Good day, ladies and gentlemen, and welcome to the Vicor Earnings Results for the First Quarter Ended March 31, 2018 Conference Call hosted by James Sims and Doctor. Patricia Vincarelli. My name is Sam, and I'm the event manager. During the presentation, your lines will I would like to advise all parties this conference is being recorded for replay purposes. And now I'd like to hand over to James.
Please go ahead.
Thank you, Sam. Good afternoon, everyone, and welcome to Vicor Corporation earnings call for the first quarter of 2018. I'm Jamie Sims, Chief Financial Officer. And with me here in Andover are Patricio of NCirelli, Chief Executive Officer and Dick Nagel, Chief Accounting Officer. Today, we issued a press release summarizing our financial results for the 3 month period ended March 31st.
The press release is available on the Investor Relations page of our website, bicorppower.com. We also filed a Form K earlier today with the SEC related to the issuance of this press release. As always, I remind listeners this conference call is being recorded and the copyrighted property of Vicor Corporation. I also remind you various remarks we may make during this call may come 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 as well as forecast 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 2017 Form 10 K, which we filed with the SEC on March 9th. 2018. Please note the information provided during this conference call is accurate only as of today.
Tuesday, April 24, 2018. 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 replay will be available beginning at midnight tonight through May 9 2018. The replay dial in number is 888 2868010 followed by the passcode 746
8:5:6:9:1.
In addition, a webcast replay of today's call will be available shortly on the Investor Relations page of our website. I'll start this afternoon's discussion with a review of our financial performance for the first quarter. Dick will comment briefly on our first quarter implementation of ASC 606 and our outlook for income taxes. And Patricio will follow with comments about current business conditions, after which he will take your questions. Beginning with consolidated results, as stated in this afternoon's press release, Vicor recorded total revenue for the 4th excuse me, for the first quarter of $65,300,000 representing a sequential quarterly increase of revenue recorded for the first quarter of 2017.
Revenue associated with our Advanced Product portfolio rose 12% sequentially. A comparison of first quarter 2018 to first quarter 2017 clearly illustrates the substantive shift underway for our revenue mix toward our Advanced Products, which rose 46 percent period to period from our legacy products which rose 8% period to period. Quarterly international revenue increased by 8.5 percent sequentially. Turns volume, that is orders received and shipped within the quarter totaled $15,400,000, representing approximately 24% of 1st quarter revenue. Gross profit margin dollars increased at a faster pace than revenue dollars, 12% versus 11% as total gross profit margin rose sequentially from 46.3 excuse me, to 46.3 percent from 45.8 percent.
As stated in today's press release, gross profit margins are expected to improve, driven by higher volumes and economies of scale. As reported for the fourth quarter of 2017, 1st quarter gross margins for VI Chip product lines again exceeded those for our legacy BBU product lines, representing further evidence in the U. S. Market. In the U.
S. Market, we're also capturing processes and packaging technology, which can support gross margins commensurate to levels achieved with advanced power management ASICs Our operating expenses for the first set by reduced spending in We recorded an income tax provision, reflecting state and foreign amounts of $134,000. As such, net income for the first quarter was $3,900,000, representing $0.10 per diluted share compared to $0.04 per diluted share recorded for the fourth quarter of 2017. Recall, our 4th quarter EPS included approximately $0.02 per share of net income associated with the year end change in accounting Our first quarter EPS includes no unusual or nonrecurring tax influences. Turning to the balance sheet, Given the increase in sales, net receivables also increased, portfolio quality remains high.
Inventory also rose sequentially, increasing 2,500,000 largely a reflection of rising material and component purchases to meet our increased backlog. Annualized inventory turns declined to 3.5 from 4.0 for the 4th quarter, reflecting higher than usual levels of safety stock given industry wide raw material lead times and other supply chain uncertainties. Cash and cash equivalents sequentially decreased $1,600,000 for the first quarter ending at approximately $42,600,000. This decline was due largely to a $7,800,000 increase in working capital driven by higher sales. This increase was offset by the $4,000,000 of net income, $1,300,000 realized through share purchases through our employee stock purchase plan and stock option plans and capital expenditures that were sequentially We anticipate operating cash flow to turn positive as the year progresses and intend to fund near term capacity expansion from operating cash flow.
