Vicor Corp (VICR) 2005 Q1 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the Vicor Corporation first-quarter results conference call. My name is Andrea, and I will be your coordinator for today. (OPERATOR INSTRUCTIONS) As a reminder, this conference is being recorded for replay purposes. I would now like to turn the presentation over to the host of today's call, Mr. Mark Glazer, Chief Financial Officer at Vicor. Please proceed.

Thank you. Good afternoon and welcome to Vicor's quarterly conference call. I'm Mark Glazer, Chief Financial Officer. With me is our CEO, Patrizio Vinciarelli.

Before we begin, we would like to remind all of you that today's conference call is being recorded and is the copyrighted property of Vicor Corporation. Any rebroadcast, reproduction or other transmission of this conference call, in whole or in part, without the prior written consent of Vicor is prohibited.

We would also like to remind you that various remarks that we may make during this call about future expectations, trends, plans and prospects for the Company and its business constitute forward-looking statements for purposes of the Safe Harbor provisions under the Private Securities Litigation Reform Act of 1995. These forward-looking statements mainly reflect our current beliefs, expectations and estimates which we share with you during our quarterly conference calls, and we cannot assure that future results or outcome of the matters described in any of those statements. Actual results may differ materially as a result of risks and uncertainties, including those discussed in the MD&A Part 1 and Legal Proceedings sections included in our Quarterly and Annual Reports filed with the SEC on Forms 10-Q and 10-K.

A replay of this conference call will be available beginning shortly upon its conclusion through April 28, 2005 by calling 888-286-8010 and using the pass code 21991049. In addition, a webcast replay of the conference call will be available on the Investor Relations section of the Company's website at www.vicorpower.com/irwebcast beginning shortly upon its conclusion. However, the information we provide during this call is accurate only as of the date of this call, and investors should not assume that the information remains accurate at any later time. We undertake no obligation to revise or update any statements made during this call in order to reflect events or circumstances that may arise after this call, and you should not rely upon them after the conclusion of this call.

We are now ready to begin the Q&A portion of our conference. I would ask you that you limit yourselves to up to two questions at a time so that everyone gets a chance to ask his or her question. You may, of course, get back in the queue to ask additional questions. Andrea, we will now take the first question.

(OPERATOR INSTRUCTIONS) Walter Nasdeo, Ardour Capital.

Good afternoon. I have a couple of questions that I'd like to address regarding the increased demand for the legacy first and second generation products. Do you see that demand kind of holding where it is now going into this quarter, or are you seeing it tail off or pick up? Or what is your feel for that?

We see continuing improvements throughout the year.

Throughout the year, you said?

Yes.

Okay, great. Now, how is the V-I Chip developing? What is the expected demand for that in concurrent to the first and second generation?

We're still making very small quantities of V-I Chip for sampling purposes, and very small volume initial power production by some customers. It's suggested in our conference calls we expect volume production towards the end of this year and significant programs early next year.

Is that R&D then going to hang about where it is now? Are you expecting that to decline or increase going forward?

We expect it to be in that general ballpark.

Okay, I will get back in the queue. Thank you.

Ron Opel, Moors & Cabot.

Congratulations. Very good quarter.

Thank you.

Patrizio, are you -- you know, the market really has been under -- in general the stock market has been under pressure. And I think one of the factors has been a fear that the economy is slowing down, and that retail sales in particular have been soft and so forth. I take it that given your outlook for sequential growth throughout the year, you're not seeing much of this. Would you comment also on the relative geographic strengths in the quarter?

Yes. First of all, some comments with respect to strength or relative strength by market segment. As we have discussed, I think late last year, we expected to see some improvement in some of our historically significant end markets such as test equipment, ATE, semiconductor capital equipment, and we've seen some of that. We see continuing strength and government/defense. Those, I would say, are the primary market segments, the relative strength areas.

Geographically we had a great quarter in Asia and China in particular, and that really stood out. Does that answer your question?

