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DATE

  • Tuesday, July 22, 2025 at 5 p.m. ET

CALL PARTICIPANTS

  • Chief Executive Officer — Patrizio Vinciarelli
  • Chief Financial Officer — Jim Schmidt
  • Corporate Vice President, Global Sales and Marketing — Phil Davies

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TAKEAWAYS

  • Revenue: Vicor reported $141 million for Q2 2025, a 50.1% sequential increase and a 64.3% rise year over year, driven by product revenues, licensing income, and a patent litigation settlement.
  • Advanced Products Revenue: $60.6 million for Q2 2025, up 1.2% sequentially.
  • Brick Products Revenue: $35.5 million for Q2 2025, up 4% sequentially.
  • Distributor Shipments: Shipments to stocking distributors increased 18.1% sequentially and decreased 14.3% year over year.
  • Exports as Percent of Total Revenue: Declined sequentially to approximately 51.9% from 60.8%.
  • Gross Margin: 65.3% gross margin for Q2 2025, up 1,810 basis points sequentially, primarily due to the patent litigation settlement.
  • Tariff Expense: Approximately $2 million.
  • Operating Expenses: $46.7 million total operating expense for Q2 2025, a 5% sequential increase, mainly from $5.1 million in legal incentive fees linked to the settlement.
  • Equity-Based Compensation: $3.7 million total equity-based compensation expense for Q2 2025, composed of $2.69 million in cost of goods and $1.02 million in SG&A and R&D.
  • Effective Tax Rate: 16% on a tax provision of approximately $78 million.
  • Net Income: GAAP net income was $41.2 million for Q2 2025, with GAAP diluted EPS of $0.91 on 45,077,000 shares.
  • Cash and Cash Equivalents: $338.5 million cash and cash equivalents for Q2 2025, up $42.4 million sequentially after $17.5 million in share repurchases.
  • Accounts Receivable and DSOs: $55.1 million net receivables for Q2 2025 and 31 days sales outstanding.
  • Inventory: $95.5 million as of Q2 2025, inventories net of reserve decreased 3.1% sequentially, with annualized inventory turns of 1.6.
  • Capital Expenditures: $6.2 million in capital expenditures.
  • Construction in Progress: $11.8 million at period-end, with $3.1 million remaining to be spent.
  • Book-to-Bill: Book-to-bill ratio was below one, with one-year backlog decreasing 9.6% sequentially to $155.2 billion.
  • Tariff Surcharge: Instituted a 10% tariff surcharge on all new orders and backlog shipping after July 2.
  • ITC Enforcement: "cease and desist orders against the named respondents, and an exclusion order against their customers," are now in place, according to Phil Davies.
  • Gen 5 Product Progress: Gen 5 vertical power delivery for the lead customer has surpassed its original current density target; 83% solution has been delivered as contractually agreed.
  • Sampling of 800V Module: The new 800-volt 10-kilowatt module will begin sampling in Q4 2025.
  • Automotive Segment: "concluded a successful audit with a large European OEM" and is preparing for an ASEAN OEM audit in Q3.
  • Patent Litigation Returns: Approximately $200 million in returns are locked in so far through March 2026.
  • Royalty and License Streams: with headwinds from one OEM license reported as behind the company.

SUMMARY

Vicor Corp. (VICR 16.55%) Management highlighted that the wide range of quarterly and annual outcomes stems from variability in licensing and litigation, not product revenue. A 10% tariff surcharge has been implemented on all new orders and backlog shipments after July 2, with order placement hesitancy and cancellations in China attributed directly to tariff concerns. The company expects to expand customer engagements in its four target markets in the second half as next-generation products are sampled, including a new 800-volt to 48-volt converter expected to position Vicor for high-growth AI and automotive platforms. Investments in technology licensing and enforcement continue, with leadership reiterating a strategy focused on pursuing infringers via both supply chain and legal channels.

