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What changed in VICOR CORP's 10-K — 2023 vs 2024

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Paragraph-level year-over-year comparison of VICOR CORP's 2023 and 2024 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2024 report.

+153 added−180 removedSource: 10-K (2025-03-03) vs 10-K (2024-02-28)

Top changes in VICOR CORP's 2024 10-K

153 paragraphs added · 180 removed · 134 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

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Biggest changeWe are unaware of any competitive solution for AI acceleration offering the power system performance and density of Power-on-Package, as IBA-based solutions must increase the number of conversion phases to reach high current levels, thereby increasing component count and motherboard area used, which contributes to higher switching and distribution losses, inferior dynamic response, and associated heat generation. 5 Table of Contents Our latest innovation for powering processors is vertical power delivery, which involves mounting our 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.
Biggest changeOur latest innovation for powering processors is vertical power delivery, which involves mounting our 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.
Many of our 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. This efficiency and small 3 Table of Contents size is enabled by our proprietary switching circuitry and magnetic structures, as well as our use of highly differentiated packaging.
Many of 3 Table of Contents our 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. This efficiency and small size is enabled by our proprietary switching circuitry and magnetic structures, as well as our use of highly differentiated packaging.
Given the growth profiles and performance requirements of the market segments served with Advanced Products and Brick Products, our strategy involves a 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 we serve with Brick Products with a high-mix, low-volume operational model.
Given the growth profiles and performance requirements of the market segments served with Advanced Products and Brick Products, our 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 we serve with Brick Products with a high-mix, low-volume operational model.
With our Advanced Product lines, our customers are concentrated in the data center and hyperscaler segments of enterprise computing, in which our products are used for power delivery on server motherboards, in server racks, and across datacenter infrastructure, although we also serve 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).
With our Advanced Product lines, our customers are concentrated in the data center and hyperscaler segments of enterprise computing, in which our products are used for power delivery on server motherboards, in server racks, and across datacenter infrastructure, although we also serve applications in aerospace and aviation, defense electronics, satellites, factory automation, instrumentation, test equipment, transportation, 6 Table of Contents telecommunications and networking infrastructure, and vehicles (notably in the autonomous driving, electric vehicle, and hybrid vehicle niches of the vehicle segment).
Accordingly, we offer compelling compensation and benefits, foster a culture of innovation in which employees are empowered to do (and are rewarded for) their best work, and seek to establish Vicor as a meaningful contributor to the communities in which we operate, further strengthening the bonds between employees and the Company.
Accordingly, 9 Table of Contents we offer compelling compensation and benefits, foster a culture of innovation in which employees are empowered to do (and are rewarded for) their best work, and seek to establish Vicor as a meaningful contributor to the communities in which we operate, further strengthening the bonds between employees and the Company.
As of December 31, 2023, in the United States, we have been issued 128 patents having expirations scheduled between 2024 and 2040 and have filed a number of patent applications which are still pending, many of which are expected to issue as patents in 2024. We have vigorously protected our rights under these patents and will continue to do so.
As of December 31, 2024, in the United States, we have been issued 121 patents having expirations scheduled between 2025 and 2040 and have filed a number of patent applications which are still pending, many of which are expected to issue as patents in 2025. We have vigorously protected our rights under these patents and will continue to do so.
Our research and development activities have resulted in important patents protecting our products and enabling technologies, as well as proprietary trade secrets associated 9 Table of Contents with our use of certain components and materials of our own design and proprietary manufacturing, packaging, and testing processes.
Our research and development activities have resulted in important patents protecting our products and enabling technologies, as well as proprietary trade secrets associated with our use of certain components and materials of our own design and proprietary manufacturing, packaging, and testing processes.
Current exports to China and Hong Kong are heavily oriented toward Brick Products for industrial and rail applications, as well as certain aerospace and defense electronics applications permitted under U.S. export control regulations (our products are designated EAR99 commodities under the Export Administration Regulations of the U.S. Department of Commerce and are not subject to export licenses).
Current exports to China and Hong Kong are heavily oriented toward Brick Products for industrial and rail applications, as well as certain aerospace and defense electronics applications permitted under U.S. export control regulations (our products are designated EAR99 commodities under the Export Administration Regulations of the U.S.
Customers and Backlog 6 Table of Contents The applications in which our Advanced Products and Brick Products are used are typically in the higher-performance, higher-power segments of the market segments we serve.
Customers and Backlog The applications in which our Advanced Products and Brick Products are used are typically in the higher-performance, higher-power segments of the market segments we serve.
We recovered $6,954,000, $229,000 and $10,000 for the years ended December 31, 2023, 2022 and 2021, respectively, however, we are not able to estimate the amount or timing of any additional recoveries, and there can be no assurance that there will be any additional recoveries.
We recovered $1,669,000, $6,954,000 and $229,000 for the years ended December 31, 2024, 2023 and 2022, respectively, however, we are not able to estimate the amount or timing of any additional recoveries, and there can be no assurance that there will be any additional recoveries.
Annual revenue associated with the sale of Brick Products, inclusive of such sales of our Vicor Custom Power and VJCL subsidiaries, was approximately 44.7%, 39.0%, and 52.6% of the Company’s consolidated revenue for the years ended December 31, 2023, 2022, and 2021, respectively.
Annual revenue associated with the sale of Brick Products, inclusive of such sales of our Vicor Custom Power and VJCL subsidiaries, was approximately 45.0%, 44.7%, and 39.0% of the Company’s consolidated revenue for the years ended December 31, 2024, 2023, and 2022, respectively.
Average quarterly turns volume was approximately 18% of 2023 revenue, approximately 11% of 2022 revenue, and approximately 19% of 2021 revenue. Competition and Market Characteristics The competitive characteristics of the markets we serve with Advanced Products and Brick Products can differ significantly.
Average quarterly turns volume was approximately 30% of 2024 revenue, approximately 18% of 2023 revenue, and approximately 11% of 2022 revenue. Competition and Market Characteristics The competitive characteristics of the markets we serve with Advanced Products and Brick Products can differ significantly.
As of December 31, 2023, the Company’s order backlog was approximately $160,805,000, compared to $304,392,000 as of December 31, 2022. Backlog, as presented here, consists of orders for products for which shipment is scheduled within the following 12 months, subject to our scheduling and cancellation policies.
As of December 31, 2024, the Company’s order backlog was approximately $155,505,000, compared to $160,805,000 as of December 31, 2023. Backlog, as presented here, consists of orders for products for which shipment is scheduled within the following 12 months, subject to our scheduling and cancellation policies.
We incurred approximately $67,857,000, $60,594,000, and $53,114,000 in research and development expenses in 2023, 2022, and 2021, respectively, representing approximately 16.8%, 15.2%, and 14.8% of revenues in 2023, 2022, and 2021, respectively. We believe our intellectual property affords advantages by building fundamental and multilayered barriers to competitive encroachment upon key features and performance benefits of our principal product families.
We incurred approximately $68,922,000, $67,857,000, and $60,594,000 in research and development expenses in 2024, 2023, and 2022, respectively, representing approximately 19.2%, 16.8%, and 15.2% of revenues in 2024, 2023, and 2022, respectively. We believe our intellectual property affords advantages by building fundamental and multilayered barriers to competitive encroachment upon key features and performance benefits of our principal product families.
Advanced Products 4 Table of Contents We continue to invest in the research and development of power system technologies and product concepts addressing two accelerating trends, the first toward higher required conversion efficiencies, and the second toward more and diverse on-board voltages, higher performance demands of complex loads, and, in particular, higher current requirements of those loads.
We also sell a range of electrical and mechanical accessories for use with our products. 4 Table of Contents Advanced Products We continue to invest in the research and development of power system technologies and product concepts addressing two accelerating trends, the first toward higher required conversion efficiencies, and the second toward more and diverse on-board voltages, higher performance demands of complex loads, and, in particular, higher current requirements of those loads.
Annual revenue associated with the sale of Advanced Products was approximately 55.3%, 61.0%, and 47.4% of the Company’s consolidated revenue for the years ended December 31, 2023, 2022, and 2021, respectively.
Annual revenue associated with the sale of Advanced Products which includes royalty revenue, was approximately 55.0%, 55.3%, and 61.0% of the Company’s consolidated revenue for the years ended December 31, 2024, 2023, and 2022, respectively.
Based on design, performance, and form factor considerations, as well as the range of evolving applications for which the products are appropriate, we categorize our product portfolios as either Advanced Products or Brick Products. We also sell a range of electrical and mechanical accessories for use with our products.
Based on design, performance, and form factor considerations, as well as the range of evolving applications for which the products are appropriate, we categorize our product portfolios as either Advanced Products or Brick Products.
As of December 31, 2023, we had 1,063 full-time employees, of which 968 were in the U.S. and 95 were in our international locations. As of December 31, 2023, we also had 25 part-time temporary employees. None of our employees are represented by a labor union or covered by a collective bargaining agreement.
As of December 31, 2024, we had 1,074 full-time employees, of which 984 were in the U.S. and 90 were in our international locations. As of December 31, 2024, we also had 26 part-time temporary employees. None of our employees are represented by a labor union or covered by a collective bargaining agreement.
