VICOR CORP

Vicor Corporation designs, develops, manufactures, and markets modular power components and power systems for converting electrical power. The company also licenses certain rights to its technology in return for recurring royalties. The principal markets for the company's power converters and systems are large original equipment manufacturers (OEMs), original design manufacturers (ODMs) and their contract manufacturers, and smaller, lower volume users, which are broadly distributed across several major market areas. The company categorizes its product portfolios as either Advanced Products or Brick Products based on design, performance, and form factor considerations, as well as the range of evolving applications for which the products are appropriate. The company's strategy involves a continuing transition in organizational focus, emphasizing investment in Advanced Products design and manufacturing, targeting high growth market segments with a low-mix, high-volume operational model, while maintaining a profitable business in mature market segments served with Brick Products with a high-mix, low-volume operational model.

The company's competitive position is supported by innovations in product design and achievements in product performance, largely enabled by its focus on the research and development of advanced technologies and processes, often implemented in proprietary semiconductor circuitry, materials, and packaging. Many of the company's products incorporate patented or proprietary implementations of high-frequency switching topologies, which enable the design of power system solutions more efficient and much smaller than conventional alternatives. The company believes its product offering is among the most comprehensive in the market segments it serves. The company's Advanced Products most often compete with solutions offered by large integrated device manufacturers (IDMs), which offer integrated circuits (ICs) and semiconductor-based modules. The Brick Products competitive landscape is relatively fragmented, with large-scale, low-cost global suppliers of commodity solutions and many smaller manufacturers focused on specialized products or narrowly defined market segments or geographies. Despite its minor share in the overall merchant market and the competitive presence of numerous, far larger vendors, the company believes it maintains an advantageous competitive position in those market segments based on its differentiated technology.

The company generates revenue through the sale of modular power components and power systems, as well as through licensing arrangements with customers resulting in royalty revenue. The company's primary source of net revenue comes from the sale of products, which are modular power components and power systems for converting, regulating and controlling electric current. The company recognizes revenue for product sales at a point in time following the transfer of control of such products to the customer, including sales to stocking distributors, which typically occurs upon shipment or delivery, depending on the terms of the underlying contract. The company licenses its intellectual property under right to use licenses, in which royalties due to the company are based upon a percentage of the licensee's sales. The company's customers range from independent manufacturers of highly specialized electronic devices to larger OEMs and their contract manufacturers.

The company categorizes its product portfolios as either Advanced Products or Brick Products. The Advanced Products category consists of the company's most innovative products, which are used to implement its proprietary distribution architecture, Factorized Power Architecture (FPA), a highly differentiated approach to power distribution that enables flexible, rapid power system design using individual components optimized to perform a specific function. The company's most popular Power-on-Package solution consists of one MCD (Modular Current Driver) unit, providing high-bandwidth, low-noise regulation, and two MCM (Modular Current Multiplier) units, providing high performance current multiplication. This three-module laterally-mounted Power-on-Package configuration, powering an AI accelerator card requiring 350W, delivers 0.7V, 650A average current, and up to 1,200A peak current to the GPU or AI ASIC. Annual revenue associated with the sale of Advanced Products which includes royalty revenue, was approximately 61.0% ¹, 55.0% ², and 55.3% ³ of the company's consolidated total net revenues for the years ended December 31, 2025, 2024, and 2023, respectively. The Brick Products category largely consists of integrated power converters (i.e., "bricks"), incorporating multiple conversion stages, used in conventional power systems architectures including CPA, DPA, and IBA. Annual revenue associated with the sale of Brick Products, inclusive of such sales of the company's Vicor Custom Power and VJCL subsidiaries, was approximately 39.0% ⁴, 45.0% ⁵, and 44.7% ⁶ of the company's consolidated total net revenues for the years ended December 31, 2025, 2024, and 2023, respectively.

