Good day, everyone, and welcome to Vicor Earnings Results for the third quarter ended September 30th, 2022, hosted by James Schmidt, Chief Financial Officer. My name is Peter, and I'm your event manager today. During the presentation, your lines will remain on listen only. If you require assistance anytime, please key star zero on your phone. If you wish to ask a question, please press star and one. I would like to advise all parties this conference is being recorded. Now I'd like to hand over to James Schmidt. Please proceed. Thank you. Good afternoon, and welcome to Vicor Corporation's earnings call for the third quarter ended September 30th, 2022. I'm James Schmidt, Chief Financial Officer, and I am in Andover with Philip Davies, Vice President of Global Sales and Marketing. Our CEO, Patrizio Vinciarelli, is unable to join today's call because he is out of state attending the trial relating to IP litigation we referenced on our earnings call last quarter. After the markets closed today, we issued a press release summarizing our financial results for the three month and nine months ending September 30th. 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 risk 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 1st, 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, Tuesday, October 25th, 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 November 9th, 2022. The replay dial-in number is 888-286-8010, followed by the passcode 10145508. 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 Q3 financial performance, after which Phil will review recent market developments, and 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 third quarter of $103.1 million, approximately a 1% sequential increase from $102.2 million in the second quarter of 2022, and a 21.4% increase from the same quarter a year ago. Advanced products revenue decreased 12.5% sequentially, while brick products revenue increased 27.2% from the prior quarter. Advanced products revenue increased 36.2% from the same quarter a year ago. Shipments to stocking distributors increased 22.5% sequentially and 27.3% year-over-year. The brick products revenue increase over the prior quarter is the result of our manufacturing team's ability to adapt to changing circumstances and focus on the open brick backlog as we have the supply to get the additional output for the quarter. The sequential decline in advanced products revenue in Q3 was due in part to the issuance of an approximately $6 million return merchandise authorization, or RMA, in the quarter. Product covered by this RMA will be evaluated upon receipt and prior to restocking in advance of its future shipment. Exports for the third quarter were relatively flat sequentially as a percentage of total revenue at approximately 70.1% from the prior quarter, 69.2%. For Q3, advanced product share of total revenue decreased to 57.4% compared to 66.2% in the second quarter of 2022, with brick product share correspondingly increasing to 42.6% of revenue. Turning to Q3 gross margin, we recorded a consolidated gross profit margin of 45.5%. Gross margin decreased sequentially from 45.8% in the second quarter of 2022 primarily as a net result of favorable overhead absorption offset by tariff costs, higher costs at outside vendors, and incremental in-house manufacturing costs associated with ongoing vertical integration investment in advance of substantial in-house production. Tariffs continue to be a drag on gross margin at $3 million in Q3 and 2.9% of revenue. Our work to reduce tariffs by reducing imports from China continues. I'll now turn to Q3 operating expenses. Total operating expense increased 5.4% from the second quarter of 2022. Like last quarter, and for the same reasons, this above-average sequential increase was largely due to legal fees incurred in connection with intellectual property litigation we've described previously and as disclosed in our filings. The amounts of total equity-based compensation expense for Q3 included in cost of goods, SG&A, and R&D was $479,000, $1,537,000, and $813,000, respectively, totaling approximately $2.8 million. For Q3, we recorded operating income of $9.5 million, representing an operating margin of 9.2%. Income taxes for Q3 were a tax provision of $842,000. Net income for the quarter totaled $8.1 million. GAAP diluted earnings per share was $0.18, based on a fully diluted share count of 44,898,000 shares. Before I review our financial position, just a brief update about COVID-19 in 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 are associated with risk 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 effect on our results are unpredictable. Turning to our cash flow and balance sheet, cash equivalents, and short-term investments totaled $202 million at the end of Q3. Accounts receivable, net of reserves, totaled $56.3 million at quarter end, with DSOs for trade receivables at 38 days. All balances are current. Inventories, net of reserves, increased 13.6% sequentially to $94.3 million and with annualized turns at 2.61. Operating cash flow totaled $6.6 million for the quarter. Capital expenditures for Q3 totaled $14.4 million. We ended the quarter with a total construction in progress balance of $57 million and approximately $13.5 million scheduled to be spent through the end of the year, primarily for manufacturing equipment. I'll now address bookings and backlog. Q3 book-to-bill came in below one and with one-year backlog decreasing sequentially by 9.4% from the second quarter of 2022. Before addressing our outlook for the fourth quarter of 2022, I'd like to comment on significant external events and developments that have occurred since our last earnings call in July. Over the course of the last three months, the macroeconomic environment has deteriorated. Many parts of the semiconductor industry have entered a downturn. The Commerce Department issued new and stricter export control rules, and the CHIPS and Science Act became law. While it's too soon to tell what the impact of the first three of these developments may mean for our business, they certainly represent headwinds in the near term. On the other hand, the passage of the CHIPS and Science Act could present an opportunity for Vicor, both in terms of potential funding for new investments in vertically integrated U.S.