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Table of Contents
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM
10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended
March 31,
2024
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from __________________________
Commission File Number
0-18277
VICOR CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 04-2742817
(State of Incorporation) (I.R.S. Employer Identification No.)
25 Frontage Road
,
Andover
,
Massachusetts
01810
(Address of Principal Executive Office)
(
978
)
470-2900
(Registrant's telephone number)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Trading Symbol(s) Name of each exchange on which registered
Common Stock VICR The NASDAQ Stock Market LLC
, par value
$0.01 per share
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes
No
Indicate by check mark whether the registrant has submitted electronically
every Interactive Data File required to be submitted pursuant to Rule 405 of
Regulation S-T ((s)232.405 of this chapter) during the preceding 12 months (or
for such shorter period that the registrant was required to submit such files).
Yes
No
Indicate by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, a smaller reporting company, or an
emerging growth company. See the definitions of "large accelerated filer,"
"accelerated filer," "smaller reporting company," and "emerging growth
company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer Smaller reporting company
Accelerated filer Emerging growth company
Non-accelerated filer
If an emerging growth company, indicate by check mark if the registrant has
elected not to use the extended transition period for complying with any new
or revised financial accounting standards provided pursuant to Section 13(a)
of the Exchange Act.
Indicate by check mark whether the registrant is a shell company (as defined
in Rule 12b-2 of the Exchange Act). Yes No
The number of shares outstanding of each of the issuer's classes of Common
Stock as of April 25, 2024 was:
Common Stock, $.01 par value 32,808,042
Class B Common Stock, $.01 par value 11,738,718
-------------------------------------------------------------------------------
Table of Contents
VICOR CORPORATION
IND
EX
Page
Part I - Financial Information:
Item 1 - Financial Statements (Unaudited)
Condensed Consolidated Balance Sheets at March 31, 2024 and December 31, 2023 1
Condensed Consolidated Statements of Operations for the three months ended March 31, 2024 and 2023 2
Condensed Consolidated Statements of Comprehensive (Loss) Income for the three months ended March 31, 2024 and 2023 3
Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2024 and 2023 4
Condensed Consolidated Statements of Equity for the three months ended March 31, 2024 and 2023 5
Notes to Condensed Consolidated Financial Statements 6
Item 2 - Management's Discussion and Analysis of Financial Condition and Results of Operations 14
Item 3 - Quantitative and Qualitative Disclosures About Market Risk 21
Item 4 - Controls and Procedures 22
Part II - Other Information: 23
Item 1 - Legal Proceedings 23
Item 1A - Risk Factors 23
Item 5 - Other Information 23
Item 6 - Exhibits 23
Signatures 25
EX-31.1 SECTION 302 CERTIFICATION OF CEO
EX-31.2 SECTION 302 CERTIFICATION OF CFO
EX-32.1 SECTION 906 CERTIFICATION OF CEO
EX-32.2 SECTION 906 CERTIFICATION OF CFO
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Table of Contents
VICOR CORPORATION
Pa
rt I - Financial Information
Item 1 - Fin
ancial Statements
Condensed Consoli
dated Balance Sheets
(In thousands, except share data)
(Unaudited)
March 31, 2024 December 31, 2023
Assets
Current assets:
Cash and cash equivalents $ 239,172 $ 242,219
Accounts receivable, net 57,604 52,631
Inventories 112,316 106,579
Other current assets 19,173 18,937
Total current assets 428,265 420,366
Long-term deferred tax assets, net 277 296
Long-term investment, net 2,622 2,530
Property, plant and equipment, net 157,677 157,689
Other assets 16,276 14,006
Total assets $ 605,117 $ 594,887
Liabilities and Equity
Current liabilities:
Accounts payable $ 12,439 $ 12,100
Accrued compensation and benefits 11,636 11,227
Accrued litigation 23,700 6,500
Accrued expenses 7,078 5,093
Short-term lease liabilities 1,812 1,864
Sales allowances 3,130 3,482
Income taxes payable 1,602 746
Short-term deferred revenue and customer prepayments 2,684 3,157
Total current liabilities 64,081 44,169
Long-term deferred revenue 660 1,020
Long-term income taxes payable 2,236 2,228
Long-term lease liabilities 6,094 6,364
Total liabilities 73,071 53,781
Commitments and contingencies (Note 10)
Equity:
Vicor Corporation stockholders' equity:
Class B Common Stock: 118 118
10
votes per share, $
.01
par value,
14,000,000
shares authorized,
11,743,218
shares issued
and outstanding in 2024 and 2023
Common Stock: 446 445
1
vote per share, $
.01
par value,
62,000,000
shares authorized
44,434,840
shares issued and
32,800,034
shares outstanding in 2024;
44,354,394
shares issued and
32,719,588
shares outstanding in 2023
Additional paid-in capital 389,367 383,832
Retained earnings 282,201 296,674
Accumulated other comprehensive loss ( ) ( )
1,390 1,273
Treasury stock at cost: ( ) ( )
11,634,806 138,927 138,927
shares in 2024 and 2023
Total Vicor Corporation stockholders' equity 531,815 540,869
Noncontrolling interest 231 237
Total equity 532,046 541,106
Total liabilities and equity $ 605,117 $ 594,887
See accompanying notes.
-
1
-
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Table of Contents
VICOR CORPORATION
Condensed Consolidated
Statements of Operations
(In thousands, except per share amounts)
(Unaudited)
Three Months Ended
March 31,
2024 2023
Net revenues $ 83,872 $ 97,816
Cost of revenues 38,749 51,282
Gross margin 45,123 46,534
Operating expenses:
Selling, general and administrative 25,999 20,223
Research and development 18,039 15,869
Litigation-contingency expense 17,200 -
Total operating expenses 61,238 36,092
(Loss) income from operations ( ) 10,442
16,115
Other income (expense), net:
Total unrealized gains on available-for-sale 92 9
securities, net
Less: portion of gains recognized in other ( ) ( )
comprehensive income 92 9
Net credit gains recognized in earnings - -
Other income (expense), net 2,724 1,950
Total other income (expense), net 2,724 1,950
(Loss) income before income taxes ( ) 12,392
13,391
Provision for income taxes 1,071 1,141
Consolidated net (loss) income ( ) 11,251
14,462
Less: Net income attributable to 11 7
noncontrolling interest
Net (loss) income attributable to Vicor Corporation $ ( ) $ 11,244
14,473
Net (loss) income per common share attributable to
Vicor Corporation:
Basic $ ( ) $ 0.25
0.33
Diluted $ ( ) $ 0.25
0.33
Shares used to compute net (loss) income per common share
attributable to Vicor Corporation:
Basic 44,516 44,162
Diluted 44,516 44,907
See accompanying notes.
-
2
-
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Table of Contents
VICOR CORPORATION
Condensed Consolidated Statem
ents of Comprehensive (Loss) Income
(In thousands)
(Unaudited)
Three Months Ended
March 31,
2024 2023
Consolidated net (loss) income $ ( ) $ 11,251
14,462
Foreign currency translation losses, net of tax (1) ( ) ( )
226 15
Unrealized gains on available-for-sale 92 9
securities, net of tax (1)
Other comprehensive loss ( ) ( )
134 6
Consolidated comprehensive (loss) income ( ) 11,245
14,596
Less: Comprehensive (loss) income attributable to ( ) 6
noncontrolling interest 6
Comprehensive (loss) income attributable to
Vicor Corporation $ ( ) $ 11,239
14,590
(1)
The deferred tax assets associated with foreign currency translation losses
and unrealized gains on available-for-sale securities are completely offset by
a tax valuation allowance as of
March 31, 2024 and 2023
. Therefore, there is
no
income tax benefit (provision) recognized for the three months ended
March 31, 2024 and 2023
.
See accompanying notes.
-
3
-
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Table of Contents
VICOR CORPORATION
Condensed Consolidated
Statements of Cash Flows
(In thousands)
(Unaudited)
Three Months Ended
March 31,
2024 2023
Operating activities:
Consolidated net (loss) income $ ( ) $ 11,251
14,462
Adjustments to reconcile consolidated net (loss) income to net cash provided by
operating activities:
Depreciation and amortization 4,614 4,199
Stock-based compensation expense 3,780 2,817
Litigation-contingency expense 17,200 -
(Decrease) increase in long-term deferred revenue ( ) 2,038
360
(Decrease) increase in other assets ( ) 33
99
Deferred income taxes 4 -
Increase in long-term income taxes payable 8 7
Change in current assets and liabilities, net ( ) ( )
8,103 10,232
Net cash provided by operating activities 2,582 10,113
Investing activities:
Additions to property, plant and equipment and internal-use software ( ) ( )
7,270 10,089
Net cash used for investing activities ( ) ( )
7,270 10,089
Financing activities:
Proceeds from employee stock plans 1,756 2,261
Net cash provided by financing activities 1,756 2,261
Effect of foreign exchange rates on cash ( ) 1
115
Net (decrease) increase in cash and cash equivalents ( ) 2,286
3,047
Cash and cash equivalents at beginning of period 242,219 190,611
Cash and cash equivalents at end of period $ 239,172 $ 192,897
Supplemental disclosure:
Purchases of property, plant and equipment and internal-use software incurred $ 1,983 $ 2,083
but not yet paid
See accompanying notes.
