Vicor Corp (VICR) 2025 Q1 法說會逐字稿

Good day and thank you for standing by. Welcome to the Q1 2025 Vicor earnings conference call.

(Operator Instructions)

I would now like to turn the conference over to Jim Schmidt, Chief Financial Officer. Please go ahead.

Thank you. Good afternoon and welcome to Vicor Corporation's earnings call for the first quarter ended March 31, 2025. I'm Jim Schmidt, Chief Financial Officer, and I'm in Andover with Patrizio Vinciarelli, Chief Executive Officer, and Philip Davies, corporate Vice President, global sales and marketing.

After the markets closed today, we issued a press release summarizing our financial results for the three months ended March 31. This press release has been posted on the investor relations page of our website, www.vicorpower.com. We also filed a Form 8K today related to the issuance of this press release. I remind listeners this conference call is being recorded and it's the 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 risk and uncertainties.

In light of these risks and uncertainties, we can offer no assurance that any forward-looking statement 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 risk and uncertainties we face are discussed in item 1A of our 2024 Form 10k, which we filed with the SEC on March 3, 2025. This document is available via the EDA system on the SEC's website. Please note the information provided during this conference call is accurate only as of today, Tuesday, April 29, 2025. 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 Q1 financial performance, after which Bill 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 changes for P&L and balance sheet items and refer you to our press release or our upcoming Form 10 for additional information.

As stated in today's press release, Vicor recorded total revenue for the first quarter of $94 million down 2.3% sequentially from the fourth quarter of 2024 total of $96.2 million. And up 12% from the first quarter of 2024 total of $83.9 million. Advanced products revenue increased 2.7% sequentially to $59.9 million. While [brick] product revenue decreased 10% sequentially to $34.1 million. Shipments the stocking distributors decreased 16.9% sequentially and decreased 33.8% year over year.

Exports for the first quarter increased sequentially as a percentage of total revenue to approximately 60.8% from the prior quarters 56.9%. For Q1, advanced product share of total revenue increased to 63.7% compared to 60.6% for the fourth quarter of 2024, with -- product share correspondingly decreasing to 36.3% of total revenue. Turning to Q1 gross margin, we recorded a consolidated gross profit margin of 47.2%. Which is a 520-basis point decrease from the prior quarter.

To elaborate on the factors causing the sequential decline in gross margin, I'd like to first mention that over the course of the full quarter of last year and into the first quarter of this year, like transitioned off of a legacy ERP system and onto a state of the art ERP system, SAP, which went live on January 1st. In planning for a successful transition and to de-risk it, we increased production in Q4. Required a mandatory week of paid time off in December by any employees not involved in the cutover and funded outside consultants who provided the necessary expertise as we implemented the change.

All required actions were successfully completed in Q1. What I've just described is an important contributor to about half of the percentage point decline in gross margin, and sequentially, Utilization and absorption declined, compensation increased, and so did consulting expense. Aside from these factors and a sequential decline in royalty revenue, which on its own accounted for about half of the percentage point decline in gross margin, other components of the decline included the normal seasonal reset hire FICA expense to start the year, as well as incremental depreciation expense associated with bringing online capital investments in US-based semiconductor manufacturing in both Andover and Rhode Island. Tariff expense, net of duty drawback was approximately $700,000 in Q1.

I'll now turn to Q1 operating expenses. Total operating expense increased 8.2% sequentially from the fourth quarter of 2024 to $44.5 million. The sequential increase was primarily due to an increase in research and development expenses. Here too, the sequential increase was due in part to the mandatory time off in Q4 that did not repeat in Q1. As well as the normal seasonal reset higher of FICA expense. The amounts of total equity-based compensation expense for Q1 included in cost of goods, SG&A, and R&D was $967,000, $2,194,000, and $1,188,000 respectively, totaling approximately $4.3 million.

Turning to income taxes, we recorded a tax provision for Q1 of approximately $0.4 million representing an effective tax rate for the quarter of 14.2%. Net income for Q1 totaled $2.5 million got diluted earnings per share was $0.06 based on a fully diluted share count of 45,495,000 shares. Turning to our cash flow and balance sheet, cash and cash equivalents totaled $296.1 million Q1. Accounts receivable net of reserves totaled $65.9 million at quarter end, with DSOs for trade receivables at 43 days. Inventory net reserves decreased 7.1% sequentially to $98.5 million.

