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Operator
Good day, ladies and gentlemen, and welcome to the Vicor earnings results for the first quarter and year ended March 31st, 2010.
My name is Larry, and I will be your operator for today.
At this time, all participants are in listen-only mode.
Later we will conduct a question-and-answer session.
(Operator Instructions)
I would now like to turn the conference over to your host for today, Dr.
Patrizio Vinciarelli and Mr.
James Simms.
Please proceed.
James Simms - CFO, Secretary
Thank you, Larry.
Good afternoon, and welcome to Vicor's earnings conference call for the first quarter ended March 31st, 2011.
I'm Jamie Simms, Chief Financial Officer.
And with me here in Andover are Patrizio Vinciarelli, Vicor's Chief Executive Officer, and Dick Nagel, our Chief Accounting Officer.
Today we issued a press release outlining our financial results for the first quarter.
This press release is available on the investor page of our website, www.vicorpower.com.
We also have filed a form 8-K with the Securities and Exchange Commission in association with issuing this press release.
I remind all of you today's conference call is being recorded and is the copyrighted property of Vicor Corporation.
I also remind you various remarks we may make during this call may constitute forward-looking statements for purposes of the Safe Harbor Provisions under the Private Securities Litigation Reform Act of 1995.
Our forward-looking statements are subject to risks and uncertainties, which may cause actual results to differ materially from those projected or implied in our statements.
Such risks and uncertainties are discussed in our most recent reports on forms 10-K and 10-Q filed with the SEC.
Please note the information provided during this conference call is accurate only as of the date of the call.
Vicor undertakes no obligation to update any of the statements made during this call, and you should not rely upon them after the conclusion of the call.
A replay of this call will be available beginning shortly upon its conclusion, through May 11th, 2011, by calling 888-286-8010, and using the pass code 60651207.
In addition, a webcast replay of the conference call will be available on the investor relations page of our website, beginning shortly upon its conclusion.
Patrizio and I each have prepared remarks, after which we will take your questions.
Patrizio.
Patrizio Vinciarelli - Chairman, President, CEO
Thank you, Jamie.
Hello, everyone, and welcome to our Q1 earnings call.
I'm pleased to report that Vicor performed within expectations for the first quarter ended March 31st, highlighted by a significant ramp in production of shipments of our V-I Chip products.
The Big Business Unit performed well, (inaudible) in exports, observing a decline in domestic defense programs.
And PICOR got closer to bringing into fruition it's silicon centric (inaudible).
As Jamie will address the specifics of the income statement and the balance sheet in his remarks, I will focus my remarks on strategic and operational trends within our business units.
Revenue from the Big Business Unit declined 4.2% sequentially from the fourth quarter, due to completion of a large defense electronics program.
However, Q1 2011 BBU revenue of $55.6 million grew from the Q1 2010 total of $47.1 million.
In other words, thanks to its diversified approach to markets and products, the BBU was able to grow quarterly revenue approximately 18% on a year-over-year basis.
As Jamie will discuss in more detail, export activity has contributed to our revenue base.
For the quarter, international sales, the percent is approximately 56% of consolidated revenue, up from 50% from the fourth quarter 2010, and approximately 48% for the first quarter of 2010.
As you may have seen, we have recently made several new product announcements involving expanding IBC line of V-I Brick intermediate bus converters.
These products, which we expect to be a significant element of the BBU revenue growth going forward, are isolated fixed ratio converters for power system application in the enterprise networks.
Our new products offer essentially double the density and efficiency of industry standard bus converters, which they can replace on a PIN compatible basis.
We [entering] this market segment as well as the (inaudible) manufacturers, open up a new and broad range opportunities for the Big Business Unit in (inaudible).
We've already received promising early [orders for] in the sampling product to dozens of interested parties.
The near-term success with our new bus converter product line is related to a legal dispute with a company by the name of Synqor.
As disclosed and previously addressed, Synqor won a jury verdict in 2010, against 11 manufacturers of commodity bus converters.
Vicor was not named in that suit, which was tried in the Federal District Court of Eastern Texas.
However, as we introduce our own differentiated and proprietary bus converter products, Synqor, being unable to compete in the marketplace with the superior performance and cost effectiveness of our products, have sought to receive compensation by moving the Texas Court for a preliminary injunction against us and one of our early customers.
We have said both publicly and in our court filings, the Synqor claims are without merit.
Unlike antiquated square wave converters that were found to infringe Synqor patterns, our [san amp] convertors, our [resident] converters, that Synqor specifically disclaimed in their pursuit of infringes of its square wave technology.
Unfortunately, in spite of lack of merit, Synqor's threat of a preliminary injunction has had its intended effect, to interfere with the short-term adoption by potential customers that are, on the one hand, attracted to the superior performance of our products, but, on the other hand, reluctant to place large production orders given the uncertainty caused by the threat of preliminary injunction.
We're confident that the Texas Federal Court will appreciate the infringing nature of our technology which is fundamentally different from Synqor and reject Synqor's claims, giving us the green light after holding a hearing now scheduled for May 20th.
An additional area of uncertainty regarding near-term revenue growth is the unknown extent to which efforts to reduce the federal deficit will impact that portion of our business tied to government spending.
Although the figure varies considerably from quarter-to-quarter, revenue tied directly or indirectly to government programs represents approximately one-fifth of our consolidated revenue.
We first became aware of funding constraints last year, as certain programs began to be deferred due to shifting budget priorities in the Pentagon.
However, our government business, which is primarily in field [deploy, defense electronics], and avionics well suited for high-performance solutions, is sufficiently diversified across long-term programs and program subcontractors to support growth once funding constraints are resolved.
Another point BBU operations we should briefly address is our subsidiary Vicor Japan Company, or VJCL.
We're all aware of the extraordinary destruction and personal losses in Japan resulting from the March earthquake, tsunami, and subsequent nuclear crisis.
We're relieved that VJCL employees were not hurt and VJCL suffered only minor physical damage in our Tokyo offices and in our (inaudible) facility in northern Japan.
Although [Iwanta] is less than 50 miles away from the coastal impact zone, the community is sufficiently inland and above sea level to have avoided meaningful damage.
We send our deepest sympathy to the Japanese people who have suffered so much as a result of these events.
We anticipate VJCL to experience some decline in near-term revenue due to all [this casualty] as they suffer the crisis, but do not anticipate a long-term negative impact on performance.
