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Vicor Corp (VICR) Q4 2025 Earnings Call Transcript

•February 19, 2026

Motley Fool – Earnings Transcripts•Feb 19, 2026

Why It Matters

The strong demand signal and capacity constraints underline near‑term revenue visibility, while the pending fab expansion and aggressive IP licensing position Vicor for accelerated growth in high‑performance power markets.

Key Takeaways

•Advanced product revenue up 26.6% YoY
•Book-to-bill ratio exceeds 1.2, indicating strong demand
•Patent settlement adds $45M, licensing potential huge
•Export share near 50%, showing global reach
•Backlog grew 15.8% to $176.9M

Pulse Analysis

Vicor’s Q4 earnings highlight a pivotal shift toward its high‑margin advanced power‑delivery solutions. The 26.6% year‑over‑year jump in advanced product revenue reflects accelerating adoption of Gen 5 vertical power delivery (VPD) modules across AI, hyperscaler, and test‑equipment customers. Coupled with a book‑to‑bill ratio above 1.2, the data signals a robust order pipeline that outpaces current manufacturing capacity, prompting the firm to explore a second chip fab to sustain growth through 2028. This capacity expansion, whether via greenfield construction or acquisition, will be critical for meeting the projected 80% fab utilization target and preserving Vicor’s competitive edge in high‑current density markets.

Intellectual‑property enforcement emerges as a parallel growth engine. The $45 million patent‑litigation settlement, while sizable, is portrayed by management as a modest fraction of the anticipated licensing upside, with the U.S. International Trade Commission launching a second investigation into infringing power modules. Analysts anticipate that successful licensing could generate “hundreds of millions” in incremental revenue, diversifying Vicor’s income beyond product sales and bolstering cash flow. This strategy aligns with broader industry trends where semiconductor firms monetize IP portfolios to offset cyclical demand fluctuations.

Geographically, Vicor’s export mix approaching 50% underscores its expanding global footprint, particularly in aerospace, defense, and industrial automation sectors that demand high‑efficiency power solutions. The company’s backlog increase to $176.9 million and its focus on capacity‑reservation agreements with strategic customers suggest a disciplined approach to revenue recognition and supply‑chain reliability. As the market for automatic test equipment and next‑generation computing platforms expands, Vicor’s ability to scale manufacturing while leveraging IP licensing positions it for sustained top‑line acceleration and improved profitability over the next five years.

Vicor Corp (VICR) Q4 2025 Earnings Call Transcript

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DATE

Feb. 19, 2026, 5 p.m. ET

CALL PARTICIPANTS

Chief Executive Officer — Patrizio Vinciarelli
Chief Financial Officer — James F. Schmidt
Vice President, Global Sales and Marketing — Philip D. Davies

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TAKEAWAYS

Product Revenue -- $92,700,000 in the quarter, representing a 4.5% sequential increase and 15.3% year-over-year increase.
Royalty Revenue -- $14,500,000, down 33.1% sequentially due to a prior quarter catch-up amount, and down 7.8% year over year.
Full-Year Product Revenue -- $350,300,000, growing 4.1% year over year.
Full-Year Royalty Revenue -- $57,400,000, reflecting a 23.2% increase.
Patent Litigation Settlement -- $45,000,000 received within the year, resulting in total product and royalty revenue plus settlement up 26.1% to $452,700,000.
Advanced Product Revenue -- Increased 26.6% annually to $248,600,000, with a 4.4% sequential decrease mainly from prior quarter royalty catch-up; advanced products’ share of total revenue, including royalties, was 58% this quarter compared to 59.2% sequentially.
Brick Product Revenue -- Decreased 1.6% year over year to $159,100,000.
Exports -- Accounted for 49.3% of revenue, up from 42.8% sequentially; annual export mix increased to 50.8% from 48.2%.
Gross Margin -- 55.4% this quarter, down 2.1% sequentially, mainly from lower royalty catch-up; full year gross margin rose 6.1% to 57.3%.
Operating Expense -- Increased 2.7% sequentially; annual operating expenses as percent of revenue and settlement rose to 39.2% from 31.6%.
Q4 Operating Income -- $15,700,000, with a margin of 14.6%.
Full-Year Operating Income -- $81,800,000, or 18.1% of revenue plus settlement, versus a prior-year operating loss.
Tax Benefit -- $27,300,000 tax benefit in the quarter, resulting in an effective tax rate of -142%; annual effective tax rate was -25.4%, largely from partial recognition of deferred tax assets.
Q4 Net Income -- $46,500,000; GAAP diluted earnings per share of $1.01 using 46,297,000 shares.
Full-Year Net Income -- $118,600,000, up from $6,100,000; full-year diluted earnings per share of $2.61.
Cash and Cash Equivalents -- $402,800,000 at quarter end.
Operating Cash Flow -- $15,700,000 for the quarter.
Capital Expenditures -- $5,500,000; construction-in-progress at $7,800,000, with $6,900,000 left to spend, mainly for manufacturing equipment.
Book-to-Bill Ratio -- Sequentially improved to "well above one" in the quarter; Q4 exited above 1.2, and continued to increase in Q1.
Backlog -- Up 15.8% sequentially to $176,900,000.
Manufacturing Capacity Utilization -- CEO Vinciarelli confirmed: "the demand getting to a run rate that would utilize 80% or so of the capacity in Andover’s fab" within a year, with full fab capacity stated as "slightly above a billion dollars in revenues."
Second Chip Fab Planning -- Two offers made on land for a new facility; "no deal done yet," but management expects a decision "very soon." Alternatives include acquiring an existing building nearby to accelerate capacity expansion.
IP Enforcement and Licensing Growth -- The United States International Trade Commission has initiated a second investigation into "illegal importation of power modules and computing systems infringing Vicor's IP." Management expects "hundreds of millions of dollars" in future licensing revenues and stated: "the $45,000,000 event last year is, in hindsight, going to be another drop in the bucket to be sure, but not all that significant."
Industry Demand Drivers -- A lead customer is "ramping a Gen 4 factorized power system" with transition to a "Gen 5-based solution with higher current density and performance" expected in the second half, while production of Gen 4 continues to ramp at a steep rate.
Customer Engagement and Capacity Reservations -- Capacity reservation agreements are under discussion as the first chip fab nears high utilization; cash components from such agreements appear on the balance sheet, with revenue recognized on shipment.
Per-XPU Content Opportunity -- Philip D. Davies estimated content value "somewhere between $200 to $400 per XPU," dependent on required current and number of rails.
Market Outlook -- Aerospace, defense, and industrial market demand for automatic test equipment is "projecting high growth," and management claims the ability to double revenues from these markets over the next four to six years.

