Good day everyone, and welcome to the Vicor Earnings Results for the First Quarter Ended March 31, 2020, Conference Call hosted by Chief Financial Officer, James Simms. My name is Atila and I’m your Event Manager today. I would like to advise all parties, this conference is being recorded for replay purposes. And now, I’d like to hand over to James. Please proceed.

Thank you very much. Good afternoon and welcome to Vicor Corporation’s earnings call for the first quarter ended March 31, 2020. I’m Jamie Simms, Chief Financial Officer; and with me here in Andover is Patrizio Vinciarelli, Chief Executive Officer. After the markets closed today, we issued a press release summarizing our financial results for the three months ended March 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 related to the issuance of this press release. I remind listeners that this conference call is being recorded and is the copyrighted property of Vicor Corporation. I also remind you various remarks we make during this call may constitute forward-looking statements for purposes of the safe harbor provisions under the Private Securities Litigation Reform Act of 1995. Except for historical information contained in this call, the matters discussed on this call, including any statements regarding current and planned products, current and potential customers, potential market opportunities, expected events and announcements, planned capacity expansion as well as management’s expectations for sales growth, spending and profitability are all 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 prove in fact to be correct. Actual results may differ materially from those explicitly set forth or implied by any of our remarks today. The risks and uncertainties we face are discussed in Item 1A of our 2019 Form 10-K, which we filed with the SEC on February 28, 2020. Please note that the information provided during this conference call is accurate only as of today, Thursday, April 23, 2020. 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 the call. A replay of today’s call will be available beginning at midnight tonight through May 8, 2020. The replay dial-in number is 888-286-8010, again, that’s 286-8010 followed by the passcode 82686567. This dial-in and passcode are also set forth in today’s press release. In addition, a webcast replay of today’s call along with the transcript will be available shortly on the Investor Relations page of our website. I will start this afternoon’s discussion with a review of our Q1 financial performance. And after closing remarks by Patrizio, we will take your questions. Beginning with consolidated results, as stated in today’s press release, Vicor recorded total revenue for the first quarter of $63.4 million, up slightly from the prior quarter’s $63.1 million. Brick product revenue declined 2.8% sequentially, while Advanced Products revenue rose 9.8% sequentially. Late in Q1, a small number of customers requested we postpone shipments due to the COVID-19 pandemic. However, the impact of those postponed shipments on first quarter revenue was immaterial. For Q1, Brick Products represented 71.8% of total revenue, while Advanced Products' share rose to 28.2%. Domestic volume rose to 52.9% of total revenue; revenue from shipments to stocking distributors domestically rose as well. Export revenue declined 4.8%, reflecting prior period bookings influenced by macro weakness across Asia, notably in China for our Brick Products. However, exports to Asia of Advanced Products to contract manufacturers building for our OEM customers rose slightly. Consolidated gross margin as a percentage of revenue declined sequentially from Q4’s 47.1% to 43.1% for Q1. Production inefficiencies caused by delayed shipments of components from China and ramping volume of Advanced Products impacted gross margin. We also have incurred a noncash charge to increase the reserve against certain inventories of raw materials. High inbound tariffs continue to impact gross margin as we recorded $1.8 million of tariffs for Q1, up from $1.3 million for the prior quarter. Regarding tariffs, U.S. customs remains backed up with high volumes of applicants for the duty drawback program. So, we have yet to recover any amount of tariffs paid to date. The total amount of Section 301 tariff paid since implementation exceeds $7.4 million and we anticipate nearly two thirds of this amount is eligible for drawback. During the height of the Chinese shutdown in February, we did experience some delays in receipt of raw materials. By mid-March, however, all of our suppliers were operational in meeting their commitments to us. I will now turn to Q1 operating expenses. Total OpEx rose just under 3%, with the increase entirely associated with a project-specific rise in prototype development spending. No other category of operating spend rose meaningfully. Full-time headcount stood at 991 at March 31, in line with the year-end total of 993. We recorded an operating loss for the quarter of $2.4 million, reflecting lower product level profitability. Turning to income taxes. We recorded a small net benefit for Q1 of $494,000. We are forecasting a full year of profitability. We have thoroughly reviewed the CARES Act for any possible provisions from which we might benefit. Because Vicor is too large to qualify for lending programs, and our financial performance and resources have not been materially affected by the pandemic to date, the primary CARES provision available to us is the temporary retention of the company’s portion of social security taxes payable in 2020, representing 6.2% of payroll. This will be a balance sheet item, not a P&L item as we will continue to expense such taxes through the year, but we will not be required to repay the full amount until December 2022, which we estimate to be approximately $3 million. Net loss attributable to Vicor for Q1 totaled $1.7 million. GAAP loss per share was $0.04 based on a share count of 40,635,000 shares. Turning to our balance sheet. Cash and cash equivalents sequentially declined to $82.8 million due to the net loss and an unfavorable swing in working capital. Accounts receivable, net of reserves totaled $41.3 million at quarter end, with DSOs for trade receivables improving to 42 days. All balances are current. Inventories net of reserves rose 8.5% sequentially to $53.4 million as raw materials increased to support our near-term outlook for increasing production. Annualized turns correspondingly declined to 2.8. Capital expenditures for Q1 totaled $3 million as compared with Q4’s $3.4 million. I’ll now turn to bookings and backlog. Q1 bookings totaled $70.1 million compared to $76.8 million booked in Q4 of 2019. At quarter end, backlog was $110.8 million, an increase of 6.4% sequentially. Advanced Product orders came in as expected. The sequential 9% decline reflects the composition of the prior quarter’s order book, which included a large year-long program for high-end commercial lighting. Absent that single large order, Advanced Product bookings rose 23% sequentially, and were almost entirely associated with customers in AI acceleration. Brick Product bookings declined slightly quarter-to-quarter with the uncertainties of COVID-19 across Asia, notably in China. So far in this quarter, bookings have been robust. But given the uncertainties associated with the COVID-19 pandemic, we cannot predict that this will continue. Before I turn to our outlook for the second quarter of 2020, I will address the challenges we face with the pandemic, which has brought about widespread uncertainty as segments of the economy came to a halt. Since the declaration of the state of emergency in Massachusetts on March 23, our manufacturing operations have, however, continued to function without interruption. Vicor is an essential business under policies of the U.S. Department of Homeland Security given our role in supporting industrial sectors considered critical infrastructure. In the second quarter, we have adapted to social distancing in the workplace and have provided work from home privileges to the extent feasible while maintaining productivity. We continue to operate three shifts at our Andover manufacturing facility and our engineering, sales and administrative departments continue to function globally. We have taken substantial measures to protect the health and safety of our employees, and I refer listeners to our pending Form 10-Q filing, which will set forth the details regarding these measures. Although there is uncertainty related to the possibility that COVID-19 may influence future operational and financial results, we believe Vicor’s power system franchise, our strong balance sheet and our flexible operational model will enable us to emerge from the COVID-19 pandemic with relative strength. Our expansion plans remain on track. We intend to begin construction of the planned 90,000 square foot addition to our Federal Street facilities in a few weeks. And as stated, we expect to fund this construction and related investment in capital equipment from operating cash flow. Subject to unexpected disruptions from COVID-19, we anticipate increased revenue for the second quarter, which we are forecasting to be profitable. With that, I’ll turn the call over to Patrizio.