Despite our minor share in the overall merchant market and the competitive presence of numerous, far larger vendors in the market segments we serve with both Advanced Products and Brick Products, we believe we maintain an advantageous competitive position in those market segments based on our differentiated technology.
Department of Commerce and are not subject to export licenses). 7 Table of Contents Despite our minor share in the overall merchant market and the competitive presence of numerous, far larger vendors in the market segments we serve with both Advanced Products and Brick Products, we believe we maintain an advantageous competitive position in those market segments based on our differentiated technology.
The warranty period is three years for a range of H Grade, M Grade, and MI Family DC-DC products. Because of the technically complex nature of our products and the applications they address, we maintain an extensive staff of Field Applications Engineers to support our own sales and customer support activities, as well as those of our channel partners.
Because of the technically complex nature of our products and the applications they address, we maintain an extensive staff of Field Applications Engineers to support our own sales and customer support activities, as well as those of our channel partners.
Marketing and Sales We reach and serve customers through several sales channels: a direct sales force; independent, authorized non-stocking distributors in Europe and Asia; and four authorized stocking distributors world-wide: Arrow Electronics, Inc., Digi-Key Corporation, Avnet Electronics, and Mouser Electronics, Inc.
Marketing and Sales We reach and serve customers through several sales channels: a direct sales force; independent, authorized non-stocking distributors in Europe and Asia; and four authorized stocking distributors world-wide: Arrow Electronics, Inc., Digi-Key Corporation, Avnet Electronics, and Mouser Electronics, Inc. All sales channels are supported by regional TSCs, each offering application engineering and sales support for our channel partners.
Vertically-mounting the solution allows unrestricted access to microprocessor input/output I/O pins on the top side of the motherboard, thereby improving I/O speed and memory access, which are a priority for GPUs and AI ASICs in AI applications. We continue the development of our vertical power delivery solutions and shipped prototype products to a certain customer in 2022.
Vertically-mounting the solution allows unrestricted access to microprocessor input/output I/O pins on the top side of the motherboard, thereby 5 Table of Contents improving I/O speed and memory access, which are a priority for GPUs and AI ASICs in AI applications.
For the year ended December 31, 2023, costs associated with tariffs totaled approximately $7,985,000, a decrease of 21.7% over the $10,201,000 in costs incurred for the year ended December 31, 2022. For the year ended December 31, 2021, costs associated with tariffs totaled approximately $6,678,000.
For the year ended December 31, 2024, costs associated with tariffs totaled approximately $4,189,000, a decrease of 47.5% compared to $7,985,000 in costs incurred for the year ended December 31, 2023. For the year ended December 31, 2022, costs associated with tariffs totaled approximately $10,201,000.
In 2023, our order backlog declined as a result of working down both current and overdue backlog while the book to bill ratio stayed below 1.0. An additional influence on turns volume has been our transition to larger OEM customers, which typically schedule large volumes for delivery over multiple quarters and frequently reschedule deliveries for either earlier or later shipment.
In 2024, our order backlog remained approximately flat, and consequently our book-to-bill ratio was approximately 1.0 during the year. An influence on turns volume has been our transition to larger OEM customers, which typically schedule large volumes for delivery over multiple quarters and frequently reschedule deliveries for either earlier or later shipment.
We also partner with a range of non-profit organizations and have had notable success in our collaboration for over two decades with the Crest Collaborative of Andover, MA, a local advocacy agency, in providing enriching employment opportunities for individuals with disabilities. 10 Table of Contents For more information on our employee and community initiatives, please see our Corporate Social Responsibility webpage at www.vicorpower.com/about-the-company/corporate-social-responsibility .
We also partner with a range of non-profit organizations and have had notable success in our collaboration for over two decades with the Crest Collaborative of Andover, MA, a local advocacy agency, in providing enriching employment opportunities for individuals with disabilities.
Our quality assurance practices include rigorous testing and, as necessary, burn-in and temperature cycling (i.e., extended operation of a product to confirm performance) of our products using automated equipment.
We follow industry best practices in manufacturing and are compliant with ISO 9001 certification standards (as set forth by the International Organization for Standardization). Our quality assurance practices include rigorous testing and, as necessary, burn-in and temperature cycling (i.e., extended operation of a product to confirm performance) of our products using automated equipment.
In 2023, there was a general loosening of the semiconductor supply chain, even as the supply of some components remained constrained. Certain Advanced Products and semiconductor devices used in our production are manufactured by a limited number of wafer foundries, with packaging and test services provided by a limited number of third parties.
Certain Advanced Products and semiconductor devices used in our production are manufactured by a limited number of wafer foundries, with packaging and test services provided by a limited number of third parties. We rely on these wafer foundries and packaging and test providers for supply continuity of these critical semiconductor devices.
Our strategy, competitive positioning, and product offerings are all based on highly differentiated product performance, reflecting our anticipation of the evolution of system power architectures and customer performance requirements.
In addition to offering competitively differentiated products for sale, we also offer and engage in licensing arrangements with customers, resulting in royalty revenue. Our strategy, competitive positioning, and product offerings are all based on highly differentiated product performance, reflecting our anticipation of the evolution of system power architectures and customer performance requirements.
International TSCs are located in: Beijing, China; Hong Kong, China; Shanghai, China; Shenzhen, China; Munich, Germany; Bangalore, India; Milan, Italy; Tokyo, Japan; Seoul, South Korea; Taipei, Taiwan (Republic of China); and Camberley, United Kingdom. Customers do not place purchase orders with TSCs, but do so directly with the Company or with our channel partners.
Domestic TSCs are located in: Andover, Massachusetts; Lombard, Illinois; and Santa Clara, California. International TSCs are located in: Beijing, China; Hong Kong, China; Shanghai, China; Shenzhen, China; Munich, Germany; Bangalore, India; Milan, Italy; Tokyo, Japan; Seoul, South Korea; Taipei, Taiwan (Republic of China); and Camberley, United Kingdom.
Our proprietary technologies enable us to offer a range of Advanced Products, in various package formats across functional families, applicable to other market segments and power distribution architectures other than FPA. Within computing, these market segments include AC to DC voltage conversion and DC voltage distribution in server racks and high voltage conversion across datacenter infrastructure.
We continue the development of our vertical power delivery solutions and shipped prototype products to a certain customer in 2022. Our proprietary technologies enable us to offer a range of Advanced Products, in various package formats across functional families, applicable to other market segments and power distribution architectures other than FPA.
We incurred approximately $52,938,000, $49,708,000, and $46,602,000 in marketing and sales expenses in 2023, 2022, and 2021, respectively, representing approximately 13.1%, 12.5%, and 13.0% of revenues in 2023, 2022, and 2021, respectively. 8 Table of Contents Manufacturing, Quality Assurance, and Supply Chain Management Our manufacturing facility, consisting of approximately 320,000 square feet, is located in Andover, Massachusetts, where we are headquartered.
Manufacturing, Quality Assurance, and Supply Chain Management Our manufacturing facility, consisting of approximately 320,000 square feet, is located in Andover, Massachusetts, where we are headquartered.
The switching power supply market can be segmented by product type (i.e., DC-DC converters, AC-DC converters, and DC-AC inverters), by output power levels, and by numerous vertical markets (i.e., industry-specific applications). For 2023, exports to China and Hong Kong were approximately $71,554,000, representing approximately 17.7% of total revenue and an approximately 4.8% decrease over the 2022 total of approximately $75,194,000.
The switching power supply market can be segmented by product type (i.e., DC-DC converters, AC-DC converters, and DC-AC inverters), by output power levels, and by numerous vertical markets (i.e., industry-specific applications).
Our primary manufacturing processes involve steps common to automated assembly of electronics devices. We also have developed and employ proprietary manufacturing processes that contribute to the differentiated performance of our devices, including the innovative electroplating of our SM-ChiP © modules discussed below.
We also have developed and employ proprietary manufacturing processes that contribute to the differentiated performance of our devices, including the innovative electroplating of our SM-ChiP © modules. 8 Table of Contents Product quality and reliability are critical to our success and, as such, we emphasize quality and reliability in our design and manufacturing activities.
In granting licenses, we generally retain the right to use our patented technologies and manufacture and sell our products in all licensed geographic areas and fields of use. Revenues from licensing arrangements have not exceeded 10% of our consolidated revenues in any of the last three fiscal years.
In granting licenses, we generally retain the right to use our patented technologies and manufacture and sell our products in all licensed geographic areas and fields of use. Revenues from licensing arrangements were approximately $46,595,000, $15,872,000, and $2,801,000 in 2024, 2023, and 2022, respectively, representing approximately 13.0%, 3.9%, and 0.7% of revenues in 2024, 2023, and 2022, respectively.
In Japan, customers place purchase orders with authorized distributors or, for certain custom products, VJCL. We generally sell our products on the basis of our standard terms and conditions, and we most commonly warrant our products for a period of two years.
We generally sell our products on the basis of our standard terms and conditions, and we most commonly warrant our products for a period of two years. The warranty period is three years for a range of H Grade, M Grade, and MI Family DC-DC products.
