same And aspect flexibilities, larger this power is methodology. semiconductor a size within where just particular these set semiconductor three the depending a multiplicity chips certain a case flow stack two or wafer. of panel in have a vertical panels.

process automotive on So XX multiplicity relatively say, a can let's devices. we a the process go And manufacture, can a smaller through same low application steps, they for steps. XX same much we manufacture through panel basis, or a the panel converter well that just on as power, as going XX-kilowatt on a of

and we're number it that respect implies fabs the semiconductor from operational packaging week the with of some ways, we process the is in with the escalating, are the the per broad from getting enjoy in then precedent So be processing. going financial Again, carried to the predictability enterprise, the engineering to get to to more XXs further semiconductor that throughout along we're But to in production. level. can necessary inherent And manufacture, in and technology been flexibility requirements is complexity and going wafer mass say, in flow let's products there to where be. strong of these devices customer to scalability panels have we've we as that rapidly the of deliver over there we scale, we're and to as And benefits degree, scalability with other efficient what a is the a performance. support yields order able repeatability and for now

Gus Richard

appreciate just the I Advanced the in has terms -- understand. diversified? in is it. of then how the base Products And much customer I --

Philip Davies

developing some of XX-plus So space, customers in customers XX while when NVIDIA Asia, we that for And on and companies as the would example, neck the really woods. ago. that that, Israel AI in GPU technologies impressive about at working two company chips North also And for into of we've a chip are there new the to of technology. very got this Europe started in ASIC America that list with growing. and across AI and of new power lateral started a to we're that Asia are even start-ups years today, the that well a say about the delivery of there I diversification started Many number ago introduce diversification X and in companies compete

levels those delivery the into to it's that as continually be strong future. in And eventually will been Patrizio going and about, it's current companies vertical transition their yes, So growing, there talked their very then power moving to products. increase

Operator

from is The next coming one John Dillon.

John Dillon

shipping Phil, companies many to wins engineering companies wondering, on I'm do Phil, you how then good engagements any and do on And currently? great Congratulations many production you And is to see. are different quarter. designed Really small it's geared auto how have have some with? And autos. question My a specialized just you towards with? runs

Philip Davies

question. Good

shipping automobile yet not production So units to the big we're industry.

markets. different But we've success. niche types in in of plays that off of that terms some particular have activity, seen of continued We

talked a where same big be platforms levels of the scalability. with a one companies engagements So on in engaged in together right with three around are modular one vehicle And power component. three major proposals we're products power others that Japan, going lot to Europe for America. have now putting one we in about This required. eight advantage the we different world, can and methodology is the in And with component Patrizio attack North

working that's on -- didn't us, that. to companies production, we A So We those our sample for with good a did customers. ship a John. the different first we're ship story three And very We're we're But actually but samples still doing stage. A question. car exciting at

Patrizio Vinciarelli

still two... So, we're

Philip Davies

Yes, two away... years

Patrizio Vinciarelli

from... Away

John Dillon

ways No, design know real I Or talking design you're are engagement the or just wins? a away. you any therein? these an it's have Do Yes. that wins about

Philip Davies

Yes.

wins, got working the we've now. And actively about, said, we're John. We seven or pipeline in three as I that eight have

Patrizio Vinciarelli

chips to well. requirements. this in coming And are thus they've these Yes. with parting impressed to that. company NREs There's with more after extremely their get And companies a been far, substantial order quarter

prototypes in system. Our their performed

importantly, with an voltages, battery vehicle, it manner, the battery a safety with of weight, our derivative also a insulating with eliminated. So rid ability requisite landscape. in complex but sufficient. is battery vehicle what of up converters with we we are doing assembled particularly have one power European it's doing I volume support the of power and thus order customer to with take the that, battery efficiently of weight across very with but eliminate generate impressed for on of extremely both great a boundaries duplicate for of power terms can systems. will requirements takes takes be by And the and converter, they're wherever photons there's need that with the so volume have because and of at fundamentally to to be in kilowatts It's energy the storage to power them systems and otherwise a modules reducing needs of system throughout lot vast wiring configure And of traits the that, safe in mean, that possible those distribute on only node have to most a converters kinds you to bandwidth that the system density, that this, And get our that by a allows the enable has legacy in IP wait simplifying process can speed need heavy removing you products, capability. tens Because necessary systems. weight, from also the our efficiency. array node, out an the it a and vehicle, one in of XX-volt fundamentally,

