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VICOR CORP (VICR)·Q1 2025 Earnings Summary

Executive Summary

  • Q1 revenue was $94.0M, down 2.3% q/q and up 12.0% y/y; gross margin contracted to 47.2% (from 52.4% in Q4), and diluted EPS was $0.06. Both revenue and EPS missed S&P Global consensus for Q1 ($96.6M revenue, $0.195 EPS). Backlog rose to $171.7M, and book-to-bill was >1, providing a constructive setup into 2H25* .
  • Sequential margin compression reflected lower royalty income and transient manufacturing inefficiencies tied to the SAP ERP cutover; tariff expense was ~$0.7M. Management will add a 10% tariff surcharge on shipments after July 2 to preserve margins .
  • AI/VPD roadmap: Gen-2 VPD progressed with arrival of the critical ASIC; management targets initial deliveries to the lead customer and production ramp in 2H25, followed by demo systems to processor vendors and hyperscalers .
  • Licensing/IP: One licensee transitioned to an unlicensed product, pressuring Q1 royalties, but management expects licensing income to be a growth contributor and noted ITC exclusion and cease-and-desist orders that bar importation of infringing computing systems post presidential review .
  • Stock reaction catalysts: headline miss vs consensus*, margin contraction, withheld quarterly guidance, tariff surcharge implementation, and advancing AI/VPD milestones that could re-rate sentiment on execution in 2H25 .

What Went Well and What Went Wrong

What Went Well

  • Backlog/ordering momentum: Book-to-bill >1 and backlog increased 10.4% q/q to $171.7M, supported by new NBM orders from a hyperscaler licensee .
  • Cash generation and balance sheet: Operating cash flow rose to $20.1M, cash increased to $296.1M q/q, inventories declined 7.1% q/q, DSOs were 43 days, and inventory turns were 1.7 .
  • Strategic product progress: “Our 2nd generation VPD for leading AI applications is coming to fruition with the arrival of an ASIC raising the density and bandwidth of our current multipliers” — CEO Dr. Vinciarelli .

What Went Wrong

  • Sequential margin compression: Gross margin fell to 47.2% (down ~520bps q/q), driven by ERP transition (utilization/absorption, consulting, compensation), lower royalty revenue, FICA reset, and incremental depreciation from U.S. manufacturing investments .
  • Royalty pressure from a licensee transition: “Reduced income from a licensee transitioning to a new generation of unlicensed products” weighed on Q1 gross margin and profitability .
  • Tariffs and China exposure: Tariff expense was ~$700K; reciprocal Chinese tariffs prompted some cancellation requests (not yet material), leading VICR to institute a 10% tariff surcharge across the portfolio after July 2 to protect margins .

Financial Results

MetricQ3 2024Q4 2024Q1 2025
Revenue ($USD Millions)$93.2 $96.2 $94.0
Gross Margin ($USD Millions)$45.7 $50.4 $44.4
Gross Margin %49.1% 52.4% 47.2%
Operating Expenses ($USD Millions)$40.4 $41.2 $44.5
Net Income ($USD Millions)$11.6 $10.2 $2.5
Diluted EPS ($USD)$0.26 $0.23 $0.06
Cash from Operations ($USD Millions)$22.6 $10.1 $20.1
Capital Expenditure ($USD Millions)$8.4 $1.7 $4.6
Backlog ($USD Millions)$150.6 $155.5 $171.7
Segment Mix (%)Q4 2024Q1 2025
Advanced Products (% of revenue)60.6% 63.7%
Brick Products (% of revenue)39.4% 36.3%
Segment Dollars (Current Quarter)Q1 2025
Advanced Products Revenue ($USD Millions)$59.9
Brick Products Revenue ($USD Millions)$34.1
KPIsQ4 2024Q1 2025
Book-to-Bill>1 >1
Exports (% of total revenue)56.9% 60.8%
Shipments to Stocking Distributors-4% q/q; +7.6% y/y -16.9% q/q; -33.8% y/y
DSOs (days)39 43
Inventory Turns (annualized)~1.65 1.7
Cash and Cash Equivalents ($USD Millions)$277.3 $296.1
Results vs S&P Global ConsensusQ4 2024Q1 2025
Revenue (Actual vs Consensus)$96.2M vs $91.0M* — Beat $94.0M vs $96.6M* — Miss
EPS (Actual vs Consensus)$0.23 vs $0.145* — Beat $0.06 vs $0.195* — Miss

Values marked with * are from S&P Global; actual values cited from company disclosures. Values retrieved from S&P Global.

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Quarterly revenue/EPS guidance2025 (near term)None providedWithheld due to “wide range of scenarios”Maintained withheld
Tariff pricing surchargeShipments after July 2, 2025None10% surcharge across the portfolio to offset tariff costs; margin preservation targetedIntroduced
Gross margin trajectoryQ2–Q3 2025Not guidedERP/SAP transition completed; expect margin improvement with higher fab loading and licensingQualitative improvement noted
Gen-2 VPD ramp (lead customer)2H 2025“Taking longer than expected”Targeting production ramp in 2H 2025; demo systems to broader customers thereafterTimeline reaffirmed
Licensing/IP2025Broadly constructiveExpect licensing income to grow, but quarter-to-quarter can be lumpy given small number of licenseesConstructive but variable

