Q4 2023 Vicor Corp Earnings Call
Participants
James Schmidt; Chief Financial Officer; Vicor Corp
Philip Davies; Corporate Vice President - Global Sales and Marketing; Vicor Corp
Patrizio Vinciarelli; Chairman of the Board, President, Chief Executive Officer; Vicor Corp
Jon Tanwanteng; Analyst; CJS Securities
Quinn Bolton; Analyst; Needham & Company Inc.
Presentation
Operator
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 coordinator for today. (Operator Instructions)
And now I'd like to hand it over to James Schmidt, Chief Financial Officer. Please go ahead.
James Schmidt
Thank you. Good afternoon and welcome to Vicor Corporation's earnings call for the fourth quarter and year ended December 31st, 2023. I'm Jim Schmidt, Chief Financial Officer, and I'm going to handover with Patrício 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 31st. This press release has been posted on the Investor Relations page of our website, www.vicorpower.com. We also filed a Form eight K today relating to the issuance of this press release. I'll remind listeners this conference call is being recorded and is the copyrighted property of Vicor Corporation. I ought 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 and the risk and uncertainties we face are discussed in Item 1A of our 2022 Form 10 K, which we filed with the SEC on February 28th, 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 and 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 mark recent market developments and Patricio, Phil and I will take your questions in my remarks.
I will focus mostly on the sequential quarterly change for P and L and balance sheet items as well as full year on 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% from the third quarter. Total of one or $7.8 million and down 12.2% from the fourth quarter 22 total of one or $5.5 million. Revenues for the year ended December 31st, 2023 increased 1.5% to four or $5.1 million from three 91 through $99.1 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 ending 2023 decreased 8% to $23.9 million from two 43.3 million the year before. Revenues for brick products for the year ending 2023 increased to 16.3% to one $81.2 million from one 55.8 million the year before shipments to stocking distributors decreased 23.5% sequentially, but increased 46.9% year over year. Exports for the fourth quarter to decrease sequentially as a percentage of total revenue to approximately 56.5% from the prior quarter 62.8%. On a year-over-year basis, exports decreased as a percentage of total revenue to approximately 63.1% from the prior year 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. But 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 680,001 million 895,001 million 7,000, 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%. And 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 and 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 42.2 million in Q4. Accounts receivable net of reserves totaled 52.6 million at quarter end, with DSOs for trade receivables of 40 days. Inventories net of reserves increased 1.9% sequentially to one of $6.6 million. Annualized inventory turns were approximately flat sequentially at 1.92. Operating cash flow totaled approximately $22.1 million for the quarter. Capital expenditures 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 a net 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 one and with one year backlog decreasing 8% from the prior quarter, posing it was 60.8 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, Philip 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?
Philip Davies
So 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 HPCQ., Q4 bookings were lower than expected as we turn down deals inconsistent with our long-term OEM licensing strategy. The license gives OEM.s access to alternate sources of supply for products covered by Vicor IP from otherwise infringing suppliers, enabling current and future JNAI. 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 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 MEMs. 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 JNI 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 A. power system market, we are getting ready to deliver evaluation systems models, tools and samples. Two may 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 OEMOEM. relationships through early learning cycles. Momentum is picking up in both the mild hybrid and BEV market, combined with 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 ordered our new chip fab as we now ramp production of advanced products.
Thank you. And with that, we will now take your questions.
Question and Answer Session
Operator
(Operator Instructions) Jon Tanwanteng. Please go ahead.
James Schmidt
Hello, John.
Jon Tanwanteng
Hello?
James Schmidt
Yes. Go ahead, Jon.
Jon Tanwanteng
Great. I think your second question on So to clarify, you turn down data center or HPC deals. And are you saying for XPO power due to NBN licensing issues or were they just pure MDM deals? And kind of help me understand what the concerns were surrounded now uses less. It's economical for us. So surrounding the IP?
James Schmidt
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 it clear vision of where we're going and we're sticking to that vision are as events unfold on a variety of fronts relating to bomb, asserting our patents with respect to the NBN in other developments. So the marketplace needs to say is driven by a complex set of forces. On the one hand, there is it drives to multi-sourcing, particularly for very high-volume applications. But at the end of the day, these also are an overwhelming need for higher current density solutions, vertical power delivery. And these areas were Vicor as a pioneer as establish some beachhead of IT in opportunities that we're going to seek to realize through the right mix of licensing to facilitate multi-sourcing as needed, where needed our participation directly with them our module solutions from new fab.