The company also sells a range of electrical and mechanical accessories for use with its products. The company offers a wide range of brick-format DC-DC converters, as well as complementary components providing AC line rectification, input filtering, power factor correction, and transient protection. The company also integrates these converters and components into complete power systems representing standard or custom AC-DC and DC-DC solutions for its customers' power needs. The company refers to such standard products as its "Configurable" product line, while its two Vicor Custom Power subsidiaries design, sell, and service custom power system solutions. Revenues from licensing arrangements were approximately $57,384,000 ⁷, $46,595,000 ⁸, and $15,872,000 ⁹ in 2025, 2024, and 2023, respectively, representing approximately 14.1% ¹⁰, 13.0% ¹¹, and 3.9% ¹² of total net revenues in 2025, 2024, and 2023, respectively.

In the second quarter of 2025, the company received $45,000,000 ¹³ as a patent litigation settlement. In July 2024, the Board of Directors authorized the repurchase of up to $100,000,000 ¹⁴ of the company's Common Stock (the "New Repurchase Authorization"). As of December 31, 2025, the company had approximately $64,327,000 ¹⁵ remaining available for repurchases of its Common Stock under the New Repurchase Authorization. In 2025, the company used $35,175,000 ¹⁶ for repurchases of Common Stock. The company also received $41,495,000 ¹⁷ in connection with the exercise of options to purchase its Common Stock and the issuance of Common Stock under its 2017 Employee Stock Purchase Plan. Capital expenditures were $20,318,000 ¹⁸ in 2025. The company implemented a 10% ¹⁹ tariff surcharge on its products in July 2025 to mitigate the impact of tariffs.

Total net revenues increased 13.5% ²⁰ to $407,701,000 ²¹ for 2025, from $359,058,000 ²² for 2024. Gross margin for the year ended December 31, 2025 increased $75,431,000 ²³, or 41.0% ²⁴, to $259,429,000 ²⁵ from $183,998,000 ²⁶ for the year ended December 31, 2024. Gross margin, as a percentage of total net revenues and patent litigation settlement, increased to 57.3% ²⁷ for the year ended December 31, 2025, as compared to 51.2% ²⁸ for the year ended December 31, 2024. The company reported net income for 2025 of $118,556,000 ²⁹, or $2.61 ³⁰ per diluted share, compared to net income of $6,129,000 ³¹, or $0.14 ³² per diluted share, for 2024. Operating expenses for 2025 decreased $7,707,000 ³³, or 4.2% ³⁴, to $177,601,000 ³⁵ from $185,308,000 ³⁶ for 2024. Litigation-contingency expense was $0 ³⁷ for 2025, as compared to $19,500,000 ³⁸ for 2024.

The company's order backlog as of December 31, 2025 was approximately $176,938,000 ³⁹, compared to $155,505,000 ⁴⁰ as of December 31, 2024. In 2025, the company's order backlog remained approximately flat, and consequently its book-to-bill ratio was approximately 1.0 ⁴¹ during the year with an improvement in the fourth quarter. Average quarterly turns volume was approximately 34% ⁴² of 2025 total net revenues, approximately 30% ⁴³ of 2024 total net revenues, and approximately 18% ⁴⁴ of 2023 total net revenues. The company has reduced quoted lead time to 22 – 28 weeks ⁴⁵, depending on product family.

The company continues the development of its vertical power delivery solutions, which involve mounting its highest-performance solutions on the underside of the motherboard, opposite the GPU or AI ASIC, thereby enabling a further reduction in distribution losses at the load, yielding higher efficiency and unprecedented power density. The company has established a leadership position in the emerging market segment for powering high-performance processors used for acceleration of applications associated with artificial intelligence (AI). The company's customers in the AI market segment include the leading innovators in processor and accelerator design, as well as early adopters in cloud computing and high performance computing. The company also serves applications in aerospace and aviation, defense electronics, satellites, factory automation, instrumentation, test equipment, transportation, telecommunications and networking infrastructure, and vehicles (notably in the autonomous driving, electric vehicle, and hybrid vehicle niches of the vehicle segment). The company has continued its expansion of a dedicated sales effort to penetrate the automotive market with its Advanced Products, notably in the electrification of passenger automobiles. The company's Power Component Design Methodology provides conversion solutions for 800V, 400V, and 48V within advanced electric vehicles.