V-I Chip serves several large customers in Japan directly from Andover, and we're relieved to know that our customers' facilities were not damaged and that their employees are safe.
We have not been informed of any request of delays in scheduled shipments or any push outs of scheduled production.
Vicor also has several important Japanese suppliers and we've been in constant contact with our supplier partners so that we can assess what delays might be expected due to manufacturing interruptions brought on by the national disaster or consequences thereof such as rolling blackouts or brownouts.
At this time, we do not foresee delays in shipment of key components from our Japanese suppliers that would disrupt their production plants.
However, we're carefully monitoring component availability.
I will now update (inaudible) on our V-I Chip activities for the quarter.
V-I Chip third-party revenue, up $15.4 million, was essentially unchanged quarter-to-quarter, and up 242% from the first quarter of 2010.
However, please note that the V-I Chip revenues in the fourth quarter, including a significant contribution from the [recession] of non-recurring engineering charges paid by one customer.
In terms of net unit production, unit growth was 34% ahead in Q1 relative to Q4.
I should also note that unit production of V-I Chips has essentially doubled from approximately 100,000 units to 200,000 units per month in four months, from November 2010 to March 2011.
While our volumes across a number of programs [with an early adopt] continue to represent a substantial majority of V-I Chip's volume, we're sampling products across a wide range of customers and applications.
As discussed on our last call, V-I Chip inside DCM and PFM Bricks are developing traction in new applications that represent growth opportunities for both V-I Chip and the BBU.
We're also encouraged by the interest expressed by major commodity suppliers for V-I Chip-enabled, high-performance, and lightweight products targeted at electric and (inaudible).
[PICOR's] revenues for the first quarter were also essentially unchanged of 1.5 million for third-party sales, and up approximately 130% from the first quarter of 2010.
In anticipation of major new PICOR product introductions, in Q1, Vicor hired Robert Gendron to lead Vicor Sales and Marketing.
Robert is working closely with Phil Davies, Vicor's new Vice President for Global Sales and Marketing.
Robert, I should point out is a seasoned, accomplished semiconductor professional with significant experience that is highly relevant to PICOR's power component paradigm.
In closing my remarks, we are optimistic about our future.
I've spoken about the transition now underway at Vicor both in terms of the mix of our business, but also in terms of the customer base and the products and solutions that we provide.
As discussed in my February remarks, for the first time leading OEMs in networking, data storage, and computing, are set to become customers of the Big Business Unit.
This will support greater diversification and long-term momentum for (inaudible) offering of power management components.
We're executing our [far-reaching] vision of providing high-performance, cost-effective, modular power system solutions from the wall plug to the point of load.
Our valuable position is to enable customers using innovative V-I Chip, V-I Brick, and PICOR modules to achieve competitive advantages arising in part from [faster time] to market, greater functionality, and superior performance, holding to the unique density and efficiency attributes of our modules.
Vicor's future is promising, as advanced power system solutions, leveraging [commodity] V-I Chip technology and building blocks are getting traction across new vertical markets supporting greater diversification in long-term growth opportunities.
This concludes my prepared remarks.
I'll turn it over to Jamie.
James Simms - CFO, Secretary
Thank you, Patrizio.
I'll now review the specifics of our quarterly performance.
Consolidated revenue for the first fiscal quarter totaled $70.5 million, down 3.5% from $73 million realized for the fourth quarter of 2010, but up 36.3% from the $51.7 million realized for the corresponding first quarter a year ago.
Majority of this year-over-year increase is associated with the ramp of V-I Chip, but the BBU and PICOR also contributed to the increase.
As Patrizio mentioned, international revenue rose to represent 55.7% of consolidated revenue for the quarter, up from 50.2% last quarter.
As reported for prior quarters, much of the recent growth of international sales is related to increases in sales to Asian contract manufacturers working on behalf of US OEMs that have designed our components into their products.
If such sales are attributed to the domestic OEMs, our international revenue would be more inline with historical averages.
Also recall that Vicor sells in dollars worldwide, except for Japan.
The weakening of the dollar for the first quarter against most currencies also contributed to the increase, as we sold more units in Asia, particularly in China.
Our consolidated book-to-bill for the first quarter was 0.94, as compared to 0.66 for the fourth quarter of 2010.
Total backlog at the end of the first quarter was $74.8 million, compared to $78.9 million at the end of 2010.
As regular listeners know, we do not disclose specific book-to-bill ratios by business unit, but we can state that bookings were covered across all business units.
Much of our revenue is derived from large, multi-quarter programs and, therefore, subject to irregularity in bookings, shipments, and revenue recognition.
I should note that having increased our capacity, we are now operating with shorter lead times, and shorter lead times tend to artificially depress book-to-bill ratios.
Last quarter's book-to-bill ratio of 0.66 was particularly representative of the wide swings that occur due to the timing and magnitude of orders and shipments, as well as changing lead times.
As always, we caution listeners that management does not consider the quarter book-to-bill ratio, nor comparisons of quarter-end backlog to be definitive indicators of forward revenue.
Q1 revenues well above the levels that might have been inferred from our Q4 book-to-bill ratio are evidence of this proposition.
Our consolidated gross profit for the first quarter was $30.5 million, down $7.7 million from the $33 million realized for the fourth quarter of 2010, but up 30.6% from the $23.3 million realized for the corresponding first quarter a year ago.
Gross margin as a percentage of revenue decreased to 43.2% for the first quarter of 2011, from 45.2% for the fourth quarter of 2010, and 45.1% for the first quarter of 2010.
This decline in absolute and relative gross profit has three causes, two of which should be nonrecurring and one of which will have a short-term impact.
The first cause with a short-term negative impact is the increase share of V-I Chips in our total volume.
As we've discussed before, we are still early in the ramp of V-I Chip, and the gross margins realized on these products are still far short of our targets.
As such, our consolidated gross margin reflects the higher percentage of lower margin products in our total mix.
We are, however, making substantial quarter-over-quarter progress at reducing average unit cost in V-I Chip.
Unit volume in V-I Chip is the primary driver of lower unit cost, whether because we can spread relatively fixed overheads across higher volumes or because we can obtain more favorable pricing from suppliers on higher raw material and component volumes.
The second cause was the aforementioned completion of a large defense electronics program at a relatively high gross margin.
The third cause to the reduction in absolute and relative gross profit was an increase in our warranty reserve by $635,000 to reflect the likely impact of expected returns of products under warranty that were manufactured with a component that we found to exhibit a higher-than-expected failure rate.