  • Phil Davies said the company remains "very serious about protecting our intellectual property" and is "preparing additional actions" following success in its first ITC case.
  • Lead customer engagements for Gen 5 vertical power solution remain on track, with the company prioritizing fulfillment for this customer before opening to the broader market.
  • Management indicated that pipeline growth in aerospace, defense, and industrial segments may enable these businesses to double within "four to six years," according to Phil Davies at the Annual Shareholders' Meeting.

INDUSTRY GLOSSARY

  • ITC: U.S. International Trade Commission; a government agency with authority to issue exclusion and cease and desist orders on infringing imports.
  • Gen 5 vertical power delivery: Vicor's fifth-generation vertical power delivery architecture, focused on high current density and efficiency for demanding computing applications.
  • Book to Bill: The ratio of orders received to units shipped and billed; a value below one signals declining backlog.
  • SAM: Serviceable Addressable Market; the company-defined subset of the total market targeted by specific solutions.
  • VPD: Vertical Power Delivery; a power architecture concept referenced in Vicor's product releases and roadmaps.

Full Conference Call Transcript

Jim Schmidt: Good afternoon, and welcome to Vicor Corporation's earnings call for the second quarter ended June 30, 2025. Jim Schmidt, Chief Financial Officer, and I'm in Andover with Patrizio Vinciarelli, Chief Executive Officer, and Phil Davies, Corporate Vice President, Global Sales and Marketing. After the market closed today, we issued a press release summarizing our financial results for the three and six months ended June 30. This press release has been posted on the Investor Relations page of our website, www.vicorpower.com. We also filed a Form 8-K today related to the issuance of this release. I want to remind listeners that this conference call is being recorded and is the copyrighted property of LifeHealth Corporation.

I want to remind you various remarks we make during this call may constitute forward-looking statements for the purpose of safe harbor provisions under the Private Securities Litigation Reform Act of 1995. Except for historical information contained in this call, the matters discussed on this call, including any statements regarding current and planned products, current and potential customers, potential market opportunities, expected events and announcements, and our capacity expansion as well as management's expectations for sales growth, spending, and profitability are forward-looking statements involving risks and uncertainties. In light of these risks and uncertainties, we can offer no assurance that any forward-looking statement will, in fact, 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 2024 Form 10-K, which we filed with the SEC on March 3, 2025. This document is available via the EDGAR system on the SEC's website. Note the information provided during this conference call is accurate only as of today, Tuesday, July 22, 2025. Vicor undertakes no obligation to update any statement, including forward-looking statements made during this call, and you should not rely upon such statements after the conclusion of this call.

A webcast replay of today's call will be available shortly on the Investor Relations page of our website. I'll now turn to a review of our Q2 financial performance, after which Phil will review recent market developments, and Patrizio, 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 for our upcoming Form 10-Q for additional information.

As stated in today's press release, Vicor recorded product revenues, licensing income, and a patent litigation settlement for the second quarter of $141 million, up 50.1% sequentially from the first quarter 2025 total of $94 million, and up 64.3% from the 2024 total of $85.9 million. Advanced products revenue increased 1.2% sequentially to $60.6 million, and brick products revenue increased 4% sequentially to $35.5 million. Shipments to stocking distributors increased 18.1% sequentially and decreased 14.3% year over year. Exports for the second quarter decreased sequentially, as a percentage of total revenue, to approximately 51.9% from the prior quarter's 60.8%.

For Q2, 63.1% compared to 63.7% for the first quarter of 2025, with group product share correspondingly increasing to 36.9% of total. Turning to Q2 gross margin, we recorded a consolidated gross profit margin of 65.3%, which is an 1,810 basis point increase from the prior quarter, primarily due to the patent litigation settlement within the quarter. Tariff expense was approximately $2 million. I'll now turn to Q2 operating expenses. Total operating expense increased 5% sequentially from 2025 to $46.7 million. The sequential increase was primarily due to an increase in selling, general, and administrative expenses, which was primarily attributable to $5.1 million of incentive legal fees associated with the patent litigation settlement.

