Vicor Corporation (NASDAQ:VICR) Q2 2025 Earnings Call Transcript

Vicor Corporation (NASDAQ:VICR) Q2 2025 Earnings Call Transcript July 22, 2025

Vicor Corporation beats earnings expectations. Reported EPS is $0.91, expectations were $0.2.

Operator: Hello, and welcome to Vicor’s Second Quarter Earnings Conference Call. [Operator Instructions] I would now like to turn the conference over to Jim Schmidt, Chief Financial Officer. You may begin.

James F. Schmidt: Thank you. Good afternoon, and welcome to Vicor Corporation’s earnings call for the second quarter ended June 30, 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 the 3 and 6 months ended June 30. This press release has been posted on the Investor Relations page of our website, www.vicorpower.com. We also filed a Form 8-K today related to the issuance of this press release. I want to remind listeners that this conference call is being recorded and is the copyrighted property of Vicor Corporation.

I want to remind you various remarks we make during this call may constitute forward-looking statements for purpose of 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 those 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, 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 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, July 22, 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 Q2 financial performance after which Phil will review recent market developments and Patrizio, Phil and I will take your questions.

In my remarks, I will focus mostly on the sequential quarterly changes for P&L and balance sheet items and refer you to our press release for our upcoming Form 10-Q for additional information. As stated in today’s press release, Vicor recorded product revenues, licensing income and a patent litigation settlement for the second quarter of $141 million, up 50.1% sequentially from the first quarter of 2025 total of $94 million and up 64.3% in the second quarter of 2024 total of $85.9 million. Advanced Products revenue increased 1.2% sequentially to $60.6 million and Brick Products revenue increased 4% sequentially to $35.5 million. Shipments to stocking distributors increased 18.9% sequentially and decreased 14.3% year-over-year. Exports for the second quarter decreased sequentially as a percentage of total revenue to approximately 51.9% from the prior quarter 60.8%.

For Q2, Advanced Products share of total revenue decreased to 63.1% compared to 63.7% for the first quarter of 2025, with it — with new product share correspondingly increasing to 36.9% of total revenue. Turning to Q2 gross margin. We recorded a consolidated gross profit margin of 65.3%, which is a 1,810 basis point increase compared to prior quarter, primarily due to patent litigation settlement within the quarter. Tariff expense was approximately $2 million in Q2. I’ll now turn to Q2 operating expenses. Total operating expense increased 5% sequentially from the first quarter of 2025 to $46.7 million. The sequential increase was primarily due to the increase in selling, general and administrative expenses, which was primarily attributable to $5.1 million of incentive legal fees associated with the patent litigation settlement.

The amounts of total equity-based compensation expense for Q2 included in cost of goods, SG&A and R&D was $900,000, $1,790,000 and 1,020,000, respectively, totaling approximately $3.7 million. Turning to income taxes. We recorded a tax provision to be approximately $7.8 million, representing an effective tax rate fpr the quarter of 16%. Net income for Q2 totaled $41.2 million. GAAP diluted income per share was $0.91 based on the fully diluted share count of 45,77,000 shares. While royalties legal expenses and income from patent litigations have become part of Vicor’s ordinary course of business, I will point out that without the patent litigation settlement, net Q2 revenue would have increased by approximately $2 million, gross margin would have increased by approximately 200 basis points, operating expenses would have declined by approximately $3 million and income before taxes would have increased from approximately $3 million in Q1 to approximately $9 million in Q2.

Turning to our cash flow and balance sheet. Cash and cash equivalents totaled $338.5 million in Q2, an increase of $42.4 million sequentially and net of approximately $17.5 million in share repurchases during the quarter. Accounts receivable net of reserves totaled $55.1 million equivalent with DSOs for trade receivables is 31 days. Inventories net of reserves decreased 3.1% sequentially to $95.5 million. Annualized inventory turns were 1.6. Operating cash flow totaled $55.2 million for the quarter. Capital expenditures for Q2 totaled $6.2 million. We ended the quarter with a construction in progress balance primarily for manufacturing and equipment of approximately $11.8 million and with approximately $3.1 million remaining to be spent. I’ll now address bookings and backlog.

Q2 book-to-bill came in below 1 and 1-year backlog decreased 9.6% from the prior quarter, closing at $155.2 million. As we said on last quarter earnings call, 2025 was 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, Bill Phil provide an overview of recent market developments and then Patrizio, Phil and I will take your questions. I ask that you limit yourselves to 1 question and a related follow-up, so 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?