Annualized inventory returns were $1.7 million. Operating cash flow totaled $20.1 million for the quarter. Capital expenditures for Q1 totaled $4.6 million. We ended the quarter with a construction in progress balance primarily for manufacturing equipment of approximately $9.9 million, and with approximately $12.3 million remaining to be spent. I'll now address bookings and backlog. Q1 book the bill came at above one, and one year backlog increased 10.4% from the prior quarter, closing at $171.7 million.

As we said on last quarter earnings call 2025 as a year of uncertainty and opportunity. As of today, the quarterly and annual outcome in terms of top line and bottom line is subject to a relatively wide range of scenarios. Given the wide range of possible outcomes, we are unable to provide quarterly guidance until we are further along resolving uncertainties and capitalizing on opportunities.

With that, Phil will provide an overview of recent market developments, and then Patrizio, Phil, and I will take your questions. I ask that you limit yourselves to one question and a related follow up so that we can respond to as many of you as possible in the limited time available. If you have more than one topic to address, please get back in the queue. Phil.

Thank you, Jim.

Our first quarter book to bill ratio increased well above one with new orders for NBMs in our HPC business from a hyperscalar licensee. Conversations continue with potential licensees facing a first exclusion order following the ASIC final determination and Presidential review period. Our second generation high density VPD for leading AI applications is coming to fruition, with the recent arrival of an ASIC raising the bar on the density and bandwidth of our MCM current multipliers.

Second generation VPD will enable AI processors to set new standards for performance. Development of the next generation VPD system for a lead customer is approaching completion, and we will soon provide evaluation systems to processor chip companies and hyper scales. Appetite for factorized power VPD solutions is growing as multi-phase voltage regulators are unable to deliver the performance and current density required by future AI systems. With AI driving rack power up to 160 kilowatts, the HPC industry is evaluating a transition to 800-volt power delivery to the rack and bus conversion to 48-volt nodes within the rack on the way to the point of load.

Vicor's fixed ratio bus converter modules with industry-leading power density and liquid-cooled thermal management flexibility are a perfect solution for these requirements. Given these market forces, FICO will be uniquely positioned to offer front end 800-volt to 48-volt bus converters and direct VPD 48-volt to sub 1-volt solutions, enabling a complete high efficiency, high density power delivery network for our customers.

The market SAM for these solutions is expected to exceed $5 billion by 2028. As with other USA-based manufacturers, we are navigating a changing tariff landscape. Components used in our power modules are not exempt from tariffs. In Q1, we informed our customers and channel partners that a 10% tariff surcharge line item will be added to invoices for shipments after July 2nd. Due to higher reciprocal tariffs levied by the Chinese government, we have also seen cancellation requests from China-based customers, but these potential cancellations are not at levels high enough to impact our overall business.

New product introductions will continue to ramp as we move through 2025. In Q1, we announced the availability for general sale of a new high density 48-volt DC to DC converter family. We have also initiated sampling of a new family of three phase AC to DC power modules to lead customers in the aerospace market. This will be a new market for Vicor, offering excellent growth opportunities. Our engagement with our TOP100 customers continues to strengthen as 48-volt power delivery moves to the mainstream along with 800-volt DC-based front end power systems.

A strategy of developing complete front end to point of load solutions that are centered on a 48-volt hub offering high power density, ease of use, scalability, and flexibility across product platforms is proving to be right, as evidenced by strong engagements across our TOP100 customers in our four target business segments. As stated in our Q4 call, we see 2025 as a year of opportunities and of high confidence in our business.

Thank you, that we'll now take your questions.

Thank you. (Operator Instructions)

The first question will come from the line of Quinn Bolton of Needham and Company. Your line is open.

Hey guys, I wanted to ask about something in the press release in the press release you mentioned revenue gross margins declined sequentially with reduced income from a licensee transitioning to a new generation of unlicensed products. Can you just elaborate on that?

Is that new generation of expand an entire family of new GPUs or XPUs or is it more limited just you know trying to gauge how significant the change in your licensing or royalty income might be as a result of this transition?

I really cannot for a variety of reasons elaborate on that.

Can you elaborate just on the impact of Vicor would you expect a material change in the licensing outlook with that licensee?