The amounts of total equity-based compensation expense for Q2 included in cost of goods, SG&A, and R&D was $2.69 million, $1.02 million, respectively, totaling approximately $3.7 million. Turning to income taxes, we recorded a tax provision for pay to approximately $78 million, representing an effective tax rate for the quarter of 16%. Net income for Q2 totaled $41.2 million. GAAP diluted income per share was 91¢, based on the fully diluted share count of 45,077,000 shares. While royalties, legal expense, and income from patent litigation have become part of Vicor's ordinary course of business, I will point out that without the patent litigation settlement, net Q2 revenue would have increased by approximately $2 million.

Gross margin would have increased by approximately 200 basis points. Operating expenses would have declined by approximately $3 million. Income before taxes would have increased from approximately $3 million in Q1 to approximately $9 million in Q2. Turning to our cash flow and balance sheet, cash and cash equivalents totaled $338.5 million in Q2, an increase of $42.4 million sequentially, and net of approximately $17.5 million in share repurchase during the quarter. Accounts receivable, net of reserves, totaled $55.1 million at quarter end. The DSOs for trade receivable is thirty-one days. Inventories net of reserve decreased 3.1% sequentially to $95.5 million. Annualized inventory turns were one point six. Operating cash flow totaled $65.2 million for the quarter.

Capital expenditures for Q2 totaled $6.2 million. We ended the quarter with a construction in progress balance primarily for manufacturing equipment of approximately $11.8 million and with approximately $3.1 million remaining to be spent. I'll now address bookings and backlog. Q2 book to bill came in below one, and one-year backlog decreased 9.6% from the prior quarter, closing at $155.2 billion. As we said on last quarter's earnings call, 2025 is a year of uncertainty and opportunity. As of today, the quarterly and annual outcome in terms of top line and bottom line is subject to a relatively wide range of scenarios.

Given a wide range of possible outcomes, we are unable to provide quarterly guidance until we are further along resolving certainties and capitalizing on opportunities. With that, Phil will provide an overview of the 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 Davies: Thank you, Jim. Our second quarter book to bill ratio came in below one, due to order cancellations from customers in China and widespread order placement hesitancy around tariffs. Vicor has instituted a 10% tariff surcharge applicable to all new orders and customer backlog shipping after July 2. This tariff surcharge is now in effect. Earlier this year, we brought to fruition our first ITC action, which has resulted in cease and desist orders against the named respondents, and an exclusion order against their customers, both OEM and hyperscalers. We are pursuing additional actions against companies who are knowingly infringing our IP while playing a game of catch me if you can.

At the Annual Shareholders' Meeting on June 20, I presented an update on our business strategy, which is fundamentally centered around our top 100 customers enabling high-performance modular power delivery networks. At the meeting, we showcased next-generation products providing significant advances in power and current density at levels far beyond our nearest competitors. These next-generation products are being sampled to lead customers across our four target markets, and customer engagements are expected to expand in Q3 and Q4. I am pleased to announce that our Gen 5 vertical power delivery solution to a lead customer is coming to fruition with a current density exceeding its original target specification.

Higher current density, thermally adaptive, and scalable VTE will enable us to engage with hyperscalers, AI processor, and network processor companies to deliver solutions with superior performance and cost-effectiveness. These engagements will begin with the delivery of VPD evaluation boards and online selection and simulation tools. As discussed at the ASM, we're also focused on the future AI megawatt rack, which will require 800-volt DC power delivery and conversion to 48 volts. Vicor has pioneered high-density non-isolated 400-volt to 800-volt and isolated 800-volt to 48-volt bus converters for automotive applications. A new 800-volt power module, which will deliver 10 kilowatts at 48 volts in a package smaller than an iPhone, will begin sampling in Q4.

Vicor will be uniquely positioned to offer front-end 800-volt to 48-volt bus converters and direct VPD 48-volt to sub-one-volt solutions enabling a high-efficiency, high-density power delivery network for our customers. The market SAM for these solutions is expected to exceed $5 billion by 2027. Opportunities continue to grow in our automotive business. We have just concluded a successful audit with a large European OEM for an initial low-volume project, and we are now preparing for an audit by a large ASEAN OEM in Q3. It is very clear that 48-volt zonal architectures are the highest growth opportunity in automotive, followed by 800-volt to 48-volt conversion, which will allow us to scale and leverage technologies across our AI and automotive market.

