Good day, and welcome everyone to the Vicor Earnings Results for the Second Quarter ended June 30, 2022. Hosted by Jim Schmidt, Chief Financial Officer. My name is Nandy, and I'm your event manager today. During the presentation, your lines remain on listen-only. I would like to advise all parties that this conference is being recorded. And now, I would like to hand it over to your host, Jim. Please proceed.

Thank you. Good afternoon and welcome to Vicor Corporation's earnings call for the second quarter ended June 30, 2022. I'm Jim Schmidt, Chief Financial Officer. And I am in Andover with Patrizio Vinciarelli, Chief Executive Officer, and Phil Davies, Vice President of Global Sales and Marketing. After the markets closed today, we issued a press release summarizing our financial results for the three and six months ended June 30. 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 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 statements regarding current and planned products, current and 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 or implied by any of our remarks today. The risks and uncertainties we face are discussed in Item 1A of our 2021 Form 10-K, which we filed with the SEC on March 1, 2022. The 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, July 21, 2022. Vicor undertakes no obligation to update any statement including forward-looking statements made during this call, and you should not rely upon such statements after the conclusion of this call. A replay of today's call will be available beginning at midnight tonight through August 5, 2022. The replay dial-in number is 888-286-8010 followed by the passcode 64490033. 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 a transcript will be available shortly on the Investor Relations page of our website. I'll now turn to a review of our Q2 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 for P&L and balance sheet items and refer you to our press release or our upcoming Form 10-Q for year-over-year comparisons. As stated in today's press release, Vicor recorded total revenue for the second quarter of $102.2 million, a 15.7% sequential increase from $88.3 million in the first quarter of 2022. Advanced Products revenue increased 27.8% sequentially, while Brick Products revenue declined 2.4% from the prior quarter. Advanced Products revenue increased 64.9% from the same quarter a year ago. Shipments to stocking distributors decreased 3.4% sequentially and 34.1% year-over-year. Exports for the second quarter were relatively flat sequentially as a percentage of total revenue at approximately 69.2% from the prior quarter 72%. For Q2, Advanced Products share of total revenue increased to 66.2% compared to 59.9% in the first quarter of 2022, with Brick Products share correspondingly decreasing to 33.8% of revenue. Turning to Q2 gross margin, we recorded a consolidated gross profit margin of 45.8%. Gross margin increased sequentially from 42.6% in the first quarter of 2022, primarily as a result of higher volume. Headwinds impacting our gross margin including elevated cost of securing supply and outsourced capacity continued in Q2. In addition, tariffs continue to be a drag on gross margin at $2.1 million in Q2 and 2.1% of revenue. Our work to reduce tariffs by reducing imports from China continues. I'll now turn to Q2 operating expenses. Total operating expense increased 8.3% from the first quarter of 2022. This above the average sequential increase was largely due to legal fees incurred in connection with an intellectual property litigation. Vicor is both a defendant in a case scheduled for trial in October and a plaintiff in an upcoming ITC case to stop the importation of infringing OEM products into the US. In the larger context, as described previously, Vicor has developed proprietary power modules and system architectures providing superior power system solutions. These capabilities are being broadly adopted by OEMs purchasing Vicor modules, by an OEM licensing Vicor technology to procure otherwise infringing modules from unlicensed suppliers and by OEMs taking their chances with the importation into the U.S. of infringing products. Vicor is committed to vigorously enforce its IP. The amounts of total equity-based compensation expense for Q2 included in cost of goods, SG&A and R&D was $431,000, $1.44 million and $751,000 respectively. Totaling approximately $2.6 million. For Q2, we recorded operating income of $11.3 million, representing an operating margin of 11.1%. Income taxes for Q2 were a tax provision of $802,000. Net income for the quarter totaled $10.6 million. GAAP diluted earnings per share was $0.24 based on a fully diluted share count of 44,866,000. Before I review our financial position, just a brief update about COVID-19 on our workforce. As previously discussed, as a designated essential manufacturer using masks and practicing social distancing from the onset of the pandemic, we have continuously operated three shifts at our Andover manufacturing facility. Cases and absenteeism due to COVID-19 are now negligible. Nevertheless, because much of the potential influence of the COVID-19 pandemic is associated with risks outside of our control, we cannot estimate the extent of such influence on our financial or operational performance or when such influence might occur. In particular, the zero COVID policy adopted by China has caused disruptions in parts of our supply chain and the impact and timing of the effects on our results are unpredictable. Turning to our cash flow and balance sheet. Cash, cash equivalents and short-term investments totaled $207.6 million at the end of Q2. Accounts receivable net of reserves totaled $54.5 million at quarter-end with DSOs for trade receivables at 37 days. All balances are current. Inventories, net of reserves increased 12.4% sequentially to $83.1 million with annualized turns at 2.62. Operating cash flow totaled $10.8 million for the quarter. Capital expenditures for Q2 totaled $14.2 million. We ended the quarter with a total construction and progress balance of $50.8 million and approximately $35.1 million scheduled to be spent through the year, primarily for manufacturing equipment. I'll now address bookings and backlog. Q2 book-to-bill came in below one and with one year backlog decreasing sequentially by 3.2% from the first quarter of 2022. Turning to the third quarter of 2022, as we updated at the Annual Shareholders Meeting in June, our ChiP fab is nearing completion and we expect vertically integrated production in Q4. As it ramps up, our ChiP fab will provide the capacity we need to further improve output and the efficiency necessary to improve gross margins. With that, Phil will provide an overview of recent market developments and then Patrizio, Phil, and I will take your questions.