We believe this 7 Table of Contents decreased volume was primarily associated with a softer market in this region driving lower demand for our products.
For 2024, exports to China and Hong Kong were approximately $45,199,000, representing approximately 12.6% of total revenue and an approximately 36.8% decrease compared to the 2023 total of approximately $71,554,000. We believe this decreased volume was primarily associated with a softer market in this region driving lower demand for our products.
As stated, our strategy involves maintaining high levels of customer engagement and support for design and engineering.
As stated, our strategy involves maintaining high levels of customer engagement and support for design and engineering. We incurred approximately $49,827,000, $52,938,000, and $49,708,000 in marketing and sales expenses in 2024, 2023, and 2022, respectively, representing approximately 13.9%, 13.1%, and 12.5% of revenues in 2024, 2023, and 2022, respectively.
Over the course of 2023, the supply picture for the global semiconductor industry generally improved and as a result we were able to increase raw material inventory. We generally maintained quoted lead time for delivery to customers at 26 – 32 weeks depending on product family.
Over the course of recent years the supply picture for the semiconductor industry generally improved and we have reduced quoted lead time to 22 – 28 weeks, depending on product family. In the final quarter of 2024, we increased prices for most products as part of our portfolio management process.
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In the first quarter of 2023, we increased prices for most products as part of our portfolio management process.
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Within computing, these market segments include AC to DC voltage conversion and DC voltage distribution in server racks and high voltage conversion across datacenter infrastructure.
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For 2023, exports to Taiwan were approximately $59,005,000, representing approximately 14.6% of total revenue and an approximately 43.9% decrease over the 2022 total of approximately $105,226,000. The decreased volume related to lower demand in Taiwan which is a contract manufacturing site for certain high performance compute OEMs.
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Customers do not place purchase orders with TSCs, but do so directly with the Company or with our channel partners. In Japan, customers place purchase orders with authorized distributors or, for certain custom products, VJCL.
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In order to provide greater focus to our account base in 2023, we discontinued use of independent sales representatives in North America. All sales channels are supported by regional TSCs, each offering application engineering and sales support for our channel partners. Domestic TSCs are located in: Andover, Massachusetts; Lombard, Illinois; and Santa Clara, California.
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Our primary manufacturing processes involve steps common to automated assembly of electronics devices.
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During the third quarter of 2020, we began construction of an addition of approximately 90,000 square feet to our existing manufacturing facility.
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We initially planned on taking occupancy of the addition in the first half of 2021, but due to a variety of factors including the effect of the global pandemic, we took occupancy of this addition during the first half of 2022. In 2023, we completed the installation of our advanced plating equipment and our advanced plating operation began production.
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We partnered with a highly-specialized third-party developer of electroplating processes and equipment, which performed certain elements of our proprietary manufacturing process using equipment designed by the developer. In 2019 and 2020, we entered into service and equipment purchase agreements with this partner.
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While commodity electroplating services are available from numerous alternate providers, we entered into these agreements due to the level of our collaboration with the partner in the refinement of certain proprietary processes we employ and our joint commitment to environmentally sound manufacturing minimizing toxic waste.
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We relied on this partner’s services to meet our requirements for SM-ChiP production until 2023, when we completed the plating line and brought the production process in-house. The initial planned installation dates for this equipment in 2021 were, in some cases, delayed due to a variety of factors including the effect of the global pandemic.
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Product quality and reliability are critical to our success and, as such, we emphasize quality and reliability in our design and manufacturing activities. We follow industry best practices in manufacturing and are compliant with ISO 9001 certification standards (as set forth by the International Organization for Standardization).
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We rely on these wafer foundries and packaging and test providers for supply continuity of these critical semiconductor devices.
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While prior to 2023 there had been supply constraints across a number of these suppliers, in 2023 we were generally able, with the exception of a limited number of constraints on certain components, to drive sufficient supply so as to reduce overdue backlog during the year.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeOur future operating results may be materially influenced by a number of factors, many of which are beyond our control, including: • changes in demand for our products and for our customers’ end-products incorporating our products, as well as our ability to respond efficiently to such changes in demand, including changes in delivery lead times and the volume of product for which orders are accepted and the product shipped within an individual quarter; • our ability to manage our supply chain, inventory levels, and our own manufacturing capacity or that of third-party partners, particularly in the event of delays or cancellation of significant customer orders or in the event of delays or cost increases associated with our supply chain; • our ability to effectively coordinate changes in the mix of products we manufacture and sell, while managing our ongoing transition in organizational focus and manufacturing infrastructure to Advanced Products from Brick Products; • our ability to provide and maintain a high level of sales and engineering support to an increasing number of demanding, high volume customers; • the ability of our third party suppliers and service subcontractors to provide us sufficient quantities of high quality products, components, and/or services on a timely and cost-effective basis; • the effectiveness of our ongoing efforts to continuously reduce manufacturing costs per unit and manage operating expenses; • our ability to absorb and mitigate the impact of inflation on our operating results; • our ability to utilize our manufacturing facilities and personnel at efficient levels, maintaining sufficient production capacity and necessary manufacturing yields; 11 Table of Contents • the timing of our new product introductions and our ability to meet customer expectations for timely delivery of fully qualified products; • the timing of new product introductions or other competitive actions (e.g., product price reductions) by our competitors; • the ability to hire, retain, and motivate qualified employees to meet the demands of our customers; • intellectual property disputes; • litigation-related costs, which may be significant; • adverse economic conditions in the U.S. and those foreign countries in which we operate, as well as our ability to respond to unanticipated developments, such as the imposition of tariffs or trade restrictions; • adverse budgetary conditions within the U.S. government, particularly the Department of Defense, which continue to influence spending on current and anticipated programs into which we sell or anticipate to sell our products; • costs related to compliance with increasing worldwide governance, quality, environmental, and other regulations; • costs and consequences of disruption by third-parties of our global computer network and related resources; and • the effects of events outside of our control, including public health emergencies, natural disasters, terrorist activities, political risks, international conflicts, information security breaches, communication interruptions, and other force majeure .
Biggest changeOur future operating results may be materially influenced by a number of factors, many of which are beyond our control, including: • changes in demand for our products and for our customers’ end-products incorporating our products, as well as our ability to respond efficiently to such changes in demand, including changes in delivery lead times and the volume of product for which orders are accepted and the product shipped within an individual quarter; • our ability to manage our supply chain, inventory levels, and our own manufacturing capacity or that of third-party partners, particularly in the event of delays or cancellation of significant customer orders or in the event of delays or cost increases associated with our supply chain; • our ability to effectively coordinate changes in the mix of products we manufacture and sell, while managing our ongoing transition in organizational focus and manufacturing infrastructure to Advanced Products from Brick Products; • our ability to provide and maintain a high level of sales and engineering support to an increasing number of demanding, high volume customers; • the ability of our third party suppliers and service subcontractors to provide us sufficient quantities of high quality products, components, and/or services on a timely and cost-effective basis; • the effectiveness of our ongoing efforts to continuously reduce manufacturing costs per unit and manage operating expenses; • our ability to absorb and mitigate the impact of inflation on our operating results; • our ability to utilize our manufacturing facilities and personnel at efficient levels, maintaining sufficient production capacity and necessary manufacturing yields; • the timing of our new product introductions and our ability to meet customer expectations for timely delivery of fully qualified products; • the timing of new product introductions or other competitive actions (e.g., product price reductions) by our competitors; • the ability to hire, retain, and motivate qualified employees to meet the demands of our customers; • intellectual property disputes including disputes relating to the licensing of our intellectual property; • our ability to license our intellectual property; • litigation-related costs, which may be significant; • adverse economic conditions in the U.S. and those foreign countries in which we operate, as well as our ability to respond to unanticipated developments, such as the imposition of tariffs or trade restrictions; • adverse budgetary conditions within the U.S. government, particularly the Department of Defense, which continue to influence spending on current and anticipated programs into which we sell or anticipate to sell our products; • costs related to compliance with increasing worldwide governance, quality, environmental, and other regulations; • costs and consequences of disruption by third-parties of our global computer network and related resources; and • the effects of events outside of our control, including public health emergencies, natural disasters, terrorist activities, political risks, international conflicts, information security breaches, communication interruptions, and other force majeure . 11 Table of Contents As a result of these and other factors, we cannot assure you we will not experience significant fluctuations in future operating results on a quarterly or annual basis.
Since the introduction of our 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) or indirectly to the customers’ contract manufacturers.
Since the introduction of our 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.
These recent export controls are, in part, intended to restrict the ability of the People’s Republic of China to obtain advanced computing chips, develop and maintain supercomputers, and manufacture advanced semiconductors.
These export controls are, in part, intended to restrict the ability of the People’s Republic of China to obtain advanced computing chips, develop and maintain supercomputers, and manufacture advanced semiconductors.
We have experienced shortages of certain semiconductor components and delays in service delivery, have incurred additional and unexpected costs to address the shortages and delays, and have experienced our own delays in production and shipping.
In the past, we have experienced shortages of certain semiconductor components and delays in service delivery, have incurred additional and unexpected costs to address the shortages and delays, and have experienced our own delays in production and shipping.