Philip D. Davies: Thank you, Jim. Our second quarter book-to-bill ratio came in below 1 due to order cancellations from customers in China and widespread order placement hesitancy around tariffs. Vicor has instituted a 10% tariff surcharge applicable to all new orders and customer backlog shipping after July 2. This tariff surcharge is now in effect. Earlier this year, we bought to fruition our first ITC action, which has resulted in cease and desist orders against the name respondents and an exclusion order against their customers, both OEM and hyperscalers. We are pursuing additional actions against companies unknowingly infringing our IP while playing a game of catch me if you can. At the Annual Shareholders Meeting on June 20, I presented an update on our business strategy is fundamentally centered around our top 100 customers, enabling high-performance modular power delivery networks.

At the meeting, we showcased next-generation products, providing significant advances in power and current density at levels far beyond our nearest competitors. These next- generation products are being sampled to lead customers across our 4 target markets and customer engagements are expected to expand in Q3 and Q4. I am pleased to announce that our Gen 5 vertical power delivery solution to a lead customer is coming to fruition with a current density exceeding its original target specification. Higher current density, thermally adapt and scalable VPD will enable us to engage with hyperscalers, AI processor and network processor companies to deliver solutions with superior performance and cost effectiveness. These engagements will begin with the delivery of VPD valuation boards and online selection and simulation tools.

As discussed at the ASM, we are also focused on the future AI megawatt rack which will require 800-volt DC power delivery and conversion to 48 volts. Vicor has pioneered high-density non-isolated 400-volt to 800-volt, an isolated 800-volt to 48-volt bus converters for automotive applications. A new 800-volt power module, which will deliver 10 kilowatts at 48 volts in a package smaller than an iPhone will begin sampling in Q4. 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 high-efficiency, high-density power delivery network for our customers. The market SAM for these solutions is expected to exceed $5 billion by 2027. Opportunities continue to grow in our automotive business.

We have just concluded a successful audit with a large European OEM for initial low volume project, and we are now preparing for an audit by a large ASEAN OEM in Q3. It is very clear that 48-volt zonal architectures are the highest growth opportunity in automotive, followed by 800-volt to 48-volt conversion, which will allow us to scale and leverage technologies across our AI and automotive market. The pipelines in our industrial and aerospace and defense businesses are healthy and growing. Our new product introductions will strengthen these businesses and put them firmly on a path to doubling in 4 to 6 years, respectively. As presented at the ASM, we remain confident in our business strategy of innovation, customer focus, market focus and a successful technology licensing practice.

Thank you. We will now take your questions.

Q&A Session

Operator: [Operator Instructions] Our first question comes from the line of Quinn Bolton with Needham & Company.

Nathaniel Quinn Bolton: Congratulations on the patent litigation settlement. It’s a very nice amount. I wanted to kind of start there and at the Annual Shareholder Meeting in late June. You guys talked about a return on the money spent on the ITC case, somewhere in the round number, $200 million range. And I’m just kind of curious, as you look at that kind of return, I assume that that’s includes the patent litigation settlement that you just announced, but also just wanted to check, does that include the royalties from the OEM, the hyperscaler licenses just in 2025 and ’26 or does that include what you also recognized in 2024? Just want to make sure I’ve got the time frame right on that $200-ish million return. And then I’ve got a follow-up.

Patrizio Vinciarelli: So that’s — the approximate amount that we have locked in so far, through ’26.

Nathaniel Quinn Bolton: Okay. through ’26. Got it. Okay. Perfect. And then either Patrizio or Phil, book-to-bill was below 1 in the June quarter. I think you mentioned some hesitancy around the tariff surcharge and just general tariff uncertainty in the business as well as some cancellations in China. Do you sort of feel like the bookings activity has reached a minimum. Have you seen any improvements in July on the bookings trend and any evidence that book-to-bill might be getting back above 1:1 in the September quarter? Or do you see this tariff uncertainty continuing? I know August 1 is an important date for reciprocal tariffs. So just kind of wondering if that tariff uncertainty has continued here in the July time frame.

Philip D. Davies: So Quinn, this is Phil. So we think that the hesitancy around tariffs is now behind us. It’s very clear now what we’re doing. Customers are working with that expectation and I think that — as I said, that’s behind us now and it’s on to future quarters.