Yes. Thank you. My second question perhaps is for Mark. I see that you taxed away almost all of the pre-tax profit for a tax rate of 80, 85% or something like that. What happened there, and what is the outlook for the tax rate for the rest of the year?

It's not necessarily a rate anymore. We have to provide based on what happens during the quarter. And in this case, as was the case last year when we lost money and still had provisions, we have a couple of subsidiaries that we have minority interest in. And they were probable, so we have to apply taxes to that. So I expect that the rate -- not the rate, but the dollar amount -- will be slightly up, slightly down, depending on what happens in those areas as we walk forward through the year.

So a tax rate in the vicinity of 35, 36% is a reasonable expectation?

No, it depends where the profits come from, not the profit amount.

Okay. Thank you.

Jim Bartlett, Bartlett Investors.

The buy back that was mentioned in the press release is 178,000 shares. Was that as of the end of the quarter, as of the end of March?

Yes, that's correct.

The $6 million that you mentioned in spending, it was Vicor and Picor. Could you give us an idea of sort of the relative amount of spending within those two?

That comprises the V-I Chip operations and Picor operation. We're not going to give you a precise breakdown, but you can expect the larger majority was in V-I Chip operations.

Got you. And this was a combination of developments. Is it also in the cost of goods sold and SG&A? Where would we see the $6 million?

A good deal of it is R&D development. Some of it is relating to people (indiscernible) infrastructure, and that would impact the margins. Those are the primary areas.

So it will be mostly in R&D and cost of goods sold then?

R&D and to a lesser extent cost of goods sold, yes.

And within the -- could you just update us on the PRM progress and status?

We are sampling customers. We are developing additional models. We are prioritizing opportunities based on high-volume potential, individual situations. And that causes, as I mentioned in the past, some periodic change in priority with respect to the many items on our product roadmap and development list.

How soon should we expect some granularity of fractional -- I think you call it the fractional V-I product?

We have had actually for several months a first half (indiscernible) brick low voltage VPM, 50 amp (ph) per unit. We're waiting to have some additional capabilities in place to have critical mass with respect to half brick product introduction later this year. We've also recently made first engineering samples of double (indiscernible) for off-line applications. So we are expanding the V-I Chip metrics to provide the comprehensive set of capabilities. Both at the point of load and all the way back to the wall plug, which is a way of saying off-line applications.

Great. Thank you.

Steve Smigie, Raymond James.

I was hoping you might be able to comment a little bit more specifically on what we might see in terms of sequential topline growth. I see there is a nice book-to-bill; it's just I'm not sure quite what that means in terms of sequential growth.

Well, I think looking at this quarter we should see an increase in the topline, an increase in the bottom line, an increase in the margins, leading to a more pronounced bottom line expansion than the topline growth. As we look further into the year, it becomes harder to forecast. And for that reason I'm not going to make any comments, except that our forecast for the year at this point in time shows sequential growth and at a progressive fashion through the third quarter.

The bookings in that book-to-bill ratio, are those largely for the second quarter?

We have very good feel for the second quarter. And these were all essentially bookings related to first and second generation products.

In terms of the gross margin improvement that you saw, was that -- you mentioned manufacturing efficiencies as one of the contributors. Is that largely related to second generation manufacturing improvements? And if you could you give some sense if that maybe is (indiscernible) close to 35% gross margins (indiscernible) second generation?

We made improvements, particularly with respect to second gen products. You might recall that the Company embarked in a program called Fast Track (ph) to convert the second generation platform to a more advanced platform with better and fresher ability attributes and improved yields, and we're seeing the fruits of that effort.

Do (ph) you close the gap then clearly between first gen and second gen a little bit in terms of gross margin?

The margins in second gen are making more significant improvements, but there's been improvement with first gen as well.

Great. Thank you.

Alan Mitrani, Copper Beech.