I should point out the contribution of the BBU to product level profitability, as the BBU was, once again, able to reduce unit cost of our traditional brick components for the quarter.
The ongoing reduction of material costs and the implementation of efficiency improvements are evidence of the considerable talent in our operational organization, and this supports our confidence in bringing V-I Chip product margins to t heir target levels.
Consolidated operating income for the first quarter was $6.4 million, down 39% from the $10.5 million realized for the fourth quarter of 2010, but up 149.2% from the $2.6 million realized for the corresponding first quarter a year ago.
Operating margin, as a percentage of revenue, decreased to 9.1% for the first quarter of 2011, from 14.4% for the fourth quarter of 2010, but increased from 5% for the first quarter of 2010.
Operating expenses were particularly impacted by substantial legal fees relating to our litigation against Synqor.
We also had increased compensation expenses in both sales and marketing and research and development.
Total headcount at quarter end was 1,081, up from the prior quarter's total of 1,070.
We are monitoring our SG&A and R&D expenses closely, and seek to identify cost reductions or efficiencies throughout the organization.
Quarterly pretax income, including interest income and the net effect of accounting for certain changes in the value of our investment portfolio, totaled $6.2 million, representing 8.8% of revenue in contrast to the fourth quarter's pretaxed income of $10.4 million, which represented 14.3% of revenue.
Our effective tax rate for the first quarter was 33.0%.
The full year 2011 provision for income taxes, which is based on an estimated annual effective tax rate for 2011, approximate a full statutory tax rate as compared with the lower effective tax rate for 2010.
As discussed in prior calls, by the end of 2010, we had utilized all of our federal and a significant portion of our state net operating loss carry forwards.
We continue to have certain deferred tax assets against which we maintain a valuation allowance, for which realization cannot be considered more likely than not at this time.
While we have certain other tax credit carry forwards that may reduce our provision in future periods and we may generate additional credits that may reduce our provision in future periods, we expect to be a full taxpayer going forward.
Net income for the first quarter was $4.0 million, or $0.10 per diluted share, compared to net income of $10.8 million, or $0.26 per diluted share, for the fourth quarter of 2010, and $2.0 million, or $0.05 per diluted share for the corresponding period a year ago.
Recall that the fourth quarter figures include a tax benefit of approximately $1.2 million, or $0.03 per share.
On a pro forma basis, excluding nonrecurring tax adjustments, fourth quarter net income was $9.6 million, or approximately $0.23 per diluted share.
Cash flow from operations totaled $10 million for the first quarter, compared to $5.8 million for the fourth quarter of 2010.
We experienced a favorable swing in working capital, as we started to absorb the inventory built up for the V-I Chip production ramp.
We also did not have the non-cash reversal of allowances against our deferred tax assets that we had experienced in the third and fourth quarters of last year.
Capital expenditures totaled $3.0 million for the first quarter, reflecting additional equipment for both the BBU and V-I Chip that came online during the quarter.
We are expanding manufacturing capacity to meet our V-I Chip production forecast, which is based on current and expected bookings.
We are monitoring our longer term requirements, especially in light of our expectation that we'll be broadening our customer base over the coming quarters.
Turning to the consolidated balance sheet.
Cash and cash equivalents increased to $56.4 million for the first quarter, up from $49.3 million for the fourth quarter.
Long-term financial investments made up of our portfolio of student loan backed auction-rate securities purchased through Bank of America, were carried at quarter end at an estimated market value of $18.4 million, essentially unchanged from the prior quarter.
These securities continue to pay interest in accord with the terms of their indentures.
Although we have no insight into when we might expect to receive par value for the whole portfolio, we did receive notification in early April of a call at par value for securities totaling $5.5 million, representing approximately a quarter of our portfolio.
We have now received payment in full from the issuer.
Our receiver -- excuse me -- receivables portfolio is in excellent shape with day sales steady at 47 days, compared to the prior quarter's 46 days.
While bank credit remains an issue for some smaller customers, we have encountered few problems with delayed payments and our charge-off experience has been exceptional.
We have no debt.
We own all of our primary facilities, and with carrying value of cash and investments representing 35.2% of total assets and 40.7% of total equity, believe we have more than adequate resources and liquidity to fund our operations.
This concludes management's prepared remarks, so we'll now take your questions.
Larry?
Operator
(Operator Instructions) And our first question comes from the line of [John Dillon] of C&B Capital.
Please proceed.
John Dillon - Analyst
Hi, Patrizio.
Congratulations on a good quarter.
36% revenue growth is pretty darn good.
Patrizio Vinciarelli - Chairman, President, CEO
Thank you.
John Dillon - Analyst
I've got a -- my question is in regard to the PIN compatible market.
This sounds like it's a complete change for you.
I mean, I don't remember Vicor ever being in the PIN compatible market.
Am I correct in that?
Patrizio Vinciarelli - Chairman, President, CEO
I think you're essentially right about it, yes.
John Dillon - Analyst
Can you give us a little more color then?
I mean, it must be -- I mean I understand that there's a lawsuit and that, I mean that the Synqor basically shutdown 11 suppliers.
I mean, that must be a huge amount -- do you have any kind of guesstimate as to what amount of revenue those 11 suppliers were putting into the market?
Patrizio Vinciarelli - Chairman, President, CEO
Somewhere between $100 and $150 million.
John Dillon - Analyst
And that's the market -- that's per year, correct?
Patrizio Vinciarelli - Chairman, President, CEO
Yes.
John Dillon - Analyst
And you've got a superior product that you can just plug right in there?
Patrizio Vinciarelli - Chairman, President, CEO
Yes, we have a superior (inaudible) of typical [drives] half the heat offered within the same package line, in fact, with a lower profile, it allows for better airflow and better cooling, as much as twice the power level of competitive products.
John Dillon - Analyst
And so they can just plug your product in and then they actually have better specs on their product that they're providing their customers, correct?
Patrizio Vinciarelli - Chairman, President, CEO
Well, I think in the short-term it's even more down to earth than that.
[They're something] that they can ship where they could not otherwise.
John Dillon - Analyst
Yes.
Interesting.
Because you mean they couldn't because they can't get the product?
Patrizio Vinciarelli - Chairman, President, CEO
Well, because the Synqor suit against the 11 companies that were found to infringe.
As we sought a permanent injunction, which is under review by the Federal Circuit, there's a partial stay.