Operator: Our next question comes from the line of Jon Tanwanteng with CJS.

Jonathan E. Tanwanteng: Congratulations on a nice settlement. I was wondering if you could talk a little bit more about the cancellations that you saw with what end markets those were in. Was that HPC or something else industrial, automotive, aerospace, any help there would be appreciated.

Philip D. Davies: Most — Jon, this is Phil. Mostly from the industrial market in China, we have customers there for many, many years using a lot of older products as well as some of our advanced products. It was widespread. It came through distribution channels sort of across the board because the tariff there was pretty high initially. So we had some order pushouts and some cancellations, it was a mix. So that’s the color on that.

Jonathan E. Tanwanteng: Understood. And second, just on the royalty streams that you’re seeing, are you expecting to continue growing those license streams into the future quarters. Is that part of the engagement that you’re talking about? Or is that mostly stable for now?

Patrizio Vinciarelli: So we completed the first ITC case with [indiscernible] and order that the IDC issued earlier this year. That’s still ripping through the supply chain. We are aggressively pursuing infringers that are still trying to import products that are some exclusion. We’re also preparing additional actions in the fall. So as evidence said by the track record to date, we are very serious about protecting our intellectual property and nobody should have any doubt that we’re going to go to whatever length is necessary to preclude infringement. I believe the message is getting around. But I should say, given the track record of the industry, an industry in which suppliers have been urged by OEMs, sometimes hyperscalers to healthy, successful products.

This is a practice that’s going to take some time to change, but we have the [indiscernible] to make it happen, and we are very determined to make it happen. So, so far, so good. There’s going to be a lot more of what has happened.

Operator: Our next question comes from the line of Richard Shannon with Craig-Hallum.

Richard Cutts Shannon: Well, let me ask a question. My first 1 is going to be on this new license settlement. Congratulations on what seems like a very nice win here. Maybe you can describe this in a few different ways for us to the extent you’re allowed or able to. Is this settlement — will we see any ongoing royalties from this customer? Or is it fully paid up in any manner? Can you describe who this is either by name or kind of a company, OEM, hyperscaler, et cetera? I guess just to start with that one, please.

Patrizio Vinciarelli: So I cannot disclose any of the details that you’re looking for. I can only say that at the shareholders meeting that there’s been no license in connection with this particular action. So you should not assume that the parties were involved got a license and by mutual license, they are able to keep doing what may have beensubject to exclusion order and potentially other actions were coming.

Richard Cutts Shannon: Okay. Just as a heads up for — actually for all of you, I’m getting a little bit of scratchiness from the line here. I’m not sure I’m hearing everything here, but I think I caught most of it. With that said, I’ll follow up with my second question here, which is to kind of understand the dynamics going forward in regard to licensing and should we understand that you’re not able to fully lay out your strategy here. But as I think Phil said in his prepared remarks about trying to play the infringers are providing or doing a catch me if you can strategy here. And obviously, it seems like this patent settlement is 1 example of success there. I guess I’d love to understand the degree to which you think this is an example of that and willl stop others? Or are we going to see some back and forth here like what we saw last quarter with the licensee coming off.

Patrizio Vinciarelli: So I can describe the strategy. And I think we’ve made no history with it. The strategy is to protect IP, enforcing it selectively smartly, by fundamentally going after the supply chain that in the pricing industry, as I mentioned earlier, relied on copying successful products. That’s been part of some people call the ecosystem. It’s an ecosystem that, for the most part, players that don’t innovate, they tend to copy each other. And when a successful product comes to market and hyperscalers or OEMs, if they want to have it and have it commoditized. These players will have been [indiscernible]. And so the supply chain starts at the top with the enablers. They enable copycat products. Then there are [indiscernible] incorporate them in higher value assemblies, I’m speaking, much higher value assemblies.

And then further down in the supply chain, the OEMs and hyperscalers that, in a way, they are facilitating this kind of practice. we are committed to bringing this practice, at least in so far as IP is concerned, to Are. And that will entail some companies going line down because they know about the IP, they should respect it. And if they don’t, there are consequences to buy infringement. One of those consequences [indiscernible] or exclusion of this. And that’s what’s happened with our first action. There’s more of that coming. So the strategy is crystal clear [indiscernible.

Operator: Our next question comes from the line of John Dillon with D&B Capital.