In your press release you made some, I guess what I would interpret as disparaging comments regarding not really competitors, but other people in the power supply industry as they look towards developing point of load and other products. I guess you comment on their limitations. Can you expand a little more about your view regarding the limitations of point of load and some of the digital controllers, and where you see how some of the power semiconductor companies are going to play into this business versus your strategy?

I wouldn't call them disparaging remarks. I would characterize them as factual statements. Obviously there is always some level of subjectivity with respect to these. But the technical limitations of the (indiscernible) architecture and no isolated point of load convert -- buck convert as they referred to in technical circles -- are well-documented, understood and not really a matter of opinion. There is some fundamental compromises that have to take place with (indiscernible) architecture where in fact you either have acceptable performance in one respect or another and one comes at the expense of the other. And this compromise gets harder and harder as point of load voltages, particularly voltages associated with processor chips (indiscernible) get lower and lower or when the power department associated with these devices gets to be more substantial because feeding devices that are very hungry in terms of their current consumption capability at very low voltage is done with a great deal of difficultly in an approach where at the point of load you usually do not have the capability to multiply the current.

Let me approach it in a different way. The power feed to your house does not come in at a low voltage. It comes in through high tension wiring carrying the power at relatively high-voltage. And it is done that way for a reason -- in order to make the distribution efficient. It is converted within the boundaries of the building or the house down to a low voltage at higher current for the sake of efficiency. And that transformation capability is an essential part of an efficient power distribution system that is missing from IBA. IBA does not have the ability to in effect multiply currency. It can only average down a voltage. In the averaging down, there are some fundamental limitations.

So these are facts that stand in the way of broad capability of (indiscernible) isolated point of load converters. And as I commented in the past, these issues are there irrespective of the control strategy (ph), whether it's analog, digital or any combination thereof. The fundamental issues that relate to power conversion engines and capabilities are the same.

I appreciate that explanation. Also, your backlog going into the quarter, at least at the end of the quarter, you said was 40 million. Obviously you did 43 million roughly in revenues. Is this backlog you expect, is this 90-day backlog? Do you expect to ship all of it this quarter?

No, our definition of backlog is anything shippable in the next 12 months.

Twelve months. Can you give us a sense of how much of your business you need to get in turns business in order to be able to get up revenues here, or what your expectations are from a turns prospective, and where that's trending?

I can only tell you that the amount of backlog that's shippable in this quarter is slightly better than the amount that was shippable at the end of Q4 for Q1. And that's kind of indicated by the book-to-bill being better also. I can't tell you the amount, but obviously we will need turns business.

And then also, just one broader question. Most -- the market has pulled back this year. A lot of tech companies are starting to miss earnings. IBM and Sun tonight and others talking about slower growth, raw materials costs, other things that have hit companies. You guys seem to be coming at it a little different, I guess, in thinking the quarter is going to get better every single quarter throughout the -- that the year is going to get better every quarter throughout the year. I realize some of it is product related. Can you give us your sense of what your sense is for your customers' end demand right now and what gives you the confidence that you can go through the year and have up revenues?

I would say that a lot of it is product related and business model related. We are not in the market with a “me too” product dealing in commodities. We have unique proprietary products that offer customers advantages. We're also a very well diversified entity in terms of participating with thousands of different flavors of first and second generation bricks in a variety of end markets and across all geographies. It's that business model, coupled with what we're seeing in the primary market segments and important geographies that gives us that visibility.

And again, to be clear, the visibility is always a function of how far you're looking. And we're able to see pretty clearly with respect to the second quarter to a much earlier point (ph). And our fill at this point for the second quarter is ahead of where we were this time last quarter by the same percentage decrease.

As we go further into the year, it is too early because those orders haven't been booked yet to have a corresponding level of visibility, and the best we can do is rely on forecasts. And as we all know, forecasts are subject to change due to changing conditions in the end markets and the key geographies. That can be a change for the better or a change for the worse. We will have to wait and see.

Thank you.

Walter Nasdeo, Ardour Capital.

