Vicor Corp (VICR) 2023 Q4 法說會逐字稿

Welcome, everyone, to today's webinar entitled Vicor earnings results for the fourth quarter ended December 31, 2023.

My name is Yono, and I'm your conference operator for today.

I would like to advise all parties this conference is being recorded.

And now, I'd like to hand it over to Jim Schmidt, Chief Financial Officer.

Please go ahead.

Thank you.

Good afternoon, and welcome to Vicor Corporation's earnings call for the fourth quarter and year ended December 31, 2023.

I'm Jim Schmidt, Chief Financial Officer, and I'm going to hand over with Patrizio Vinciarelli, Chief Executive Officer; and Phil Davies, Vice President, Global Sales and Marketing.

After the markets closed today, we issued a press release summarizing our financial results for the three months and year ending December 31.

This press release has been posted on the Investor Relations page of our website, www.vicorpower.com.

We also filed a Form 8-K today relating to the issuance of this press release.

I'll remind listeners this conference call is being recorded and is a copyrighted property of Vicor Corporation.

I also remind you various remarks we 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.

Except for historical information contained in this call, the matters discussed on this call, including any statements regarding current and planned products, current and potential customers, potential market opportunities, expected events and announcements, and our capacity expansion, as well as management's expectations for sales growth, spending, and profitability, are forward-looking statements involving risks and uncertainties.

In light of these risks and uncertainties, we can offer no assurance that any forward-looking statements will, in fact, prove to be correct.

Actual results may differ materially from those explicitly set forth in or implied by any of our remarks today.

The risks and uncertainties we face are discussed in Item 1A of our 2022 Form 10-K, which we filed with the SEC on February 28, 2023.

This document is available via the EDGAR system on the SEC's website.

Please note, the information provided during this conference call is accurate only as of today, Thursday, February 22, 2024.

Vicor undertakes no obligation to update any statements, including forward-looking statements made during this call, and you should not rely upon such statements after the conclusion of this call.

A webcast replay of today's call will be available shortly on the Investor Relations page of our website.

I'll now turn to a review of our Q4 and full-year financial performance, after which Phil will review recent market developments, and Patrizio, Phil, and I will take your questions.

In my remarks, I will focus mostly on the sequential quarterly change for P&L and balance sheet items, as well as full year -- year-on-year changes and refer you to our press release for our upcoming Form 10-K for additional information.

As stated in today's press release, Vicor recorded total revenue for the fourth quarter of $92.7 million, down 12.2% (sic - see press release, "14.1%") from the third-quarter total of $107.8 million and down 12.2% from the fourth-quarter '22 total of $105.5 million.

Revenues for the year ended December 31, 2023, increased 1.5% to $405.1 million from $399.1 million for the prior year.

Advanced products revenue declined 20.1% sequentially, while brick products revenue declined 7% from the third quarter.

Revenues for advanced products for the year ending 2023 decreased 8% to $223.9 million from $243.3 million the year before.

Revenues for brick products for the year ending 2023 increased to 16.3% to $181.2 million from $155.8 million the year before.

Shipments to stocking distributors decreased 23.5% sequentially, but increased 46.9% year over year.

Exports for the fourth quarter decreased sequentially as a percentage of total revenue to approximately 56.5% from the prior quarter's 62.8%.

On a year-over-year basis, exports decreased as a percentage of total revenue to approximately 63.1% from the prior year's 67.6%.

For Q4, advanced products share of total revenue decreased to 50.4% compared to 54.2% for the third quarter, with brick products share correspondingly increasing to 49.6% of total revenue.

Turning to Q4 gross margin, we recorded a consolidated gross profit margin of 51.1%, approximately 0.7% less than the prior quarter.

For the full-year 2023, gross margin rose by 5.4% to 50.6% from 45.2% in the prior year.

A number of factors contributed to the year-on-year increase in gross margin percentage, including improved sales mix, increased royalty income, reductions in ChiP supply chain costs, and lower freight and tariff costs.

I'll now turn to Q4 operating expenses.

Total operating expense including litigation expenses decreased 0.4% from the third quarter.

