Earnings call transcript: Vicor’s Q2 2025 sees robust revenue growth

Vicor Corporation reported significant growth in its Q2 2025 earnings call, with a notable 64.3% year-over-year increase in revenue to $141 million, driven by strong product revenues and a favorable patent litigation settlement. The stock, currently trading at $52.42, saw a premarket decline of 2.27% following the announcement, reflecting mixed investor sentiment. InvestingPro data shows the stock has gained nearly 25% over the past year, with a beta of 1.74 indicating higher volatility than the broader market.

Key Takeaways

• Revenue surged 64.3% year-over-year to $141 million.
• Stock fell 2.27% in premarket trading.
• Gross profit margin improved significantly to 65.3%.
• Net income reached $41.2 million, with EPS at $0.91.
• Strong focus on AI and automotive markets.

Company Performance

Vicor’s Q2 2025 performance marks a substantial improvement over the previous year, with product revenues and strategic settlements boosting overall financial results. The company’s focus on innovation and expansion into high-growth markets such as AI and automotive appears to be paying off, despite some challenges in the Chinese industrial sector. Compared to industry peers, Vicor’s emphasis on high-voltage bus conversion technologies positions it uniquely in the market.

Financial Highlights

• Revenue: $141 million, up 64.3% year-over-year.
• Earnings per share: $0.91.
• Gross profit margin: 65.3%, up 18.1 percentage points.
• Cash and cash equivalents: $338.5 million, increasing by $42.4 million sequentially.
• Share repurchases: $17.5 million, approximately 400,000 shares.

Outlook & Guidance

Vicor remains optimistic about 2025 being a record revenue year, despite uncertainties in quarterly outcomes. The company is advancing its Gen 5 Vertical Power Delivery solutions and targeting a market opportunity exceeding $5 billion by 2027. Analysts expect EPS to reach $1.58 in FY2025, though InvestingPro notes that 2 analysts have recently revised their earnings estimates downward. The stock is currently trading near its InvestingPro Fair Value, with analyst targets ranging from $50 to $55.

Executive Commentary

• "We are committed to bringing this practice, at least insofar as Vicor IP is concerned, to an abrupt end," said CEO Patrizio Vinciarelli, emphasizing the company’s focus on IP enforcement.
• "The automotive market... you don’t just enter that market. It’s a hard slog, it’s a grind," stated Phil Davies, Corporate VP of Sales and Marketing, highlighting the challenges and opportunities in the automotive sector.

Risks and Challenges

• Potential supply chain disruptions could impact production timelines.
• Market saturation in certain sectors may limit growth.
• Economic uncertainties in China pose challenges for industrial market expansion.
• Competitive pressures from other high-voltage technology providers.
• Regulatory changes affecting international operations.

Vicor’s earnings call reflects a company on a growth trajectory, bolstered by innovation and strategic market positioning. With an Altman Z-Score of 18.63 indicating strong financial stability, and robust gross margins of 49.45%, the fundamentals appear solid. For deeper insights into Vicor’s valuation and growth prospects, access the comprehensive Pro Research Report, available exclusively on InvestingPro, covering over 1,400 US stocks with expert analysis and actionable intelligence.

Full transcript - Vicor Corporation (VICR) Q2 2025:

Conference Call Operator: Hello and welcome to Vicor’s second quarter earnings conference call. At this time, all participants are in a listen-only mode. After the speakers’ presentation, there will be a question and answer session. To ask a question during the session, you will need to press 11 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press 11 again. I would now like to turn the conference over to Jim Schmidt, Chief Financial Officer. You may begin.

Jim Schmidt, Chief Financial Officer, Vicor Corporation: Thank you. Good afternoon and welcome to Vicor Corporation’s earnings call for the second quarter ended June 30, 2025. I’m Jim Schmidt, Chief Financial Officer, and I’m in Andover with Patrizio Vinciarelli, Chief Executive Officer, and Phil Davies, Corporate Vice President, Global Sales and Marketing. After the markets closed today, we issued a press release summarizing our financial results for the three and six months ended June 30. This press release has been posted on the Investor Relations page of our website, www.vicorpower.com. We also filed a Form 8-K today related to the issuance of this press release. To remind listeners, this conference call is being recorded and is the copyrighted property of Vicor Corporation. I want to remind you various remarks we make during this call may constitute forward-looking statements for purposes of safe harbor provisions under the Private Securities Litigation Reform Act of 1995.