I did want to touch on the raw materials. And the price of silicon has been kind of climbing pretty rapidly lately, and I wanted to get your thoughts on how exposed you are to that in your hedging, and how you're dealing with that right now.

We're dealing with a material cost structure that is in good shape. It isn't posing us an increase in (indiscernible) cost. If anything we have opportunities to reduce material costs; not by gigantic amounts. Obviously with earlier generations of products that are at this point quite mature that have been in manufacturing in some cases for as much as 20 years or more, the further cost reductions opportunities are not all that significant, but we see opportunities there. And at the other end of the line, which is average sell price is, again, because of the nature of our business model, the nature of our products not being commodity products, in good times and bad times we do not see the kind of pressures that you would see with products that don't share those attributes.

So there's some stability there? That's good. And can you just -- you know, you mentioned that the Asian market was pretty strong this past quarter. How do you see the geographic markets going forward? Are they looking -- is there any one that looks particularly strong? Or is everything kind of perking up? Or how do you feel about that right now?

I don't know that there is a particularly unique angle on that that we would have and that you wouldn't see independently of us. I think economic conditions in different parts of the world are what they are, and you know them as well as I do. We don't have any particular insight of a unique nature in that regard.

In terms of end markets and the market segments that impacts our business, I made a comment earlier with respect to some important markets that are giving signs of improved demand. So we have to watch that.

Well listen, I appreciate it very much. Goodnight.

Ron Opel, Moors & Cabot.

In the press release you say the buck regulator is an old power conversion engine whose cost is driven by silicon. My question is what differences are there in the cost structure of V-I Chips vis-à-vis the bricks? And what is the main cost driver in V-I Chips that you’d contrast with the cost of silicon?

Silicon is a very important part, and silicon cost of the V-I Chips. I'm not suggesting in any way that the silicon content isn't an important element when it comes to V-I Chip. But there's a profound difference in effect what kind of silicon, and there is a profound difference with respect to who can make that silicon and whether the availability of that silicon can turn the end product into a commodity. The point of my comment really was that the industry's obsession with interior pass (ph) architecture and isolated point of load and the convergence from all fronts on an old engine with solutions that are available to any party from anywhere around the world in my opinion points to some very predictable developments along the lines of giving the silicon makers, which the center of mass is obviously more and more located in Asia, a distinct advantage going forward, given the lack of meaningful intellectual property and meaningful differentiation among a growing multiplicity of buyers.

Thank you. And you mentioned specific markets also -- consumer electronics, communications, information technology and automotive. Are those the market areas where you expect to achieve the greatest initial penetration and then spreading out to other markets later on?

I think it's a little bit still too early to say where we're going to see the greatest initial contribution. But we are having significant potential in initial three areas, I would say. One is consumer electronics. Two is transportation. And three is information technology.

As to what is going to turn into a significant opportunity first, well, as you might guess, transportation has a long registration period (ph) because the programs take a long time to come to fruition. Consumer electronics could be ahead of information technology or it could be the other way around. We will have to wait and see.

Are you pleased with the level of interest that's being demonstrated in the VIC brick so far?

In the what?

In the VIC bricks.

Yes, I think the opportunity is there. We're still at an early stage, but we think that both in terms of performance and cost structure with the V-I Chip-based solution going forward we're going to be able to compete very effectively. And we have heard the improvements in the works with the (indiscernible) V-I Chip that will add pizzazz to the VIC bricks as we roll out a more complete VIC brick product line.

Robert Katz, SunTrust.

Very nice quarter. I have a question about your bookings. Where is the strongest demand coming from? I know you mentioned in the current quarter you saw ATE, and government/defense. Do you think that will continue throughout the rest of the year or do you think there'll be other areas that will pick up? You said you expect to see continued strength throughout the year.

We don't see a change in the pattern at this point. I think as we all know, with respect to some of these end markets, particularly test equipment and semiconductor capital equipment, they're subject to very wild swings because of the nature of (indiscernible). So changes with respect to those are rather hard to predict. With respect to government/defense, I think for reasons that are clear to everybody, the outlook there continues to be for significant demand, at least for the foreseeable future.