As Jamie stated, these are challenging times. However, Vicor is equipped to deal with these challenges effectively. I’m grateful to our employees and our suppliers for their efforts in support of our customers. As stated, we’re moving ahead with the addition of a new 90,000 square foot wing to our Andover manufacturing facilities. The new wing will enable us to establish double the capacity for Advanced Products. And the new wing will provide vertical integration for all of the process steps necessary to manufacture Advanced Products. Vertical integration of our chip or converter-in-package processes is a major milestone. The combination of a large investment made over the last 15 years, measured in R&D dollars, this investment is up to nearly $500 million. In terms of addressable market, this investment should strengthen our early leadership position in an emerging TAM we believe will be greater than the aforementioned investment. And in terms of intellectual property, this investment is protected by a comprehensive patent portfolio, which, as I’ve characterized before, represents a minefield of patents no competitor will be able to cross for a long time. This minefield spans a multitude of proprietary technologies relating to power conversion engines, control systems and three-dimensional power packaging. In combination, these proprietary technologies enable high-density power solutions, including power-in-package and vertical power delivery, which are on the critical path of the rapidly escalating requirements of artificial intelligence processors. So despite the unsettling current circumstances, Vicor is positioned to emerge on the other side of the pandemic with a strong and well-protected leadership in the expanding market for 48-volt systems in AI, data center service and vehicle electrification. Recognition of this leadership and of the technology gap separating us from any aspiring competitor motivates every power engineer and project manager facing high-density power system challenges to approach Vicor for our unique performance-enabling solutions. We offer listeners our best wishes for the health and well-being of their families, friends and colleagues. We will now take your questions. Operator?