For the full-year 2023, total operating expense as a percent of revenues decreased to 37.9% from 38.4% in the prior year.

The amounts of total equity-based compensation expense for Q4 included in cost of goods, SG&A, and R&D was $680,000, $1,895,000, and $1,007,000, respectively, totaling approximately $3.6 million.

For Q4, we recorded operating income of $7.3 million, representing an operating margin of 7.9%.

For the full-year 2023, operating income totaled $51.4 million, or 12.7% of revenue, compared to $27.2 million, or 6.8% of revenue in the prior year.

Turning to income taxes, we recorded a tax provision for Q4 of approximately $1.9 million, representing an effective tax rate for the quarter of 18.2%.

The tax provision for the full-year 2023 was approximately $6.6 million, representing an effective tax rate for the year of 11%.

Net income for Q4 totaled $8.7 million. GAAP

diluted earnings per share was $0.19 based on a fully diluted share count of 45,017,000.

For the full-year 2023 net income increased to $53.6 million from $25.5 million in the prior year.

In 2023, fully diluted earnings per share rose from the prior year, increasing to $1.19 from $0.57.

Turning to our cash flow and balance sheet, cash and cash equivalents totaled to $242.2 million in Q4.

Accounts receivable net of reserves totaled $52.6 million at quarter end, with DSOs for trade receivables at 40 days.

Inventories net of reserves increased 1.9% sequentially to $106.6 million.

Annualized inventory turns were approximately flat sequentially at 1.92%.

Operating cash flow totaled approximately $22.1 million for the quarter.

Capital expenditures for Q4 totaled $7.7 million.

We ended the quarter with a construction in progress balance, primarily for manufacturing equipment of approximately $17.7 million with approximately $17.3 million remaining to be spent.

It's worth noting that in Q4, we accrued approximately $13 million as an investment tax credit related to the CHIPS Act for equipment installed in our vertically integrated ChiP fab.

I'll now address bookings and backlog.

Q4 book-to-bill, while improving sequentially, came in below 1 and with one-year backlog decreasing 8% from the prior quarter, closing at $160.8 million.

Turning to the first quarter and the full year, 2024 is a year of uncertainty and opportunity.

As of today, the year's outcome in terms of top line and bottom line is subject to a relatively wide range of scenarios.

Given a wide range of possible outcomes, we are unable to provide quarterly guidance until we are further along resolving uncertainties and capitalizing on opportunities.

With that, Phil will provide an overview of recent market developments.

And then Patrizio, Phil, and I will take your questions.

I ask that you limit yourself to one question and a related follow-up, so we can respond to as many of you as we can in the limited time available.

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

Phil?

Thank you, Jim.

As Jim covered in his update, our book-to-bill ratio was still below one in Q4, mainly due to low booking levels in our HPC business and the automatic test equipment segment of our industrial business.

In HPC, Q4 bookings were lower than expected as we turn down deals inconsistent with our long-term OEM licensing strategy.

The license gives OEMs access to alternate sources of supply of products covered by Vicor IP from otherwise infringing suppliers, enabling current and future gen AI processes to achieve higher performance.

The OEM license provides access to game-changing technology from a single source innovator through multi-source supply chains.

The OEM license avoids the risk of exclusion orders, and the OEM license respects the IP of American innovators and manufacturers.

In anticipation of market needs, Vicor was the first to develop key technologies, control systems, topologies, components and packaging for 48 volt high-current processor power delivery networks.

Those market needs are clearly with us now in the advent of gen AI machine learning, 48-volt rack power systems and vertical power delivery.

As evidenced by progress already made enforcing our IP to MBMs, our message to the market is clear.

The OEM license gives you open-ended access to superior power system technology.

It provides continuity of supply for otherwise infringing servers and AI processes.

Additional customer engagements in Q4 confirm that gen AI and network processor platforms will require significantly higher current density and vertical power delivery.

Our investment in the world's first ChiP foundry and our 5G product line, once again, anticipated these future AI power system requirements, uniquely positioning us to expand our share of the AI power system market.

We are getting ready to deliver evaluation systems, models, tools, and samples to lead AI processor customers.