-based manufacturing and also the possibility of leveraging its investment tax credit. As we operate in this environment, we are working to control all the factors that we can control. For example, we are taking a more conservative stance on hiring and have recently reprioritized and reduced open personnel requisitions. We continue to work to bring our vertically integrated U.S.-based production capacity online while also looking for opportunities to take advantage of the investment tax credit in the CHIPS Act relating to equipment procured after the CHIPS Act became law and is subsequently placed into service after December. We have taken steps to rebalance our manufacturing production plan in order to make progress catching up with customer demand that we've not been able to adequately support in the past. We are continuing our company-wide work in support of operational excellence, and we remain focused on the development of our next-generation power delivery technology while building the business across our customer base in HPC, automotive, industrial, and aerospace and defense end markets. In all of this, we remain focused on executing our strategy, which we laid out at our annual shareholders meeting in June. Given our continued near-term dependence on outsourced production for certain package process steps, our outlook for the fourth quarter is approximately flat to our Q3 results. With the potential for modest sequential improvement as we increasingly leverage in-house process equipment to alleviate production constraints. With that, Phil will provide an overview of recent market developments, and then Phil and I will take your questions. I ask that you limit yourselves 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 available. If you have more than one topic to address, please get back in the queue. Phil? Thank you, Jim. As Jim mentioned, our book-to-bill ratio came in below one in Q3, reflecting the second quarter in a row where this has occurred. At a high level, this trend is reflective of the deteriorating macroeconomic environment. However, it's important to point out that we maintain substantial backlog as we enter Q4. From an end market perspective, and on a more positive note, the outlook for the data center market in North America at the current time is still good, as hyperscalers continue to build out their machine learning technologies and capabilities, as well as upgrading their CPU racks with the latest Intel and AMD CPUs. Managing the transitions to newer processor platforms in our customer base will require some maneuvering of our NCNR backlog in Q4 from Gen 3 to Gen 4 Factorized Power modules. I remain confident in our position in the HPC market and in the customers that we have worked hard to develop in recent years. Our Factorized Power solutions remain the highest performance in terms of current density, low noise, and overall power system efficiency. Our Generation 5 technology and new FPA modules, which we are now beginning to introduce to lead customers, will be a game changer in cloud computing and machine learning, with a significant step up in current density. Our Gen 5 technology will also enable direct chip-on-processor solutions, which will completely eliminate board and substrate PDN losses for our advanced processor customers, while also providing a significant step up in transient performance. While multiphase buck regulators have increased their power density and represent an attractive alternative due to the multi-sourcing, it remains to be proven if these multiphase solutions can manage significantly higher PDN losses and meet the low noise and high performance required by high-power AI and network processors. Our industrial and aerospace business remained stable in Q3, and both POS and new orders within our global distributors remain strong. However, we have started to see signs of a potential slowdown in some segments of our industrial business in China and Europe, which reflect macroeconomic headwinds. Our automotive business development continued its positive trajectory with OEM and tier-one power system evaluations making great progress towards securing start-of-production dates with very attractive volume opportunities at several OEMs. We had two successful OEM audits in Q3. Both OEMs have approved Vicor as a supplier of power modules for their vehicles. In Q3, we also engaged with additional hyperscalers and processor OEMs regarding an OEM license that would ensure continuity of supply ahead of our upcoming campaign to enforce Vicor bus converter patents. Thank you. Jim and I will now take your questions. Okay, operator, if you could go ahead and start into the questions. Yes, sir. Everyone, if you wish to ask a question, please make sure to unmute your phone, then key star one. All questions will be asked in the order received, and you will be advised when to ask your question. All other lines will remain on listen only. The first question is coming