But the long and short of it is that effectively the market has been frozen out for what constituted the large majority of the suppliers.
John Dillon - Analyst
And so it sounds like you said that you're actually receiving some orders and delivering some shipments, but it's not what you fully expect if you got the green light from the courts.
Did I hear that correctly?
Patrizio Vinciarelli - Chairman, President, CEO
We are in the early going of this.
And as I mentioned in my prepared remarks, Synqor was [certainly] surprised by this [kind] of advance, our entry into the market, possibly because the earlier point (inaudible) has not been part of Vicor's strategy to, in effect, offer PIN compatible solutions, as responded by bringing an action, seeking preliminary injunction, which we think is devoid of any merit.
But nevertheless, whether -- we're not obviously [with] the motivation, but we can infer that it may be motivated largely by desire to preclude customers from feeling comfortable to switch to a better technology is very cost effective, which is not the case for the alternatives that they're left with, because the alternatives they're left with involve doing business with Synqor, which they all despise and would rather not do business with, or substituting alternatives that involve lower efficiency solutions that at the [earlier] point bring about challenges from [a power] management perspective than can get in the way of their being able to have functional products.
John Dillon - Analyst
Sounds like a good opportunity.
So when do you expect -- I mean, do you have any idea when you might expect to see some of the revenue really start flowing from that?
Patrizio Vinciarelli - Chairman, President, CEO
Well, we're going to start seeing some revenue, but to [open to speak of], it will take a green light in terms of having this action, Synqor's [gambit] for lack of better words, be rejected by the court, [if] we anticipate that that should happen towards the end of the month of May.
John Dillon - Analyst
That sounds promising.
And the PFC, is that moving along also?
I think I heard you, you did say it was moving along.
But can you give us just a little bit more color on that?
Patrizio Vinciarelli - Chairman, President, CEO
Well, it is moving along.
We're moving along on two different fronts relating to that with the [power] chip is being produced and we have an even more advanced device, which is in development, in a state of development.
That's part of a grander plan that involves a next generation of V-I Chips with even greater performance and cost effectiveness attributes.
So there's a lot of irons in the fire, a number of different [reactions].
We spent quite a bit of time now talking about the IBC product line, which has gotten a tremendous reception in the marketplace and has open doors for us at a number of accounts where historically we've not done any business or gotten any visibility.
But we're using [that, in part] to expose customers to this V-I technology, using V-I Chips in all of their attributes, so with their (inaudible) packaging and flexibilities.
But in terms of part distribution, architecture and in terms of [density] efficiency, low-noise attributes and so on and so forth.
So there's a lot of activities going on on a number of different fronts and involving a variety of different (inaudible) markets.
John Dillon - Analyst
Sounds good.
Now, I notice your CapEx spending was up from a year ago, but down slightly from last quarter.
What do you plan -- is that for the V-I Chip line still?
Is that what you're focusing on?
Patrizio Vinciarelli - Chairman, President, CEO
Well, we've added an expansion regarding the Big Business Unit specifically aimed at the IBC product line.
So we vested in [having] equipment related to that.
We've also begun to make some small investments, which are going to get escalated over time, in connection with next generation of V-I Chips.
John Dillon - Analyst
Great.
Thank you.
Thank you very much.
Patrizio Vinciarelli - Chairman, President, CEO
Thank you.
Operator
And our next question comes from the line of Jim Bartlett of Bartlett Investors.
Please proceed.
Jim Bartlett - Analyst
Given your comments that you just made about some of these investments that you're making in R&D activities, would you expect the R&D line to continue to ramp this year at the same rate it grew first quarter to fourth quarter?
Patrizio Vinciarelli - Chairman, President, CEO
We expect to be able to essentially hold the level of operating expenses, (inaudible) because we feel that we now have the opportunity to, as I mentioned in the past, bring to fruition the investment we've been making over the last 10 years in developing the technology.
So as I may have mentioned in the past, we have shifted from R&D, as in big R, small D, to R&D, as in small R, big D.
Even the next generation V-I Chip developments, they are not, in effect, developments that involve the level of (inaudible) research that requires (inaudible) operating expense level in R&D.
So we think that with the infrastructure that we have in place, maybe some minor addition here and there, there's a lot that can be accomplished in terms of [qualifying] products that address the breadth of market opportunities across markets in which we've had early penetration with V-I Chip technology, Brick markets, including communication space and other spaces, and last, but not least, the automotive marketplace which represents a tremendous opportunity for us.
Jim Bartlett - Analyst
So roughly holding the $14.2 million level of the first quarter, or increasing slightly from that for the rest of the year?
Patrizio Vinciarelli - Chairman, President, CEO
Yes.
I think on a quarter-to-quarter basis, you might see some relatively small changes.
I wouldn't read too much into them.
They're meant to do with particular projects requiring some tooling or expenses that get incurred in a particular quarter.
But in terms of investment in people, salaries, there shouldn't be any major change for quite some time.
We think we can get a lot more done with the [precious] resources we have in place.
Jim Bartlett - Analyst
Could you or Jamie also just comment on what we should expect from the SG&A expenses?
Legal was a big jump up, you mentioned.
Give us an idea roughly how much that was?
And then commission expenses and other marketing expenses.
Are there new marketing programs in that [first] quarter rate that Phil Davies has implemented or start to implement?
Patrizio Vinciarelli - Chairman, President, CEO
Well, I'll deal with the legal [part].
For obvious reasons, we're not going to quantify that.
There's been and will continue to be a significant expense.
Jamie, you want to comment on the other --
James Simms - CFO, Secretary
Well, part of moving from big R to big D is also moving to enhance our sales and marketing efforts, and that's what Phil Davies is -- and Robert Gendron is here to do for us.
While I do not anticipate and we're not budgeting for significant changes, I would expect that if you were to look at our P&L, that those numbers around our sales and marketing expense would be the ones that might climb.
But since so much of our SG&A is headcount related, I really don't see a lot of variance in the coming quarters.
What I do see is leverage in that we have the people to support a, we hope, a lot larger top line.
Jim Bartlett - Analyst
One further question.
In your comments when you were talking about PICOR and the direction in making -- well, if you could just expand on the comments on -- and their direction in getting close to introducing some important products.
Patrizio Vinciarelli - Chairman, President, CEO
Okay.
So as a reminder, PICOR is our fabless entity in the semiconductor space with a focus on power management products and a more specific focus on leveraging the technology that we've been developing over the last 10 years, generally known as V-I Chip technology [at] lower power levels, so complimenting our capabilities, our other capabilities, with modular building blocks that in effect replicate the efficiency, density attributes of V-I Chip.