Except for historical information contained in this call, the matters discussed on this call, including any statements regarding current and planned products, current and potential customers, potential market opportunities, expected events and announcements, and our capacity expansion, as well as management’s expectations for sales growth, spending, and profitability, are forward-looking statements involving risk and uncertainty. In light of these risks and uncertainties, we can offer no assurance that any forward-looking statement will, in fact, actual results may differ materially from those explicitly set forth in or implied by any of our remarks today. The risks and uncertainties we face are discussed in Item 1A of our 2024 Form 10-K, which we filed with the SEC on March 3, 2025. This document is available via the EDGAR system on the SEC’s website. Please note, the information provided during this conference call is accurate only as of today, Tuesday, July 22, 2025.

Vicor undertakes no obligation to update any statement, including forward-looking statements made during this call, and you should not rely upon such statements after the conclusion of this call. A webcast replay of today’s call will be available shortly on the Investor Relations page of our website. I’ll now turn to a review of our Q2 financial performance, after which Phil will review recent market developments and Patrizio and I will take your questions in my remarks. I will focus mostly on the sequential quarterly changes for P&L and balance sheet items and refer you to our press release or our upcoming Form 10-Q for additional information.

As stated in today’s press release, Vicor recorded product revenues, licensing income, and a patent litigation settlement for the second quarter of $141 million, up 50.1% sequentially from the first quarter of 2025 total of $94 million and up 64.3% from the second quarter of 2024 total of $85.9 million. Advanced product revenue increased 1.2% sequentially to $60.6 million and brick product revenue increased 4% sequentially to $35.5 million. Shipments to stocking distributors increased 22.9% sequentially and decreased 14.3% year over year. Exports for the second quarter decreased sequentially as a percentage of total revenue to approximately 51.9% from the prior quarter, 60.8% for Q1. Advanced product share of total revenue decreased to 63.1% compared to 63.7% for the first quarter of 2025, with brick product share correspondingly increasing to 36.9% of total revenue.

Turning to Q2 gross margin, we recorded a consolidated gross profit margin of 65.3%, which is an 1810 basis point increase from the prior quarter, primarily due to the patent litigation settlement within the quarter. Tariff expense was approximately $2 million in Q2. I’ll now turn to Q2 operating expenses. Total operating expense increased 5% sequentially from the first quarter of 2025 to $46.7 million. The sequential increase was primarily due to an increase in selling, general, and administrative expenses, which was primarily attributable to $5.1 million of incentive legal fees associated with the patent litigation settlement. The amounts of total equity-based compensation expense for Q2 included in cost of goods, SG&A, and R&D was $900,000, $1,790,000, and $1,020,000 respectively, totaling approximately $3.7 million. Turning to income taxes, we recorded a tax provision for Q2 of approximately $7.8 million, representing an effective tax rate for the quarter of 16%.

Net income for Q2 totaled $41.2 million. GAAP diluted income per share was $0.91 based on the fully diluted share count of 45,077,000 shares. While royalties, legal expenses, and income from patent litigation have become part of Vicor’s ordinary course of business. I will point out that without the patent litigation settlement, net Q2 revenue would have increased by approximately $2 million, gross margin would have increased by approximately 200 basis points, operating expenses would have declined by approximately $3 million, and income before taxes would have increased from approximately $3 million in Q1 to approximately $9 million in Q2. Turning to our cash flow and balance sheet, cash and cash equivalents totaled $338.5 million in Q2, an increase of $42.4 million sequentially and net of approximately $17.5 million in share repurchases during the quarter.

Accounts receivable net of reserves total $55.1 million at quarter end, with DSOs for trade receivable at 41 days. Inventories net of reserves decreased 3.1% sequentially to $95.5 million. Annualized inventory turns were 1.6. Operating cash flow totaled $65.2 million for the quarter. Capital expenditures for Q2 totaled $6.2 million. We ended the quarter with a construction in progress balance primarily for manufacturing equipment of approximately $11.8 million and with approximately $3.1 million remaining to be spent. I’ll now address bookings and backlog. Q2 book-to-bill came in below one. Backlog decreased 9.6% for the prior quarter, closing at $155.2 million. As we said on last quarter, earnings call, 2025 is a year of uncertainty and opportunity. As of today, the quarterly and annual outcome in terms of top line and bottom line is subject to a relatively wide range of scenarios.

Given the wide range of possible outcomes, we are unable to provide quarterly guidance until we are further along resolving uncertainties and capitalizing on opportunities. With that, Phil will provide an overview of recent market developments, and then Patrizio, Phil, and I will take your questions. I ask that you limit yourselves to one question and a related follow-up so that we can respond to as many of you as possible in the limited time available. If you have more than one topic to address, please get back in the queue. Phil, thank you, Jim.