Operator: And we already have three questions in queue. And the first one is coming from the line of Quinn Bolton from Needham & Company, LLC.

Hey, guys. Congratulations on the nice activity in the Advanced Products side. I guess I wanted to start there. In the press release, you talked about the pace of activity in early second quarter, reflecting strengthening demand for Advanced Products. Can you give us a better sense? Is that sort of across the board? Is that more for the hyperscale server motherboard business that you’ve been involved in for a while? Is it more for GPU or AI accelerators? How broad-based is that demand for Advanced Products?

It’s relatively broad-based. So it includes the early portion of a ramp for a new GPU, hyperscale servers. But it also encompasses strong activity for even our bricks, our older brick products, in industrial markets, medical equipment. So it’s surprisingly broad. Frankly, I would not have thought that a few weeks ago. I’ve asked a number of questions relating to what’s behind it. And in a nutshell, it derives from the programs that I outlined a moment ago.

And Patrizio, just want to follow-up, especially on the Bricks business. Is there any way to determine whether or not your customers are trying to buy ahead or build inventory, buffer inventory, given the increasingly uncertain demand environment, as I think nobody really knows what the second half of the year is looking like? Or do you have pretty good confidence that this is in-demand and real demand for those products?

So, I asked that same question of a couple of people here. And the answer I received and what I read in the daily bookings is evidence of programs that are going into production and generally sustained demand. Now without question, to your point, and in fact, my own question with our sales folks, there could be some component of customers trying to ensure that they have a continued pipeline of products through uncertain times. But we haven’t been able to add up that component to anything significant.

And as a complement to that, Quinn, we’re not susceptible to the double booking patterns that you sometimes see in commodity businesses.

Because most of those solutions are customized, correct?

To some extent, yes.

Yes. And just two quick ones for you, Jamie. One, just wondering, obviously, the gross margin was hit by some of the supply chain inefficiencies in the first quarter. How do you think gross margin looks in the second quarter? And similarly, on OpEx, you mentioned development and prototype expense was higher in the first quarter. Does that continue at an elevated level in Q2? Or does it step back down to levels that we might have seen in 2019?

Patrizio, that’s your department, so…

Okay. Well, I’ll try to answer your question first. I think in Q1 with some rather unique set of circumstances. I think looking at Q2, the margins look better. We are ramping new products. So that’s not necessarily going to immediately bring about the level of efficiency we like. So to mitigate expectations, I think we may need to wait until we progress further along in the year to achieve greater efficiencies with those new product ramps. But as a team, we’re very much focused on growing our margins. We see ways of accomplishing that. And certainly, it is a long-term proposition, not one that leads to immediate gratification. But given the proprietorship in the products, the unique franchise we have, the economies of scale, we’re about to achieve the vertical integration that is going to be brought about with the expansion of the factory. We have a plan to get there.

And any quick comments on prototype expense into the second quarter? Does that continue? Or does it step back down?

Yes. So, there’s a lot of activity going on in support of a variety of customers’ requirements. These are very intense developments requiring quite a bit of prototype activity that, again, is a costly proposition, but one that sets the stage for long-term opportunity in terms of those programs. In general, our strategy going forward, given a new product line of devices that can be used both for lateral and vertical power delivery, and they represent a standard product offering. Our general strategy going forward will be to leverage to the extent possible for most applications and most customers those standard products in order to provide a combination of benefits, including shorter cycle time and faster time to market, and most significantly, minimization of ad hoc developments that are intense and costly and also not inherently scalable as we would like our capabilities to be. There are just so many of these major projects that can be handled at any one point in time. So, mindful of that, we put a lot of effort into profitability using our 4G technology and scaling up so-called golden cells to provide the level of modularity and granularity that should enable us for most applications to provide the solution based on standard building blocks that are available off the shelf. This we’re going to be rolling out as the year progresses. It’s a very extensive product line. And again, it will provide customers with benefits in terms of immediacy in their power system solution, flexibility if their power requirements change as they often do, while lessening the burden on R&D to customize or heavily customize solutions that are tailored to particular needs. But there’s still going to be some of those. There’s no question about it. If a program warrants it because the program is in the tens of millions of dollars of revenues per year, we will still entertain it. At lower revenue levels, we can’t justify it. The standard methodology is, generally speaking, going to be good enough.

