Good day, and thank you for standing by. Welcome to the Vicor first quarter 2026 earnings conference call. At this time, all participants are on listen only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star one one on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star one one again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, James Schmidt, Chief Financial Officer. Please go ahead. Thank you. Good morning and welcome to Vicor Corporation's earnings call for the first quarter ended March 31, 2026. I'm James 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. Earlier this morning, we issued a press release summarizing our financial results for the three months ended March 31, 2026. 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 the 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 risks and uncertainties. In light of these risks and uncertainties, we can offer no assurance that any forward-looking statement will in fact prove to be correct. Actual results may differ materially from those explicitly set forth in or implied by any of our remarks today. The risks and uncertainties we face are discussed in Item 1A of our 2025 Form 10-K, which we filed with the SEC on March 2, 2026. 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 21, 2026. Vicor undertakes no obligation to update any statements, including forward-looking statements made during this call, and you should not rely upon such statements after the conclusion of this call. A webcast replay of today's call will be available shortly on the investor relations page of our website. I'll now turn to a review of 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 product and royalty revenue for the first quarter of $113 million, up 5.3% sequentially from the fourth quarter of 2025 total of $107.3 million, and up 20.2% from the first quarter of 2025 total of $94 million. Advanced products revenue increased 3.7% sequentially to $64.9 million, and brick products revenue increased 7.7% sequentially to $48 million. Shipments to stocking distributors increased 0.5% sequentially and increased 63.6% year-over-year. Exports for the first quarter decreased sequentially as a percentage of total revenue to approximately 48.9% from the prior quarter's 49.3%. For Q1, advanced product share of total revenue decreased to 57.5% compared to 58.4% for the fourth quarter of 2025, with brick product share correspondingly increasing to 42.5% of total revenue. Turning to Q1 gross margin, we recorded a consolidated gross profit margin of 55.2%, a 20 basis point decrease from the prior quarter. Q1 gross margin increased 800 basis points from the same quarter last year. I'll now turn to Q1 operating expenses. Total operating expense increased 4% sequentially from the fourth quarter of 2025 to $45.5 million. This increase included higher legal expenses related to enforcement of our IP. The amounts of total equity-based compensation expense for Q1 included in cost of goods, SG&A, and R&D was $836,000, $1,959,000, and $1,057,000 respectively, totaling approximately $3.9 million. Turning to income taxes, we recorded a tax benefit for Q1 of approximately $0.3 million, representing an effective tax rate for the quarter of -1.3%. The company's tax provision and effective tax rate for the quarter ended March 31, 2026 was positively impacted by stock options exercised in the quarter. Net income for Q1 totaled $20.7 million. GAAP diluted income per share was $0.44 based on a fully diluted share count of 47,254,000 shares. Turning to our cash flow and balance sheet, cash and cash equivalents totaled $404.2 million at Q1. An increase of $1.4 million sequentially. Accounts receivable net of reserves totaled $67.4 million at quarter end, with DSOs for trade receivables at 42 days. Inventories net of reserves increased 3.8% sequentially to $94.8 million. Annualized inventory turns were 2.1. Cash flow used for operating activities totaled $3.9 million for the quarter, which was net of a litigation settlement payment of $28.6 million. Capital expenditures for Q1 totaled $12.4 million. We ended the quarter with a construction in progress balance, primarily for manufacturing equipment of approximately $10.7 million, and with approximately $33.9 million remaining to be spent. I'll now address bookings and backlog. Q1 book-to-bill came in above 2, and one-year backlog increased 70% from the prior quarter, closing at $300.6 million. 