Today, and thank you for standing by. Welcome to the Q1 2025 Vicor Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speakers' presentation, there'll be a question-and-answer session. To ask a question during the session, you'll need to press star 11 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 11 again. Please be advised that today's conference is being recorded. I would now like to turn the conference over to Jim Schmidt, Chief Financial Officer. Please go ahead. Thank you. Good afternoon and welcome to Vicor Corporation's earnings call for the first quarter ended March 31, 2025. I'm Jim Schmidt, Chief Financial Officer, and I'm in Andover with Patrizio Vinciarelli, Chief Executive Officer, and Phil Davies, Corporate Vice President, Global Sales and Marketing. 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 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, 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 risk and uncertainties, we can offer no assurance that any forward-looking statement will, in fact, prove to be correct. Actual results may differ materially from those explicitly set forth in or implied by any of our remarks today. The risk and uncertainties we face are discussed in item 1A of our 2024 Form 10-K, which we filed with the SEC on March 3, 2025. This document is available via the EDGAR system on the SEC's website. Please note the information provided during this conference call is accurate only as of today, Tuesday, April 29, 2025. Vicor undertakes no obligation to update any statements, including forward-looking statements made during this call, and you should not rely upon such statements after the conclusion of this call. A webcast replay of today's call will be available shortly on the investor relations page of our website. I'll now turn to a review of our Q1 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 changes for P&L and balance sheet items and refer you to our press release or our upcoming Form 10-Q for additional information. As stated in today's press release, Vicor recorded total revenue for the first quarter of $94 million, down 2.3% sequentially from the fourth quarter of 2024 total of $96.2 million, and up 12% from the first quarter of 2024 total of $83.9 million. Advanced product revenue increased 2.7% sequentially to $59.9 million, while Brick product revenue decreased 10% sequentially to $34.1 million. Shipments to stocking distributors decreased 16.9% sequentially and decreased 33.8% year over year. Exports for the first quarter increased sequentially as a percentage of total revenue to approximately 60.8% from the prior quarter's 56.9%. For Q1, advanced product share of total revenue increased to 63.7% compared to 60.6% for the fourth quarter of 2024, with Brick product share correspondingly decreasing to 36.3% of total revenue. Turning to Q1 gross margin, we recorded a consolidated gross profit margin of 47.2%, which is a 520 basis point decrease from the prior quarter. To elaborate on the factors causing the sequential decline in gross margin, I'd like to first mention that over the course of the fourth quarter of last year and into the first quarter of this year, Vicor transitioned off of a legacy ERP system and onto a state-of-the-art ERP system, SAP, which went live on January 1st. In planning for a successful transition and to de-risk it, we increased production in Q4, required a mandatory week of paid time off in December by any employees not involved in the cutover, and funded outside consultants who provided the necessary expertise as we implemented the change. All required actions were successfully completed in Q1. What I've just described is an important contributor to about 0.5 percentage point decline in gross margin, as sequentially utilization and absorption declined, compensation increased, and so did consulting expense. Aside from these factors and the sequential decline in royalty revenue, which on its own accounted for about 0.5 percentage point decline in gross margin, other components of the decline included the normal seasonal reset higher of FICA expense to start the year, as well as incremental depreciation expense associated with bringing online capital investments in U.S.-based semiconductor manufacturing in both Andover and Rhode Island. Tariff expense and net of duty drawback was approximately $700,000 in Q1. I'll now turn to Q1 operating expenses. Total operating expense increased 8.2% sequentially from the fourth quarter of 2024 to $44.5 million. The sequential increase was primarily due to an increase in research and development expenses. Here, too, the sequential increase was due in part to the mandatory time off in Q4 that did not repeat in Q1, as well as the normal seasonal reset hire of FICA expense. The amounts of total equity-based compensation expense for Q1 included in cost of goods, SG&A, and R&D was $967,000, $2,194,000, and $1,188,000, respectively, totaling approximately $4.3 million. Turning to income taxes, we recorded a tax provision for Q1 of approximately $0.4 million, representing an effective tax rate for the quarter of 14.2%. Net income for Q1 totaled $2.5 million. GAAP diluted earnings per share was 6 cents based on a fully diluted share count of 45,495,000 shares. Turning to our cash flow and balance sheet, cash and cash equivalents totaled $296.1 million at Q1. Accounts receivable net of reserves totaled $65.9 million at quarter end, with DSOs for trade receivables at 43 days. Inventory's net of reserves decreased 7.1% sequentially to $98.5 million. Annualized inventory turns were 1.7. Operating cash flow totaled $20.1 million for the quarter. Capital