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VICOR CORPORATION
Condensed Consolidat
ed Statements of Equity
(In thousands)
(Unaudited)
Total
Accumulated Vicor
Class Additional Other Corporation
B
Common Common Paid-In Retained Comprehensive Treasury Stockholders' Noncontrolling
Stock Stock Capital Earnings Loss Stock Equity Interest E
Three
Months
Ended
March
31,
2024
Balance $ 118 $ 445 $ 383,832 $ 296,674 $ ( ) $ ( ) $ 540,869 $ 237 $
on 1,273 138,927
December
31,
2023
Issuance 1 1,755 1,756
of
Common
Stock
under
employee
stock
plans
Stock-based 3,780 3,780
compensation
expense
Components
of
comprehensive
income
(loss),
net
of
tax:
Net ( ) ( ) 11
(loss) 14,473 14,473
income
Other ( ) ( ) ( )
comprehensive 117 117 17
loss
Total ( ) ( )
comprehensive 14,590 6
(loss)
Balance $ 118 $ 446 $ 389,367 $ 282,201 $ ( ) $ ( ) $ 531,815 $ 231 $
on 1,390 138,927
March
31,
2024
Total
quity
541,106
1,756
3,780
( )
14,462
( )
134
( )
14,596
532,046
Total
Accumulated Vicor
Class Additional Other Corporation
B
Common Common Paid-In Retained Comprehensive Treasury Stockholders' Noncontrolling T
Stock Stock Capital Earnings Loss Stock Equity Interest Eq
Three
Months
Ended
March
31,
2023
Balance $ 118 $ 441 $ 360,365 $ 243,079 $ ( ) $ ( ) $ 464,088 $ 248 $ 4
on 988 138,927
December
31,
2022
Issuance 1 2,260 2,261
of
Common
Stock
under
employee
stock
plans
Stock-based 2,817 2,817
compensation
expense
Components
of
comprehensive
income
(loss),
net
of
tax:
Net 11,244 11,244 7
income
Other ( ) ( ) ( )
comprehensive 5 5 1
loss
Total 11,239 6
comprehensive
income
Balance $ 118 $ 442 $ 365,442 $ 254,323 $ ( ) $ ( ) $ 480,405 $ 254 $ 4
on 993 138,927
March
31,
2023
otal
uity
64,336
2,261
2,817
11,251
( )
6
11,245
80,659
See accompanying notes.
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VICOR CORPORATION
Notes to Condensed Conso
lidated Financial Statements
March 31, 2024
(unaudited)
1.
Basis of Presentation
The accompanying unaudited Condensed Consolidated Financial Statements of
Vicor Corporation and its consolidated subsidiaries (collectively, the
"Company") have been prepared in accordance with generally accepted accounting
principles for interim financial information and pursuant to the rules and
regulations of the Securities and Exchange Commission (the "SEC").
Accordingly, these interim financial statements do not include all of the
information and footnotes required by generally accepted accounting principles
for complete financial statements.
In the opinion of management, all adjustments (consisting of normal recurring
adjustments) considered necessary for a fair presentation have been included.
Operating results for the three months ended March 31, 2024 are not
necessarily indicative of the results that may be expected for any other
interim period or the year ending December 31, 2024. The balance sheet at
December 31, 2023 presented herein has been derived from the audited financial
statements at that date but does not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. For further information, refer to the consolidated
financial statements and notes thereto contained in the Company's Annual
Report on Form 10-K for the year ended December 31, 2023
filed by the Company with the SEC on February 28, 2024.
2.
Inventories
Inventories were as follows (in thousands):
March 31, 2024 December 31, 2023
Raw materials $ 88,365 $ 88,716
Work-in-process 15,113 10,525
Finished goods 8,838 7,338
$ 112,316 $ 106,579
3.
Long-Term Investments
As of March 31, 2024 and December 31, 2023
, the Company held one auction rate security with a par value of $
3,000,000
and an estimated fair value of approximately $
2,622,000
and $
2,530,000
, respectively, purchased through and held in custody by a broker-dealer
affiliate of Bank of America, N.A., that has experienced failed auctions (the
"Failed Auction Security") since February 2008. The Failed Auction Security
held by the Company is Aaa/AA+ rated by major credit rating agencies, is
collateralized by student loans, and is guaranteed by the U.S. Department of
Education under the Federal Family Education Loan Program. Management is not
aware of any reason to believe the issuer of the Failed Auction Security is
presently at risk of default. Through
March 31, 2024
, the Company has continued to receive interest payments on the Failed Auction
Security in accordance with the terms of its indenture. Management believes
the Company ultimately should be able to liquidate the Failed Auction Security
without significant loss primarily due to the overall quality of the issue
held and the collateral securing the substantial majority of the underlying
obligation. However, current conditions in the auction rate securities market
have led management to conclude the recovery period for the Failed Auction
Security
exceeds 12 months
. As a result, the Company continued to classify the Failed Auction Security
as long-term as of
March 31, 2024.
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VICOR CORPORATION
Notes to Condensed Consolidated Financial Statements
March 31, 2024
(unaudited)
Details of our investments are as follows (in thousands):
March 31, 2024
Cash and Cash Long-Term
Equivalents Investment
Measured at fair value:
Available-for-sale securities:
Money market funds $ 209,702 $ -
Failed Auction Security - 2,622
Total 209,702 2,622
Other measurement basis:
Cash on hand 29,470 -
Total $ 239,172 $ 2,622
December 31, 2023
Cash and Cash Long-Term
Equivalents Investment
Measured at fair value:
Available-for-sale securities:
Money market funds $ 209,489 $ -
Failed Auction Security - 2,530
Total 209,489 2,530
Other measurement basis:
Cash on hand 32,730 -
Total $ 242,219 $ 2,530
The following is a summary of the available-for-sale securities (in thousands):
Gross Gross Estimated
Unrealized Unrealized Fair
March 31, 2024 Cost Gains Losses Value
Failed Auction Security $ 3,000 - 378 $ 2,622
Gross Gross Estimated
Unrealized Unrealized Fair
December 31, 2023 Cost Gains Losses Value
Failed Auction Security $ 3,000 - 470 $ 2,530
As of March 31, 2024
, the Failed Auction Security had been in an unrealized loss position for
greater than
12
months.
The amortized cost and estimated fair value of the available-for-sale
securities on
March 31, 2024, by type and contractual maturities, are shown below (in
thousands):
Estimated
Cost Fair Value
Failed Auction Security:
Due in nineteen years $ 3,000 $ 2,622
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VICOR CORPORATION
Notes to Condensed Consolidated Financial Statements
March 31, 2024
(unaudited)
4.
Fair Value Measurements
The Company accounts for certain financial assets at fair value, defined as
the price that would be received to sell an asset or paid to transfer a
liability (i.e., an exit price) in the principal or most advantageous market
for the asset or liability in an orderly transaction between market
participants on the measurement date. As such, fair value is a market-based
measurement that should be determined based on assumptions market participants
would use in pricing an asset or liability. A three-level hierarchy is used to
show the extent and level of judgment used to estimate fair value measurements.
Assets and liabilities measured at fair value on a recurring basis included
the following as of
March 31, 2024 (in thousands):
Using
Significant
Quoted Prices Other Significant
in Active Observable Unobservable Total Fair
Markets Inputs Inputs Value as of
(Level 1) (Level 2) (Level 3) March 31, 2024
Cash equivalents:
Money market funds $ 209,702 $ - $ - $ 209,702
Long-term investment:
Failed Auction Security - - 2,622 2,622
Assets and liabilities measured at fair value on a recurring basis included
the following as of December 31, 2023 (in thousands):
Using
Significant
Quoted Prices Other Significant
in Active Observable Unobservable Total Fair
Markets Inputs Inputs Value as of
(Level 1) (Level 2) (Level 3) December 31, 2023
Cash equivalents:
Money market funds $ 209,489 $ - $ - $ 209,489
Long-term investment:
Failed Auction Security - - 2,530 2,530
The change in the estimated fair value calculated for the investment valued on
a recurring basis utilizing Level 3 inputs (i.e., the Failed Auction Security)
for the three months ended
March 31, 2024 was as follows (in thousands):
Balance at the beginning of the period $ 2,530
Gain included in 92
Other comprehensive loss
Balance at the end of the period $ 2,622
Management utilized a probability weighted discounted cash flow model to
determine the estimated fair value as of March 31, 2024
.