On other market and customer fronts, our new product and applications pipeline continues to grow, creating both near term and future demand to fill our vertically integrated foundry.

In our automotive business, collaborations that were initiated with OEMs in 2021 have started to move into production with low volume platforms as we ramp our automotive qualification, manufacturing, and OEM relationships through early learning cycles.

Momentum is picking up in both the mild hybrid and BEV market from Vicor's technology in response to the 48-volt zonal architecture, first conceived and patented by Vicor and recently promoted by Tesla.

Collaborations with larger OEMs on higher volume platforms are gaining momentum with visibility to production dates in coming years.

We will be participating at WCX in Detroit once again this year with four technology papers that will showcase our technology and power system value propositions for 800-volt and 48-volt power modules.

In our other business units, we continue to see stronger demand in our broad industrial, aerospace, and defense markets for both large OEMs and smaller customers who purchase through our channel partners.

Customer visits from our top 100 accounts have also continued to view and audit our new ChiP fab as we now ramp production of advanced products.

Thank you.

And with that, we will now take your questions.

(Operator Instructions) Jon Tanwanteng.

Please go ahead.

Great.

Thanks for taking my question on.

So to clarify, you turned down data center or HPC deals are you saying for XPU power due to MBM licensing issues, or were they just pure MDM deals?

And help me understand what the concerns were surrounding the technology.

Was it economic or purely surrounding the IP?

Yeah.

So you're not going to have an opportunity to analyze it because we're not going to get into specific details about ARM.

I think it's important to understand that we have a clear vision of where we're going, and we're sticking to that vision as events unfold on a variety of fronts relating to asserting our patents with respect to the MBM in other developments.

The marketplace, needless to say, is driven by a complex set of forces.

On the one hand, there is a drive to multi-sourcing, particularly for very high-volume applications.

But at the end of the day, there is also are an overwhelming need for higher current density solutions, vertical power delivery.

And these areas were Vicor, as a pioneer, has established a strong beachhead of IP in opportunities that we're going to seek to realize through the right mix of licensing to facilitate multi-sourcing as needed, where needed in participation directly with our modular solutions from new fab.

Okay.

Fair enough, and I understand.

Is this something that can be resolved in the near term as you negotiate more?

Is this something that will take the assertion of your litigation strategy and then the completion of that to complete?

As implied by Jim's point in his remarks regarding the uncertainty and opportunity that characterizes the last several quarters, we can't make that prediction.

And we don't want to make that prediction because we want to retain the flexibility needed to implement our long-term strategy.

So we're not going to work on them in terms of predicting when things will happen.

I can tell you that my expectation is that we're going to be successful.

We're going to be successful with our first litigation with respect to our certain MBM patterns.

We're doing very well in that regard and will follow along with respect to that process.

And we're also going to fill the factory in due course.

So we're very confident of our strategy, very determined to enable it and patient as need be in order to bring it about.

Understood.

Thank you.

I'll jump back in queue.

Quinn Bolton.

Okay, great.

I guess understanding you don't want to provide a lot of details, but I just wanted, try to make sure I understand sort of that range of alternatives.

You said you're turning down deals for MBMs.

It sounds like from your opinion or perspective, many of the competing MBMs may infringe your patents and so if you turn down the deal, what's the alternative for the customer?

They just use infringing MBM until you have asserted those patents or competitors licensed your patents?

We have existing proof of a business model that works quite well.

We have a significant licensee that has been sourcing MBMs from an otherwise infringing source by virtue of an OEM license with us.

And that's again part of our overall strategy which is expected to balancing a variety of needs and opportunities for our customers, the market at large, and ourselves with due respect for intellectual property as well as the needs of the customers that in some relevant instances do have an overwhelming need for multiple share sources.

I guess a second question, just sort of around the IP front, I know we've got the APEX show next week.

A lot of people at that conference will be talking about vertical power delivery.

I think Monolithic Power, Analog Devices, and Infineon have all talked about vertical power delivery from the multiphase perspective.

Can you give us your latest thoughts, Patricio, just where do you feel the industry is in terms of adopting vertical power delivery and to the extent that multiphase competitors are moving in that direction?