Phil Davies, Corporate Vice President, Global Sales and Marketing, Vicor Corporation: Our second quarter book-to-bill ratio came in below one due to order cancellations from customers in China and widespread order placement hesitancy around tariffs. Vicor has instituted a 10% tariff surcharge applicable to all new orders and customer backlog shipping after July 2. This tariff surcharge is now in effect. Earlier this year we brought to fruition our first ITC action, which has resulted in cease and desist orders against the named respondents and an exclusion order against their customers, both OEMs and hyperscalers. We are pursuing additional actions against companies for knowingly infringing IP while playing a game of Catch Me if You Can. At the annual shareholders meeting on June 20, I presented an update on our business strategy, which is fundamentally centered around our top 100 customers enabling high performance modular power delivery networks.

At the meeting we showcased next generation products providing significant advances in power and current density at levels far beyond our nearest competitors. These next generation products are being sampled to lead customers across our four target markets and customer engagements are expected to.

Patrizio Vinciarelli, Chief Executive Officer, Vicor Corporation: Expand in Q3 and Q4.

Phil Davies, Corporate Vice President, Global Sales and Marketing, Vicor Corporation: I am pleased to announce that our Gen 5 Vertical Power Delivery solution to a lead customer is coming to fruition with a current density exceeding its original target specification. Higher current density, thermally adept and scalable.

Patrizio Vinciarelli, Chief Executive Officer, Vicor Corporation: VPD will enable us to engage with.

Phil Davies, Corporate Vice President, Global Sales and Marketing, Vicor Corporation: Hyperscalers, AI processor and network processor companies to deliver solutions with superior performance and cost effectiveness. These engagements will begin with the delivery of Gen 5 Vertical Power Delivery (VPD) evaluation boards and online selection and simulation tools as discussed at the ASM. We are also focused on the future AI megawatt rack which will require 800V DC power delivery and conversion to 48V. Vicor has pioneered high density non-isolated 400V to 800V and isolated 800V to 48V bus converters for automotive applications. A new 800V power module which will deliver 10kW at 48V in a package smaller than an iPhone will begin sampling in Q4. Vicor will be uniquely positioned to offer front end 800V to 48V bus converters and direct VPD 48V to sub 1V solutions, enabling a high efficiency, high density power delivery network for our customers.

The market SAM for these solutions is expected to exceed $5 billion by 2027. Opportunities continue to grow in our automotive business. We have just concluded a successful audit with a large European OEM for an initial low volume project and we are now preparing for an audit by a large Asian OEM in Q3. It is very clear that 48V zonal architectures are the highest growth opportunity in automotive, followed by 800V to 48V conversion, which will allow us to scale and leverage technologies across our AI and automotive market. The pipelines in our industrial and aerospace and defense businesses are healthy and growing. Our new product introductions will strengthen these businesses and put them firmly on a path to doubling in four to six years respectively.

As presented at the ASM, we remain confident in our business strategy of innovation, customer focus, market focus, and a successful technology licensing practice.

Jim Schmidt, Chief Financial Officer, Vicor Corporation: Thank you.

Phil Davies, Corporate Vice President, Global Sales and Marketing, Vicor Corporation: We will now take your questions.

Conference Call Operator: Thank you. As a reminder, ladies and gentlemen, to ask the question, please press star 11 on your telephone, then wait for your name to be announced. To withdraw your question, please press star 11. Again, please limit yourself to one question and one follow up. You may return to the queue for additional questions. Please stand by while we compile the Q and A roster. Our first question comes from the line of Quinn Bolton with Needham & Company. Your line is open.

Patrizio Vinciarelli, Chief Executive Officer, Vicor Corporation: Hey guys.

Quinn Bolton, Analyst, Needham & Company: Congratulations on the patent litigation settlement. That’s a very nice amount. Wanted to kind of start there. At the annual shareholder meeting in June, you guys talked about a return on the money spent on the ITC case somewhere in the round number, $200 million range. I’m just kind of curious. As you look at that kind of return, I assume that that includes the patent litigation settlement that you just announced. Also just wanted to check, does that include the royalties from the OEM, the hyperscaler licenses just in 2025 and 2026, or does that include what you also recognized in 2024? Just want to make sure I’ve got the time frame right on that $200 million return and then I’ve.

Patrizio Vinciarelli, Chief Executive Officer, Vicor Corporation: That’s the approximate amount that we have locked in so far through 2026.

Quinn Bolton, Analyst, Needham & Company: Okay, 326.

Patrizio Vinciarelli, Chief Executive Officer, Vicor Corporation: Yep, got it.

Quinn Bolton, Analyst, Needham & Company: Okay, perfect. Either Patrizio or Phil, book-to-bill was below one in the June quarter. I think you mentioned some hesitancy around the tariff surcharge and just general tariff uncertainty in the business, as well as some cancellations in China. Do you sort of feel like the bookings activity has reached a minimum? Have you seen any improvements in July on the bookings trend? Any evidence that book-to-bill might be getting back above 1 to 1 in the September quarter? Do you see this tariff uncertainty continuing? I know August 1 is an important date for reciprocal tariffs, so just kind of wondering if that tariff uncertainty has continued here in the July timeframe.