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VICOR CORPORATION
Notes to Condensed Consolidated Financial Statements
March 31, 2024
(unaudited)
5.
Revenues
The following tables present the Company's net revenues disaggregated by
geography based on the location of the customer, by product line (in
thousands):
Three Months Ended March 31, 2024
Brick Products Advanced Products Total
United States $ 20,974 $ 27,186 $ 48,160
Europe 6,857 3,999 10,856
Asia Pacific 12,268 12,052 24,320
All other 493 43 536
$ 40,592 $ 43,280 $ 83,872
Three Months Ended March 31, 2023
Brick Products Advanced Products Total
United States $ 21,256 $ 13,710 $ 34,966
Europe 7,546 4,027 11,573
Asia Pacific 16,847 33,444 50,291
All other 876 110 986
$ 46,525 $ 51,291 $ 97,816
The following tables present the Company's net revenues disaggregated by the
category of revenue, by product line (in thousands):
Three Months Ended March 31, 2024
Brick Products Advanced Products Total
Direct customers, contract manufacturers and $ 20,810 $ 21,640 $ 42,450
non-stocking distributors
Stocking distributors, net of sales allowances 19,407 9,632 29,039
Non-recurring engineering 375 3,468 3,843
Royalties - 8,180 8,180
Other - 360 360
$ 40,592 $ 43,280 $ 83,872
Three Months Ended March 31, 2023
Brick Products Advanced Products Total
Direct customers, contract manufacturers and $ 30,486 $ 42,013 $ 72,499
non-stocking distributors
Stocking distributors, net of sales allowances 15,737 5,052 20,789
Non-recurring engineering 302 2,128 2,430
Royalties - 2,020 2,020
Other - 78 78
$ 46,525 $ 51,291 $ 97,816
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VICOR CORPORATION
Notes to Condensed Consolidated Financial Statements
March 31, 2024
(unaudited)
The following table presents the changes in certain contract liabilities (in
thousands):
March 31, 2024 December 31, 2023 Change
Short-term deferred revenue and customer prepayments $ ( ) $ ( ) $ 473
2,684 3,157
Long-term deferred revenue ( ) ( ) 360
660 1,020
Sales allowances ( ) ( ) 352
3,130 3,482
The Company records deferred revenue, which represents a contract liability,
when cash payments are received or due in advance of performance under a
contract with a customer. The Company recognized revenue of $
360,000
and approximately $
1,609,000
for the three months ended
March 31, 2024 and 2023
, respectively, that was included in deferred revenue at the beginning of the
respective period.
6.
Stock-Based Compensation
The Company uses the Black-Scholes option pricing model to calculate the fair
value of stock option awards, whether they possess time-based vesting
provisions or performance-based vesting provisions, and awards granted under
the Vicor Corporation 2017 Employee Stock Purchase Plan ("ESPP"), as of their
grant date.
Stock-based compensation expense was as follows (in thousands):
Three Months Ended
March 31,
2024 2023
Cost of revenues $ 754 $ 486
Selling, general and administrative 1,919 1,520
Research and development 1,107 811
Total stock-based compensation $ 3,780 $ 2,817
Compensation expense by type of award was as follows (in thousands):
Three Months Ended
March 31,
2024 2023
Stock options $ 3,466 $ 2,496
ESPP 314 321
Total stock-based compensation $ 3,780 $ 2,817
7.
Rental Income
Income, net under the Company's operating lease agreement, for its owned
facility leased to a third party in California, was approximately $
198,000
for each of the three month periods ended
March 31, 2024 and 2023.
8.
Income Taxes
The provision for income taxes is based on the estimated annual effective tax
rate for the year, which includes estimated federal, state and foreign income
taxes on the Company's projected pre-tax income (loss).
The provision for income taxes and the effective income tax rates were as
follows (dollars in thousands):
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VICOR CORPORATION
Notes to Condensed Consolidated Financial Statements
March 31, 2024
(unaudited)
Three Months Ended
March 31,
2024 2023
Provision for income taxes $ 1,071 $ 1,141
Effective income tax rate ( )% 9.2 %
8.0
The effective tax rates differ from the statutory tax rates for the three
months ended March 31, 2024 and 2023 primarily due to the Company's full
valuation allowance position against domestic deferred tax assets. The
provision for income taxes for the three months ended March 31, 2024 and 2023
included estimated federal, state and foreign income taxes in jurisdictions in
which the Company does not have sufficient tax attributes.
As of March 31, 2024
, the Company had a valuation allowance of approximately $
52,291,000
against all net domestic deferred tax assets for which realization cannot be
considered more likely than not at this time. Management assesses the need for
the valuation allowance on a quarterly basis. In assessing the need for a
valuation allowance, the Company considers all positive and negative evidence,
including scheduled reversals of deferred tax liabilities, projected future
taxable income, tax planning strategies, and past financial performance.
Despite recent positive operating results, the Company faces uncertainties in
forecasting its operating results due to supply and factory capacity
constraints, certain process issues with the production of Advanced Products
and the unpredictability in certain markets. This operating uncertainty also
makes it difficult to predict the availability and utilization of tax benefits
over the next several years. As a result, management has concluded, as of
March 31, 2024, it is more likely than not the Company's net domestic deferred
tax assets will not be realized, and a full valuation allowance against all
net domestic deferred tax assets is still warranted as of
March 31, 2024. The valuation allowance against these deferred tax assets may
require adjustment in the future based on changes in the mix of temporary
differences, changes in tax laws, and operating performance. If the positive
operating results continue, and the Company's concerns about industry
uncertainty and world events, supply and factory capacity constraints, and
process issues with the production of Advanced Products are resolved, and the
amount of tax benefits the Company is able to utilize to the point that the
Company believes future taxable income can be more reliably forecasted, the
Company may release all or a portion of the valuation allowance in the
near-term. If and when the Company determines the valuation allowance should
be released (i.e., reduced), the adjustment would result in a tax benefit
reported in that period's Condensed Consolidated Statements of Operations, the
effect of which would be an increase in reported net income.
The Company was informed in September 2021 by the Internal Revenue Service of
their intention to examine the Company's 2019 Federal income tax return. The
IRS is in the process of closing examination of the 2019 tax year with no
material adjustments. There are no other audits or examinations in process in
any other jurisdiction.
9.
Net (Loss) Income per Share
The following table sets forth the computation of basic and diluted net (loss)
income per share (in thousands, except per share amounts):
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VICOR CORPORATION
Notes to Condensed Consolidated Financial Statements
March 31, 2024
(unaudited)
Three Months Ended
March 31,
2024 2023
Numerator:
Net (loss) income attributable to Vicor Corporation $ ( ) $ 11,244
14,473
Denominator:
Denominator for basic net (loss) income per share-weighted 44,516 44,162
average shares (1)
Effect of dilutive securities:
Employee stock options (2) - 745
Denominator for diluted net (loss) income per share - adjusted 44,516 44,907
weighted-average shares and assumed conversions
Basic net (loss) income per share $ ( ) $ 0.25
0.33
Diluted net (loss) income per share $ ( ) $ 0.25
0.33
(1)
Denominator represents the weighted average number of shares of Common Stock
and Class B Common Stock outstanding.
(2)
Options to pur
chase
2,500,448
and
1,035,618
shares of Common Stock for the three months ended
March 31, 2024 and 2023
, respectively, were not included in the calculations of net (loss) income per
share as the effect would have been antidilutive.
10.
Commitments and Contingencies
At March 31, 2024
, the Company had approximately $
11,475,000
of cancelable and non-cancelable capital expenditure commitments, principally
for manufacturing equipment.
