VICOR CORP [VICR] Filings

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

Emerging growth company

10-Q 1 d373442d10q.htm 10-Q 10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM

10-Q

☑	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2022

☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from __________________________

Commission File Number

0-18277

VICOR CORPORATION

(Exact name of registrant as specified in its charter)


Delaware		04-2742817
(State of Incorporation)		(I.R.S. Employer Identification No.)

25 Frontage Road, Andover

, Massachusetts 01810

(Address of Principal Executive Office)

(978)

470-2900

(Registrant’s telephone number)

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, par value $0.01 per share	VICR	The NASDAQ Stock Market LLC

Indicate by

check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes

☑ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation

S-T

(§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes

☑ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a

non-accelerated

filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule

12b-2

of the Exchange Act.

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule

12b-2

of the Exchange Act). Yes ☐ No ☑

The number of shares outstanding of each of the issuer’s classes of Common Stock as of July 25, 2022 was:


Common Stock, $.01 par value			32,225,594
Class B Common Stock, $.01 par value			11,758,218

Table of Contents

VICOR CORPORATION

INDEX


	Page
Part I — Financial Information:
Item 1—Financial Statements (Unaudited)
Condensed Consolidated Balance Sheets at June 30, 2022 and December 31, 2021		1
Condensed Consolidated Statements of Operations for the three and six months ended June 30, 2022 and 2021		2
Condensed Consolidated Statements of Comprehensive Income for the three and six months ended June 30, 2022 and 2021		3
Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2022 and 2021		4
Condensed Consolidated Statements of Equity for the three and six months ended June 30, 2022 and 2021		5
Notes to Condensed Consolidated Financial Statements		7
Item 2—Management’s Discussion and Analysis of Financial Condition and Results of Operations		19
Item 3—Quantitative and Qualitative Disclosures About Market Risk		31
Item 4—Controls and Procedures		31
Part II — Other Information:
Item 1—Legal Proceedings		33
Item 1A—Risk Factors		33
Item 6—Exhibits		33
Signature(s)		34
EX-31.1 SECTION 302 CERTIFICATION OF CEO
EX-31.2 SECTION 302 CERTIFICATION OF CFO
EX-32.1 SECTION 906 CERTIFICATION OF CEO
EX-32.2 SECTION 906 CERTIFICATION OF CFO

Table of Contents

VICOR CORPORATION

Part I – Financial Information

Item 1 – Financial Statements

Condensed Consolidated Balance Sheets

(In thousands, except share data)

(Unaudited)


	June 30, 2022			December 31, 2021
Assets
Current assets:
Cash and cash equivalents	$	187,677		$	182,418
Short-term investments		19,921			45,215
Accounts receivable, net		54,536			55,097
Inventories		83,055			67,322
Other current assets		7,142			6,708

Total current assets		352,331			356,760
Long-term deferred tax assets, net		266			208
Long-term investment, net		2,552			2,639
Property, plant and equipment, net		156,815			115,975
Other assets		1,392			1,623

Total assets	$	513,356		$	477,205

Liabilities and Equity
Current liabilities:
Accounts payable	$	32,032		$	21,189
Accrued compensation and benefits		13,128			12,660
Accrued expenses		4,011			4,158
Short-term lease liabilities		1,572			1,551
Sales allowances		1,006			1,464
Accrued severance and other charges		—			93
Income taxes payable		2			66
Short-term deferred revenue and customer prepayments		7,702			7,912

Total current liabilities		59,453			49,093
Long-term deferred revenue		270			413
Long-term income taxes payable		577			569
Long-term lease liabilities		7,952			3,225

Total liabilities		68,252			53,300
Commitments and contingencies (Note 10)
Equity:
Vicor Corporation stockholders’ equity:
Class B Common Stock: 10 votes per share, $.01 par value, 14,000,000 shares authorized, 11,758,218 shares issued and outstanding in 2022 and 2021		118			118
Common Stock: 1 vote per share, $.01 par value, 62,000,000 shares authorized 43,885,382 shares issued and 32,220,576 shares outstanding in 2022; 43,789,528 shares issued and 32,154,722 shares outstanding in 2021		440			439
Additional paid-in capital		352,253			345,664
Retained earnings		233,225			217,633
Accumulated other comprehensive loss		(2,246	)		(1,328	)
Treasury stock at cost: 11,634,806 shares in 2022 and 2021		(138,927	)		(138,927	)

Total Vicor Corporation stockholders’ equity		444,863			423,599
Noncontrolling interest		241			306

Total equity		445,104			423,905

Total liabilities and equity	$	513,356		$	477,205

See accompanying notes.