He also holds 11,023,648 shares of our unregistered Class B Common Stock (which may only be sold or transferred after required conversion, on a one-for-one basis, into registered shares of Common Stock), which together with his ownership of Common Stock, represents 47.6% of our total issued and outstanding shares of capital stock.
He also holds 11,023,648 shares of our unregistered Class B Common Stock (which may only be sold or transferred after required conversion, on a one-for-one basis, into registered shares of Common Stock), which together with his ownership of Common Stock, represents 47.3% of our total issued and outstanding shares of capital stock.
Furthermore, we may never generate the anticipated revenues from a product after incurring such expenses if our customer cancels or changes its product plans. In 2023, we continued our expansion of a dedicated sales effort to penetrate the automotive market with our Advanced Products, notably in the electrification of passenger automobiles.
Furthermore, we may never generate the anticipated revenues from a product after incurring such expenses if our customer cancels or changes its product plans. We have continued our expansion of a dedicated sales effort to penetrate the automotive market with our Advanced Products, notably in the electrification of passenger automobiles.
We have no formal policy regarding dividends and, as such, investors cannot make assumptions regarding the possibility of future dividend payments nor the amounts and timing thereof. As of December 31, 2023, we have no plans to declare or pay a cash dividend. The ownership of our Common Stock is concentrated between Dr.
We have no formal policy regarding dividends and, as such, investors cannot make assumptions regarding the possibility of future dividend payments nor the amounts and timing thereof. As of December 31, 2024, we have no plans to declare or pay a cash dividend. The ownership of our Common Stock is concentrated between Dr.
Please see Note 15 – Commitments and Contingencies, to the Consolidated Financial Statements for information regarding current litigation related to our intellectual property. Any expenses or liability resulting from the outcome of litigation could adversely influence our operating results and financial condition.
Please see Note 16 – Commitments and Contingencies, to the Consolidated Financial Statements for information regarding current litigation related to our intellectual property. Any expenses or liability resulting from the outcome of litigation could adversely influence our operating results and financial condition.
As we qualify equipment and bring production online, any delay in achieving anticipated operating efficiencies associated with added capacity may cause manufacturing costs to be higher than expected for some period of time, thereby potentially negatively influencing our operating and financial results. Disruption of our information technology infrastructure could adversely affect our business.
As we qualify equipment and bring production online, any delay in achieving anticipated operating efficiencies associated with added capacity may cause manufacturing costs to be higher than expected for some period of time, thereby potentially negatively influencing our operating and financial results. 13 Table of Contents Disruption of our information technology infrastructure could adversely affect our business.
Our 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 our operating results. Unanticipated delays in purchase orders from, and shipments to, certain large customers have resulted in lower than expected revenue.
Our 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 our operating results. 10 Table of Contents Unanticipated delays in purchase orders from, and shipments to, certain large customers have resulted in lower than expected revenue.
The power systems industry, and the electronics industry as a whole, can be subject to pronounced, lengthy business cycles and otherwise subject to sudden and sharp changes in demand. Our success, in part, is dependent on our ability to forecast and procure inventories of components and materials to match production schedules and customer delivery requirements.
The power systems industry, and the electronics industry as a whole, can be subject to pronounced, lengthy business cycles and otherwise subject to sudden and sharp changes in demand. Our success, in part, is dependent on our ability to forecast and procure inventories of components and materials to match production schedules and customer delivery 12 Table of Contents requirements.
Changes in these factors could materially impact our financial statements. Please see Note 15 – Commitments and Contingencies, to the Consolidated Financial Statements for information regarding current litigation related to our intellectual property.
Changes in these factors could materially impact our financial statements. Please see Note 16 – Commitments and Contingencies, to the Consolidated Financial Statements for information regarding current litigation related to our intellectual property.
If we identify excess inventory or determine certain inventory is obsolete (i.e., unusable), we likely will record 13 Table of Contents additional inventory reserves (i.e., expenses representing the write-off of the excess or obsolete inventory), which could have an adverse effect on our gross margins and on our operating results.
If we identify excess inventory or determine certain inventory is obsolete (i.e., unusable), we likely will record additional inventory reserves (i.e., expenses representing the write-off of the excess or obsolete inventory), which could have an adverse effect on our gross margins and on our operating results.
We have incurred and expect to incur significant financial costs in the defense of our patented technologies and have devoted and expect to devote significant resources to these efforts which, if unsuccessful, may have a material adverse effect on our operating results and financial position.
We have incurred and expect to incur significant financial costs in the defense of our patented technologies and have devoted 16 Table of Contents and expect to devote significant resources to these efforts which, if unsuccessful, may have a material adverse effect on our operating results and financial position.
In the event our Chief Executive Officer or Chief Financial Officer, our certifying officers under SOX, or our independent registered public accounting firm determines our internal controls over financial reporting are not effective as defined under Section 404, we may be unable to produce reliable financial reports or prevent fraud, which could materially harm our business.
In the event our Chief Executive Officer or Chief Financial Officer, our certifying officers under SOX, or our independent registered public accounting firm determines our internal controls over financial reporting are not effective as defined under Section 404, we may be unable to produce reliable financial reports or prevent fraud, which could materially 17 Table of Contents harm our business.
With our Advanced Product lines, we compete with global IDMs and fabless developers of semiconductor-based power management modules and power 16 Table of Contents management ICs. These competitors have far larger organizations and broader semiconductor-based product lines.
With our Advanced Product lines, we compete with global IDMs and fabless developers of semiconductor-based power management modules and power management ICs. These competitors have far larger organizations and broader semiconductor-based product lines.
We have been making and will continue to make capital investments for the expansion of manufacturing capacity for the production of Advanced Products at our Andover facility. In 2023, as part of the expansion of our Andover facility, we brought in-house the complex electroplating operation previously outsourced to a third-party partner.
We have been making and will continue to make capital investments for the expansion of manufacturing capacity for the production of Advanced Products at our Andover facility. Over the last few years, as part of the expansion of our Andover facility, we brought in-house the complex electroplating operation previously outsourced to a third-party partner.
Some of our competitors have far greater financial, manufacturing, technical, and sales and marketing resources than we possess or have access to. Our Brick Products compete with those products offered by domestic and foreign manufacturers of integrated power supplies and related power conversion components.
Competitive Risks We compete with many companies possessing far greater resources. Some of our competitors have far greater financial, manufacturing, technical, and sales and marketing resources than we possess or have access to. Our Brick Products compete with those products offered by domestic and foreign manufacturers of integrated power supplies and related power conversion components.
Furthermore, the U.S. government has continued to expand, the number of foreign entities on the Entity List (a restricted party list that imposes additional licensing requirements on shipments to listed parties).
In recent years, the U.S. government has continued to expand the number of foreign entities on the Entity List (a restricted party list that imposes additional licensing requirements on shipments to listed parties).
However, the costs of Section 301 Tariffs have had a material impact on our profitability. For the year ended December 31, 2023, Section 301 Tariffs totaled approximately $7,985,000, a decrease of 21.7% over the $10,201,000 incurred for 2022. For the year ended December 31, 2021, costs associated with tariffs totaled approximately $6,678,000.
However, the costs of Section 301 Tariffs have had a material impact on our profitability. For the year ended December 31, 2024, Section 301 Tariffs totaled approximately $4,189,000, a decrease of 47.5% compared to $7,985,000 incurred for 2023. For the year ended December 31, 2022, costs associated with tariffs totaled approximately $10,201,000.
Vinciarelli and a limited number of institutional investors. As of December 31, 2023, Dr. Vinciarelli was the beneficial owner of 9,592,017 shares of our Common Stock, plus 430,743 shares which Dr. Vinciarelli has the right to acquire upon exercise of options to purchase Common Stock within 60 days of December 31, 2023.
Vinciarelli and a limited number of institutional investors. As of December 31, 2024, Dr. Vinciarelli was the beneficial owner of 10,021,388 shares of our Common Stock, plus 6,199 shares which Dr. Vinciarelli has the right to acquire upon exercise of options to purchase Common Stock within 60 days of December 31, 2024.
However, as evidenced by the ransomware incident described above, we remain vulnerable to computer viruses and related software-based challenges to the integrity of our systems, unauthorized or illegal break-ins, or malicious network hacking, equipment or software sabotage, acts of vandalism to our systems by third parties, and, in the extreme, forms of cyber-terrorism.
Our systems are designed to protect us from network security incidents and associated disruptions. However, we remain vulnerable to computer viruses and related software-based challenges to the integrity of our systems, unauthorized or illegal break-ins, or malicious network hacking, equipment or software sabotage, acts of vandalism to our systems by third parties, and, in the extreme, forms of cyber-terrorism.
While we carry business interruption insurance to offset financial losses from such an interruption, and cyber-risk insurance to address potential liabilities from such circumstances, such insurance may be insufficient to compensate us for the potentially significant costs or liabilities incurred.
While we carry business interruption insurance to offset financial losses from such an interruption, and cyber-risk insurance to address potential liabilities from such circumstances, such insurance may be insufficient to compensate us for the potentially significant costs or liabilities incurred. Any such events, if prolonged, could have a material and adverse effect on our operating results and financial condition.