Understood. Thank you for that detail, Patrizio. Thank you, Jamie.

You’re welcome.

The next question is coming from the line of Jon Tanwanteng from CJS Securities Inc.

Good afternoon, guys. Thank you for taking my questions. My first one is we’ve seen reports from some heads of some large hyperscale companies that they’re talking about or thinking about reducing their data center spending. I’m wondering if you’ve already seen that in your Advanced Products orders. Or is that still yet to come? Or is it maybe being offset by these new customers and applications that you’re now rolling out? Any color there would be helpful.

So, with respect to the visibility we have, I don’t see that. We don’t see that. Again, we are at the beginning of a couple of major programs with major customers, and the number of other somewhat smaller programs, those may not be affected by any tightening of the belt that may be going on, depending on how the dominoes of coronavirus end up falling. But I would say that thus far, I’ve been surprised by the resiliency of the demand, well above where I thought we would be at this point in the second quarter in terms of bookings. And to Jamie’s point, that’s not going to be negated by a weakening of the demand later on. We don’t see that. It could happen, but we don’t see it.

Yes. I would just highlight Alibaba’s statements about the magnitude of their intended spend; we’re not seeing any contraction in terms of our opportunities.

Understood, thank you. And Patrizio, you mentioned you were surprised by the strength in the orders. Was that broad based? Or was it just one or two bigger customers that came in earlier or stronger than you expected? Can you just help us think about what actually went on at a little deeper level as possible?

Suggesting the earlier answer, it’s been two major programs that are beginning to ramp with demand, where the forecast has been revised up. We’ll have to see that that holds. We’ve been around long enough to be surprised. But certainly, the indications are positive. But also general demand for not just Advanced Products, but also traditional bricks. So, I think it’s, generally speaking, relatively broad-based.

Great, thank you. Jamie, just one for you and piggybacking a bit on what Quinn just asked. Can you quantify the gross margin hit from the supply side in the last quarter and also the prototyping costs that were, I guess, above your normal run rate? And I assume that latter bit is going to keep…

I can, but I won’t. Let’s just characterize it as something that we hope is behind us.

Okay, fair enough. And then just a general question, are there any issues with your partners — whether suppliers or customers — in terms of solvency or liquidity or maybe some of them might have been shut down by quarantine or state issues or maybe even contracting viruses in their facilities? Just wondering if there’s any risk there? And then how could we capture that? Or how are you planning for that?

We’ve been monitoring our suppliers closely and have seen pockets of increased lead times, particularly in power semiconductors. The combination of component lead time increases and the need to plan factory capacity with greater visibility led us to extend lead times earlier. In general, though, our suppliers have been operational and we’ve been able to address issues as they arise. We continue to monitor liquidity and operational readiness with key partners and believe we have sufficient visibility and contingency plans to manage near-term risks.

Got it. Thank you very much. Good luck and hopefully, the strength continues.

Thank you.

Yes. Thank you.

The next question is coming from the line of Don McKenna from DB McKenna & Co., Inc.

Hi, guys. I wanted to go back, if I could, to the bookings a bit. I know at the beginning of the month, you increased lead times from 20 to 24 weeks, which in and of itself would seem like it would generate about a 20% increase in bookings for the upcoming quarter. If you backed out any increased demand that you see that would be generated by that increase in lead time, what would you see as a percentage increase for end demand for the quarter?