The company continues to focus its go-to-market strategy on larger opportunities with global OEMs, ODMs, and contract manufacturers. The company's growth is therefore dependent on the pace at which these OEMs and ODMs develop their own new products, the acceptance of its Advanced Products by these OEMs and ODMs, and the success of the customers' products incorporating its Advanced Products. The company anticipates the percentage of periodic revenue associated with the sale of Advanced Products will increase in the future, given its strategic and organizational focus and the relatively higher expected growth of the market segments it serves. The company also seeks to license its intellectual property, and revenues from licensing arrangements were approximately $57,384,000 ⁴⁶, $46,595,000 ⁴⁷, and $15,872,000 ⁴⁸ in 2025, 2024, and 2023, respectively.

The company's quarterly gross margin as a percentage of total net revenues may vary, depending on production volumes, licensing income, average selling prices, average unit costs, the mix of products sold during that quarter, and the level of importation of raw materials subject to tariffs. The company's quarterly operating margin as a percentage of total net revenues also may vary with changes in revenue and product level profitability, but its operating costs are largely associated with compensation and related employee costs, which are not subject to sudden or significant changes. For the year ended December 31, 2025, costs associated with tariffs totaled approximately $7,375,000 ⁴⁹, an increase of 76.1% ⁵⁰ compared to $4,189,000 ⁵¹ in costs incurred for the year ended December 31, 2024. For the year ended December 31, 2023, costs associated with tariffs totaled approximately $7,985,000 ⁵². The company recovered $907,000 ⁵³, $1,669,000 ⁵⁴ and $6,954,000 ⁵⁵ for the years ended December 31, 2025, 2024 and 2023, respectively, however, it is not able to estimate the amount or timing of any additional recoveries.

The company's manufacturing facility, consisting of approximately 320,000 square feet ⁵⁶, is located in Andover, Massachusetts, where the company is headquartered. In this facility, the company manufactures Brick Products, with the exception of custom products produced by its Vicor Custom Power and VJCL subsidiaries, and Advanced Products, with the exception of certain products manufactured, packaged, and tested by third party wafer foundries and packaging contractors in the United States and Asia. The company has been making and will continue to make capital investments for the expansion of manufacturing capacity for the production of Advanced Products at its Andover facility. Over the last few years, as part of the expansion of its Andover facility, the company brought in-house the complex electroplating operation previously outsourced to a third-party partner. In addition, work is underway to bring in-house an additional final step associated with the manufacture of power modules, which step is now conducted by a subcontractor at the subcontractor's facilities. As of December 31, 2025, the company had 1,092 ⁵⁷ full-time employees, of which 1,006 ⁵⁸ were in the U.S. and 86 ⁵⁹ were in its international locations.

The company incurred approximately $78,570,000 ⁶⁰, $68,922,000 ⁶¹, and $67,857,000 ⁶² in research and development expenses in 2025, 2024, and 2023, respectively, representing approximately 19.3% ⁶³, 19.2% ⁶⁴, and 16.8% ⁶⁵ of total net revenues in 2025, 2024, and 2023, respectively. Capital expenditures were $20,318,000 ⁶⁶ in 2025, compared to $23,602,000 ⁶⁷ in 2024. As of December 31, 2025, the company had a total of approximately $3,877,000 ⁶⁸ of cancelable and non-cancelable capital expenditure commitments, principally for manufacturing and production equipment. In November 2000, the Board of Directors authorized the repurchase of up to $30,000,000 ⁶⁹ of the company's Common Stock (the "November 2000 Plan"). In July 2024, the Board of Directors authorized the repurchase of up to $100,000,000 ⁷⁰ of the company's Common Stock (the "New Repurchase Authorization"). As of December 31, 2025, the company had approximately $64,327,000 ⁷¹ remaining available for repurchases of its Common Stock under the New Repurchase Authorization. As of December 31, 2025, the company has no plans to declare or pay a cash dividend.