from the line of Jonathan Tanwanteng. Please proceed. Hi. Good afternoon. Thank you for taking my questions. My first one is, how have you seen orders trend in October so far? Has it gotten worse from what you've seen in Q3? When do you see that kind of picking back up? Is it more decline ahead as you look forward and talk to your customers and think about what they're needing for 2023? The daily order rate in October is below what it was in Q3, John. In terms of, you know, there's lots of uncertainty out there with China and Europe, as I mentioned. As I mentioned, the data center, you know, cloud computing and the hyperscalers and processor guys in North America are still strong, but they've also got large amounts of backlog, right, in place with Vicor that would allow us to maintain healthy revenue shipments, you know, for the foreseeable future. I think that what's to be seen in that particular market is really the rollout of the new platforms and the success of those and what happens with China business for several of those processor companies. That's a little bit of an uncertainty there as well. Like I said, North America is still very strong in investment and capital expenditure in the data center, cloud computing, as well as machine learning. Got it. Thank you. My next one is just, could you give us an update on the new facility? How is it running so far and kind of what kind of utilization are you expecting out of it in the near future? Yeah, this is Jim here. I would say that we're on track as we described it on our last call. I think we said in the range of 80%-90% vertical integration this quarter, and we're on track to do that later this quarter. We're hitting some significant milestones. In terms of bringing up production equipment, it helped us in third quarter. It'll help us in fourth quarter as well to really handle some of the backlog and clear some of the backlog. I would say that that's very much on track as we've described it in the past. Okay, great. I'll jump back in queue. Thank you. Yeah. Thank you. The next question is coming from Quinn Bolton from Needham & Company. Please proceed. Thanks for taking my question. I guess the question around the China export controls, one of your large customers clearly saw an impact from the tighter restrictions on shipments of GPUs to the China market. I'm wondering, you know, can you quantify or give us some sense as to how that might impact your revenue, or what you know what lost revenue might be associated with those tighter export controls? Yeah. It's really mostly with our, we call our legacy business and some of our older chip products. It's really you know new companies being added after I think the Department of Commerce is doing more investigations and the types of businesses that these customers are involved in. It's not for, if you like, our advanced products. It's really our older products. We started to see some of the effects of that at the beginning of Q4, as well as some weakness in the general market over there due to the zero-COVID policies and factories not yet really getting back to where they were you know a couple of years ago. It's really a legacy business issue, Quinn. I guess, Phil, just one of your large customers, I believe, you know, said that they would be affected by as much as 400 million of their GPUs. I guess I'm surprised that you're saying it's more of a legacy impact. Can you provide any more color, you know, if one of your larger customers is seeing that level of hit to shipments of their GPUs, how that doesn't affect your advanced products? Well, I think that, you know, in terms of increased bookings for those advanced products, that's where it would hit. But again, like I said, we've got extensive backlog in place with them, and they've got really big positions in North America and Europe with different types of data center customers. So that's what we're, you know, we're relying on for the next couple of quarters. Then I think things will change as the new platforms start to roll out. Great. Then my follow-up is just, you know, lots of questions this year about competition for multi-phase and, you know, I think it's pretty clear, you know, next generation, you know, product from a lead GPU customer is starting off with multi-phase. But I guess, can you know, give us any updated thoughts on your position both on current generation GPUs as well as next generation GPUs? You know, do you feel like multi-phase is gaining share? Do you think you're holding share? Again, this is both for current generation as well as next generation GPUs. Thanks. No, I think I'm confident in our position with the technology, the Factorized Power technology. It's a very clean solution. It's as we talked about before, it's, you know, power modules which are, you know, significantly less component count, easier for board layouts, much lower noise 'cause of the performance of the parts, better thermal management of the design. I'm confident that the Vicor technology will compete effectively because I still think the jury's out with regards to multiphase and whether or not it can really hit the performance levels that are needed. You know, that's yet to be seen. We'll keep pushing ahead with our stuff, and I'm looking forward to the Gen 5 stuff even pushing us further out ahead of the competition. Thanks. I'll go back in queue. Thank you. The next question is coming from online where there was no name recorded. If you press star one, please unmute yourself, state your name and company. Yeah. Hello? Hello. Yeah. Am I on? Yeah, you're on. Oh, okay. This is Alan Hicks from AMC Capital Management. I wasn't