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VICOR CORPORATION

Condensed Consolidated Statements of Operations

(In thousands, except per share amounts)

(Unaudited)


	Three Months Ended June 30,						Six Months Ended June 30,
	2022			2021			2022			2021
Net revenues	$	102,186		$	95,376		$	190,468		$	184,172
Cost of revenues		55,337			45,505			106,018			89,601

Gross margin		46,849			49,871			84,450			94,571
Operating expenses:
Selling, general and administrative		20,035			16,589			38,603			33,543
Research and development		15,516			13,273			29,769			26,299

Total operating expenses		35,551			29,862			68,372			59,842

Income from operations		11,298			20,009			16,078			34,729
Other income (expense), net:
Total unrealized gains (losses) on available-for-sale securities, net		16			20			(87	)		44
Less: portion of (gains) losses recognized in other comprehensive income		(15	)		(19	)		89			(42	)

Net credit gains recognized in earnings		1			1			2			2
Other income (expense), net		83			372			244			603

Total other income (expense), net		84			373			246			605

Income before income taxes		11,382			20,382			16,324			35,334
Provision for income taxes		802			999			754			856

Consolidated net income		10,580			19,383			15,570			34,478
Less: Net loss attributable to
noncontrolling interest		(13	)		(11	)		(22	)		(8	)

Net income attributable to Vicor Corporation	$	10,593		$	19,394		$	15,592		$	34,486

Net income per common share attributable to Vicor Corporation:
Basic	$	0.24		$	0.45		$	0.35		$	0.79
Diluted	$	0.24		$	0.43		$	0.35		$	0.77
Shares used to compute net income per common share attributable to Vicor Corporation:
Basic		43,973			43,553			43,963			43,504
Diluted		44,866			44,841			44,910			44,841

See accompanying notes.

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VICOR CORPORATION

Condensed Consolidated Statements of Comprehensive Income

(In thousands)

(Unaudited)


	Three Months Ended June 30,						Six Months Ended June 30,
	2022			2021			2022			2021
Consolidated net income	$	10,580		$	19,383		$	15,570		$	34,478
Foreign currency translation losses, net of tax (1)		(385	)		(10	)		(579	)		(271	)
Unrealized losses on available-for-sale securities, net of tax (1)		(66	)		(231	)		(382	)		(359	)

Other comprehensive loss		(451	)		(241	)		(961	)		(630	)

Consolidated comprehensive income		10,129			19,142			14,609			33,848
Less: Comprehensive loss attributable to noncontrolling interest		(42	)		(12	)		(65	)		(29	)

Comprehensive income attributable to Vicor Corporation	$	10,171		$	19,154		$	14,674		$	33,877

(1)

The deferred tax assets associated with foreign currency translation losses and unrealized losses on

available-for-sale

securities are completely offset by a tax valuation allowance as of

June 30,

2022

and 2021. Therefore, there is no income tax benefit (provision) recognized for the three and six months ended

June 30,

2022 and 2021.

See accompanying notes.

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VICOR CORPORATION

Condensed Consolidated Statements of Cash Flows

(In thousands)

(Unaudited)


	Six Months Ended June 30,
	2022			2021
Operating activities:
Consolidated net income	$	15,570		$	34,478
Adjustments to reconcile consolidated net income to net cash provided by operating activities:
Depreciation and amortization		6,665			5,618
Stock-based compensation expense		4,616			3,138
Decrease in long-term deferred revenue		(143	)		(160	)
Decrease in contingent consideration obligations		—			(74	)
Gain on disposal of equipment		—			106
Increase in other assets		133			37
Increase in long-term income taxes payable		8			6
Deferred income taxes		(58	)		5
Credit gain on available-for-sale securities		(2	)		(2	)
Change in current assets and liabilities, net		(11,381	)		(13,037	)

Net cash provided by operating activities		15,408			30,115
Investing activities:
Purchases of short-term investments		—			(50,706	)
Sales or maturities of short-term investments		25,000			30,000
Additions to property, plant and equipment		(36,878	)		(15,782	)
Other		—			(106	)

Net cash used for investing activities		(11,878	)		(36,594	)
Financing activities:
Proceeds from employee stock plans		1,974			4,751
Payment of contingent consideration obligations		—			(107	)

Net cash provided by financing activities		1,974			4,644
Effect of foreign exchange rates on cash		(245	)		(144	)

Net increase (decrease) in cash and cash equivalents		5,259			(1,979	)
Cash and cash equivalents at beginning of period		182,418			161,742

Cash and cash equivalents at end of period	$	187,677		$	159,763

See accompanying notes.