2026 is a year of great opportunity for Vicor. We expect Q2 revenues of nearly $126 million, and 2026 revenues of nearly $570 million. This guidance is based on conservative assumptions about our licensing practice, specifically that we will not enter into new licensing agreements until our second ITC case gets to its final determination in 2027. Additional exclusion orders further restricting importation of infringing computing systems will provide motivation to close new licensing deals on the right terms. Along with revenue growth in 2026, we expect margin expansion. Phil? Thank you, Jim. With a book-to-bill above 2, Q1 bookings were strong across our high-performance computing, industrial, and aerospace and defense markets. They remain strong in the second quarter, and I'll discuss each of them in turn. Our lead computing customer is continuing a steep production ramp of its wafer-scale engine with best-in-class AI inference performance. Wafer-scale engines and future embedded multi-die and CoWoS packages for AI chiplet solutions are uniquely enabled by vertical power delivery. Further advances in AI performance are about to be enabled by Vicor's 2nd generation VPD solution, with 3 A per sq mm current density and a current multiplication factor of up to 40 in a 1.5 mm thin package. Per my Q4 comments, engagement with other HPC customers for 2nd generation VPD solutions will follow the generational transition by our lead customer. With capacity in our first chip fab earmarked for existing strategic customers, we will continue to be selective as we add additional customers. On the VPD front, competition is handicapped by a multiplicity of issues, including inadequate current density and stacked packages that are not mechanically and thermally adept. That's because competition copied a 1st generation VPD solution whose pioneering aspects are still immature and at risk of continuity of supply challenges caused by patent infringement. Our broad industrial market, which is supported by our global distribution partners, had a strong first quarter, and our top 100 industrial OEMs in the automated test and semiconductor manufacturing equipment markets continue to benefit from the AI data center build-out with strong order placement. We are also winning next-generation platforms with earlier generation and new factorized power system solutions. Our current multipliers supplying high power to ASIC and memory test heads and pin electronics remain unchallenged in terms of current density, low noise, and thin packages. Geopolitical developments have been a key driver of our aerospace and defense business in recent quarters. Increases in spending as a percentage of GDP and replenishment of defensive and offensive systems supports the growth of this market. Our objectives, goals, and strategies for 2026 remain unchanged, with a focus on a portfolio of 100 customers globally across four market segments. Future growth opportunities will require capacity expansion, including a second fab. Our combinatorial strategy of being the power system technology innovator and an IP licensing company is delivering results. With that, we'll take your questions. Thank you. As a reminder to ask a question, please press star one one on your telephone and wait for your name to be announced. To withdraw your question, please press star one one again. Our first question comes from the line of Quinn Bolton with Needham & Company. Your line is now open. Hey, guys. Congratulations on the nice results and outlook. I guess where I wanted to start with just the assumptions you're making around 2026 for the IP licensing business. Looks like royalty revenue in Q1 was about $15 million or about $60 million annualized. I know you're not assuming any additional or new licenses signed. Where do you see royalty or licensing revenue this year as part of that $570 million guidance? The $570 guidance includes R oyalties, which will increase somewhat based on existing licensing agreement. In terms of providing, in effect, safe guidance, we thought it would be best to set aside any opportunity with respect to, if you will, early deals relating to current actions. Our working assumption for guidance purposes is that we're not going to have any until we get to final dissemination or our second case next year, but it could be that we do get some ahead of that timeframe. Understood. Patrizio, last quarter you seemed pretty confident that the utilization in Andover would approach 80% by the end of 2026 or early 2027. Looks like you're on a strong product ramp, but are you still sort of comfortable or still expecting utilization to sort of achieve those levels that you discussed last quarter? Yes. In absolute terms with respect to product revenues, what has transpired, since we last spoke on this topic, is that we actually have a significant level of elasticity with respect to expansion capacity within the leased facility that's giving us a little bit more flexibility with respect to the timing and choice of the location for the second fab. To get a little bit more specific, we've seen an opportunity for relatively significant expansion capacity. It could be as much as 50% above what had been planned to be supported in terms of annual revenues out of the leased facility. That gives us cushion with respect to timing, which we're putting to good use in terms of the choice of a location. To give you a little bit more flavor with respect to that, we've also come around to focusing