able to pre-register, but so did I hear you say you got a licensing deal? We are offering. We've stepped up basically our interaction with potential hyperscalers and processor companies that we've now obviously have confirmation about use of alternate bus converters. We are offering them to take an OEM license before the action begins in you know restricting importation of those products into the United States. We're in conversation with a number of them at the moment to take a license and you know that will progress through the next you know 3-4 months. Okay. You're getting closer to a licensing deal? Well, we already have one licensing deal in place, but you know, as this moves forward, you know, I do expect others to happen. Okay. I had a question on you've been paying quite a bit in tariffs. At what point do you think you'll be able to? I assume that's all from China. At what point do you expect to get past those high tariffs? I think it was around $0.07 worth last quarter, $3 million and $2 million in the previous quarter. I think that. Thanks for that question. That's a great question. We'll probably have to say we're not as satisfied as we would like to be in terms of extricating ourselves from some of these production operations. They are difficult to move out of China in some cases. In one case, we actually moved, unfortunately, a semiconductor process step from an operation that shut down in the U.S., and we had to move it to China. And that'll move ultimately likely to South Korea. We are getting some momentum going on that front. I think we're also getting some additional momentum going on what it's called duty drawback, where we make application to the U.S. Customs and Border Protection to recover some of the tariffs we've already paid in the past. I'm hopeful that we're able to talk about better results on that front going forward. We have seen on a maybe not completely related topic, but we have seen some relief on freight costs, some small amount of improvement there, for us. That's a good indicator for us in terms of the P&L, but we've got more work to do on tariffs. There is a team inside Vicor working very hard on that. Last question. Your legal costs are up $4 million from Q1. Can you give an update on that and when can you get past those legal costs? That's, you know, as I said in the prepared remarks, that's a function of really a significant amount of R&D and legal expense associated with preparing for the trial that is happening right now. I think that'll taper down obviously as that wraps up. There will be other incremental legal costs coming in as we pick back up where we left off with the ITC activity around what Phil had mentioned, which is, you know, basically Vicor is a plaintiff defending our IP. I would say there's going to be a net reduction in legal costs over coming quarters, but it won't revert back down to, you know, the low level it had been maybe a year and a half ago. Mm-hmm. Okay. Thank you very much. Thank you. The next question is coming from the line of John Dillon from DB Capital. Please proceed. Hi, guys. Thanks for taking my call. Phil, I got a question. Last call, we talked about the bubble chart a little bit, in particular about the GPU customer bubble that you had at your annual meeting. At that time, you're expecting revenue from that current, from their current product for a longer time than you initially expected until their new five-nanometer product would kick in, and then you expected revenue from that. Then you expected a kind of a fairly smooth transition as far as revenue is concerned. I'm just wondering, is that still the case? Yeah. Yeah, we see that big program that we've been involved in to continue through next year, even into Q4. It won't be at the same rate as in Q1, Q2, but it'll still be there. The next generation program will kick in and you know, that will start to take off. You know, that A100 project is a very successful project, and it's still going very strong. Okay, you're still on all the A-100s, and you expect to be on the H-100s coming up here? Yeah. Excellent. I'm wondering about your next generation lateral-vertical, and you talked about some new design wins. I'm just wondering if you can give some color on that and when we might see some of those come into production quantities. Sure. Let's just start with lateral vertical. I think that we'll see production on lateral vertical next year with a couple of processor guys. Then I think that the pure vertical into the clustered computing sort of market will start in Q1 and then a follow-on customer probably Q3, Q4 next year for that. I think that you know then by that timeframe we should have Gen 5 technology starting to hit the market, where that really is a game changer because we have a significant step up in current density, and the packaging gets a lot smaller, and we can do a lot more with it in terms of vertical power delivery. Even as we're talking right now to companies where we will partner with them in a way to actually attach the current multipliers directly to their processor silicon so that you eliminate completely the PDN resistance that and the losses associated with that in substrates and circuit boards. I mean, it's almost the perfect power delivery network, right? Attaching it directly to the silicon. That's what Gen Five will enable, and that'll be later, you know, next year and into 2024. That sounds excellent. I'll get back in the queue. I have some other questions. Thank you very much. Next question is coming from Jonathan Tanwanteng from CJS Securities. Please proceed. Hey, thanks for the follow-up. Just wanna confirm that