Have you picked up any new accounts which is accounting for some of this growth? Or is it mostly your existing accounts that are ramping up the new products that you've been designed into? What is sort of the major -- the underlying theme in the demand?

A lot of this activity has to do with design-ins that took place over the years, in some cases many, many years ago. Particularly if you look at government/defense, there's very long time costs associated with those programs. So some of the activities today have to do with design-ins that took place in some cases five or ten years ago.

What type of demand in Asia -- what type of end markets are driving demand from Asia?

I don't have a specific comment to make with respect to that, but I think we're impressed with what's going on in at least some parts of our Asian markets.

Is it telecom related at all in China -- datacom/telecom?

I will actually be there the week after next, and I will find out a lot more about it. But I really can't comment right now.

Nice quarter.

Steve Smigie, Raymond James.

In your press release you mentioned that there was another 15 points of gross margin improvement to operate within your business model. Is that just sort of a general comment, or are you sort of suggesting some sort of time frame for that?

I think it's a general comment. In terms of the time frame, I think the progress that's taken place to get from 25% to 40% after the bust of year 2000, that progress has taken about three years. So that's roughly speaking the timescale. There is not a timescale of months. But we see significant progress as this year progresses and into next year.

And I think the book-to-bill last quarter you said was 0.94, and so it seems coming into this quarter there weren't a lot of bookings. And obviously you had pretty nice sequential revenue growth, so did a lot of the business just sort of show up as turns this quarter?

Yes, quite a bit, even though a lot of the bookings fell into the second quarter. So we started a quarter in a certain position and we started the second quarter in a better position relative to where we were at the first point in time in the first quarter.

I'm not sure if I understood that correctly. I was just more thinking about Q1, where it seemed like you didn't have a lot of backlog coming into the quarter and you seemed to make it. So I was curious about stuff that developed in the quarter. And if so, is that tied back again to, as you mentioned, defense programs you won five or ten years ago so that while maybe you were surprised at the magnitude in Q1 at the same time it was not like there were a number of new design wins all of a sudden?

I don't think it was really any surprise. I mean, we have, I think, commented in February, in the corresponding conference call in February, that we saw progress beginning with the first quarter, and that's what happened. And that was based on the visibility that we had at that time that we commented about in terms of improving demand.

Thank you very much.

Is there another question?

Jim Bartlett, Bartlett Investors.

Could you just give us an update on your strategy and the level of interest in licensees (ph)?

We are working on opportunities, both in terms of licensing and partnerships. And that's all I can say at this point in time. But our strategy remains to make the most of the opportunity with factorized power and V-I Chip technology and V Chip products in all the major end markets, and both licensing and partnering are essential parts of that strategy.

And just on product related issues, I know you have mentioned the potential uses of V-I Chips in plasma flat screen TVs. Is there commensurate, or is their interest also, in other flat screen technologies that use the V-I Chips?

I think generally speaking there is opportunity for V-I Chips wherever the distinguishing attributes of V-I Chip, which in particular consist of very high density, very high efficiency, particularly efficiency at the point of load, very fast dynamic response -- there is a speed in response in change in load demands -- very low noise, with an attractive cost, with a low cents per watt (indiscernible) if you will, wherever those factors, any one of those factors or a combination of those factors, is a key factor in designing in V-I Chips are an opportunity. Obviously (indiscernible) have been and continue to be to a large extent the breadth of capabilities in terms of V-I Chip offerings. And to some extent, the customers in major end markets getting familiar with these capabilities and figuring out how to best take advantage of them. So those are all factors that create timescales to fruition.

But the (indiscernible) attributes, technical attributes and cost attributes of V-I Chips, open up lots of market opportunities. Because, as we all recognize, the world more and more goes around on electronics systems and devices that value thinness. You gave one example of that. There are many. Or density, or speed and other factors apply.