The Company is the defendant in a patent infringement lawsuit originally filed
on January 28, 2011 by SynQor, Inc. ("SynQor") in the U.S. District Court for
the Eastern District of Texas (the "District Court"). The complaint, as
amended, alleged that the Company's unregulated bus converters used in
intermediate bus architecture power supply systems infringed SynQor's U.S.
patent numbers 7,072,190, 7,272,021, 7,564,702, and 8,023,290 ("the `190
patent", "the `021 patent", "the `702 patent", and "the `290 patent",
respectively, and collectively the "SynQor Patents"). The Company asserted
counterclaims against SynQor alleging unfair competition and tortious
interference with business relations (the "Counterclaims"). As a result of
certain actions by the United States Patent and Trademark Office ("USPTO") and
the District Court, SynQor's infringement allegations regarding the `021
patent and the `290 patent were dismissed from the case prior to the beginning
of trial. Specifically, the USPTO invalidated all the asserted claims of the
`021 patent and that decision was upheld on appeal on August 30, 2017. In
addition, on October 5, 2022, the District Court issued an order involuntarily
dismissing the `290 patent infringement allegations on grounds of equitable
and judicial estoppel, in view of representations by SynQor to the District
Court agreeing to such dismissal as a condition of lifting a prior stay of the
lawsuit. On January 18, 2023, the United States Court of Appeals for the
Federal Circuit issued a decision upholding a decision of the Patent Trial and
Appeal Board of the USPTO invalidating all claims of the `290 patent.
A trial in the District Court began on October 17, 2022 on the asserted claims
of the `190 patent and the `702 patent, as well as on the Company's
Counterclaims. The District Court dismissed the Company's Counterclaims on
October 25, 2022. On October 26, 2022, the jury returned a verdict on SynQor's
patent infringement claims, finding that the Company willfully infringed the
`702 patent, but did not infringe the `190 patent. The jury verdict awarded
SynQor damages in the amount of $
6,500,000
for infringement of the `702 patent. All of the SynQor Patents expired in 2018.
On December 23, 2022, SynQor filed in the District Court (a) a motion for
judgment as a matter of law that the Company infringed the `190 patent, (b) a
motion requesting the District Court to award SynQor treble damages, as well
as pre- and post-judgment interest, (c) a motion requesting the District Court
to award SynQor its attorneys' fees, and (d) a motion for a new trial. On
December 23, 2022, the Company filed in the District Court (a) a motion
requesting judgment as a matter of law that it did not infringe the `702
patent, and (b) a motion requesting judgment with respect to its defenses of
equitable estoppel and waiver. On January 8, 2024, the District Court issued
orders denying (a) SynQor's motion for judgment as a matter of law, (b) the
Company's
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VICOR CORPORATION
Notes to Condensed Consolidated Financial Statements
March 31, 2024
(unaudited)
motion for judgment as a matter of law, (c) the Company's motion for judgment
with respect to its defenses of equitable estoppel and waiver and (d) SynQor's
motion for a new trial.
On April 24, 2024, the District Court issued an order granting SynQor's
motions for enhanced damages, pre-judgment and post-judgment interest, costs
and attorneys' fees. Specifically, the District Court determined that the
jury's damages award of $
6,500,000
should be enhanced by $
4,500,000
. The District Court also granted SynQor an award of costs in the amount of
approximately $
87,000
. The District Court also awarded SynQor pre-judgment interest at the 2009
prime rate, compounded quarterly beginning in July 2009, as well as
post-judgment interest at the statutory rate. The District Court also awarded
SynQor its attorneys' fees relating to the assertion of the `702 patent, in an
amount to be determined based upon the District Court's consideration of
subsequent submissions by SynQor.
The Company anticipates appealing the District Court's final judgment to the
United States Court of Appeals for the Federal Circuit.
In accordance with applicable accounting standards, the Company recorded a
litigation related accrual of $
6,500,000
in the third quarter of 2022 and an incremental litigation related accrual of $
17,200,000
in the first quarter of 2024 as its estimate based on the awarded judgments,
including enhanced damages, pre-judgment interest, costs and estimated
attorneys' fees. The final determination of attorneys' fees and any associated
pre-judgment and post-judgment interest will depend on the District Court's
determination of those fees and interest amounts, subject to appeal, and could
differ from the recorded liability.
In addition, the Company is involved in certain other litigation and claims
incidental to the conduct of its business, both as a defendant and a
plaintiff. While the outcome of such other lawsuits and claims against the
Company cannot be predicted with certainty, management does not expect such
litigation or claims will have a material adverse impact on the Company's
financial position or results of operations.
11.
Impact of Recently Issued Accounting Standards
On November 27, 2023, the Financial Accounting Standards Board ("FASB") issued
Accounting Standards ("ASU") No. 2023-07,
Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures
, which enhances segment disclosures and requires additional disclosures of
segment expenses. This ASU is effective for annual periods in fiscal years
beginning after December 15, 2023, and interim periods thereafter. Early
adoption is permitted. The Company has not yet determined the impact of this
ASU on the Company's consolidated financial statements and disclosures.
In December 2023, FASB issued ASU No. 2023-09,
Income Taxes (Topic 740): Improvements to Income Tax Disclosures
, which focuses on the rate reconciliation and income taxes paid. ASU No.
2023-09 requires a public business entity (PBE) to disclose, on an annual
basis, a tabular rate reconciliation using both percentages and currency
amounts, broken out into specified categories with certain reconciling items
further broken out by nature and jurisdiction to the extent those items exceed
a specified threshold. In addition, all entities are required to disclose
income taxes paid, net of refunds received disaggregated by federal,
state/local, and foreign and by jurisdiction if the amount is at least 5% of
total income tax payments, net of refunds received. For PBEs, the new standard
is effective for annual periods beginning after December 15, 2024, with early
adoption permitted. An entity may apply the amendments in this ASU
prospectively by providing the revised disclosures for the period ending
December 31, 2025 and continuing to provide the pre-ASU disclosures for the
prior periods, or may apply the amendments retrospectively by providing the
revised disclosures for all period presented. The Company expects this ASU to
impact disclosures with no impact to the Company's consolidated financial
statements.
Other new pronouncements issued but not effective until after March 31, 2024
are not expected to have a material impact on the Company's consolidated
financial statements.
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VICOR CORPORATION
Management's Discussion and Analysis of
Financial Condition and Results of Operation
March 31, 2024
Item 2 - Management's Di
scussion and Analysis of Financial Condition and Results of Operations
Cautionary Note Regarding Forward-Looking Statements
The Company's consolidated operating results are affected by a wide variety of
factors that could materially and adversely affect revenues and profitability,
including the risk factors described in the Company's Annual Report on Form
10-K for the year ended December 31, 2023. As a result of these and other
factors, the Company may experience material fluctuations in future operating
results on a quarterly or annual basis, which could materially and adversely
affect its business, consolidated financial condition, and operating results,
and the share price of its Common Stock. This document and other documents
filed by the Company with the Securities and Exchange Commission ("SEC")
include forward-looking statements regarding future events and the Company's
future results that are subject to the safe harbor afforded under the Private
Securities Litigation Reform Act of 1995 and other safe harbors afforded under
the Securities Act of 1933 and the Securities Exchange Act of 1934. All
statements other than statements of historical fact are statements that could
be deemed forward-looking statements. Forward-looking statements are based on
our current beliefs, expectations, estimates, forecasts, and projections for
the future performance of the Company and are subject to risks and
uncertainties. Forward-looking statements are identified by the use of words
denoting uncertain, future events, such as "anticipate," "assume," "believe,"
"continue," "could," "estimate," "expect," "future," "goal," "if," "intend,"
"may," "plan," "potential," "project," "prospective," "seek," "should,"
"target," "will," or "would," as well as similar words and phrases, including
the negatives of these terms, or other variations thereof. Forward-looking
statements also include, but are not limited to, statements regarding: our
ability to address certain supply chain risks; our ongoing development of
power conversion architectures, switching topologies, materials, packaging,
and products; the ongoing transition of our business strategically,
organizationally, and operationally from serving a large number of relatively
low-volume customers across diversified markets and geographies to serving a
small number of relatively large volume customers; our intent to enter new
market segments; the levels of customer orders overall and, in particular,
from large customers and the delivery lead times associated therewith;
anticipated new and existing customer wins; the financial and operational
impact of customer changes to shipping schedules; the derivation of a portion
of our sales in each quarter from orders booked in the same quarter; our
intent to expand the percentage of revenue associated with licensing our
intellectual property to third parties; our plans to invest in expanded
manufacturing capacity, including the introduction of new manufacturing
processes, and the timing, location, and funding thereof; our belief that cash
generated from operations together with our available cash and cash
equivalents will be sufficient to fund planned operational needs and capital
equipment purchases, for the foreseeable future; our outlook regarding tariffs
and the impact thereof on our business; our belief that we have limited
exposure to currency risks; our intentions regarding the declaration and
payment of cash dividends; our intentions regarding protecting our rights
under our patents; and our expectation that no current litigation or claims
will have a material adverse impact on our financial position or results of
operations. These forward-looking statements are based upon our current
expectations and estimates associated with prospective events and
circumstances that may or may not be within our control and as to which there
can be no assurance. Actual results could differ materially from those implied
by forward-looking statements as a result of various factors, including but
not limited to those described above, as well as those described in the
Company's Annual Report on Form 10-K for the year ended December 31, 2023
under Part I, Item 1 - "Business," under Part I, Item 1A - "Risk Factors,"
under Part I, Item 3 - "Legal Proceedings," and under Part II, Item 7 -
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and those described in this Quarterly Report on Form 10-Q,
particularly under Part I, Item 2 - "Management's Discussion and Analysis of
Financial Condition and Results of Operations." The discussion of our business
contained herein, including the identification and assessment of factors that
may influence actual results, may not be exhaustive. Therefore, the
information presented should be read together with other documents we file
with the SEC from time to time, including our Annual Reports on Form 10-K, our
Quarterly Reports on Form 10-Q and our Current Reports on Form 8-K, which may
supplement, modify, supersede, or update the factors discussed in this
Quarterly Report on Form 10-Q. Any forward-looking statement made in this
Quarterly Report on Form 10-Q is based on information currently available to
us and speaks only as of the date on which it is made. We do not undertake any
obligation to update any forward-looking statements as a result of future
events or developments, except as required by law.