And possibly the sale Total employee headcount as of March 31st increased to 995 from 9.80 due to an increase in temporary staffing. As addressed last quarter, productivity continues to improve with level loading of quarterly production and longer term visibility into our growing backlog. Beginning with the first quarter, Vicor adopted ASC 606, which sets forth new guidance for how we recognize revenue. Dignagle will now describe the impact of this adoption on our results for the first quarter and going forward.
Thank you, Jamie. As discussed during the last 2 quarterly earnings calls, on January 1, 2018, we adopted ASC 606, revenue from contracts with customers, which codifies the U. S. GAAP requirement for revenue recognition. The adoption was addressed in our recent Form 10 K filing.
We utilized the modified retrospective method of adoption which instead of restating prior year's data, led us to make a single adjustment of approximately $3,700,000 retained earnings as of January 1, 2018. This increase in retained earnings represents the net effect of application of ASC 606 to existing customer contracts subject to such application. The $3,700,000 credit to retain earnings is reflected in our first quarter financial statements. Was no cash impact from the adoption of new guidance. As I addressed last quarter, the most significant impact of ASC 606 going forward is on the timing of recognition of sales to our stocking distributors.
As of January 1st, we no longer defer revenue and the related cost of sales on shipments to stocking distributors. With ASC 606, we record revenue at the time of sale to the stocking distributor, while also recording sales reserves based on our historically based estimate or activity in his remarks as such activity is no longer subject to different treatment. Turning to our tax outlook for 2018, we are forecasting sustained taxable income for the entire year which at some point would cause the release of an allowance of approximately $33,000,000 against our deferred tax asset generating a significant one time tax benefit. With that, I'll return the call to Jamie.
Thanks, Dick. Turning to our second quarter outlook, given recent increases in backlog, which totaled $90,000,000 as of March 31st, We anticipate a 10% sequential increase in consolidated revenue for the second quarter with expanding gross margins and net profitability. I must remind listeners as unanticipated changes. So with that, I'll turn the call over
Thank you, Jamie. It's reported the first quarter was characterized by strong bookings from both customers for our legacy products. Expanding base of customers for our advanced products, factorized power systems that VAS 48 volts to the point of load are gaining traction in demanding applications, including hyperscale data centers and supercomputing. Notably, GPUs are pervasively being used both as accelerators of CPUs based platforms and as dedicated compute engines, particularly for machine learning and related artificial intelligence applications. Vigor is uniquely positioned this high growth market with our power and package modular current multipliers, MCMs.
Enjoying design wins for the highest profile opportunities. Aside from directly contributing to our revenue growth, Starting in the second half of twenty eighteen, success in converting advanced GPUs to 48 volt is accelerating the transition of data centers and automotive systems to a 48 volt infrastructure that is central to Vicor's power system architecture and power components methodology. Having to supply 48 Volt GPUs within a 12 volt legacy infrastructure, that is no longer capable of supporting higher bandwidth and connectivity is the catalyst for change that we've been pursuing. As always, I could go on, but I'm sure listeners have specific questions, so I will open the call.
Certainly. All questions will be answered in the order received and you'll be advised when to ask your question. Thank you. We do have a question. The first question comes from Don McKenna.
Congratulations many times over, guys. This was just terrific. Patricio, based on the design wins that you've got now, can you kind of quantify the size of the addressable market that you see out there?
I don't know that, I can quantified in a meaningful way. I think it's safe to say first of all, it would have to be done by segments and there are a number of different segments that ongoing transitions that favor, our park components and power system architecture and technology. If we focus, as an example, on the datacenter space, is, you may know, Google played a pioneer role with respect to adopting a 48 volt system in its data centers. And now this goes back a number of years. They contributed one of their systems to open compute to accelerate conversion of the industrial large two forty eight volt in an effort to, in effect, expand an ecosystem that would be beneficial to all.