Is that an area where you may have to assert your patents on that front because I know you've been talking about vertical power delivery now for probably three-plus years?

Thank you.

Yes.

Vertical power delivery means certain specific things.

One of them with what we call first gen VPD, the stacking of what we call a multi-site converter.

The multi-site converter can be a Vicor current multiplier.

It can also be a multiphase solution.

It doesn't matter.

It falls within our IP in the context of a stack solution with certain attributes.

So we pioneered that concept.

It's being implemented to eliminate the stack by competitors' solutions, lack robustness, lack scalability, lack cost effectiveness.

They suffer from all the trace of a first-generation technology that, in many respects, is immature and not scalable.

Without question, it's going to become somewhat more mature and somewhat more scalable as initially conceived by Vicor.

But see your handicap in a variety of fronts, including the intellectual property front.

With our 5G technology, we are on what we call a second generation of VPD, which is much more scalable, much more cost effective, mature profile, much more efficient, and which we believe before too long will enable much more advanced solutions.

Understood.

Thank you.

John Dillon.

In your prepared remarks, you were talking about some IP that you have in your automotive.

And then right after that, you said it was promoted by Tesla.

Can we infer from that that Tesla might be a customer of yours soon?

I heard the word Tesla and the 48-volt zonal

--

Is Tesla going to be a customer soon, I think is what John was asking.

Yes.

So we're not going to make comments about specific companies or potential customers.

But I will mention that as in other fronts, Vicor was a pioneer with respect to the concept of using bus converters within automotive power distribution.

That's an area of intellectual property that may come to fruition at some point in time.

As you can imagine, as implied by earlier comments, there is no shortage of opportunity.

As of now, we're very focused on bringing to fruition our MBM initiative.

But this is just part of a very broad campaign which, again, is part of a very comprehensive strategy to enable a more efficient, scalable, and fair market when it comes to advance power system technology.

Great.

The other thing, I wanted to congratulate you on the bookings.

It looks like, from the press release, it's headed up and it looks like your bookings were up about $13.5 million from the previous quarter.

I'm just wondering, do you expect this trend to continue?

I don't want any specifics, but can we expect that trend to continue throughout the year?

Yes.

So I don't think that the word trend applies or separation, whatever you want to call it, to events unfolding over the next few quarters because it's discussed earlier.

I think we should all be clear with respect to this.

There is a wide range of scenarios.

And because of that individual events, it could impact bookings, top line, bottom line from one quarter to the next in ways that are frankly unpredictable.

Needless to say, there is a book stop at the low end, but we're not going to quantify what that is.

There is limited downside, I would say.

There is quite a bit of upside, but that upside is hard to predict in terms of the time to fruition.

I get that.

I understand that.

Last quarter, you alluded to, at the last conference call you alluded to a sizable upside.

It sounds like that sizable upside is still out there, but it's not predictable at this time.

That's right.

I will say that the cumulative impact over time is more predictable than instant contribution that may happen sooner or later.

So fundamentally our strategy, as it has always been, is to take a very long-term view.

We're not, I know we're in the context of reporting to the financial markets, but we are not to be perfectly honest with you making decisions based on what may look particularly good in any one quarter.

We are making decisions based on what we think is in the long-term interest of the shareholders, again, balancing the various factors at play in a comprehensive strategy.

I'll get back in the queue.

Thank you.

Thank you very much.

Quinn Bolton.

I just wanted to follow up on John's question.

There are obviously a range of scenarios you're talking about.

But to the extent the upside scenario plays out, I assume that those are likely either MBM or fourth generation or more, hopefully fifth generation design wins.

How quickly could you ramp that business?

I think in past quarters, you've talked about manufacturing lead times that are about six months, and so would it take a couple of quarters to start to realize some of those upside opportunities that are weighted to think about the timing, to the extent the upside case begins to play out?

And then I've got a follow-up.

So we have capacity in place now.

We could, in the next quarter or the quarter after that, manufacture more subject to obviously material procurement lead time than we would base on what we stand currently in terms of the bookings and backlog situation, Just as a reminder, the issues and challenges of yesteryears when we didn't have a vertically-integrated factory, when we're dependent on outside sources supply for critical process steps, are gone.