on existing buildings as opposed to a piece of land, because of the fact that with an existing building, we can execute much more rapidly in terms of capacity expansion. Part of the strategy with respect to getting more out of the Federal Street facility is to selectively source outside of that facility some of the process steps that can be more easily relocated. That should give you the picture with respect to both the capacity utilization and the plans with respect to capacity expansion. Sorry, Patrizio, just a quick clarification. Did you say that in the first Andover facility, you would be outsourcing some manufacturing steps, either to third parties or would that be to the second chip fab? It would be to an interim location for the second chip fab, but this would still be totally within Vicor control. There are process steps that can be easily located in a nearby building, and that's part of the plan to extend capacity of the Federal Street facility. Understood. Thank you. I'll get back in queue. Thank you. Our next question comes from the line of Justin Clare with ROTH Capital Partners. Your line is now open. Hey, good morning. Thanks for the questions here. I think first off, you mentioned engagement with additional VPD customers I think could follow the generational transition for the lead customer, from gen four to gen five. I was wondering if you could just provide an update on the anticipated timing of that transition. I think you had previously been looking for the second half of 2026, and then so trying to get a sense for when the potential orders with additional customers could be and what the revenue timing might be. Yeah. The generational transition we're referring to here, it will be enabled in the second half of this year. We expect a ramp to begin before the end of this year with respect to that next generation capability with the lead customer. We will follow that with additional customers for second-gen VPD solution. As Phil pointed out earlier, we are planning for the increments of capacity that we're going to have available to support opportunities that are, as in the case of our lead customer, long-term strategic to Vicor. Fundamentally, in spite of capacity expansions, we expect to remain capacity-constrained for a substantial timeframe. That leads us to want to pick the right companies, the right applications, where, as in the case of the lead customer, we can make a very substantial difference with respect to levels of performance and opportunity to win substantial market share. Got it. Okay. Just on the backlogs, in Q1, backlog increased significantly here to just over $300 million. Wondering if you could speak to how quickly you anticipate turning that over. I guess, just as the business continues to scale, how do we think about the lead times and the conversion of that backlog? Maybe how much backlog do you think may be necessary in order to support the $800 million run rate that you have previously talked about? Well, starting with Q2, the bookings are just as strong as they were in Q1. We expect to, once again, in Q2, have a very strong book-to-bill. The backlog is going to keep building up as we step up the revenue levels, and capacity utilization as the year progresses. Phil, do you have... No, I think the question was the existing backlog. I mean, that rolls pretty much over the next 12 months. That's how we recognize it. Yeah. Yep. Got it. Okay. Justin, any backlog we quote, the bookings we quote, it's always a 12-month window. Just to- Yeah. Yeah. Got it. Okay. Maybe just one more on the capacity. You're talking about expanding capacity at Fab One. How much capacity do you anticipate adding? What level of revenue do you think could be supported by the first fab? I think you had talked about this a little bit in terms of the potential size of Fab Two, but I'm not sure I caught it. Maybe just what revenue level could be supported by the second fab? You might recall in the past we had earmarked capacity out of Fab One at roughly a $1 billion per year run rate. We see a way to get that to at least $1.5 billion at this point, and that's coming out of a combination of initiatives we've identified with certain process steps that have been historically capacity limiting overall, opportunities to get to a shorter cycle time and increase capacity with those steps. That's a key element of this capacity expansion plan. To complement that, as I mentioned earlier, we see opportunities with process steps that are not as critical and which can be easily redeployed, an opportunity to redeploy them in an existing neighboring facility. Again, as a stepping stone to the second fab, which has got a longer lead time in terms of what it takes to bring it to fruition. We believe this approach gives us a lot more flexibility. It will improve our opportunity for significant margin expansion because we will not be incurring, for a certain level of total capacity, as much in terms of