But actually, it was not until recently until, a leading company in the GPU arena, made the switch to 48 volts that, within the datacenter space and the major players in that space, we started seeing a, sense of urgency with respect to, making a transition from the to 48 volts. There are compelling reasons now to do it given our pervasive GPUs are becoming within a variety of systems within the center space. I expected that it's now a mother of relatively few years. And this is not an overnight affair because of the complexity infrastructure, but it's going to be another years before we're going to see a broad conversion. And with that, the addressable market, just in datacenterspace, to answer your question with respect to one of the market opportunities, will expand greatly because Google while being a very major player is clearly not the only player in that space.
I could address your question in the context of other end markets, in the long term, well, the center space remains particularly interesting for us and right with opportunities, it's, it's not the only major opportunity. So, I think in a nutshell, it's fair and safe to say that the addressable market is expanding very rapidly. I'll make one more comment with respect to this. Historically, particularly in the center space, Intel, Intel servers have been dominant. Intel historically has relied on its own on chip regulators to lessen the challenge for, their customers in applying their, CPUs.
But what we're seeing now more and more and, applications or opportunities are really coming up more and more frequently, on a monthly basis. We're seeing expanding requirements for what we call XPU solutions AISX other type of devices that unlike Intel CPUs require a lower voltage, not 1.8volt but typically 0.8 volt going down to 0.7 volt, going down to 0.6 volt. Our currents that are rapidly approaching and short to long exceeding 1000 amperes, in that type of socket, there's nothing else. That can provide, an effective solution as recently demonstrated by recent design wins and recent adoption. So That's another power force outplay because as we all know, artificial intelligence, chips that, that, you know, more and more are getting developed by the key players in the center space and other places, to serve their unique needs in a tailor manner that maximizes the efficiency of their applications, they're becoming more and more part of the strategy, at the core of, major developments.
So It's a combination of a variety of forces play that are coming together to increase our market opportunity in the addressable market. Sorry for the lengthy.
No, that's quite all right. But, if I could try it a different way in previous conference calls, you've indicated that as far as you can see that we're going to be going through these increased revenue periods, and with the forecast for the upcoming quarter being 10% or so. Is this a scenario that you would see sequential increases in that magnitude for, say, 3 to 5 years as you see these outside markets developing?
I think we all know around long enough to make very long term forecast, right? It's Russia's game, but I think I can safely say, as I indicated in my earlier response, that there are forces at play, they the conversion from 12 volt to 48 volt the competition to CPUs from GPUs and Essex that require, very icons of regular voltages. These are all, perfectly match the 2 our capabilities. And I would say rather uniquely match the 2 our capabilities. So as far as my eye can see, I see expanding opportunities.
And frankly, we are in the envelope position of having to pick which particular customers, which particular applications we want to pursue and we are being more selective with respect to the ones that represent the greatest opportunity for us in the long term.
Okay. Thank you very much. And I'll get back in line and once again, congratulations and Thanks for sticking to your dream there.
We do have several other questions. The next question comes from Jim Bartlett Jim, please go ahead. You're now live.
Yes. Along that same line, could you tell us how many ACID GPU customers where you're now shipping product and how many design wins, that you may have in this space So what can you expect to say a year from now?
So I'm not going to give you specific numbers for a variety of reasons, but I will say that, there are several engagements, and the number is growing. And the inquiries with respect to our willingness to support the new developments That's increasing. So I think we're engaged with the multiples of customers in a range of applications, in sub-one volt, you know, XPUs, the range from, sell under the amps to up one extreme for, in a way, around 16,000 amperes. So, there's a variety of applications and a growing number of opportunities. Again, when talking about this particular class opportunities.
I want to remind us that it is not, while being extremely exciting, what our power component methodology should be entirely about. The remarkable thing is that with the same engines with the same, our compartment of the allergy with the same packaging technology, all of which are very unique to us highly proprietary and very heavily talented, we can address different types of applications. So for instance, we're also involved at the other end of the spectrum in front end requirements that take us from 3 phase ac lines or, high voltage passes to the 48 volt node, which is, in effect, the center of gravity for, our power system methodology, the hub around which our solutions revolve. So the high current ethics are very exciting and clearly great opportunity for, for, I believe, many used to come. This is a market that is now expanding, which literally didn't exist, measured in terms of applications requiring other swamp peers, as recently as couple of years ago.