Those are no longer challenges.

Now we face a different type of challenge that, again, is resulting from sticking to a strategy that has us balance a variety of considerations.

But as I think back about historic challenges, I feel that with the establishment of our first ChiP foundry, we are in a position we've never been in, in answer to your question regarding scalability.

We have a level of scalability that Vicor never had.

We manufacture advanced products in pallets, which are akin to wafers.

And in our ChiP foundry, we can make very, very large quantity of panels.

We have a large capacity.

Needless to say, there's still going to be a lead time.

There's no set function to be had.

But demand can be addressed with supply within a relatively short cycle time.

Thank you, Patrizio.

And then the follow-up question is on the current latest generation GPU market, one of the multiphase vendors that has pretty high share recently had some testing issues.

And I'm wondering if you've had any discussions since that event that might lead you to believe that any of the large AI processor or GPU vendors won are now more open to having multiple sources of supply.

And particularly, has this event potentially raised some concerns about the multiphase approach in general, given that you've got one or more controllers that may have to control 20, 30, 40 phases?

Have you seen anything coming out of that event that may benefit Vicor either in the near term or the longer term?

Thank you.

Multiphase systems have challenges, and those challenges get compounded in a VPD-type of solution.

The underlying primary challenge of multiphase is that in the FE is a lower current density type of solution.

It involves the averaging down over voltage to step-up the current through switching elements that need to support a much higher voltage we send, and do so reliably and with safe operating area than with the Vicor current multiplier which can, in effect, multiply current and do so much more efficiently with lower voltage semiconductors without commensurate safe operating area challenges.

The benefits have to do, in particular just to give you some examples with the fact that with our proprietary approach, there is no multiplicity of phases.

Each one of which, should it fail, could take a GPU or the AI processor with it as you can fail with a top switch short, which could happen with any of a large multiplicity of phases.

So we have many, many advantages in terms of the power distribution architecture, the topology, the type of components that the solutions are required, which are fundamentally different.

But then getting back to the VPD side of things, a multi-cell approach involving a multiplicity of phases as opposed to a multiplicity of current multipliers as we have, you have in effect the compounded challenge of power conversion topology, back converter, which is inherently low current density, compounded by the mechanical challenges with first generation VPD of stacking this multi-cell topology with gearboxes or capacitive layers that are required in order to provide the filtering and dynamic response.

I don't mean to get too technical with this.

Getting into the punch line, first generation VPD implemented with multi-cell solutions in the form of multiphase is very, very challenged, costly, not truly scalable, an E&C handicap, and in need of an overhaul.

We're not seeing, based on our visibility, it being scaled up with the level of low defect rates and manufacturability that larger OEMs would expect to have.

Alan Hicks.

Okay.

It sounds like the factory is virtually complete although I know you have some more buildout.

Can you confirm that?

Yes, we have a bar graph that we review every week.

It used to be to be yellow and red.

It's now all green in the sense that the green sourcing of yesteryear, which was yellow and red, has become a green source has made an and/or a vertically integrated facility.

And those bars are rising from week to week.

So we are doing well in that regard.

That challenge is essentially behind us.

To your point, we're not totally done with bringing in equipment, there's still some additional equipment, that is equipment we committed to.

That is going to add some additional capacity and process capability is due in the next several months.

But the core capability of them, in effect, building up the other layers of our unique converter housing package type of technology through panels, again the wafer analogy when it comes to car converter modules, that capability is in place.

And we were using it and we're scaling it up.

Okay.

You would say your lead times are coming down?

What has been going on in particular within the last quarter is that the mix has changed with a different backlog situation and the need to utilize capacity to address some of the backlog that have been overdue.

Our mix has changed, and that places some constraint to our capacity.

And that's frankly the reason why we fell short somewhat of our internal target in terms of top line within the quarter.

It wasn't that we didn't have enough backlog.

It's just that there was a bit of a mix challenge because instead of making lots of modules of a certain kind, we had to make somewhat smaller quantity of a variety of different things.

That's a factor with respect to our capacity, and it was a factor in particular with respect to the top line in the last quarter.