Thank you, Jim. Q2 bookings are a result of securing long-term NCNR orders in prior quarters that now form a large part of our backlog. The outlook for the data center market is positive, as hyperscalers continue to build out their machine learning technologies and capabilities, as well as upgrading their 48-volt CPU racks with the latest Intel and AMD CPUs. Our backlog, which stands at over $400 million, is strong and made up of major HPC customers with a mix of older and newer programs that are just beginning their ramps. Our objectives in the next two to three quarters are to catch up with customer demand and reduce lead times. As discussed in our Annual Shareholders Presentation a few weeks ago, we are working on next-generation AI processor and AI systems in the HPC market with the lateral and lateral vertical solutions and with new network processor-based designs for backhaul speed upgrades. Since the ASM, we have also agreed to a funded collaboration agreement with an additional automotive OEM. Our legacy product backlog increased in Q2 and although a smaller percentage of our overall business mix, legacy products remain important to our business. Many of our 8,000 plus customers representing a very long tail and loyal base are transitioning to our Advanced Products for next-generation programs. This is important to our portfolio as we build out our broad-based industrial and channel business. I cannot emphasize enough how important our new ChiP fab is to not only increasing short-term revenue growth for our Advanced Product customers globally, but also to our mid and long-term strategic goals. Our major HPC customers need access to scalable capacity with shorter lead times in support of their critical production ramps and volume requirements. Our automotive customers also need assurance that the power modules they use in vehicle platforms are manufactured in an automotive-qualified facility under Vicor's full control. In conjunction with world-class manufacturing of chips in our first fab, our company-wide operational excellence initiatives are now being rolled out. Our pivot from a product-centric company to a more customer-centric company is at the heart of this change. On the ASM call, I spoke of a focused set of 100 customers that had the SAMS to get us to our $1 billion revenue target. We will be laser-focused on this customer set with the objective of achieving the highest possible scores across technology, quality, responsiveness, delivery and cost, more commonly referred to as TQRDC, such that the most impactful companies around the world trust us to deliver power system solutions with the high performance necessary to enable their innovations.

Yeah. So to expand on that, if you are referencing next-generation solutions that are triggering additional bookings, if those are approaching availability, but we have not yet booked orders for those devices.

Great. Thank you. Congratulations on the nice increase in quarterly revenue. But I wanted to ask, Phil, you gave a little bit of color on bookings. So it looks like on a quarterly basis bookings declined pretty meaningfully. You mentioned the NCNR orders in previous quarters, but can you sort of just elaborate a little bit more? I'm not sure if I know the term NCNR, so maybe first start with what those are and then perhaps more importantly, when would you expect to see bookings recover, are you already starting to see better bookings in the September quarter or do you expect them to remain subdued as you work down backlog?

So, hi, Quinn. So NCNR is non-cancelable, non-returnable. That was necessary pretty much across the board because we are booking out really way beyond, in some cases, 40 weeks. Our lead times are at 32 weeks for Advanced Products, but obviously, big customers have secured their supply chain and guaranteed they are able to build their product have been placing very large NCNR orders with us in prior quarters. Very lumpy, very high, in some cases. So I'm not concerned about bookings at all, with the backlog being so strong and visibility out there, it's okay. I'm very confident in the backlog.

I guess maybe a related question you talked about some of the next-generation platforms that may ship later this year or in 2023. Should investors assume that perhaps orders for those advanced next-generation platforms were already placed under the NCNR terms that you talked about or would you expect platforms for 2023 to book later this year?

No. We're seeing orders. As I mentioned, the backlog is made up of all the programs and new ones, recent ones, and those are NCNR and for the 2023 timeframe, but some of them will start to ship in Q4.

It was a combination of a couple of things. I think that the investments we've made in capacity did help us in Q2. So the beginnings of some positive results from particularly Surface Mount Technology, not necessarily the package process steps the plating operations. So we did get some benefit from that. We still have the headwinds associated with the most part, outsourced operations and that continues now, as we bring our own lineup. But there was some benefit there. And I think, John, we have to give a lot of credit to our operations team, who worked against long odds to get supply and really drive supply hard in Q2, to get the revenue lift.