For the years ended December 31, 2025, 2024, and 2023, net revenues from sales outside the United States were 50.8% ⁷², 48.2% ⁷³, and 63.1% ⁷⁴, respectively, of the company's total net revenues. Net revenues from customers in China and Hong Kong, accounted for approximately 11.9% ⁷⁵ in 2025, approximately 12.6% ⁷⁶ in 2024, and approximately 17.7% ⁷⁷ in 2023 of the company's total net revenues. For 2025, exports to China and Hong Kong were approximately $48,347,000 ⁷⁸, representing approximately 11.9% ⁷⁹ of total net revenues and an approximately 7.0% ⁸⁰ increase compared to the 2024 total net revenues of approximately $45,199,000 ⁸¹. The company expects international sales, notably in Asia, will continue to be a significant component of total sales.

The company's strategic focus on higher volume opportunities with OEMs, ODMs, and contract manufacturers has caused the actions of a relative few such customers to disproportionately influence its operating results. Unanticipated delays in purchase orders from, and shipments to, certain large customers have resulted in lower than expected revenue. Since the introduction of its Advanced Products, the company has derived the majority of its revenue from Advanced Products in any given year from either one customer or a limited number of customers, whether through sales directly to the customer(s), indirectly to the customers' contract manufacturers, or through royalties. This concentration of revenue is a reflection of the relatively early stage of adoption of the Advanced Products and the associated technologies and power system architectures, and the company's targeting of market leading innovators as initial customers. The company's current sales and marketing efforts are focused primarily on accelerating the adoption of Advanced Products by a diversified customer base, across a number of identified market segments.

The company's operating results are difficult to predict and are subject to fluctuations, and its strategic focus on higher volume opportunities with OEMs, ODMs, and contract manufacturers has caused the actions of a relative few such customers to disproportionately influence its operating results. Since the introduction of its Advanced Products, the company has derived the majority of its revenue from Advanced Products in any given year from either one customer or a limited number of customers. For the year ended December 31, 2025, Section 301 Tariffs totaled approximately $7,375,000 ⁸², an increase of 76.1% ⁸³ compared to $4,189,000 ⁸⁴ incurred for 2024, representing a reduction in the company's gross profit margin as a percentage of total annual net revenues. The company relies on third-party vendors and subcontractors for supply of components, assemblies, and services, some of which are supplied by a single vendor, and any inability to secure sufficient raw materials could reduce revenue and profitability. The company is dependent on the services of Dr. Vinciarelli, its founder, Chairman of the Board, Chief Executive Officer, and President, and the loss of his services could have a material adverse effect on the development of new products and on the company's business and results of operations. The company faces intellectual property infringement claims, and in the second quarter of 2025, it received $45,000,000 ⁸⁵ as a patent litigation settlement, but litigation-contingency expense was $19,500,000 ⁸⁶ for 2024 related to the SynQor litigation.

Management's message emphasizes the company's strategy of demonstrable product differentiation and a value proposition based on competitively superior solution performance, advantageous design flexibility, and a compelling total cost of ownership. Management highlights that the company's competitive position has been maintained by continuous innovations in product design and achievements in product performance, largely enabled by its focus on the research and development of advanced technologies and processes, often implemented in proprietary semiconductor circuitry, materials, and packaging. Management notes that the company has established a leadership position in the emerging market segment for powering high-performance processors used for acceleration of applications associated with artificial intelligence (AI). Management states that the company's strategy involves a continuing transition in organizational focus, emphasizing investment in Advanced Products design and manufacturing, targeting high growth market segments with a low-mix, high-volume operational model, while maintaining a profitable business in mature market segments served with Brick Products with a high-mix, low-volume operational model. Management also notes that the company anticipates the percentage of periodic revenue associated with the sale of Advanced Products will increase in the future, given its strategic and organizational focus and the relatively higher expected growth of the market segments it serves.