Okay.

And going forward, you're capable of building 4G products lateral and vertical?

And what's the interest in 4G?

I think, frankly, our focus right now, we do have you -- Phil, do you want to answer that question?

We have some 4G design wins, absolutely.

So that will play out as we move through the year.

But the real focus, and I think that's where Patrizio is going, is really establishing the 5G technology because it's 3X the power density of 4G, which is a major value proposition to vertical power delivery and other lower current lateral applications too.

It opens up new markets for us, bigger markets.

So I think it's an exciting time yet.

Frankly, I'm not thinking about for 4G.

I'm thinking -- the second theme is very much focused on making sure that we bring 5G to completion and get the demo system goes out to customers, tools, and begin that scale up.

Okay.

Jon Tanwanteng.

Thanks for the follow-up.

I was wondering if your expectations for the automotive applications have changed at all just given the shift in automotive sentiment where maybe hybrids are back, a little bit more back in fashion versus pure EVs, and how that plays out to your 48-volt technology?

Hi, Jon, it's Phil.

The market is sizable for us as a new entrant of course.

There are still millions of EVs and mild hybrids out there for us to go after with their 800-volt or 400-volt battery technology.

And what we're seeing at the moment, it's actually quite interesting, is that we have powertrain solutions that go from 800 to 48 or 800 to 12.

We have an onboard charger platform that is incredibly power dense and is getting a lot of interest in the market with 800-, 400-volt bidirectional conversions.

And so what we're seeing recently actually are different applications like, for example, converting a condenser or a active suspension system or a seat heater from an 800- or 400-volt battery down to 48 volts, 48 volt starts to take ahold in some of these electromechanical applications.

So we've seen a lot more of that in the last, I would say, the last two quarters.

And that's exciting for us because those are relatively high-volume applications.

Like the active suspension, for example, is two to four modules per vehicle.

So we're encouraged about the continued progress in automotive, and the application spread is actually increasing for us.

Understood.

Thank you.

And then secondly, I just wanted to go back to the the issues with the IBM and the IP.

As you assert your intellectual property there, is there a risk that it deters or potential customers from pursuing designs or are closing deals on fifth generation VPD technology?

Or do you view them as mostly ring-fenced here?

I'm just thinking that maybe if you're pursuing this path and the demand is out there for all these AI processes, maybe your customers might settle for something that's less than perfect just to meet the demand that they see.

The way I would view this is that in terms encouraging or discouraging OEMs doing business with us, I would expect that OEMs make these decisions based on their considered interest, which involves access to competitive technology because, needless to say, if they are foreclosed from -- if our system technology that their competitors have, they are in a challenging competitive position of their own.

So to the extent that Vicor provides access to enabling power system technology, whether it's VPDs, particularly second gen VPD, or high current density solutions, customers come to us because they realize we have those capabilities which the commodity pack of multiphase does not have.

Now, the enforcement of the IP is a necessity.

IP needs to be respected.

We can't have a market in which OEMs, particularly large OEMs, wish to commoditize a proprietary products covered by a lot of innovation and patents, as is the case for the MBM and other unique Vicor capabilities.

So we need to make the investment necessary in getting the respect that that intellectual property it deserves.

And our first action in this regard is an action of the International Trade Commission.

We're now more than halfway through that process.

We are going to be at trial at the end of April.

And thus far, we're winning on just about every key decisions that's been made to date.

So I'm very encouraged with respect to the outcome, and we're very focused on bringing that to a successful conclusion later this year.

Got it.

When do you expect the final decisions to be made there?

And what are you expecting the legal cost to be just on a run-rate basis as we get there?

So the LJ will render its decision by, I think, at the very beginning of October.

The trial is at the end of April, beginning of May, cherry blossom time in Washington, DC. Good time to be in Washington.

Got it.

And the costs, the legal expenses associated with that?

It's significant, but not nearly as significant as our opponents because of how we structured our deal with the law firms that work with us as partners.

So we have a common goal, a common set of interests.

Got it.

Okay.

Thank you.

John Gillam.

Thanks for the follow up.

