VICOR CORP [VICR] Filings

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

Emerging growth company

10-Q 1 d385444d10q.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 September 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 October 25, 2022 was:


Common Stock, $.01 par value			32,305,315
Class B Common Stock, $.01 par value			11,743,218

VICOR CORPORATION

INDEX


	Page
Part I — Financial Information:
Item 1 - Financial Statements (Unaudited)
Condensed Consolidated Balance Sheets at September 30, 2022 and December 31, 2021		1
Condensed Consolidated Statements of Operations for the three and nine months ended September 30, 2022 and 2021		2
Condensed Consolidated Statements of Comprehensive Income for the three and nine months ended September 30, 2022 and 2021		3
Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2022 and 2021		4
Condensed Consolidated Statements of Equity for the three and nine months ended September 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		18
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		34
Signature(s)		35
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

VICOR CORPORATION

Part I – Financial Information

Item 1 – Financial Statements

Condensed Consolidated Balance Sheets

(In thousands, except share data)

(Unaudited)


	September 30, 2022			December 31, 2021
Assets
Current assets:
Cash and cash equivalents	$	182,098		$	182,418
Short-term investments		19,949			45,215
Accounts receivable, net		56,287			55,097
Inventories		94,336			67,322
Other current assets		5,483			6,708

Total current assets		358,153			356,760
Long-term deferred tax assets, net		260			208
Long-term investment, net		2,552			2,639
Property, plant and equipment, net		163,198			115,975
Other assets		2,939			1,623

Total assets	$	527,102		$	477,205

Liabilities and Equity
Current liabilities:
Accounts payable	$	24,004		$	21,189
Accrued compensation and benefits		13,070			12,660
Accrued litigation		6,500			—
Accrued expenses		5,754			4,158
Short-term lease liabilities		1,449			1,551
Sales allowances		1,427			1,464
Accrued severance and other charges		—			93
Income taxes payable		7			66
Short-term deferred revenue and customer prepayments		12,148			7,912

Total current liabilities		64,359			49,093
Long-term deferred revenue		1,833			413
Long-term income taxes payable		529			569
Long-term lease liabilities		7,520			3,225

Total liabilities		74,241			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 43,923,786 shares issued and 32,288,980 shares outstanding in 2022; 43,789,528 shares issued and 32,154,722 shares outstanding in 2021		440			439
Additional paid-in capital		357,255			345,664
Retained earnings		235,017			217,633
Accumulated other comprehensive loss		(1,279	)		(1,328	)
Treasury stock at cost: 11,634,806 shares in 2022 and 2021		(138,927	)		(138,927	)

Total Vicor Corporation stockholders’ equity		452,624			423,599
Noncontrolling interest		237			306

Total equity		452,861			423,905

Total liabilities and equity	$	527,102		$	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						Nine Months Ended
	September 30,						September 30,
	2022			2021			2022			2021
Net revenues	$	103,118		$	84,911		$	293,586		$	269,083
Cost of revenues		56,148			42,098			162,166			131,699

Gross margin		46,970			42,813			131,420			137,384
Operating expenses:
Selling, general and administrative		22,719			17,322			61,322			50,865
Research and development		14,747			13,519			44,516			39,818
Litigation-related		6,500			—			6,500			—

Total operating expenses		43,966			30,841			112,338			90,683

Income from operations		3,004			11,972			19,082			46,701
Other income (expense), net:
Total unrealized gains (losses) on available-for-sale securities, net		—			37			(87	)		81
Less: portion of losses (gains) recognized in other comprehensive income		1			(36	)		90			(78	)

Net credit gains recognized in earnings		1			1			3			3
Other income (expense), net		(569	)		393			(325	)		996

Total other income (expense), net		(568	)		394			(322	)		999

Income before income taxes		2,436			12,366			18,760			47,700
Provision for income (benefit) taxes		641			(886	)		1,395			(30	)

Consolidated net income		1,795			13,252			17,365			47,730
Less: Net income (loss) attributable to noncontrolling interest		3			(7	)		(19	)		(15	)

Net income attributable to Vicor Corporation	$	1,792		$	13,259		$	17,384		$	47,745

Net income per common share attributable to Vicor Corporation:
Basic	$	0.04		$	0.30		$	0.40		$	1.10
Diluted	$	0.04		$	0.29		$	0.39		$	1.06
Shares used to compute net income per common share attributable to Vicor Corporation:
Basic		44,031			43,710			43,986			43,573
Diluted		44,898			45,034			44,906			44,905

See accompanying notes.