expenditures for Q1 totaled $4.6 million. We ended the quarter with a construction in progress balance primarily for manufacturing equipment of approximately $9.9 million, and with approximately $12.3 million remaining to be spent. I'll now address bookings and backlog. Q1 book-to-bill came in above 1x, and one-year backlog increased 10.4% from the prior quarter, closing at $171.7 million. As we said on last quarter earnings call, 2025 is a year of uncertainty and opportunity. As of today, the quarterly and annual outcome in terms of top line and bottom line is subject to a relatively wide range of scenarios. Given the wide range of possible outcomes, we are unable to provide quarterly guidance until we are further along resolving uncertainties and capitalizing on opportunities. With that, Phil will provide an overview of recent market developments, and then Patrizio, 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 possible in the limited time available. If you have more than one topic to address, please get back in the queue. Phil? Thank you, Jim. Our first quarter book-to-bill ratio increased well above 1x, with new orders for NBMs in our HPC business from a hyperscaler licensee. Conversations continue with potential licensees facing a first exclusion order following the ITC final determination and presidential review period. Our second-generation high-density VPD for leading AI applications is coming to fruition, with the recent arrival of an ASIC raising the bar on the density and bandwidth of our MCM current multipliers. Second-generation VPD will enable AI processors to set new standards for performance. Development of the next-generation VPD system for a lead customer is approaching completion, and we will soon provide evaluation systems to processor chip companies and hyperscalers. Appetite for Factorized Power VPD solutions is growing as multi-phase voltage regulators are unable to deliver the performance and current density required by future AI systems. With AI driving rack power up to 160 kW, the HPC industry is evaluating a transition to 800-volt power delivery to the rack and bus conversion to 48-volt nodes within the rack on the way to the point of load. Vicor's fixed ratio bus converter modules with industry-leading power density and liquid-cooled thermal management flexibility are a perfect solution for these requirements. Given these market forces, Vicor will be uniquely positioned to offer front-end 800-volt to 48-volt bus converters and direct VPD 48-volt to sub-1-volt solutions, enabling a complete high-efficiency, high-density power delivery network for our customers. The market SAM for these solutions is expected to exceed $5 billion by 2028. As with other U.S.-based manufacturers, we are navigating a changing tariff landscape. Components used in our power modules are not exempt from tariffs. In Q1, we informed our customers and channel partners that a 10% tariff surcharge line item will be added to invoices for shipments after July the 2nd. Due to higher reciprocal tariffs levied by the Chinese government, we have also seen cancellation requests from China-based customers, but these potential cancellations are not at levels high enough to impact our overall business. New product introductions will continue to ramp as we move through 2025. In Q1, we announced availability for general sale of a new high-density 48-volt DC-to-DC converter family. We have also initiated sampling of a new family of three-phase AC-to-DC power modules to lead customers in the aerospace market. This will be a new market for Vicor, offering excellent growth opportunities. Our engagement with our top 100 customers continues to strengthen as 48-volt power delivery moves to the mainstream along with 800-volt DC-based front-end power systems. Our strategy of developing complete front-end to point-of-load solutions that are centered on a 48-volt hub, offering high power density, ease of use, scalability, and flexibility across product platforms, is proving to be right, as evidenced by strong engagements across our top 100 customers in our four target business segments. As stated in our Q4 call, we see 2025 as a year of opportunities and have high confidence in our business. Thank you. With that, we'll now take your questions. Thank you. As a reminder, if you would like to ask a question, please press star 11 on your telephone. You will then hear an automated message advising your hand is raised. We also ask that you please wait for your name and company to be announced before proceeding with your question. One moment while we come to the first question. The first question will come from the line of Quinn Bolton of Needham & Company. Your line is open. Hey, guys. I wanted to ask about something in the press release. In the press release, you mentioned revenue and gross margins decline sequentially with reduced income from a licensee transitioning to a new generation of unlicensed products. Can you just elaborate on that? Is that new generation of products span an entire family of new GPUs or XPUs, or is it more limited? Just trying to gauge how significant the change in your licensing or royalty income might be as a result of this transition. Ideally, you can ask for a variety of reasons. Elaborate on that. Can you elaborate just on the impact of Vicor? Would you expect a material change in the licensing outlook with that licensee? Obviously, that's a short-term impact in our results for Q1, but we remain confident with respect to our licensing business being a growth business that will contribute substantially at the starting levels to both the top line and particularly the