Phil Davies, Corporate Vice President, Global Sales and Marketing, Vicor Corporation: Quinn, this is Phil. We think that the hesitancy around tariffs is now behind us. It’s very clear now what we’re doing. Customers are working with that expectation. I think that, as I said, that’s behind us now and it’s on to future quarters.

Conference Call Operator: Perfect.

Quinn Bolton, Analyst, Needham & Company: I’ll get back in the queue. Thank you.

Conference Call Operator: Thank you. Please stand by for our next question. Our next question comes from the line of Jonathan Tanwanteng with CJS Securities, your line is open.

John Tanwanteng, Analyst, CJS Securities: Hi, good afternoon. Thank you for taking my question and congratulations on the nice settlement. I was wondering if you could talk a little bit more about the cancellations that you saw with what end market customers are doing. Was that HPC or something else? Industrial, automotive, aerospace? Any help there would be appreciated.

Phil Davies, Corporate Vice President, Global Sales and Marketing, Vicor Corporation: John, this is Phil. Mostly from the industrial market in China. We have customers there for many, many years using a lot of older products as well as some of our advanced products. It was widespread. It came through distribution channels across the board because the tariff there was pretty high initially. We had some order pushouts and some cancellations. It was a mix. That’s the color on that.

John Tanwanteng, Analyst, CJS Securities: Understood. Second, just on the royalty streams that you’re seeing, are you expecting to continue growing those licensing streams into the future quarters? Is that part of the engagements that you’re talking about, or is that mostly stable for now?

Patrizio Vinciarelli, Chief Executive Officer, Vicor Corporation: We completed the first ITC case with the cease and desist order and exclusion order that the ITC issued earlier this year. That’s still rippling through the supply chain. We are aggressively pursuing infringers that are still trying to import products that are subject to exclusion while also preparing additional actions in the fall. As evidenced by the track record today, we are very serious about protecting our intellectual property and nobody should have any doubt that we’re going to go to whatever length is necessary to preclude infringement. I believe the message is getting around, but needless to say, even the track record of the industry, an industry in which suppliers have been hurt by OEMs time, cybersecurity to copy successful products.

This is a practice that’s going to take some time to change, but we have the wherewithal to make it happen and we are very determined to make it happen. So far so good. There’s going to be a lot more of what has happened.

Jim Schmidt, Chief Financial Officer, Vicor Corporation: Okay, great.

John Tanwanteng, Analyst, CJS Securities: Thank you. I’ll jump back in queue.

Conference Call Operator: Thank you. Please stand by for our next question. Our next question comes from the line of Richard Shannon with Craig-Hallum Capital Group LLC. The line is open.

Richard Shannon, Analyst, Craig-Hallum Capital Group LLC: Thank you, guys, for letting me ask a question. My first one is going to be on this new license settlement. Congratulations on what seems like a very nice win here. Maybe you can describe this in a few different ways for us to the extent you’re allowed or able to. Is this settlement, will we see any ongoing royalties from this customer or is it fully paid up in any manner? Can you describe who this is, either by name or kind of a company, OEM, hyperscaler, et cetera? I guess let’s just start with that one, please.

Phil Davies, Corporate Vice President, Global Sales and Marketing, Vicor Corporation: Thanks.

Patrizio Vinciarelli, Chief Executive Officer, Vicor Corporation: I cannot disclose any of the details that you’re looking for. I can only say, as stated at the shoulders meeting, that there’s been no license in connection with this particular action. You should not assume that the parties involved got a license, and by virtue of a license they’re able to keep doing what they’ve been doing.

Jim Schmidt, Chief Financial Officer, Vicor Corporation: Subject to.

Patrizio Vinciarelli, Chief Executive Officer, Vicor Corporation: Exclusion order and potentially other actions. Okay.

Richard Shannon, Analyst, Craig-Hallum Capital Group LLC: Just as a heads up for all of you, I’m getting a little bit of scratchiness from the line here. I’m not sure I’m hearing everything here, but I think I caught most of it.

Jim Schmidt, Chief Financial Officer, Vicor Corporation: With that said, I’ll follow up.

Richard Shannon, Analyst, Craig-Hallum Capital Group LLC: My second question here, which is to kind of understand the dynamics going forward with regard to licensing and certainly understand that you’re not able to fully lay out your strategy here. As I think Phil said in his prepared remarks about trying to play the infringers are providing or doing a catch me if you can strategy here. Obviously, it seems like this patent settlement is one example of success there. I guess I’d love to understand the degree to which you think this is an example of that and will stop others or are we going to see some back and forth here like what we saw last quarter with the licensee coming off? Thank you.