I heard that correctly. You're expecting me to be in the H-100 at some point in the future? Yes. Okay, great. That's great news. I was wondering also about the $6 million in RMA product that you mentioned earlier in the call. What was that all about, and where does it show up in your results? Yeah. What that was about was a request to return material that, you know, from Vicor's perspective, you know, our quality team, and this is where I'm not an expert, but what I can do is comment on what they've told me. It's been fully qualified. It's to industry standard test, and it's fit for use. But we work with the customer, and as these issues arise, and we've agreed to take the product back. It's not product that's in production. It's product that we expect to get back vacuum sealed and be able to restock it and resell it. Okay. Did Sometimes customers, you know, they have harsher environments than we expect, and they expect sometimes, and it's part of the partnership, right? You work with them to deliver product. If they've got an application that requires, you know, more robustness or to work in even harsher environments, then, you know, we'll work with them to do that. In this particular case, we have other customers for this product, so it'll go on the shelf, like Jim said. After it's been fully tested and evaluated, and we expect to be shipping that out, you know, next year, early next year. Okay. Got it. One more if I could. Just as you shift your production in-house in the new facility, what are your margin expectations as we go forward? Are you still gonna see a little bit of pressure as you ramp that up in Q4, or is there gonna be more relief as you kind of transition away from these outside suppliers? Yeah. You know, it's our practice to not give specific guidance on gross margin. What I will say is that, you know, we've modeled this quite extensively. The entire transition internally will be accretive. As we, you know, move more and more of our operation out of this outside operation that we've been, you know, using, and come internal, we will be generating incremental gross margin, and that's before we even get to a point where we're running substantially more volume. The entire model is based on driving margin, you know, by virtue of the volume increasing over time. Bringing in-house will be savings right away. We're not gonna give specific guidance, John, but we're mapping this out to the financial model we've talked about on many occasions, long-term model at 65% gross margin. Understood. Thank you for that comment. Thank you. The next question is coming from the line of Richard Shannon from Craig-Hallum. Please proceed. Great. Thanks for taking my questions, guys. Phil, on the last earnings call, Patrizio made a comment about next-generation solutions that were approaching availability but haven't booked those orders yet. Can you talk about those next gen solutions? Have they gotten to availability, and have you gotten any bookings on them yet? I think if I remember rightly, he wasn't talking about the Gen 5 stuff just yet. He was talking still about Gen 4 and some of the vertical power delivery products that we've developed for clustered computing companies, and, you know, 2-stack chips and 3-stack chips. I think that's what he was referring to. We should start seeing revenues, as I mentioned, on those products in Q1 and bookings in Q1 as well for other customers. We've got about, I think it's 3 accounts right now that should book business in the early part of next year for some of those multi-stack chips on the Gen 4 technology. Okay. Fair enough then. Also want to follow up on one of your comments from one of the earlier questions, Phil, regarding multiphase and whether you say the jury is still out there. Is this a comment regarding kind of the long term, or are you talking about like, you know, leading-edge products available from, you know, leading accelerator companies the next year? Maybe you can delineate that comment a little bit more, please. Sure. I think that, you know, you see the, you know, the power MOSFET, the silicon technology, you know, improving in terms of its current density, but you still have a fundamental voltage averaging and a in a multiphase system with lots of phases required to support some of these very high current processes in AI and also network backplane stuff, that, you know, that there's a lot more there with regards to getting a controller that's able to meet all of the current accuracies and low noise requirements of the system. And then you also have thermal challenges with the PDN. It isn't simple. It's not easy. I mean, it's attractive from the potential of having multi-sourcing, but you know, again, how multi-sourcing is it when you have different controllers from different companies that require different layouts, all sorts of different considerations if they're 12-phase, 16-phase, 20-phase, whatever they are. That's not really a multi-sourcing strategy, but you can make yourself feel good about that. There's a lot of issues around you know, getting a multi-phase solution to deliver 1,000 amps in a you know, very small accelerator card. It's still a lot of work to be done to get that thing you know, ready to go prime time. That's not just at you know, a GPU customers that's at ASICs and network processors. There's a whole host of applications where there are challenges to do that. Okay, great. One last question for me, I'll jump out of line here just about the guidance for the quarter and kind of the broader commentary in the macro. Maybe you can tell us just generally speaking, how you're expecting the trends in the