Jon Tanwanteng
Okay. Fair enough. And I understand, is this something that can be resolved in the near term as you as you negotiate more is this something that will take the helm, the assertion of your litigation strategy and then the completion of that to complete?
Philip Davies
Well. So as implied by Jim's point in his remarks regarding our is the uncertainty and opportunity that characterizes the Asola quarters past. We can't make that prediction and we don't want to make that position because we want to retain the flexibility needed to implement our long-term sales that you saw. We're not going to unveil them in terms of predicting when things will happen. I can tell you that most profession is that arm, we're going to be successful. We're going to be successful with some first litigation with respect of certain CMBS patents. We're doing very well in that regard.
And what how long with respect to that process. And we're also going to fill the factory in on in due course. So we'll have a coffee at our strategy. They determine two enablement and patient need be in order to bring it about.
Jon Tanwanteng
Understood. Thank you. I'll jump back in queue.
Operator
Quinn Bolton.
Quinn Bolton
Hello?
James Schmidt
Yes. Go ahead, Quinn.
Quinn Bolton
Okay, great. I guess I'm understanding you don't want to provide a lot of detail, but I just wanted to make sure I understand sort of that range of alternatives. You said you're turning down deals for MBM.s. It sounds like from your opinion or perspective, many of the competing MBM.s 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.
James Schmidt
So we have to conclusive proof of business model that works quite well. We have a significant licensee that Tom has been sourcing and VMs from an otherwise infringing source by virtue of an OEM license with us. And that's, again part of our overall strategy with respect to balancing a variety of needs and opportunities for our customers, the market, a large and ourselves with some use factor for intellectual property bar as well as the needs of the customers that in some on relevant Eastern seas, we do have an overwhelming need for multiple share sources.
Quinn Bolton
I guess a second question, just sort of around the IP front. I know we've got the APEX show next week from a lot of people at that conference. We'll be talking about vertical power delivery, I think Monolithic Power, Analog Devices and Infinion have all talked about vertical power delivery from the multi-phase 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 multi-phase competitors are moving in that direction? Is that an area where you may have just are your patents on that front? Because I know you've been talking about vertical power delivery now for probably three plus years think.
James Schmidt
Yes. So investing upfront delivery, it means certain specific things, wow, them with what we call first gen VPD., the stacking of what we call a multi-cell converter. The multi-site converter can be a bag or current multiplier. It can also be a multiphase Solutia. It doesn't matter you falls within IP in the context of a stack solution with certain attributes. So we pioneered that concept. It's been implemented to eliminate the SAT by competitors' solutions. It lacked robustness, lack scalability and cost effectiveness. They suffer from all this race of volume. You know, a first-generation technology that in many respects is using mature and not scalable are without question is going to become are somewhat more mature and somewhat more scalable. Al is initially conceived by Vega our but see I handicap in a variety of fronts, including the intellectual property front, our with our 5G technology, we are on what we call a second generation of EBITDA, which is much more scalable much more cost effective. Are your mature profile much more efficient and which we believe before too long, we enable much more advanced solutions.
Quinn Bolton
Understood. Thank you.
Operator
John Dillon.
Go ahead, Michael, I mean I think Jeremy take a pretty fair, Jonathan.
Philip Davies
Yes, if we can hear you had 10 months film and in your prepared remarks, you were talking about IP that you have in the automotive and then right after that, you said it was noted by Tesla.
Can we infer from that that it might be a customer visit So I heard the word SaaS lock and the 48 volt zonal and any Okay, Tesla going to be a customer soon, I think is what John was.
James Schmidt
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. So that's an area of intellectual property that may come to fruition at some point in time. As you can imagine, as implied earlier comments, there is no shortage of opportunity. As of now, we're very focused on bringing to fruition our NBM initiative. But ARM 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 ARM Advanced Persistent technology right now.
The other thing I wanted to congratulate you on the bookings and it looks like from the press release, it's added up and it looks like your bookings were up about $13.5 million on a previous quarter. I'm just wondering, do you expect this trend to continue? And I don't want to give specifics, but can we expect that trend to continue throughout the year?