So it's within a couple of years, I've seen requirements grow from a couple of 100 amps to 1000 amps. And as I suggested earlier, well beyond that, And we don't see that subsiding to the country. We see it with but in datacenterspace in supercomputing and other types of applications we see it, expanding with more and more players looking at AI chips playing a key role going forward. Autonomous driving, you know, other kinds of applications, not necessarily within a data center.
Do you help me understand the, NBN module that you introduced that, the availability and that, and that how, this may enable you to penetrate legacy data centers that are on 12 boat how quickly could this have an impact?
So we're looking to start shipping MBMs into applications, into the center space. Were to your point, there is an existing 12 voltage transaction that cannot be changed overnight to 48 volts. But which gets challenged by leading GPUs running on a 48 volt bus. So we want to facilitate adoption of these kinds of devices, making it easy, efficient, cost effective to use them in a 12 volt infrastructure. And that's what our MDM solution is all about.
It enables, conversion from 12 to 48. And by the way, it also enables conversion from 48 to 12 in a very effective way with very high efficiency, peak efficiencies of the order of 98% plus and going higher later this year, going higher later this year. It's very cost effective, it's very dense, essentially circumvent the challenge of making immediate decisions with respect to how to power 48 volt loads in a 12 volt system or 12 volt loads in a 48 volt system. Let me talk a moment more about that. I think your question was aimed at how do we use NBM?
To enable the center customers that would like to use a 48 volt GPU in their 12 volts infrastructure. The NBM, again, will convert 12 volt up to 48 so that, the 48 volt GPU load can be readily powered. But there's a this complementary play. And that complementary play has to do with using that same NBM for appraisal purposes to convert 48 to 12. And how does that play into the overall transition of a 12 volt infrastructure to 48.
It plays by, in effect, taking away the anxiety that some casters might have with respect to making their transition because it's a big bet, with very profound ramifications. So many of these customers have being longer accustomed to their 12 volt, multi phase regulators as the preferred way of powering CPUs and memory in their servers. But they all recognize that there are significant efficiency benefits, infrastructure benefits to 48 volts. So by adding a device like an NVM that can convert 48 to 12, we're going to be facilitating a conversion of infrastructure to 48 so that the infrastructure can readily power 48 volt GPUs, it can power 12 volt systems legacy systems through the NBNs. As we're stepping stone to eventually powering it all directly from 48.
So it is a key in every building block that can facilitate use of 48 volts GPUs in particular, 48 volt ASICs in a twelve volt infrastructure and conversely can power legacy twelve volt loads in a 48 volt transaction. That facilitated transition from 12 to 48.
And when do you think you'd start seeing some impact of this?
Well, so we are beginning to see, some early requirements. I think in terms of a meaningful impact on revenues. I don't anticipate that until 2019. We're aware of programs that should start in the second half of twenty eighteen. But frankly, I think that in the very short term, the 4k volt GPUs in particular are going to be powered from within their system that doesn't require that is self sufficient in terms of being powered directly from the AC Mains.
But, I think over time, and again, that may take 6, 9 months There should be some significant contribution to the revenues from the NBL opportunity. We see it as a very exciting product. Our NVM is a lot denser more cost effective than any competitive alternative. And it will become even more so when we roll out our 4G, our next generation, technology later this year. But even with our older generation technology, it is 3 or 4 times smaller than any competitive alternative.
And it's more cost of active competitive alternatives. So we think we have, the winning car to play in that space.
And sort of a childish analogy, is this getting in terms of that, you get the nose under the tent with this. And then, but that may facilitate a broader conversion to 48 Volt and data centers that are that are now, really just twelve volt?
Yes. I think the NBM is a building block can foresee that I think again, what has recently been asked regarding cell DR GPUs, that is of itself is going to change the industry, I believe, but, facilitating the transition in every way we can is certainly part of our mission.
The next question comes from John Anderson. John please go ahead. You're now live on the call.
Hey guys, congratulations on your progress.
Thank you.
I had two questions if I could. My first question relates to the tenor of orders in the current quarter. You've just landed your perhaps your one of your biggest customers ever. Is it logical to assume? I think on your last call, you talked about orders sequentially expected to grow throughout the year in each quarter?