On a smaller scale aimed at addressing lower power requirements.
Obviously there's a lot of those requirements and there's a lot to be said for the [mass] opportunities that come about from being able to offer (inaudible) power solutions that span the range of power system requirements that people encounter in typical applications.
So that's an essential part of division.
It is, as I've been referring to it, a silicon centric part of division because as you get to lower power levels, let's say typically below 100 watts and more typically in the range of 25 to 50 watts, the silicone (inaudible) and the silicone value proposition becomes a much bigger percentage of the total cost and value proposition.
And with that comes a different set of traits that impact [your concession] from the frontend in terms of the type of applications, the type of solutions, all the way to the backend in terms of the manufacturing processes and the manufacturing infrastructure and the packaging aspects of the technological solution.
So it is a power component paradigm that is very complimentary to the V-I Chip and Brick paradigm.
On a different scale, it plays independently of and in concert with the V-I Chip and Brick paradigm and gives us a unique position in the marketplace in terms of being able to offer customers a range of [modular] solutions that over time should address most of their needs.
Jim Bartlett - Analyst
Should we be able to see some much more significant revenue from PICOR in 2012?
Patrizio Vinciarelli - Chairman, President, CEO
We're going to see an escalating revenue line with [I expect] very dynamic characteristics, obviously in the early stages the growth rates can be substantially greater than they can be for more mature companies, obviously.
They're a lesser [revenue impact] on Vicor as a whole.
But there's going to be a lot of action there, much like what we've seen in the last year, year and a half on the V-I Chip front.
Jim Bartlett - Analyst
Thank you.
Patrizio Vinciarelli - Chairman, President, CEO
And I think that's going to be starting here in the -- within the next 12 months.
Operator
Our next question comes from the line of Steve Anderson from Steve Anderson from Venator Capital Management.
Please proceed.
Steve Anderson - Analyst
Good afternoon.
Patrizio Vinciarelli - Chairman, President, CEO
Good afternoon.
Steve Anderson - Analyst
Hi.
I wasn't expecting commentary on the budget for the legal side.
But perhaps you could just quantify what the amount was in the first quarter, if possible.
Patrizio Vinciarelli - Chairman, President, CEO
We're not going to do that.
It was a substantial enough amount that it made an appreciable difference in our earnings per share.
Let's leave it at that.
Steve Anderson - Analyst
Okay.
But if we look at where you've been kind of running for the past four quarters, on a base operating expense budget, it wouldn't be much different from that?
Is that fair to say?
Patrizio Vinciarelli - Chairman, President, CEO
Well, obviously, it was an operating expense line item.
And I think if you want to make an educated guess, you can look at the operating expense line for Q4 and the Q1 operating expense line and from the difference make an inference.
But we're not going to quantify these numbers.
Steve Anderson - Analyst
Okay.
And I'm relatively new to the story.
So I'm just trying to understand a little better.
What do you actually see the size of V-I Chip market as?
Can you give any kind of overviews to that?
Patrizio Vinciarelli - Chairman, President, CEO
Well, the size of the power system market are large, including both [so-called] DC-DC solutions and AC-DC solutions is quite large, in the several tens of billions of dollars per year worldwide.
It is a market that historically has been highly fragmented.
There's been lack of economies of scale arising from the lack of the right technological solution.
Meaning that historically power system needs have been addressed but with what some will refer to as a tailpipe syndrome, meaning the power system is (inaudible) design that's part of an OEM system, very often, not always, but often the case.
And this job gets done by, in effect, developing or having an [Asian] company develop what's been known as a [cast-on] power supply.
The [SUC] market is (inaudible) for that.
It is actually considerably larger than the DC-DC market.
And we believe and our vision is that this is a situation that is bound to change.
It will undergo the kind of revolutionary changes that are taking place in other parts of the electronics industry.
Once the right kind of modular solutions with requisite performance and cost effectiveness attributes became available.
So our vision with respect to the modular solutions offered under the V-I Chip brand and PICOR and to some degree the Brick component paradigm are to, in effect, enable this kind of transition where [deemed this as a whole migrates] from what's been largely a [cast-on] industry without economies of scale to an industry that relies on a modular solution so they never cast-on so [it's] a very fast time to market with a high degree of [stability] and a great level of performance and overall cost effectiveness.
To extent that that vision is going to come to fruition, by the [finish] it will change what is a huge market and the market opportunity overall in years to come, and, obviously, this is not going to happen overnight.
We're looking at a process that will take five, 10, 15 years.
It would have an implication that should be measured in many billions of dollars, potentially 10, 20 billion dollars market opportunity.
Steve Anderson - Analyst
Well, I guess going through previous transcripts, et cetera, and looking at the way you've talked, it just sounds like more and more people keep trying the V-I Chip and experimenting with it.
I'm wondering what that design cycle is and what the lag is between testing to production for a lot of these clients, potential clients.
Patrizio Vinciarelli - Chairman, President, CEO
It is [often] cash independent.
In some cases it may require to take full advantage of all the benefits avoiding the tailpipe syndrome, in effect designing the solution with enough lead time to take full advantage of it.
But part of the challenge in terms of lead time is that with early generation V-I Chips, the ease of use from a cast, from a designing perspective, has been characteristic of a first implementation of [an ebbing] technology.
So as you might imagine, we are very focused on bringing about the next generation of devices that will make it a lot easier for customers to go to market quickly with products that [evidently are] superior power density, meaning process more power and less volume, have considerably less heat, high efficiency.
We demonstrated recently with the IBC product line that we initially get [90%] efficiency, I think in our future or even higher efficiency.
So to the point where in effect the power management aspect of the challenge that OEMs face, gets more easily addressed, and these further developments, I think are going toward the effect of shortening the lead time from interest, initial interest that -- by an OEM to bringing it to fruition.
So we're going through the process, that's characteristic of these kinds of developments that take early adopters and require a certain level of just (inaudible) the marketplace before reaching a higher rate of acceptance and general use.
And, obviously, breaking into markets that have very significant volume opportunities where, in effect, the cost pressures are the hardest [ease] -- test by far, that will, in effect, do a lot in terms of (inaudible) technology and the products for general use.
So that's very much part of our strategy.
Steve Anderson - Analyst
Correct me if I'm wrong.