Pipelines in our industrial and aerospace and defense businesses are healthy and growing. Our new product introductions will strengthen these businesses and put them firmly on a path to doubling in four to six years, respectively. As presented at the ASM, we remain confident in our business strategy of innovation, customer focus, market focus, and a successful technology licensing practice. Thank you. We will now take your questions.

Operator: Thank you. Then wait for your name to be announced. To withdraw your question, please press 11 again. Please limit yourself to one question and one follow-up. You may return to the queue for additional questions. Our first question comes from the line of Quinn Bolton with Needham and Company. Your line is open.

Quinn Bolton: Hey, guys. Congratulations on the patent litigation settlement. That's a very nice amount. Wanted to kind of start there and at the Annual Shareholder Meeting in late June, you guys talked about a return on the money spent on the ITC case. Somewhere in the, you know, round number $200 million range. And I'm just kind of curious, as you look at that kind of return, I assume that's in the patent litigation settlement that you just announced, but also just wanted to check. Does that include the royalties from the OEM, the hyperscaler licenses, just in 2025 and '26, or does that include what you also recognized in 2024?

Just want to make sure I've got the time frame right on that.

Jim Schmidt: 200-ish million dollar return. Then I've got a follow-up.

Quinn Bolton: So that's the approximate amount that we have locked in so far.

Patrizio Vinciarelli: Through '26.

Jim Schmidt: Okay. March 26. Yeah. It. Okay. Perfect. And then either Patrizio or Phil, book to bill was below one in June. I think you mentioned some hesitancy around the tariff surcharge and just general tariff uncertainty in the business, as well as some cancellations in China. Do you sort of feel like the bookings activity has reached a minimum? Have you seen any improvements in July, on the bookings trend, and any evidence that booking to bill might be getting back above one:one in the September quarter? Do you see this tariff uncertainty continuing? I know August 1 is an important date for reciprocal tariffs.

So just kind of wondering if that tariff uncertainty has continued here in the July time frame?

Phil Davies: So, Quinn, this is Phil. So we think that the hesitancy around tariffs is now behind us. It's very clear now what we're doing. Customers are working with that expectation, and I think that, as I said, that's behind us now, and it's on to future quarters.

Quinn Bolton: Perfect. I'll get back in the queue. Thank you.

Operator: Please stand by for our next question. Our next question comes from the line of Jon Tanwanteng with CJS. Your line is open.

Jon Tanwanteng: Congratulations on a nice settlement. I was wondering if you could talk a little bit more about the cancellation that you saw with what end markets those are in. Was that HPC or something else, industrial, automotive?

Jim Schmidt: Aerospace? Any help there would be appreciated.

Phil Davies: Most Jon, this is Phil. Mostly from the industrial market in China. We have customers there for many, many years using a lot of older products, as well as some of our advanced products. It was widespread. It came through distribution channels. Sort of across the board because the tariff there was pretty high initially. So we had some order push outs and some cancellations. It was a mix. So that's the color on that.

Jon Tanwanteng: Understood. And second, just on the royalty streams that you're seeing, are you expecting to continue growing those license streams into the future quarters? Is that part of the engagements that you're talking about, or is that mostly stable for now?

Jim Schmidt: So we completed the first ADC case with the cease and desist of and exclusion order that the IDC issued earlier this year. That's still rippling through the supply chain. We are aggressively pursuing infringers that are still trying to import products that are subject to exclusion. We're also preparing additional actions in the fall. So as evidenced by the track record today, we are very serious about protecting our intellectual property and no quality should have any doubt that we're going to go to whatever length is necessary.

Now to preclude infringement. Believe message is getting around. But this would say, even accredited with the industry, an industry in which you know, gas suppliers in first by OEMs time hyperscalers to copy successful products. This is a practice that's going to take some time to change, but we have the wherewithal to make it happen, and we are very determined. To make it. So, so far, so good. There's going to be a lot more of what has happened.

Jon Tanwanteng: Okay. Great. Thank you. I'll jump back in queue.

