Vicor Corporation (NASDAQ:VICR), a leading provider of power conversion and control solutions, reported its second quarter 2024 financial results, showcasing resilience in the face of a dynamic market environment. The company's revenue for the quarter reached $85.85 million, a decrease of 19.6% year-over-year, while its revenue for the first half of the year stood at $169.726 million. Despite the top-line challenges, Vicor demonstrated strong operational execution, generating annual operating cash flow of $73.945 million and annual free cash flow of $40.493 million.
Business Overview
Vicor designs, develops, manufactures, and markets modular power components and power systems for converting electrical power for use in a wide range of applications, including data centers, industrial equipment, transportation, and aerospace and defense. The company's competitive edge is rooted in its focus on advanced technologies and processes, often implemented in proprietary semiconductor circuitry, materials, and packaging.Vicor's product portfolio is divided into two main categories: Advanced Products and Brick Products. The Advanced Products line consists of the company's more recently introduced products, largely used to implement its proprietary Factorized Power Architecture (FPA), an innovative power distribution architecture enabling flexible, rapid power system design. The Brick Products category encompasses Vicor's well-established families of integrated power converters, used in conventional power systems architectures.
Quarterly Performance Highlights In the second quarter of 2024, Vicor reported revenue of $85.85 million, a decrease of 19.6% compared to the same period in the prior year. This decline was primarily driven by softness in the company's underpenetrated markets, partially offset by increased royalty revenue. For the first half of the year, Vicor's revenue stood at $169.726 million.
Gross margin for the second quarter was 49.8%, down from 51.7% in the same quarter last year. The decrease in gross margin was mainly attributable to an unfavorable sales mix and higher supply chain costs, including freight and tariffs, partially offset by production efficiencies and higher royalty revenue. For the full year, Vicor's gross margin was 51.8%.
Operating expenses for the second quarter decreased by 30.5% sequentially to $42.6 million, primarily due to a reduction in legal fees and expenses. On an annual basis, operating expenses were $103.795 million. The company reported a net loss of $1.196 million, or $0.03 per diluted share, for the second quarter, compared to net income of $17.101 million, or $0.38 per diluted share, in the same period last year. For the full year, Vicor reported a net loss of $15.669 million.
Liquidity
Vicor's balance sheet remained strong, with cash and cash equivalents totaling $251.884 million as of the end of the second quarter. The company generated $15.6 million in operating cash flow during the quarter and $73.945 million for the full year. Free cash flow for the year amounted to $40.493 million.Segmental Performance
Vicor's revenue is primarily derived from two product lines: Advanced Products and Brick Products. In the second quarter, Advanced Products revenue decreased 31.3% year-over-year to $46.368 million, while Brick Products revenue increased 0.6% to $39.486 million. For the first half of the year, Advanced Products revenue was $89.648 million, and Brick Products revenue was $80.078 million.The decrease in Advanced Products revenue was mainly due to continued softness in underpenetrated markets, partially offset by increased royalty revenue. The Brick Products segment performed relatively better, benefiting from stable demand in its core industrial, aerospace, and defense markets.
Geographical Breakdown
Vicor's revenue is diversified across various geographical regions. In the second quarter, the United States accounted for 56.7% of total revenue, Europe contributed 11.6%, Asia Pacific made up 31.3%, and all other regions represented 0.4%. For the first half of the year, the United States contributed 57.1% of revenue, Europe accounted for 12.3%, Asia Pacific made up 30.1%, and all other regions represented 0.5%.Guidance and Outlook Vicor did not provide specific financial guidance for the upcoming quarter or full year due to the wide range of potential outcomes it is facing. The company cited ongoing supply chain uncertainties, process issues with the production of Advanced Products, and the unpredictability of certain markets as factors contributing to this decision.
However, management expressed optimism about the company's long-term prospects, particularly in the industrial, aerospace, and defense markets, where it is targeting a doubling of revenues over the next five to seven years. The company also highlighted the potential of its upcoming Gen 5 power conversion technology, which it believes will enable it to better serve the growing demand for high-performance computing and artificial intelligence applications.
Risks and Challenges Vicor operates in a highly competitive and cyclical industry, which can lead to significant fluctuations in its quarterly and annual operating results. The company's reliance on a limited number of large customers, particularly in the high-performance computing and data center markets, exposes it to risks associated with customer concentration. Additionally, Vicor faces ongoing challenges related to supply chain disruptions and the successful transition of its business from serving a large number of low-volume customers to a smaller number of high-volume customers.
The company is also involved in ongoing litigation related to patent infringement, which could result in significant financial and operational impacts if the outcomes are unfavorable.