Patrizio Vinciarelli, Chief Executive Officer, Vicor Corporation: I can describe the strategy and I think we’ve made history of it. The strategy is to protect therapy, enforcing it selectively, smartly, by fundamentally going after the supply chain. In the power industry, as I mentioned earlier, relied on copying successful products. That’s been part of what some people call the ecosystem. It’s an ecosystem that for the most part, players that don’t innovate, they tend to copy each other. When a successful product comes to market and hyperscalers or OEMs want to have it and have it commoditized, these players will use enablers. The supply chain starts at the top with enablers; they enable copycat products. Then there are those who incorporate them in higher value assemblies, much higher value assemblies, and then further down the supply chain, OEMs.

In a way, this kind of practice, we are committed to bringing this practice, at least insofar as Vicor IP is concerned, to an abrupt end and that will entail it’s an east of feed problems going lying down. Because they know about their IP, they should respect it. If they don’t, there are serious consequences to IP infringement. One of those consequences is injunction or exclusion of this. That’s what’s happened with our first action. There’s more of that coming. The strategy is crystal clear.

Conference Call Operator: Thank you. Please stand by for our next question. Our next question comes from the line of John Dillon with D&B Capital. Your line is open.

John Dillon, Analyst, D&B Capital: Hi guys, congratulations on a nice settlement. Really nice to see.

Jim Schmidt, Chief Financial Officer, Vicor Corporation: Phil.

John Dillon, Analyst, D&B Capital: My question for you is at the annual shareholder meeting you presented a chart that showed a timeline when you’re going to be delivering Gen 5 Vertical Power Delivery solutions to your lead customer. I’m wondering, is that still on target? Are you still going to meet all those dates? Does it still look solid? I have a follow up question after that.

Patrizio Vinciarelli, Chief Executive Officer, Vicor Corporation: Things are progressing well with respect to the current multiplier piece that had been challenging because of its very, very high current density as well as the other building blocks. We’re still, as discussed, very much focused on addressing the needs of a lead customer. We’re keeping our paddle dry with respect to engaging with other venture customers. Shortly after satisfying the very high current necessity need of our lead customer, we’ll be ready, as Phil Davies pointed out earlier, with demo system boards, radio tools to see database scalable adoption cycle.

Jim Schmidt, Chief Financial Officer, Vicor Corporation: I think the question.

Phil Davies, Corporate Vice President, Global Sales and Marketing, Vicor Corporation: Sorry, John, the question was on the slide that we showed. We’re still on target with that slide that we showed, John.

John Dillon, Analyst, D&B Capital: Okay, did you deliver the 83% solution then?

Patrizio Vinciarelli, Chief Executive Officer, Vicor Corporation: Yes, we have provided relatively significant quantities of the 83% solution, which, by the way, was the backstop agreed upon with the customer to begin with, and went on our way making good progress with respect to 100% and 133%.

John Dillon, Analyst, D&B Capital: Excellent. My follow up question would be when do you expect to have a fully productized product that you can produce in quantities for the general market?

Patrizio Vinciarelli, Chief Executive Officer, Vicor Corporation: I’m going to not spell that out again as suggested earlier, John. We want to stay very, very focused on taking care of our lead customer first, and that’s 100% of us at this point in time. That’s not to say that we’re not preparing for a general market introduction. As I mentioned earlier, we made grade size demo system and general market capabilities, but we’re only going to pull the figure on that once we’re done with 100% level that was initially targeted just before we get 100% reach goal.

John Tanwanteng, Analyst, CJS Securities: Excellent.

John Dillon, Analyst, D&B Capital: Okay, I got you, John.

Phil Davies, Corporate Vice President, Global Sales and Marketing, Vicor Corporation: If I could just add to that.

Jim Schmidt, Chief Financial Officer, Vicor Corporation: Just a little bit.

Phil Davies, Corporate Vice President, Global Sales and Marketing, Vicor Corporation: That’s not to say that the front end team is engaging with customers from a perspective of understanding their loads. Anybody that’s looking at VPD, we’re talking to them about their new next generation processors, networking chips, so forth. It’s not that there’s not any work going on, it’s just that the front end team isn’t involved in, if you like, the development of the product for the lead customer. We’re able to have the resources available to talk and gather information such that when we do launch that out to the general market, we’re ready to hit those customers very, very quickly with solutions that they need. That work is ongoing, and we’ve got a lot of engagement with anybody looking at VPD right now.

John Dillon, Analyst, D&B Capital: Will your lead customer be able to ship the product that you’re shipping them to their customers?

Jim Schmidt, Chief Financial Officer, Vicor Corporation: Is it?

John Dillon, Analyst, D&B Capital: the quality going to be good enough that they can actually use it to ship to their customers? Are they still in a kind of evaluation stage?

