Vicor Corporation

Ladies and gentlemen, thank you for standing by. Welcome to the fourth quarter 2024 Viacor earnings conference call. I would now like to turn the conference over to Jim Schmidt, Chief Financial Officer. Sir, please go ahead.

Thank you. Good afternoon and welcome to Viacor Corporation's earnings call for the fourth quarter and year ended December 31, 2024. I'm Jim Schmidt, Chief Financial Officer, and I'm an Andover with Patrizio Vincerelli, 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, .vicorpower.com. We also filed a form 8K today related to the issue of the importance of this press release. I remind listeners this conference call is being recorded and is copyrighted property of Viacor Corporation. I also remind you various remarks we make during this call may constitute forward looking statements for purposes of the safe harbor provisions under the Private Securities Litigation Reform Act of 1995. Except for historical information contained in this call, the matters discussed on this call, including any statements regarding current and planned products, current and potential customers, potential market opportunities, expected events and announcements, and our capacity expansion, as well as management's expectations for sales growth, spending and profitability are forward looking statements involving risk and uncertainties. In light of these risks and uncertainties, we can offer no assurance that any forward looking statement will in fact prove to be correct. Actual results may differ materially from those explicitly set forth in or implied by any of our remarks today. The risk and uncertainties we faced are discussed in item 1A of our 2023 form 10K, which we filed with the SEC on February 28th, 2024. 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 20th, 2025. VYQOR 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 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 or our upcoming form 10K for additional information. As stated in today's press release, VYQOR recorded total revenue for the fourth quarter of $96.2 million, up .2% from the third quarter total of 93.2 million and up .8% from the fourth quarter of 2023 total of 92.7 million. Revenues for the year ended December 31, 2024 decreased .4% to 359.1 million from 405.1 million for the prior year. Advanced product revenue increased 18% sequentially while brick product revenue declined 13% from the third quarter. Revenues for advanced products for the year ending 2024 decreased .9% to 197.3 million from 223.9 million the year before. Revenues for brick products for the year ending 2024 decreased .7% to 161.7 million from 181.2 million the year before. Shipments to stocking distributors decreased 4% sequentially but increased .6% year over year. Exports for the fourth quarter increased sequentially as a percentage of total revenue to approximately .9% from the prior quarter's 49%. On a year over year basis, exports decreased as a percentage of total revenue to approximately .2% from the prior year's 63.1%. For Q4, advanced product share of total revenue increased to .6% compared to 53% for the third quarter with brick product share correspondingly decreasing to .4% of revenue. Turning to gross margin, we recorded a consolidated gross profit margin of 52.4%, approximately .3% more than the prior quarter. For the full year 2024, gross margin rose by .7% to .2% from .6% in the prior year. The year on year increase in gross margin percentage was primarily due to increased royalty income and reductions in supply chain costs. I'll now turn to Q4 operating expenses. Total operating expense including litigation expenses increased 2% from the third quarter. For the full year 2024, total operating expense as a percent of revenue increased to .6% from .9% 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 858,000, ,106,000, and ,093,000 respectively, totaling approximately 4.1 million. For Q4, we recorded operating income of 9.2 million, representing an operating margin of 9.6%. For the full year 2024, operating loss totaled 1.3 million or negative .4% of revenue, compared to operating income of 51.4 million or .7% of revenue in the prior year. Turning to income taxes, we recorded a tax provision for Q4 of approximately 1.5 million, representing an effective tax rate for the quarter of 12.9%. The tax provision for the full year 2024 was approximately 4.3 million, representing an effective tax rate for the year of 41.5%. Net income for Q4 totaled 10.2 million. Gap diluted earnings per share was 23 cents, based on a fully diluted share count of ,296,000 shares. For the full year 2024, net income decreased to 6.1 million, from 53.6 million in the prior year. In 2024, fully diluted earnings per share decreased to 14 cents from $1.19 in the prior year. Turning to our cash flow and balance sheet, cash and cash equivalents totaled 277.3 million in Q4, accounts receivable net of reserves totaled 52.9 million at quarter end, with DSOs for trade receivables at 39 days. Inventories net of reserves increased .3% sequentially to 106 million. Annualized inventory turns were approximately flat at 1.65. Operating cash flow totaled approximately 10.1 million for the quarter. Capital expender cheers for Q4 totaled 1.7 million. We ended the quarter with a construction and progress balance primarily for manufacturing equipment of approximately 8.2 million, and with approximately 4.9 million remaining to be spent. I'll now address bookings and backlog. Q4 booked a bill, improving sequentially, came in above one and with one year backlog increasing .3% from the prior quarter, closing at 155.5 million. Turning to the first quarter in the full year, 2025 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 yourselves to one question and a related follow-up so that we can respond to as many of you as we have the time available. If you have more than one topic to address, please get back in the queue. Phil?