Hi. Good afternoon, guys. Thanks for taking my question and nice quarter. I was wondering if you could just give us a little bit more color on what enabled this sequential increase, whether it was your internal capacity freeing up or was it external supply chain just help us get us to where you got today and is that sustainable actually going forward?

Supply is still tight. We've talked about that internally, I've talked to our operations people, it's still a very tight environment for supply.

Hi, guys. I'm following up on Quinn's question; I was trying to get a feel for the dollar value of the bookings received in the quarter. Am I right to assume that you net out new orders with any cancellations or move-outs of existing orders when you determine your book-to-bill ratio and if that's the case, could you please identify what the dollar value of new orders were? Otherwise, it looks like it was only about $76 million.

The bookings were higher than that, there are minimal cancellations in our order pattern, really. So I think the book-to-bill was as we said, below one backlog… Not that far below one. I think the telling number that we quoted was the opening backlog dropped by sequentially by 3% which is on the order.

Yes. Hi, guys. I just have two brief but unrelated questions. Have you received the final piece or pieces of equipment for the new facility? And then switching gears, you guys brought up the litigation, what capital requirements or any distraction will these litigations create moving forward?

Okay. Let me take that so I’ll start first with the working stand in terms of our new facilities, a federal state and bringing on capacity, as Jim pointed out earlier, we already benefited in Q2 from some of their capacity and equipment is being sold at the high rate and lines within the new facility are being tested. In fact, one of the lines relating to the packaging process is beginning to be applied that with respect to some of the engineering prototypes. But we will have to wait for the balance of Q3 to have the bulk of the production equipment installed and then we'll have to wait for a fraction of Q4 for us to reclaim the lion’s share of the capacity or production for Advanced Products. So there will be some incremental contribution this quarter and this going to happen, the increasing pace as the quarter progresses, but it will not be until the fourth quarter that, in effect, all of the production equipment that is in the critical path, just to say, there will be additional production equipment coming next year, but all of the critical production equipment with respect to Advanced Products for that to be in place that would be in Q4.

So simple follow-up, has there been a delay in the final piece of equipment?

I will say generally no. However, given the numerous pieces of equipment and the overall complexity of what we are bringing together for the first fab, it’s important to think of the power components in the context of this first fab. This fab is being conceived, developed, and implemented, and that is a significant task that has largely remained on schedule.

Just a quick question because I've been on every call as an investor with you for eight or nine years. Has there been a delay with the final piece of equipment? My original impression was that it would be completed a bit sooner.

Yeah. So delivery of the equipment has been pretty much on schedule. Now we've had and we're continuing to add to air freight, some of this equipment is heavy and frankly, very costly to ship by air. So the timelines and the constraints. But for the most part, I think everything was up and pretty much on time. We're now going through in effect a different phase, which is with all the equipment has been delivered. We're bringing up new lines that perform certain portions of the Advanced Products process steps. And there is still some equipment due to be delivered in the next month or so that would be commissioned late in this quarter and would become operational in the fourth quarter. Yeah. So we have some long-standing litigation in which unfortunately, we've had to play mostly defense and that's coming to a head in October. And there will be behind us in a few months. And in the meantime, we're gearing up for the more important litigation opportunity, which has to do with getting a return on investment with respect to all of the IP that Vicor has developed in terms of power system technology, power components, and other aspects of the overall power system challenge. So there are, as we've discussed in past quarterly calls, there are on the fringes, instances of infringement regarding the earlier part of your question, as to why these people can copy.

Good. That's what I wanted to hear. Good.

Hi, guys. Congratulations first of all on the quarter, but also on the factory, I've got a little of the remodeling project here at my house and I know how hard it is to stay on target and schedule just in this little project. I don't know how you guys did it for the whole factory, but it's really remarkable.

The bubble chart was basically to show the customers, on the progression of customers that we're bringing on. It's really a mix of both bookings and revenue. I didn't get that granular on it; it was really meant as a visual to say to everybody because I always get asked, we only got one or two customers. So the answer is no. We've got a lot of customers and we are building that customer portfolio out in the HPC market. So it was really meant to represent that in a mix of bookings revenue and to visually show how they grow over time.

Got you. So the GPU customer sounds like their existing product line may be continuing a little bit longer than we thought. And then in time for the new product, you expect to get some revenue from the new 5-nanometer product that will continue that growth in that particular customer?

I think we're going to be in that privileged position by the end of this year. I think that because of all the learning has been going on over the last 1.5 years, our operations team doesn't have to, in effect, sort through challenging processes. They understand what needs to be done. They've aligned themselves in terms of chemicals and equipment and capabilities with proven solutions that we expect will enable us to ramp without glitches, having completed the validation of the equipment and the processes, which, again, is something that has begun, it's taking place already with respect to some of the lines in the upper floor of the new facility, which are dedicated to advanced packaging.

Understood. Thanks for that on technology and good luck guys.

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