SUMMARY

Advanced product revenue growth and robust backlog expansion, coupled with a sequentially rising book-to-bill ratio exceeding 1.2, signal acceleration in demand and near-term manufacturing capacity constraints at the Andover fab. Management confirmed plans to add a second chip facility, with decisions pending between ground-up construction and acquisition of an existing site, and expedited expansion appears likely. Aggressive IP enforcement, including a new U.S. International Trade Commission investigation, supports a doubling-to-tripling of licensing opportunity, as leadership described recent patent litigation settlements as minor relative to projected licensing revenues. Engagements for Gen 5 VPD solutions are being prioritized among strategic customers due to limited near-term capacity, while other large sector opportunities such as aerospace, defense, and industrial automation are forecasted to contribute substantial growth in the years ahead.

Bookings pace in the current quarter is already above last quarter’s 1.2 book-to-bill ratio, per Schmidt’s comment.
Annual net income increased more than nineteenfold as a result of higher revenues, a large tax benefit, and a major litigation settlement.
Vicor(VICR+11.22%) is negotiating capacity reservation agreements as the first fab approaches prudent utilization thresholds, with shipment-based revenue recognition and customer cash prepayments impacting the balance sheet but not accelerating revenue timing.
Lead customer’s transition from Gen 4 to Gen 5 systems, along with selective Gen 5 customer engagement, reflects both technological deployment sequencing and near-term resource constraints.
Exposure to automatic test equipment markets, alongside long-term partners in brick products, positions Vicor for multi-year revenue expansion outside its lead AI and hyperscaler customers.

INDUSTRY GLOSSARY

Gen 4 / Gen 5 VPD: Successive generations of Vicor’s Vertical Power Delivery solutions, enabling higher current density and efficiency for power systems in advanced computing applications.
Book-to-Bill Ratio: Order intake divided by revenue recognized in the same period; a ratio above one signals increasing demand and future revenue visibility.
Brick Products: Traditional modular DC-DC converter product line, distinct from advanced VPD products, serving legacy industrial, aerospace, and defense markets.
FAE: Field Applications Engineer; technical experts who support customer design-in and integration of complex power modules.
Hyperscaler: Large-scale cloud computing providers or operators of highly-integrated data center infrastructure relying on advanced electronics.
XPU: Generic term for high-performance processing units (including CPUs, GPUs, NPUs, etc.) targeted at advanced computing workloads.

Full Conference Call Transcript

James F. Schmidt: fourth quarter and year ended 12/31/2025. I am James F. Schmidt, Chief Financial Officer, and I am in Andover with Patrizio Vinciarelli, Chief Executive Officer, and Philip D. Davies, Vice President, Global Sales and Marketing. After the market closed today, we issued a press release summarizing the financial results for the three months and year ending December 31. This press release has been posted on the Investor Relations page of our website, www.vicorpower.com. We also filed a Form 8-K today relating to the issuance of this press release. I remind listeners this conference call is being recorded. It is the copyrighted property of Vicor Corporation.

I also remind you that we may make forward-looking statements under the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995. Except for historical information contained in this call, matters discussed on this call, including any statements regarding current and planned products, markets, potential customers, potential market opportunities, expected events and announcements, and our capacity expansion, as well as management's expectations for sales growth, spending, and profitability are forward-looking statements involving risks and uncertainties. In light of these risks and uncertainties, we can offer no assurance that any forward-looking statement will, in fact, prove to be correct. Actual results may differ materially from those explicitly set forth in or implied by any of our remarks today.

Risks and uncertainties discussed on these dates are discussed in Item 1A of our 2024 Form 10-K, which we filed with the SEC on March 25. This document is available via the EDGAR system on the SEC's website. Please note the information provided during this conference call is accurate only as of today. Thursday, 02/19/2026. Vicor undertakes no obligation to update any statements, including forward-looking statements made during this call, and you should not rely upon such statements after the conclusion of this call. A webcast replay of today's call will be available shortly on the Investor Relations page of our website. I will now turn to a review of our Q4 and full year financial performance.