Well, obviously that's a short-term impact you know for Q1, but we remain confident with respect to a licensing business, being a growth business that will contribute substantially at levels to both the top line and particularly the line.

And Patrizio might be there that was my sort of follow on I think in the script you guys mentioned ongoing negotiations or discussions with additional licensees. Can you clarify now that that we have, I think the injunction against Delta. If non licensee hyper scalers import, modules from Delta, would that be subject to the injunction?

Yes

Got it. Okay, I will get back in the queue with a couple more.

Thank you.

Thank you one moment for the next question.

And our next question will be coming from the line of John Tanwanteng of CJS. Your line is open.

Hi, thank you for taking my questions. I was wondering if you could just talk about the indirect impacts from tariffs and the direct impacts from tariffs, if you've made any assumptions going forward. -- What do you think the indirect might be on, supply and demand, as potentially other suppliers may not be able to import as much stuff and the impact on your own tariff paying to modules from China?

So, we the impact on our building material, and obviously the impact varies depending on which particular platform we're talking about and the mix of components from various countries of origin. But having gone through that assessment as of weeks ago, we took collective action as Phil pointed out in newspaper remarks in terms of instituting a 10% tariffs that will be applied at the beginning of the third quarter.

We don't expect that to have an appreciable negative impact. Oh Demand for our products. But when it comes to reciprocal tariffs, as Phil pointed out, In China we do start with some of the programs to see an impact in quantity as Phil pointed out. Is not as of now assessed to be significant in terms of moving the needle or altering revenue.

Okay, great. And then my second question, just, has there been any change to the timeline for ramping your second generation VPD products to lead customer? Do you still expect that to be happening at the end of this year or maybe early next year?

So based on the testing that's been done today on recently received the ASIC, which is instrumental to the point of local multiplier. We feel very good with respect to being able to bring the development to fruition as mentioned in the press release and in fields remarks, we remain focused on our lead customer, very important to raise the bar on current capability, delivering the goods for that application. First, and we'll follow that up with the demo systems for the potential customer base a large, as soon as we completed the effort for the lead.

Thank you.

Thank you. One moment for the next question.

And the next question will come from the line of John Dillon of DMB Capital. Your line is open.

Thank you, Patrizio, I have a follow up to John's question. That's in regard to what you're shipping to your lead customer. Are those alpha or beta units and can you kind of give us a time frame or schedule what it's going to take to actually productize the Gen5 point load that you're giving to that customer, so it's available, generally available, and you can manufacture that in quantities?

So to be clear, we are on our end with respect to the customer on an older generation platform, and I mentioned this, I think in most recent quarterly call, and we are closing in on being able to Ship units that meet these passions as they've evolved up in terms of capability and density. But we're not quite there yet. We expect to be there soon. And we are targeting power production in the second half of this year for the solution.

Okay, and that would be a productized and would that be completely productized? what I mean by that is, typically when I've been in the industry when we ship the initial product to a customer, they evaluate it and they find some bugs and then they feed it back to Vicor. Then Vicor makes the corrections and then they give it back to them. Do you expect a lot of that to go on, or are you very confident that you can make the second half of the year to ship to them production quality units?

Well, obviously, in order to be very confident, we need to complete the development, but as you can imagine based on your experience, this has not been a case where it all awaits the availability of fully functional units. We've been able to make incremental steps happen even before. The arrival of the ASIC which we recently received, and we now expect this next major step. To begin deliver car multipliers using that AI in a matter of several weeks and we expect with that step to be able to achieve the Base level performance originally being targeted by our customers.

I guess I understand that, but then after that you still got to get to a product that you can manufacture in quantities and sell to the customer, correct? Or am I missing something?

No, you're not missing anything and to your point, the challenge is a complex challenge, right, that involves, electrical, mechanical, thermal, as well as to your point, process capability, equipment capacity, and all that is involved in being able to ramp the chipset for this application.

So, this is not, it's a multifaceted challenge, but again, with respect to each of the elements of challenge, we have been making good progress, in particular when it comes to the processes and the capacity we've been able to make steps in the right direction, and I expect that all of it will come together as it has in prior initiatives of a similar kind as we progress through the summer.

Right, thank you very much for that detailed response. I'll get back in the queue.

Thank you.

Thank you one moment for the next question.