Patrizio, your cash keeps increasing even after investing in building a new factory.

So I'm wondering, are you saving the cash for building a multiplicity of ChiP fabs, or are you considering stock buybacks for that cash?

Building more fabs or stock buyback, is it?

I'm sorry.

I couldn't understand what you said.

But regarding mul fabs, we first have to fill the existing one.

And the existing one, which we have represented to have a capability of nearly $1 billion based on some of the advances we made with our 5G technology, is now expected to be able to support considerably more that level of yearly revenues.

So we got a while to go before having to invest in a second fab.

What about stock buybacks?

Well, we're focused on a variety of opportunities at this point in time.

And frankly, that's not been on my radar screen.

But it may get on my radar screen, and if and when happens, we'll all find out when it happens.

And what are you using your cash for then?

You said a huge cash forward that keeps growing.

So what are we using our cash forward for?

I think at this point, it is the case, John, that one very favorable thing that occurred in the last couple of quarters is a couple of quarters of greater than $20 million per quarter of operating cash flow.

So there is a sense now that with royalties and other parts of the P&L and the factory internalized, no more spend outside.

We can be pretty efficient and very efficient in fact in generating cash.

But let's let the cash pile grow and then we'll decide, as Patricio said, look at it.

Yeah.

So needless to say, we, particularly in the early stage of IP campaign, want to be in a very strong financial position, right?

And there, the side conservatives with respect to being able to invest in the campaign to the extent necessary for as long as it takes to achieve the goals.

And that's our top priority.

That's most important strategically.

Going back to your question, let's say we could buy back 5% or 10% of our float.

That opportunity, roughly speaking, pales relative to the opportunity to double the value or do more than that by succeeding at salvaging the mission.

And that's our focus.

Okay.

And Phil, can you just give us a brief update on your design wins, how they're going, where you see coming up?

Sorry, John.

I couldn't make out that question from you.

Yes.

It's very hard.

Speak louder.

Phil, can you just give us an update on the design wins?

As I mentioned in my remarks, John, the pipeline is continuing to grow.

As I talked about, we're focused as a strategy on 100 customers.

We've identified those 100 customers with about a $6 billion SAM for Vicor.

We're very focused on those top 100 with account managers on every single one of them.

And every single one of them is targeted for a set of new products that will have started to release in Q4, and we'll have more in Q1 and Q2.

So the pipeline is growing.

We've got a very healthy growing pipeline.

I'm quite confident in all four business units achieving their goals over the next three to four years by 2027.

Yeah.

It's important to note, this is diversified model.

We're not -- even though there's been a lot of talk of ours particularly from the investors’ community on AI for obvious reasons they're center opportunities, that is one of the primary markets, if not the only market.

You heard us talk about automotive.

That's an important market as well, obviously an emerging market for us.

But we have two other end markets that in their own right represent a good deal opportunity, aerospace and defense, industrial market.

Our products have all the right traits for those applications in those end markets.

And those in their own right represents the opportunity for us.

And if you see here, the business model is obviously key to the overall strategy in terms of market transaction.

The next question is coming from attendees who joined on the phone.

So I will unmute you now, but I would like to ask you to introduce yourself before you take a question.

You might want to go to the next questions, operator.

Sure.

The next questioner also joined over the phone.

So I will unmute you now.

And as I asked earlier, please introduce yourself before you ask a question.

Please go ahead.

Okay, hi.

This is Don McKenna.

Then I was following up on John Dillon's earlier question relative to bookings, and I know you said you didn't want to project any kind of trends, but can you give a rough idea how they're running so far?

You're halfway through the quarter.

How they're running compared to last quarter?

Again, setting expectations with respect to what is going to happen this quarter or next quarter is not something we're going to do because it could be misleading one way or the other, and we don't want to do that.

We want to be very honest in effect sharing what we categorize as challenges and opportunities that on balance could lead to a variety of outcomes.

Setting any kind of specific expectation would be potentially misleading one way or the other, and we don't want to do that.

All right, thanks.

And we have one more question from an attendee who also joined over the phone.

So I will unmute you now.

Please introduce yourself before you take a question.