After which, Phil will review recent market developments, and Patrizio, Phil, and I will take your questions. In my remarks, I will focus mostly on the sequential quarterly change to P&L and balance sheet items, as well as full year-on-year changes and refer you to our press release and our upcoming Form 10-K for additional information. As stated in today's press release, Vicor recorded product revenue for the fourth quarter of $92,700,000, up 4.5% from the third quarter total of $88,700,000 and up 15.3% from the fourth quarter for a total of eighty. Royalty revenue for the fourth quarter totaled $14,500,000, a 33.1% decrease from $21.7 million in the third quarter, and a 7.8% decrease from $15,800,000 in 2024.

The sequential decrease in royalty revenue was the result of a catch-up amount that was included in the Q3 result. Product revenues for the year ended 12/31/2025 increased 4.1% to $350,300,000 from $312,500,000 for the prior year. Royalty revenue for the year ended 12/31/2025 totaled $57,400,000, a 23.2% increase from $46,600,000 for the year ended 12/31/2024. Total product revenue and royalty revenue, including a $45,000,000 patent litigation settlement received for the year ended 12/31/2025, increased 26.1% to $452,700,000 from $359,100,000 for the prior year. Advanced product revenue, which includes royalty revenue, decreased 4.4% sequentially, which was the result of the catch-up amount of royalty revenue in Q3. Brick products revenue declined 0.6% in the third quarter.

Revenues for advanced products for the year ending 2025 increased 26.6% to $248,600,000 from $197,300,000 the year before. Revenues for brick products for the year ending 2025 decreased 1.6% to $159,100,000 from $161,700,000. Shipments to stocking distributors decreased 11.1% but increased 5.3% year over year. Exports for the fourth quarter increased sequentially, as a percentage of total revenue, to approximately 49.3% from the prior quarter 42.8%. On a year-over-year basis, net sales increased as a percentage of total revenue to approximately 50.8% from the prior year's 48.2%. Q4 advanced product share of total revenue, including royalty revenue, decreased to 58% compared to 59.2% for the third quarter, with brick product share correspondingly increasing to 48.6%.

Turning to Q4 gross margin, we reported a consolidated gross profit margin of 55.4%, approximately 2.1% less than the prior quarter as a result of the lower catch-up amount in Q3. For the full year 2025, gross margin rose by 6.1% to 57.3% from 51.2% in the prior year. I will now turn to Q4 operating expense. Total operating expense increased 2.7% in the third quarter. For the full year 2025, operating expenses as a percent of revenue and patent litigation settlement increased to 39.2% from 31.6% in the prior year. The amount of total equity-based compensation expense for Q4 included in cost of goods, SG&A, and R&D was $1,088,000, $2,206,000, and $1,153,000, respectively, totaling approximately $4,447,000.

For Q4, we recorded operating income of $15,700,000, representing an operating margin of 14.6%. For the full year 2025, operating income totaled $81,800,000, or 18.1% of revenue and patent litigation settlement, compared to operating loss of $1,300,000, or minus 0.4% of revenue, in the prior year. Turning to income taxes, we reported a tax benefit in Q4 of approximately $27,300,000, representing an effective tax rate for the quarter of minus 142%, as a result of the partial recognition of certain deferred tax assets in the period. The tax benefit for the full year 2025 was approximately $40 million, representing an effective tax rate for the year of minus 25.4%. Net income for Q4 totaled $46,500,000.

GAAP diluted earnings per share was $1.01 based on a fully diluted share count of 46,297,000. For the full year 2025, net income increased to $118,600,000 from $6,100,000 in the prior year. In 2025, fully diluted earnings per share increased to $2.61 from $0.14 in the prior year. Turning to our cash flow and balance sheet, cash and cash equivalents totaled $402,800,000 in Q4. Accounts receivable, net of reserve, totaled $15,700,000 in the quarter, with DSOs for trade receivable of 84 days. Inventories, net of reserves, increased 1% sequentially to $91,300,000. Annualized inventory turns were approximately flat sequentially at 1.96. Operating cash flow totaled approximately $15,700,000. Capital expenditures for Q4 totaled $5,500,000.

We ended the quarter with a construction-in-progress balance, primarily for manufacturing equipment, of approximately $7,800,000 with approximately $6,900,000 remaining to be spent. I will now address bookings and backlog. Q4 book-to-bill, improving sequentially, came in well above one, and one-year backlog increased 15.8% from the prior quarter, closing at $176,900,000. 2026 is the year of great opportunity for Vicor. We are working to deliver on the opportunities. However, given that we cannot predict with certainty timing or amounts of outcomes relating to our licensing practice, we will not provide quarterly guidance. With that, Phil will provide an overview of recent market development, and then Patrizio, Phil, and I will take your questions.

I ask that you limit yourself to one question and a related follow-up so that we can respond to as many of you as we can in the limited time. If you have more than one topic to address, please get back in the queue. So thank you, Jim. At the beginning of 2025, we talked about the year ahead being one of challenges and opportunities. As we look back, 2025 met those expectations, with improvements in product bookings and revenues in Q4 and our IP licensing practice one of the major contributors to our top and bottom lines. As we exited 2025, the book-to-bill ratio increased to over 1.2 in Q4 and has continued to increase in Q1.