Is there visibility to expand upon on the call here to lessen this?
Well, we've seen forecasts from key customers going up. For the balance of this year, in some cases, going up, by significant multipliers. I think with some of these applications, the ramp in earnest will start in Q3. But looking at Q2 thus far, we're doing very well well ahead of where we were at this time last quarter. So, the outlook in the near term, in terms of actual bookings, that have already taken place and the outlook, in terms of forecast and demand is forecasted by some of the key customers.
They're all suggesting, strength going forward. And again, that fits with, you know, the general logic of the solutions and the applications and their respective opportunities in their marketplace.
Great. Thanks for the color there. And my other question relates to a note in your annual report where you referenced you guys in late 2017, we know you've been working with Google for 5 years. That you're also kind of working with other very large hyperscale data center players. Can you give any update there on we just saw Facebook last week, talk about starting a new ASIC division without naming any new potential customers, can you give any update on that initiative?
So with respect to customer names, the ones that the public domain we can talk about the ones that are not we want. I'm not sure I fully understood the second half of your question, if you could maybe rephrase it, in particular regarding new ASIC developments. Oh, I think there
was just, within the news last week, Facebook was rumored to basically be starting a new division focused on implementing ASIC chips just like Google's been doing. So I just was referencing that. Just in relation to the note in your annual report because I know you guys said in that note you're working with multiple hyperscale data center players. So just without specifically talking about Facebook, can you give any, are there other opportunities that are kind of maybe nearing the Navidea finish line that could be groundbreaking new customer relationships in the back half of the year?
So no comments regarding Facebook, particularly and no comments with respect to other key data center customers. I can say that, as suggested earlier, we're working to power a variety of high current ethics as you point out, Facebook recently announced or is looking to our key people to staff a key development in this general area. Well, guess what, as we all know, they're not alone, right? Fundamentally, advanced ASICs that are customized to process applications with unique advantages for these companies are going to be commonplace to all of the key players. They all have the resources do it.
They will have the will to do it as far as we know, and, and they're doing it. And to dissent again that they have, with these developments, a common denominator need for devices that ran on, very low voltage nodes, 0.6.7.8 volts of very high currents. That's a, you know, a proxy for a current multiplier and a factorized power system architecture is the one that has got current multipliers that these very high currents can lessen the challenge of delivering a 1000 amps by a factor of 50. So fundamentally, we are the only ones with the technology to take a 1000 ampere load and convert it to 20 amps or even less, 15 amps, we are developing for one customer a so called K0172, which is a 72 to 1 current multiplier. So they'll take a 1000 amp load to down to 15 amps.
And that's all that with our technology, you need to deliver to the Essex packages. So, your point is, Facebook is going that direction and it's some other public record that they are, so are the other ones. And guess what, they're all in need of low voltage, high current solutions because, again, unlike Intel with a long time, and 1,000,000,000 of dollars of development R and D to develop a cheap actual solution. And by the way, the Intel on cheap solution only reduces the challenge by roughly a factor of 2. In other words, if an internship consumes 500 amps, It still needs to be fed with about 250 because the on chip regulator can only convert 1.8volt to let's say, 0.8volt and that's roughly a factor of 2 division in voltage and multiplication in current, we can affect much, much larger, current multiplicational ratios again, in the early engagement with Pazy in Japan, with a the center customer in the U.
S, we had, prime multipliers. I think they were in the 48 to 1 or 64 to 1. We're now going to 72 to 1. This provides, again, a huge advantage in terms of Lastly, the challenge of delivering the current, freeing up precious IOs for connectivity as opposed to power delivery, So this is a very timely development that we think we are well positioned for us, not just with one customer, but with a larger multiplicity at them.
Well, thank you for that explanation. And I'm going to seed the call to to other shareholders. Before I did that, I just want, I'm sure I speak for other shareholders and I'm relatively new one with our firm, but I personally hold a lot of admiration for your forward vision and building this company. You've been very tenacious and sticking to kind of predicting where the market was going to go. And for that, my hat's off to you.
And thank you for all your efforts and really appreciate it. Thank you. Thank
you.
We do have several other questions. The next question comes from John Dillon. John, please go ahead. You're now live.
