Vicor Corporation (NASDAQ:VICR) Q4 2023 Earnings Call Transcript
Vicor Corporation (NASDAQ:VICR) Q4 2023 Earnings Call Transcript February 22, 2024
Vicor Corporation misses on earnings expectations. Reported EPS is $0.19 EPS, expectations were $0.32. Vicor Corporation isn’t one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here).
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'll be your operator for today. I would like to advise all parties this conference is being recorded. And now I would like to hand it over to Jim Schmidt, Chief Financial Officer. Please go ahead.
Jim Schmidt: Thank you. Good afternoon and welcome to Vicor Corporation's earnings call for the fourth quarter and year-ended December 31, 2023. I'm Jim Schmidt, Chief Financial Officer and I'm in Andover with Patrizio Vinciarelli, Chief Executive Officer; and Phil Davies, Vice President, Global Sales and Marketing. After the markets closed today, we issued a press release summarizing our financial results for the three months and year-ending December 31. This press release has been posted on the Investor Relations page of our website, www.vicorpower.com. We also filed a Form 8-K today relating to the issuance of this press release. I 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 risk 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 and/or implied by any of our remarks today. 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 28, 2023. This document is available via the EDGAR system on the SEC's website. Please note the information provided during this conference call, is accurate only as of today, Thursday, February 22, 2024. Vicor undertakes no obligation to update any statements, including forward-looking statements, made during this call, and you should not rely upon such statements after the conclusion of this call. A webcast replay of today's call will be available shortly on the Investor Relations page of our website. I'll now turn to a review of our Q4 and full year financial performance, after which Phil will review recent market developments, and Patrizio, Phil, and I will take your questions.
In my remarks, I will focus mostly on the sequential quarterly change for P&L and balance sheet items, as well as full year-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 $107.8 million, and down 12.2% from the fourth quarter, $22 total of $105.5 million. Revenues for the year ended December 31, 2023, increased 1.5% to $405.1 million, from $399.1 million for the prior year. Advanced product revenue declined 20.1% sequentially, while brick product revenue declined 7% from the third quarter. Revenues for advanced products for the year ending 2023 decreased 8% to $223.9 million, from $243.3 million the year before.
Revenues for brick products for the year ending 2023 increased 16.3% to $181.2 million, from $155.8 million the year before. Shipments to stocking distributors decreased 23.5% sequentially, but increased 46.9% year-over-year. Exports for the fourth quarter decreased sequentially, as a percentage of total revenue to approximately 56.5% from the prior quarter's 62.8%. On a year-over-year basis, exports decreased as a percentage of total revenue, to approximately 63.1% from the prior year's 67.6%. For Q4, advanced product share of total revenue, decreased to 50.4%, compared to 54.2% for the third quarter, with Brick product 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 supply chain costs, and lower freight and tariff costs. I'll now turn to Q4 operating expenses. Total operating expense, including litigation expenses, decreased 0.4% from the third quarter. For the full year 2023, total operating expense as a percent of revenue decreased to 37.9%, from 38.4% in the prior year. The amounts of total equity-based compensation expense for Q4 included in cost of goods, SG&A, and R&D was $680,000, $1,895,000, and $1,007,000, respectively, totaling approximately $3.6 million.
For Q4, we recorded operating income of $7.3 million, representing an operating margin of 7.9%. For the full year 2023, operating income totaled $51.4 million, or 12.7% of revenue, compared to $27.2 million, or 6.8% of revenue in the prior year. Turning to income taxes, we recorded a tax provision for Q4, of approximately $1.9 million, representing an effective tax rate for the quarter of 18.2%. The tax provision for the full year 2023 was approximately $6.6 million, representing an effective tax rate for the year of 11%. Net income for Q4 totaled $8.7 million. GAAP diluted earnings per share was $0.19, based on a fully diluted share count of $45,017,000. For the full year 2023, net income increased to $53.6 million, from $25.5 million in the prior year.