At the start of 2026, we can say that this is a year of different challenges with greater opportunity. They should result in record bookings, revenues, and profitability. Significantly higher utilization of our first chip fab. As Patrizio commented in today's press release, the United States International Trade Commission has instituted a second investigation into the illegal importation of power modules and computing systems infringing Vicor's IP to non-isolated bus converters. By now, it should be clear that Vicor will methodically and relentlessly enforce its intellectual property to the many inventions it pioneered and that suppliers of infringing systems are putting themselves and their customers at risk, including unlicensed OEMs and hyperscalers.

Following the example set by licensed OEMs and hyperscalers, companies with an ethical backbone should do the right thing, avoiding infringement by taking a license to secure their supply chain. A lead customer for VPD solutions is ramping a Gen 4 factorized power system before transitioning to a Gen 5-based solution with higher current density and performance. This transition is expected to start in the second half of this year, while production of the Gen 4 system will continue to ramp at a steep rate. At the 2026.

Engagement with other Gen 5 VPD customers will be selected, as capacity in our existing first chip fab is getting earmarked for strategic customers and additional capacity from our second chip fab may not be available until 2028. Our industrial and aerospace and defense business outlook for 2026 is strong, particularly in the automatic test equipment market, which is seeing substantial growth and projecting high growth for the next several years. Given our power density advantage, which is of paramount importance to our customers, I am confident that we can double the revenues in these markets over the next four to six years, respectively.

As we approach high utilization of our first chip fab, we are beginning to engage customers in capacity reservation agreements to secure their supply needs. While in the planning stages of a second chip fab to expand the market opportunity, we are having discussions with candidates for an alternate source of high current density Gen 5 VPD solution. An alternate source will give licensed OEMs and hyperscalers broader access to best-in-class power system technology. In view of these developments, we remain confident in our business strategy of innovation, customer focus, and market focus. With that, we will now take your question.

Operator: Thank you. At this time, we will conduct a question and answer session. As a reminder, to ask a question, you will need to press *11 on your telephone and wait for your name to be announced. To withdraw your question, please press *11 again. Our first question comes from the line of Nathaniel Quinn Bolton of Needham & Company. Your line is now open.

Nathaniel Quinn Bolton: Hey, guys. Congratulations on 2025 and the record outlook for 2026. Patrizio or Phil, I wanted to start with your lead customer. It sounds like you are seeing a pretty strong ramp from that customer, and you mentioned that Andover is getting filled. Can you talk, is Andover being filled largely from your lead customer, or do you have other significant Gen 4, Gen 5 customers that are contributing to that growing utilization in the Andover facility.

Patrizio Vinciarelli: It is a combination of demand, increasing demand, on a number of fronts. Not just AI computing, where there is a multiplicity of factors at play with respect to increasing the fab capacity but also in test equipment, as Phil mentioned in his prepared remarks, and some of the other end

Nathaniel Quinn Bolton: Got it. Okay. Thank you. And then I guess, maybe a follow-up on the IP licensing. In the press release, you talked about seeing record revenue from the IP licensing business this year. Just wanted to clarify, does that include or exclude the $45,000,000 patent litigation settlement that was part of the 2025 revenue stream as we think about 2026?

Patrizio Vinciarelli: We see our licensing business expanding. As Jim suggested earlier, the timing of elements contributing to the expansion is somewhat unpredictable. But as we look at the predicament that OEMs and hyperscalers face in terms of potential exclusion orders, we see a major opportunity for us to grow our licensing business considerably. As we had discussed in our last quarterly call, we see that business expanding greatly in the next couple of years. I think what has transpired since then suggests that those are conservative estimates.

James F. Schmidt: And, Quinn, just to clarify the number for you, the royalty revenue I quoted in my prepared remarks of $57,400,000 in 2025 does not include the litigation settlement. That is royalty revenue. It was up 23.2% from $46,600,000 in 2024.

Nathaniel Quinn Bolton: Gavin, just to clarify, Jim, when the comment in the press release about the licensing business expanding, are you looking at the $57.4 million as the 2025 base, or should we be thinking about that base being $102,000,000, which would include that $45,000,000 patent settlement as part of the base.

Patrizio Vinciarelli: So, for one thing, there are going to be more patent settlements. And for another, the one balanced element from last year in terms of the outlook for licensing business does not really make a substantial difference with respect to the upside with respect to this part of our business. We expect hundreds of millions of dollars of revenues from a lot of things. And the $45,000,000 event last year is, in hindsight, going to be another drop in the bucket to be sure, but not all that significant.

Nathaniel Quinn Bolton: Understood. Okay. Thank you.

Operator: Thank you. One moment for our next question. Our next question comes from the line of Jonathan E. Tanwanteng of CJS Securities. Your line is now open.

Jonathan E. Tanwanteng: Hi, thank you for taking my questions. And I also congratulate you on a great year. I was wondering if you could give us a little bit more detail on the launch customer for VPD. You mentioned that they were going with the Gen 4 product. Could you talk about the decision that went into that and why they are not starting with Gen 5 and how that happened?

Patrizio Vinciarelli: Well, the Gen 4 system is mature. One that has gathered from our record of success that is expanding in terms of field support opportunity. In order to get to the next generation system, a mature design, a mature system, it is not just the power system. It is the system as a whole that needs to come to fruition. It is not quite there yet. It will be there soon, and that will lead to the next set of opportunities. But to be clear, with our lead customer, we are seeing a significant share of our capacity utilized as we get towards the end of this year on the early generational system.