Operator: Thank you. Please standby for our next question. Our next question comes from the line of Richard Shannon with Craig Hallum. Your line is open.

Richard Shannon: Well, thanks, guys, for letting me ask a question. My first one is gonna be on this new license settlement. Congratulations on what seems like a very nice win here. Maybe you can describe this in a few different ways for us to the extent you're allowed or able to. Is the settlement will we see any ongoing royalties from this customer, or is there fully paid up in any manner? Can you describe who this is either by name or, you know, kind of a company OEM hyperscaler, etcetera? I guess let's just start with that one, please. Thanks.

Jim Schmidt: So I cannot disclose any of the details that you're looking for. I can only say that at the shareholders meeting that there's been no license in connection with this particular action. So you should not assume that the parties were involved got a license, and by mutual license, they're able to keep doing what's happened. The subject to exclusion order, and potentially other actions will coming.

Richard Shannon: Okay. Just as a heads up for all of you, I'm getting a little bit of scratchiness from the line here. I'm sure I'm hearing everything here, but I think I caught most of it. With that said, I'll follow-up with my second question here, which is to kinda understand the dynamics going forward regarding the licensing and certainly understand that you're not able to fully lay out your strategy here. But as I think Phil said in his prepared remarks about trying to play the infringers are you know, providing a or doing a catch me if you can strategy here. And, obviously, it seems like patent settlement is one example of success there. I guess I'd love to understand the degree to which you think this is an example of that, and we'll stop others, or are we gonna see some back and forth here like what we saw last quarter with the licensee coming off? Thank you.

Phil Davies: So I can describe the strategy, and think we've, we've made a history of it. Strategy is to protect IP, enforcing it, selectively, smartly, by fundamentally going after the supply chain that in the pricing industry as I mentioned earlier, rely on copying successful products. That's been part of something we'll call the ecosystem. It's an ecosystem that for the most part in our players that don't innovate. They tend to copy each other. And when a successful product come to market, and hyperscalers or OEMs. We won't have it, and we won't have it commoditize. These players will have been focused in networks. And so the supply chain starts to talk with the enablers. They enable copycat products.

Then there are comparable captures, incorporate them to higher value assemblies. I speak in much higher value assemblies. And then further down supply chain, OEMs and hyperscalers, that in a way, it really is to be a proceeding this kind of practice. We committed to bringing this practice, at least in so far as Vicor IP is concerned, to an abrupt end. And that will entail it's an instance, it's conference going lying down. Because they know about their IP. They should respect it. If they don't, there are serious consequences to buy infringement. One of the stop losses is comes to this enjoyment or exclusion orders. And that's what's happened with our first action. There's more of that coming. So the strategy is crystal clear. Every project on this

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

John Dillon: Hi, guys. Congratulations on a nice settlement. Really nice to see.

Phil Davies: Phil, my question for you is, at the Annual Shareholder Meeting, you presented a chart that showed a timeline when you can be delivering Gen 5 vertical to your lead customer. So I'm wondering, is that still on target? Are you still gonna meet all those dates? Does it still look does it still look solid? And I have a follow-up question after that.

Phil Davies: So, John, I'll take that. So things are progressing well. Both with respect to the current multiplier piece that had been, you know, challenging because of its very, very high crown density. As well as the other building blocks. So we're still, as you know, as discussed at this meeting, very much focused on addressing the needs of our lead customer. We're keeping our pilot dry with respect to engaging with other potential customers. But shortly after, Celesign the very iconic message we need of our lead customer, we'll be ready as Phil pointed out earlier, with demo system boards, idea tools, to see database scalable, adoption side of. So I think the question sorry, John. Did you question was on the slide that we filled. We're still on. Target with that slide that we showed, John.

John Dillon: Yeah. Okay. So did you deliver the 83% solution then?

Phil Davies: Yes. We have provided the relief CTM quantities of the, 83% solution, which, by the way, was the backstop agreed upon with the customer to begin with. And we're not our way making good progress with respect to 100133%.

John Dillon: Excellent. Then my follow-up question would be, when do you expect to have a fully productized product that you can you can produce in quantities for general market?

