Good day, everyone, and welcome to the Vicor Earnings Results for the First Quarter Conference Call. My name is Wanda, and I will be your event manager today. During the presentation, your lines may remain on listen only. I would like to advise all parties that this conference is being recorded. And with that, I would like to hand over to Tyk Nagel.
Please proceed.
Thank you. Good afternoon, and welcome to Vicor Corporation's earnings call for the Q1 Ended March 31, 2021. I'm Dick Nagel, Chief Accounting Officer and in Over are Patrizio Vinciarelli, Chief Executive Officer Phil Davies, Vice President of Global Sales and Marketing And Kemble Morrison, Vice President and Corporate Controller. After the markets closed today, we issued a press release summarizing our financial results for the 3 months ending 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 ks today related to the issuance for 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 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 And or implied by any of our remarks today, the risks and uncertainties we face are discussed in Item 1A of our 2020 Form 10 ks, which we filed with the SEC on March 1, 2021. 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, Thursday, April 22, 2021. Vicor undertakes no obligation to update any statements, including forward looking statements made during this call, And you should not rely on such statements after the conclusion of this call. A replay of today's call will be available Beginning at midnight tonight through May 7, 2021, the replay dial in number 888 2,8,680 followed by the passcode 6,6693, 367.
This dial in and passcode are also set forth in today's press release. In addition, a webcast replay of today's call, along with the transcript, will be available shortly on the Investor Relations page of our website. As noted in our press release dated April 6, 2021, we announced the appointment of Jim Schmidt as Chief Financial Officer Effective June 1, 2021, succeeding Jamie Sims. Jim will also join the Vicor Board of Directors And serve as the corporate company's Treasurer and Secretary. We're looking forward to having Jim join the company.
I'll now turn to a review of our Q1 financial performance, after which Phil will review recent market developments, And Patrizio and Phil will take your questions. In my remarks, I will focus mostly on the sequential quarterly change for P and L And balance sheet items and refer you to our press release or our upcoming Form 10 Q for year over year comparisons. As stated in today's press release, Vicor recorded total revenue for the Q1 $88,800,000 up 5.3% from the 4th quarter total of $84,300,000 Quarterly, Advanced Products revenue rose 2.2% sequentially. This growth constrained by limited component availability due to global semiconductor supply allocation issues experienced during the quarter. Brick Products revenue rose 7.6% sequentially, reflecting a resumption of shipments to our European customers after the pandemic Related trough of 2020, while Asian customers grew 18% from Q4 2020.
These increases offset a modest sequential decline in shipments to North America. Shipments to stocking distributors rose 79% sequentially, primarily due to an increase in Brick Products shipments. Terns volume also increased sequentially. Exports for the Q1 Increased sequentially as a percentage of total revenue, approximately 69% of consolidated revenue From the prior quarter's 64%, reflecting the factors just mentioned regarding Europe and Asian shipments. For Q1, Advanced Products share of total revenue declined slightly to 39% compared to 40% for the 4th quarter, With Brick Product share correspondingly increasing to 61% of total revenue.
We believe advanced product sales though We'll expand significantly as a percentage of total revenues, especially once new manufacturing capacity comes online Given the high growth segments we have penetrated with our 48 volt technology, including AI, data center and automotive, In contrast to the maturity of the segments we serve with Brick Products. Turning to Q1 gross margin, We recorded a consolidated gross profit margin of 50.3%. Higher volumes and improved mix contributed to higher profitability, As did a reduction in cost variances and tariff charges. Gross margin dollars rose 11% sequentially. While margins remain under the pressure of high tariff charges, the Q1 charge declined approximately 33% From Q4's charge is approximately $1,500,000 We expect to see further improvement through 2021, In part reflecting our ongoing efforts to reduce component imports from China.