Thank you, Jim. When we entered 2024, we talked about the year in terms of challenges and opportunities. As we enter a new fiscal year, a number of challenges have been overcome, and we now see 2025 in terms of opportunities. The two main challenges we faced in 2024 were refining processes and scaling up capacity in our chip fab and protecting our intellectual property. We are pleased with the successful ramp of our new vertically integrated chip factory, which is now achieving the short cycle times and high-yield goals that we set, enabling a more efficient operation and improving our customer responsiveness and key performance measures. 2025 will see further progress as we build out our top 100 customer operational excellence program, leveraging the new factory. The recent final determination by the ITC in our first NBM patent infringement case has resulted in exclusion and cease and desist orders banning the importation of infringing power modules and unlicensed computer systems infringing two VICO patents. Affected companies are taking notice of the risk of computing hardware being stranded because of infringing NBMs, and a hyperscaler has recently taken a license to VICO's NBM IP. While our first ITC action achieved most of its goals, foreign power module makers, certain contract manufacturers, and some of their US customers are still playing a game of catch me if you can, which we will, by pursuing monetary damages and by seeking additional exclusion orders, enforcing relevant patents in our comprehensive IP portfolio. Turning to our fourth quarter, our book to bill ratio rose above one in Q4, and with our new licensee booking its future NBM requirements in January, our high performance computing business is beginning to strengthen. On the new product front, we are laser focused on delivering our ultra high density, high bandwidth Gen5 VPD system to a lead customer and to leading AI and network processor companies and hyperscalers. As Patricio commented in our press release today, perfecting our second generation VPD has taken longer than expected, with the fab out of a new ASIC raising the bar on the density and bandwidth of our current multipliers for customers who need current densities up to five amps per millimeter squared. Our industrial and broad business remains strong with bookings from top 100 customers and strength with channel partners globally. Our ATE customers are continuing to see strong growth, servicing the processor, ASIC and memory testing needs for AI markets. A new family of factorized power chips will be sampled to these major ATE customers in Q2, further strengthening our position as a leading modular power system provider. Our aerospace and defense business maintained a double digit growth trajectory that began three years ago with our top 100 accounts. Power system standardization with rack based power supplies offers further growth opportunities to Vico for both power modules and for complete systems designed and manufactured by our subsidiaries. Opportunities in the satellite market for our factorized power radiation tolerant modules are significant and we are well positioned should favorable program award decisions occur in the second half of 2025. We closed out 2024 with continued global pipeline expansion for our automotive business and we're now shipping into production programs. Our focus for 2025 is to bring the many OEM and tier one collaborations to a design win status, setting us up for continued growth in this new business through 2027. So in closing, we are in a stronger position at the start of this year than at this time last year. No doubt there's still challenges to be overcome but we have the determination, the staying power and the bench strength with our superior power system technology, our new chip fab and our global team to achieve our North Star financial goals of $1 billion in revenues, 65% gross margins. 2025 will be another exciting year. Thank you. So with that, we'll now take your questions.

Thank you. To ask a question, please press star one one on your telephone and wait for your name to be announced. To withdraw your question, please press star one one again. And our first question will come from John Tanwating with CJS Securities, your line is now open.