If any of our products contain defects, or have reliability, quality, or compatibility problems, the Company’s reputation may be damaged, which could make it more difficult for us to sell our products to existing and prospective customers and could adversely affect our operating results.
If any of our products contain defects, or have reliability, quality, or compatibility problems, the Company’s reputation may be damaged, which could make it more difficult for us to sell our products to existing and prospective customers and could adversely affect our operating results. 14 Table of Contents Our ability to successfully implement our business strategy may be limited if we do not retain our key personnel and attract and retain skilled and experienced personnel.
We cannot offer any assurance the markets we currently serve will grow in the future, our Advanced Products or Brick Products will meet respective market requirements, or we can maintain adequate gross margins or operating profits in these markets.
We cannot offer any assurance the markets we currently serve will grow in the future, our Advanced Products or Brick Products will meet respective market requirements, or we can maintain adequate gross margins or operating profits in these markets. Intellectual Property Risks We may be unable to adequately protect our proprietary rights, which may limit our ability to compete effectively.
Accordingly, the market float for our Common Stock and average daily trading volumes are relatively small, which may negatively impact investors’ ability to buy or sell shares of our Common Stock in a timely manner. 19 Table of Contents Dr.
Accordingly, the market float for our Common Stock and average daily trading volumes are relatively small, which may negatively impact investors’ ability to buy or sell shares of our Common Stock in a timely manner. Dr. Vinciarelli owns 93.9% of the issued and outstanding shares of our Class B Common Stock, which possess 10 votes per share. Dr. Estia J.
Uncertain macroeconomic conditions, extended trade disputes, and the relative strength of the U.S. Dollar may reduce end-demand for our customers’ products and, in turn, their purchases of our products, thereby reducing our revenues and earnings.
Dollar may reduce end-demand for our customers’ products and, in turn, their purchases of our products, thereby reducing our revenues and earnings.
Intellectual Property Risks 17 Table of Contents We may be unable to adequately protect our proprietary rights, which may limit our ability to compete effectively. We operate in an industry in which the ability to compete depends on the development or acquisition of proprietary technologies that must be protected to preserve the exclusive use of such technologies.
We operate in an industry in which the ability to compete depends on the development or acquisition of proprietary technologies that must be protected to preserve the exclusive use of such technologies. We devote substantial resources to establish and protect our patents and proprietary rights, and we rely on patent and intellectual property law to protect such rights.
Section 404 of the Sarbanes-Oxley Act of 2002 (“SOX”) requires our 18 Table of Contents management to report on, and our independent registered public accounting firm to attest to, the effectiveness of our internal control over financial reporting.
An effective internal control environment is necessary for us to produce reliable financial reports and is an important part of our effort to prevent financial fraud. Section 404 of the Sarbanes-Oxley Act of 2002 (“SOX”) requires our management to report on, and our independent registered public accounting firm to attest to, the effectiveness of our internal control over financial reporting.
If we are unable to attract and retain such employees, our ability to successfully implement our business strategy may be harmed.
Our continued operations and growth depend on our ability to attract and retain skilled and experienced personnel in a very competitive employment market. If we are unable to attract and retain such employees, our ability to successfully implement our business strategy may be harmed.
If we fail to develop and commercialize leading-edge technologies and products that are cost effective and maintain high standards of quality, and introduce them to the market on a timely basis, our competitive position and results of operations could be materially adversely affected.
If we fail to develop and commercialize leading-edge technologies and products that are cost effective and maintain high standards of quality, and introduce them to the market on a timely basis, our competitive position and results of operations could be materially adversely affected. 15 Table of Contents Our future success depends upon our ability to develop and market differentiated, leading-edge power conversion products for larger customers, potentially contributing to lengthy product development and sales cycles that may result in significant expenditures before revenues are generated.
In addition, our research and development and marketing and sales activities depend on highly skilled engineers and other personnel with technical skills, who are in high demand and are difficult to replace. Our continued operations and growth depend on our ability to attract and retain skilled and experienced personnel in a very competitive employment market.
The loss of the services of Dr. Vinciarelli could have a material adverse effect on our development of new products and on our business and results of operations. In addition, our research and development and marketing and sales activities depend on highly skilled engineers and other personnel with technical skills, who are in high demand and are difficult to replace.
Our ability to successfully implement our business strategy may be limited if we do not retain our key personnel and attract and retain skilled and experienced personnel. Our success depends on our ability to retain the services of our executive officers. The loss of one or more members of senior management could materially adversely influence our business and financial results.
Our success depends on our ability to retain the services of our executive officers. The loss of one or more members of senior management could materially adversely influence our business and financial results. In particular, we are dependent on the services of Dr. Vinciarelli, our founder, Chairman of the Board, Chief Executive Officer, and President.
For 2023, 2022 and 2021, Section 301 Tariffs totaled approximately 2.0%, 2.6% and 1.9%, respectively, of annual revenue, representing a material reduction in our gross profit margin as a percentage of annual revenue. We continue to evaluate alternative sources of raw materials, and in 2021, 2022, and 2023 we qualified non-Chinese vendors for certain high-volume raw materials and components.
For 2024, 2023 and 2022, Section 301 Tariffs totaled approximately 1.2%, 2.0% and 2.6%, respectively, of annual revenue, representing a reduction in our gross profit margin as a percentage of annual revenue. We have filed “duty drawback” applications with U.S.
We devote substantial resources to establish and protect our patents and proprietary rights, and we rely on patent and intellectual property law to protect such rights. This protection, however, may not prevent competitors from independently developing products similar or superior to our products.
This protection, however, may not prevent competitors from independently developing products similar or superior to our products.
Vinciarelli owns 93.8% of the issued and outstanding shares of our Class B Common Stock, which possess 10 votes per share. Dr. Estia J. Eichten, a member of our Board of Directors, owns the majority of the balance of the Class B Common Stock issued and outstanding. As such, Dr.
Eichten, a member of our Board of Directors, owns the majority of the balance of the Class B Common Stock issued and outstanding. As such, Dr. Vinciarelli, controlling in aggregate 79.6% of our outstanding voting securities, has effective control of our governance. 18 Table of Contents
Net revenues from customers in China and Hong Kong, accounted for approximately 17.7% in 2023, approximately 18.8% in 2022, and approximately 27.5% in 2021 of total net revenues.
For the years ended December 31, 2024, 2023, and 2022, revenues from sales outside the United States were 48.2%, 63.1%, and 67.6%, respectively, of our total revenues. Net revenues from customers in China and Hong Kong, accounted for approximately 12.6% in 2024, approximately 17.7% in 2023, and approximately 18.8% in 2022 of total net revenues.
We recovered $6,954,000 for the year ended December 31, 2023, however, we are not able to estimate the amount or timing of any additional recoveries, and there can be no assurance that there will be any additional recoveries. 12 Table of Contents In 2019, China implemented reciprocal inbound tariffs of up to 25% on products exported from the U.S., including all of our products.
We recovered $1,669,000 for the year ended December 31, 2024, however, we are not able to estimate the amount or timing of any additional recoveries, and there can be no assurance that there will be any additional recoveries. Uncertain macroeconomic conditions, extended trade disputes, an evolving and unpredictable tariff environment, export controls, and the relative strength of the U.S.
Our operating results recently have been influenced by a limited number of customers, and our future results may be similarly influenced.
We cannot predict the extent and/or impact of the current trade and tariff disputes between the United States and other countries, which adds to the uncertainty and risks associated with our business. Our operating results recently have been influenced by a limited number of customers, and our future results may be similarly influenced.
The labor market for skilled and unskilled workers has been very tight over the past year, and at times we have experienced longer than normal times in recruiting necessary resources, and have had to increase compensation to attract and retain employees. 15 Table of Contents Our operations could be affected by the complex laws, rules and regulations to which our business is subject, and political and other actions may adversely impact our business.
Our operations could be affected by the complex laws, rules and regulations to which our business is subject, and political and other actions may adversely impact our business.
Global economic and political uncertainties, notably those associated with trade policy, could materially and adversely affect our business and consolidated operating results. For the years ended December 31, 2023, 2022, and 2021, revenues from sales outside the United States were 63.1%, 67.6%, and 67.0%, respectively, of our total revenues.
In addition, if our operating results do not meet the expectations of investors, the market price of our Common Stock may decline. Global economic and political uncertainties, notably those associated with trade policy, could materially and adversely affect our business and consolidated operating results.
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As a result of these and other factors, we cannot assure you we will not experience significant fluctuations in future operating results on a quarterly or annual basis. In addition, if our operating results do not meet the expectations of investors, the market price of our Common Stock may decline.
Added
While these supply challenges have recently abated, as supply chains loosened up following the pandemic-related shortages and delays, they nonetheless remain risks to our business going forward as the global environment and supply chains are buffeted by changing geopolitical forces.
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We also expect international revenue from our distributors to continue to increase.
Added
On January 1, 2025, Vicor converted from a legacy enterprise resource planning (“ERP”) system to a modern ERP system. While this system change is a technology upgrade, we may not be able to successfully implement the ERP system without delays related to resource constraints or challenges with the design or testing phases of the implementation.