But did you say you expect that you should be able to do 60 million in V-I Chip sales this year?
Is that correct?
In the past.
Patrizio Vinciarelli - Chairman, President, CEO
I think he said 16.
No, it is considerably higher than that.
Steve Anderson - Analyst
No.
Six oh.
Six oh.
Patrizio Vinciarelli - Chairman, President, CEO
Yes.
James Simms - CFO, Secretary
Oh, six zero.
Patrizio Vinciarelli - Chairman, President, CEO
Yes.
Yes, we did 13 and change in the first quarter.
So the number is going up.
Steve Anderson - Analyst
So if you look at the pipeline as they exist now, and you're working with a ton of new clients, obviously, there are a number that are fully entrenched in developing their applications and moving towards production that you expect to come on this year.
But if you look at the pipeline in entirety, how much larger is that number given the opportunities that are in front of you at this point in time?
Patrizio Vinciarelli - Chairman, President, CEO
Is much, much larger.
Steve Anderson - Analyst
Much --
Patrizio Vinciarelli - Chairman, President, CEO
We -- put it this way.
We recently started tooling of a platform, a V-I Chip platform that could by itself in just one platform do a large, very large multiple of the V-I Chip revenues for this year.
So there are tremendous opportunities.
But we all need to be very realistic and patient with respect to bringing them to fruition.
It isn't going to happen overnight.
And we still have significant work ahead of us in the frontend of the business and the backend of the business, in engineering.
The nature of the challenge changes because we've been already through the most difficult part.
But that doesn't make it a walk in the park.
There is a lot of hard work ahead of us.
But the nature of the challenge is changing.
We're now, in effect, focused on a different set of issues.
And you've seen this reflected in some of the recent steps in terms of adding bandwidth in the frontend of the business and corresponding each of these in other fronts.
Steve Anderson - Analyst
Now, am I wrong in assuming that if someone's actually come through your front door and asked for samples and discussing opportunities with you, that's a big headway along bringing them into the actual physical pipeline of production, correct?
Patrizio Vinciarelli - Chairman, President, CEO
Right.
That works by the usual sales process, keeping them.
Steve Anderson - Analyst
So what would the sales process, would that be on the outside 18 months, like typical other semiconductor pipeline from design in to production?
Or does it range on --
Patrizio Vinciarelli - Chairman, President, CEO
It's a wide range.
At one end of the spectrum it could be literally a few months.
So if we go to the example of the bus converters, the IBC power line, obviously where there's a void created in the market by the events that have taken place in the last six months, and these -- the ability to replace with [a compatible] product and existing solution and do it very cost effective with much higher performance, the gestation period of that can be literally overnight.
Steve Anderson - Analyst
So that's a --
Patrizio Vinciarelli - Chairman, President, CEO
Meaning it can be a few months.
So that's overnight in this business.
It's not -- it's not a one-day affair in any case.
But it can be relatively short.
At the other end of the spectrum, if we're talking the multi-program, even though those don't take as long as they used to take, they still take several years.
Steve Anderson - Analyst
Okay.
And something like that one where you're discussing where it could be multiples, that would be one of the longer tailed ones?
Patrizio Vinciarelli - Chairman, President, CEO
Well, I will say that on average, you're probably dealing with a gestation period of 18 months.
I think about 12 to 18 months would be the run of the mill.
And the exception of the short term would be three months and these programs that take three years.
Steve Anderson - Analyst
So in your wildest, blue-sky, rose-colored glasses, you'd love to see us doing multiples of the current V-I Chip volume in a year or year and half?
Patrizio Vinciarelli - Chairman, President, CEO
Well, so we've been working this pipeline, right.
So the good news is that as we work it from period to period, we're laying vast layers of future business opportunities that range from a [wider] spectrum, things can turn into revenues and business for our -- quickly, as well as other things that have longer gestation period and we're approaching it with a very long-term perspective.
We're not in it for a quick hit.
We're in it for the long term and we're laying the foundations to see significant growth in the next five to 10 years.
Steve Anderson - Analyst
Great.
Well, thank you very much.
Patrizio Vinciarelli - Chairman, President, CEO
Thank you.
Operator
Our next question comes from the line of Bob Sales of LMK Capital Management.
Please proceed.
Bob Sales - Analyst
I wasn't sure I was ever going to get a question in.
James Simms - CFO, Secretary
Well, you got lucky.
Bob Sales - Analyst
I did.
Just a few questions, mostly bookkeeping questions.
Can you quantify how much the weaker dollar year-over-year contributed to the top line?
James Simms - CFO, Secretary
I won't give you a specific number.
But because we do sell in dollars there obviously is an impact when a customer in a foreign country can actually use fewer of their home currency.
Bob Sales - Analyst
Can you tell me what the average price --
James Simms - CFO, Secretary
No, I can't.
Bob Sales - Analyst
No idea?
You don't have the exchange rate because you've got multiple currencies.
No problem.
James Simms - CFO, Secretary
Yes.
But what I think is important to know is what we stated in the prepared remarks, is that to date we have been, certainly through 2010, and going forward, we've been selling more into contract manufacturers overseas.
But the products are designed in to US-based OEMs.
So it's kind of one of those analyses where you have to step back and look at the entirety.
It's not as if we're seeing a decided shift in the nature of our business.
Patrizio Vinciarelli - Chairman, President, CEO
I mean, to put in different terms, the depreciation of the dollar is, to some degree, good for us because it makes our products more cost -- even more cost effective, even though that's negated to some extent by the fact that we have significant reliance on foreign suppliers.
So we purchase materials that have a significant international [content].
But in any case, it doesn't have short-term impact on revenues because, to Jamie's point, the sales are fixed in dollars.
So while the problem, [again], more competitive for the longer term, it doesn't have a short-term impact on increased revenues.
Bob Sales - Analyst
Understood.
And then I'm -- I didn't quite hear the Japanese impact going forward.
Can you just maybe summarize in one or two points the impact on -- of the Japan problems?
Patrizio Vinciarelli - Chairman, President, CEO
Yes.
As mentioned in the prepared remarks, fortunately there hasn't been a direct hit on either any of our facilities in Japan or any of our key customers in Japan or any of our key suppliers in Japan.
Even though indirectly some of our key suppliers in Japan have been impacted by the inability to source from within Japan some of their materials, so lead times have gone out in some cases.
We're watching very carefully the availability of components.
Having a Japan subsidiary is helpful with respect to having an inside track on what is going on and being able to deal with issues in real time.