Good afternoon, thank you for taking my questions and nice quarter. I was first wondering if you could talk a little bit more about the delay you mentioned or taking longer than you expect in the VPT products. Is there a change in your expectation for when that product will ship in volume? And if so, what, when do you think that that window might be?

So it turns out we needed to complete an ESIC in order to achieve the performance goals and in particular, current capability, efficiency, that we think are key to major penetration with our 5G product line, in particular with second generation of VPD. That ESIC is coming out of fab before the end of February, in the next 10 days. And we expect to be able to in the month of March, take final steps with respect to being in a position to provide complete high performance solution for our lead customer. And at the same time, have the most section capabilities to full performance for a broader set of customers. So it's fagging longer than expected. To set it in relative perspective, I view this as a once in a lifetime development in terms of its significance for AI and AI and computing. And the extra time necessary to achieve the level of performance we targeted, we think is worth it. In terms of our lead customer, we are very focused on being able to support their ramping needs in the second half of this year. We think we're going to be able to accomplish that.

Got it, thank you, Pashiju. Can I ask a question for your lead customer? Do they have a dual source strategy on this product where maybe on one side they use your VPD and on the other they use a traditional multiphase, maybe for a different type of SKU, but with the same silicon?

So our lead customer is Eli Donass with respect to their exciting production requirements on our new generation products. And I believe they're relying on us for the foreseeable future. The level of performance they require is not achievable by any competitive alternative. The nature of the solution is highly proprietary, very extensively covered by our IP portfolio. So we are on a self-contained in terms of long-term collaboration with this lead customer.

Got it, thank you. I'll jump back in queue. Thank you.

And our next question will come from Nicholas Doyle with Needham, your line is open.

Hey you guys, this is actually Quinn from Needham. Just wanted to ask Patricio and Phil, congratulations on your second licensee to the patent portfolio. Wondering if you could at all give us some sense how that might impact your future royalty revenue. I know in the third quarter of last year you generated over 13 million in royalty income. Does this meaningfully increase the royalty revenue going forward or would you expect your first licensee to continue to represent a majority of, sorry, royalty income going forward and then I have a follow-up?

So all that I can tell you is that it's a significant license, but we are constrained in terms of not being a liberty disclose for obvious reasons. Any information relating to what it would mean for us is what it means for the licensee. We obviously value our licensee relationships and want to be, want to honor commitments with respect to maintaining the national relationship highly confidential. So I can't tell you anything beyond the fact that it's an hyperscaler and it's a significant license.

Understood the sensitivity. I appreciate it. Thank you for sharing what you can. Patricia, it sounds like you also may have secured NBM product orders from this hyperscaler. I believe in the script Phil mentioned that you received orders from this hyperscaler for NBM product in the January quarter. Can you give us any sense how meaningful those NBMs orders are? I know in this press release, you talked about margins going forward would depend on your ability to fill the new ChipFab. And I'm curious if the orders for NBMs are meaningful and could start you on your way to increase the capacity utilization at the ChipFab. Thank you.

So in general, the answer is yes. A common feature of standard licensing methodology is incentives for licensees to do business with us as a module provider. Needless to say with a fab, we have a very unique highly proprietary capability that is getting more and more leverage with advances including our 5G capability. So all of this goes in a common denominator type of direction in terms of engaging with licensees both as a licensor of critical intellectual property and as a supplier for major programs that enable the licensee to achieve levels of performance they can't realize otherwise. And all of this will lead to our first fab getting filled. It is not going to happen overnight. It takes time. There is obviously just fashion period associated with all of this. There is no sudden change. So I urge us all to be realistic with respect to the time scale and expectations. But we do see our first fab with a billion dollar per year in round numbers capacity get in field before too long.

Thank you, Mr. Chair.

And our next question will come from Richard Shannon with Craig Hallam Capital. Your line is now open.