fourth quarter between advanced and brick products, and to what degree are you seeing the macro affecting either grouping? Well, I think that, you know, as Phil said, the order rate is depressed going into the quarter. To get to your first part of the question, Richard, our expectation is advanced products revenue will, you know, rebound this quarter and brick may be, you know, down sequentially. It'll be kind of a mixed shift there. As we said, I'm looking for, you know, approximately flat to Q3. You know, as we get more and more activity internal and can rely more on ourselves to produce the product, we might have some modest upside this quarter. Okay, fair enough. That's all for me, guys. Thank you. Thank you. The next questioner hasn't recorded his name. You are on the line. Please unmute yourself and state your name and company. Thank you. Yes. Is this me? This is Don McKenna, D.B. McKenna. Hi. Hello? Hi. Okay. Yeah, I wanted to ask during the year, we've had additions from Wellington Management, also from Thrivent and of course Capital Group has continued to add to their positions where they last I saw, the last recorded there, 6:30, they were over 3.5 million shares that they owned. I know they've held on to them in their small-cap fund right through the end of September. I've got to think that they have more access to you for information than what we're getting on this, you know, quarterly conference call. I'd like to suggest that especially in this upcoming blackout period, I'll call it, over the next four months before we talk again, that perhaps you schedule a meeting at the new facility like you did probably 25 years ago when you brought in a lot of the area financial people to have a general discussion beyond what just happens at the end of a quarter. So that's my request anyway. Well, I appreciate that, and I thank you for that. On May 18th, we had it was fairly limited audience. We did have a ribbon cutting. We're really intent on doing that, in terms of more of those kind of events. What we focused on a lot in the last, you know, six months, quite frankly, is getting this operation up and running, and you know keeping the factory team focused. That's very good input. We appreciate that. Have you maintained your positions with all these major institutional investors? I would say I'm not sure if we have. You know, the data's out there. I think we have interest from a large number of investors that you know are interested in the Vicor story, and I think we've got a compelling story. Yeah, I particularly like the Capital Group taking a long-term approach. That's why I was wondering if they hung through all the way. Thank you. I'll get back in line. Thank you. Jon Gruber from Lagunitas. Please proceed. Yes, question. The $6 million return, so why? If that was the case, it was a -$6 million in the quarter there, why then can't you get an up quarter given that you know, if you were flat, you would be at $6 million higher. Why? You know, why is the quarter so weak given the large backlog? Well, I think, like I said, John, we will get a rebound in advanced products. We're counting on that. One of the reasons we're really a bit challenged with respect to being confident in some of these statements is that there's still a significant process, at least step or two, that's outside of our control, which is going to be the case through the end of this quarter. We really are a bit guarded making any kind of more bullish prediction because of that. I think as we get into next year, the early part of next year, we're gonna have some of the final pieces come together. I think as Patrizio said on the last call, you know, it's not an expectation that Vicor is gonna be 100% vertically integrated. It'll approach that level, but it, you know, there's always gonna be parts of this that are done outside. However, as we get into next year, the key pieces will be inside Vicor. Until that happens, we just have to be careful about, you know, our expectation setting. The last questioner asked a question that we really wouldn't answer. Do you plan on having an analyst meeting or be more open this quarter to the analysts and the investors than you were last quarter where you were totally silent? None of the analysts had talked to you, Jim, which was very strange. What's the policy going forward? I think we will gear up to have an investor day. Like I said, our focus has been on execution, you know- Generally the view is, you know, let the results do the talking in the short term. We know we have to be open to the idea of an investor day, and we're gonna put that on the docket in, at some point in next year. I think I'll feel better about that when the factory is up and running. Thank you. The next question is coming from John Dillon, D&B Capital. Hi, guys. First of all, I would just wanna second what Don and John just requested. There's so much misinformation going around about Vicor. You know, I try to respond to a lot of this, but there's only so much I could do. It'd be so much better if it came directly from the company. Jim, I have a question for you. With the vertical integration getting to the 80% or 90% level, will that have a positive effect on your turns, and that will positively affect your cash flow? One of the metrics that's reported on weekly in an update from our manufacturing team is just that very thing, turns. There is incremental improvement that we're getting in the factory. Ultimately, it certainly will affect, you know, the level of inventory we have to carry, and ultimately, that'll affect cash flow. That's out in the future. You know, right now, in the short term, we're