And the next generational system will provide an additional layer of utilization capacity as we get into next

Jonathan E. Tanwanteng: Understood. Thank you. And then, when you start, sorry. You are considering a new facility. I was just wondering if you are planning to build that yourself, or are you still planning to work with partners to do that perhaps in a capital-light fashion? And, you know, just wondering what kind of capacity a new facility would have.

Patrizio Vinciarelli: So we made two offers on an area where we could build a facility. The lead time associated with that goal is two to three years when everything is said and done. We are also looking at existing buildings within a 30-mile radius of Andover. It is an hour to the west. And we have not decided yet which of these alternatives we are going to close on. But, again, we have made two offers, no deal done yet, but I would expect that we are likely to do something on this channel very soon.

Jonathan E. Tanwanteng: Okay. Great. Thank you. I will jump back in queue.

Operator: Thank you. One moment for our next question. And our next question comes from the line of Richard Cutts Shannon of Craig-Hallum Capital Group. Your line is now open.

Richard Cutts Shannon: Well, thanks, Patrizio, Phil, and Jim, for taking my questions. I will also add my congratulations on a really good last year. My first question is on royalties and licensing. You mentioned that there are some questions here in the Q&A about growth in this business. I guess I wanted to triangulate it differently from how you have talked about it in the past, where you were hoping to get a roughly $300,000,000 revenue stream. I know that is not entirely royalties, maybe some product in there, but talking about a $300,000,000 bogey between 2024 and 2026.

And, by my numbers at least, that would require a fair amount of growth, like doubling or so of your royalty revenues from 2025 to 2026. But you did not talk about it that way this quarter. Can you maybe talk about it in those terms here? Is that a number that we should continue to expect, better or worse, just to help us triangulate those things? Yeah.

Patrizio Vinciarelli: So we have two major licensees. We expect to have a lot more. And future contributions from those two should become quite a bit larger. So I think one way of looking at it, in AI computing, AI systems require from the power system perspective, VPD. And to reset that, in order to be able to deploy those systems, a license would become necessary. That defines the opportunity. As you can see, the opportunity far exceeds what we have harnessed thus far. It is a world to be captured in years to come. So the $300,000,000 number, we would see at a point involves contributions from royalties and product business, licensees. It is not a long time ago.

It is a relatively near-term goal, not for this year, to be clear. But, as we have said last year, in a couple of years’ timeframe. But you can see it growing beyond that.

Richard Cutts Shannon: My follow-on question is on second-gen VPD engagements. You already talked about your lead customer today and in past quarters, but last quarter, you also mentioned engagements that did not seem to be early stage ones with a hyperscaler and an OEM. I did not hear any comments in the prepared remarks, although I was a little bit late. So, wondering if you can comment on the progress of those and the other ones you have added to the pipeline. Thank you.

Philip D. Davies: Yeah. So, Richard, this is Phil. So maybe I can get a little bit more granular on that. So the next step for us is, over the next couple of weeks, we are bringing in our global FAE team that is dedicated to supporting customers in different locations. We have target hyperscalers and OEM chip companies located. So they will be going through, if you like, a boot camp on Gen 5 VPD, using the demo boards and tools that the central applications group here in Andover have developed for the market. And so that is happening in the next couple of weeks.

After we get that in place, as we talked about, we are going to be fairly selective in who we are going to be engaging with. It is very important we do that. And that is the next step after that. So we know that is here in the next couple of weeks, and we are on the way.

Richard Cutts Shannon: Okay. Thanks for that detail. I will jump off the line for you guys.

Operator: Thank you. One moment for our next question. Our next question comes from the line of Justin Clare of Roth Capital Partners. Your line is now open.

Justin Clare: So first, I just wanted to follow up on the potential for capacity expansion here. So given the plan to add a second fab, I was just wondering how we should think about the ramp in utilization for your existing facility over the next couple of years and what utilization threshold you anticipate reaching that is necessitating the additional fab here. And then just if you could talk about when you anticipate approaching that optimal utilization for the first fab?

Patrizio Vinciarelli: So based on ramps with a number of customers in different markets, with a strong contribution from AI computing, we see the existing fab being well utilized within a year. And that is obviously prompting the initiative to secure additional capacity both by bringing up the second fab and by having discussions with potential alternate sources that could provide customers with equivalent solutions using their own capabilities and our technology. In terms of the fabs, as I mentioned earlier, we started exploring the opportunity of being at that, with a large piece of real estate and flexibility to increment capacity in steps.

As a reminder, this would be a campus that could support up to half a million square feet of manufacturing space. Just to set things in perspective, our current facilities are at 300,000. So there would be substantially more in terms of the real estate available for capacity, but also, given the learning that we have done, we think we can achieve more capacity per unit of area in that facility. The thinking of late has evolved more toward potentially acquiring a building in, you know, to be clear, there has been no decision. We work the other angle. It could go either way.

But the benefit of doing it with an existing building is that the time to fruition would be a year, year and a half shorter. So we might go that way. It would be on the same scale, though, in terms of the increment of capacity we want to think about with the second.

Justin Clare: Okay. Got it. That is helpful. And then just so we when we think through this, if you are reaching close to optimal utilization within a year, I think historically you have talked about your fab being able to support $1,000,000,000 in product revenue. So within a year, could you be close to that level where you are getting to a run rate of a billion dollars in product revenue? And then just curious on the second fab, how much in CapEx spending you might anticipate in terms of what is required there?