James Schmidt
Yes. So I don't think that the word trend applies only in a separate action, whatever you want to call it to, you know, events unfolding over the next few quarters because it's discussed earlier. I think we should be clear with respect to this, there is a wide range of scenarios. And because of that on individual events, it could impact that on bookings on the top line bottom line from one quarter to the next in ways that are frankly unpredictable. Needless to say, these books are at the low end, but we're not going to quantify what that is while 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. So this is on last quarter, you alluded to 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 of this.
James Schmidt
I will say that the cumulative impact over time is more predictable than on Easter contribution that may happen sooner or later is so fundamentally, our strategy, as it has always been, is to take a very long-term view, you know, whatnot. I know we're in the process of reporting to the financial markets, but we are not to be perfectly honest with you are making decisions based on what Tom, it 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, but again, balancing the various factors at play in a comprehensive salvage model.
I'll get back in the queue. Thank you. Thank you very much.
Operator
Karim Morton.
Hey 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 for a generation or more, hopefully fifth-generation generation design wins, how quickly could you ramp that business? I mean, 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 sort of start to realize some of those upside opportunities there, right. Your kind of way to think about the timing takes and the upside case begins to play out. And then I've got a follow-up.
Patrizio Vinciarelli
So we have capacity in place now. We could be in the next quarter or the quarter after that, our manufacturer more subject to obviously material procurement lead time. And then we would based on what we stand currently in terms of the bookings and backlog situation.
Al, just as a reminder, the issues and challenges. So yes, the years when we didn't have a vertically integrated factory will dependent on outside sources, supply for critical process, steps are gone. Those are no longer challenges. Now we face is different. What type of challenges again is resulting from our seeking to establish the gene that ARM has us balance a variety of considerations. But if I think back about historic challenges. I feel that way on the establishment of a fifth 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. The Vicor never have. We manufacture advanced products in pallets, which are akin to wafers. And in now in our chip foundry, we can make a very, very large quantity of barrels. We have a large capacity. Needless to say, this is going to be a lead time is there's no step function to be had, but our demand can be addressed with supply within a relatively short cycle times.
Thank you, Patrizio. And then the follow-up question is on the current latest generation GPU market, one of the multi-phase vendors that has pretty high share recently had some testing issues. And I'm wondering if you've had any discussions sort of since that event that might lead you to believe that any of the large AI processor or GPU vendors, wind are now more open to having multiple sources of supply. And particularly what has this event potentially raised some concerns about the multi-phase approach in general, given that you've got one or more controllers that that may have to control 2030, 40 phases, have you seen anything coming out of that event that that may benefit Vicor either in the near term or the longer term? Thank you.
Patrizio Vinciarelli
So multiphase systems, you know, have challenges and those challenges get compounded in a VPD. type of solution arm. So the the underlying primary challenge of multi-phase is that NESE is a lower current density type of solution. It involves on the averaging down over voltage to step-up to clients of true switching elements that need to support a much higher and voltage. We stand on and do so reliably and with other with safe operating area, but then come in with the Viper car multiplier, which can affect multi-play car and do so much more efficiently with lower voltage semiconductors without a commensurate SAP operating area of the challenges, the bank is set to do Al would be particularly just to give you some examples with the fact that with our proprietary approach, there is no multi VCO phases, each one of which should it fail could take a GPU or the air process with it, Al, as you can fail with a TOPSwitch short, which could happen with any of the larger multi VCO faces. 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 differ, but then getting back to the VPD. side of things are with a multi-cell approach involving a multiplicity of phases as opposed to a multiplicity of current multi-device as we have some you have in effect, the compounded challenge all a in power conversion topology, buck converter, which is inherently low current density compounded by the mechanical challenges with first generation VPD. of stacking this multi-cell topology with gearboxes, our capacitive layers that are required in order to provide the filtering and dynamic response sale on me to get too technical with this are getting to the punch line. RVPD. first generation, which will be implemented with a multi-cell solutions in the form of multi-phase is very, very challenge. Costly, not truly scalable in E&C handicap a need of an oral power. And we're not seeing based on our visibility is being scaled up with the level of low defect rates and down manufacturability that there are larger OEMs with respect to it.