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We anticipate a reduction in Section 301 Tariffs we incur during 2024, given the ongoing transition to non-Chinese vendors, but we are not able to estimate the amount of such reduction, if any. Similarly, we cannot predict if or when the U.S. government may reduce or eliminate Section 301 Tariffs. We also have filed “duty drawback” applications with U.S.
Added
Inefficiencies in our financial reporting processes due to the conversion to a new ERP system could adversely affect our ability to produce accurate financial statements on a timely basis until the new ERP system and processes have matured.
Removed
We do not believe these tariffs, incurred by our Chinese and Hong Kong distributors, have had a material impact on the unit volume or dollar value of our exports to China, which we attribute to the differentiated performance of our products in market segments in which we have an established presence.
Added
Additionally, the effectiveness of our internal control over financial reporting could be adversely affected if the new ERP system is not successfully implemented. If we are not able to effectively integrate the new ERP system, on the anticipated timeline or at all, our operating results and financial condition could be materially and adversely affected.
Removed
However, we cannot predict the long-term influence of these tariffs on our competitive position in China, especially in light of the increased pressure by the Chinese government on Chinese manufacturers to meet the “China 2025” mandate for targeted development of Chinese technology sectors. Under this mandate, domestic technology vendors are explicitly favored over foreign vendors such as Vicor.
Added
We cannot be certain what changes to the regulatory environment might occur under the new administration. However, if the regulatory environment changes in ways that disrupt our business there could be a material and adverse effect on our operations and financial performance.
Removed
We believe we experienced reduced demand in certain segments (e.g., rail), notably in 2019, reflecting the significant role of state-owned enterprises in those segments. We regularly assess the competitive position and profitability of certain product lines sold in China and Hong Kong, and may choose to reduce our product offerings if competitive conditions and reduced profitability so warrant.
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In October 2022, the U.S. Government instituted export controls of certain semiconductor technologies to China, and subsequent to that action, the U.S. Department of Commerce added certain China-based companies to its entity list, which precludes shipment of semiconductor products to these companies without a license.
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These restrictions could cause a reduction in demand for our products from contract manufacturing customers that manufacture for high performance compute OEMs, as well as a reduction in exports to customers on the entity list. We cannot be certain what the ultimate impact of these export controls will be on our business, financial condition, and results of operations.
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Any such events, if prolonged, could have a material and adverse effect on our operating results and financial condition. 14 Table of Contents On December 24, 2019, elements of our network were compromised by a form of malware referred to as “ransomware.” In close collaboration with our service provider, we had restored computing and network functions to full operational status by the afternoon of December 27, 2019.
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Subsequent analysis by management and the forensic specialists we retained allowed us to conclude the incident had no material impact on our operations, financial condition and performance, or the integrity of our financial reporting systems. Our systems are designed to protect us from network security incidents and associated disruptions.
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Our security measures or those of our third party service provider detected, but did not prevent, the network security incident and the associated disruptions described above and may not detect or prevent such incidents and disruptions in the future.
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Our network segmented NIST 800-171 environment was not impacted by the December 2019 ransomware incident, but there can be no assurance that it will not be impacted by similar incidents in the future, which could have a material and adverse effect on our operating results and financial condition for the reasons described above.
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In particular, we are dependent on the services of Dr. Vinciarelli, our founder, Chairman of the Board, Chief Executive Officer, and President. The loss of the services of Dr. Vinciarelli could have a material adverse effect on our development of new products and on our business and results of operations.
Removed
For example, in 2022, the U.S. government imposed additional export controls on certain advanced computing semiconductor chips (chips, advanced computing chips, integrated circuits (“ICs”)), certain semiconductor manufacturing items and transactions for certain IC end use, including supercomputer end uses.
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Global economic uncertainty associated with the COVID-19 pandemic could materially and adversely affect our business and consolidated operating results.
Removed
While the COVID-19 pandemic is for the most part behind us, with limited incidents at Vicor in 2023, there is a continued risk that the virus will return and we are not able to predict the impact a further outbreak could have on our business, financial condition or results of operations.
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Trading conditions in China (inclusive of Hong Kong) had deteriorated through 2019 due to macroeconomic and trade-related uncertainties. At the beginning of 2020, trading conditions were significantly further affected by the COVID-19 pandemic, with much of the country’s manufacturing disrupted for January and February 2020.
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By late March 2020, after aggressive measures to contain the coronavirus, the Chinese government quickly implemented economic stimulus measures, and we experienced a rapid recovery of demand from China and Hong Kong. This demand was sustained through the first part of 2021 before subsiding in late 2021.
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As addressed in our discussion herein of market characteristics, exports to China and Hong Kong for 2023 totaled approximately $71,554,000, representing approximately 17.7% of total revenue for the year, and a reduction from the prior year. It is not possible for us to predict whether this market will rebound as the Chinese government has eliminated their zero-COVID policy.
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Our customers, business partners, and suppliers have been and may continue to be adversely affected by the COVID-19 pandemic, which also may contribute to a negative influence on our future financial and operational performance. Competitive Risks We compete with many companies possessing far greater resources.
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Our future success depends upon our ability to develop and market differentiated, leading-edge power conversion products for larger customers, potentially contributing to lengthy product development and sales cycles that may result in significant expenditures before revenues are generated.
Removed
An effective internal control environment is necessary for us to produce reliable financial reports and is an important part of our effort to prevent financial fraud.
Removed
Vinciarelli, controlling in aggregate 79.8% of our outstanding voting securities, has effective control of our governance.

Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

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Biggest changeNotwithstanding the extensive approach we take to cybersecurity, we may not be successful in preventing or mitigating a cybersecurity incident that could have a material adverse effect on us. While Vicor Corporation maintains 20 Table of Contents cybersecurity insurance, the costs related to cybersecurity threats or disruptions may not be fully insured. See Item 1A.
Biggest changeNotwithstanding the extensive approach we take to cybersecurity, we may not be successful in preventing or mitigating a cybersecurity incident that could have a material adverse effect on us. While Vicor Corporation maintains cybersecurity insurance, the costs related to cybersecurity threats or disruptions may not be fully insured. See Item 1A. “Risk Factors” for a discussion of cybersecurity risks.
Removed
“Risk Factors” for a discussion of cybersecurity risks.

Item 2. Properties

Properties — owned and leased real estate

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Biggest changeWe are currently negotiating with such corporate tenant regarding the renewal of this lease. All other domestic and foreign facilities are leased from third-party lessors on arms’ length terms. We believe our owned and leased facilities are adequate for our foreseeable needs.
Biggest changeThe initial term of the lease agreement expired on May 31, 2024 and was extended for an additional eighty-four months, commencing June 1, 2024 and ending May 31, 2031. All other domestic and foreign facilities are leased from third-party lessors on arms’ length terms. We believe our owned and leased facilities are adequate for our foreseeable needs.
ITEM 2. PROPERTIES Our corporate headquarters building in Andover, Massachusetts, which we own, provides approximately 90,000 square feet of office space for our sales, marketing, engineering, and administrative personnel. We also own a building of approximately 320,000 square feet (which includes the 90,000 square foot expansion described below) in Andover, Massachusetts, which houses all Massachusetts manufacturing activities.
ITEM 2. PROPERTIES Our corporate headquarters building in Andover, Massachusetts, which we own, provides approximately 90,000 square feet of office space for our sales, marketing, engineering, and administrative personnel.
We took occupancy of this addition during the first half of 2022 and the completion of the installation of advanced plating operations was completed in 2023. We own a single-story industrial building of approximately 31,000 square feet in Sunnyvale, California, which we have leased on a long-term basis to a corporate tenant, which has occupied the building since June 2016.
We also own a building of approximately 320,000 square feet in Andover, Massachusetts, which houses all Massachusetts manufacturing activities. 19 Table of Contents We own a single-story industrial building of approximately 31,000 square feet in Sunnyvale, California, which we have leased on a long-term basis to a corporate tenant, which has occupied the building since June 2016.
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Current capital investments are focused on the expansion of manufacturing capacity for the production of Advanced Products at our Andover facility. During 2020, we began construction of a two-story addition to our Andover manufacturing facility to expand the Advanced Products production area by approximately 90,000 square feet. Completion of the construction and production had been delayed from 2021 to 2023.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeMonth of Fourth Quarter 2023 Total Number of Shares Purchased Average Price Paid per Share Total Number of Shares Purchased Pursuant to November 2000 Plan Remaining Dollar Value of Shares Authorized For Purchase Pursuant to November 2000 Plan October 1 - 31, 2023 — $ — — $ 8,541,000 November 1 - 30, 2023 — $ — — $ 8,541,000 December 1 - 31, 2023 — $ — — $ 8,541,000 Total — $ — — $ 8,541,000 Stockholder Return Performance Graph The graph set forth below presents the cumulative, five-year stockholder return for each of (i) the Company’s Common Stock, (ii) the Standard & Poor’s 500 Index (“S&P 500 Index”), a value-weighted index made up of 500 of the largest, by market capitalization, listed companies, (iii) the Standard & Poor’s SmallCap 600 Index (“S&P SmallCap 600 Index”), a value-weighted index of 600 listed companies with market capitalizations between $750,000,000 and $4,600,000,000, and (iv) the Standard & Poor’s MidCap 400 Index (“S&P MidCap 400 Index”), a value-weighted index of 400 listed companies with market capitalizations between $4,600,000,000 and $12,700,000,000.