Well, Craig, thanks for taking my question as well. Let me ask a kind of top down question here. Jim's prepared remarks you talked about as you have recently about this year being one of uncertainty and opportunity. And then you also described some of the dynamics here between your AI slides, HPC opportunities and other markets. So I guess my question here is trying to get a sense of the degree to which these uncertainties are related mostly related to HPC versus other markets. Is there a heavy influence or kind of a balance between those? Just want to get a sense here given some of the remarks about non HPC markets. Thank you.

I think the uncertainties and opportunities for this year revolve primarily around AI and AI and computing. I think with respect to other markets, I think there is a high degree of predictability. Phil, do you want to?

Yeah, no, I totally agree. Yeah, I mean, our automotive business is a fledgling business, so it is just full of opportunity there. And as I talked about, our goal is conversion of the pipeline. Industrial and defense and aerospace, they're going from strength to strength. And as I've mentioned before, our goal is to double those businesses and we're in good shape to do that. So it's about HPC and lots of opportunity there.

That's a market that we had a big reset couple of years ago, we're rebuilding it. And I think we're rebuilding it from a position of strength, not just from the IP perspective, but before too long, in terms of enabling solutions that cannot otherwise be realized. With our own hardware made in our fab.

Okay, I appreciate that detail. My second question is related to your second gen BPD products here. I guess this is a two-parter, I guess it wasn't clear to me whether this ASIC respin that you talked about is specific to the leading customer or applied to the broader portfolio across the AI space here, if you can confirm that. And then maybe just talk about the pipeline here for the next set of customers, when you expect to sample and get some understanding of design wins. Is it gonna happen this year, first half, second half, or just some kind of detail how that's progressing? Thank you.

So the new ASIC is generally applicable to all of the current multipliers that fundamentally enable the five per square millimeter capability of 5G and its BPD implementation. And it's something that we add in the pipeline from a next development perspective that we needed to prioritize and accelerate delivery of, in order to address some issues that we encountered in completing development of the current multipliers. So we are very close to adding the device and looking forward to completing the development. And I'm reading this chapter. I must say this one building block of a very comprehensive set of modules that perform in combination all of the essential functions of a very high performance factorized power system. Everything has gone very well with respect to other building blocks, the current multiplier from a control perspective, as an issue that we need to address.

And our next question comes from John Dillon with DMV Capital. Your line is open.

Hi guys. Congratulations on a good quarter and a nice book to bill. Really good to see. Betruth, at the fireside chat, Quinn asked you if you had everything you need for a GPU manufacturer who is having heat problems. I think your answer was you think you do. And what I'm wondering is, has that customer gotten insight into your second gen VPD and the new factory and what is their reaction?

I'm afraid this is a little bit too customer specific. I think without naming names, you know, it would be, clear who the customer is. And so I'm going to refrain from answering your questions, but I will answer the question in more general terms. I think across all the customers and potential customers in AI and high-end computing, I believe with second generation VPD and our 5G chipset, we have what it takes to address outstanding needs, challenges that all of these customers face with respect to inability to deliver the current that their ethics would want to be able to consume. Thermal management issues, noise issues, a long list of issues that conventional technology is saddled with and a factorized power system with the, it's not to convert the current multiplier, addresses much more effectively. So no comments with respect to any one, present customer, former customer, future customer will stick to a general practice of avoiding getting into those details. But again, they are confident on my part with respect to are getting traction across the range of customers in that space with the capability of 5G.

Okay, can I ask the question a little more generally then? Are all the major GPU customers aware of your new second gen technology and have they seen your new factory and are they satisfied with what you're doing?

Not all of them. And as implied by earlier comments, we've been keeping our product right for two reasons. One, to make sure that we devote all the support necessary to our lead customer, but also to make sure that when we spread out to service other applications and other customers that we have completed all that we need to have in place for that scale up to be very predictable and very efficient. Phil, do you wanna add anything to that?

No, I think the only thing I would add would be that, John, we have very clear line of sight to the target chip companies, whether it's AI GPU or network processor companies or hyperscalers that have programs in development. So we know when those programs are starting, what their specs are, we've got a very good picture, view of the market. So as Petriccio said, we're focused on our lead customer and then we'll have the demo systems go out to a set of target follow on customers and I expect going from the evaluation to the design win will be fairly quick with some of them and a little bit longer for others, but it depends on the new chip schedules. So it'll be a mix.