bottom line. Patrizio, maybe there, that was my sort of follow-on. I think in the script, you guys mentioned ongoing negotiations or discussions with additional licensees. Can you clarify, now that we have, I think, the injunction against Delta? If non-licensee hyperscalers import modules from Delta, would that be subject to the injunction? Yes. Got it. Okay. I will get back in the queue with a couple more. Thank you. Thank you. One moment for the next question. Our next question will be coming from the line of John Tanwanteng of CJS. Your line is open. Hi. Thank you for taking my questions. I was wondering if you could just talk about the indirect impacts from tariffs and the direct impacts from tariffs, if you've made any assumptions going forward. What do you think the—excuse me—what do you think the indirect might be on supply and demand, as potentially other suppliers may not be able to import as much stuff, and the impact on your own tariff paying to modules from China? We've assessed the impact on our bill of material. Obviously, the impact varies depending on which particular platform we're talking about and the mix of components from various countries of origin. Having gone through that assessment as of several weeks ago, we took corrective action, as Phil pointed out in his prepared remarks, in terms of instituting a 10% tariff surcharge that will be applied at the beginning of the third quarter. We don't expect that to have an appreciable negative impact on demand for our products. When it comes to reciprocal tariffs, as Phil pointed out, in China, we do expect with some of the programs to see an impact. In a quantity that, as Phil pointed out, is not, as of now, assessed to be significant in terms of moving the needle or altering our revenue. Okay. Great. My second question, just has there been any change to the timeline for ramping your second-generation VPD products to lead customer? Do you still expect that to be happening at the end of this year or maybe early next year? Based on the testing that's been done today on recently received ASIC, which is instrumental to the point-of-load current multiplier, we feel very good with respect to being able to bring the development to fruition, as mentioned in the press release and in Phil's remarks. We remain totally focused on our lead customer, very important to raise the bar on current capability delivering the goods for that next-generation application first, and we'll follow that up with demo systems for the potential customer base at large as soon as we completed the effort for the lead customer. Thank you. I'll jump back in the queue. Thank you. One moment for the next question. The next question will come from the line of John Dillon of D&B Capital. Your line is open. Thank you. Patrizio, as a follow-up to John's question, that's in regard to what you're shipping to your lead customer. Are those alpha or beta units? Can you kind of give us a timeframe or schedule what it's going to take to actually productize the Gen 5 point-of-load that you're giving to that customer so it's generally available and you can manufacture that in quantities? To be clear, we are on a ramp with respect to lead customer on an older generation platform. I mentioned this, I think, in the most recent quarterly call. We are closing in on being able to ship units that meet the expectations as they've evolved in terms of current capability and current density. We're not quite there yet. We expect to be there soon, and we are targeting power production in the second half of this year for the 5th-gen solution. Okay. That would be a productize. Would that be completely productized? I mean, what I mean by that is typically when I've been in the industry, when we ship the initial product to a customer, they evaluate it, and they find some bugs, and then they feed it back to Vicor, and then Vicor makes the corrections, and then they give it back to them. Do you expect a lot of that to go on, or are you very confident that you can make the second half of the year to ship to them production-quality units? Obviously, in order to be very confident, we need to complete the development effort. As you can imagine, based on your experience, this has not been a case where it all awaits the availability of fully functional units. We've been able to make incremental steps happen even before the arrival of the ASIC, which we recently received. We now expect as a next major step to begin to deliver current multipliers using that ASIC in a matter of several weeks. We expect with that step to be able to achieve the base-level performance originally being targeted by our customer. I guess I understand that. After that, you still got to get to a product that you can manufacture in quantities and sell to the customer, correct? Or am I missing something? No, you're not missing anything. To your point, the challenge is a complex challenge, right, that involves electrical, mechanical, thermal, as well as, to your point, process capability, equipment capacity, and all that is involved in being able to ramp the chipset for this application. This is not—it's a multifaceted challenge. Again, with respect to each of the elements of challenge, we have been making good progress. In particular, when it comes to the processes and the capacity, we've been able to make steps in the right direction. I expect that all of it will come together as it has in prior initiatives of a similar kind as we progress through the summer months. Great. Thank you very much for that detailed response. I'll get back in the queue. Thank you. Thank you. One moment for the next question. The next