Biggest changeMonth of Fourth Quarter 2024 Total Number of Shares Purchased Average Price Paid per Share Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs Approximate Dollar Value of Shares That May Yet Be Purchased Under the Plans or Programs October 1 - 31, 2024 — $ — — $ 99,502,521 November 1 - 30, 2024 — $ — — $ 99,502,521 December 1 - 31, 2024 — $ — — $ 99,502,521 Total — $ — — $ 99,502,521 Stockholder Return Performance Graph The graph set forth below presents the cumulative, five-year stockholder return for each of (i) the Company’s Common Stock, (ii) the Standard & Poor’s 500 Index (“S&P 500 Index”), a value-weighted index made up of 500 of the largest, by market capitalization, listed companies, and (iii) the Standard & Poor’s SmallCap 600 Index (“S&P SmallCap 600 Index”), a value-weighted index of 600 listed companies with market capitalizations between $750,000,000 and $4,600,000,000.
We have no formal policy regarding dividends and, as such, investors cannot make assumptions regarding the possibility of future dividend payments nor the amounts and timing thereof. As of December 31, 2023, we have no plans to declare or pay a cash dividend in the foreseeable future.
We have no formal policy regarding dividends and, as such, investors cannot make assumptions regarding the possibility of future dividend payments nor the amounts and timing thereof. As of December 31, 2024, we have no plans to declare or pay a cash dividend in the foreseeable future.
The graph assumes an investment of $100 on December 31, 2018, in each of our Common Stock, the S&P 500 Index, the S&P SmallCap 600 Index, and the S&P MidCap 400 Index, and assumes reinvestment of all dividends.
The graph assumes an investment of $100 on December 31, 2019, in each of our Common Stock, the S&P 500 Index, and the S&P SmallCap 600 Index, and assumes reinvestment of all dividends.
As of February 16, 2024, there were 96 holders of record of our Common Stock and 12 holders of record of our Class B Common Stock. These numbers do not reflect persons or entities that hold their shares in nominee or “street name” through various brokerage firms.
As of February 18, 2025, there were 92 holders of record of our Common Stock and 11 holders of record of our Class B Common Stock. These numbers do not reflect persons or entities that hold their shares in nominee or “street name” through various brokerage firms.
Issuer Purchases of Equity Securities In November 2000, our Board of Directors authorized the repurchase of up to $30,000,000 of our Common Stock (the “November 2000 Plan”). The November 2000 Plan authorizes us to make such repurchases from time to time in the open market or through privately negotiated transactions.
Issuer Purchases of Equity Securities In November 2000, our Board of Directors authorized the repurchase of up to $30,000,000 of our Common Stock (the “November 2000 Plan”). In July 2024, our Board of Directors authorized the repurchase of up to $100,000,000 of our Common Stock (the “New Repurchase Authorization”).
The historical information set forth below is not necessarily indicative of future performance. 22 Table of Contents Comparison of Five Year Cumulative Return Among Vicor Corporation, S&P 500 Index, S&P SmallCap 600 Index, and S&P MidCap 400 Index 2018 2019 2020 2021 2022 2023 Vicor Corporation $ 100.00 $ 123.63 $ 244.03 $ 336.01 $ 142.22 $ 118.89 S&P 500 Index $ 100.00 $ 131.49 $ 155.68 $ 200.37 $ 164.08 $ 207.21 S&P SmallCap 600 Index $ 100.00 $ 122.78 $ 136.64 $ 173.29 $ 145.39 $ 168.73 S&P MidCap 400 Index $ 100.00 $ 126.20 $ 143.44 $ 178.95 $ 155.58 $ 181.15 Our equity plan information required by this item is incorporated by reference to the information in Part III, Item 12 of this Annual Report on Form 10-K.
The historical information set forth below is not necessarily indicative of future performance. 21 Table of Contents Comparison of Five Year Cumulative Return Among Vicor Corporation, S&P 500 Index, and S&P SmallCap 600 Index 2019 2020 2021 2022 2023 2024 Vicor Corporation $ 100.00 $ 197.39 $ 271.79 $ 115.03 $ 96.17 $ 103.39 S&P 500 Index $ 100.00 $ 118.40 $ 152.39 $ 124.79 $ 157.59 $ 197.02 S&P SmallCap 600 Index $ 100.00 $ 111.29 $ 141.13 $ 118.41 $ 137.42 $ 149.37 Equity Compensation Plan Information Our equity plan information required by this item is incorporated by reference to the information in Part III, Item 12 of this Annual Report on Form 10-K.
The timing and amounts of Common Stock repurchases are at the discretion of management based on its view of economic and financial market conditions.
The New Repurchase Authorization replaces the November 2000 Plan in its entirety and no further repurchases will be made pursuant to the November 2000 Plan. The timing and amounts of Common Stock repurchases pursuant to the New Repurchase Authorization are at the discretion of the Company’s President and Chief Executive Officer based upon economic and financial market conditions.
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We were included within the S&P MidCap 400 Index and removed from the S&P SmallCap 600 Index in December 2021. We were removed from the S&P MidCap 400 Index and included within the S&P SmallCap 600 Index in October 2023.
Removed
The S&P SmallCap 600 Index and, previously, the S&P MidCap 400 Index were selected because they include or included (as applicable) companies with market capitalizations comparable to ours and because we do not believe that we can reasonably identify a published industry or line-of-business index or a specific peer group that would offer a meaningful comparison.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

40 edited+11 added−8 removed27 unchanged
Biggest changeThe increase in gross margin dollars and gross margin percentage was primarily due to higher sales volume, improved sales mix, and certain reductions in supply chain costs and recovery of tariff costs. • Backlog, representing the total of orders received for products for which shipment is scheduled within the next 12 months, was approximately $160,805,000 at the end of 2023, as compared to $304,392,000 at the end of 2022 as a result of getting more current on overdue backlog. • Operating expenses for 2023 increased $213,000, or 0.1%, to $153,571,000 from $153,358,000 for 2022. • We reported net income for 2023 of $53,595,000, or $1.19 per diluted share, compared to net income of $25,446,000, or $0.57 per diluted share, for 2022. • In 2023, as a result of activities associated with our construction and capacity expansion, depreciation and amortization totaled $17,240,000, and capital expenditures were $33,452,000, compared to $13,776,000 and $63,966,000, respectively, for 2022. • Inventories increased by approximately $5,169,000, or 5.1%, to $106,579,000 at the end of 2023, as compared to $101,410,000 at the end of 2022, primarily consisting of raw materials.
Biggest changeThe decrease in gross margin dollars was primarily the result of lower sales volume in 2024, with the increase in gross margin percentage primarily attributable to higher royalty revenue and improved production efficiencies compared to 2023 along with certain reductions in supply chain costs. • Backlog, representing the total of orders received for products for which shipment is scheduled within the next 12 months, was approximately $155,505,000 at the end of 2024, as compared to $160,805,000 at the end of 2023. • Operating expenses for 2024 increased $31,737,000, or 20.7%, to $185,308,000 from $153,571,000 for 2023.
Given the growth profiles of the markets we serve with our Advanced Products line and our Brick Products line, our strategy involves a transition in organizational focus, emphasizing investment in our Advanced Products line and targeting high growth market segments with a low-mix, high-volume operational model, while maintaining a profitable business in the mature market segments we serve with our Brick Products line with a high-mix, low-volume operational model.
Given the growth profiles of the markets we serve with our Advanced Products line and our Brick Products line, our strategy involves a continuing transition in organizational focus, emphasizing investment in our Advanced Products line and targeting high growth market segments with a low-mix, high-volume operational model, while maintaining a profitable business in the mature market segments we serve with our Brick Products line with a high-mix, low-volume operational model.
For both Brick and Advanced product lines, the methodology used compares on-hand quantities to forecasted usage and historical consumption, such that amounts of inventory on hand in excess of management’s estimate of expected future utility, are fully reserved.
For both our Brick and Advanced Product lines, the methodology used compares on-hand quantities to forecasted usage and historical consumption, such that amounts of inventory on hand in excess of management’s estimate of expected future utility, are fully reserved.
Supply chain disruptions, including those associated with our reliance on outsourced package 24 Table of Contents process steps that are essential in the production of some of our Advanced Products, and those relating, for example, to the procurement of raw material, have in the past negatively impacted and may in the future negatively impact our operating results.
Supply chain disruptions, including those associated with our reliance on outsourced package 23 Table of Contents process steps that are essential in the production of some of our Advanced Products, and those relating, for example, to the procurement of raw material, have in the past negatively impacted and may in the future negatively impact our operating results.