Okay, that makes a lot of sense and I really appreciate you guys giving us those details. I'll get back in the queue. Thank you so much.

Thank you.

And our next question will come from Don McKenna with DB McKenna & Company. Your line's open.

Hey, Petriccio, again, congratulations. During the Needham Conference, you indicated that you expected 25 to be a record year and looking back at, you know, earnings in previous years, the high point was 126, a share in 21. Is that what you were referring to as the earnings that you expected to be the record?

I expected this year under reasonable scenarios would be a record year for revenues and profitability. Great, thank

you very much.

And our next question will come from John Tanwen Ting with CJS Securities. Your line is open.

I just wanted to follow up on the licensing portion. You mentioned you signed a significant hyperscaler. How many more of those entities are out there of size, number one, you know, that are negotiating good faith with you and contact with you? And how many are there out there that maybe, you know, are trying to avoid you and that you may have to hunt down and litigate against? And if, you know, if there are a significant amount in the second part, what's the cost going to be to do that?

Phil has been getting funk-holed, so you wanna add? Well, the ICC action is certainly smoking out the people who are hiding, that's for sure. So I think that, yeah, I'm getting contacted now by other companies wanting to talk about licensing. So that's a good thing and that's what the ICC action was meant to do. I think one of the key things here is that I think when people think about this, they might think about it as adversarial, but my goal is not to have an adversarial relationship with our licensees. Patrice talked about there's a big incentive to buy modules from VyCore, not just because it helps you with the license royalty, but because it's amazing technology and it enables new performance levels that you haven't been able to achieve before. So I'm, as I said earlier, I think 2025 is gonna be a very exciting year.

And to double up on that, clearly these customers or potential customers, other parties that have been using buying infringing modules, they are not in effect directly responsible for things that happened without their understanding. And because of that, we owe them respect with respect to ensuring that they're dealt with fairly in the aftermath of an exclusion order. The cause of the issues rests with infringing parties. They are the ones that are responsible for creating these kinds of issues and hopefully they will learn from this experience not to make the same kinds of mistakes in the future and if they do, there's going to be unfortunately more of these kinds of experiences coming that way and coming the way of their customers and their customers before too long will come to the conclusion that they can't really rely on suppliers that copy innovative products of an American innovator that are well protected by intellectual property to avoid that property being infringed.

Got it, that's very helpful. I was wondering if you could also update us on if there's any viable workarounds that you've seen or heard about from the infringers if they're trying to get around the pack.

Let me be categoric with respect to that. There is no NBN alternative that doesn't infringe vital patents. We have not played out all the patents, but there is no viable alternative known to me. Now, again, there are suppliers to the market that are going to customers telling them, we don't infringe Vigo IP, we know Vigo, you can buy from us without any concern, but the reality of it is that either they don't really understand their product and the IP that covers them or they're misleading their customers and they should know by now that that's not a long term win-win strategy for their relationship with their customers.

Got it, thank you.

And the next question comes from Patrick Connors with AJAX Capital, your line's open.

Hi guys, really good quarter, really happy for you, nice book to bill, but I think most importantly, so far it looks like a successful defense of your IP, which I know has been very important to you. In that context, can you describe the, I understand that your defendant have to post the bond, can you describe the mechanics of the bond, what's the purpose of the bond, the size of the bonds, et cetera, can you walk me through those mechanics please?

Yeah, so in general terms, following the final determination, the IPC case is closed, it undergoes a mandatory 60 days presidential review period, the acronym which is for the most part a foregone conclusion, there have been few instances in which there's been a presidential veto of an exclusion order, so we should all expect the exclusion order will go into effect 60 days from the final determination. At that point in time, infringing products cannot be imported into the US, but up to the expiration of the presidential review period, there is in effect a 60 day grace period within which, to your point, the respondents, their customers, can import infringing products in the US if they post a bond, now the bond in this particular investigation for computing systems was set at 100% of the value of the computing system, so in the case of computing system, it would be a lot of money to post a bond and that bond would not be recoverable.