Got it. Thank you.
Operator
Alan Hicks.
Can you hear me?
Patrizio Vinciarelli
Yes.
Okay. It sounds like the factory is done virtually complete of the I know you have some more buildout that. Can you confirm that?
Patrizio Vinciarelli
Yes, we are all we have a back after we review every week continues to be yellow and red is now all green in this asset. The green beginning sourcing of yesterday, which was yellow red, is become a green source as major handle in our vertically integrated facility. And those bars are it rising, you know, from week to week. So we are doing well in that regard. So that challenge is essentially behind us to your point what NAB would not tie them with bringing in some additional equipment that is equipment we committed to there is going to add some additional capacity and process capability is doing in the next 12 months, but the core capability of them in effect, building up the other layers of our unique converter housing package type of technology to browse, again, the wafer. Our analogy when it comes to Parkway that we've our 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?
Patrizio Vinciarelli
Well, so what is going on in what has been going on in particular within the last quarter is that the mix has changed right with some and with a different of 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 on top capacity. And that's frankly the reason why we fell short somewhat of an 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 have a certain kind of we had to make our somewhat smaller quantity of a variety of different things based on that's a factor with respect to our capacity up and down on. It was a factor in particular with respect to the top line in the last quarter.
Okay. And then going forward, we are capable of building the four G products that are medical vertical and what's the interest in 4G aside? What is what interest in 4G?
Philip Davies
Sorry, what is what? Interest in 4G?
Yeah.
Philip Davies
So I think, frankly, our focus right now, we do have you ask the question, but we have some 4G design wins.
Yes, 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 three times the power density of 4G, which is a major our value proposition to vertical power delivery and other lower current the lateral applications to us. It opens up new markets for us, bigger market so I think it's such an exciting time yet.
Patrizio Vinciarelli
Any factory I'm not thinking about for June, I'm thinking. And then the second theme is very much progress on you. Should that we bring 5G to completion and get demo system bores out to customers towards and begin now that are scheduled.
Okay.
Thank you very much.
Operator
Jon Tanwanteng.
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?
Philip Davies
Now, the -- Hi, Jon, it's Phil. So now that the market is sizable for us as a new entrant. Of course, I mean, there's still millions of BV.s and mild hybrids out there for us to go after with their 800 volt, 400 volt battery technology. And what we're seeing at the moment, it's actually quite interesting is that we have powertrain solutions in order to 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, the 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 volt, 48 volt starts to take hold in some of these electromechanical applications. So 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 and like the active suspension for example, is two to four modules per vehicle. So so we were encouraged about the continued progress in automotive and the the application spread is actually increasing for us.
Jon Tanwanteng
Understood. Thank you. And then secondly, I just wanted to go back to the the issues with the would be IBM and the IPSUI. search, your intellectual property there is there a risk that it deters, you are potential customers for from pursuing designs or are closing deals on fifth generation VPT. technology? Or do you view them as on mostly ring-fence tier. And I'm just thinking that maybe if you're pursuing this path and the demand is out there for all these aircraft as maybe the customers might settle for something that's less than perfect just to meet the demand that they see.
Patrizio Vinciarelli
So I guess I would the way we view this is that in terms of are encouraging of discouraging MAOEM.s. He's doing business with us on the I would expect that the OEMs make these decisions based on their consider interest rate, which involves our access to competitive technology goes is to say if they are foreclosed from 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 our enabling power system technology, our this VPD.s, particularly second gen VPD. or high current density solutions. Our customers come to us because they realize we have those capabilities which are of the commodity impact a multi-phase. It does not have now the enforcement of the AP is essentially a year 18 is to be expected we can't have a market in which we ask for your larger OEMs. You know, I wish to commoditize it proprietary products covered by allowing the ration and patents as is the case for the NBM in other unique Vicor capabilities. So we need to make the investment necessary in now are getting the effect of the intellectual property it deserves. And our first action in this regard is an action of the International Trade Commission or now Amol then OffHighway to that process. So we are going to be our trial at the end of April and thus far, we're winning on just about every our key decisions has 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.
Jon Tanwanteng
Got it. When do you expect the final decisions to be made there? And what are the what are you expecting the labor cost to be just on a run-rate basis what as we get there.