I'll now turn to Q1 operating expenses. Total OpEx rose just under 4% sequentially, but consistent with longer term trend reflecting periodic swings And discretionary spending. The amounts of total equity based compensation expense for Q1 Included in cost of goods, SG and A and R and D were approximately 228,000 $853,000 $490,000 respectively, totaling $1,600,000 For Q1, we reported operating income of $14,700,000 representing an operating margin of 16.6%. The sequential 27% increase in operating income reflects the operational leverage in our model. Turning to taxes, we recorded a net benefit for Q1 of $143,000 Representing an effective tax rate for the quarter of minus 1%.
Net income attributable to Vicor for Q1 totaled $15,100,000 GAAP diluted earnings per share was $0.34 Based on a fully diluted share count of 44,841,000. Before I turn to our financial position, just a brief Update about COVID-nineteen and our workforce. As previously discussed, the designated essential manufacturer Using masks and practicing social distancing from the onset of the pandemic, we have continuously operated 3 shifts at our Andover Manufacturing facility. While we have seen a small increase in cases again recently, cases are below the levels experienced in the December through January timeframe and absenteeism has declined. Nevertheless, because much of The potential influence of the COVID-nineteen pandemic is associated with risks outside of our control.
We cannot estimate the extent of such influence on our financial or operational performance or when such influence might occur. Turning to our cash flow and balance sheet. Cash, cash equivalents and short term investments totaled 223,000,000 at Q1, sequential increase of 5%. Accounts receivable net of reserves totaled 47 point $7,000,000 at quarter end, an increase of 16.3% over Q4, with DSOs for trade receivables steady at 38 days. All balances are current.
Inventories, net of reserves, declined 5.3% sequentially to $54,300,000 Annualized turns improved to 3.1 more. Reflecting the positive operating results, operating cash flow Totaled $17,600,000 for the quarter. Capital expenditures for Q1 totaled $9,300,000 We ended the quarter with a construction and progress balance of $19,000,000 leaving approximately $38,000,000 Our capital budget is scheduled to be spent through the year. Our factory expansion project is proceeding on schedule and on budget. I'll now address bookings and backlog.
Q1 bookings totaled $99,000,000 a 8.1% sequential increase. The overall book to bill was approximately 1.1 with Advanced Products at 1.4 and Brick Products at 1.0. Q1 bookings largely reflected the same circumstances we saw with shipments, growth in Europe and Asia with a modest decline in North America. At year end, 1 year backlog totaled $157,100,000 An increase of 6.5% sequentially. Turning to our outlook for the Q2 of 2021, We expect revenue growth.
We continue to address the sources of gross margin pressure and are forecasting improvement in product level profitability. Further, we do not anticipate any meaningful increase in operating expenses. While substantial further improvements in gross margins will have We expect incremental revenue to drive earnings per share Given the scalability of our operating model. With that, Phil will provide an overview of recent market developments, And then Patrizio and Phil will take your questions. I ask that you limit yourself to one question and a related follow-up, So that we can respond to as many of you as we can in the limited time available.
If you have more than one topic to address, Please get back in the queue.
Bill? Thank you, Dick. Well, we're off to a great start in 2021 with bookings increasing across a range of markets and regions globally. Our legacy product bookings were strong as was our data center, supercomputer and AI customer demand. To reflect the supply chain challenges that the industry is facing, We have recently increased lead times to 32 weeks for Advanced Products and 26 weeks for legacy products.
Manufacturing capacity for Q2 and Q3 is essentially filled and new orders subject to standard lead times We continue to engage with existing and new data center, HPC and AI customers for our 48 volt point of load power delivery solutions, driven by rapidly escalating demand for higher currents that will enable next generation GPU and ASIC performance enhancements. We are also taking to the next stage our OEM licensing initiative to enable OEMs to develop alternate sources without risk of OEM systems using infringing power modules being excluded from importation into the United States. Our robust automotive pipeline continues to grow with new 48 volt and 408 100 volt modular power solutions for OEMs. The automotive market is not only undergoing major shift with electrification of vehicles, but as OEMs look for innovative And cost effective solutions for higher power electrified systems. They are also looking towards new suppliers can deliver solutions and value without the traditional Tier 1 margin stack.