So, generally speaking, as we all know, bookings within a quarter tend to be non-linear. What I generally expect as the quarter progresses is that the plan is achieved with a strong contribution in the second month and particularly in the third month. So case in point, last quarter, we had a very strong finish to the quarter. And that made the quarter from a bookings perspective. This quarter, thus far, we’re actually percentage-wise appreciably ahead of the linear fill for the plan for the quarter as a whole. Lead times, to your point, do play a role. But I think the strength we’ve seen in terms of the actual programs points to sustained demand. We’ve had examples such as providing bricks for ventilators, as an example, or other kinds of solutions that are unrelated to lead times. But anytime, it could be a component. With our own suppliers, we’ve seen increased lead times, particularly in the power semiconductors area, and the combination of component lead times with respect to some key components going out and the need to plan factory capacity with greater visibility—that’s what led us to take the step of extending lead times by four weeks.

But if you backed out the increased bookings because of your increased lead time, can you give us a feel for what kind of a percentage increase you anticipate in terms of bookings for the quarter?

At a general level, I would say that in a typical quarter this far into the quarter we would expect on a linear basis to be at a percentage below the 100% level, typically 15% to 25% below if things were perfectly linear. Instead, we’re ahead of the quarterly plan on a linear basis by a percentage I’m not going to disclose. So I think that differential is substantial enough to fit with what we see in terms of the specifics of the orders that we’re getting. Again, when we go back to the earlier question of the composition of the bookings and the fact that when it comes to so-called strategic customers, these bookings relate to new programs that need to ramp, as they ramp, they should lead to an increased rate of bookings as we get further into the second and third quarters.

Okay. But my other question is kind of related to that. What is the current percentage of capacity for the Advanced Products that you have?

So, we are doing okay in that regard. We have the capacity we need. We always like to have spare capacity to be able to deal with burst demand.

But are we running at 50% of capacity or 60%?

I don’t have a specific accurate number to give you. We’re not running at 100%, we’re not running at 50%, and we’re running somewhere in between. Capacity is somewhat model-dependent based on what levers we pull to adjust it. So we’re comfortable with respect to not having a capacity problem over the next few quarters. But we’re also mindful of the fact that we’re going to need more capacity, and that’s why in spite of the challenging times and uncertainties, we decided to move ahead with the expansion to our Advanced Products capabilities. We aim to move equipment into the facility by the end of this year or at the very beginning of Q1 of 2021.

Thank you.

The next question is coming from the line of John Dillon from D&B Capital.

Hi, guys. Is that backlog number a record?

I’m not sure, but it’s close.

It might be.

I think it is from whatever. Anyway, congratulations. That’s really good to see. It’s obviously you guys are doing well in the COVID environment. So, I had a question. It looked like your shares of stock went down. I was just kind of curious as to what happened there? Why did they go down?

Well, you can answer the question for me. I’m not sure I’m going to venture a guess with respect to that other than, obviously, to a significant degree —

But remember, we’re working off of a loss position for the quarter. So, we use what used to be called basic shares as opposed to fully diluted.

Okay. So, had some options become dated? Or did you buy back any shares or anything like that?

No, it’s just that we do it on outstanding shares. The basic share count, which is the 40.6 million.

Yes. It just seems like it went down. So I was just kind of curious as why it would go down.

Actually, the basic went up from 40.482 million to 40.635 million.

And diluted went down?

Yes. But again, it’s based on options that are exercisable in the immediate future and based on stock price.

That can be related to the stock price.

Got you. Okay, thank you. Patrizio, I was wondering if you could comment a little bit about GCM engagements. Are there any new engagements or how is that going? Are you picking up some new significant customers in that?

Yes. There’s a lot of activity on that front. As I suggested earlier, we are actually trying to limit the number of engagements for GCMs. This is an even more complex triple-stack approach, where we’ve engaged thus far with two major customers. Going forward, while we get requests literally every day for solutions that involve GCMs, we’ll limit to the extent possible because there’s a level of complexity to it that gets in the way of scalability. So, it is something that we’re only going to entertain for major programs in the tens of millions of dollars per year. Again, solutions where customers would like us to address through a custom GCM can be made to happen with still state-of-the-art power density, efficiency and general performance without involving the custom development into GCM. To be a little clear with respect to why GCMs require tailoring: with the GCM, we have a current multiplier that is sized to deliver the current requirement of a processor — be it 700 amps or 900 amps or 1,000 amps in that general ballpark. We have the multiplier layered on top of what we call a gearbox, which adapts the current multiplier or any modular power system to the pin map of the SoC or ASIC that is being powered. In other words, the customer comes to us not just with a current requirement and a power requirement, but also the pin map of its ASIC, which drives customization. We’ve learned from doing these exercises how to make it more scalable, and we’re getting more proficient at it. To the point where we’ve taken on two major opportunities with so-called triple stacks, where there is a gearbox, a current multiplier, and the rest of the power system is layered on top of the current multipliers. You can have a complete vertical power delivery solution. These complex custom developments have been useful in exploring what could be done and what the technological and intellectual property opportunities would be. They are not something we would pursue for broad general purpose applications.