additional equipment and depreciation. Overall, it's a plan that meets the combination of objectives that we set ourselves and the need to support a variety of market opportunities, not just in the computer space, but in the other markets where we're seeing considerable strength. Got it. Okay. Thank you. Appreciate it. Thank you. Our next question comes from the line of Jonathan Tanwanteng with CJS Securities. Your line is now open. Good morning. Thank you for taking my questions, and congrats on the nice quarter and the strong orders and outlook. My first question is, Patrizio, you mentioned you expect to be capacity constrained before the expected new fab to come up, and I don't know if the expansions will occur before that as well. What does that mean for your customers and their sourcing strategies? Do they need to turn to your competitors, or do you have some kind of licensing strategy that you may employ or have in mind to help them avoid that constraint? Just help me understand what the timing is around their growth trajectory is and what you expect your capacity to be underlying that. First of all, we purchased a second 3Di or three-dimensional interconnect line that is going to be installed in the Q3, Q4 time frame. That in and of itself is an element of the capacity expansion plan. Second, as I mentioned earlier, within the niche of the 3D interconnect lines, we have identified ways to reduce cycle time and increase capacity in inverse proportion. Beyond that, we have expansion plans outside of the Federal Street facility, and we are engaged in discussions that could lead to an alternate source for our 2nd-gen VPD technology, which we believe is going to be in great demand for a variety of reasons in years to come. Because fundamentally, it is the only way we know how to address the current demands of processors with all of the right attributes. The way it is done with competitive alternatives that, to some degree, build upon what we call our 1st generation VPD technology is, as suggested in the earlier remarks, challenged in a number of respects because of the high current density. It is fundamentally a dominant effect. In other words, current density forces stacking of the elements of the solution, the stacking adds mechanical complexity and thermal challenges because the heat gets trapped within the stack, is fundamentally inept at keeping up with escalating current density needs in future generation of processors. Even though we have ambitious capacity expansion plans, we see an alternate source playing a key role in years to come in terms of achieving greater overall penetration and win-win opportunities in the marketplace. Got it. Thank you. Could you also talk about the upcoming 800 V data center architecture and the potential for a transition to a 6 V intermediate bus, and where your 48 V to 12 V systems sit within that? Do you expect maybe the NVM market to continue to grow as those architectures take share, or is there a transitory period where maybe that falls off then maybe transitions to your VPD technology and licensing and royalties on that side? We believe the initiative to go directly from 800 V to 6 V is frankly ill-conceived. It's internally inconsistent, and it's relatively easy to understand why. The logic of busing power at 800 V is predicated on that power distribution being at a higher voltage, more efficient. There's an opportunity to improve efficiency by a few percentage points through the use of 800 V bus. In doing that, it is the opposite effect at the other end of that proposed bus conversion step, because going all the way down to 6 V, as you can imagine, relative to 48 V, the ratio being essentially 8-to-1. You have to square that. The square of 8 is 64x. The proposition of changing power distribution next to the point of load down to 6 V is fundamentally challenged by the extreme inefficiency of distributing any amount of significant power at 6 V. You can only go short distances and retain some level of efficiency. To some extent, that's incompatible with an 800 V bus not being safe, because it can give rise to hazards. There's a lot of challenges with that whole concept. Fundamentally, it's a change in direction away from where the focus should be, which is at the point of load with respect to vertical power delivery. That's where the core challenge technically resides. Going off and trying to figure out how to save a few points out of 800 V distribution, particularly when you combine that with a step all the way down to 6 V, is, in my opinion, a bad idea. Time will tell. By the way, Vicor has proprietary technology at 800 V. We did a lot of pioneering developments with respect to bus conversion from 800 V. Should that be successful to any degree, there's going to be issues with respect to IP there, too. In terms of your question as to what we expect to happen with that, we expect it to move forward, but we think it's a diversion from the real challenge, which