These market shifts are opening up more opportunities for Vika to work with new partners on our automotive business development. So very quick updates on the satellite market opportunity. In Q1, we started delivery of evaluation boards from our initial family of radiation tolerant power modules to customers in Europe and North America who have been eagerly awaiting their delivery. We'll have more to say on this initiative in future quarters as we begin to build this business out. Overall, I'm pleased with the progress we made in Q1 on a number of important initiatives with a level of exciting new customer engagements and new opportunities that we are creating.
The power systems market is rapidly changing and our holistic high density modular power component strategy Has us in the right place at the right time. We plan to maximize the substantial opportunities that are ahead of us, While also asserting and monetizing the intellectual property that effectively protects our pioneering innovations. Thank you. Operator, we will now take questions.
All right. Thank you. We have some upcoming questions. The first one is coming from Hamed Khoshan. Please go ahead.
Hi. So first off, could you just talk about the Timing that you experienced in North American shipments and advanced products, and the feedback you're getting from those customers as far as The decline that you experienced in Q1? Yes. We have commented in the prepared remarks, We've been constrained with respect to Advanced Products by the capacity Within our existing factory and with external partners for those process that are not vertically integrated yet. There have also been some component availability limitations due to the state of The semiconductor industry.
Our customers understand the capacity Thanks. We're working with them very closely. They appreciate the efforts to address their needs. We are catching up with the requirements. We expect in Q2 To have a significant step up in advanced product deliveries, and that trend will continue into Q3 and Q4 at an accelerating pace.
And as we progress towards the end of this year, we're going to begin To deploy the expanded capacity and reduce cycle time that are enabled by our expanded manufacturing facility with all of the packaging process that's vertically integrated. Okay. And then are you still testing out your advanced products with these customers? Or is this Purely at the deployments level? Well, it depends on which advanced product we're talking about.
Some of these Advanced products are being made and shipped literally by the millions. Other Advanced products At the other end of the spectrum are still being sampled the initial prototype or pilot quantities. So There is a wide range of volumes depending on When the engagement began with a particular customer, what particular type of advanced product we're talking about? So with our very unique packaging technology, we have a very broad range of capabilities that Apply somewhat differently, but also in a related way across the type of markets that are very unique, Our component methodology addresses. So there's a whole range of volumes involved depending on the customer, the application And when that particular product happened to have been introduced.
Okay. Thank you. You're welcome.
The next question is coming from Chris Bolton. Please go ahead.
Hi, Patricio and Phil. Congratulations on the nice results and outlook. Patricio, I just wanted to follow-up on that last Obviously, you're highlighting some manufacturing capacity constraints as well as component availability constraints. And I'm Just trying to reconcile the comment that you had in the press release about revenue growth would be limited to 7% sequentially. Are we are you looking at is that a comment on overall revenue will be up 7% Quarterly for Q2, Q3, Q4, is that the way we should interpret the comment in the press release?
And then Within that growth, are you mostly constrained on advanced products or are you also constrained on brick products?
So the primary constraints are on Advanced Products and given near term capacity, We see the revenue growth overall based on the ability to scale up The quantities of Advanced products being limited to about 7% for this quarter And the quarter after that and the Q4 of this year. Again, once we get past This timeframe and we begin to deploy the additional capacity and the shorter cycle time of the expanded factory With Vertu integrated processes, those constraints will go away. Needless to say, the rate Of bookings, demand book to bill would have us, absent the capacity constraints, Step up revenues at a faster rate quarter to quarter, but in the short term, the capacity constraints are the limiting factor, and that's what's Projected in the statements of the press release.
And I guess my follow-up on that is, Will most of the growth come from Advanced Products over the next three quarters, such that Advanced Products will grow faster than 7% sequentially, but overall revenue is constrained to 7%. So Brick Products perhaps more flattish with higher growth in Advanced Products with the net result is overall top line growing about 7% Q2, Q3, Q4?