Unidentified Analyst: Congratulations on a nice settlement, really nice to see. Phil, my question for you is at the Annual Shareholder Meeting, you presented a chart that shared a timeline when you can be delivering Gen 5 vertical to your lead customer. So I’m wondering, is that still on target? Are you still going to meet all those dates? Does it still look solid. And I have a follow-up question after that.

Patrizio Vinciarelli: So Jon, I’ll take that. So things are progressing well. But we expect the current multiplier piece that has been challenging because of its very, very high current density as well as the other building blocks. So we’re still, as you know, as discussed at our shareholder’s meetings, very much focused on addressing the needs of our lead customer. We’re keeping our powder dry with respect to engaging with other potential customers. But shortly after satisfying the very high current necessity need of our lead customer, we’ll be ready as Phil pointed out earlier, with demo system boards, range of tools to see data very scalable adoption side.

Philip D. Davies: So I think the question — sorry, John, the question was on the slide that we showed. We’re still on target with that slide that we showed, John.

Unidentified Analyst: Okay. So did you deliver the 83% solution then?

Philip D. Davies: Yes. We have provided relatively significant part is of the 80% solution, which by the way, was the backstop agreed upon with the customer to begin with and we’re on our way, making good progress with respect to 100% and 133%.

Unidentified Analyst: Excellent. Then my follow-up question would be, when do you expect to have a fully productized product that you can you can produce in quantities for the general market?

Patrizio Vinciarelli: I’m going to not spell that out. Again, as suggested earlier, John, we want to stay very, very focused on taking care of our lead customer first. And that’s 100% of ours at this point in time. That’s not to say that we’re not preparing for a general market introduction. As I mentioned earlier, we made great strides in demo systems [indiscernible] and general market capabilities. But we’re only going to pull the figure on that once we’re done with 100% current level that was initially targeted just before we get 113% reach goal.

Unidentified Analyst: Excellent. Okay. I got you.

Philip D. Davies: Just to add to that, just a little bit. That’s not to say that the front-end team is engaging with customers from a perspective of understanding their loads. So anybody that’s looking at VPD, we’re talking to them about their new next-generation processors, networking chips, so forth. So it’s not that there’s not any work going on. It’s just that the front-end team isn’t involved in, if you like, the development of the product for the lead customer. So we’re able to have the resources available to talk and gather information such that when we do launch that out to the general market, we’re ready to hit those customers very, very quickly with solutions that they need. So that work is ongoing, and we’ve got a lot of engagement with anybody looking at VPD right now.

Unidentified Analyst: Will you lead customer be able to shift the product that you’re shipping them to their customers? Is the quality going to be good enough that they can actually use it to ship to their customers? Are they still in the kind of evaluation stage.

Patrizio Vinciarelli: So I can’t give you details obviously, but I can say this. The customer is considering amortizing the platform that we’ve started to ship, but our objective is to enable a higher level of capability and improved performance and to do so ahead of the customer target market introduction date.

Operator: We have a follow-up question from the line of Quinn Bolton with Needham & Company.

Nathaniel Quinn Bolton: Patrizio, at the annual shareholders meeting, you were asked is your outlook for 2025 to be still a record year. I think at the Annual Shareholder Meeting, you had referenced some increased uncertainty around tariffs, but you still thought you got there. Obviously, with the June quarter results and the $45 million patent litigation settlement, it certainly looks like you’re tracking to a record year in 2025, but wondering if you had any updated thoughts on whether 2025 is a record year for revenue? And then I’ve got another follow- up.

Patrizio Vinciarelli: Yes. As suggested, I think for a couple of quarters, we do expect ’25 to be a record year.

Nathaniel Quinn Bolton: Excellent. Okay. And then a follow-up question. I know you don’t provide quarterly guidance, but just wondering if you could directionally give some comments. Your royalty revenue was on a very nice upward trajectory through 2024. In March and June, you sort of pulled back to the roughly $10 million level, and I think you’d mentioned that one of the OEM licenses wasn’t paying on a new generation product, but it looks like that royalty income level has stabilized. I’m just wondering, as you look into the back half of the year, would you generally expect royalty to begin to increase again? Or does it stay in this $10-ish million range? Could you give any sort of qualitative comment on how you think the royalty portion of the revenue stream might trend over the next couple of quarters?