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VICOR CORPORATION

Condensed Consolidated Statements of Equity

(In thousands)

(Unaudited)


	Class B Common Stock		Common Stock		Additional Paid-In Capital		Retained Earnings		Accumulated Other Comprehensive Loss			Treasury Stock			Total Vicor Corporation Stockholders’ Equity			Noncontrolling Interest			Total Equity
Three months ended June 30, 2022
Balance on March 31, 2022	$	118	$	440	$	349,467	$	222,632	$	(1,824	)	$	(138,927	)	$	431,906		$	283		$	432,189
Issuance of Common Stock under employee stock plans						164										164						164
Stock-based compensation expense						2,622										2,622						2,622
Components of comprehensive income (loss), net of tax:
Net income (loss)								10,593								10,593			(13	)		10,580
Other comprehensive loss										(422	)					(422	)		(29	)		(451	)

Total comprehensive income (loss)																10,171			(42	)		10,129

Balance on June 30, 2022	$	118	$	440	$	352,253	$	233,225	$	(2,246	)	$	(138,927	)	$	444,863		$	241		$	445,104

	Class B Common Stock		Common Stock		Additional Paid-In Capital		Retained Earnings		Accumulated Other Comprehensive Loss			Treasury Stock			Total Vicor Corporation Stockholders’ Equity			Noncontrolling Interest			Total Equity
Six months ended June 30, 2022
Balance on December 31, 2021	$	118	$	439	$	345,664	$	217,633	$	(1,328	)	$	(138,927	)	$	423,599		$	306		$	423,905
Issuance of Common Stock under employee stock plans				1		1,973										1,974						1,974
Stock-based compensation expense						4,616										4,616						4,616
Components of comprehensive income (loss), net of tax:
Net income (loss)								15,592								15,592			(22	)		15,570
Other comprehensive loss										(918	)					(918	)		(43	)		(961	)

Total comprehensive income (loss)																14,674			(65	)		14,609

Balance on June 30, 2022	$	118	$	440	$	352,253	$	233,225	$	(2,246	)	$	(138,927	)	$	444,863		$	241		$	445,104

	Class B Common Stock		Common Stock		Additional Paid-In Capital		Retained Earnings		Accumulated Other Comprehensive Loss			Treasury Stock			Total Vicor Corporation Stockholders’ Equity			Noncontrolling Interest			Total Equity
Three months ended June 30, 2021
Balance on March 31, 2021	$	118	$	435	$	333,011	$	176,100	$	(573	)	$	(138,927	)	$	370,164		$	318		$	370,482
Issuance of Common Stock under employee stock plans				1		1,700										1,701						1,701
Stock-based compensation expense						1,567										1,567						1,567
Components of comprehensive income (loss), net of tax:
Net income (loss)								19,394								19,394			(11	)		19,383
Other comprehensive loss										(240	)					(240	)		(1	)		(241	)

Total comprehensive income (loss)																19,154			(12	)		19,142

Balance on June 30, 2021	$	118	$	436	$	336,278	$	195,494	$	(813	)	$	(138,927	)	$	392,586		$	306		$	392,892

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VICOR CORPORATION

Condensed Consolidated Statements of Equity

(In thousands)

(Unaudited)


	Class B Common Stock		Common Stock		Additional Paid-In Capital		Retained Earnings		Accumulated Other Comprehensive Loss			Treasury Stock			Total Vicor Corporation Stockholders’ Equity			Noncontrolling Interest			Total Equity
Six months ended June 30, 2021
Balance on December 31, 2020	$	118	$	433	$	328,392	$	161,008	$	(204	)	$	(138,927	)	$	350,820		$	335		$	351,155
Issuance of Common Stock under employee stock plans				3		4,748										4,751						4,751
Stock-based compensation expense						3,138										3,138						3,138
Components of comprehensive income (loss), net of tax:
Net income (loss)								34,486								34,486			(8	)		34,478
Other comprehensive loss										(609	)					(609	)		(21	)		(630	)

Total comprehensive income (loss)																33,877			(29	)		33,848

Balance on June 30, 2021	$	118	$	436	$	336,278	$	195,494	$	(813	)	$	(138,927	)	$	392,586		$	306		$	392,892

See accompanying notes.