Yes. Your interpretation is correct. As you know, Advanced Products are to time tens of years, they are decades old, right? And As suggested in the prepared remarks, they are not they are serving mature applications in relatively mature Markets and there is no growth with The classic products, they are essentially a stable component of our revenues in dollars. So all of The unit growth and revenue growth is being generated By the Advanced Products, which before too long are going to make the classic bricks And the standard products for product purposes fade into the sunset, right?
So the combined revenue growth It's essentially driven by Advanced Products, which will step up at a rate considerably faster than 7% This quarter, next quarter and the one after that.
Thank you, Patricia. I'll get back in the queue.
Operator, do we have another question?
Okay. As I can see, there is a question in the queue and able to speak is Alan Hicks. So your line is open. Please go ahead.
Yes. Good afternoon.
I had a
question about the brick revenues. If they were up 7% like they were up 7.6%, which would puts them around $54,500,000 I think, Which would be about a 10 year high. And I think order the book to bill last quarter was 0.9. So What explains the strong strength in BBU? It also implies advanced products were only up Around 3% or so.
So what's the strength in the Brick Products and what's the Going through the year, would we expect that to stay at that level?
So again, The fact that from Q4 of last year to Q1 of this year, Brick revenues rose It should not be interpreted to suggest that there is substantial growth in Brick Products. The big component of our revenues, but for Quarterly fluctuations may have to do with a variety of factors like capacity or particular demand. That Component in dollars and units is essentially constant. It's not really going anywhere as suggested earlier. So in Q1, because of the constraints with certain semiconductor components and Our capacity constraints, the advanced products could not grow as fast as the demand would ever lap, which is something that, as suggested earlier, we are focused on effectively addressing in Q2, Q3 and Q4.
So you should expect that in this quarter, following quarters this year, The revenue growth will come entirely out of our mass products.
Okay. So will Brit products Remain at this level rest of the year around $54,500,000
Well, I would Try to pin it down to 3 significant digits, right. So they are going to stay at essentially the same level.
Okay. So that's pretty positive for the brick customers that they're ordering. Like I said, it was about a 10 year high, I think, for big revenues.
Yes, but again, I wouldn't Reading to that any sustained growth in Brick Products, the action is all to do with the advanced products. The big products have been remarkably Long lasting and they continue to be that way. They're not going anywhere, but they're not going up.
Okay. But you don't expect them to fall off?
We don't expect it to either fall off or go up. Again, WAGO going forward is going to be almost entirely about Advanced Products. The bricks will fade away in terms of their relevance to our financial performance.
But over time, do you expect them to stay relatively, say, in the $50,000,000 range or?
Yes, we expect to be essentially constant in dollars, But it's 20% of Geovar power revenues.
Yes. But I think it's pretty positive that those products are Continuing to sell now. So, okay. Thank you and I'll get back in the queue.
Thank you.
This is Wanda, the operator speaking. I'm sorry for the technical issue. It seems to be okay now. And the next question is coming from the line of John Dillon. Please go ahead.
Hi, guys. Really congratulations on some great numbers, really good.
Thank you.
Welcome. Phil, in your prepared remarks, you talked about OEM licensing for alternative sources. Can you expand on that a little bit? I didn't quite catch what your the gist of what you were saying on that.
Yes, I'll let Patricio take that one. Yes. So
we have Our strategy with respect to addressing OEM refinements for a multiplicity of sources That obviously respects our intellectual property, But accommodates the needs of OEMs for more scalable capacity and alternate sources. And that's been the subject of conversations and discussions and negotiations With a growing number of OEMs, we are Seeing a good deal of pressure in the marketplace given escalating demands for current, High power density in a variety of applications and end markets. And that's a market pressure that In our mind, it needs to be addressed with an intelligent strategy that satisfies market needs while providing us with an opportunity to Again, the return on investment both based on revenue growth with Exciting quantities of advanced products and with licensing income to be derived from Rulties that OEMs will pay for the privilege of being able to access out end sources for Certain of these products.
Can we I mean, does this mean that you're close to a licensing deal with someone?