And the next question is coming from the line of Richard Shannon of Craig Hallum. Your line is open.

Well, thanks guys for taking my question.

I guess I want to follow up on the comments in the press release I think Quinn asked on as well here, which is the hyper scalar or some customer transitioning to an unlicensed product. Is this also an infringing product? And if so, there's some actions being contemplated here to alter the trajectory of what this customer is doing?

Yes.

Okay.

Well, maybe I'll follow up on this topic here and licensing here following on the prior response here on looking at this revenue stream here, but how do we think about this and we're returning to a growth track here something we expect to start in the second quarter in the second half, or and what are the dynamics under which that occurs?

Well, I think it's again a combination of increased progresses revenues and needless to say the step up in the bookings and the backlog sets the stage for that. As well as increased licensing. It's as simple as that. Those are the components of the revenue growth that we anticipate happening as the year progresses.

Okay, I'll jump back in the queue.

Thank you.

Thank you.

Thank you and our next question will come from the line of Alan Hicks of Ainsley Capital Markets, excuse me, management line is open.

Hey, good afternoon. Yeah, I wanted to clarify on the royalties and advanced products, sounded like royalties fell about $5 million or about 13%, while advanced products still grew. The in-house produced products grew about 16% and they did in the fourth quarter also.

So, I guess my question is, did you sign up your licenses in the Q1 and So, that will continue to grow in royalties?

We did sign up a licensing in, a new licensee, but you're right to say that the advanced products excluding the decline in royalty grew. The product revenue in the factory grew on the advanced product side, so that was a positive outcome.

Okay, so you had a significant customer that transitioned from royalties to accepting in-house produced products.

That wouldn't be the right assumption, yeah.

Okay, so what's driving the actual in-house produced.

An existing customer ramping further on production and as well as new opportunities. That we--

Yes, and as mentioned the facilities and as we did have an existing licensee transition to, a new platform where this new product is unlicensed.

Okay, is that is that a new version of the NBM products?

That's all I can say at this point in time. I think this question has been answered already to extent I can.

Okay, so we can expect continued growth in royalties and continued growth in product sales for the rest of the year.

I think we can confidently say that. We see growth in pro revenues and we see both in licensing. We are still obviously when it comes to, let's say the licensing income relying on small multiplicity of licensees. And with that, there can be surprises as it happened, they can be negative surprises, become positive surprises. And once the of OEMs and sellers that have taken a license increases. Then I would expect the licensing business is going to become more predictable in terms of its quarter to revolution.

And the same can be said on the revenue side, obviously we have invested a great deal in our 5G technology. We believe it's unique without equals without cross competition. Obviously, it's taking longer than expected, but it is a reflection of the magnitude of the challenge that we, and I believe it will pay great dividends as you roll it out, so we have some revenue, growth opportunities in years to come, being enabled by that capability.

Okay, and can you give any update on the ITC case? Is it, was it Texas case on damages, I think? Can you say anything about that?

So the ITC case came to an end with the ITC issuing its final determination. It came to a further end once the 60 days Presidential review period came to an end, as you may know, through the Presidential review period respondents, the customers continue to import the infringing product by posting a bond following the end of the Presidential review period, ex exclusion order are sending and they can longer import infringing products.

So that's where things stand with respect to the ITC case. There are certain aspects of the father determination that are, objectionable and with respect to which lagers found an appeal at the and so that's the next step on that general front.

Okay, and lastly, BBU products fell about $4 million, but is that going to continue about that level, or What do you see in the BBU area?

I would say, yeah, I mean, I think that we wouldn't expect, it bounces around a bit. I think it's fairly stable, I guess, as Phil mentioned, a potential risk element is in China, the simple tariffs and the cost of a product being higher in China, but I think we're sorting that out and as Phil said so far, at least there's no appreciable significant impact. I would say that steady as she goes with the brick business over the course of the year.

Okay, thank you very much.

Thank you one moment for the next question.

The next question is going to be a follow up from John Tangwanteng of CJS. Your line is open.

Hi, could you clarify what your pricing expects to look like after you implement the tariff surcharges? Is that plus 10% on just the advanced products that have the Chinese component exposure, or is that across bricks as well, which portion of your portfolio has that increased?

Thank you.