Patrizio Vinciarelli: We’re not going to commit to any specific level. But as evidenced by the results in Q2, I think it’s fair to say that in any 1 quarter, there is a great deal of upside on a bigger scale than what happened in Q2. So — and that’s the reason, frankly, why we can’t provide a reliable forecast. There is a good deal of variants, different scenarios. And you should say, given a strategy and commitment for [indiscernible], we don’t want to be, in effect, committed, hooked on any particular target in any 1 quarter less that the drivers of the leverage we need in order to be successful in bringing about the right output. So that, as you can imagine, has uncertainty, which is, at this point in time, part of our IP business.

I think as we progress further along and we get a more diversified licensee base, the licensing business is going to become more predictable. At that point in time, the kind of challenging forecasting that we presently face will no longer be there.

Nathaniel Quinn Bolton: Maybe just, Patrizio, I understand that like patent litigation settlements are difficult to forecast timing and probably the signing of new licenses to the extent they include a license payment is a little bit less predictable. But royalty payments, I would think on existing licenses might be a little bit more predictable. And I guess that’s what I was asking about. I know you had, again, talked about some sort of headwinds in that royalty income with the OEM license. And I’m just kind of wondering at this level, do you think that those headwinds are now largely behind the company on the existing licenses? I’m not trying to get you to comment on new licenses or patent litigation settlement in the future? Just more kind of wondering if that OEM license headwind that you had previously talked about might be behind you at this point?

Patrizio Vinciarelli: It’s not behind us. We are enforcing the existing exclusion order, and we’re looking at additional actions for, in effect, making sure that the use of our IP does not go without appropriate royalties or penalties for not paying royalties when they were due.

Operator: Our next question comes from the line of James Liberman with American Trust Investment Services.

James Liberman: Great results. It’s good to see the licensing and the settlement income coming in. You mentioned the automotive area. An event for the company in Europe and Asia. And in the past, you’ve mentioned you’re seeing some continuing strength in the electric vehicle market in China. Can you give a little bit better overall color to how you see that playing out

Philip D. Davies: Yes. So the automotive market, I mentioned at the Annual Shareholders Meeting, it’s pretty obvious to people that have dealt with the automotive market. You don’t just enter that market. It’s a hard slog. It’s a grind. You have to really prove yourself as a supplier. So typically starting out with lower volume programs and platforms and then expanding the business from there once you’ve proven yourself. The critical steps through that sort of collaborations on different power delivery networks with Tier 1s and OEMs, which we’ve established. We’re now going through the audit phase with a number of customers, that’s a very critical step where they have teams that come in and look at all our quality systems and manufacturing systems and product development system.

So we’re going through those now. So we’re well on the journey, no pun intended to becoming established at least as a lower volume platform supplier, but those do expand then fairly quickly after that. So we’re very early days still. I think there’s still ways to go before that becomes a significant piece of our revenue probably out in the ’29, ’30, 2030 time frame, but we are excited about the activity that’s going on there.

Operator: Our next question comes from the line from — a follow-up question from Jon Tanwanteng with CJS.

Jonathan E. Tanwanteng: A couple of months ago, the largest chip designer in the AI space disclosed their plans for 800-volt servers and the architectures they plan to use they named a lot of partners in the press release there. And I was wondering, since you weren’t on the list that was announced, if there’s an opportunity there at all, does that shut you out? Or is there still a way to participate in that ecosystem either with this designer or with others — with the products that you have?

Patrizio Vinciarelli: So I think as mentioned in Phil’s prepared remarks, we have a history of pioneering high-voltage bus conversion with or without isolation, the DL IP at various levels. I think anybody now pursuing high-density power system solutions involving bus conversion from 800-volt to 48-volt or in the general realm is going to be needing our IP or in effect, suffering consequences in terms of inferior power density. As Phil mentioned, we’re bringing to fruition a new high-power module that is a good fit for a lot of these requirements in a 10 kilowatt block, which is very small. It’s a small fraction of the size of any competitive alternative that analogy is being developed. So here again, we have a leading technology — leading power density capability. And last but not least, a lot of significant IP that we think is going to become necessary for high-performance solutions.

Philip D. Davies: Jon, there’s a long way between having a high-voltage discrete GaN or silicon carbide product to an 800-volt multi-kilowatt rack published system. So there’s a lot of announcements there, but there’s a long way from that to having a real high performance, high- efficiency solutions. So we shall see.