I'm not going to speculate with respect to the timing of any deal. We are having discussions. We are looking to establish certain standards With respect to OEM license agreements that we're going to be able to apply consistently and fairly At each stage of an engagement and There can be a progression with respect to stage. And generally speaking, Our methodology rewards early adopters and commercially puts Late adopters at a relative handicap with respect to the royalty rates. So this is a strategy that is very well Sachard, which we're going to take the time necessary to fully implement.
It sounds good. Do you have like a target of hopefully closing a deal within this calendar year then or is there some kind of internal target for that?
We don't feel pressured. We believe that with the passage of time, the value All these licenses in terms of royalty rates is going up, it's not going down. Fundamentally, When it comes to applications like AI, we don't believe there is any way there is no Alternate technology that can address the solutions with the level of performance, The competitive pressures in that market require. So we don't see the value of technology Going down, we see it going up and we're prepared to take the time necessary to make the most out of it.
Great. I'll get back in the queue. Congrats guys.
Thank you.
The next question is coming from Jon Grueber. Please go ahead.
Yes. The new addition to the Andover facility, when does revenue kick in And how much will that be and when how soon will you be have all the machines moved in there? What's the status of that facility in addition to the handover?
So the building is up.
It's not quite fully enclosed, but
it's about to be, is up. It's not quite fully enclosed, but it's about to be some of the initial equipment is moving in next month and there's going to be a progression through the balance of the year. We're going to begin to get some initial capacity As we get towards the latter part of the year, the entire deployment will not Come together until the beginning of next year. In terms of the total capacity Out of the building, we believe that we can ship upwards of $750,000,000 in Yearly product revenues out of the expanded facility with this vertically integrated capabilities And that will take care of us for a while. We're beginning to look at the next Increment of capacity, referring back to the earlier discussions regarding OEMs and licensing deals, we're also entertaining the possibility of some joint venture to expand capacity in working in concert with Certain OEMs.
So the 7% you're seeing addition, not addition, The 7% increase in revenue in Q2, Q3, Q4 does not include this extra two $50,000,000 that's more in 2022, is that correct?
So yes, the 7% this quarter, Next quarter, the quarter after that, that's coming out of getting more capacity before We get to take advantage of the equipment that is being installed into the new facility. So as I mentioned earlier, some of the equipment is going in May And more equipment will go in as demands progress in the second half of the year. But obviously this equipment in addition to being installed needs to be qualified, we need to do some pilot ramps. So we're not going to be in effect turning on the additional capacity in earnest until at the very end of the year, beginning of next year. So the increasing capacity That are being brought about this quarter, next quarter and for the most part the quarter after that, Those are you should think of them as being brought about based on improvements In capacity utilization from equipment is accessible to us today.
Thank you.
The next question is coming from Richard Shannon. Please proceed.
Well, good afternoon, guys. Thanks for taking my questions as well. Maybe a quick question on following up on the topic of constraints here. You've talked about on the capacity side. I think you've also had some constraints in inputs here.
I think you've described in the semi Are these commodity or custom products? And do they affect both Advanced and Bricks or just Advanced products?
They affect primarily Advanced Products. And they're semiconductor components In effect of our own making, but working with fab partners and other back end partners, Part of our plan going forward is to become also more vertically integrated with respect to in particular the back end, But that's not going to happen at Federal Street. It's going to happen in a campus that will provide The next incremental capacity, and that's still some time away. But Yes to say, the semagunato industry is becoming more challenged, as you know, In terms of demand for capacity and we're mindful of that And we're looking to become more vertically integrated with respect to those dependencies.
Okay.
So your vertical integration is going to ease or eliminate these constraints on commodity parts then, is that what you're saying?
Not in the near term, but we do have a plan with respect to Vertica integrating the back end Processes, which are very much of a bottleneck right now. So that's the primary constraint it's been the primary constraint over the last several months.
Okay. And so is the timeframe by which that is relieved, is that coincidence and highly correlated with your capacity additions and then getting those Online per what you just answered for Mr. Gruber?