Hi guys, congratulations. 15% sequential bookings is just outstanding. And, Jamie, is the backlog of $90,000,000, is that a record for you guys?
I can't
remember ever having a $90,000,000 backlog. So congratulations. And Patricia also wanted to thank you for the explanation on the, on the currents and the amps because, what I think I'm hearing is, is that wind tells got a built in regulator they only need 1.8 volts, but the other guys are going down to 0.9.7.6 even, which is going to need a a lot more amps and this is where your technology is really, really shines. So, this is really your sweet spot and this is the trend in the industry. That's what I'm hearing.
Is that correct?
That's correct. Another way of saying that is that, as you know, with some remarkable wins powering Intel Processors. In spite of the fact that they only need a couple of 100 amps of 1.8 volts.
Right. It's not even your sweet spot, exactly.
And at that level, the 12 volt bus and a regulator, which doesn't really multiply current. It averages the voltage down. And by averaging the voltage down, it can provide more current, but fundamentally, I don't want to get too technical here, but the analogy I like to use is, in effect, getting water at the right temperature by mixing the hot water faucet flow with the cold water faucet flow. You know, when you are 1.8 volt, and your power source is 12, 1.8 divided by 12 is about 15%. And if you open the hot water faucet alone, and you throw most of the water from the cold water faucet, you can get down to 1.8 from 12 volts relatively easily.
But doing it at 0.6 volts, makes the trickle of water out of the hot water faucet which in technical jargon is called beauty cycle, much more challenging, not to mention of the fact that power levels are going up and densities are becoming more challenging. So to your point, being able to win at 1.8 powering an Intel Processor is indicative of the competitive advantage we have powering sub 1 volt Essex, be they GPU's or other kinds of ethics, you know, at lower voltages. And obviously, this would be devices that wouldn't come out of Intel fabs would typically come out of TSMC. And their voltage nodes are going down and down and down. And with that, the costs are going up and up and up and the appetite to form more our compute capability is, as we all know, escalating.
So, we think that we've had some good hits at 1.8. We are in a sweet spot below 1 Vault And I don't see anything else that can really challenge us there.
Now that also kind of reminds me of that if the leading guys are doing this and they're freeing up pins and they're providing a more efficient GPU or XPU, the other guys are going to really have to follow in order to be competitive, aren't they?
Yes, I think we all know how these things go. There are visionaries within companies that foster that mindset, we're willing to take risks in order to gain competitive advantages for their own products. They realize that playing the commodity game of being extra conservative isn't going to be a good long term strategy. And then there are other companies that limit risk taking to core developments and tend to be a lot more cautious when it comes to figure the power technology, but to your point, that's becoming a risky proposition because it's becoming more and more of an impediment to getting the fundamental task done. So, I think there's been relactants in the past on the part of Sam to embrace Radigai Different new technology from the likes of Viger that reluctance is getting overcome superseded by other considerations.
And I'll tell you one thing. If it isn't by way of current multipliers or MCDs and MCMs, we're getting there by way of NVMs or, or, other power components or potentially front end products. So these buyers are breaking down. And and once, you know, we're in and we prove that, you know, we are very trustworthy as a supplier, in terms of capacity, pricing, reliability, We expect that the doors will open with respect to more sensitive, application.
Yes, I agree. I think the NBM is just a brilliant move on your part. But I do have another question that's more related towards bookings. And I'm just wondering sometimes companies will prime the pump when they start placing orders with you or another company. They have a big order upfront.
And so then you your bookings might tend to tick down a little. So I'm just wondering for the next quarter, is it safe for us to assume another 10% sequential increase in bookings or we can see it go down a little bit because they've already put other big orders in? I don't know if I'm
We haven't we haven't yet gotten any big orders with respect to the recent GPU design win. That's going to be second half of twenty eighteen event. Now, we gather some initial orders and they're not negligible, but nothing that has really impacted the bookings pattern today.
So we could expect another 10% sequential increase in bookings.