Patrizio Vinciarelli: Yes. So, to be clear, the first fab has a capacity, given the dollars per panel and the number of panels it can process per unit of time, to do slightly above a billion dollars in revenues. But you would not want to use 100% of the capacity because, by definition, it would leave no room for error. So 80% capacity is actually the prudent number that you want to think of in terms of fundamentally having achieved a very good capacity utilization of this fab.

Now, in terms of the next facility, whether it is backfilling land, moving up the building, and then equipping it with what is necessary in order to be about that relative incremental capacity, this is, well, in a proposition of the order of $250 to $900,000, something that Vicor has the wherewithal to handle on its own in our cap position. I want to adopt it.

Justin Clare: Okay. I appreciate it. Thanks for the detail.

Operator: Thank you. One moment for our next question. And our next question comes from the line of John Dillon of DNB Capital. Your line is now open.

John Dillon: Hi, guys. Thanks a lot for taking my call. And again, congratulations on the year. Phil, I wanted to go back to the customers you talked about before in Q3 and Q4. Kind of got the impression that you had design wins, these customers find alternative ways to power their new AI processors. So I am wondering, are those customers still working with you, or have they gone to other customers? Are you going to be able to meet their time schedule for their new products. They have a need for

Patrizio Vinciarelli: a VPD solution, in particular that has more of the right freight. And the competitive landscape does not have that. And that has constrained the market opportunity for VPD to, if there is a limited set of companies that have actually done it while incurring the real pain because of the shortcomings of the power system. So what we bring about with a second-gen VPD and edge-connection modules is a solution that has the vision of much higher current density and a much higher grade level of manufacturing quality in terms of the assembly of the core solution. I will definitely call such a situation VPD does. It is much easier to cool. It is more efficient.

It has a number of benefits that we have to themselves in many ways. So, as Phil suggested, we are going to be speaking to those customers that strategically need to be aligned with us. We have a great deal of interest. As an example, we were out in the Valley just a few weeks ago, and in the morning, in another major customer, there is a good deal of interest in our VPD capability. We have not decided yet where and what we want to engage in that particular case. We will use the existing fab before we get another fab in place to decide which applications make the most sense.

And, needless to say, a lead customer is one that we prioritize. There is going to be more in that league, in that end market. As you might have gathered, we are looking at tremendous opportunity in terms of volume. That one alone fills two fabs. So, our predisposition, we have difficulty and the capability. We can leverage opportunity both by selling product and by collecting licensing. We can also do it by bringing about nondefense slots while pursuing all of these opportunities.

John Dillon: Got it. So I just want to make sure I understand. So the customers that you mentioned before, they are still on the hook. They are still talking to you. They are still engaged with you. They still cannot find an alternative source to power their new processors, but it sounds like it just slipped a bit.

Patrizio Vinciarelli: Well, I think if you were to ask them, they would all say that they will find a solution whether or not Vicor exists. Right? Nobody will acknowledge that they are out of luck. And that is not the real world. There is no such thing as resolving some way, getting something done. But to be clear, that way of getting it done is dramatic in terms of the technical tradeoffs and technical challenges, whether it is cooling or manufacturability. And it may also be very much challenged from the IP perspective. So, yeah. It is a complex landscape, but

John Dillon: Yeah. It sounds like it is still it sounds like it is still a competitive situation then.

Patrizio Vinciarelli: Well, it is always beneficial to our competitors.

John Dillon: Yeah. Got it. Alright. So my follow-on question is, are you seeing any AI processor designs with horizontal or horizontal-vertical besides your lead customer?

Philip D. Davies: So I think if you look at, as Patrizio actually said, there is one very, very large company that is using vertical power delivery today in very high volume, and that is increasing year on year. In terms of anybody else really in high-volume production, it is vertical power delivery, John. It is fairly limited right now. They are all trying to get Gen 1 VPD to work in some fashion, but, to date, I am not hearing anybody that is buying that in volume. They are trying. They are working on it.

But I think when we come out with our Gen 5 and launch it, and selectively launch it, as we have talked about, we are going to have some winners on our hands.

John Dillon: Got it. I saw a picture of a new AI processor coming out that had what looked like a gold bar on the top, and that is why I asked about horizontal. I am wondering if you have any upcoming horizontals or horizontal-verticals besides your lead customer because I know they are different.

Patrizio Vinciarelli: So I do not think we are going to make comments specifically about that stuff. I think, yeah. What we want to say about that is we have, we do have Gen 4

Philip D. Davies: customers using our gold bars, as it were, laterally. Lateral.

Patrizio Vinciarelli: Yeah.

Philip D. Davies: Yeah. But, yeah.

Patrizio Vinciarelli: I do not think the visibility to a gold bar is really

Philip D. Davies: Yeah.

Patrizio Vinciarelli: you know, what is fundamentally at issue. Despite, I think, a better way of looking at it is that we have tremendous opportunity, and we have the technology that matches the needs of the marketplace. Again, going back to the earlier question, it is not that if a solution did not exist there would not be a solution. The applied solution, which is really a common dynamic, all of the competitors do pretty much the same thing with relatively slight differences. They look over each other's shoulder to, you know, make incremental steps down an old road. It carries a lot of baggage in a number of respects: technical, and, when it comes to VPD, also IP challenges.

John Dillon: Excellent. Listen. Thank you very much. I might get back in the queue. Thank you again.