is at the point of load, in particular the point of load with respect to vertical power delivery. Got it. Very helpful. Thank you, Patrizio. Good luck. Thank you. Our next question comes from the line of John Dillon with D&B Capital. Your line is now open. Yes, guys. First of all, congratulations, especially on the bookings. Looks really good. Hey, I just wanted to go back to capacity for a minute. I want to make sure my numbers are right. If I heard correctly, you've got about $1 billion in capacity in your current fab. You can add another half a billion. On top of that, you have bricks, and I would guess your bricks would be at least $250 million. Am I right in assuming that your capacity with this expansion in the current area is about $1.75 billion? No. The bricks are part of it. I don't think they're quite at the level of 250. As we've been saying for quite some time, before too long, they're practically irrelevant. We shouldn't be thinking about bricks. In effect, part of our strategy with respect to the expansion of capacity at Federal Street is to minimize the footprint taken up by legacy products that don't have the growth opportunity of advanced products, in particular 2nd- gen VPD. The number I quoted earlier as a step up in our capacity plan for Federal Street from $1 billion-$1.5 billion, that's an all-inclusive number. Now, that all-inclusive number could potentially go further up, but it wouldn't be because of the brick contribution. It would be because of more opportunity for expansion capacity of advanced products. Got it. You see you could get above $1.5 billion. Excellent. Yes. We feel comfortable with a $1.5 billion target at this point in time. Again, the same process that has led us to identify opportunities to step capacity up, measured in revenues per year from $1 billion - $1.5 billion may have yet some further opportunity. Again, the logic behind it is to give ourselves more runway with respect to the next set of steps, which include a variety of strategic choices, ranging from the second fab to alternate sourcing. Excellent. With this expansion capacity, will you be able to satisfy the OEM and the hyperscaler customers you talked about in Q3 that came to you back in Q3 conference call? You mentioned those two, and I'm wondering if this expansion capacity will be able to satisfy them. Yes. Excellent. Yes. Thank you. I'll get back in the queue. Yeah, go ahead. Thank you. As a reminder, to ask a question at this time, please press star one one on your touch tone telephone. Our next question comes from the line of Richard Shannon with Craig-Hallum Capital Group, LLC. Your line is now open. Well, hi guys. Thanks for letting me ask a couple of questions. I guess my first is a simple one here. The backlog has risen very nicely, I think 70% sequentially. If you could characterize the sources of that increase here, whether it's from the lead VPD customer or anyone else in the high-performance computing space and in all other markets, can you characterize between those two? That'd be helpful. Thanks. Yeah. Hi, Richard, it's Phil. In high-performance compute, yeah, it was the lead customer and the hyperscaler customers that we have. We also saw some really good lift in industrial and the defense aerospace markets, as I commented. It was real strength across the board in our broad markets as well as in high-performance compute with a few lead customers. Okay, great. Thanks for that. My follow-on question is, and apologies if I missed something, I had a couple of interruptions here. Wondering if you could discuss the engagement or even design win status with follow-on VPD customers here. Sounds like, if I heard correctly, you're talking about strategic reservations on either capacity in the first fab or the proposed second one here. Wondering if you can discuss the dynamics around those follow-on customers. I suggested earlier, Richard, we're very much focused on computing readiness with respect to starting a generational change with a lead customer, and with some other opportunities relating to that. I guess a way to think about this is that in spite of the capacity expansion that we are pursuing, we see ourselves being essentially sold out in terms of capacity for the foreseeable future. That gives us the opportunity to be very selective with respect to new engagements in terms of their strategic significance and alignment of interests for the medium to long term. In a way analogous to the comments I made earlier regarding expansion of capacity coming out of Federal Street, first of all, giving us more time and opportunity with respect to parallel initiatives. On the front end of the business, just like the back end of the business, the fact that we're going to be enjoying strong bookings and strong backlog and that we have a near-term capacity nearly sold out, gives us an opportunity to align ourselves with the right applications and the right customers going forward. We