Patrizio Vinciarelli
So the LJ will render his decision by, I think, to the very beginning of October, the trial is at the end of April, beginning of May. Charlie brought some time in Washington, D.C., good time to be wash.
Got it. And the costs, so the legal expenses associated with that?
Patrizio Vinciarelli
It's significant, but not nearly as significant. A significant performance fee goes on of how we structured our deal with them, our law firms that work with us as partners. So we have a common goal, a common set of interests.
Jon Tanwanteng
Got it. Okay. Thank you.
Operator
John Gillam.
I guess thanks for the follow up on your cash keeps increasing even after investing in building a new factory. Wondering are you saving the cash for building a multiplicity of chip fabs or are you considering stock buybacks that fair, certainly more fabs or a stock buyback is?
Patrizio Vinciarelli
Yeah. Sorry -- I'm saying without the center of what you said, but you regarding them regarding them well, perhaps we first set to shield the existing run rate and the existing one of which we have represented to have a capability of nearly EUR1 billion based on some of the advances we made with our 5G technology and is now expected to be able to support considerably more debt the level of yearly revenues. So we got a while to go before having to invest the second fab.
What about stock buybacks?
Patrizio Vinciarelli
Well, a lot of progress on a variety of opportunities at this point in time. And frankly, that's not been on my radar screen. But in May, you be together regulatory Elestrin. And if and when that happens, we'll all find out two ways out. That's when we do business with that includes Ashford, Inc.
Yes, yes. So what are we using your cash hoard for?
Philip Davies
I think at this point, it is the case, John. It on very favorable thing that occurred in last couple of quarters, couple of quarters of greater than 20 million per quarter of operating cash flow. So there is that there is a sense now that with royalties and other yes, parts of the P & L and the factory internalized no more spend outside that we can be pretty efficient and very efficient in science and generating cash. So but let's let the cash pile grow that and then we'll decide, as Patricio said, you look at it.
Yes. So needless to say, we are clearly in the early stage of IP campaign we want to be in a very strong financial position, right? And they are the same crossover is not with respect to being able to invest in the campaign to the extent the necessity for as long as it takes to achieve the goals. And that's our top priority is the best most important strategically.
Patrizio Vinciarelli
Right. Going back to your question, let's say we could buy back five or 10% of our float of that opportunity, roughly speaking pales relative to the opportunity to double the value or do more than that by succeeding after the St. James admission, and that's our focus.
It is up. And Phil, can you just give us a brief update on new design wins there?
Philip Davies
It's system. Sorry, John.
Patrizio Vinciarelli
I couldn't make the question again, look very, very hard speak louder or rough.
Yes. I mean, can you just give us an update on the design wins?
Philip Davies
I put up the runway, although as I mentioned in my remarks, John, where the pipeline is continuing to grow. I mean, we're 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. And so the pipeline is growing. We've got a very healthy growing pipeline.
Patrizio Vinciarelli
And I'm quite confident in in all four business units achieving their goals over the next three to four years by 2027 it's important to note, this is diversified model rate were not even though there's been a lot of talk of ours, particularly from the investors community on non RAI. for obvious reasons they're center opportunities is 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 the opportunity, aerospace and defense industrial market. Our products evolve that a trace for those applications in those end markets. And those in their own right represents the opportunity for us. And if you see here shows the business model is obviously key to the overall strategy in terms of market penetration.
Yes. Great. Thank you, gentlemen. Appreciate it.
Operator
The next question is coming from attendees who joined always-on. So I will ask him to know, but I would like to ask you to introduce yourself before you take a question.
Hello?
Operator
Yes, we can hear you.
James Schmidt
You might want to go to the next questions, operator?
Operator
Sure. The next questioner also joined over the phone. So we don't want you to know. And as I asked earlier, please introduce yourself before you ask a question. Please go ahead.
James Schmidt
Okay, hi. This is Dan McKenna.
Hi, Dan.
Patrizio Vinciarelli
Please go ahead.
James Schmidt
I can can you guys hear me?
Patrizio Vinciarelli
Yes, very well.
Yes.
Okay.
James Schmidt
Then I was following up on John Dylan'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.