Operator: Thank you. One moment for our next question. Our next question comes from the line of Jonathan E. Tanwanteng of CJS Securities. Your line is now open.

Jonathan E. Tanwanteng: Hi, thank you for taking my follow-up. Earlier, you mentioned that you were taking capacity reservations at your facility. I was wondering what the financials of that looked like. Is there an upfront payment? Are there contract terms for minimums or something like that? Just how are you approaching those reservations?

Patrizio Vinciarelli: So, in terms of revenue recognition, that would happen as shipments take place, obviously, there is a cash component that would show up in our balance sheet. But there is no acceleration of revenue that comes on the capacity reservations. Revenues get recorded as product ships, covered by the reservation.

Jonathan E. Tanwanteng: Okay. Got it. And then can you talk a little bit more about the 800-volt data center opportunity and if you are seeing any traction there, or are you seeing any orders ahead of that? And I am specifically talking about, you know, products that are outside the vertical or lateral power or the NDMs that you have today?

Patrizio Vinciarelli: So we have technology there. There too, Vicor is a pioneer. High density bus conversion from 380-volt and 400-volt for many, many years. We have relevant IP. We have products. We have more products in the pipeline that come out later this year. Frankly, though, I would say that there is quite a bit of hype about this 800-volt. I think that, to some degree, it is missing the point, with respect to what the real issues are. It is a diversion.

The reason why generations of GPUs have not been able to meet the expectations with respect to performance, having to do with the power system gating the GPU performance, has nothing to do with 400 volts or 800 volts. They have to do with the point of load, and the fact that the multi multiphase mainstream types of solutions are by handicap. That is where the follow-up should be. So, obviously, we operate in an industry that goes through phases of progress and potential for hype. Without question, there is value to a 400-volt bus, but that value, probably if you measure it in terms of efficiency, is measured in a few percent.

Most of what gets lost gets lost in inferior point-of-load solutions, which is 15 or 20 points. So I personally wonder why anybody would worry about capturing the 3% improvement in another volt distribution when they are missing 15 or 20% in the point of load, and they cannot cool or deliver the power they need to achieve the level of performance they have targeted. But irrespective of how these things evolve, we have the technology, we have the IP, and we are going to make the most of the opportunity. But, frankly, I think that there is going to be a lot of hype related to 800 volts.

And that could lead to problems because people are focused on the wrong problem, which is not really a material problem. They need to be solving the real problems.

Jonathan E. Tanwanteng: Understood. Thank you for that insight.

Operator: Thank you. One moment for our next question. Our next question comes from the line of Nathaniel Quinn Bolton of Needham & Company. Your line is now open.

Nathaniel Quinn Bolton: Hey, guys. Thanks for taking my follow-up. Patrizio, I just wanted to make sure everybody on the line is thinking about the revenue ramp the same way. You have not, obviously, guided revenue for 2026, but you have given us three kind of guideposts, which are you expect Andover to approach full utilization over the next year, you have said full utilization would be around 80%—otherwise, you do not leave a lot of room for error—and you have said at 100% utilization, the fab would be able to produce a billion in revenue.

And so, when I put all of that together, it sort of sounds like you are pointing to revenue that could approach an $800,000,000 product revenue could approach an $800,000,000 run rate over the next year, and that would be more than double what you did on a product revenue front in calendar 2025. I know you are not giving guidance, but some of those guideposts point to very significant revenue.

And I just want to make sure, to the extent that you think that interpretation of the comments you have made is too aggressive, I wanted to see if you would correct any of those thoughts or if that is the right way to be thinking about the data points you have suggested.

Patrizio Vinciarelli: I think your analysis is on point. Obviously, key to that is run rate. Right? That is distinct from revenues for this year, 2026. So we see the demand getting to a run rate that would utilize 80% or so of the capacity in Andover’s fab. Another way of, in fact, tagging this is that we see this year as being one of major increase in product revenue, well, I hope, the rate of last year. At a level that we have not enjoyed for quite some time. And that is pretty much baked in at this point, based on bookings that we have received and additional bookings that will come our way as the year progresses.

Nathaniel Quinn Bolton: Got it. Thank you very much.

Operator: Thank you. Thank you. One moment for our next question. And our next question comes from the line of Richard Cutts Shannon of Craig-Hallum Capital Group. Your line is now open.

Richard Cutts Shannon: Well, hey, guys. Thanks for letting me ask a couple of follow-on questions here. My first one is on licensing. Patrizio, following up on an answer to one of the prior questions, you mentioned about having a couple, or specifically two, licensees so far. As we think about growing the licensing revenue stream this year—and if you can comment beyond that, that would be great—in terms of your general expectations, how do we think about adding to the customer list here versus number of licensees or licenses per licensee or other dynamics that help us think about this?

And, specifically, if you could address, if things went well for you, what is the kind of number of major licensees you would have? I do not know if this is three or five or eight, but if you can just characterize that in any way, that would be helpful. Thanks.

Patrizio Vinciarelli: In the AI computing, AI market, I think in terms of a base of foundational licensees, it would be half a dozen. So three times as many as we currently have in that market. A reminder, we are on top of that. And, by the way, the focus has been—and actions of the ITC thus far have been—focused on AI computing, but there is a future going on in other markets as well. So there is a lot of opportunity, not just for the VPD technology, but for other technology that Vicor pioneered.