question is coming from the line of Richard Shannon of Craig-Hallum. Your line is open. Thanks, guys, for taking my question. I guess I want to follow up on the comment in the press release I think Quinn asked on as well here, which is the hyperscaler or some customer transitioning to an unlicensed product. Is this also an infringing product? If so, are there some actions being contemplated here to alter the trajectory of what this customer is doing? Yes. Yes. Yes. Okay. Maybe I'll follow up on this topic here, on licensing here, following on the prior response here on looking at this revenue stream here. How do we think about this returning to a growth track here? Is it something we expect to start in the second quarter, in the second half? What are the dynamics under which that occurs? I think it's, again, a combination of increased prior revenues. Needless to say, the step-up in the bookings and the backlog sets the stage for that, as well as increased licensing income. It's as simple as that. Those are the components of the revenue growth that we anticipate happening as the year progresses. Okay. I'll jump back in the queue. Thank you. Thank you. Thank you. Our next question will come from the line of Alan Hicks of Ainsley Capital Management. Your line is open. Hey. Good afternoon. Yeah, I wanted to clarify on royalties and advanced products. Sounded like royalties fell about $5 million or about a third, while advanced products still grew. But in-house produced products grew about 16%, and they did in the fourth quarter also. I guess my question is, did you sign up new licenses in the Q1? And that will continue to grow in royalties? We did sign up a licensing in Q1, a new licensing. You are right to say that the advanced products, excluding the decline in royalty, grew. The product revenue in the factory grew on the advanced product side. That was a positive outcome. Okay. You had a significant customer that transitioned from royalties to accepting in-house produced products? That wouldn't make that assumption. That wouldn't be the right assumption. Yeah. Okay. What's driving the actual in-house produced growth? An existing customer ramping further on production as well as new opportunities that we—yeah. As mentioned in the press release and as earlier asked, we did have an existing licensee transition to a new product platform where this new product is unlicensed. Okay. Is that a new version of the NBM products? That's all I can say at this point in time. I think this question has been answered already to the extent I can. Okay. So we can expect continued growth in royalties and continued growth in product sales the rest of the year? I think we can confidently say that we see growth in prior revenues, and we see growth in licensing income. We are still, obviously, when it comes to, let's say, the licensing income, relying on a really small multiplicity of licensees. With that, there can be surprises as it happened this quarter. There can be negative surprises. There can be positive surprises. Once the publicity of OEMs and hyperscalers that are taking a license increases, I would expect the licensing business is going to become more predictable in terms of its quarter-to-quarter evolution. The same can be said on the prior revenue side. Obviously, we have invested a great deal in our 5G technology. We believe it's unique, without equals, without close competition. Obviously, it's taking longer than expected, but it is a reflection of the magnitude of the challenge we've gone on. I believe it will pay great dividends as we roll it out. We have strong revenue growth opportunities in years to come being enabled by that capability. Okay. Can you give any update on the ITC case? It was a Texas case on damages, I think. Can you say anything about that? The ITC case came to an end with the ITC issuing its final determination. It came to a further end once the 60-day presidential review period came to an end. As you may know, through the presidential review period, respondents, the customers can continue to import infringing product by posting a bond. Following the end of the presidential review period, there's an exclusion order outstanding, and they can no longer import infringing product. That's where things stand with respect to the ITC case. There are certain aspects of the final determination that are objectionable and with respect to which Vicor has filed an appeal at the federal circuit. That's the next step on that general front. Okay. Lastly, BBU products fell about $4 million. Is that going to continue about that level, or what do you see in the BBU area? I would say, yeah, I mean, I think that we wouldn't expect it bounces around a bit. I think it's fairly stable. I guess, as Phil mentioned, a potential risk element is in the China, the typical tariffs and the cost per product being higher in China. I think we're sorting that out. As Phil said, so far, at least, there's no appreciable significant impact. I would say that steady as she goes with the brick business over the course of the year. Okay. Thank you very much. Thank you. One moment for the next question. The next question is going to be a follow-up from John Tanwanteng of CJS. Your line is open. Hi. Could you clarify what your pricing expected to look like after you implement the tariff surcharges? Is that + 10% on just the advanced products that have the Chinese component exposure, or is that across bricks as well? Which portion of your portfolio has that increased? Thank you. Hi, John. It's Phil. It's across the board. It's a 10% tariff surcharge, as Patrizio mentioned, that will go into effect after the beginning of July. It's 10% across the board. We've analyzed this, Patrizio mentioned, the different products, the different variations in it, up or down on the tariff impact. 