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VICOR CORPORATION

Notes to Condensed Consolidated Financial Statements

June 30, 2022

(unaudited)

Basis of Presentation

The accompanying unaudited Condensed Consolidated Financial Statements of Vicor Corporation and its consolidated subsidiaries (collectively, the “Company”) have been prepared in accordance with generally accepted accounting principles for interim financial information and pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”). Accordingly, these interim financial statements do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements.

In the opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation have been included. Operating results for the three and six months ended June 30, 2022 are not necessarily indicative of the results that may be expected for any other interim period or the year ending December 31, 2022. The balance sheet at December 31, 2021 presented herein has been derived from the audited financial statements at that date but does not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. For further information, refer to the consolidated financial statements and notes thereto contained in the Company’s Annual Report on Form

10-K

for the year ended December 31, 2021 filed by the Company with the SEC on March 1, 2022 (“2021 Form

10-K”).

Inventories

Inventories were as follows (in thousands):


	June 30, 2022		December 31, 2021
Raw materials	$	64,978	$	51,289
Work-in-process		12,735		12,514
Finished goods		5,342		3,519

	$	83,055	$	67,322

Short-Term and Long-Term Investments

As of

June 30, 2022 and December 31, 2021, the Company held $19,921,000 and $45,215,000, respectively, of short-term investments, consisting of obligations of the U.S. Treasury, all of which were debt securities with original maturities greater than three months but less than one year at the time of purchase.

As of

June 30, 2022 and December 31, 2021, the Company held one auction rate security with a par value of $3,000,000 and an estimated fair value of approximately $2,552,000 and $2,639,000, respectively, purchased through and held in custody by a broker-dealer affiliate of Bank of America, N.A., that has experienced failed auctions (the “Failed Auction Security”) since February 2008. The Failed Auction Security held by the Company is Aaa/AA+ rated by major credit rating agencies, is collateralized by student loans, and is guaranteed by the U.S. Department of Education under the Federal Family Education Loan Program. Management is not aware of any reason to believe the issuer of the Failed Auction Security is presently at risk of default. Through June 30, 2022, the Company has continued to receive interest payments on the Failed Auction Security in accordance with the terms of its indenture. Management believes the Company ultimately should be able to liquidate the Failed Auction Security without significant loss primarily due to the overall quality of the issue held and the collateral securing the substantial majority of the underlying obligation. However, current conditions in the auction rate securities market have led management to conclude the recovery period for the Failed Auction Security exceeds 12 months. As a result, the Company continued to classify the Failed Auction Security as long-term as of June 30, 2022.

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VICOR CORPORATION

Notes to Condensed Consolidated Financial Statements

June 30, 2022

(unaudited)

Details of our investments are as follows (in thousands):


	June 30, 2022
	Cash and Cash Equivalents		Short-Term Investments		Long-Term Investment
Measured at fair value:
Available-for-sale debt securities:
Money market funds	$	119,736	$	—	$	—
U.S. Treasury Obligations		—		19,921		—
Failed Auction Security		—		—		2,552

Total		119,736		19,921		2,552
Other measurement basis:
Cash on hand		67,941		—		—

Total	$	187,677	$	19,921	$	2,552


	December 31, 2021
	Cash and Cash Equivalents		Short-Term Investments		Long- Term Investment
Measured at fair value:
Available-for-sale debt securities:
Money market funds	$	94,282	$	—	$	—
U.S. Treasury Obligations		—		45,215		—
Failed Auction Security		—		—		2,639

Total		94,282		45,215		2,639
Other measurement basis:
Cash on hand		88,136		—		—

Total	$	182,418	$	45,215	$	2,639

The following is a summary of the

available-for-sale

securities (in thousands):


June 30, 2022	Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value
U.S. Treasury Obligations	$	20,083	$	—	$	162	$	19,921
Failed Auction Security		3,000		—		448		2,552

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VICOR CORPORATION

Notes to Condensed Consolidated Financial Statements

June 30, 2022

(unaudited)


December 31, 2021	Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value
U.S. Treasury Obligations	$	45,238	$	—	$	23	$	45,215
Failed Auction Security		3,000		—		361		2,639

As of June

30, 2022, the Failed Auction Security had been in an unrealized loss position for greater than 12 months.