John Dillon

autos The exciting. It's I really in would also that be X other in answer. applications. a would but That's follow-on used understand front-ends great be, Gen your

the So, along. I'm Gen coming X just wondering how are front-ends

Patrizio Vinciarelli

quite well. along coming It's

functional. We It's we controller have fully that -- actually, we developed. got a

We have powered up the power stages.

We an power have of vertical but a lateral system delivery first high-end implemented That delivery a lead realm, customer very computing generation be solutions. actually happens MCM-type effect the in with power where been a we've MCD, components. to supplying

we the effect, first would customer, of been across and triple units stack in DCM radicals a get a a double a efficient end, developing which for front-end of the power each in large the to, that more customer, of are for we've kilowatts we capability basically front radicals increments current provide compact, For developing of multiplicity same wafer. much of system. flexible XX and that And functional

samples a of initial and power ship of a topologies to front expect proprietary we towards XG QX. which is the using end, that front end technology So end system

Operator

This more line. one is Shannon. the Richard one. ahead. on question have Please last from It's go the We coming

Richard Shannon

down year issues the gross XX% we we see margins over one the today. next here. now equipment me, us we've -- Just in several the we wondering of improvement manufacturing we'd see looking issues? the which to range, those? based XX% see XX, when last XXs. get kind guess, I be if in without you help the of new into on mix for Would quantify just that without fab supply we Or that quarters, degree cycle margins last where If topic at two-stage we're the more gross kind here I'm look the got XX could to margin. one question the new be here, being range of gross kind we The these you understand the at kind we you're answer, on model of gross margins, the where without can at chain of again, XX%, the

Patrizio Vinciarelli

margin the for factory in opportunity terms described resulting and of an we the new even factors and manufacturing bring several of integration vertical we efficiencies, to points get from before that So the improvement earlier. see were benefits that will

yields, in advanced percentage production Products of transitioned from as improvement they yields stable, more like rates. for early points all, to of production Advanced tens more on major First

going So That's up. that's a factor. contributing factor. a have been AS&Ps

and wing the integration, of per keep the of the a that's the how to federal before new per of that the to there, and or something cost the So that say, favorable meaning not our of new should we into panel, state only account. reduction need make to be equipment And But counterpart to be to we're each more needs to in to able which So panel. we process we will close depreciated, of get departed a new equipment in But cost, again, wafer with processing. operation, steps, going needless track our folks new very we're a cost factory trade-offs into life is, going vertical we taken for get that point process see life equipment see, many lot to easier. step out the right? factors

leading the to have to facility, economies, I as phase save, until quarter. this fruits will dependent of say, on a little of we the would is we're this I in and for believe production to outside some improvement expect discussed next that really steps. the several There's that all while But in will And be key is still it up instant going there quarter process of earlier. for for sources are, still starting first We where couple initial effect, that, in let's So quarters, capture about inefficient. low-hanging that margin should points that we assume year. later to those going wouldn't there, quarter, the come in of an not next QX we're new too, going in opportunities because right? They're be

John Dillon

much Okay, thank for that you very detail.

Patrizio Vinciarelli

to question But -- your yes.

final one comment. Just

I between think as be this, phase We'll after you And another next a it's this then there's good opportunity talking the very comprising at margin time right? February. about two year, to thanks and in phase that. much. There's phases, look now to and

Operator

much you today. call concludes everyone. so That your Thank conference for

your Thank you may and the You joining, for day. disconnect. of enjoy now rest

Vicor (VICR) 22 Oct 202020 Q3 Earnings call transcript