I don't want to get being down on I think what you can legitimately expect is, progress on the bookings front, on the revenue front, I think it's easier to forecast revenue and that's why sticking and neck out a little bit with respect to the revenue forecast for this quarter, then it is to forecast bookings because particularly with big projects, whether they come in, a large order that comes in, the last 2 weeks of the quarter, 1st 2 weeks of the next quarter that can make easily a 10%, 15% difference with respect to the bookings of the quarter. So, I'm not going to seek my neck out with respect to bookings, but I have said that thus far, in this quarter, we are substantially ahead of where we were last quarter and we'll let the quarter go by.
And it sounds like there was no real priming of the pump from some of the big guys. So
No, there's been no primary of the pump with respect to none whatsoever with respect to to new, projects. Now, nothing in the first quarter with respect to the bookings that have been reported, there's been some heightened activity of late, but that's part of the second quarter opportunity.
Thank you, Patricio and Jamie, this is what we've been waiting for. This is phenomenal. Great, great job. Thanks.
The next question comes from Alan Hicks. Alan, please go ahead. You're now live.
Good afternoon. And I had my congratulations to both your vision and your execution.
Thank you. I like it.
My question is on well, first of all, can you break out revenues per segment VITF, PICOR and BBU?
So I think in the prepared remarks, Jamie pointed out that the year over year growth is primarily due to the Advanced Products, and you can take those to be the Trip and PIGO products. That was at 40 some percent We have been doing pretty well with, with legacy products which are showing their resiliency. But again, that's not where the growth going forward is going to come from. And as discussed in recent quarterly calls, we're now at the point with the Advanced Products where they are causing a pivot with respect to, a growth curve overall because historically, they were not critical mass They are now critical mass. And as I look at the daily bookings report, I see the legacy system type of solutions doing okay, but essentially being slightly up, fundamentally, level, over a long time scale was the advanced solutions, MCDs, MCMs, VTMs, PRMs, BCMs, ships, these are the products that I've been driving the of light and they're going to be driving the growth, for the foreseeable future.
We do have major opportunities with front end products, particularly DRF family. We talked about that, in the past, we've had major engagement in Japan, which is going forward. We're seeing a number of interested parties in that product. So that's not a classic legacy product. But it is not the kind of point to load device that we've been talking about in this conference call.
It's very complementary to it because it gets customers from their power source, whatever that may be, to 40 a volt on the way it's the point of load. But those are going to become significant, I believe, over the next 12 months as well. So all the action is with respect to these new products to give you yet a bit of a different flavor. When it comes to advanced products, what we're shipping is primarily what we call our 2g And 3g Technology. You may reference to Tiger, obviously, key part of our effort, with, data ASICs, in particular, the 2G ASICs and the 3 gs, we've been able to make, a great deal of progress.
We're now very close 2. And in fact, we already have with, 1 of the 2 key Essex, 4G platforms that are working on the bench, very soon, we're going to have the complementary piece. And before too long starting late this year and into next year, we're going to see our 4G technology give us yet another level of capability and that builds on the packaging technology, but takes the control system to a much higher level of integration and efficiency and flexibility. So we're layering in these other developments, which are coming in being contributed by, portions of the enterprise, in particular, the fiber portion.
Alan, to answer your earlier question more specifically, you'll have to wait, roughly 2 weeks until we file our Q, we will have all of the segment reporting broken down, plus we'll have the new format of our ASC 606 disclosures.
Thanks. What I wanted to get at, I was reading through your 10 Q for last year and PICO is extremely profitable. Give about 33% operating margins. BBU looks like operating income fell in half to about 3% or 4%. But VI Chip has still lost last year about $11,000,000, although it improved.
And I know it was improving throughout the year. At what point, do we get to profitability on what revenue level on BI Chips?
A BI chip is there. So I think we're getting to the 50% margin area. I think as we get into the second half of this year, while it is true to your point that Pago ships have led the way with respect to very high margins. Gross margins in the 70%, 80% area. We achieve products have the potential of getting to comparable levels.
It's all to do with, scale and capacity utilization and absorbing the significant infrastructure costs of the unique packages, packaging technology that underlies the VHF power component. But all of these developments, when you look at the say at the GPU with, you know, 3 golden chips on it. Those are all VH chips. There are 2 of them are current multipliers. So one is a modular current driver those are all devices that will bring about economies of scale.