Richard Cutts Shannon: Okay. My follow-on question is wondering if there is any way that you can help us think about, specifically about your second-gen VPD technology. How do we think about content per XPU? And I am going to offer a couple ways maybe to think about it. I know you are not going to quantify in any specific way, but I think a lot of us who have covered this name for a while have a decent idea of what that content looked like a few years ago in your last really high-volume, or potential high-volume, win that you had in point of load.

But, also, since that time, the level of power and the level of current in leading XPUs, particularly getting to reticle limit, are increasing a lot. So do we think about the content opportunity now as being proportional to power/current? And how would you have somebody think about what that might look like on a per-unit basis? Thank you.

Patrizio Vinciarelli: So, as I look back at a compromised power system for GPUs, a number of years ago, that was, in one way of looking at it, about a $100,000,000 per year type of opportunity.

Richard Cutts Shannon: Yep.

Patrizio Vinciarelli: Rising, we are locked into an opportunity that will double that.

Richard Cutts Shannon: And

Patrizio Vinciarelli: to Phil's earlier point, there is a hyperscaler with an opportunity, you know, the money. I do not know if that answers your question.

Richard Cutts Shannon: Mine was really more on content per XPU, but the way you characterized it is helpful. But, anyway, how we might think about it on a per XPU basis would be helpful too. Thank you.

Philip D. Davies: Yeah. So, Phil, do you want to take that? Yeah. I think, Richard, to your point, it really depends on the current that XPU needs, the number of rails, that type of thing. So I think that opportunity for us would be somewhere between $200 to $400 per XPU. But, pretty much, you can question that. Right? So, yeah, take that with a grain of salt. Yeah.

Richard Cutts Shannon: Understood. That is getting us a half order of magnitude. It is very helpful. So thank you for that help.

Patrizio Vinciarelli: Richard, just to clarify, it is about a 2,000-amp up to a 4,000-amp type of product.

Richard Cutts Shannon: Got it. Okay. Great. Thank you.

Operator: Thank you. One moment for our next question. Our next question comes from the line of Alan Hicks of Insy Capital Management. Your line is now open.

Alan Hicks: Yeah. Good afternoon. Just wanted to confirm it is a billion dollars capacity now.

James F. Schmidt: Hello? I think we lost part of your

Patrizio Vinciarelli: I think the question was a confirmation of the billion-dollar capacity of one fab. Was that the question?

Alan Hicks: Yeah. Yeah. Just for advanced products. Nothing else.

Patrizio Vinciarelli: Yes. We are very confident that we can generate upwards of a billion dollars’ worth of revenues out of

Alan Hicks: Okay. Because I am looking at what your sales were for just for advanced products, without

Patrizio Vinciarelli: royalties, for the year was around $200,000,000. Is that what it is for 2025? Yes.

Alan Hicks: Okay. So with you were saying within a year or so, you could be at $800,000,000 in advanced products?

Patrizio Vinciarelli: It is, suggesting an earlier question and by me, that we have done already. Mhmm.

Alan Hicks: Okay. And then on the bricks, the original bricks fab, could that be converted in the future to advanced products?

Patrizio Vinciarelli: So, no. The bricks are much older products. They have got a very stable, if you like, customer base. Some of those customers are moving to advanced products, and we have had quite a bit of success with that in recent years in some higher-volume end markets. But aerospace and defense and some very broad-based industrial, they like bricks. They are going to stay with the bricks. But the brick piece should be fairly stable over the next few years, I believe. We, weeks from the early, play a role at this to capacity of this direction. They become, well, a lower percentage of the business. They become essentially the

Alan Hicks: Okay. But you are also adding capacity to this first fab. Is that correct also?

James F. Schmidt: Yes, we are. Yeah. So that is right. We are adding capacity incrementally to the existing footprint.

Alan Hicks: Okay. And then did you say you are in discussions with a partner to have them produce products themselves?

Patrizio Vinciarelli: So we are having discussions. It may take some time because it is an important decision selection. We have customers that want us to have an alternate source. So we see the benefit of an alternate source in terms of end-market opportunity. If you just look at AI, there is so much market opportunity that frankly there is no way that Vicor alone could do that, even with a second or third fab. So we need to, you know, look at making the most out of the opportunity, as opposed to leaving the scope of the opportunity unwarranted due to it.

Alan Hicks: Mhmm. Then I was just kind of curious. How many panels can you produce in a day out of the factory you have now?

Patrizio Vinciarelli: I am not going to quantify that for competitive reasons. I will just say that, in terms of the revenue opportunity of the fab, Fab 1 is slightly above a billion dollars a year.

Alan Hicks: Okay. Okay. Thank you very much.

Patrizio Vinciarelli: Thank you.

Operator: Thank you. One moment for our next question. Our next question comes from the line of John Dillon of DNB Capital. Your line is now open.

John Dillon: Hi, guys. I will make this quick because I know we are up against the timeline. First of all, Patrizio, thank you for answering Quinn's question. That was one of my follow-up questions also, and I appreciated that answer. Another one is just a quick one. We are halfway through the quarter. I am wondering how bookings are looking so far this quarter.

James F. Schmidt: I mentioned in my prepared remarks, John, that the book-to-bill was 1.2 in Q4, and we are above that already in Q1.

Operator: Excellent. Thank you very much. Congratulations, guys. Thank you.

Operator: Thank you. This concludes the question and answer session. Thank you for your participation in today's conference. This does conclude the program. You may now disconnect.

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