This is

[Neil Gua].

General Motors announced that they're building a big plant domestically for EVs.

Do you expect that you'll be selling your products to GM for this?

So we are not, again, not talking about any specific customers.

But we have really covered most of the OEMs globally with our technology as being part of our strategy to get the OEMs excited about Vicor technology and what it can do in their BEV platforms or mild hybrid platforms.

And for them to really start collaborations with us and to then bring in Tier ones.

As our strategy for 2024 evolves, we're starting to work with more Tier 1s on those types of collaborations.

So rather than get specific about one customer, I can say that generally, and on a global footprint, we're doing very well with those collaborations and moving forward with our automotive strategy.

But it's good to see the GM investment.

That really is good to see.

Thank you.

If there is one more question before we close?

The last questioner also joined over the phone.

This is Richard Shannon with Craig-Hallum.

I'm not sure what's wrong with this service, but I've been trying to get on for 45 minutes.

So I guess maybe kind of a multi-part, as we look at your 5G technology, I think in your last call you talked about wanting to deliver models and tools sometime this quarter.

I think I got in early enough to hear the prepared remarks and didn't hear anything regarding that.

But I'd love to get an update on whether those have been delivered yet here.

And then as we think about your getting to volume production with this, and I think you alluded to maybe by the end of this year, early next year, what needs to happen between now and then?

And how do you exercise the new facility here to give confidence to large customers that you have the ability to ramp with high yields, high quality and low lead times?

So customers come to visit the facility, kicked the tires as it were.

And generally speaking, they've been very impressed.

We have done, as an example, a couple of weeks ago the Vice President of Operations for a company with a very unique product in the realm of AI capabilities, and he commented having visited the factory he'd never seen anything like that in terms of capabilities and state-of-the-art facilities.

So the customer visits and customers being exposed to the equipment, the processes, the systems that our team has put in place speaks volumes to the scalability, the methodology of making panels of chips as if they were wafers of semiconductor devices.

Regarding 5G, we are engaged with some lead customers, including what I was referencing a moment ago and another notable one that come to mind that's particularly keen on our technology.

And we have a schedule that has us deliver them functional samples, tools and demo systems, as we progress through Q2 and Q3 of this year.

Regarding getting into production, we're going to have power production for 5G in the second half of the year.

In terms of revenue opportunity, this is a Q1 2025 type of event.

It's not in terms of contribution to revenue in any meaningful way in 2024 event, just to be clear.

Okay, perfect.

I wanted to get that confirmation.

I appreciate that one.

My last quick question here is, there's a statement made by, I can't remember, it's either Patrizio or Phil on the last call here about expecting a dominant share of AI power systems.

I think referring to, the with 5G over a period of time, I just wanted to, especially given the step-down in revenues that might have concerned people, I wanted you to reiterate if you still believe that to be the case, reiterate that that's what you think is going to happen?

It's not a dream.

It's a vision that is rooted in our numbers.

The current density, the amps per square millimeter so to speak, the efficiency, the scalability, vertical power delivery, capabilities are the key attributes that we know data center, AI, and customers need, and with respect to which they are really today severely handicapped.

The multiphase approach, particularly with VPD, but even without VPD, is very, very challenged.

And it's been the de facto standard for obvious reasons, because it is multi-sourcing historically, it has had scalability of its own through the ecosystem of a large multiplicity of suppliers around the globe.

But technically, it's very severely.

And it's that visibility that I have, which again comes down to numbers are like amps per square millimeter and other attributes, the ability to provide a VPD solution in 1.5-millimeter-thin current multiplier.

That line up with what the AI processes require.

We're looking at applications with the 2,000, 4,000-amp requirements.

In other cases, we're looking at vertical scale applications at the 50,000-amp level.

You can't do that with the multiphase.

You can only do it by enabling technology.

And that's what we're set to enable directly with our fab and, to some degree, indirectly through our licensee model.

Appreciate those, Patrizio.

That's all for me.

Thank you.

And then with that, we'll have to wrap it up.

So operator, if you could close the call?

Thank you.

Thank you everyone.

That marks the end of the webinar.

Thank you for joining and have a nice day.