And with that, significant margin opportunity. I made this point in the past. I know it was difficult to make it and probably hard to believe when margins for via chip were 0 or negative. I think it's becoming a lot more credible today. I think we taken it from negative 20%, 30% to, positive to close to 50%.
And I think we're going to take it quite a bit higher with rising volumes.
So overall, you can far surpass 50% gross margins.
Well, I believe we're going to be a past 50% starting in Q3.
Okay. And my next question is when do you expect to announce the RFM product and when will it ship in volume?
So we've been very selective with respect to that. We've shipped some noneligible quantity of it, but just to one customer. And we're doing that cognizant of the unique challenges of the front end products of that kind of that power scale. I mean, this is depending on where it is applied, an 8, 10, 12 kilowatt device, there are unique application requirements that go with it. We have a few different flavors.
So the device under development. We want to complete that development before, making it available to other customers. We have reminded every other day that we have 3, 4 major customers that are very eager to, to evaluate it and, potentially adopt it and and we see some major opportunities with it. But, I think it's very important to, to keep our pilot dry with respect to some of these things and roll them out when they achieve the level of maturity, they need to have.
That's more of a 20 nineteen opportunity?
No, I think we are, we're very close to, more customers for that product. I think it's 2018 event, but I think in terms of it being a large care contributor, As a large care contributor, it'll probably be, late 2019, maybe even 2020.
Then, on the on the PESI supercomputer, is that shipping yet?
Yeah. So the company had some issues that they've, overcame those issues. And we look forward to a long term relationship as a key supplier. They are pursuing opportunities with us on a variety of fronts.
And do you have other opportunities in supercomputers?
Oh, yeah. I think you named the supercomputer and we're likely to be in it.
And then last question, are you on track for increasing capacity?
Yes. So with respect to that very key question, so, as you've heard me say, we've been reassessing our strategy and we'll continue to reassess it. In the October time frame of last year, we were very close to actually, acquiring some space, to develop about in 70,000 dollars, 80,000 square feet of incremental capacity capability. We have decided, since then, to, you know, partner with a company that there's certain complementary capabilities and that's progressing very well. We are pretty far along with that.
To bring about capacity that will relieve some of our existing bottlenecks. And that gives us the breathing room we want to have to make a judicious choice. You know, we're actively looking for space in the 200,000, 250,000 square feet area in nearby, but far enough away from Arandua so that meteorite could not hit both places at the same time, which is believe it or not, there's also concern for some potential customers. When we actually pulled the trigger on that, I do not yet know it could happen relatively soon. But yet, we may be able to find other relief valves that enable us to extend the capacity capability we have within our Federal Seat facility, which is about 250,000 square feet.
So that we don't have to, divert our focus from the ramp that we are in the midst of. So we like to defer to the extent possible the acquisition of additional vertical integration capacity to the extent that we can source it from the outside without any compromise either in terms of quality capacity or cost effectiveness. And we think we can accomplish the combination of goals.
Well, thank you very much and congratulations again.
Thank you. If there's one more question, we'll, we'll take it. Otherwise,
Yeah, you do have several others, but then the next one comes from Ron Feinstein. Ron, please go ahead. You're now live on the call.
Thank you. Patricia, the biggest compliment I can give you is, in 10 years, I haven't asked any questions. So thank you for your results. Just want to ask whether the foreign policy and the trade issues that could be coming for China or elsewhere will that influence or affect your business at all?
In a very minor way, I think a few $1,000,000, if a recent decision by Department of Commerce holds for the next 7 years with 1 Chinese customers. But otherwise, so it's in Media. To our prospects, particularly in the near term. I think the opportunity there was a somewhat longer term opportunity. And I believe that that's an issue that likely to get resolved before too long.
But in any case, it wouldn't be, it's certainly affecting our prospects in the near term of the long term. So we're not particularly concerned about it.
Okay. Well, congratulations, to the whole team. Thank you.
Thank you. And with that, we'll call it a day. We'll talk to you in a few months. Actually at the shoulders meeting in June. Have a good day.
Thank you. Ladies and gentlemen, that concludes your conference call for today. You may now disconnect. Thank you for joining and have a good day.