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Table of Contents
VICOR CORPORATION
Management's Discussion and Analysis of
Financial Condition and Results of Operation
March 31, 2024
Overview
We design, develop, manufacture, and market modular power components and power
systems for converting electrical power for use in electrically-powered
devices. Our competitive position is supported by innovations in product
design and achievements in product performance, largely enabled by our focus
on the research and development of advanced technologies and processes, often
implemented in proprietary semiconductor circuitry, materials, and packaging.
Many of our products incorporate patented or proprietary implementations of
high-frequency switching topologies enabling power system solutions that are
more efficient and much smaller than conventional alternatives. Our strategy
emphasizes demonstrable product differentiation and a value proposition based
on competitively superior solution performance, advantageous design
flexibility, and a compelling total cost of ownership. While we offer a wide
range of alternating current ("AC") and direct current ("DC") power conversion
products, we consider our core competencies to be associated with 48V DC
distribution, which offers numerous inherent cost and performance advantages
over lower distribution voltages. However, we also offer products addressing
other DC voltage standards (e.g., 380V for power distribution in data centers,
110V for rail applications, 28V for military and avionics applications, and
24V for industrial automation).
Based on design, performance, and form factor considerations, as well as the
range of evolving applications for which our products are appropriate, we
categorize our product portfolios as either "Advanced Products" or "Brick
Products." The Advanced Products category consists of our more recently
introduced products, which are largely used to implement our proprietary
Factorized Power ArchitectureTM ("FPA"), an innovative power distribution
architecture enabling flexible, rapid power system design using individual
components optimized to perform a specific conversion function.
The Brick Products category largely consists of our broad and well-established
families of integrated power converters, incorporating multiple conversion
stages, used in conventional power systems architectures. Given the growth
profiles of the markets we serve with our Advanced Products line and our Brick
Products line, our strategy involves a transition in organizational focus,
emphasizing investment in our Advanced Products line and targeting high growth
market segments with a low-mix, high-volume operational model, while
maintaining a profitable business in the mature market segments we serve with
our Brick Products line with a high-mix, low-volume operational model.
The applications in which our Advanced Products and Brick Products are used
are typically in the higher-performance, higher-power segments of the market
segments we serve. With our Advanced Products, we generally serve large
Original Equipment Manufacturers ("OEMs"), Original Design Manufacturers
("ODMs"), and their contract manufacturers, with sales currently concentrated
in the data center and hyperscaler segments of enterprise computing, in which
our products are used for power delivery on server motherboards, in server
racks, and across datacenter infrastructure. We have established a leadership
position in the emerging market segment for powering high-performance
processors used for acceleration of applications associated with artificial
intelligence ("AI"). Our customers in the AI market segment include the
leading innovators in processor and accelerator design, as well as early
adopters in cloud computing and high performance computing. We also serve
applications in aerospace and aviation, defense electronics, satellites,
factory automation, instrumentation, test equipment, transportation,
telecommunications and networking infrastructure, and vehicles (notably in the
autonomous driving, electric vehicle, and hybrid vehicle niches of the vehicle
segment). With our Brick Products, we generally serve a fragmented base of
large and small customers, concentrated in aerospace and defense electronics,
industrial equipment, instrumentation and test equipment, and transportation
(notably in rail and heavy equipment applications). With our strategic
emphasis on larger, high-volume customers, we expect to experience over time a
greater concentration of sales among relatively fewer customers.
Our quarterly consolidated operating results can be difficult to forecast and
have been subject to significant fluctuations. We plan our production and
inventory levels based on management's estimates of customer demand, customer
forecasts, and other information sources. Customer forecasts, particularly
those of OEM, ODM, and contract manufacturing customers to which we supply
Advanced Products in high volumes, are subject to scheduling changes on short
notice, contributing to operating inefficiencies and excess costs. In
addition, external factors such as supply chain uncertainties, which are often
associated with the cyclicality of the electronics industry, regional
macroeconomic and trade-related circumstances, and force majeure events (most
recently evidenced by the COVID-19 pandemic), have caused our operating
results to vary meaningfully. Supply chain disruptions, including those
associated with our reliance on outsourced package process steps that are
essential in the production of some of our Advanced Products, and those
relating, for example, to the procurement of raw material, have in the past
negatively impacted and may in the future negatively impact our operating
results. We have taken steps to mitigate the impact of supply chain
disruptions by, among other things and in varying degrees, moving outsourced
manufacturing steps in-house to the Company, ordering supplies with extended
lead times, paying higher prices for certain supplies or outsourced
production, and expediting deliveries at a cost premium. The resulting
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VICOR CORPORATION
Management's Discussion and Analysis of
Financial Condition and Results of Operation
March 31, 2024
impact of the steps taken to mitigate supply chain disruptions have, to
varying degrees and at different times, reduced our revenue, gross margin,
operating profit and cash flow and may continue to do so in the future. While
we continue to make progress in moving outsourced manufacturing steps in-house
to the Company, we are still experiencing long lead times on certain raw
material components, and uncertainty of output from our outsourced
manufacturing supplier. Our quarterly gross margin as a percentage of net
revenues may vary, depending on production volumes, average selling prices,
average unit costs, the mix of products sold during that quarter, and the
level of importation of raw materials subject to tariffs. Our quarterly
operating margin as a percentage of net revenues also may vary with changes in
revenue and product level profitability, but our operating costs are largely
associated with compensation and related employee costs, which are not subject
to sudden or significant changes.
Changes from Previously Disclosed Results
As discussed below, we reported a net loss for the first quarter of 2024 of
$(14,473,000), or $(0.33) per diluted share, compared to $11,244,000, or $0.25
per diluted share, for the first quarter of 2023. Initially, in our earnings
release issued on April 23, 2024, we disclosed net income for the first
quarter of 2024 of $2,604,000, or $0.06 per diluted share. On April 24, 2024,
after the issuance of our earnings release and completion of the related
earnings call, the U.S. District Court for the Eastern District of Texas (the
"District Court") issued an order granting SynQor, Inc.'s motions for enhanced
damages, pre-judgment and post-judgment interest, costs and attorneys' fees.
The District Court also entered a final judgment reflecting these rulings. The
Company anticipates appealing the District Court's final judgment to the
United States Court of Appeals for the Federal Circuit.
In light of this judgment, in accordance with applicable accounting standards,
we recorded an incremental litigation related loss reserve of $17,200,000 in
the first quarter of 2024, resulting in the decrease in our reported net
income and net income per share from the amounts previously disclosed in our
earnings release, as well as a corresponding $17,200,000 increase in operating
expenses to $61,238,000 from the previously disclosed $44,038,000. See Note 10
to the Condensed Consolidated Financial Statements for additional information
regarding the SynQor litigation and loss reserve.
Summary of First Quarter 2024 Financial Performance Compared to Fourth Quarter
2023 Financial Performance
The following summarizes our financial performance for the first quarter of
2024, compared to the fourth quarter of 2023:
.
Net revenues decreased 9.5% to $83,872,000 for the first quarter of 2024, from
$92,652,000 for the fourth quarter of 2023. Net revenues for Brick Products
decreased 11.7% compared to the fourth quarter of 2023, primarily due to
reduced market demand and lower available backlog. Advanced Products net
revenues decreased 7.3% compared to the fourth quarter of 2023, primarily due
to our continued softness in underpenetrated markets, partially offset by
increased royalty revenue in the quarter.