Thank you. That was a great explanation. So that kind of dovetails into my next question, which I think you’ve answered in previous questions here, but I want to make sure I’m clear. You mentioned that you had specific customers that drove your expenses up. It looked like your R&D was up about $2 million and your SG&A was up about $1 million. Are those in customer engagements with GCMs? Or were they also involved in projects that were like for $20 million or more a year, like you mentioned a couple of times?

Yes. Generally speaking, there’s a threshold that isn’t always the same to justify this kind of development. In the case of opportunities that have significant potential, we may entertain custom development even if the revenue thresholds vary. In some cases, there are established companies where the opportunity is very clear for us to see, and we may take on development. Judgment enters into it. In some cases the amount of risk with respect to seeing a return on investment is acceptable. Just to quantify the level of activity that is going on recently: within the last month and a half, several of these engagements were progressing through R&D engineering with a variety of activities that represent significant expense, both with materials and R&D personnel, and they were all concurrent developments. That’s at the root of the R&D costs being what they are.

All right, thank you very much. I’ll get back in the queue at this time. Thank you.

Thank you.

The next question is coming from the line of Richard Shannon from Craig-Hallum Capital Group.

Hi Patrizio and Jamie. Thanks for taking my questions. So, let me start with the financial one on gross margins. It sounded like from your prior discussions that you were looking for gross margins improving here in the second quarter. But Patrizio, based on your comments, it sounded like it would take a couple of quarters maybe to get back up to prior levels of 2019 based on the ramp of some new products. Is there a kind of history that you can fall back on and give us a sense of how fast it would take before you can get your gross margins back up to the mid-to-high 40s?

Well, I think a very reasonable threshold given the level of investment in the technology and the IP is 50%. So, as a management team, we have set our sights on crossing the 50% level in a matter of a few quarters, and then going well beyond that as justified by the roughly $0.5 billion investment that I referenced earlier in the technology portfolio that we’ve been developing over the last 15 years. A fair return for this kind of technology is not based on gross margins in the 40s or even 50s. We need to be thinking of gross margins in the 60% range and maybe even higher. Part of this is cost structure. The cost structure is key to making customers happy not only with solutions that enable their competitive advantages, but also doing so cost effectively, and importantly enabling us to achieve good margins and returns on investment. Going forward, with the expansion of our facility, the vertical integration of the balance of processes required for power package and vertical power delivery, and economies of scale associated with greater volume, given the fixed cost structure that we currently have in Advanced Products, we have tremendous opportunities to dramatically reduce cost. That’s a focus for us. We measure this in terms of so-called panel costs. Similar to wafers in a foundry, we create panels from which chips are made, and costs are driven by the panel cost and how many chips we get per panel. As we increase power density, the area per chip effectively goes down in some dimensions, enabling more chips per panel for a given power level. Those are the key drivers to continuous and dramatic cost reduction.

Wonderful. Patrizio, thank you for the complete and helpful answer there. Maybe, one or two more from me and I’ll jump back in the line. You referenced in the last conference call the OEMs, the OCP accelerator modules. Maybe if you can characterize how important you see that for this year or next, and I think specifically last quarter you referenced one of the versions using your LPD. To what degree do you see that as a contributor to revenues this year?

That space has an established dominant player and many aspiring competitors. Wherever the current requirements get beyond a few hundred amps, particularly up to 700, 800 amps and beyond, our solution is highly differentiated and enabling where competitive alternatives are not. Comparative alternatives have limitations and potential IP constraints. We feel strongly that as that market continues to expand over the next five to ten years, we see ourselves as being a common denominator power system enabler for those solutions.

Okay. Last question from me. Last quarter, you talked about automotive and the signing of two agreements. I didn’t hear anything in your prepared remarks today. Any updates you can give on progress there? I know that we’ve seen a lot of the automotive space slow down — have those slowdowns impacted any engagement or discussions in that space?