No. What I'm referencing in terms of Vertigo Integrating Backhand this semiconductor packaging processes, that's the next Opportunity for vertical integration beyond the packaging processes, Which we're vertically integrating in the expanded Ferra Street facility. So the next area of opportunity, Which is in the works as we speak and which will be realized by the end of this year, that has to do With the Vicor packaging technology, the converter housing package technology, which is quite unique, heavily At Power Productive and you're at the heart of the so called golden products that you've seen in a variety of applications. That's the Vertica integration, which is currently being implemented And for which we've been relying on external partner with significant constraints. The back end processes With respect to the semiconductor components that we use inside our packages, that's a next area of opportunity, And that's still frankly at least a year away.
Got it.
Okay. Thanks for that detail, Pradipio. Just one follow on question on your licensing. Is this related to both or just with the automotive segment or Do you also see this in data center and supercomputing and other segments too?
We see it in both of those end markets.
Okay, perfect. Thank you much for the detail. That's all for me.
Thank you.
The next question is coming from guys Richford. Please go ahead.
Yes. Thank you very much for taking the question.
I just wanted to see if I
can get a little color
as you bring on your new facility. Can you talk about at least Quantitatively or qualitatively, what the margin profile, how that will be affected? Will there be a hit in depreciation at first and then it will expand? Any color there would be very helpful.
So even before we bring on the expanded The facility with the Sperte integration, our goal our internal goal is to get To approximately 55% gross margin as a run rate gross margin at the end of this year and beyond that next year. The vertical integration of the expanded facility, they will play a role with Back to getting us beyond the 55%. Now to your implicit point, as we bring on The new facility we're going to start depreciating a significant amount of equipment that we're going to be deploying And that's obviously a factor with respect to the overall margin opportunity. But I think as we commented in the past, The talk cost of performing all the process steps that are at the heart of our packaging technology Through external partners, we're fundamentally our panels, which are the equivalent of wafers in the semiconductor industry Type of fab, our panels have to travel from a federal seat facility to some place in New Hampshire to another place in They put on 100 of miles and they Require weeks of cycle time, which are all going to get collapsed Into a much shorter cycle time within a facility, the panels that is the equivalent of waivers I'm only going to have to travel maybe from one floor to another.
So the economies of Scale, the efficiency, the reduction in cycle time, the improvement with respect to yields Are going to weigh heavily with respect to the margin opportunity. And that's going to start Playing out in 2022.
Got it. That's very helpful. And then Just in terms of the strength in gross margin in Q1, there was a couple of factors, I think higher utilization And mix, could you talk a little bit about the factors, the puts and takes on gross margin? And is there a delta between the gross margin of Advanced Products and Brick Products? Or are they similar?
Or does it Eventbury within Brick and Advanced? So to your point, capacity recession By itself, more revenues, irrespective of which particular
mix makes up their revenue Contributes because of the leverage of the model. We have significant costs associated with overhead. And yes to say that overhead cost in dollars is not expanding nearly at the rate Of the revenues and that's a factor with respect to margin improvement. Getting Through cycles of learning with respect to, in particular, the advanced products, learning How to refine the process parameters and improve the yields is another factor. So we're getting better and better at that, Getting yields from the 80s into the 90s and needless to say, those are points of margin that Go to the bottom line, go into the gross margin of the products and help lift those margins.
With larger quantities, we also can achieve reduced costs for the components, Even though of late, there's been impeded that progress by the current Demand for capacity, particularly in the semiconductor area, we've had to accommodate some Cost challenges, but overall, all these factors contribute to the near term Margin improvement with revenue growth being a significant driver.
Got it. Thank you so much.
Thank you.
We have the next question from Quinn Bolton. Please go ahead.
Hey, guys. I wanted to ask, I think it was
on the last call you talked about your engagements with new and existing customers on their Next generation architectures, I'm wondering if you could comment whether those next generation designs are still on track or have some of the Component shortages and manufacturing capacity constraints affected the timelines of some of those next gen products? And then I've got a follow-up on automotive.