So, it's across the board. It's a 10% tariff surcharge as Patrizio mentioned, that will go into effect after the beginning of July. It's 10% across the board. We've analyzed as Patrizio mentioned, the different products, the different variations in it up or down on the tariff impact, so 10% was a good base number to begin with.

Okay, and does that cover the expected gross profit you were expecting to make before the tariffs and maybe dilute the margins a little bit, or is it a different formula than that?

We expect to be able to maintain the margin. So, to be clear, we've analyzed products, including some high-volume products where the impact of the charge as of a few weeks ago was as high as 31% to 32%, but then there are other products where the impact is less and for simplicity, it didn't make sense to have a Unique, surcharge, based on the customer application. So, it's an across the board if you will, which accounts for bump cards other costs and the maintenance of margins.

Understood. Thank you. And then finally, could you talk a little bit more about your expected OpEx heading forward, including R&D and maybe any litigation or legal expenses you might have coming up?

Well, I would say, John, we've taken the position that we're not going to guide specifically on any of the P&L elements. What I try to describe the Q4 to Q1 transition did have some moving parts in there that we felt were worth kind of describing and talking through, but beyond that, I think Vicor is a very stable place relative to spend and headcount, etc. So that's I think as much as I would say on it.

Okay, great. Thank you.

Thank you. One moment, and we have a follow up coming from the line of Quinn Bolton of Needham and Company. Your line is open.

Hey guys, I wanted to follow up. I think you said in a prepared script that you'd seen a recovery in the MBM business, which I think might be associated with one of your licensees. Just wondering if you could give us, as you look out through the year, would you expect that MBM business to continue to grow? Would it be stable like Q1 levels just any kind of shape to that MBM business on a go forward basis and then I've got a follow up.

So we expect MBM business to grow and the saying the obvious years ago we had enjoyed the significant ramp of revenues associated with MBMs until infringers came about and undermined our market opportunity. The wind was called the ITC and concern on the part of OEMs and scalers with respect to the exclusion order is brought about the demand for MBM.

Thank you for that. And then I just want to make sure I sort of understand your comments about licensing or royalty income going forward. You said that you expect that to grow. I think some of that is driven by an expectation or the likelihood of additional licensees signing agreements with you, but I guess I just wanted to clarify if you've got a licensee that's currently transitioned to an unlicensed product.

I think in response to Richard's comment, it didn't sound like that was something that necessarily changes in a quarter. And so to the extent licensing or royalty income grows, say in '25, would you expect that to be mostly generated from new licensees signing new license agreements, or would you expect that existing licensee revenue to recover?

There's a lot of moving pieces there and so I I'm not able to Make a specific statement with respect to how each of these components will play out. But it's enough to know that in the aggregate we have lots of opportunities with both the existing licensees whose revenue license is ramping. All the licensees, there's been a change that could lead to a number of different places and then there is potential for additional licensees. You know how each of these components will play out is frankly difficult to predict, but there is enough opportunity in the aggregate to be comfortable in a forecasting that license is licensing revenue is going to be a growth business survival.

Understood. Okay, thank you, Patrizio.

Thank you.

Thank you, one moment. And we do have a follow up from John Dillon of DB Capital. Your line is open.

Patricio, on the last conference call you've mentioned that you're expecting a record year, so I'm just wondering, are you still expecting a record year?

Yes,

Excellent. And my follow up is I was wondering about the new fab. Are all the kinks iron out of the new fab and in particular, is the plating turnkey and is it better than what you're getting from your previous outsourced supplier?

Yes, we are happy with the progress we made. We have a lot of capacity. We're going to put that capacity to good use, particularly with our 5G Platforms, we made the right decisions. It's a big investment. It needs to say, in terms of margins, we have been paying a price of late with all the equipment that we're depreciating, not being close to being fully utilized, but we think that as we get into later this year and next year. We're going to see improvements in car margins beyond the contribution from licensing.

That sounds that sounds good. Thank you very much for that response.

Thank you, and we'll talk next quarter or the annual meeting, I guess. Yeah.

That's right.

Thank you one moment.

And we have a follow-up coming from the line of Richard Shannon of Craig Hallum. Your line is open.

Well guys. Thanks for let me ask a follow up here.

I want to ask you about, product growth the rest of the year, and I've heard a couple of pieces and other responses here. You're talking about MBMs growing nicely here. It sounds like it will be flat. Obviously, it sounds like advanced include NBMs will be up to some degree.