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VICOR CORPORATION

Condensed Consolidated Statements of Comprehensive Income

(In thousands)

(Unaudited)


	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2022			2021			2022			2021
Consolidated net income	$	1,795		$	13,252		$	17,365		$	47,730
Foreign currency translation losses, net of tax (1)		(94	)		(12	)		(672	)		(283	)
Unrealized income (loss) on available-for-sale securities, net of tax (1)		1,054			(215	)		671			(574	)

Other comprehensive income (loss)		960			(227	)		(1	)		(857	)

Consolidated comprehensive income		2,755			13,025			17,364			46,873
Less: Comprehensive loss attributable to noncontrolling interest		(4	)		(7	)		(69	)		(36	)

Comprehensive income attributable to Vicor Corporation	$	2,759		$	13,032		$	17,433		$	46,909

(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 September 30, 2022 and 2021. Therefore, there is no income tax benefit (provision) recognized for the three and nine months ended September 30, 2022 and 2021.

See accompanying notes.

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VICOR CORPORATION

Condensed Consolidated Statements of Cash Flows

(In thousands)

(Unaudited)


	Nine Months Ended
	September 30,
	2022			2021
Operating activities:
Consolidated net income	$	17,365		$	47,730
Adjustments to reconcile consolidated net income to net cash provided by operating activities:
Depreciation and amortization		10,250			8,564
Stock-based compensation expense		7,445			5,005
Litigation-related expense		6,500			—
Increase (decrease) in long-term deferred revenue		1,420			(240	)
Amortization of bond premium		1,027			—
Decrease in contingent consideration obligations		—			(74	)
(Decrease) increase in other assets		(1,451	)		56
Decrease in long-term income taxes payable		(40	)		(79	)
Deferred income taxes		(52	)		5
Credit gain on available-for-sale securities		(3	)		(3	)
Provision for doubtful accounts		5			—
Change in current assets and liabilities, net		(20,456	)		(20,737	)

Net cash provided by operating activities		22,010			40,227
Investing activities:
Purchases of short-term investments		—			(50,706	)
Sales or maturities of short-term investments		25,000			50,000
Additions to property, plant and equipment		(51,279	)		(30,942	)

Net cash used for investing activities		(26,279	)		(31,648	)
Financing activities:
Proceeds from employee stock plans		4,147			8,621
Payment of contingent consideration obligations		—			(153	)

Net cash provided by financing activities		4,147			8,468
Effect of foreign exchange rates on cash		(198	)		(126	)

Net (decrease) increase in cash and cash equivalents		(320	)		16,921
Cash and cash equivalents at beginning of period		182,418			161,742

Cash and cash equivalents at end of period	$	182,098		$	178,663

See accompanying notes.

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VICOR CORPORATION

Condensed Consolidated Statements of Equity

(In thousands)

(Unaudited)


															Total
									Accumulated						Vicor
	Class B				Additional				Other						Corporation
	Common		Common		Paid-In		Retained		Comprehensive			Treasury			Stockholders’		Noncontrolling			Total
	Stock		Stock		Capital		Earnings		Income (loss)			Stock			Equity		Interest			Equity
Three months ended September 30, 2022
Balance on June 30, 2022	$	118	$	440	$	352,253	$	233,225	$	(2,246	)	$	(138,927	)	$	444,863	$	241		$	445,104
Issuance of Common Stock under employee stock plans						2,173										2,173					2,173
Stock-based compensation expense						2,829										2,829					2,829
Components of comprehensive income (loss), net of tax:
Net income								1,792								1,792		3			1,795
Other comprehensive income (loss)										967						967		(7	)		960

Total comprehensive income (loss)																2,759		(4	)		2,755

Balance on September 30, 2022	$	118	$	440	$	357,255	$	235,017	$	(1,279	)	$	(138,927	)	$	452,624	$	237		$	452,861


															Total
									Accumulated						Vicor
	Class B				Additional				Other						Corporation
	Common		Common		Paid-In		Retained		Comprehensive			Treasury			Stockholders’		Noncontrolling			Total
	Stock		Stock		Capital		Earnings		Income (loss)			Stock			Equity		Interest			Equity
Nine months ended September 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		4,146										4,147					4,147
Stock-based compensation expense						7,445										7,445					7,445
Components of comprehensive income (loss), net of tax:
Net income (loss)								17,384								17,384		(19	)		17,365
Other comprehensive income (loss)										49						49		(50	)		(1	)

Total comprehensive income (loss)																17,433		(69	)		17,364

Balance on September 30, 2022	$	118	$	440	$	357,255	$	235,017	$	(1,279	)	$	(138,927	)	$	452,624	$	237		$	452,861


															Total
									Accumulated						Vicor
	Class B				Additional				Other						Corporation
	Common		Common		Paid-In		Retained		Comprehensive			Treasury			Stockholders’			Noncontrolling			Total
	Stock		Stock		Capital		Earnings		Loss			Stock			Equity			Interest			Equity
Three months ended September 30, 2021
Balance on June 30, 2021	$	118	$	436	$	336,278	$	195,494	$	(813	)	$	(138,927	)	$	392,586		$	306		$	392,892
Issuance of Common Stock under employee stock plans				1		3,869										3,870						3,870
Stock-based compensation expense						1,867										1,867						1,867
Components of comprehensive income (loss), net of tax:
Net income (loss)								13,259								13,259			(7	)		13,252
Other comprehensive loss										(227	)					(227	)		—			(227	)