I would say that a primary concern in the short term is [continuity] of supply, more so than impact on Japanese revenues.
I think we're in good shape on that front.
Bob Sales - Analyst
Okay.
And then on the tax rate, you said for 2011 you'll pay the full statutory rate.
You were 33% in Q1.
And so what is the combined state and federal statutory rate expectation for the full year?
James Simms - CFO, Secretary
Well, we won't give you a specific number.
But I think in the mid-30s is a fair estimate.
Bob Sales - Analyst
Okay.
So it will be higher --
James Simms - CFO, Secretary
Slightly higher.
Bob Sales - Analyst
-- higher in the out quarters to get -- that's the full-year rate is a little bit higher number than what we saw in Q1?
James Simms - CFO, Secretary
It's really flat.
I mean, we had 33% this quarter, and expect a point or two increase and then flat thereafter.
Bob Sales - Analyst
Okay.
And then with respect to gross margins, I understand the V-I Chip ramp, and that's an important part of the longer term story.
But I'm just curious with the 43% gross margins with defense being somewhat susceptible to spending cuts, and defense is always known to be good margin business, and V-I Chip still ramping, can you give some sort of indication on whether or not we've seen the trough in gross margins as we go forward?
James Simms - CFO, Secretary
Well, let me answer it a little bit differently than you asked it.
As we highlighted, we had a substantial program that was at an attractive margin that came to an end in Q1.
And we also incurred a charge to increase our warranty reserve.
Both of those masked the progress we've been making on gross margin.
And as I highlighted, BBU, which is --
Patrizio Vinciarelli - Chairman, President, CEO
A mature business.
James Simms - CFO, Secretary
-- the more mature business, has been able to extract incremental costs and reduce bond.
So they're capable of doing it and we are doing very well on the V-I Chip side.
I'm --
Patrizio Vinciarelli - Chairman, President, CEO
Right.
So [today] the progress on V-I Chip gets measured in not a few points of margin --
James Simms - CFO, Secretary
Right.
Patrizio Vinciarelli - Chairman, President, CEO
-- or a few point of [causative] action.
James Simms - CFO, Secretary
Right.
Patrizio Vinciarelli - Chairman, President, CEO
It gets measured in double digits.
James Simms - CFO, Secretary
Yes.
Now --
Patrizio Vinciarelli - Chairman, President, CEO
So that rate of progress over the next year is very important with respect to the margin picture for V-I Chip and the overall margin picture.
Another factor is the [product] contribution going forward because there I think we're going to see even higher margins.
James Simms - CFO, Secretary
Because PICOR has typical mixed signal semiconductor fabless model-type margins.
Patrizio Vinciarelli - Chairman, President, CEO
And we're going to see that from the early going.
So unlike V-I Chip, which is relying on proprietary packages which have, in effect, tooling and processes that are unique [where] there's a learning curve that we have to go through in order to get to an [empty] place from a cost perspective.
With the PICOR power component paradigm, there's going to be an opportunity to leverage a common denominator packaging available for (inaudible) sources.
And the margin picture will look very bright from the first day.
Bob Sales - Analyst
So do you want to go out on a limb?
Have we --
Patrizio Vinciarelli - Chairman, President, CEO
No, I don't.
Bob Sales - Analyst
Will we see lower gross margins?
James Simms - CFO, Secretary
Again, I don't -- I'm not going to say that you've seen the nadir or the trough.
Bob Sales - Analyst
I'm glad for you to say that.
James Simms - CFO, Secretary
Yes.
Because we discussed the impact, the uncertainty of Pentagon business.
Patrizio Vinciarelli - Chairman, President, CEO
And by the way, on that front, the percent (inaudible) could get open to some degree, there's also upside.
So as suggested in our earlier comments, there's a lot of moving pieces here with significant leverage in a number of different directions.
And for us to be speculating about a point or two of margin relative to the 43% reported in the first quarter, would really not be on point because I think as long-term investors, we want to be focused on is getting from 43% to 50% to 55%, and possibly higher than that.
Not this year, but in a time frame that we can look forward to.
And that opportunity comes about as a result of all the initiatives that we talked about and the balance of margin opportunities that involve further improvements in the cost [structure] of the BBU, which can measure the incremental points.
[Tenths of] points of margin improvement to be had on the V-I Chip front, and then blending in a contribution from PICOR, are very high margins from the word go.
Obviously that's going to be on what is initially a smaller revenue base, which will not have a big impact on the overall.
But over time it will have a lifting effect on margin, just like V-I Chip in the early going has had a depressing effect on margins.
Bob Sales - Analyst
Got you.
Okay.
Thank you for the explanation.
Appreciate it very much.
James Simms - CFO, Secretary
Thank you.
Operator
Our next line of questioning comes from Don McKenna of D.B.
McKenna.
Please proceed.
Don McKenna - Analyst
I got two of them for you.
I was wondering what the percentage of the backlog is scheduled for delivery over the next two quarters or the current quarter and the third.
Patrizio Vinciarelli - Chairman, President, CEO
I don't think that we --
James Simms - CFO, Secretary
We don't typically --
Patrizio Vinciarelli - Chairman, President, CEO
Yes.
James Simms - CFO, Secretary
-- discuss that.
But I think it's fair to say it's the majority of it.
Patrizio Vinciarelli - Chairman, President, CEO
Yes.
James Simms - CFO, Secretary
I mean, all of our backlog as we disclosed it is within one year.
Don McKenna - Analyst
Yes.
Patrizio Vinciarelli - Chairman, President, CEO
And most of it is relatively shorter term than that.
Don McKenna - Analyst
Yes.
And you did mention too that with the additional capacity that you have the ability to ship quicker.
Are you experiencing the fact that the backlog is a shorter time frame than normal?
Patrizio Vinciarelli - Chairman, President, CEO
So what happens in this business, and it's not unusual, it's a common characteristic is that as you get caught up on capacity and you use your lead times, which is what your customers want you to do, you're good to your customers, which is right thing to do, but the [net] effect is that you [lose] your visibility with respect to having a large book-to-bill ratio above one or having backlog that goes out further because the customers, rightly so, take advantage of not having to place orders three or four months ahead of time.
So and the pendulum swings back and forth inevitably, as you get more capacity constraint and you are to stretch out lead times, then customers get squeezed in terms of having to place orders further out.
And that looks good in terms of the book-to-bill ratio, but it doesn't make for happy customers.