The amortized cost and estimated fair value of the

available-for-sale

securities on June 30, 2022, by type and contractual maturities, are shown below (in thousands):


	Cost		Estimated Fair Value
U.S. Treasury Obligations:

Maturities greater than three months but less than one year	$	20,083	$	19,921


	Cost		Estimated Fair Value
Failed Auction Security:
Due in twenty years	$	3,000	$	2,552

Fair Value Measurements

The Company

accounts for certain financial assets at fair value, defined as the price that would be received to sell an asset or paid to transfer a liability (i.e., an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. As such, fair value is a market-based measurement that should be determined based on assumptions market participants would use in pricing an asset or liability. A three-level hierarchy is used to show the extent and level of judgment used to estimate fair value measurements.

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VICOR CORPORATION

Notes to Condensed Consolidated Financial Statements

June 30, 2022

(unaudited)

Assets and liabilities measured at fair value on a recurring basis included the following as of June 30, 2022 (in thousands):


	Using
	Quoted Prices in Active Markets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total Fair Value as of June 30, 2022
Cash equivalents:
Money market funds	$	119,736	$	—	$	—	$	119,736
Short-term investments:
U.S. Treasury Obligations		19,921		—		—		19,921
Long-term investment:
Failed Auction Security		—		—		2,552		2,552

Assets and liabilities measured at fair value on a recurring basis included the following as of December 31, 2021 (in thousands):


	Using
	Quoted Prices in Active Markets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total Fair Value as of December 31, 2021
Cash equivalents:

Money market funds	$	94,282	$	—	$	—	$	94,282
Short-term investments:
U.S. Treasury Obligations		45,215		—		—		45,215
Long-term investment:
Failed Auction Security		—		—		2,639		2,639

The change in the estimated fair value calculated for the investment valued on a recurring basis utilizing Level 3 inputs (i.e., the Failed Auction Security) for the six months ended June 30, 2022 was as follows (in thousands):



Balance at the beginning of the period	$	2,639
Credit gain on available-for-sale security included in Other income (expense), net		2
Loss included in Other comprehensive income		(89	)

Balance at the end of the period	$	2,552

Management utilized

a probability weighted discounted cash flow model to determine the estimated fair value as of June 30, 2022.

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VICOR CORPORATION

Notes to Condensed Consolidated Financial Statements

June 30, 2022

(unaudited)

Revenues

The following tables present the Company’s net revenues disaggregated by geography based on the location of the customer, by product line (in thousands):


	Three Months Ended June 30, 2022
	Brick Products		Advanced Products		Total
United States	$	18,668	$	12,782	$	31,450
Europe		5,041		2,229		7,270
Asia Pacific		9,846		52,550		62,396
All other		968		102		1,070

	$	34,523	$	67,663	$	102,186

	Six Months Ended June 30, 2022
	Brick Products		Advanced Products		Total

United States	$	32,729	$	23,408	$	56,137
Europe		12,083		4,997		17,080
Asia Pacific		23,367		92,045		115,412
All other		1,701		138		1,839

	$	69,880	$	120,588	$	190,468

	Three Months Ended June 30, 2021
	Brick Products		Advanced Products		Total

United States	$	19,708	$	14,356	$	34,064
Europe		10,224		1,285		11,509
Asia Pacific		24,045		25,339		49,384
All other		375		44		419

	$	54,352	$	41,024	$	95,376

	Six Months Ended June 30, 2021
	Brick Products		Advanced Products		Total

United States	$	38,291	$	22,905	$	61,196
Europe		18,420		2,280		20,700
Asia Pacific		51,373		49,992		101,365
All other		727		184		911

	$	108,811	$	75,361	$	184,172

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VICOR CORPORATION

Notes to Condensed Consolidated Financial Statements

June 30, 2022

(unaudited)

The following tables present the Company’s net revenues disaggregated by the category of revenue, by product line (in thousands):


	Three Months Ended June 30, 2022
	Brick Products		Advanced Products		Total
Direct customers, contract manufacturers and non-stocking distributors	$	23,566	$	61,979	$	85,545
Stocking distributors, net of sales allowances		10,908		3,102		14,010
Non-recurring engineering		49		1,908		1,957
Royalties		—		656		656
Other		—		18		18

	$	34,523	$	67,663	$	102,186

	Six Months Ended June 30, 2022
	Brick Products		Advanced Products		Total
Direct customers, contract manufacturers and non-stocking distributors	$	47,967	$	109,450	$	157,417
Stocking distributors, net of sales allowances		21,672		6,846		28,518
Non-recurring engineering		241		3,294		3,535
Royalties		—		962		962
Other		—