Over the last couple of months, things have been relatively quiet in that general area. People can’t travel or visit automotive customers and potential partners. So we’ll have to wait a while to see what transpires after recent events. I would expect the trend toward the 48-volt node in electrified vehicles will accelerate before too long, despite short-term sales headwinds, because of other secular trends driving these advances. Leaders in that area are continuing to push for AI solutions for autonomous driving and other power system needs in electrified vehicles. But frankly, over the last several weeks I haven’t been as closely engaged on automotive as other areas for obvious reasons.

Okay. That makes sense. Thanks for the detail. That’s all the questions from me. Thank you.

Thank you.

The next question is coming from the line of Alan Hicks from Ainsley Capital Management.

Yes. Good afternoon. I had a question about it seems like with everything that’s happening that data center service demand is increasing. What are you seeing from your customers? Are things getting stronger?

As suggested earlier, the customers and the programs that we’re particularly focused on appear to be doing well. Their motivation to accelerate ramps and get new products that create new revenue opportunities and new efficiencies in data centers are driving these ramps. I can’t tell you whether other programs and other customers follow the same trend, but with the visibility that we have thus far, it’s been remarkably strong.

And how are things going with getting new customers?

It’s going very well. In AI, any leading company you would think of is either an existing engagement or an engagement waiting to be kicked off.

How do you see 48-volt adoption? Is interest increasing?

It’s definitely a done deal in many respects; the train has left the station. In AI, the switch from 12-volt to 48-volt was driven by the realization that a 48-volt intermediate node is necessary to support the high current requirements of modern GPUs. While many data center infrastructures remain 12-volt today, 48-volt is becoming the norm for new high-current GPU solutions. In automotive, the same trend is present: conferences and industry activity around 48-volt have been very frequent. There may be fewer car sales now, but I think the rationale for 48-volt and related advancements will remain compelling and accelerate once the near-term disruption settles.

Okay. And then on your front-end products, that RFM product based on 4G technology, how’s that going?

That’s going well. We are engaged with a lead customer for that product where we are already providing the point-of-load solution as a power-in-package solution. This customer currently has a bulky classical front end and will be able to shrink the size of that front end by an order of magnitude using 4G RFM technology. That will be a lead customer for us, and we look to broaden it from there. We’re very focused on this initial engagement.

So, you still have very high hopes with that product?

Yes, we do.

And then lastly, can you give a quick update on your supercomputer business?

There are programs ramping in that space as well. There are some government programs and other programs; supercomputers are one of the areas where programs have deadlines and production requirements are coming. So we expect to see sales from that in the near term.

So, you expect sales from that in the second or third quarter?

Yes.

Okay. Thank you very much.

Thank you. I think if there is one more question, we are at the end of the hour.

We do have one more question. It’s coming from Jim Bartlett from Bartlett Investors.

Many of my questions have been asked. Just last on the RFM product: you had said in the last conference call that in six to seven weeks you’d have the 4G controller chip and you’d start powering it up. Has that happened?

We’ve had a first revision of the 4G controller that we used for some initial benchmarking. Not surprisingly, silicon generally requires a re-spin to address minor issues found in benchmarking Rev A. We have a Rev B which is due in about three to four weeks from now. We expect that to be good to go for scaling up our capabilities with respect to 4G PFC — both single-phase and three-phase — and RFM for a variety of products for AC to DC front-end power conversion.

And when you see bookings, well design wins, production bookings, what sort of cycle might you see?

I look at 4G RFM as a near-term contributor that will move the needle in 2020, but the initial significant opportunities and scale may be more evident next year and the year after. It is a very important complementary capability because it brings power from any worldwide AC mains to the common-denominator 48-volt node, which is the hub from which we deliver power to the point-of-load. We have a lead customer that has gone to 48-volt to support very high current requirements and now wants a state-of-the-art front-end solution to power their systems from worldwide AC mains. This is complementary technology for that complete system.

Thank you for the explanation and congratulations. I’m very much looking forward to the order of magnitude return on the $400 million.

We’re counting on it. Thanks very much and we’ll be talking to you in a few months. Have a good day.

Goodbye, everyone.

Thank you very much, everyone. That concludes your conference call for today. You may now disconnect. Thank you for joining. Enjoy the rest of your day.