This is Phil. So no, we're still very actively engaged on the next gen GPU, ASIC and high performance CPU projects with a number of the hyperscalers and chip Manufacturers globally, actually, not just in North America. So no, that's been going really well. And we've got a next generation product technology that they're really interested in because of the current density that we offer. And the currents are just continuing to go up.
And actually this quarter, I would say that We've seen an uptick in the 48 volt interest from some of the companies that hyperscalers that have been Lagging behind, if you like, in converting data centers to 48 worlds. We've got a couple of really great conversations going on right now. They're early, but I'm confident that they will turn into opportunities for Vicor. And it's really nice to see that prediction of, I guess, is finally coming to bear in the marketplace. So it's been an exciting quarter.
Great. And Phil, I wanted to follow-up. You had made some comments on the automotive design pipeline. It seems like you continue to expand your engagement. Should we Still be thinking about calendar 'twenty three is when you start to see some of the initial revenue ramp.
I know you're probably shipping some Sample revenue today, but in terms of the meaningful ramp, is that still a calendar 'twenty three program? Or could there be opportunities, You're saying things like charging stations that might even ramp before then?
Yes, the charging station the charging opportunity for us is really On vehicle, I mean that's what we're really focused on. So yes, you're right, it's really towards, I would say, middle to end of 'twenty three in terms of the early With some of the early customers that we have and then picking up through 2024 and 2025 and the opportunities that The team is developing for the company, very exciting. And I mentioned in some of my remarks, the market is changing too. I mean, The electrification challenge has always been there and it's picking up, but the OEMs are really looking at supply chains very hard And looking to the companies that can bring the next generation technology to them, but at the right value and That's changing the supply chain too. So I think as we go through this year, we'll probably be announcing Some engagements with partners that will help us bring the automotive opportunity, I think, even bigger than the one from just supplying modules.
Great. Thank you.
The next one is coming from John Tom with Inc. Please go ahead.
Hi guys. Nice quarter and thank you for taking my questions. I just wanted to address the new facility and how you've been limited or will be limited this year to that 7% sequentially. Do you immediately break through that limitation as you get the new facility online in Q1? Or is there some other constraint that we should be thinking about that maybe You're not going to be able to go past that?
No. With the turn normal capacity after completion of validation, after the equipment is installed, the step up in capacity from the new facility is To be on our RD scale, major, right? We're talking about Whether we measure it in number of panels or units, which obviously depends on granular, the devices within a panel, It's a major step up. Again, I guess, I'll say, maybe the best way to relate to it from the financial perspective It is in aggregate revenue dollars. So we have $750,000,000 Bogie, with respect to debt capacity, the Far Sea Capacity with vertical integration.
And I will say that number could be conservative. There could be opportunity to With all the equipment that is going into the new wing to get maybe a little beyond the $750,000,000 So That obviously represents a lot of headroom relative to what we're going to be at the end of this year.
Okay, great. Thank you. And just wanted a little more color on the licensing discussions that you're having. Are they have they been received well? Or are they Combative, are they constructive?
Just trying to get an overall sense of the direction you think those discussions are going.
Well, I think that they are the way they should be under the circumstances. I think Averaging across a number of discussions have taken place. I would say that OEMs recognize that we have a huge investment in very unique technology. It's a decade old investment. It adds up to well over $500,000,000 In R and D and unmeasurable creativity, they understand that we have a very Comprehensive power portfolio that covers many critical facets of advanced Power Systems, both in terms of the engines, the control system, the packaging technology, The Power Distribution Architecture and they appreciate the fact that logically We would want to get a return on that investment that we would not Allow unscrupulous competitors to step into our turf.
But at the same time, We understand that we have to use our intellectual property in intelligent, Considered and cooperative way with OEMs that Logically, want to be sure that they don't have all the rags in one basket, that they can have the Incremental capacity they need to take care of their growth needs, those are Legitim requirements and I think there is a way to have win win relationships We see OEMs that satisfy all these objectives.
Okay, great. Thank you for that color. Just one more if I could. Is there any risk of your customers delaying shipments because of supply constraints on their end? Maybe a bottleneck might pop up and They won't want to take your product until they can get more into their factories that they might not be related to yours at all?
