VICOR CORP (VICR)·Q2 2025 Earnings Summary

Executive Summary

• Q2 2025 total revenues (product, royalty, and patent litigation settlement) were $141.0M, up 50.1% q/q and 64.3% y/y; gross margin expanded to 65.3% and diluted EPS rose to $0.91 as the $45M patent settlement materially boosted profitability .
• Versus S&P Global consensus, revenue beat by a wide margin ($141.0M vs $96.4M*) and EPS was also a major beat ($0.91 vs $0.105*), driven by settlement income and higher gross margins; management noted underlying profitability excluding the settlement improved sequentially as well .
• Book-to-bill was below 1.0 and backlog fell 9.6% q/q to $155.2M; management cited tariff-related order hesitancy and cancellations in China, implemented a 10% tariff surcharge on new orders/backlog shipping after July 2, and withheld quarterly guidance given a wide range of outcomes .
• Strategic themes: accelerating IP enforcement with cease-and-desist and exclusion orders, ongoing licensing momentum, and advancing next-gen AI power delivery solutions (Gen 5 VPD and high-performance ChiPs) expected to drive future revenue and fab utilization .

What Went Well and What Went Wrong

What Went Well

• Strong headline prints: total revenues $141.0M (+50.1% q/q, +64.3% y/y), gross margin 65.3%, diluted EPS $0.91; operating cash flow surged to $65.2M with cash and equivalents up to ~$338.5M .
• Patent enforcement success: “Having brought to fruition our first ITC action with cease-and-desist and exclusion orders, we are pursuing additional actions to curtail importation... by unlicensed OEMs and Hyper-scalers” (CEO) .
• AI product roadmap progressing: “bringing to fruition high performance ChiPs and 2nd gen VPD for AI applications... increase product revenues and utilization of our first ChiP fab” (CEO); Gen 5 VPD evaluation boards and tools imminent, with a 10kW 800V→48V module sampling in Q4 .

What Went Wrong

• Demand softness and uncertainty: book-to-bill <1; backlog down 9.6% q/q to $155.2M; cancellations in China and tariff-driven hesitancy pressured orders .
• Tariffs and legal costs: instituted a 10% tariff surcharge after July 2; Q2 OpEx included ~$5.1M incentive legal fees tied to the settlement, creating P&L lumpiness .
• Limited visibility: management withheld quarterly guidance due to licensing/litigation variability; royalty streams around ~$10M/q are not yet firmly trending upward, given ongoing enforcement dynamics .

Financial Results

Notes:

• Q2 2025 includes a $45M patent litigation settlement recognized in revenue .
• CFO indicated that excluding the settlement, Q2 revenue would have increased by ~$2M q/q, gross margin by ~200 bps, OpEx would have declined by ~$3M, and income before taxes would have improved from ~$3M in Q1 to ~$9M in Q2 .

Segment breakdown: Vicor does not report formal operating segments. Management highlighted product mix and channels (advanced vs brick, distributors, exports), but figures were provided qualitatively and are not reconciled to GAAP segment reporting .

KPIs

Guidance Changes

Earnings Call Themes & Trends

Management Commentary

• “Having brought to fruition our first ITC action with cease-and-desist and exclusion orders, we are pursuing additional actions to curtail importation into the US of infringing power and computing systems” — CEO .
• “We are bringing to fruition high performance ChiPs and 2nd gen VPD for AI applications, which should increase product revenues and utilization of our first ChiP fab” — CEO .
• “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” — CFO .
• Automotive traction: “We have just concluded a successful audit with a large European OEM… preparing for an audit by a large Asian OEM in Q3” — VP Sales .
• Long-term auto revenue: “still a ways to go… significant piece of our revenue, probably out in the 2029, 2030 time frame” — VP Sales .

Q&A Highlights

• Tariffs and bookings: Book-to-bill <1 due to China cancellations and tariff hesitancy; 10% surcharge now in effect; hesitancy largely behind them per management .
• Licensing/settlement: Details undisclosed; management emphasized continued enforcement, exclusion orders, and additional actions planned; variability limits guidance .
• VPD timeline and performance: 83% solution shipped to lead customer; working toward 100%/133%; general market launch after lead-customer milestones; evaluation boards and tools planned .
• Capital allocation: ~$17.5M buybacks (~400k shares) in Q2 .
• Outlook tone: Management suggested 2025 remains a “revenue year” consistent with prior record-year commentary, but stressed wide outcome ranges due to IP/litigation dynamics .

Estimates Context

• Consensus coverage: Revenue (# est) = 3*, EPS (# est) = 2* for Q2 2025.
• Material beats driven by the $45M settlement and higher gross margin; CFO also indicated underlying profitability improved sequentially even excluding settlement effects .

Values with asterisks (*) retrieved from S&P Global.

Key Takeaways for Investors

• Headline beat and margin expansion were primarily driven by a $45M settlement; underlying sequential improvement (ex-settlement) suggests operational progress, but not yet a clean trend given tariff/legal noise .
• Near-term demand signals are mixed: backlog declined and book-to-bill <1 amid China/tariff pressures, yet management believes tariff hesitancy is largely behind them post-surcharge implementation .
• Strategic IP enforcement is a core profit driver and stock catalyst; additional actions could yield episodic revenue and licensing gains, but introduce variability that constrains guidance .
• AI power delivery roadmap is advancing (Gen 5 VPD, ChiPs, 800V→48V module sampling in Q4), providing medium-term optionality; broad monetization awaits lead-customer completion and broader market introductions .
• Automotive is progressing through rigorous OEM audits, with revenue impact likely long-dated (2029–2030), but provides diversification and technology leverage across markets .
• Cash generation strengthened (CFO $65.2M) and liquidity is robust ($338.5M); buybacks ($17.5M) underscore capital flexibility despite legal expenses .
• Trading lens: Expect volatile prints tied to licensing/settlement timing; watch for updates on additional ITC/exclusion actions, tariff normalization, and VPD lead-customer milestones as catalysts.