10% was a good base number to begin with. Okay. Does that cover the expected gross profit you were expecting to make before the tariffs and maybe dilute the margins a little bit, or is it a different formula than that? We expect to be able to maintain the margin. To be clear, we've analyzed products, including some high-volume products, where the impact of the tariff surcharge as of a few weeks ago was as high as 31%-32%. There are other products where the impact is less. For simplicity, it didn't make sense to have a unique surcharge based on the particular customer application. It is an across-the-board average, if you will, which accounts for BOM costs, other costs, and maintenance of margin. Understood. Thank you. Finally, could you talk a little bit more about your expected OpEx heading forward, including R&D and maybe any litigation or legal expense that you might have coming up? I would say, John, we've taken the position that we're not going to guide specifically on any of the P&L elements. What I tried to describe, the Q4 to Q1 transition, did have some moving parts in there that we felt it was worth kind of describing and talking through. Beyond that, I think Vicor is a very stable place relative to spend and headcount, etc. That's, I think, as much as I would say on it. Okay. Great. Thank you. Thank you. One moment. We have a follow-up coming from the line of Quinn Bolton of Needham & Company. Your line is open. Hey, guys. I wanted to follow up. I think you said in the prepared script that you'd seen a recovery in the NBM business, which I think might be associated with one of your licensees. Just wondering if you could give us, as you look out through the year, would you expect that NBM business to continue to grow? Would it be stable at Q1 levels? Just any kind of shape to that NBM business on a go-forward basis? I have a follow-up. We expect the NBM business to grow. At the risk of saying the obvious, years ago, we had enjoyed the significant ramp of revenues associated with NBMs until infringers came about and undermined our market opportunity. The win we scored at the ITC and concern on the part of OEMs and hyperscalers with respect to the exclusion order has brought about the revival of demand for our NBM. Thank you for that. I just wanted to make sure I sort of understand your comments about licensing or royalty income going forward. You said that you expect that to grow. I think some of that is driven by an expectation or the likelihood of additional licensees signing agreements with you. I just wanted to clarify if you've got a licensee that's currently transitioned to an unlicensed product. I think in response to Richard's comment, it did not sound like that was something that necessarily changes in a quarter. To the extent licensing or royalty income grows, say, in 2025, would you expect that to be mostly generated from new licensees signing new license agreements, or would you expect that existing licensee revenue to recover? are a lot of moving pieces there. I am not able to make a specific statement with respect to how each of these components will play out. It is enough to know that in the aggregate, we have lots of opportunities with both existing licensees whose revenue or licensee income is ramping. All the licensees, there has been a change that could lead to a number of different places. There is potential for additional licensees. How each of these components will play out is, frankly, difficult to predict. There is enough opportunity in the aggregate to be comfortable in forecasting that licensing income is going to, licensing revenue is going to be a growth business for Vicor. Understood. Okay. Thank you, Patrizio. Thank you. Thank you. One moment. We do have a follow-up from John Dillon of D&B Capital. Your line is open. Hi, Patrizio. On the last conference call, you'd mentioned that you're expecting a record year. I'm just wondering, are you still expecting a record year? Yes. Excellent. My follow-up is, I was wondering about the new fab. Are all the kinks ironed out of the new fab? In particular, is the plating turnkey? Is it better than what you were getting from your previous outsourced supplier? Yes. We are happy with the progress we made. We have a lot of capacity. We're going to put that capacity to good use, particularly with our 5G power platforms. We made the right decisions. It's a big investment. Needless to say, in terms of margins, we have been paying a price of late with all the equipment that we're depreciating, not being close to being fully utilized. We think that as we get into later this year and to next year, we're going to see improvements in prior margins beyond the contribution from licensing income. That sounds good. Thank you very much for that response. Thank you. We will talk next quarter or the annual meeting, I guess. Yeah. That's right. Thank you. One moment. We have a follow-up coming from the line of Richard Shannon of Craig-Hallum. Your line is open. Hi, guys. Thanks for letting me ask a follow-up here. I wanted to ask about product growth the rest of the year. I've heard a couple of pieces and other responses here. I think you're talking about NBMs growing nicely here. It sounds like brick will be flat. Obviously, it sounds like advanced, including NBMs, will be up to some degree. Obviously, you're not going to quantify. I would also love it if maybe you could divine out what this is going to look like between end markets. Obviously, you