We don't see that. It's not to say that the superconductor Capacity constraints aren't impacting customers in a variety of ways. But as suggested in the prepared remarks, we are sold out for Q2. We're nearly sold out for Q3. We've had to Imposed some allocation with respect to the capacity that is available.
So even if Some customers, some application is otherwise constrained. There is a few behind that customer That will gladly pick up any spare capacity that becomes available.
Got it. That's good to hear. Thank you very much.
You're welcome.
We have another question from Alan Hicks. Please go ahead.
Yes. Could you give us an update on the new front end products you've been working on?
Good deal of progress. So we have 2 leading applications for that. 1 adds up to about the $13,000,000 Revenue opportunity starting later this year, and that's for LED lighting on a massive scale. The other one is in a supercomputer, wafer scale supercomputer application. And I would say from my perspective, it is the most advanced AI machine in our front end, the new front end, We enable a major advance in capability for that customer in that application environment.
So we're very excited about this. We have interest from Some of the hyperscalers with respect to this kind of liquid cooled front ends that achieve a percentage levels of density, Those engagements are not going to result in revenue near term. The early implementations are really like state of the art, very advanced, not necessarily the most cost effective, But we're looking at follow on improvements that will enable These kinds of front ends to become extremely cost effective and the technology is there For us to deliver those kinds of capabilities. So we still view this kind Front end modules, which are, by the way, manufactured with the same converter housing Packaging technology, the same panel methodology, the same equipment that is going into the expanded FLC facility. We see these front end capabilities, which also have opportunities not just In stationary applications, but also in vagal applications, we see them as longer term Making up essentially half of the revenue opportunity.
Another way of saying this is that Well, all the action in recent times has been at the point of load. For every ampere or watt at the point of load, There is an additional stage of power processing because the power comes ultimately from the AC utility That we can capture with very unique capabilities through the sale of Doctor.
Okay. So you have some initial revenue opportunities by say the Q4 and then next year would Again, to ramp more broadly?
Yes.
Okay. Thank you very much.
And with that, if there is one more brief question, we'll take it. Operator?
I'm sorry, sir, you can take one more question?
Yes, if it is a brief one, yes.
Okay, all right. And then it's coming from John Dillon. Please go ahead.
Hi, guys. Thanks for taking this last question. You've talked about NRE funding from customers and how it really shows their commitment to Vicor. So I'm just wondering, is that progressing? Is it progressing?
And is there any pushback from the customers on that?
No, there's no pushback. I think it is progressing and we look at it in effect as What you might call proof of love with respect to customers wanting to have us do something that is unique for them, right? It takes skin in the game to justify dedicating resources to a particular requirement. Packaging Technology and General, our system capability provide Some high degree of flexibility with respect to addressing Unique customer requirements within the general scalability of those technologies, But we need to be selective with respect to which particular projects we pursue because we have otherwise a lot more projects that we have bandwidth to support. And NRE is an effective filter with respect to having customers demonstrate that This development worth taking on.
And you're seeing that increasing still?
Yes. Yes. With more customers come more opportunities and when those opportunities can be addressed With standard products, then NRE is appropriate. And one final comment with respect to this, Because of the fact that there is a good deal more scalability with standard products, because obviously the standard products Can I address a multiplicity of customer requirements? We're putting more and more emphasis on those developments.
So both at the point of road and with respect to front end products, we're going to with Next generation deployments with what we call our 5th generation, Which is coming on late this year, early next year. With those developments, we're looking to Leverage stand the building blocks more than we might have in the past By in effect capturing comments and related requirements in a more comprehensive way.
That's great because that gives you more opportunities with less work.
That's right.
Great. Hi guys. Thank you so much.
Thank you. And we appreciate it. And with that, we'll wrap it up. We'll talk to you in a few months. Thank you.
Thank you very much. Everyone, that concludes your conference call for today. You may now disconnect. Thank you for joining and enjoy the rest of your day.