Patrizio Vinciarelli, Chief Executive Officer, Vicor Corporation: I can’t give you details from these reasons, but I can say this.

Jim Schmidt, Chief Financial Officer, Vicor Corporation: That.

Patrizio Vinciarelli, Chief Executive Officer, Vicor Corporation: The customer is considering monetizing the platform that we started to ship. Our objective is to enable a higher level of profitability and improve performance, and to do so ahead of the customer target market introduction date.

John Tanwanteng, Analyst, CJS Securities: Excellent.

John Dillon, Analyst, D&B Capital: Thank you very much. Very helpful and again, congratulations.

Conference Call Operator: Thank you. Please stand by for our next question. We have a follow up question from the line of Quinn Bolton with Needham & Company. Your line is open.

Quinn Bolton, Analyst, Needham & Company: Hey Patrizio, at the annual shareholders meeting you were asked, you know, is your outlook for 2025 to be still a record year? I think at the annual shareholders meeting you had referenced some increased uncertainty around tariffs, but you still thought you got there. Obviously, with the June quarter results and the $45 million patent litigation settlement, it certainly looks like you’re tracking to a record year in 2025. Wondering if you had any updated thoughts on whether 2025 is a record year for revenue. Then I’ve got a.

Patrizio Vinciarelli, Chief Executive Officer, Vicor Corporation: Another follow up. As suggested, I think for a couple of quarters we do expect 2025 to be a revenue year.

Jim Schmidt, Chief Financial Officer, Vicor Corporation: Excellent. Okay, and the follow up question.

Quinn Bolton, Analyst, Needham & Company: I know you don’t provide quarterly guidance, but just wondering if you could directionally give some comments. Your royalty revenue was on a very nice upward trajectory through 2024. In March and June, you sort of pulled back to the roughly $10 million level. I think you mentioned that one of the OEM licenses wasn’t paying on a new generation product. It looks like that royalty income level has stabilized. I’m just wondering, as you look into the back half of the year, would you generally expect royalty to begin to increase again or does it stay in this $10 million range? Could you give any sort of qualitative comment on how you think the royalty portion of the revenue stream might trend over the next couple of quarters?

Patrizio Vinciarelli, Chief Executive Officer, Vicor Corporation: We’re not going to commit to any specific level, but as evidenced by the results in Q2, I think it’s safe to say that in any one quarter there is a great deal of upside on a bigger scale than what happened in Q2.

Jim Schmidt, Chief Financial Officer, Vicor Corporation: So.

Patrizio Vinciarelli, Chief Executive Officer, Vicor Corporation: That’s the reason, frankly, why we can’t provide a reliable forecast. There’s a great deal of variance, different scenarios, and, as to say, given a strategy and commitment for CIP, we don’t want to be, in effect, committed, hooked on any particular target in any one corridor, lest that drive us the leverage we need in order to be successful in bringing about the right patterns. That, as you can imagine, creates uncertainty, which is at this point in time part of our IP business. I think as we progress further along and we get a more diversified licensee base, the licensee business is going to become a lot more predictable. At that point in time, the kind of challenging forecasting that we presently face will no longer be there.

Jim Schmidt, Chief Financial Officer, Vicor Corporation: Maybe just.

Quinn Bolton, Analyst, Needham & Company: Patrizio, I understand that patent litigation settlements are difficult to forecast. Timing, probably the signing of new licenses, to the extent they include a license payment, is a little bit less predictable. Royalty payments, I would think, on existing licenses might be a little bit more predictable. I guess that’s what I was asking about. I know you had again talked about some headwinds in that royalty income with the OEM license. I’m just wondering, at this level, do you think that those headwinds are now largely behind the company on the existing licenses? I’m not trying to get you to comment on new licenses or patent litigation settlement in the future. Just more kind of wondering if that OEM license headwind that you had previously talked about might be behind you at this point.

Patrizio Vinciarelli, Chief Executive Officer, Vicor Corporation: It’s not behind us. We are enforcing the existing exclusion order, and we’re looking at additional actions for, in effect, making sure that the use of RIP does not go.

Phil Davies, Corporate Vice President, Global Sales and Marketing, Vicor Corporation: Without.

Patrizio Vinciarelli, Chief Executive Officer, Vicor Corporation: Appropriate royalties or penalties for not paying royalties when they were due.

Richard Shannon, Analyst, Craig-Hallum Capital Group LLC: Understood.

Jim Schmidt, Chief Financial Officer, Vicor Corporation: Okay, thank you.

Conference Call Operator: Thank you. Please stand by for our next question. Our next question comes from the line of James Liberman with American Trust Investment Services. Your line is open.