Phil Davies: I'm going to not spell that out. Again, as suggested earlier, John, once they very, very focused on taking care of our lead customer first. And that's 100% our progress at this point in time. That's not to say that we're not preparing for a general market introduction. As I mentioned earlier, we made great size of the most system calls, tools, and general market capabilities. But we're only going to pull the figure on that once we're done with a 100% level. That was initially targeted just before we get that 100% reach goal.

John Dillon: Excellent. Okay. I gotcha. John, if I can just

Phil Davies: Jonathan, let me just start. Just add to that just a little bit. That's not to say that, you know, the front end team engaging, with customers from a perspective of understanding their loads, so anybody that's looking at VPD, we're talking to them about their new next-generation processors, networking chips, so forth. So it's not that there's not any work going on. It's just that the front end team isn't involved if you like, the development of the product for the lead customer.

So we're able to have the resources available to talk and gather information such that when we do launch that out to the general market, you know, we're ready to hit those customers, you know, very, very quickly. With solutions that they need. So there's that work is ongoing, and we've got a lot of engagement with anybody looking at VPD right now.

John Dillon: Will your lead customer be able to ship the product that you're shipping them and then to their customers? Is it is it is the quality gonna be good enough that they can actually use it to ship to their customers? Are they still in the kind of evaluation stage?

Phil Davies: So I can't give you details, obviously. So but I can say this that you know, the customer is considering revising the platform that we started to ship. But our objective is to enable a higher level of class capability and improved performance. And to do so, ahead of the customer target market introduction date.

John Dillon: K. Excellent. Thank you very much. It's very helpful. And, again, congratulations.

Phil Davies: Thank you.

Operator: Please stand by for our next question. We have a follow-up question from the line of Quinn Bolton with Needham and Company. Your line is open.

Quinn Bolton: Hey, Patrizio, at the Annual Shareholders Meeting, you were asked is your outlook for 2025 to be still a record year? I think at the Annual Shareholder Meeting, you had referenced some increased uncertainty around tariffs. But you still thought you got there. Obviously, with the June results and the $45 million patent litigation settlement, it certainly looks like you're tracking to a record year in 2025, but wondering if you had any updated thoughts on whether 2025 is a record year for revenue. And then I've got a another follow-up.

Patrizio Vinciarelli: Yeah. It suggested I think, the whole quarters, we do expect '25 to be a revenue.

Quinn Bolton: Excellent. Okay. And then the follow-up question I know you don't provide quarterly guidance, but just wondering if you could directionally give some comments. Your royalty revenue was on a very nice upper trajectory through 2024 in March and June. Sort of pulled back to the roughly $10 million level. And I think you'd mentioned that one of the OEM licenses wasn't paying on a new generation product, but it looks like that royalty income level has stabilized. I'm just wondering, as you look into the back half of the year, would you generally expect royalty to begin to increase again? Or it stay in this $10-ish million range?

Could you give any sort of qualitative comment on how you think the royalty portion of the revenue stream might trend over the next couple of quarters?

Patrizio Vinciarelli: We're not going to commit to any specific level, but as evidenced by the results in Q2, I think it's safe to say that in any one quarter, there is a great deal of upside. On a bigger scale. Than what happened in Q2. So and that's the reason frankly, why we can't provide a reliable forecast. There's a good deal of variance with different scenarios. And you should say, given a strategy and commitment for CIP, we don't want to be in effect committed, hooked on any particular target in any one part of the last step drivers we need in order to be successful in about the right outcome. So that, as you can imagine, creates uncertainty which is at this point in time, you know, part of our you know, IP business. I think as we progress further along, and we'll get a more diversified licensee base, the licensing business is going to become more predictable. At that point in time. The kind of challenging forecasting that we presently place will no longer be there.

Quinn Bolton: Maybe just, Patrizio, I understand that, like, patent litigation settlements are difficult to forecast timing and probably the signing of new licenses to the extent they in a license payment is a little bit less predictable. But royalty payments I would think, on existing licenses might be a little bit more predictable and I guess that's what I was asking about. I know you had, again, talked about some, you know, sort of headwinds in that royalty income with the OEM license. And I'm just kind of wondering at this level, do you think that those headwinds are now largely behind the company on the existing licenses?