still dependent on this outside operation. We have steel beams going up right now inside 400 Federal Street to install various parts of the plating operation. It's a work in progress. I think what should be understood is that the manufacturing team that's putting that factory together is the same team that's continuing to work with the outsourced supplier. You know, it's quite a complicated world they're dealing with right now. Yes, the answer is there's scorecards, there's metrics that'll include WIP, inventory turns, cycle time, all of those metrics. I would imagine that's gonna be fairly substantial because I would imagine you're, you know, sending your product out to a third party, having them plate it, having them send it back. That all adds a lot of time and money to the thing. I would imagine your cash flow is gonna be, you know, affected pretty positively. Is that a fair statement? I would say it's fair over time. I don't wanna get on that result. Yes. I got ya. of how soon that is because we still got, you know, months ahead of us, to get this factory up and running and qualified. I think, I would just ask that, you know, be patient about that, culminating in, you know, the kind of operational excellence we want with this factory over the coming, you know, months. Gotcha. I completely understand and appreciate that. With the current economic slowdown in the China situation, can you still ship as much as you can build, or are some of your orders getting pushed out to the extent your supply is exceeding your demand? No. We've still got significant overdue even on advanced products and legacy products. The guys are working hard to you know get that completed. I think it's gonna take a couple of quarters before we get totally caught up with all the legacy stuff and all of the advanced product stuff. There's still a lot of work to do, like Jim said. The guys are focusing also on the same guys to do that and also bringing up the new factory. Gotcha. There's plenty of business here to ship in the short term. That's great. It all looks good. Thanks, guys. I'll maybe get back in the queue, maybe not. I appreciate the update. Thank you. Thank you. Next question is coming from an unregistered participant. You're in the line. Please unmute yourself, state your name and company. Thank you. Hi. This is Doug Campbell from Podomus Capital. I believe I've been put on the line. Is that correct? Yes. Hi, Doug. Hey. Hey, guys. I don't wanna sound like a broken record. I've been in the queue for about 30 minutes. I 100% endorse what the other guys are saying. You know, during the quarter, there's just a lot of negativity. There's a lot of misunderstood information. You know, one of your main competitors that's been called a production machine as far as efficiency, and they're producing the lower end competition for you. These guys are, like, doing touchdown dances. They're beating their chest that they're taking business from you. As an investor, you know, of a publicly traded company, again, I don't wanna sound like a broken record. It would be great to hear from you more than four times a year and maybe two fireside chats. Now, having said that, a specific question. You know, last quarter, you guys talked about your backlog and a lot of those orders being non-cancelable. I forget the exact term. I don't have it in front of me. Is that still the case? I mean, how ironclad are the backlog orders that quote-unquote were non-cancelable? You know, economic conditions get tough. You know, stuff could be cancelable even if it's documented. Well, you always have to deal with some of that. No, we've got firm NCNR purchase orders that have been placed with a clear understanding also their end market demands of the different customers that make up that NCNR backlog. I get it. I mean, I'm confident in our backlog position. Okay. Just one follow-up about what I said at the beginning and what the other guy said. Maybe it's not so much, you know, just talking to investors, but, you know, you guys get on the call every three months, and you talk about your technology, and I'm a big believer in the technology, that it's better, or I wouldn't be an investor in my fund. However, I think you guys need to educate, whether it's investors or the marketplace or whatever it may be, a little bit more. I mean, I receive your emails when you release a new product. I read them. Some of it might be above my pay grade from a technology standpoint, but I'm pretty well-versed. I think, you know, moving forward, as you're about to become a much larger company, hopefully, there needs to be an education in place. You know, look, I know the ownership structure. Patrizio Vinciarelli owns a lot of the company. Maybe the end game is just, you know, a parachute out to an acquisition. I don't know. You know, I'm not asking for a comment. I'm just saying maybe we just, as investors, we have to deal with the volatility, and we have to deal with the misconception until the end game. But maybe some of us would like it to be a little more smoothed out, if you know what I mean. Yeah. Understood. I mean, you know, I know the company you're talking about. We all do. Yep. Yep. They said bad stuff on Volta five years ago. They said bad stuff on A100, and they say bad stuff on H100 when it comes to NVIDIA, just them. Then there are other comments that are made around all the other processor and hyperscaler guys. I mean, they just constantly do it. Not much we can do about that because we can't talk about specific customers without their approval. It puts us in a bit of a tough spot when there's a lot of, you know, comments going