Jim Schmidt, Chief Financial Officer, Vicor Corporation: Thank you. Great results. It’s good to see the licensing and the settlement income coming in. You mentioned the automotive area and an event with a company in Europe and Asia. In the past you’ve mentioned you’re seeing some continuing strength in the electric vehicle market in China. Can you give a little bit better overall color to how you see that playing out?

Phil Davies, Corporate Vice President, Global Sales and Marketing, Vicor Corporation: Yeah. The automotive market, I mentioned at the annual shareholders meeting, is pretty obvious to people that have dealt with the automotive market. You don’t just enter that market. It’s a hard slog, it’s a grind. You have to really prove yourself as a supplier. Typically, starting out with lower volume programs and platforms and then expanding the business from there once you’ve proven yourself. The critical steps through that are collaborations on different power delivery networks with OEMs, which we established. We’re now going through the audit phase with a number of customers. That’s a very critical step where they have teams that come in and look at all our quality systems and manufacturing systems and product development systems. We’re going through those now. We’re well on the journey, no pun intended, to becoming established at least as a lower volume platform supplier.

Those do expand then fairly quickly after that. We’re very early days still. I think there’s still a ways to go before that becomes a significant piece of our revenue, probably out in the 2029, 2030 time frame. We are excited about the activity.

Patrizio Vinciarelli, Chief Executive Officer, Vicor Corporation: That’s going on there.

Jim Schmidt, Chief Financial Officer, Vicor Corporation: Thank you very much for that at this time.

Conference Call Operator: Thank you. Please stand by for our next question. Our next question comes from a follow-up question from John Tanwanteng with CJS Securities. Your line is open.

John Tanwanteng, Analyst, CJS Securities: Hi. Thanks for the follow up. A couple months ago, the largest chip designer in the AI space disclosed their plans for 800V servers and the architectures they plan to use. They named a lot of partners in the press release there. I was wondering, since you weren’t on the list that was announced, if there’s an opportunity there at all, does that shut you out or is there still a way to participate in that ecosystem either with this designer or with others with the products that you have?

Patrizio Vinciarelli, Chief Executive Officer, Vicor Corporation: I think as mentioned in Phil’s prepared remarks, we have a history of pioneering high voltage bus conversion with or without isolation deployed at various levels. I think anybody now pursuing high density power system solutions involving bus conversion from 800V to 48V or in the general realm is going to be needing RIP or in effect suffering consequences in terms of inferior power density. As Phil mentioned, we’re bringing to fruition a new higher power module that is.

Phil Davies, Corporate Vice President, Global Sales and Marketing, Vicor Corporation: A good fit for a lot of.

Patrizio Vinciarelli, Chief Executive Officer, Vicor Corporation: These requirements in a 10kW block, which is very, very small. It’s a small fraction of the size of any competitive alternative that, to our knowledge, is being developed. Here again, we have leading technology.

Quinn Bolton, Analyst, Needham & Company: Leading.

Patrizio Vinciarelli, Chief Executive Officer, Vicor Corporation: Power density capability, and last but not least, a lot of significant IP that we think is going to become necessary for high performance solutions.

Phil Davies, Corporate Vice President, Global Sales and Marketing, Vicor Corporation: John, there’s a long way between having a high voltage discrete GaN or a silicon carbide product to an 800V multi-kilowatt rack power system. There are a lot of announcements there, but there’s a long way from that to having real high performance, high efficiency solutions. We shall see.

Patrizio Vinciarelli, Chief Executive Officer, Vicor Corporation: are also a lot of misconceptions, frankly there is a good deal of naivete when it comes to some of these things. We’ve been making 800V to 48V bus converters for many, many years. We know what it takes and we’re doing it in ways that, as measured as an example in terms of switching frequency, are an order of magnitude greater than what can be done with GaN, FETs, or silicon carbide FETs.

John Tanwanteng, Analyst, CJS Securities: Great, thank you for that color. That’s much appreciated. Last one for Jim, if you could just share any thoughts on OpEx going forward compared to the current quarter that just ended?

Jim Schmidt, Chief Financial Officer, Vicor Corporation: I think we won’t guide on that, John, but I will say that as I described in the results, if you would be the $5.1 million.

Phil Davies, Corporate Vice President, Global Sales and Marketing, Vicor Corporation: Incentive legal fee OpEx would have actually dropped sequentially.

Jim Schmidt, Chief Financial Officer, Vicor Corporation: That would be because, in part, and primarily because of a lull on the other legal expense we’ve had to incur.

Patrizio Vinciarelli, Chief Executive Officer, Vicor Corporation: In some of these cases.

Jim Schmidt, Chief Financial Officer, Vicor Corporation: I think we’re in a good state right now relative to a nice balance of operating expense and revenue. I think as things heat up and we go forward with other actions, we’ll see and it will be lumpy.