.
Export sales represented approximately 42.6% of total net revenues in the
first quarter of 2024 as compared to 56.5% in the fourth quarter of 2023.
.
Gross margin decreased to $45,123,000 for the first quarter of 2024 from
$47,344,000 for the fourth quarter of 2023, with gross margin, as a percentage
of net revenues, increasing to 53.8% for the first quarter of 2024 from 51.1%
for the fourth quarter of 2023. The decrease in gross margin dollars was
primarily the result of lower sales volume in the first quarter of 2024, with
the increase in gross margin percentage primarily attributable to improved
sales mix on that volume and a reduction of freight-in and tariff spending of
$153,000 (net of approximately $0 in duty drawback recovery in the first
quarter of 2024 and $1,239,000 in duty drawback recovery in the fourth quarter
of 2023 of previously paid tariffs).
.
Backlog, which represents the total value of orders for products for which
shipment is scheduled within the next 12 months, was approximately
$150,340,000 at the end of the first quarter of 2024, as compared to
$160,805,000 at the end of the fourth quarter of 2023.
.
Operating expenses for the first quarter of 2024 increased $22,543,000, or
56.4%, to $62,538,000 from $39,995,000 for the fourth quarter of 2023.
Selling, general and administrative expenses increased approximately
$3,305,000, primarily due to an increase in legal expenses. Research and
development expenses increased approximately $738,000, primarily due to an
increase in compensation expense. Litigation-contingency expense related to
the SynQor litigation was $17,200,000 for the first quarter of 2024, with no
comparable expense in the fourth quarter of 2023. See Note 10 to the Condensed
Consolidated Financial Statements for additional information.
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VICOR CORPORATION
Management's Discussion and Analysis of
Financial Condition and Results of Operation
March 31, 2024
.
We reported a net loss for the first quarter of 2024 of $(14,473,000), or
$(0.33) per diluted share, compared to net income of $8,668,000, or $0.19 per
diluted share, for the fourth quarter of 2023.
.
For the first quarter of 2024, depreciation and amortization totaled
$4,614,000 and capital additions totaled $7,270,000 as compared to
depreciation and amortization of $4,038,000 and capital additions of
$7,163,000 for the fourth quarter of 2023.
.
Inventories increased by approximately $5,737,000, or 5.4%, to $112,316,000 at
March 31, 2024, compared to $106,579,000 at December 31, 2023.
Three Months Ended March 31, 2024 Compared to Three Months Ended March 31, 2023
Net revenues for the first quarter of 2024 were $83,872,000, a decrease of
$13,944,000, or 14.3%, as compared to $97,816,000 for the first quarter of
2023. Net revenues, by product line, for the three months ended March 31, 2024
and 2023 were as follows (dollars in thousands):
Decrease
2024 2023 $ %
Advanced Products $ 43,280 $ 51,291 $ (8,011 ) (15.6 )%
Brick Products 40,592 46,525 (5,933 ) (12.8 )%
Total $ 83,872 $ 97,816 $ (13,944 ) (14.3 )%
The decrease in net revenues for Advanced Products was primarily due to our
continued softness in underpenetrated markets, partially offset by increased
royalty revenue in the quarter. The decrease in net revenues for Brick
Products was primarily due to reduced market demand and lower available
backlog.
Gross margin for the first quarter of 2024 decreased $1,411,000, or 3.0%, to
$45,123,000, from $46,534,000 for the first quarter of 2023. Gross margin, as
a percentage of net revenues, increased to 53.8% for the first quarter of
2024, compared to 47.6% for the first quarter of 2023. The decrease in gross
margin dollars was primarily the result of lower sales volume in the first
quarter of 2024, with the increase in gross margin percentage primarily
attributable to improved sales mix on that volume, including royalty revenue,
compared to the first quarter of 2023 and certain reductions in supply chain
costs, including a reduction of $1,185,000 in outsourced manufacturing costs
partially offset by incremental costs of bringing production in-house for
certain Advanced Products, and an increase in freight-in and tariff spending
of $1,222,000 (net of approximately $0 in duty drawback recovery in the first
quarter of 2024 and $2,965,000 in duty drawback recovery in the first quarter
of 2023 of previously paid tariffs).
Selling, general and administrative expenses were $25,999,000 for the first
quarter of 2024, an increase of $5,776,000, or 28.6%, from $20,223,000 for the
first quarter of 2023. Selling, general and administrative expenses as a
percentage of net revenues increased to 31.0% for the first quarter of 2024
from 20.7% for the first quarter of 2023. The components of the $5,776,000
increase in selling, general and administrative expenses for the first quarter
of 2024 from the first quarter of 2023 were as follows (dollars in thousands):
Increase (decrease)
Legal $ 5,170 380.7 % (1 )
Advertising 404 39.7 % (2 )
Compensation 348 2.8 % (3 )
Outside services 184 23.4 % (4 )
Audit fees 142 22.2 %
Training and professional development 128 1667.6 % (5 )
Travel 123 26.6 %
Commissions (745 ) (78.8 )% (6 )
Other, net 22 0.8 %
$ 5,776 28.6 %
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VICOR CORPORATION
Management's Discussion and Analysis of
Financial Condition and Results of Operation
March 31, 2024
(1)
Increase primarily attributable to an increase in activity related to
corporate legal matters, asserting our intellectual property rights.
(2)
Increase primarily attributable to increases in sales support expenses, direct
mailings, and advertising in trade publications.
(3)
Increase primarily attributable to annual compensation adjustments in May 2023
and higher stock-based compensation expense associated with stock options
awarded in May 2023.
(4)
Increase primarily attributable to an increase in the use of consultants.
(5)
Increase primarily attributable to training for new internal-use software
implementation.
(6)
Decrease primarily attributable to a reduced use of outside sales
representatives.
Research and development expenses were $18,039,000 for the first quarter of
2024, an increase of $2,170,000, or 13.7%, compared to $15,869,000 for the
first quarter of 2023. As a percentage of net revenues, research and
development expenses increased to 21.5% for the first quarter of 2024 from
16.2% for the first quarter of 2023. The components of the $2,170,000 increase
in research and development expenses were as follows (dollars in thousands):
Increase (decrease)
Project and pre-production materials $ 922 36.5 % (1 )
Overhead absorption 714 81.6 % (2 )
Compensation 421 3.9 % (3 )
Depreciation and amortization 106 16.0 %
Equipment set-up and calibration 99 51.0 %
Deferred costs (350 ) (100.0 )% (4 )
Other, net 258 10.5 %
$ 2,170 13.7 %
(1)
Increase primarily attributable to increased prototype development costs for
Advanced Products.
(2)
Increase primarily attributable to a decrease in research and development
("R&D") personnel incurring time on production activities, compared to R&D
activities.
(3)
Increase primarily attributable to annual compensation adjustments in May 2023
and higher stock-based compensation expense associated with stock options
awarded in May 2023.
(4)
Decrease primarily attributable to an increase in deferred costs capitalized
for certain non-recurring engineering projects for which the related revenues
had been deferred.
Litigation-contingency expense was $17,200,000 for the first quarter of 2024
which related to the SynQor litigation, as compared to $0 for the first
quarter of 2023. See Note 10 to the Condensed Consolidated Financial
Statements for additional information.
The significant components of ''Other income (expense), net'' for the three
months ended March 31, and the changes between the periods were as follows (in
thousands):
2024 2023 Increase (decrease)
Interest income, net $ 2,787 $ 1,732 $ 1,055
Rental income 198 198 -
Foreign currency (losses) gains, net (279 ) 19 (298 )
Other, net 18 1 17
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VICOR CORPORATION
Management's Discussion and Analysis of
Financial Condition and Results of Operation
March 31, 2024
$ 2,724 $ 1,950 $ 774
Our exposure to market risk fluctuations in foreign currency exchange rates
relates to the operations of Vicor Japan Company, Ltd. ("VJCL"), for which the
functional currency is the Japanese Yen, and all other subsidiaries in Europe
and Asia, for which the functional currency is the U.S. Dollar. These
subsidiaries in Europe and Asia experienced more unfavorable foreign currency
exchange rate fluctuations in the first quarter of 2024 compared to the first
quarter of 2023. Interest income for the three months ended March 31, 2024
increased due to higher interest rates received on the cash and cash
equivalents balance the Company holds.
Loss before income taxes was $(13,391,000) for the first quarter of 2024,
as compared to income before taxes of $12,392,000 for the first quarter of 2023.