Thank you.

Leonard Smolin (ph), Sederberge & Associates (ph).

He doesn't seem to be there.

Jeff Mensic (ph), Jefferies & Co.

Thank you. And I was wondering, Mark, can you give us some color on the revenues in terms of what you experienced in terms of pricing and what you saw in terms of volume increases?

Obviously the volume increased because the revenue was higher. As far as the average sell prices, they were a little bit better than they were the quarter before, but nothing that significant.

The progress on margins was largely due to cost reduction.

Can you refresh my memory; what was the depreciation and amortization in 4Q '04?

It was -- depreciation was about 5 million.

So that -- now the reduction in that to 4.5, was that because of the accelerated depreciation schedule, or --?

Some of the equipment dropped off at the end of 2004.

And then going forward, should that be sort of the run rate for the rest of the quarters?

No, we had indicated in our 10-K that we expected that depreciation for the total year would be down from where it was in 2004, which was 20.9 million for the year.

Right. I just meant the 4.5 in the one Q. Can we use that as a run rate going forward?

You should expect to see some continuing reductions in the (indiscernible) level in terms of aggregate dollar levels for some time. And the reasoning behind that is quite simple -- when it comes to our legacy products, the equipment was put in place quite some time ago, as you would imagine. And a good deal of that equipment has now come to the point of where it's being fully depreciated. And there's some more of that. And as we cross that point, obviously the level of the depreciation associated with the legacy products equipment gets to be smaller and smaller.

Now, counteracting that to some extent is the capital equipment investments associated with V-I Chips. Today, as an example, as an unusual example, we kicked off $4 million of capital equipment investment over the next couple of quarters in V-I Chip manufacturing equipment. But still, as we look at the balance of this year, see, to Mark's point, a continuing decline in the quarterly level of depreciation.

Very good. In terms of -- you talked about the end markets that were the strongest. What was the weakest end market in the quarter?

Europe.

Was it industrial or was it telecom, in that way of thinking about it?

I don't have the specific answer to that question.

Okay. And then the last question. Now, with C&D, have you officially licensed them now? Obviously it was with Celestica before. Is C&D officially licensed as well now?

As you know, we licensed Celestica. The Celestica power business was sold to C&D. And we understand that C&D is looking to be ready to make V-I Chips and come to market with V-I Chips. Beyond that, I really can't tell you.

But you're still comfortable with C&D manufacturing V-I Chips?

I think I said as far as I can say. They're not doing it, as far as I know, at this point in time.

Thank you.

Alen Hitz (ph), Mosley Capital (ph).

Can you give some examples in the automotive or transportation market how V-I Chips would be used and what the advantages would be?

Well, there are opportunities both in gasoline powered vehicles, hybrid based vehicles, and the issues depending on the application are somewhat different. But in a typical application it involves up or down conversion from a relatively high-voltage bus such as 300, 400 volts to a low voltage such as 30, 40 volts.

So it would be used in hybrid cars?

That's one of the possible applications, yes.

Also, in terms of consumer applications, would it also be used in small handheld devices or cell phones? Is that a possibility?

At this point in time, (indiscernible) factorized power and V-I Chip technology is being at the higher power levels, so the initial sweet spot is based on building blocks that are properly priced for a few hundred watts. We are expanding the capability down, but it would be quite some time before there is a benefit to a V-I Chip type solution at the very low-power levels of a PDA. Obviously battery operated equipment, except for notebooks and larger type of equipment, are low enough so that the solution from a (indiscernible) perspective needs to be based on devices or building blocks that are cost effective at extremely low power levels.

Thank you very much.

Kenneth Corana (ph), Wachovia Securities.

Relative to the line of information and licenses and JVs, were there any new revenues in the quarter from new royalties?

Not yet, no.

And then from the expense side, can you just review where you are in litigation expenses and what your thought is of any potential recoveries?