talk mostly about HPC versus everything else here. How do we see those two end markets, relatively speaking, growing the rest of the year? Hi, Richard. It's Phil. Again, HPC is a growth business for us, not just NBMs. Patrizio talked about a lead customer that's ramping their high-performance AI system on existing solutions that we're shipping. We're excited to see that happen, and we'll follow that on with Gen 5. If I look at the defense and aerospace market, we've been planting a lot of seeds there over the last number of years that are coming to fruition on new sort of defense systems, aerospace applications, sort of warfare equipment. Unfortunately, the state of the world, that's a growth market for us. In the industrial area, lots of, again, seeds planted over the last number of years with channel partners at smaller accounts. We've targeted very specific application segments, such as the ATE test equipment market, and picked up four or five new entries into that entrance into that marketplace, which are now growing for us with advanced products. It's really sort of across the board that we're seeing the lift. Certainly, having consolidated the channel to mainly Avnet and Arrow and Macnica in Asia, we're getting far more focused, far more targeted at customer bases and specific segments that value the density and what we bring. That's also giving us a general lift. It's occurring right across the four, well, the three businesses. In automotive, that's still fledgling. We're pulling down NREs for collaborations, but that's not really impacting anything at this point in time. Next year, we'll see production start to ramp with some high-end OEMs there. That will contribute to our portfolio. Okay. Thanks for that detail, Phil. Maybe a quick question for Jim on gross margins. If I heard the prepared remarks, it sounds like the gross margin decline, about half of it was from some investments for the SAP system and other things. The rest of it was from royalties here. I guess my question is, all other things equal basis here as we go into the second quarter. Obviously, I'm not sure how complicated adding tariffs into this might affect gross margins here. I'm assuming the gross margins in the second quarter, all things being equal, would be kind of roughly half between the fourth quarter and the first. Is that a good starting point to think about? Sorry, Richard. Did you say half of? Yes. Halfway between first quarter and fourth. Oh, I mean, we're going to have to be reluctant about offering guidance of any kind. It's just that's the position we've taken. I will say that I described the SAP installation as sort of what caused the sequential kind of changes because we required PTO in fourth quarter and drew down the vacation balance and then ramped up vacation accrual again in Q1. There was some lumpiness associated with that. That investment is behind us now. We are done with the SAP project. Without giving you a specific on the guidance, I think we feel like we're well positioned. I mean, I feel very good about the factory. I feel good about the infrastructure in Vicor. It's state of the art. Everything is set to move the needle on GM going forward once we get more loading and keep building up the licensing revenue. On the tariff front, we are building now in the second quarter is out of components that were procured largely before the institution of recent tariffs. By the time we get into the third quarter where the BOM costs is going to start suffering because of tariffs, we'll become setting for that through the tariff surcharge. That's great. Thank you, guys. Just a comment on tariffs. As a matter of interest, it's worth noting that success over multiple years has been good relative to tariffs and our ability to manage it. Now, the future is changing, but we've gone from $10 million to $8 million to $4 million to less than $1 million a quarter. So that's a good track record. That's a rearview mirror. That's a rearview mirror. The environment's changing rapidly. So far, I mean, our track record has been strong. Okay. Great. Thanks for all the comments, guys. Thank you. One moment for the next question. The next question is coming from the line of James Lieberman of American Trust Investment Services. Your line is open. Thank you. I really appreciate the progress you're making and looking forward to the year as it rolls out. Are you able to comment? Maybe you have already given some comment on the Foxconn appeal. In terms of the timeline or process that that might take where the International Trade Commission could realize that they're, in fact, defrauding and that the bills, the indications that they have rights to your technology is not correct? I'm not going to be very specific with respect to the so-called Foxconn license and the appeal to the Federal Circuit that relates to that beyond saying what we said in the past, which is that the ITC process, just as with every formal litigation, isn't the perfect process. You can't expect that judges get it 100% right, particularly when confronted with legal teams that put a lot of dust up in the air and try to confuse the issues. What I can tell you is that the administrative law judge at the ITC and the district court judge in Federal District Court in Boston got it right, which is Foxconn has no license. The commission took a different position, which we believe is contrary to all the evidence. We feel good about being able to overcome that. In any case, the license that the commission found to have been "acquired" by virtue of Foxconn issuing purchase orders with boilerplate fine print contradicted by our sales order