around, like you said. You know, we're just here executing, doing our job, and we're confident in our technology. To your point of explaining it better and doing more education around it, we can certainly do that. You know, when Jim puts together that investor day, we'll spend some time on that. Okay. Thank you very much. Appreciate it. Next question is coming from the line of Quinn Bolton. Please proceed. One of the large GPU customers in its July quarter took a $122 million warranty charge due to the failure of a third-party component in its data center products, and wondering if you guys could go on record whether Vicor was any way involved in that recall or forcing that recall or warranty, and whether that might be related to the $6 million RMA you disclosed this quarter. Thanks. I think we can't talk about any specific customer, and I don't know that we can relate what we're doing with that, Quinn. You know, I think we should say that there has been a $6 million RMA we agreed to take the product back. Our quality team believes it's fit for use. It's fully qualified. There's a question about, you know, the root cause of some of the analysis that's gone on. But I would say that there is a case here where we have made incremental improvements in the product along the way, and it's been in production for months now. I guess that's as much as we can say about it. Yeah, I mean, we wouldn't restock it and ship it to other customers if there was something wrong with the product, right? Like I said before, you work with customers, we work with in aerospace and defense or in industrial applications as well, where you come across something that needs a little bit more capability, even though you've qualified to industry standards and all sorts of specifications, and the customers also test and qualify the product too, right? You know, you deal with these things, and you have a long-term partnership with these customers. You know, we work with them to constantly improve our products. We're always doing that anyway. You know, that's something that's just normal course of business. We're gonna put that back on the shelves. We're gonna retest it first, and then we're gonna ship it. It's a good product. I guess it sounds like you're obviously in close dialogue with the customer around that $6 million. Do you think that there's been any long-term impairment in the relationship, or do you think the fact that you've agreed to take back this product, and hopefully ship different product to that customer that there's no long-term effect on the customer relationship? Well, again, like I said, we know very much all of our customers, processors and hyperscalers from, you know, the guys that we've been shipping to for many, many years. We know our PPM, so the quality levels out in the field. They range from, in some cases, zero, perfect quality, to 5 or 6 PPM. You know, once in a while you'll get an issue where you've got to work with the customer in partnership to figure out what the challenges are. Sometimes it's their end customers that are doing things that they shouldn't be doing, but you work with them in partnership to build something that's more robust than the spec, you know, originally called for. You get that work done, and, you know, they're obviously working closely with us to get that done, you know, I don't see any problems with our customer relationships. We work hard to build them, and they're in good shape. Got it. Thank you. Sorry for the interruption. There are two questions in the line. Are you going to take it? Yeah. Last one. We can take one question. Yeah, one more. Yeah. Certainly. It's coming from John Dillon from D&B Capital. Please proceed. Hey, Phil. Just wondering if you can give us an update on the front end products in the AC to DC as far as design wins, timing, and whatever else you can tell us about that? We are continuing to ship evaluation units, you know, to different customers in the high-performance computing area, in edge computing. We also have a defense and aerospace set of variants that work at much higher frequency, 400 hertz instead of the 50, 60 hertz that you typically have, both single-phase and three-phase products, different power levels. Those will all start to roll out and sample and get on Digi-Key, Mouser, and other distributor shelves in Q2 of next year. That's going along really well, and it's an exciting new product family, and my team is chomping at the bit to get those parts. It's something I think we'll have a lot of positive things to say about next year in terms of wins and future business ramps on that product family. We've talked in the past about this, and it sounds like the market for that is as big as the point of load market. Do you expect an inflection point sometime latter part of next year in that business? I think probably I would say probably early 2024, John. I mean, these markets still have long gestation periods, right? It still takes about a year, 18 months to really get this stuff firmly designed in and to then see those ramps go. Some of them could go a little quicker than that, but I would say it's more of an early 2024 event. In the meantime, though, I imagine you're still gonna see some in the LED display area. I think the market there is really more to do with high-performance compute and. Got you. Getting a very high density, high power box into racks. Gotcha. Sounds good. Thank you, guys. Appreciate it. Okay. Thank you. Thank you. I think we're ready to wrap up, operator. Certainly. Everyone, that concludes your conference call today. You may now disconnect. Thank you for joining, and enjoy your rest of the day.