It's been quiet. The case is back in front of the District Judge. We understand that she has been quite busy, and so nothing has happened now for a number of months.

But the actual dollars that are now being spent is roughly what?

Because of the fact there has been very little activity over the last several months, there's been very little expense, legal expense.

Thank you.

Jeffrey Meyers, Intrepid Capital.

If you could talk a little bit about your pricing strategy for the V-I Chip; are you planning on pricing it sort of similar to other point of load products or are you going to price it a little bit higher because obviously it has some better functionality?

One of the things that makes the world of power management and power systems exciting is that it's a very complex world. There isn't a universal generalization that can be made. So there is no way to price V-I Chips so that they represent a uniform value proposition in a variety of end applications and a variety of end markets. But generally speaking, we believe that given the (indiscernible) cost structure, both where we are today and more significantly where we expect to be as economies of scale and capabilities get put in place, we have initially priced the product to be quite attractive both in terms of cents per watt and cents per amp, which is (indiscernible) at the point of load. So 100 ampere V-I Chip in a package is a fraction of the space taken up by a competitive solution, and with added benefits can be purchased with a price tag that is reasonably competitive with commodity type alternatives.

Just ballpark what sort of volumes do you have to get to in order to achieve the margins you want and price it competitively to other products?

Again, we believe that in many cases our solutions today are being priced competitively. In some cases they may be even offering a cost advantage. In terms of economies of scale, we think that our rates of millions of V-I Chips per month sometime down the road, these devices are going to be extremely cost effective.

Thank you very much.

We will take one more question if there is one.

Don McKinney (ph), BB McKinney & Company.

Nice quarter. I did want to ask you where you talked in terms earlier on about volume production on the V-I Chips by the end of the year, substantial in 2006, are these necessarily design-ins that you already have in place?

Well, defining a design-in is always a little subjective. But based on information we have, there are programs going into volume production at the end of this year for which we believe we have a design win.

When I always -- I have been waiting now -- I think it was about two years ago that you announced this new technology, and you were looking for the rapid acceptance of it. Since some of these obviously take a while to come into production, would you say that you're on schedule, ahead of schedule, behind schedule a little bit as to how you first saw the technology being accepted by the industries?

I believe we're doing well. As I mentioned in the past, first of all, as with any power product, there is a 9, 12 month gestation period from initial availability of the product to any kind of volume production. Second of all, there's a need for critical mass; a combination of capabilities. We've talked in the past in these conference calls about the fact that up until the time when we have a capability that combines VTNs (ph), PIMs having just one and not the other is a little bit like having one shoe and not the other. It takes both to make progress.

And then in other respects, as commented in the past, it takes a capability that involves a level of granularity in terms of V-I Chips (indiscernible) other form factors that in the aggregate offer customers some choices and a broad enough sweet spot in terms of matching their power requirement to the power capabilities of these devices.

So we made, I believe, a great deal of progress in all of these fronts, as well as the very important front of being able to spend the (indiscernible) requirements from off-line to the point of load. And as we bring together all these capabilities, I think we can look forward to accelerating greater progress. But I think the progress thus far has been in many ways remarkable. We're always (indiscernible) and it always somewhat frustrating not to be able to do more, but I think looking at it in a level-headed way, a lot has been accomplished since the very first VTM (ph), the SOVTM (ph), or BCM, I should say, bus converter unit was introduced less than three years ago.

Thanks a lot. Look forward to a nice annual meeting.

Thank you. And we look forward to seeing you all at our annual meeting, which is scheduled for June 23rd. Otherwise, if you can't make it, we look forward to talking with you again at the beginning of July when we announce our Q2 numbers. Thank you for participating.

Ladies and gentlemen, thank you for your participation in today's conference. This does conclude your presentation. You may now disconnect. Good day.

The applicable company has not participated in nor authorized the preparation of this transcript nor reviewed it for accuracy or otherwise and disclaims all responsibility for any inaccuracies that may appear herein.