and other relevant evidence, including the conduct of the parties over many, many years. We think that we are not mattering in the long term for many reasons, again, no list of which there is only one patent that was found licensed. Vicor has a very big patent portfolio. Ultimately, being able to compete in this industry will depend on parties that practice advanced power system technology having a license to many, many patents, not just one. Even with respect to that one, we expect that the Federal Circuit will come to the right conclusion as both the administrative law judge and the district court judge in Boston found. That was precisely the color I was looking for. Thank you so much. Appreciate it. Thank you. Thank you. One more next question. Next question is coming from the line of Jeff Cohn of Wall Street Research. Your line is open. Hello. Thanks for taking my question. Just a little color on this customer that is transitioning to a non-licensed product. Wouldn't the ITC injunction make that prohibitive, or is this somebody through Foxconn? Can you give me a little color on the situation? Ideally, it can't. It'd be beyond what I said earlier. We think that this was an unwise decision. As I mentioned in answer to an earlier question, we believe these are licensed products in huge relevant Vicor IP. Would we expect legal expense to go up as a result of that, or is that already being litigated? I think you should expect over the foreseeable future our legal operating expenses to vary from time to time because of the need to continue to protect very valuable intellectual property. Vicor has got a very comprehensive licensable portfolio. Some OEMs and hyperscalers have done the right thing and taken a license. Others have been taking their chances. We need to make sure that our IP is consistently applied and consistently protected. From time to time, that will require substantial investment. Our best ITC case costs Vicor, I think, somewhere around $12 million-$15 million in that general ballpark. I think the return on investment on that is going to be stellar. It warrants additional investments of that kind if infringement in the industry persists. Okay. I'm hearing that the ITC decision, the injunction, is not a panacea. Well. Is that? In this kind of a dispute, I don't think one should think in terms of panacea. Let's put it this way. We believe we're well within our rights to protect IP asserted as appropriate. Thus far, I think we've done quite well with that. The return on investment is quite good, and we expect it to continue to be that way. Going back to your core question, that does imply that the operating expense line item when it comes to legal expenses may, from time to time, take significant steps. That's part of our business model going forward. Okay. All right. Thank you. Thank you. Thank you. One moment for the next question. The next question will come from the line of John Dillon of D&B Capital. Your line is open. Hi, guys. Thanks for taking my call again. I had another one pop up. Phil, you mentioned new opportunities in the data center with 800 volts to 48 volts. I'm just wondering, how much customer interest are you getting in this, and what's the timeframe for orders, and will it move the needle on revenues at all? It is interesting. I would say that six months ago, we started to hear from power system engineers at different customers that they were looking at the 400-volt system. Within the last few months, we have seen, because of the AI power growth and the rack power growth, that jumped to 800-volt systems. We are hearing it now from pretty much all of the big hyperscalers and any of the chip companies that have transitioned to providing rack-based systems, looking at that type of technology. I mean, that is right in our wheelhouse. We have been supplying 800-volt to 48-volt products to automotive OEMs and Tier 1s for the last three, four years, building out that business. The technology comes from a number of years ago. We're sitting really, really well with great products and technologies that we can do derivatives off of for higher powers and really engage with these customers now in the coming months, which is what our plan is. Patrizio and I are making a trip to the Valley, and we're having conversations with a couple of big hyperscalers about those systems in the next few weeks. It is an exciting time. I'm really excited by that opportunity, John. It sounds like this is significant, and it could move the needle somewhat in revenues, let's say, in six months to a year is what I think I'm hearing. I think you're looking at probably at early 400-volt systems coming to market early 2027, and then I think 800-volt later in 2027. That's what we're hearing. Yeah. Got it. This is based in logistics with what is going on in the automotive. Yeah. We have design needs for active suspensions involving 800-volt to 48-volt high-density, lightweight bus converters that, once again, get into the IP side of things for within many claims of several enabling Vicor patents with respect to these kinds of high-voltage bus converters, ranging from the control system, some of the semiconductor components, active technology. There are many aspects to the IP portfolio that is relevant on this kind of high-voltage, high-input voltage bus converter. Yeah. It's actually really exciting. It looks like you have a very long runway of products and opportunities coming out the next several years. I am looking forward to this. Thank you. Thank you. This does conclude today's conference call. Thank you so much for participating. You may all disconnect. Thank you. Thank you.