Earnings Call Themes & Trends

TopicPrevious Mentions (Q-2 and Q-1)Current Period (Q1 2025)Trend
AI/VPD executionQ3 2024: Close to initial deliveries; VPD enables superior density/bandwidth . Q4 2024: ASIC delivery by late Feb; focus on lead customer ramp in 2H25 .ASIC arrived; nearing completion; targeting production 2H25; demo systems to chip vendors/hyperscalers .Progressing to ramp; timeline intact
Licensing/IP enforcementQ3 2024: Initial ITC determination; encouraging license traction . Q4 2024: Final determination; exclusion/C&D orders; new hyperscaler licensee .One licensee transitioned to unlicensed product; management expects licensing to grow; injunction applies to non-licensee hyperscalers importing infringing modules .Mixed near-term royalties; structurally strengthening
Tariffs/macroLimited prior specifics.Tariff expense ~$0.7M; 10% tariff surcharge from July; some China cancellations but not material .New headwind mitigated by pricing
Fab utilization and marginsQ4 2024: New ChiP fab achieving short cycle times and high yields; underutilization weighed on margins .ERP transition impacted Q1 margins; SAP go-live completed; margin improvement expected with loading/licensing .Improving setup as loading rises
Product mix (Advanced vs Brick)Q4 2024: Advanced +18% seq; Brick -13% seq; Advanced 60.6% of revenue .Advanced +2.7% seq to $59.9M; Brick -10% seq to $34.1M; Advanced 63.7% mix .Mix shifting to Advanced
Regional/export dynamicsQ4: Exports 56.9% of revenue .Exports 60.8%; China reciprocal tariffs creating some cancellations (not material) .Slightly stronger exports; China risk contained

Management Commentary

  • CEO (press release): “Revenues and gross margins declined sequentially, with reduced income from a licensee transitioning to a new generation of unlicensed products. Margin improvements await higher utilization of our ChiP fab and increased income from existing and future licensees.”
  • CEO (press release): “Our 2nd generation VPD for leading AI applications is coming to fruition with the arrival of an ASIC raising the density and bandwidth of our current multipliers.”
  • CFO: Q1 margin decline drivers included SAP ERP transition effects (utilization/absorption, consulting), lower royalty revenue, FICA reset, and incremental depreciation; tariff expense was ~$700K .
  • Sales/Marketing VP: NBM orders from a hyperscaler licensee; strong engagement on 800V→48V bus converters for future rack power architectures; SAM >$5B by 2028 .
  • CEO (IP): ITC final determination establishes exclusion and C&D orders; Vicor intends to appeal Foxconn license finding; post-review importation of infringing computing systems is barred .

Q&A Highlights

  • Licensing transition impact: Management confirmed a licensee moved to an unlicensed product, pressuring Q1 royalties, but expects licensing to be a growth business; infringing modules imported by non-licensee hyperscalers would be subject to injunction .
  • Tariff surcharge mechanics: A 10% surcharge will be applied across the portfolio after early July; analysis suggests it preserves margins despite product-specific tariff impacts as high as ~31–32% in some high-volume SKUs .
  • VPD ramp timeline: With the ASIC received and successful testing underway, management targets production ramp in 2H25 for the lead customer, followed by demos to broader customers; acknowledges complex multi-disciplinary ramp challenges .
  • Fab performance and margin outlook: SAP project is complete; margin improvement depends on higher fab loading and licensing income; near-term tariffs mitigated by surcharge starting Q3 .
  • NBM trajectory: Management anticipates NBM demand growth tied to IP enforcement and hyperscaler licensing; brick products expected to be steady .

Estimates Context

  • Q1 2025 missed consensus: Actual revenue $94.0M vs consensus $96.6M*; actual EPS $0.06 vs consensus $0.195* .
  • Q4 2024 beat consensus: Actual revenue $96.2M vs consensus $91.0M*; actual EPS $0.23 vs consensus $0.145* .
  • Implications: Near-term estimate revisions may skew lower on EPS given royalty volatility, transient ERP/SAP impact, and tariff headwinds until surcharge flows through Q3; medium-term estimates could stabilize/improve with backlog strength, NBM orders, licensing adds, and the 2H25 VPD ramp .

Values marked with * are from S&P Global. Values retrieved from S&P Global.

Key Takeaways for Investors

  • Headline miss vs S&P Global consensus* on revenue and EPS, driven by royalty decline and transient manufacturing inefficiencies; backlog strength and book-to-bill >1 cushion forward outlook .
  • Margin compression should abate as SAP transition effects fade, fab loading rises, and tariff surcharge takes effect from Q3 to preserve gross margins .
  • VPD execution is the central 2H25 catalyst: ASIC received, lead-customer ramp targeted, demos next; watch for proof points through summer into 2H25 .
  • Licensing/IP enforcement is structurally supportive post-ITC final determination (exclusion/C&D orders), though quarter-to-quarter royalties may remain lumpy as additional licenses are negotiated .
  • Product mix is tilting toward Advanced Products and NBMs; expect Brick to be steady, with HPC/A&D/industrial contributing to Advanced growth .
  • Tariff dynamics introduce near-term risk in China but appear manageable globally; pricing actions should maintain margins, mitigating input cost rises .
  • Trading lens: Near-term sentiment hinges on visibility to margin recovery and VPD milestones; medium-term thesis rests on AI/HPC penetration, licensing scale, and fab utilization driving operating leverage .