Obvious you're not going to quantify. But also love if you maybe you could divine out what this is going to look like between end markets obviously you talked mostly about HPC versus everything else here. How do we see those two end markets relatively speaking, growing the rest of the year?

Hi Richard, it's Phil. So again, so HPC is a growth business for us, not just MBMs. Patrizio talked about a lead customer that's ramping their high-performance AI system on existing solutions that we're shipping, so we're excited to see that happen, and we'll follow that on with Gen 5. If I look at the defense and aerospace market, we've been planting a lot of seeds there over the last number of years that are coming to fruition on new, sort of defense systems, aerospace applications, sort of warfare equipment.

Unfortunately, the state of the world that's a growth market for us. In the industrial area, lots of seeds planted over the last number of years with channel partners at smaller accounts, but also, we've targeted very specific application segments such as the ATE, test equipment market and picked up four or five new entries into that entrance into that marketplace which are now growing for us with advanced products.

So it's really sort of across the board that we're seeing the lift and certainly having consolidated the channel to mainly Avnet and Arrow and Machnica in Asia, we're getting far more focused, far more targeted at customer bases in specific segments that value the density and what we bring. So that's also giving us a general lift. So it's occurring, right across the four, well, the three businesses in automotive that's still fledgling. We're pulling down NREs for collaborations, but that's not really impacting anything at this point in time. But next year we'll see production start to ramp with some high-end OEMs there. So again that will contribute to our portfolio.

Okay, thanks for that detail, Phil. Maybe a quick question for Jim, on gross margins. If I heard the prepare to marks, sounds like there of the gross margin decline, about half of it was from some investments for the SAP system and other things. Now the rest of it was from royalties here. So, I guess my question is in all the things equal basis here as we go into the second quarter. And obviously I'm not sure how complicated adding tariffs into this might affect gross margins here, but I'm assuming the gross margins in the second quarter, all things being will be kind of roughly half between the fourth quarter and the first. Is that a good starting point to think about?

Sorry Richard, did you say half of.

Halfway between first quarter and fourth.

Oh well, I mean we're going to have to be reluctant about offering guidance of any kind. It's just that's the position we've taken. I will say that I described the SAP you know installation. Have caused the sequential kind of changes because we required PTO in the fourth quarter and drew down the vacation balance and then ramped up, vacation accrual again in Q1. So there was some lumpiness associated with that investment is behind us now, so we are done with the SAP project.

So without giving you a specific on the guidance, I think. We feel like we're well positioned. I mean, I feel very good about the factory. I feel good about the infrastructure in Vicor, the state of the art, so everything is set to move the needle on GM going forward once we get more loading and keep building up the licensing revenue.

And on the tariff front we're building now and in the second quarter is out of the components of the were procured largely before the institution of recent tariffs and by the time we get into the third quarter where the bond cost is going to start suffering because of tariffs will be compensating for that.

As a matter of just a comment on tariffs. As a matter of interest, it's worth noting that, success over multiple years has been good relative to tariffs and our ability to manage it. Now the future's changing, but we've gone from, $10 million to $8 million to $4 million to, less than $1 million a quarter, so that's a good track record. But that's rearview mirror and the environment is changing rapidly, but so far, I mean, our track record has been troubled.

Okay great thanks for all the comments guys.

Thank you one moment for the next question.

And the next question is coming from the line of James Lieberman of American Trust Investment services. Your line is open.

Thank you. I really appreciate the progress you're making and looking forward to the year as it rolls out. Are you able to comment, maybe you have already given some comment on the Foxconn appeal, in terms of the timeline or process that might take where the International Trade Commission could realize that they're in fact defrauding and that the bills, the indications that they have rights to your technology is not correct.

I'm not going to be very specific with respect to the Foxconn license and the appeal to the secretary relates to that. We are saying what we said in the past, which is that the ITC process, just as with every form of litigation, isn't the process. You can't expect it judges get it 100% right, particularly when confronted with legal teams that, put a lot of dust up in the air and try to confuse the issues, but what I can tell you is that the administrative law judge at the ITC and the district court judge in the district court in Boston got it right, which is Foxconn has no license, the commission.