don't have to feel a sense of urgency because of where we stand in terms of the demand side. Thank you. Our next question is a follow-up from Quinn Bolton with Needham & Company. Your line is now open. Hey, guys. Thanks for the follow-up questions. Patrizio, just a quick clarification on the capacity expansion in Andover. When would you expect to reach that $1.5 billion of capacity? Is that end of 2026? Is it going to take until sometime in 2027? I've got a follow-up. Well, I don't think we want to be that specific at this point in time. As I'm sure you noted, because of changing circumstances, we achieved the necessary comfort level to provide guidance for revenues for this year. As we get past that, there are still so many different scenarios that it would be unwise to become very specific, beyond saying that we have planned to step up the capacity further, and we believe there is the market demand to use that expanded capacity as we get into 2027 and beyond. Got it. Okay. That's understandable. Then I just wanted to come back. I think it was Phil that mentioned on the 2nd- gen VPD, your solutions are 1.5 mm high. Just wanted to clarify that. If that's the case, I guess at the recent APEC conference, there were a ton of presentations on vertical power with folks like NVIDIA and Google asking suppliers to hit 3 mm or below. It sounds like you may be well below that threshold already, just wondering if you can talk about the interest you're seeing on the VPD products, because it does sound like you may have a major advantage in package height versus the competition. We do. Actually, it is even bigger than you might think for reasons I'm going to explain in a moment. It's not just that our solution is 1.5 mm thin, but as Phil pointed out in his prepared remarks, it's that combined with the fact that our solution provides 40x current multiplication. It does all that with 3 A per sq mm current density. In order to assess the figure of merit of a technology, you need to look at these three elements in combination. You can't just look at one. As an example, so-called integrated voltage regulators, IVRs, they can be even thinner than 1.5 mm, but they don't provide any meaningful current multiplication. They only step up the current by 2x, which is practically speaking useless in terms of efficient power delivery to the point of load, because in order to deliver, let's say, 0.6 V, 0.7 V, 2,000 A, they would require a 1,000 A feed, which is obviously extremely problematic. It's not just thickness. It's thinness combined with current density and most importantly current multiplication. Because in order to have a VPD solution that is capable of supporting wafer scale or other kinds of advanced compute capabilities, you really need the combination of all these elements, not just one of them. Understood. Thank you, Patrizio. Thank you. Our next follow-up comes from the line of Jonathan Tanwanteng with CJS Securities. Your line is now open. Hi. Thanks for the follow-up. Jim, can you touch on the taxes in the quarter? What went into that tax rate, and then what rate can we expect going forward? I have a follow-up after that. Yeah. When we closed fourth quarter, we reversed a significant portion of the valuation allowance, and our expectation was more or less that we would be in the range of 20% or in terms of an effective tax rate. What happened, John, in Q1 is that there was a substantial pent-up demand in terms of stock options that got exercised at a nice spread between strike and exercise price, and that's a tax benefit for us. That's a one-time discrete item that doesn't get baked into the effective tax rate, and our feeling is that going forward, there'll be that effect, which is a positive effect for us. Planning can be more in line with a 20% kind of a rate. Perfect. Thank you. Patrizio, could you talk a little bit more, or maybe Phil, just about the demand from the defense and semi test businesses. What percentage of revenue are they, number one? Number two, just with regards to defense piece specifically, are you able to meet the critical defense needs that the U.S. has with the upcoming capacity constraints that you're modeling? Yeah, I'm sorry. Some of your words are muffled. Can you repeat the first question? Yeah. First, the percentage of semi test and defense in the revenue today, and second, can you meet defense demand as it grows, given that it's critical, given the capacity constraints that you're modeling going forward? Yes. John, it's Phil. We don't break those things out, but the answer to the question is we can meet the needs of the defense market with the capacity that we have. Okay, great. Thank you. Thank you. Our next follow-up comes from the line of John Dillon with D&B Capital. Your line is now open. Hi. Yeah. I was just wondering, does Vicor have any vertical power licensing agreements that will generate revenue this year? There may be opportunity of alternate sourcing of the 2nd- gen