The provision for income taxes and the effective income tax rates for the
three months ended March 31, 2024 and 2023 were as follows (dollars in
thousands):
2024 2023
Provision for income taxes $ 1,071 $ 1,141
Effective income tax rate (8.0 )% 9.2 %
The effective tax rates differ from the statutory tax rates for the three
months ended March 31, 2024 and 2023 primarily due to the Company's full
valuation allowance position against domestic deferred tax assets. The
provision for income taxes for the three months ended March 31, 2024 and 2023
included estimated federal, state and foreign income taxes in jurisdictions in
which the Company does not have sufficient tax attributes.
See Note 8 to the Condensed Consolidated Financial Statements for disclosure
regarding our current assessment of the valuation allowance against all
domestic deferred tax assets, and the possible release (i.e., reduction) of
the allowance in the future.
We reported net loss for the first quarter of 2024 of $(14,473,000), or
$(0.33) per diluted share, compared to $11,244,000, or $0.25 per diluted
share, for the first quarter of 2023.
Liquidity and Capital Resources
As of March 31, 2024, we had $239,172,000 in cash and cash equivalents. The
ratio of total current assets to total current liabilities was 6.7:1 as of
March 31, 2024 and 9.5:1 as of December 31, 2023. Working capital, defined as
total current assets less total current liabilities, decreased $12,013,000 to
$364,184,000 as of March 31, 2024 from $376,197,000 as of December 31, 2023.
The changes in working capital from December 31, 2023 to March 31, 2024 were
as follows (in thousands):
Increase
(decrease)
Cash and cash equivalents $ (3,047 )
Accounts receivable 4,973
Inventories 5,737
Other current assets 236
Accounts payable (339 )
Accrued compensation and benefits (418 )
Accrued expenses (1,976 )
Accrued litigation (17,200 )
Short-term deferred revenue 473
Other (452 )
$ (12,013 )
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VICOR CORPORATION
Management's Discussion and Analysis of
Financial Condition and Results of Operation
March 31, 2024
The primary sources of cash for the three months ended March 31, 2024 were
$2,582,000 generated from operations, and $1,756,000 received in connection
with the exercise of options to purchase our Common Stock awarded under our
stock option plans and the issuance of Common Stock under our 2017 Employee
Stock Purchase Plan. The primary uses of cash during the three months ended
March 31, 2024 were for the purchase of property and equipment of $7,270,000.
In November 2000, our Board of Directors authorized the repurchase of up to
$30,000,000 of our Common Stock (the "November 2000 Plan"). The November 2000
Plan authorizes us to make such repurchases from time to time in the open
market or through privately negotiated transactions. The timing and amounts of
Common Stock repurchases are at the discretion of management based on its view
of economic and financial market conditions. We did not repurchase shares of
Common Stock under the November 2000 Plan during the three months ended March
31, 2024. As of March 31, 2024, we had approximately $8,541,000 remaining
available for repurchases of our Common Stock under the November 2000 Plan.
As of March 31, 2024, we had a total of approximately $11,475,000 of
cancelable and non-cancelable capital expenditure commitments, principally for
manufacturing and production equipment, which we intend to fund with existing
cash, and approximately $1,983,000 of capital expenditure items and
internal-use software which had been received and included in Property, plant
and equipment, net in the accompanying Condensed Consolidated Balance Sheets,
but not yet paid for. Our primary needs for liquidity are for making
continuing investments in manufacturing and production equipment. We believe
cash generated from operations together with our available cash and cash
equivalents will be sufficient to fund planned operational needs and capital
equipment purchases, for both the short and long term.
We do not consider the impact of inflation or fluctuations in the exchange
rates for foreign currency transactions to have been significant during the
last three fiscal years.
Critical Accounting Policies and Estimates
There have been no material changes in our judgments and assumptions
associated with the development of our critical accounting estimates during
the period ended March 31, 2024. Refer to the section entitled "Critical
Accounting Policies and Estimates" in Part II, Item 7 - "Management's
Discussion and Analysis of Financial Condition and Results of Operations" of
the Company's Annual Report on Form 10-K for the year ended December 31, 2023.
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Vicor Corporation
March 31, 2024
Item 3 - Quantitative and Qu
alitative Disclosures About Market Risk
We are exposed to a variety of market risks, including changes in interest
rates affecting the return on our cash and cash equivalents, our short-term
investments and fluctuations in foreign currency exchange rates. As our cash
and cash equivalents and short-term investments consist principally of cash
accounts, money market securities, and U.S. Treasury securities, which are
short-term in nature, we believe our exposure to market risk on interest rate
fluctuations for these investments is not significant. As of March 31, 2024,
our long-term investment portfolio, recorded on our Condensed Consolidated
Balance Sheet as "Long-term investment, net", consisted of a single auction
rate security with a par value of $3,000,000, purchased through and held in
custody by a broker-dealer affiliate of Bank of America, N.A., that has
experienced failed auctions (the "Failed Auction Security") since February
2008. While the Failed Auction Security is Aaa/AA+ rated by major credit
rating agencies, collateralized by student loans and guaranteed by the U.S.
Department of Education under the Federal Family Education Loan Program,
continued failure to sell at its periodic auction dates (i.e., reset dates)
could negatively impact the carrying value of the investment, in turn leading
to impairment charges in future periods. Periodic changes in the fair value of
the Failed Auction Security attributable to credit loss (i.e., risk of the
issuer's default) are recorded through earnings as a component of "Other
income (expense), net", with the remainder of any periodic change in fair
value not related to credit loss (i.e., temporary "mark-to-market" carrying
value adjustments) recorded in "Accumulated other comprehensive loss", a
component of Stockholders' Equity. Should we conclude a decline in the fair
value of the Failed Auction Security is other than temporary, such losses
would be recorded through earnings as a component of "Other income (expense),
net". We do not believe there was an "other-than-temporary" decline in value
in this security as of March 31, 2024.
Our exposure to market risk for fluctuations in foreign currency exchange
rates relates to the operations of VJCL, for which the functional currency is
the Japanese Yen, and changes in the relative value of the Yen to the U.S.
Dollar. The functional currency of all other subsidiaries in Europe and other
subsidiaries in Asia is the U.S. Dollar. While we believe the risk of
fluctuations in foreign currency exchange rates for these subsidiaries is
generally not significant, they can be subject to substantial currency
changes, and therefore foreign exchange exposures.
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Vicor Corporation
March 31, 2024
Item 4 - Contr
ols and Procedures
(a)
Disclosure regarding controls and procedures.
As required by Rule 13a-15 under the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), management, with the participation of our Chief
Executive Officer ("CEO") (who is our principal executive officer) and Chief
Financial Officer ("CFO") (who is our principal financial officer), conducted
an evaluation of the effectiveness of our disclosure controls and procedures
as of the end of the last fiscal quarter (i.e., March 31, 2024). The term
"disclosure controls and procedures," as defined in Rules 13a-15(e) and
15d-15(e) under the Exchange Act, means controls and other procedures of a
company that are designed to ensure information required to be disclosed by a
company in the reports that it files or submits under the Exchange Act is
recorded, processed, summarized and reported, within the time periods
specified in the Securities and Exchange Commission's rules and forms.
Disclosure controls and procedures include, without limitation, controls and
procedures designed to ensure information required to be disclosed by a
company in the reports it files or submits under the Exchange Act is
accumulated and communicated to the company's management, including its
principal executive and principal financial officers, as appropriate to allow
timely decisions regarding required disclosure. Management recognizes any
controls and procedures, no matter how well designed and operated, can provide
only reasonable assurance of achieving their objectives and management
necessarily applies its judgment in evaluating the cost-benefit relationship
of possible controls and procedures. Based on the evaluation of our disclosure
controls and procedures as of March 31, 2024, our CEO and CFO concluded, as of
such date, our disclosure controls and procedures were effective at the
reasonable assurance level.
A control system, no matter how well designed and operated, can provide only
reasonable, not absolute, assurance that the control system's objectives will
be met. Accordingly, management, including the CEO and CFO, recognizes our
disclosure controls or our internal control over financial reporting may not
prevent or detect all errors and all fraud. The design of a control system
must reflect the fact there are resource constraints, and the benefits of
controls must be considered relative to their costs. Further, because of the
inherent limitations in all control systems, no evaluation of controls can
provide absolute assurance misstatements due to error or fraud will not occur
or that all control issues and instances of fraud, if any, within the Company
have been detected. These inherent limitations include the realities that
judgments in decision-making can be faulty and that breakdowns can occur
because of simple error or mistake. Controls can also be circumvented by the
individual acts of some persons, by collusion of two or more people, or by
management override of the controls. The design of any system of controls is
based in part on certain assumptions about the likelihood of future events,
and there can be no assurance that any design will succeed in achieving its
stated goals under all potential future conditions. Projections of any
control's effectiveness to future periods are subject to risks. Over time,
controls may become inadequate because of changes in conditions or
deterioration in the degree of compliance with policies or procedures.