Phil Davies, Corporate Vice President, Global Sales and Marketing, Vicor Corporation: I think in OpEx.

Jim Schmidt, Chief Financial Officer, Vicor Corporation: We have said that isn’t going to be the case.

Patrizio Vinciarelli, Chief Executive Officer, Vicor Corporation: To be clear.

John Tanwanteng, Analyst, CJS Securities: Thank you.

Patrizio Vinciarelli, Chief Executive Officer, Vicor Corporation: First action in terms of contingency, we are kept out. We paid out all the contingency fees related to the first action.

John Tanwanteng, Analyst, CJS Securities: Understood. Good luck.

Conference Call Operator: Thank you. Please stand by for our next question. Our next question comes from the line of Don McKenna with D&B Capital. Your line is open.

Jim Schmidt, Chief Financial Officer, Vicor Corporation: Thank you. I wanted to ask about the settlement payment, if that represents the entirety of the settlement or if that’s an initial payment. Secondly, Jim, I thought I heard you say there was some share repurchases during the quarter, if that was the case. Can you expand on that a little bit? The number of shares and price? I think I’ll let Patrizio comment on the settlement.

Patrizio Vinciarelli, Chief Executive Officer, Vicor Corporation: Yeah, I cannot comment on the specifics of the settlement.

Jim Schmidt, Chief Financial Officer, Vicor Corporation: I think on the share repurchase, I mentioned in the prepared remarks on the order of $17.5 million worth of share repurchases last quarter and on the order of 400,000-ish shares repurchased during the period. Thank you.

Conference Call Operator: Thank you. Please stand by for our next question. We have a follow-up from the line of John Dillon with D&B Capital. Your line is open.

John Dillon, Analyst, D&B Capital: My question was answered, so thank you very much.

Conference Call Operator: Thank you. Please stand by for our next question. We have a follow-up question from the line of Richard Shannon with Craig-Hallum Capital Group LLC. Your line is open.

John Tanwanteng, Analyst, CJS Securities: Great.

Richard Shannon, Analyst, Craig-Hallum Capital Group LLC: Thanks for taking a couple more questions here, guys. I’m going to look at a couple of different comments you made both today and in past calls as well as the shareholders meeting. The first one is talking about record results of the year and I heard your answer today. You also talked about a wide range of outcomes as we look at your results today. Obviously a very large settlement creates a very wide range here. If we just look at your product revenue, how do we think about what can create these wide range of outcomes? I’d like to take the tariffs off the table, you talked about that today, but maybe discuss and give some sense of where.

Patrizio Vinciarelli, Chief Executive Officer, Vicor Corporation: You see some of these positive outcomes.

Richard Shannon, Analyst, Craig-Hallum Capital Group LLC: By product as we go through the year, that could create the record year even better.

Patrizio Vinciarelli, Chief Executive Officer, Vicor Corporation: Thank you. Yeah. To be clear, the major source of uncertainty in the short term is with respect to licensing and litigation practice with respect to the product revenue. The near term sees us still making poor use in terms of commercial utilization of our first fab, which represents obviously burden with respect to margins and level profitability, even though we’ve been making good progress on that front primarily because of the efficiencies associated with shortest time and greater yields. That progress is ongoing. On the product front, which is as I think I noted in my quotes associated with the press release, the prior front is obviously very important. We’re very much focused on that. We made tremendous investments in advancing state of the art and that’s all being reflected in our 5G product capability.

In particular AI the center opportunities, you know, point of load as well as discussed earlier, passing through critical hubs in 48 world and they don’t evolve is the kind of product superiority technology lead that will fill the fan. It’s not going to happen overnight. It’s something that will take some time, but payment service that part of the salvage as well. That’s not where the New York uncertainty with respect to quarterly top line and bottom line numbers.

Richard Shannon, Analyst, Craig-Hallum Capital Group LLC: Okay, I guess just following up on that, Patrizio, certainly we’ve obviously been talking about 2nd gen VPD and some of the newer products here, but relative to talking about the record year here, it doesn’t seem like there’s enough time for those new products to have that.

Patrizio Vinciarelli, Chief Executive Officer, Vicor Corporation: Much of an effect to benefit this.

Richard Shannon, Analyst, Craig-Hallum Capital Group LLC: Year, but I just want to make sure that was implied in your comment there.

Patrizio Vinciarelli, Chief Executive Officer, Vicor Corporation: Thank you, Chair Powell. They are not going to move the needle big time, but there’s going to be progress and certainly a contribution in the second half of the year.

Richard Shannon, Analyst, Craig-Hallum Capital Group LLC: Okay, fair enough. I will jump out.

Patrizio Vinciarelli, Chief Executive Officer, Vicor Corporation: Off line again. Thank you, guys. Thank you, thank you.

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