I'm I'm not trying to get you to comment on new licenses or, you know, patent litigation settlement, you know, in the future. Just more kinda wondering if that OEM license headwind that you had previously talked about might be behind you at this point.

Patrizio Vinciarelli: Some behind us. You know, we are enforcing the existing exclusion order, and we're looking at additional actions for you know, fact, making sure that it use of our IP does not go without appropriate royalties or penalties for not paying royalties when they were due.

Quinn Bolton: Understood. Okay. Thank you.

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

James Liberman: Thank you. Great results. It's good to see the licensing and the and the settlement income coming in. You mentioned the automotive area and event with a company in Europe and Asia. And in the past, you've mentioned you're seeing some continuing strength in the electric vehicle market in China. Can you give a little bit better overall color to how you see that playing out?

Patrizio Vinciarelli: Yeah. So the automotive market, I mentioned that the annual shareholders meeting. This pretty obvious to people that have dealt with the automotive market. You don't just enter that market. It's a it's a hard slog. It's a grind. You have to really prove yourself as a as a supplier. So typically, starting out with lower volume, programs and platforms, and then expanding the business from there once you, you know, proven yourself. The critical steps through that, sort of collaborations on different, you know, power delivery networks with e o ones and OEMs, which we established. We're now going through the audit phase with a number of customers.

That's a very critical step where they have teams that come in and look at all our quality systems and manufacturing systems and product development systems. So we're we're going through those now. So we're we're well on the journey, no pun intended, to, you know, becoming established at least as a as a lower volume smartphone supplier, but those do expand then fairly quickly after that. So we're very early days still. I think there's still a ways to go before that becomes a significant piece of our revenue, out in the twenty-ninth thirty, twenty-thirty time frame. But we are excited about, you know, the activity that's going on there.

James Liberman: Thank you very much for that.

Patrizio Vinciarelli: At this time.

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

Jon Tanwanteng: Hi, thanks for the follow-up. A couple of months ago, the largest chip designer in the AI space you know, disclosed their plans for 800-volt servers and the architecture they plan to use. They named a lot of partners in the press release there. And I was wondering since you weren't on the list that was announced if there's an opportunity there at all, does that shut you out? Or is there still a way to in that ecosystem either with this designer or with others? With the products that you have.

Jim Schmidt: So I think as mentioned, in Phil's prepared remarks, We have a history of pioneering high voltage and bus conversion with or without isolation with the LOIP. A base levels, I think anybody now pursuing high density power system solutions involving bus conversion, from 800 volt to 48 volt or in the general realm. Is going to be needing RIP or, you know, in effect, suffering consequences in terms of inferior power density. As Phil mentioned, we're bringing to fruition a new high power module that is a good fit for a lot of these requirements. You know, 10 kilowatt block, which is very, very small. It's a small fraction. Of the size of any competitive alternative that to our knowledge is being developed. So here again, we have a leading technology leading power density capability, and last but not least, lot of significant IP that we think is going to become necessary for high performance solutions.

John, there's a long way between having a high voltage discrete GaN or a silicon carbide product to a 800 volt multi kilowatt you know, rack power system. So, yeah, there's a lot of there, but there's a long way from that to having a real high performance high efficiency solution. So we shall see. And also a lot of misconceptions. You know? You these facts there is a good deal of naivete when it comes to some of these things. So we've been making 800 volt bus converters for many, many years.

We know what it takes, and we're doing it in ways that it's measured, as an example, in terms of switching frequency, not that a magnitude greater than what can be done with the GANFAS or, serial cut by FAS.

Jon Tanwanteng: Great. Thank you for that color. That's that's much appreciated. Last one for Jim, if you could. Just any thoughts on OpEx going forward? Compared to the current quarter that you just ended?