James Simms - CFO, Secretary
Yes.
Don McKenna - Analyst
I understand.
Thank you.
The other one I wanted to ask you about was, you always, in the formal filings for the SEC, talk about the risks associated with investing with the company and one of them being that your competitors, a lot of times have deeper pockets.
And I wondered if you could comment on GE's entry into the field with their purchase of Lineage Power, and how you view that.
Patrizio Vinciarelli - Chairman, President, CEO
I think what I will say with respect to that is that it's interesting development.
I think it's indication of the fact that a large company such as GE sees that power and power systems are more and more essential to a number of important industries that GE is focused on.
I think it's remarkable, actually, GE exited the power business several decades ago, only to re-enter it now through an acquisition.
So I'm sure that decision was not made lightly, and I could only rationalize in terms of the management for GE seeing that power conversion and power systems represent a more essential part of important industries, from the automotive industry, obviously as we transition progressively away from (inaudible) or combustion engine, the role of power systems in automotive is going to be huge.
And it otherwise touches us in every piece of electronic equipment we buy, from mobile devices to the stuff in your home and the office.
So it's something that being as large as tens of billions of dollars and being leveraged in terms of giving a large concern such as GE the ability to package it with other things is strategically worthwhile.
James Simms - CFO, Secretary
Don, I --
Don McKenna - Analyst
Was there much overlap [between] of the Lineage product line and Vicor's?
Patrizio Vinciarelli - Chairman, President, CEO
Not really.
I think Lineage, just like the rest of the traditional part supplies companies is characterized generally speaking in the same way.
There's only one Vicor and there's only one V-I Chip technology.
The rest of them, they're all the same.
Just like (inaudible), they all made carbon copies of the same product.
By the way, Lineage was one of them.
Don McKenna - Analyst
Oh, all right.
Thank you.
James Simms - CFO, Secretary
I don't know whether there was ironic intent in the naming of Lineage Power.
But if you look at the history of the company and the background of all the successive, prior entities, it speaks to the evolution of the power business and also speaks to the differentiation of Vicor.
We are, and I think this is the rationale of General Electric is that electricity is no longer a given.
Patrizio talked about the tailpipe factor.
Engineers and designers can no longer take power for granted, and it's in a -- really becoming a very important consideration in any designer's thinking.
Patrizio Vinciarelli - Chairman, President, CEO
[Strategic] capability.
If there's one more question or not, we'll -- I think we need to wrap it up.
Operator
Okay.
And our last question comes from the line of Paul Spitz, private investor.
Please proceed.
Paul Spitz - Private Investor
Yes.
Thank you.
Two quick comments, and maybe two brief questions.
I think the people of Vicor did a nice job in what we shareholders expected would be a challenging transitional quarter.
This change in the military business, you guys had talked about before.
And secondly, I think that introducing a PIN-to-PIN compatible product at this time is really a masterful strategy.
Two questions.
Patrizio, simple answers for technical questions.
And I think you'll understand I'm trying to get to the elements behind these court cases.
I assume there's other intellectual property here that goes behind using the transformer feedback and the square waves.
For instance, a method that you use for making -- using the multilayered circuit boards with ferrite inserts to make transformers in a very simple way is --
Patrizio Vinciarelli - Chairman, President, CEO
It's actually not really to do with that.
Paul Spitz - Private Investor
No, no.
But I meant is that, in fact, proprietary to Vicor?
Patrizio Vinciarelli - Chairman, President, CEO
Yes.
So our product, if you were to pick up products from the 11 companies that were found to infringe and that were unable to read the label, you couldn't tell them from one another, meaning they all look the same.
Paul Spitz - Private Investor
Sure.
Patrizio Vinciarelli - Chairman, President, CEO
If you pick up our product, it looks fundamentally different.
It would take a blind person not to see the difference.
And that's what we're hearing from customers and potential customers, it is different in terms of it's power capability, it's efficiency, the way which it operates, its speed, its low-noise attributes, its mechanical [internal] management aspects.
It's a fundamentally different product that embodies technology that is far superior to the [me-too] products that characterized this market for so long.
So thank you for the compliments about the (inaudible).
But to articulate that a little more, part of our strategy is to use these as a (inaudible) to show customers how superior our technology is, which goes beyond the opportunity also shared with the revenues of the product, because there's a way to make, in effect, evident the one-on-one comparison between all [clunkers] and all technology on the one hand and a product [run] for 10 times the frequency with totally different attributes.
So there's a wow factor that customers have expressed, which makes them interested in the technology [at large] for other uses.
So it is a Trojan horse, of sorts, in terms of opening the doors to other kinds of opportunities, because in effect, when a customer entertains the V-I Chip [as] a V-I Chip, [because] the factor is not being [comparatively] (inaudible), because of the fact that it's got a different [form] factor and small, that you [cannot] look inside of it, the customer can only wonder, in effect, as to what is really different.
Whereas, with the PIN for PIN compatible alternatives where the (inaudible) and the components and the attributes of the solution are so fundamentally different and superior, the customer can very easily draw the conclusion that this must be fundamentally different or fundamentally better, and maybe we need to learn a lot more about V-I Chip technology for not just bus converter use, but for other kinds of requirements and opportunities to get the competitive advantage we need in the marketplace.
Paul Spitz - Private Investor
All right.
The only -- the reason -- and thank you.
I -- the reason I asked the question that way was, it -- the first question was, historically companies that were involved in court cases, if you had IP that could be cross licensed eventually, these things dissipate.
The second question is, in the high frequency pseudo sine wave that you use, megahertz, whatever it is, how pure is that sine wave?
Can you characterize it just simply in terms of harmonics or distortion or whatever?
Can you say it's a real sine wave and differentiate it?
Patrizio Vinciarelli - Chairman, President, CEO
It's essentially pure sine wave, whereas, the competitors' product are essentially square waves.
So the competitors' products, to your point, are full harmonics, generally loud noise, are limited in terms of switching frequency because the [obstruction of] switches takes place, especially at the peak of the current, whereas, with our products, it takes place at (inaudible).
That's why we can run a lot faster and a lot better.
Paul Spitz - Private Investor
Thank you.
Patrizio Vinciarelli - Chairman, President, CEO
And with that, we're going to have to move on.
And I'm looking forward to talking to all of you again next quarter.
Have a good night.
Operator
Thank you for your participation.
Ladies and gentlemen, thank you for your participation.
This concludes the conference.