So who posts the bond, is it the customer or is it the vendor?

Well, I cannot help you with respect to that, but fundamentally, customs will not allow the importation of infringing product for which there is no bond, through the 60 day presidential review period, but at the end of that, they will simply not allow the importation of infringing product.

Can I make the analogy to a bail bond whereby it goes in forfeiture if they infringe upon your IP?

Yes, and in fact, the complainant can't actually recover the bond because we are in effect the affected party.

Wait, you just said ViCore can recover the bond?

We could if bonds get posted. Now, we have no way of knowing what is going to happen, so needless to say, we are, today is one week from the file that they've been in action and there's still a good deal of uncertainty with respect to what is actually going to happen.

Okay, that's extremely helpful. Congratulations, thank you. I'll jump back in the queue.

And the next question comes from Richard Shannon with Craig Hollam Capital. Your line's open.

Well, thanks, Kassia. Let me ask a follow-up here. And this is kind of taking two different comments during the call here. Phil's prepared to, Mark, talk about the ramp of the chip factory with getting short cycle times that you've been envisioning all along here, as well as high yields. And then a response to a later question here, you talk about devoting all your support to a lead customer, making sure you've got everything in place to scale out to be predictable and efficient. So I guess my question here is, to what degree has a chip fab been exercised at high volumes and utilization? Can you describe or quantify the level of utilization today? And then what do you mean by getting ready to be able to scale up predictably and efficiently?

Yeah, so a part of your question has to do with capacity and factory utilization, in effect, working out the inevitable glitches as you bring up something as new as the first chip fab. The second part is really to do with, you know, the novelty of a new generation of products. So that has to do with other factors of play. Let me address the first part of the question first. So as implied by Jim's opening remarks, pointing to the change in mix within the last quarter toward advanced products, you should assume that those advanced products, they're all made in our chip fab. So within the last year, and particularly getting into the fourth quarter, we've been scaling up its capacity. All of us review every Thursday morning a bar chart showing the progression of chips made with what we call 3DI, or three-dimensional interconnect, which are some of the core fab processes. And that bar chart has been stepping up at a nice pace, you know, in every period, segment, within the year. So good progress there. And again, to your point, it relates to related metrics, right? It's not just capacity. It's cycle time. It's heels. They all play together. You need them to support each other in accomplishing the overall goal. So we've been able to enjoy, we're able to make chips in a pinch if there is a very high priority in as little, -to-none, in as little as 10 days, which is a tiny little fraction of the time it used to take to complete the corresponding task two years ago. Very small fraction of the time. And with respect to devices that are in mass production in the new fab, we have file test yields of 96%. So those are measures of progress with respect to the capability of the processes implemented in the new fab. With respect to the second part of your question, predictability in the deployment of a new generation of products relates to having everything in place to enable solutions that can take on different forms in terms of current requirements, multiplicity of rails, in different customer applications. It's more than adding the core modules and core capability. It's having the complete understanding of how to adapt system solutions to a particular set of requirements, which would be different from customer to customer, application to application. And that's where we've been through a few other actions of our demo system capability. I think we are on the 10th round. And it's gotten to a level of maturity that, with respect to all the building blocks, will showcase the performance that we think will bring about a predictable adoption by customers other than our lead.

Okay. I appreciate all the detail there. Very interesting, Patricio. My following question here is related to kind of thinking towards the endpoint of your ITC case. Obviously, these patents were directed specifically at your NBM products here. And obviously, good to see a successful outcome here. I guess, wondering not only the conversations about licensing related to NBMs, but to what degree are these conversations having or intending by you to also involve your -of-load products as well? Thank you.