VPD technology, but this is not something that we're prepared to talk about today. Okay. Phil, on the bookings, can we assume a bookings run rate of what we saw today for the rest of the year? John, I think the bookings are going to be well above one like Patrizio talked about, but they're lumpy, so I don't want to be pegged to a particular ratio, but they're very strong going into Q2, and we'll say well above one. Thank you very much. Thank you. Our next question comes from the line of Don McKenna with D.B. McKenna & Co., Inc. Your line is now open. Yeah. Phil, could you give us an idea of what percentage of the backlog is attributable to your lead customer? Again, we don't break that out. They're an important lead customer for us, but they're not the only major one. We've got a hyperscaler and big customers across industrial and defense and aerospace that are ramping, as well as just the broad market. It's just general strength right now that's really good that we're benefiting from. Okay. Thank you. Thank you. As a reminder, to ask a question at this time, please press star one one on your touchtone telephone. Our next question comes from the line of Neil Gore, shareholder. Your line is now open. In the past, you said you expect that royalty income could grow to as much as 50% of product revenue. Do you still have that expectation? The expectation of the licensing as a percentage of product revenues, we've talked as much. Yeah as 50%. Question was, do we still hold to that? Yeah. We feel very good about our licensing practice. We are investing heavily in it. We'll be investing in it at an escalating rate because we see that business as being both a high growth business in terms of its top line and needless to say, it's nearly 100% margin in terms of profitability. We anticipate, as discussed in prior meetings, that there will be a time in the not too distant future when OEMs and hyperscalers will be Vicor licensees with only perhaps rare exceptions. We see that dynamic progressing, and we think we're pretty close to a crossing of the chasm with respect to the industry wanting to be protected in terms of a license enabling power system technology from Vicor. Thank you. Do you expect that some of the other lawsuits that you have had for violating your patents? Has anyone approached you to settle after the big settlement you received earlier last year? We carried the first ITC case to a successful conclusion. To be clear, that conclusion doesn't mean that there isn't ongoing opportunity relating to the first ITC case. In fact, there is an action pending at customs as we speak relating to that first exclusion order. While we're working with the case we brought earlier this year, for which the ITC once again chose to institute an investigation to get that to its final determination, which should result in a second exclusion order. This may not be the end of the road. I mean, in Italy, we are saying that there is no two without three. There's been two thus far. Don't be surprised if you see a third one. This, again, part of a very comprehensive campaign. Vicor has been the pioneer in the power system industry, always very much in the forefront of very high power density and performance for nearly 40 years. As a longstanding pioneer in the industry, we got into places well ahead of any competitor and scouting these new landscapes with respect to power distribution architecture, power conversion engines, control system, advanced power conversion components. We have consistently pursued an extensive protection through many patents. Lo and behold, the industry, given demands in AI and with respect to other electronic systems, now is very much in need of those kinds of technologies that Vicor pioneered. Licensing is going to be an expanding portion of our business, a very significant one in its own right beyond our module maker through, again, unique fabs revenue capability. Okay. Next question on that. Are there any expenses affiliated with licensing revenue? Is it part of your SG&A, perhaps? Any expenses associated with licensing revenue? Of course, the lease. Yes. We have partnered with law firms that have a share of the interest in the outcome, subject to caps and so on and so forth. As we record the licensing income, we record an operating expense for the share of the proceeds from the litigation that led to the licensing deal owed to our partners. Thank you. Thank you. Thank you. Our next question is a follow-up from Justin Clare with ROTH Capital Partners. Your line is now open. Hey. Thanks for taking the follow-up. Just one here. We did see a large transaction announcement between OpenAI and a wafer scale supplier last week. Just wondering against that backdrop, can you share how your visibility into demand has evolved over the last quarter? Then maybe if you could comment on the size of the opportunity you're seeing with your lead customer for vertical power and how that compares to the visibility