Total comprehensive income (loss)																13,032			(7	)		13,025

Balance on September 30, 2021	$	118	$	437	$	342,014	$	208,753	$	(1,040	)	$	(138,927	)	$	411,355		$	299		$	411,654

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VICOR CORPORATION

Condensed Consolidated Statements of Equity

(In thousands)

(Unaudited)


															Total
									Accumulated						Vicor
	Class B				Additional				Other						Corporation
	Common		Common		Paid-In		Retained		Comprehensive			Treasury			Stockholders’			Noncontrolling			Total
	Stock		Stock		Capital		Earnings		Loss			Stock			Equity			Interest			Equity
Nine months ended September 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				4		8,617										8,621						8,621
Stock-based compensation expense						5,005										5,005						5,005
Components of comprehensive income (loss), net of tax:
Net income (loss)								47,745								47,745			(15	)		47,730
Other comprehensive loss										(836	)					(836	)		(21	)		(857	)

Total comprehensive income (loss)																46,909			(36	)		46,873

Balance on September 30, 2021	$	118	$	437	$	342,014	$	208,753	$	(1,040	)	$	(138,927	)	$	411,355		$	299		$	411,654

See accompanying notes.

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VICOR CORPORATION

Notes to Condensed Consolidated Financial Statements

September 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 nine months ended September 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. “Other income

(

expense

)

, net”, includes an immaterial error correction of $990,000 and $834,000 for the three and nine months ended September 30, 2022, respectively, related to the amortization of bond premiums on available for sale securities. 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):


	September 30, 2022		December 31, 2021
Raw materials	$	73,940	$	51,289
Work-in-process		11,967		12,514
Finished goods		8,429		3,519

	$	94,336	$	67,322

Short-Term and Long-Term Investments

As of September 30, 2022 and December 31, 2021, the Company held $19,949,000 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 September 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 September 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 September 30, 2022.

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VICOR CORPORATION

Notes to Condensed Consolidated Financial Statements

September 30, 2022

(unaudited)

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


	September 30, 2022
	Cash and Cash Equivalents		Short-Term Investments		Long-Term Investment
Measured at fair value:
Available-for-sale debt securities:
Money market funds	$	120,217	$	—	$	—
U.S. Treasury Obligations		—		19,949		—
Failed Auction Security		—		—		2,552

Total		120,217		19,949		2,552
Other measurement basis:
Cash on hand		61,881		—		—

Total	$	182,098	$	19,949	$	2,552


	December 31, 2021
	Cash and
	Cash		Short-Term		Long-Term
	Equivalents		Investments		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

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VICOR CORPORATION

Notes to Condensed Consolidated Financial Statements

September 30, 2022

(unaudited)

The following is a summary of the

available-for-sale

securities (in thousands):


			Gross		Gross		Estimated
			Unrealized		Unrealized		Fair
September 30, 2022	Cost		Gains		Losses		Value
U.S. Treasury Obligations	$	20,028	$	—	$	79	$	19,949
Failed Auction Security		3,000		—		448		2,552


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

As of September 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 September 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	$	20,028	$	19,949


			Estimated
	Cost		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

September 30, 2022

(unaudited)

Assets and liabilities measured at fair value on a recurring basis included the following as of September 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 September 30, 2022

Cash equivalents:
Money market funds	$	120,217	$	—	$	—	$	120,217
Short-term investments:
U.S. Treasury Obligations		19,949		—		—		19,949
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 nine months ended September 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		3
Loss included in Other comprehensive income		(90	)

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 September 30, 2022.

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VICOR CORPORATION

Notes to Condensed Consolidated Financial Statements

September 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 September 30, 2022
	Brick Products		Advanced Products		Total
United States	$	21,559	$	9,303	$	30,862
Europe		7,101		1,954		9,055
Asia Pacific		14,800		47,704		62,504
All other		456		241		697

	$	43,916	$	59,202	$	103,118


	Nine Months Ended September 30, 2022
	Brick Products		Advanced Products		Total
United States	$	54,288	$	32,711	$	86,999
Europe		19,184		6,951		26,135
Asia Pacific		38,167		139,749		177,916
All other		2,157		379		2,536

	$	113,796	$	179,790	$	293,586


	Three Months Ended September 30, 2021
	Brick Products		Advanced Products		Total
United States	$	19,741	$	12,178	$	31,919
Europe		6,185		1,324		7,509
Asia Pacific		14,936		29,934		44,870
All other		582		31		613

	$	41,444	$	43,467	$	84,911


	Nine Months Ended September 30, 2021
	Brick Products		Advanced Products		Total
United States	$	58,032	$	35,083	$	93,115
Europe		24,605		3,604		28,209