Patrizio Vinciarelli
How they're running compared to last quarter and again, in 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. So we want to be very honest in effect sharing what we categorize as challenges and opportunities of the arm en masse could lead to a variety of outcomes, say, given that setting a 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 Sandy who also joined over the phone floor is, I mean, what you know now please introduce yourself before your question?
James Schmidt
Hello?
You muted?
James Schmidt
No, yes, because we do have close, yes, we can hear you loud go.
Patrizio Vinciarelli
Hello.
James Schmidt
This is moving and General Motors announced that they're building a big plant and domestically for EVs, do you expect that you'll be selling your products to GM for this?
Philip Davies
So we are not again, not talking about any specific customers. But we have some 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 and for them to really start collaborations with us and and to then bring in Tier ones. And as our strategy for 2024 evolves. We're starting to work with more Tier ones on those types of collaboration. So 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 and moving forward with our automotive strategy. But it's good to see the GM investment that really is good to see.
Thank you.
Patrizio Vinciarelli
If there is one more question before we close, right.
And the last questioner also joined over the phone. So I will only to now please introduce yourself before you take a question, please go ahead. Your line is only now, Jeremy.
James Schmidt
Yes, you can hear me?
Yes.
Patrizio Vinciarelli
Okay, great.
James Schmidt
This is Richard Shannon with Craig Hallum.
Patrizio Vinciarelli
I'm not sure what's wrong with this the service. But I've been trying to get on for 45 minutes for a moment, I guess.
Great.
I'm sorry.
Patrizio Vinciarelli
I guess maybe kind of a multi-part or as we look at your 5G technology, I think in your last call, you talked about why and deliver models and tools sometime this quarter. I think I got it early enough to hear the prepared remarks.
I didn't hear anything regarding that.
James Schmidt
Does 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.
Patrizio Vinciarelli
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 high quality and low lead times?
So customers come to visit the facility. I kicked the tires as it were in Jan speaking. They've been very impressed. We have done, as an example, a couple of weeks ago on the Meteor rations for Ron Arm A., it's a company with a very unique product in the realm of our AI capabilities. And Dom, you commented this is a factory that you never seen anything like that in terms of your capabilities set of the art facilities. So the the customer visits and customers being exposed to the equipment, the processes, the systems, the our team has put in place. This speaks volumes to the scalability, the methodology of making panels of chips as if they were wafers of semiconductor devices on.
Regarding 5G, we are engage with some lead customers, including what I was referencing a moment ago. And another notable one of that come to mind this particularly keen on our technology. And we have a schedule that allows us to deliver them functional samples. Our tools are and Dom is d.e.m.o. 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 20 top25 line that is not in terms of contribution to revenue in any meaningful way in 2024, that 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 him or was either B2C or Phil on the last call here about expecting a dominant share of AI power systems.
James Schmidt
I think referring to the with 5G and over over a period of time, I just wanted to see, given the step-down in revenues that people might have might have concerned, people wanted you to reiterate, if you still believe that to be the case, reiterate that that's what you think is going to happen?
Patrizio Vinciarelli
It is and it's not a it's not a dream. It's a vision that is rooted in our numbers, the 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 of data center, AI and customers need. And with respect to which they are really today severely handicapped the multiphase approach, particularly with DVD, but even without the Bizzy is very, very challenged and it's been now are the de facto standard now for obvious reasons because it is multi-sourcing. Historically it has done is scalability only sewn to the ecosystem of a large multiplicity of suppliers around the globe, but technically is very severely. And the gap is that visibility that they have, which again comes down to numbers are like amps per square millimeter and other attributes are the ability to provide EBITDA solution in 1.5 meter me the team from Alteva debt. I'll line up with what the our AI processes of 40 car. We're losing applications with the 24,000 requirements. In other cases, we're looking at web scale applications at the 50,000 amp level. You can't do that with the multi-phase, you can only do it with some enabling technology. And that's what we're set to enable directly with our ROM fab and to some degree, indirectly through our licensee model. Appreciate those particular. That's all for me.
James Schmidt
Thank you. And then with that, we'll have to wrap it up. So operator, if you could close the call.
Patrizio Vinciarelli
Thank you.
Sure.
Operator
Thank you everyone, and that marks the end of your open up for joining and have a nice day.