you had last quarter? Well, I think we felt very strongly about our lead customer technology and their market opportunity. Frankly, for a number of years, I was confronted with a degree of skepticism by investment bankers and the like. Would you share the same level of confidence Vicor had in our lead customer? That's been proven now to be the right expectation. We think they have a real technological advantage, at least for a certain class of AI applications, and that will translate into market share growth and we believe substantial success in years to come. That's an opportunity for us, as they say, as we have with the AI market in general. Okay. Appreciate it. Thank you. Thank you. Thank you. Our next follow-up comes from the line of Richard Shannon with Craig-Hallum Capital Group. Your line is now open. Well, hi, guys. Thanks. Let me follow up, kind of a multi-part question around licensing. Maybe you can update us on the number of licensees you currently have generating revenues, and if there's multiple licenses per licensee, that'd be probably a good understanding there. Also wondering if you have any licenses that are expiring and need to be renewed this calendar year. Ultimately, you talked about the ability or the belief in growth in this business here. To what degree do we need to see growth in licensees versus number of licenses? Or can you grow at a rate that you're expecting without any growth in those numbers? Thank you. I view our business model as being very resilient, very redundant, because we have great opportunities as a module maker, and we have great opportunities as a licensor of enabling technology. Those two opportunities are very synergistic because in our licensing deals we provide incentives for OEMs, hyperscalers to be more than licensees, to be customers of our modules and advanced technology power system solutions. We feel, I feel, speaking for myself, very confident we're going to be very successful on each of those two fronts and again, they reinforce each other in pretty much every way. Richard, maybe I can also, if you don't mind, I'll add a little bit to that. If you look at products that are getting launched later this year or maybe early next year from different GPU companies or even hyperscalers, a lot of them are going lateral and vertical because they can't really solve the full vertical problem, the vertical challenge, because of what Patrizio's talked about, lack of current density, mechanical issues. You'll see a little bit of lateral with a bit of vertical. That vertical, as we talked about, copies our 1st generation VPD. If you go to what Cerebras and the wafer-scale companies do, you've got a challenge there of bandwidth, which they solve through their Wafer-Scale Engine. Everybody now is starting to look at the CoWoS packaging, the packaging that Intel has brought to market with multi-die chiplet. The only way to power that stuff to solve the memory bandwidth problem is pure vertical power delivery. That's where you need 1.5 mm height packaging, greater than 3 A per mm squared current density, and 40 x the, if you like, the capability of the power delivery to that network. Current multiplication. Current multiplication. Where at 6 V you've got 64 x the power losses than at 48 V. At 2 V you've got 526 x the power losses for an IVR system. You start to run into real fundamental issues here where the VPD technology, our 2nd generation VPD technology for these future technologies where we're going to focus on these strategic alignments where they really need the Vicor VPD, that's where we're headed. Again, the competition tends to focus on one element, like current density. They can make some headway with respect to that element. In any event, in their architecture is a conflict among key elements of the solution, where fundamentally you got to trade off one to make it a little better for the other. When the right solution, the necessary solution, must involve all of these ingredients, high current density, high current multiplication, in a solution that is relatively thin. By the way, we're not stopping at 1.5 mm. We're going thinner. Because as we get to power in package, it will need to be thinner, and with our technology, we can go a lot thinner. Thank you. Our last question comes from the line of Don McKenna with D.B. McKenna & Co. Your line is now open. This is a simple one, guys. I haven't been able to attend the annual meeting for the last few years because of a conflict in timing, and I'm hoping that you don't schedule it for the twentieth of June this year. Well, the 20th of June is a Saturday, and so I'll let the cat out of the bag. The proxy is coming out soon. The annual meeting is Friday, June 19th. 19th. Okay. Thank you very much. Okay. Thank you. That's everything. Thank you. This concludes the question and answer session. Thank you all for your participation on today's call. This does conclude the conference. You may now disconnect.