So, with different licensees, the focus is different. And so, we have in particular what we call an OEM license, which gives access to all our IT. The licensee decides what particular capabilities to license, but they encompass the entire portfolio. And that spans the gamut from the first stage of a two-stage -of-load solution or it could be a factorized power system or a -of-load device. Our first non-OEM licensee has an error license that is specific to NBMs. So, going forward, we expect to have a mix of different scenarios. But generally speaking, we favor OEMs getting full access for their alternate sources requirements, for their capacity requirements to, in effect, take risks out of the supply chain, which recent events and the score can otherwise be a serious issue. And to be clear, in regards to our first ITC case, I want to be clear about the fact that litigation is never a perfect process, right? It's full of uncertainties. People have to make critical decisions with some of our limited disability, and they need to do so with critical timelines and under a certain level of pressure. To be sure, we didn't get 100% of what we were looking for, but it's been successful. And as I look at it in terms of the overall strategy, it accomplishes its mission as the first demonstration of the risks inherent in foreign suppliers that have had a practice of just copying and taking their chances with respect to what might happen with the legal system. I think more the kind of lessons we have just had may be necessary to get the industry to respect IP as it should be for all that it's worth, right, in terms of fostering innovation, fostering investment in the advance of technology. It shouldn't be that a company does the heavy lifting and others copy what their company does. That's not the right solution to the industry needs.

Great. Thank you,

guys. And the next question comes from Nicholas Doyle with Needham. Your line is open.

Hey, guys. Just a couple of quick follow-ups. For the hyperscaler license, licensee Patricio, is that only pertinent to NBMs from Delta or other respondents, or does it cover any NBM module imported by that hyperscaler?

It is any NBM module from any source.

Perfect. And then maybe for Dan or Phil, I think you said the prepared scripts of advanced products were up 18% sequentially. Just wondering if you could give us a sense, what drove that strength? Was it mostly the industrial A&D segments? Did you see growth in AI or HPC customers? Just any color you could give would be appreciated. Thank you.

Yeah, Quinn, it was mostly HPC pickup, but also we saw growth in industrial advanced products and also aerospace and defense, but primarily HPC.

Thank you. And the next question comes from John Dillon with DMB Capital. Your line is open.

Hi, Patricio. Earlier you mentioned that the new factory should be filled pretty quickly. So I'm wondering, are you in the early stages of planning a new factory and what kind of timeframe? And will that be a ViCOR factory or a licensee factory?

Yeah, John, so I mentioned earlier that we should be realistic about the gestation time of all these developments, right? We're not going to be filling the factory this year, to be clear. So it would be premature at this point to go out on a limb with respect to the next factory. But I think it's fair to say that we understand what needs to be done there. We've done some planning with respect to what it would take. There are scenarios as we get into next year where there could be a need, depending on what happens in terms of adoption of second-generation VPD. And as you heard me say before, it is going to be a lot easier to build the next fab having accomplished completion of the first. So we're still very focused on the first, making sure that everything is as good as it should be with it. Again, continue to reduce cycle time, improve yields, getting it filled, which will take time. It won't happen this year. But the good news is that replicating and scaling up the capacity, assuming, as I do, that we're going to get great traction with our second-generation VPD and 5G product capability in general, which is, by the way, not limited to -to-load applications. It's not just for AI. It is also for industrial products. It's for automotive products. So the market opportunity there is quite broad. And with that broad market opportunity, there will be a need for more capacity and more fabs. And those may come about under different scenarios involving potential partnerships between Vigor and other partners.

Excellent. And thank you very much for that detail. And my other question, I'm not sure if I missed this or not, but did you mention, have you bought back any more of your stock in the fourth quarter?

A very small amount, John. The threshold wasn't – happily, the threshold wasn't hit often for the buyback to kick in.

And are there any plans going forward?

I would say we'll consider it again. I'm sure Petrico will make a decision on that. But at this point, we still earn a good rate of return on our money market fund. And we have the resources now as a company to really go forward. And the investment necessary in capital is really declining now. So I think also when I think about the factory, I think about loading and the leverage we're going to get just with this factory operating extremely efficiently. It's going to be a beautiful thing as the loading comes in.

Yeah, I would imagine with the quick turns, you can really increase your cash flow, talking about what you just said. Excellent. Okay, thanks so much, guys.

Thank you.

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