Patrizio Vinciarelli: And also a lot of misconceptions. Frankly, there is a good deal of naivety when it comes to some of these things. So we’ve been making 800-volt bus converters for many, many years. we know what it takes, and we’re doing it in ways that as measured as an example, in terms of switching frequency and other manual grader than what can be done with GaN fabs or silicon carbide fabs.

Jonathan E. Tanwanteng: Great. That’s much appreciated. Last one for Jim, if you could. Just any thoughts on OpEx going forward compared to the current quarter that just ended?

James F. Schmidt: Well, I think we won’t guide on that, Jon. But I will say that as I described in the results that if you exclude the $5.1 million incentive legal fee, our OpEx will actually drop sequentially, that was because — primarily because of a low in the other legal expenses we had to incur in some of these cases. So I think we’re in a good state right now relative to a nice balance of operating expense and revenue. I think as things heat up and we go forward with other actions, then we’ll see — and it will be lumpy. I think in OpEx, and we’ve said that is it going to be the case.

Patrizio Vinciarelli: That’s the first action in terms of contingency, we have kept up. So we paid out all the contingency fees relating to the traction.

Operator: Our next question comes from the line of Don McKenna with D.B. McKenna & Company.

Donald Brian McKenna: I wanted to ask about the settlement payment, if that represents the entirety of the settlement or if that’s an initial payment? And secondly, Jim, I thought I heard you say there was some stock repurchases during the quarter, if that was the case, can you expand on that a little bit, the numbers of shares and price?

James F. Schmidt: I think I’ll let Patrizio comment on the settlement.

Patrizio Vinciarelli: Yes. So I cannot comment on the specifics of the settlement.

James F. Schmidt: So I think on the share repurchase, I mentioned in the prepared remarks, on the order of $17.5 million worth of share repurchases last quarter and on the order of 200,000 or ish shares repurchased during the period.

Operator: We have a follow-up from the line of John Dillon with D&B Capital.

Unidentified Analyst: My question was answered.

Operator: We have a follow-up question from the line of Richard Shannon with Craig-Hallum.

Richard Cutts Shannon: Great. Taking a couple of more questions here guys. I’m going to look at a couple of different comments you made both today and in past calls as well as the shareholders meeting. The first one is talking about record results for the year, and I heard your answer today. And then you also talked about a wide range of outcomes. As we look at your results today here, obviously, a very large settlement obviously, it creates a very wide range here. But as we — if we just look at your product revenue, how do we think about what can create these wide range of outcomes? And I’d like to take the tariffs off the table. You’ve talked about that today, but how about maybe discussing and kind of giving you some sense of where you see some of these positive outcomes by product as we go through the year that could create a record year even better?

Patrizio Vinciarelli: Yes. So to be clear, the major source if uncertainty in the short term is with respect to licensing and litigation practice. With respect to the product revenue, the near term sees us still making poor use in terms of copacity utilization of our first fab, which represents obviously a burden with respect to margins and our level of profitability. Even though we’ve been making good progress on that front, primarily because of the efficiencies associated with shorter time and greater yields. And that always is ongoing. But on the product front, which is, as I think I noted in my quotes associated with the press release, the product front is obviously very important. We’re very much focused on that. We’ve made tremendous investments advancing state-of-the-art and that’s all being reflected in our 5G product capability with, in particular AI, the center opportunities point of load as well as earlier, passing through critical hubs in 48- volt and 800-volt is the kind of product superiority and technology lead that will fill the fab.

It’s not going to happen overnight. It is something that will take some time. But just to say, we’re very much focused on that part of the strategy as well. But that’s not where the near-term uncertainty with respect to quarterly top line and bottom line numbers.

Richard Cutts Shannon: Okay. And I guess just following up on that Patrizio. Certainly would — obviously, you’ve been talking about second gen VPD and some of the newer products here. But relative to talking about the record year doesn’t seem like there’s enough time for those new products to have that much of an effect to benefit this year. But I just want to make sure that was implied in your comment there.

Patrizio Vinciarelli: They are not going to move the needle big time, but there’s going to be progress and certainly a contribution in the second half of the year.

Operator: [Operator Instructions] I’m showing no further questions in the queue. Ladies and gentlemen, that concludes today’s conference call. Thank you for your participation. You may now disconnect.

Patrizio Vinciarelli: Thank you.