Took a different position which is contrary to all the evidence and we feel good about being able to overcome that and in any case, the license that the commission found to have been acquired quote unquote by virtue of the Foxconn issuing purchase orders with Butterly fine print contradicted by ourselves order and other, relevant, evidence including the conduct of the parties over many years, we think that.

Not, matter in the long term for many reasons. Again, not least of which there's only one patent that was found licensed. Vicor is a very big plan portfolio and ultimately being able to compete in this industry will depend on, parties that practice advance or adding a license to many talents. Not just one, but even with respect to that one, we expect that the Federal Circuit will come to the right conclusion as both the law judge and the district judge in Boston, found.

That was precisely the color I was looking for.

Thank you so much. Appreciate it.

Thank you. One more next question.

Next question is coming from the line of Jeff Co of Wall Street Research, your line is open.

Hello, thanks for taking my question. So just a little color on this customer that is transitioning to a non-licensed product. Wouldn't the ITC injunction, make that prohibitive, or is this somebody through Foxconn or can you give me a little color on the situation?

I really can't. It's beyond what I said earlier, so we think that this was a unwise decision and as I mentioned in answer to an earlier question we believe these unlicensed products relevant or IP.

So would we expect legal expense to go up as a result of that, or is that already being litigated?

Well, I think you should respect over the foreseeable future are illegal operating expenses to vary from time to time because of We need to continue to protect very valuable intellectual property. I got very comprehensive license licensable portfolio, and some, VMs and upper scales, have done the right thing, and taken a license.

Others have been taking their chances, we need to make sure that IIP is consistently applied and consistently protected and from time to time that that will require substantial investment ABC cases. I think somewhere around $12million to $15 million in the general ballpark. I think the investment on that is going to be stellar and it warrants additional investments of that kind if infringement in the industry persists.

Okay, so I'm hearing that the ITC decision, the injunction is not a panacea.

Well, in this kind of a dispute. I don't think one should think in terms of, but let's put it this way, we believe we are within our rights to protect IP asserted as appropriate and thus far we've done quite well with that.

The investment is quite good, and we expect it to continue to be that way. And going back to your core question. That does imply that you're already expense line out and when it comes to legal expenses may from time to time take significant steps and that's not our business model going forward.

Okay.

All right. Well, thank you.

Thank you.

Thank you. One moment for the next question. And the next question will come from the line of John Dillon of DMB Capital. Your line is open.

Hi guys, thanks for taking my call again. I had another one pop up.

Phil, you mentioned new opportunities in the data center with 800-volts to 48-volts. I'm just wondering how much customer interest are you getting in this and what's the time frame for orders and will it move the needle on revenues at all?

So it's interesting. I would say that, 6 months ago we started to hear from engineers, power system engineers at different customers that they were looking at 400-volt system, and then within the last few months we've seen because of the AI power growth and the rack power growth that jumped to 800-volt systems and we're hearing it now from pretty much all of the big hyper scalers. And any of the companies, chip companies that have transitioned to providing rack-based systems, looking at that type of technology, and I mean that is right in our wheelhouse.

We've been supplying 800-volt to 48-volt products to Automotive OEMs and tier ones for the last three years or four years building out that business and so the technology comes from a number of years ago but we're sitting really well with great products and technologies that we can do derivatives off of for higher powers and really engage with these customers now in the coming months, which is what our plan is, Patrizio and I are making a trip to the valley and we're having. Conversations with a couple of big hyper scales about those systems in the next few weeks. So it's an exciting time. I'm really excited by that opportunity, John.

So it sounds like this is significant and it could move the needle some on revenues in six months to a year what I think I'm hearing.

I think you're looking at probably, early 400-volt systems coming to market early '27 and then I think 800-volt later in '27. That's what we're.

Got you very synergistic with what is going on in in the other designing for suspensions involving 800-volt to 48-volt high density lightweight converters that once again get to the IP side of things. For within many claims of several enabling micro patterns with respect to these kinds of high voltage bus converters, ranging from the system, some of the technology. There are many aspects to the portfolio that is relevant on this kind of high voltage, high input voltage.

Yeah, it's actually really exciting. It looks like you have a very long runway of products and opportunities coming out in the next several years, so I'm looking forward to this. Thank you.

Thank you. And this does conclude today's conference call.

Thank you so much for participating. You may all disconnect.

Thank you.