Jim Schmidt: Well, I think, you know, we won't guide on that John, but I will say that as I described in the results that if you exclude the $5.1 million incentive legal fee our OpEx would have actually dropped sequentially. That would be because, in part, and primarily because of a lull in the other legal expense we're scheduling incur. On some of these cases. So I think we're in a good state right now relative to a nice balance of operating expense and revenue. I think as things heat up and we go forward with other actions, then we'll we'll see, and it'll be lumpy. I think, in OpEx. And we've said that since it's gonna be the case.

Phil Davies: But typically, everything is fine. Start to the first action in terms of contingency, we are kept up. So we paid out Yeah. All the contingency fees related to the transaction.

Jon Tanwanteng: Understood. Good luck.

Operator: Thank you. Please stand by for our next question. Our next question comes from the line of Don McKenna with D. B. McKenna and Company.

Don McKenna: Thank you. I wanted to ask about the settlement if that represents the entirety of the settlement or if that's an initial payment. And secondly, Jim, I thought I heard you say there was some stock repurchases during the quarter. If that was the case, can you expand on that a little bit? The numbers are shares and price? I think I'll let Patrizio comment on the settlement.

Patrizio Vinciarelli: Yeah. So I cannot comment on the specifics of settlement.

Jim Schmidt: So I think on the on the share repurchase, mentioned in the prepared remarks, on the order of $17.5 million worth of share repurchases last and on the order of 200,000 or ish shares. Repurchased during the period. Thank you.

Operator: Thank you. Please stand by for our next question. We have a follow-up from the line of John Dillon with D and B Capital. Your line is open. My question was answered, so thank you very much. Thank you. Please stand by for our next question. We have a follow-up question from the line of Richard Shannon. With Craig Hallum. Your line is open.

Richard Shannon: Great. Thanks for taking a couple more questions here, guys. I'm gonna look at a couple of different comments you made both today and then pass calls as well as the shareholders meeting. The first one is talking about record results of the year, and I heard your answer today. Then he also talked about a raw wide range of outcomes. As we look at your results today here, obviously, a very large settlement, obviously, a great a very wide range here. But as we if we just look at your product revenue, how do we think about what can create these wide range of outcomes?

And I'd like to take the tariffs off the table. You've talked about that today. But how about maybe discussing and kinda giving some sense of where you see some of these positive outcomes by product as we go through the year that could create you know, record year even better. Thank you.

Patrizio Vinciarelli: Yeah. So to be clear, the the major source of uncertainty in the short term is with respect to licensing and litigation practice. With respect to the product revenue, the near term, sees us still making poor use in terms of capacity recession of our first fab which represents obviously burden with respect to margins. And level profitability. Even though we've been making good progress on that front, primarily because of, the efficiencies associated with shortest amount of time. In and greater yields. And that August is on rolling. But on the trial front, which is as I think I noted in my quotes, associated with the press release, the product front is obviously very important. We're very much focused on that.

We made tremendous investments in advancing cell of the art. And that's so being reflected in our five g product capability. It would you got the AI, the center opportunities you know, point of load as well as earlier, passing through critical hubs in the 48 volt and the diameter wall. It's the kind of product superiority and technology that will fill the fab It's going to happen overnight. It's Sam that will take some time But I guess to say, we're paying in troubles on that part of the salad as well. But that's not where the near term uncertainty with respect to two quarter top line of online numbers.

Richard Shannon: Okay. And I guess just following up on that, Patrizio. Certainly, what obviously, you've been talking about second gen VPD and some of the newer products here. But relative to talking about the record year here, it doesn't seem like there's enough time for those new products to have that much of an effect. To benefit this year. I just wanna make sure that was implied in your comment there. Thank you.

Patrizio Vinciarelli: They are not going to move the needle big time, but there's going to be progress and certainly a future in the second half of the year.

Richard Shannon: Okay. Fair enough. I will jump out of line again. Thank you, guys.

Jim Schmidt: Thank you.

Operator: Thank you. Ladies and gentlemen, as a reminder to ask a question, I'm showing no further questions in the queue. Thank you. Ladies and gentlemen, that concludes today's conference call. Thank you for your participation. You may now disconnect.

Jim Schmidt: Thanks.