In 2023, fully diluted earnings per share rose from the prior year, increasing to $1.19 from $0.57. Turning to our cash flow and balance sheet, cash and cash equivalents totaled $242.2 million at Q4. Accounts receivable net of reserves totaled $52.6 million at quarter end. With DSOs for trade receivables at 40 days, inventory's net of reserves increased 1.9% sequentially to $106.6 million. Annualized inventory returns were approximately flat sequentially at 1.92. Operating cash flow totaled approximately $22.1 million for the quarter. Capital expenditures for Q4 totaled $7.7 million. We ended the quarter with a construction and progress balance primarily for manufacturing equipment of approximately $17.7 million, with approximately $17.3 million remaining to be spent.
It's worth noting that in Q4, we accrued approximately $13 million as an investment tax credit related to the CHIPS Act for equipment installed in our vertically integrated ChiP fab. I'll now address bookings and backlog. Q4 book-to-bill while improving sequentially, came in below 1 and with one-year backlog decreasing 8% from the prior quarter, closing at $160.8 million. Turning to the first quarter and the full year, 2024 is a year of uncertainty and opportunity. As of today, the year's outcome in terms of top line and bottom line is subject to a relatively wide range of scenarios. Given 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 yourself to one question and a related follow-up so that 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?
Phil Davies: Thank you, Jim. As Jim covered in his update, our book-to-bill ratio was still below one in Q4, mainly due to low booking levels in our HPC business and the Automatic Test Equipment segment of our industrial business. In HPC, Q4 bookings were lower than expected as we turned down deals inconsistent with our long-term OEM licensing strategy. The license gives OEMs access to alternate sources of supply for products covered by Vicor IP from otherwise infringing suppliers, enabling current and future-gen AI processors to achieve higher performance. The OEM license provides access to game-changing technology from a single-source innovator through multi-source supply chains. The OEM license avoids the risk of exclusion orders and the OEM license respects the IP of American innovators and manufacturers.
In anticipation of market needs, Vicor was the first to develop key technologies, control systems, topologies, components, and packaging for 48-volt high-current processor power delivery networks. Those market needs are clearly with us now in the advent of gen AI, machine learning, 48-volt rack power systems, and vertical power delivery. As evidenced by progress already made in forcing are IPs to NBMs, 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 processors. Additional customer engagements in Q4 confirm that gen AI and network processor platforms, will require significantly higher current density and vertical power delivery.
Our investment in the world's first chip foundry and our 5G product line once again anticipated these future AI power system requirements, uniquely positioning us to expand our share of the AI power system market. We are getting ready to deliver evaluation systems, models, tools, and samples to lead AI processor customers. On other market and customer fronts, our new product and applications pipeline continues to grow, creating both near-term and future demand, to fill our vertically integrated foundry. In our automotive business, collaborations that were initiated with OEMs in 2021 have started to move into production with low-volume platforms as we ramp our automotive qualification, manufacturing, and OEM relationships through early learning cycles.
Momentum is picking up in both the mild hybrid and BEV market for Vicor's technology in response to the 48-volt Zono architecture first conceived and patented by Vicor and recently promoted by Tesla. Collaborations with larger OEMs on higher-volume platforms are gaining momentum with visibility to production dates in coming years. We will be participating at WCX in Detroit once again this year, with four technology papers that will showcase our technology and power system value propositions for 800-volt and 48-volt power modules. In our other business units, we continue to see stronger demand in our broad industrial, aerospace, and defense markets for both large OEMs, and smaller customers who purchase through our channel partners. Customer visits from our top 100 accounts have also continued to view and audit, our new ChiP fab as we now ramp production of advanced products.
Thank you, and with that, we will now take your questions.
See also 16 Best Dog Breeds For First Time Owners and 20 States Where Tax Filers Are Paying the Highest Percentage of Their Income.
To continue reading the Q&A session, please click here.