(b)
Changes in internal control over financial reporting.
There was no change in our internal control over financial reporting that
occurred during the fiscal quarter ended March 31, 2024, that has materially
affected, or is reasonably likely to materially affect, our internal control
over financial reporting.
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Vicor Corporation
Part II - Ot
her Information
March 31, 2024
Item 1 - Leg
al Proceedings
See Note 10.
Commitments and Contingencies
in the Notes to Condensed Consolidated Financial Statements in Part I, Item 1
- "Financial Statements."
Item 1A -
Risk Factors
There have been no material changes in the risk factors described in Part I,
Item 1A - "Risk Factors" of the Company's Annual Report on Form 10-K for the
year ended December 31, 2023.
Item 5 - Other
Information
During the three months ended March 31, 2024
, no director or Section 16 officer of the Company
adopted
or
terminated
a "Rule 10b5-1 trading arrangement" or "non-Rule 10b5-1 trading arrangement,"
as each term is defined in Item 408(a) of Regulation S-K.
Item 6 -
Exhibits
Exhibit Number Description
3.1 Restated Certificate of Incorporation,
dated February 28, 1990 (1)
3.2 Certificate of Ownership and Merger Merging Westcor Corporation, a Delaware
Corporation, into Vicor Corporation, a Delaware corporation, dated December 3, 1990 (1)
3.3 Certificate of Amendment of Restated Certificate
of Incorporation, dated May 10, 1991 (1)
3.4 Certificate of Amendment of Restated Certificate
of Incorporation, dated June 23, 1992 (1)
3.5 Bylaws, as amended (2)
31.1 Certification of Chief Executive Officer
pursuant to Rule 13a-14(a) of the Exchange Act.
31.2 Certification of Chief Financial Officer
pursuant to Rule 13a-14(a) of the Exchange Act.
32.1 Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350,
as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2 Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350,
as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS Inline XBRL Instance Document - the instance document does not appear in the Interactive
Data File because its XBRL tags are embedded within the Inline XBRL document.
101.SCH Inline XBRL Taxonomy
Extension Schema Document.
101.CAL Inline XBRL Taxonomy Extension
Calculation Linkbase Document.
101.DEF Inline XBRL Taxonomy Extension
Definition Linkbase Document.
101.LAB Inline XBRL Taxonomy Extension
Label Linkbase Document.
101.PRE Inline XBRL Taxonomy Extension
Presentation Linkbase Document.
104 Cover Page Interactive Data File (formatted
as Inline XBRL and contained in Exhibit 101)
(1) Filed as an exhibit to the Company's Annual Report on Form 10-K filed on
March 29, 2001 (File No. 000-18277) and incorporated herein by reference.
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Table of Contents
(2) Filed as an exhibit to the Company's Current Report on Form 8-K filed
on June 4, 2020 (File No. 000-18277) and incorporated herein by reference.
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Table of Contents
SIGNAT
URES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
VICOR CORPORATION
Date: May 1, 2024 By: /s/ Patrizio Vinciarelli
Patrizio Vinciarelli
Chairman of the Board, President and
Chief Executive Officer
(Principal Executive Officer)
Date: May 1, 2024 By: /s/ James F. Schmidt
James F. Schmidt
Vice President, Chief Financial Officer
(Principal Financial Officer)
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Exhibit 31.1
CHIEF EXECUTIVE OFFICER CERTIFICATION
I,
Patrizio Vinciarelli
, certify:
1.
I have reviewed this Quarterly Report on Form 10-Q of Vicor Corporation;
2.
Based on my knowledge, this report does not contain any untrue statement of a
material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this report;
3.
Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material respects
the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this report;
4.
The registrants other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over
financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f))
for the registrant and have:
a)
Designed such disclosure controls and procedures, or caused such disclosure
controls and procedures to be designed under our supervision, to ensure that
material information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities,
particularly during the period in which this report is being prepared;
b)
Designed such internal control over financial reporting, or caused such
internal control over financial reporting to be designed under our
supervision, to provide reasonable assurance regarding the reliability of
financial reporting and the preparation of financial statements for external
purposes in accordance with generally accepted accounting principles;
c)
Evaluated the effectiveness of the registrants disclosure controls and
procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures, as of the end of the
period covered by this report based on such evaluation; and
d)
Disclosed in this report any change in the registrants internal control over
financial reporting that occurred during the registrants most recent fiscal
quarter (the registrants fourth fiscal quarter in the case of an annual
report) that has materially affected, or is reasonably likely to materially
affect, the registrants internal control over financial reporting; and
5.
The registrants other certifying officer and I have disclosed, based on our
most recent evaluation of internal control over financial reporting, to the
registrants auditors and the audit committee of the registrants board of
directors (or persons performing the equivalent functions):
a)
All significant deficiencies and material weaknesses in the design or
operation of internal control over financial reporting which are reasonably
likely to adversely affect the registrants ability to record, process,
summarize and report financial information; and
b)
Any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrants internal control over
financial reporting.
Dated: May 1, 2024 /s/ Patrizio Vinciarelli
Patrizio Vinciarelli
Chief Executive Officer
(Principal Executive Officer)
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Exhibit 31.2
CHIEF FINANCIAL OFFICER CERTIFICATION
I,
James F. Schmidt
, certify:
1.
I have reviewed this Quarterly Report on Form 10-Q of Vicor Corporation;
2.
Based on my knowledge, this report does not contain any untrue statement of a
material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this report;
3.
Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material respects
the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this report;
4.
The registrants other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over
financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f))
for the registrant and have:
a)
Designed such disclosure controls and procedures, or caused such disclosure
controls and procedures to be designed under our supervision, to ensure that
material information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities,
particularly during the period in which this report is being prepared;
b)
Designed such internal control over financial reporting, or caused such
internal control over financial reporting to be designed under our
supervision, to provide reasonable assurance regarding the reliability of
financial reporting and the preparation of financial statements for external
purposes in accordance with generally accepted accounting principles;
c)
Evaluated the effectiveness of the registrants disclosure controls and
procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures, as of the end of the
period covered by this report based on such evaluation; and
d)
Disclosed in this report any change in the registrants internal control over
financial reporting that occurred during the registrants most recent fiscal
quarter (the registrants fourth fiscal quarter in the case of an annual
report) that has materially affected, or is reasonably likely to materially
affect, the registrants internal control over financial reporting; and
5.
The registrants other certifying officer and I have disclosed, based on our
most recent evaluation of internal control over financial reporting, to the
registrants auditors and the audit committee of the registrants board of
directors (or persons performing the equivalent functions):
a)
All significant deficiencies and material weaknesses in the design or
operation of internal control over financial reporting which are reasonably
likely to adversely affect the registrants ability to record, process,
summarize and report financial information; and
b)
Any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrants internal control over
financial reporting.
Dated: May 1, 2024 /s/ James F. Schmidt
James F. Schmidt
Vice President, Chief Financial Officer
(Principal Financial Officer)
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Exhibit 32.1
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Vicor Corporation (the Company) on
Form 10-Q for the period ended March 31, 2024 as filed with the Securities and
Exchange Commission on the date hereof (the Report), I, Patrizio Vinciarelli,
Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section
1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002,
that:
(1)
The Report fully complies with the requirements of Section 13(a) or 15(d) of
the Securities Exchange Act of 1934; and
(2)
The information contained in the Report fairly presents, in all material
respects, the financial condition and results of operations of the Company.
/s/ Patrizio Vinciarelli
Patrizio Vinciarelli
President, Chairman of the Board and
Chief Executive Officer
May 1, 2024
A signed original of this written statement required by Section 906 has been
provided to the Company and will be retained by the Company and furnished to
the Securities and Exchange Commission or its staff upon request.
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Exhibit 32.2
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Vicor Corporation (the Company) on
Form 10-Q for the period ended March 31, 2024 as filed with the Securities and
Exchange Commission on the date hereof (the Report), I, James F. Schmidt,
Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section
1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002,
that:
(1)
The Report fully complies with the requirements of Section 13(a) or 15(d) of
the Securities Exchange Act of 1934; and
(2)
The information contained in the Report fairly presents, in all material
respects, the financial condition and results of operations of the Company.
/s/ James F. Schmidt
James F. Schmidt
Vice President, Chief Financial Officer
May 1, 2024
A signed original of this written statement required by Section 906 has been
provided to the Company and will be retained by the Company and furnished to
the Securities and Exchange Commission or its staff upon request.
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