The following table sets forth certain items of selected consolidated financial information as a percentage of net revenues for the years ended December 31, 2023, 2022, and 2021. This table and the subsequent discussion should be read in conjunction with the Consolidated Financial Statements and related notes contained elsewhere in this report.
The following table sets forth certain items of selected consolidated financial information as a percentage of net revenues for the years ended December 31, 2024, 2023, and 2022. This table and the subsequent discussion should be read in conjunction with the Consolidated Financial Statements and related notes contained elsewhere in this report.
Our quarterly gross margin as a percentage of net revenues may vary, depending on production volumes, 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.
Our quarterly gross margin as a percentage of 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 provision for income taxes for the years ended December 31, 2023 and 2022 included estimated federal, state and foreign income taxes in jurisdictions in which the Company does not have sufficient tax attributes.
The provision for income taxes for the years ended December 31, 2024 and 2023 included estimated federal, state, and foreign income taxes in jurisdictions in which the Company does not have sufficient tax attributes.
See Note 2 – Significant Accounting Policies – Impact of recently issued accounting standards , to the Consolidated Financial Statements for a description of recently issued and adopted accounting pronouncements, including the dates of adoption and expected impact on our financial position and results of operations. 26 Table of Contents Other new pronouncements issued but not effective until after December 31, 2023 are not expected to have a material impact on our consolidated financial statements.
See Note 2 – Significant Accounting Policies – Impact of recently issued accounting standards , to the Consolidated Financial Statements for a description of recently issued and adopted accounting pronouncements, including the dates of adoption and expected impact on our financial position and results of operations. 25 Table of Contents Other new pronouncements issued but not effective until after December 31, 2024 are not expected to have a material impact on our consolidated financial statements.
Certain state tax credits, though, will likely never be released by the valuation allowance. If and when the Company determines the valuation allowance should be released (i.e., reduced), the adjustment would result in a tax benefit reported in that period’s Consolidated Statements of Operations, the effect of which would be an increase in reported net income.
Certain state tax credits, though, will likely never be released by the valuation allowance. If and when we determine the valuation allowance should be released (i.e., reduced), the adjustment would result in a tax benefit reported in that period’s Consolidated Statements of Operations, the effect of which would be an increase in reported net income.
See Note 14 to the Consolidated Financial Statements for disclosure regarding our current assessment of the valuation allowance against all domestic deferred tax assets, and the possible release (i.e., reduction) of the allowance in the future.
See Note 15 to the Consolidated Financial Statements for disclosure regarding our current assessment of the valuation allowance against all net domestic deferred tax assets, and the possible release (i.e., reduction) of the allowance in the future.
Year Ended December 31, 2023 2022 2021 Net revenues 100.0 % 100.0 % 100.0 % Gross margin 50.6 % 45.2 % 49.6 % Selling, general and administrative expenses 21.2 % 21.6 % 19.3 % Research and development expenses 16.8 % 15.2 % 14.8 % Income before income taxes 14.9 % 7.2 % 15.8 % Critical Accounting Policies and Estimates Management’s Discussion and Analysis of Financial Condition and Results of Operations is based upon our Consolidated Financial Statements, which have been prepared in accordance with accounting principles generally accepted in 25 Table of Contents the United States (“U.S.
Year Ended December 31, 2024 2023 2022 Net revenues 100.0 % 100.0 % 100.0 % Gross margin 51.2 % 50.6 % 45.2 % Selling, general and administrative expenses 27.0 % 21.2 % 21.6 % Research and development expenses 19.2 % 16.8 % 15.2 % Income before income taxes 2.9 % 14.9 % 7.2 % Critical Accounting Policies and Estimates 24 Table of Contents Management’s Discussion and Analysis of Financial Condition and Results of Operations is based upon our Consolidated Financial Statements, which have been prepared in accordance with accounting principles generally accepted in the United States (“U.S.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Overview A discussion regarding our results of operations for the year ended December 31, 2022, compared to the year ended December 31, 2021, was included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022, on pages 32-35 under Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations”, which was filed with the SEC on February 28, 2023.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Overview A discussion regarding our results of operations for the year ended December 31, 2023, compared to the year ended December 31, 2022, was included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023, on pages 27-29 under Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations”, which was filed with the SEC on February 28, 2024.
("VJCL"), for which the functional currency is the Japanese Yen, and all other subsidiaries in Europe and Asia, for which the functional currency is the U.S. Dollar. These subsidiaries in Europe and Asia experienced more favorable foreign currency exchange rate fluctuations in 2023 compared to 2022.
("VJCL"), for which the functional currency is the Japanese Yen, and all other subsidiaries in Europe and Asia, for which the functional currency is the U.S. Dollar. These subsidiaries in Europe and Asia experienced more unfavorable foreign currency exchange rate fluctuations in 2024 compared to 2023.
As a result, management has concluded, as of December 31, 2023, it is more likely than not the Company’s net domestic deferred tax assets will not be realized, and a full valuation allowance against all net domestic deferred tax assets is still warranted as of December 31, 2023.
As a result, management has concluded, as of December 31, 2024, it is more likely than not our net domestic deferred tax assets will not be realized, and a full valuation allowance against all net domestic deferred tax assets is still warranted as of December 31, 2024.
As of December 31, 2023, we had a total of approximately $15,014,000 of cancelable and non-cancelable capital expenditure commitments, principally for manufacturing and production equipment, which we intend to fund with existing cash, and approximately $2,168,000 of capital expenditure items and internal-use software which had been received and included in Property, plant and equipment in the accompanying Consolidated Balance Sheets, but not yet paid for.
As of December 31, 2024, we had a total of approximately $12,669,000 of cancelable and non-cancelable capital expenditure commitments, principally for manufacturing and production equipment, which we intend to fund with existing cash, and approximately $1,946,000 of capital expenditure items and internal-use software which had been received and included in Property, plant and equipment in the accompanying Consolidated Balance Sheets, but not yet paid for.
Gross margin, as a percentage of net revenues increased to 50.6% for 2023 from 45.2% for 2022.
Gross margin, as a percentage of net revenues increased to 51.2% for 2024 from 50.6% for 2023.
The primary use of cash during the year ended December 31, 2023 was $33,452,000 for the purchase of machinery and equipment and internal-use software. 29 Table of Contents In November 2000, our Board of Directors authorized the repurchase of up to $30,000,000 of Common Stock (the “November 2000 Plan”).
The primary use of cash during the year ended December 31, 2024 was $23,602,000 for the purchase of machinery and equipment and internal-use software. In November 2000, our Board of Directors authorized the repurchase of up to $30,000,000 of our Common Stock (the “November 2000 Plan”).
Our quarterly operating margin as a percentage of net revenues also may vary with changes in revenue and product level profitability, but our operating costs are largely associated with compensation and related employee costs, which are not subject to sudden or significant changes. 2023 Financial Highlights • Net revenues increased 1.5% to $405,059,000 for 2023, from $399,079,000 for 2022.
Our quarterly operating margin as a percentage of net revenues also may vary with changes in revenue and product level profitability, but our operating costs are largely associated with compensation and related employee costs, which are not subject to sudden or significant changes. 2024 Financial Highlights • Net revenues decreased 11.4% to $359,058,000 for 2024, from $405,059,000 for 2023.
We reported net income for the year ended December 31, 2023 of $53,595,000, or $1.19 per diluted share, as compared to $25,446,000, or $0.57 per diluted share, for the year ended December 31, 2022. Liquidity and Capital Resources At December 31, 2023, we had $242,219,000 in cash and cash equivalents.
We reported net income for the year ended December 31, 2024 of $6,129,000, or $0.14 per diluted share, as compared to $53,595,000, or $1.19 per diluted share, for the year ended December 31, 2023. Liquidity and Capital Resources At December 31, 2024, we had $277,273,000 in cash and cash equivalents.
Customer forecasts, particularly those of OEM, ODM, and contract manufacturing customers to which we supply Advanced Products in high volumes, are subject to scheduling changes on short notice, contributing to operating inefficiencies and excess costs.
We plan our production and inventory levels based on management’s estimates of customer demand, customer forecasts, and other information sources. Customer forecasts, particularly those of OEM, ODM, and contract manufacturing customers to which we supply Advanced Products in high volumes, are subject to scheduling changes on short notice, contributing to operating inefficiencies and excess costs.
The provision for income taxes and the effective income tax rate for the years ended December 31 were as follows (dollars in thousands): 2023 2022 Provision for income taxes $ 6,644 $ 3,261 Effective income tax rate 11.0 % 11.4 % The effective tax rates were lower than the statutory tax rates for the year ended December 31, 2023 and 2022 primarily due to the Company’s full valuation allowance position against domestic deferred tax assets during both years.
The provision for income taxes and the effective income tax rate for the years ended December 31 were as follows (dollars in thousands): 2024 2023 Provision for income taxes $ 4,348 $ 6,644 Effective income tax rate 41.5 % 11.0 % The effective tax rates differ from the statutory tax rates for the years ended December 31, 2024 and 2023 primarily due to the Company’s full valuation allowance position against net domestic deferred tax assets.
The ratio of current assets to current liabilities was 9.5:1 at December 31, 2023, as compared to 5.6:1 at December 31, 2022. Net working capital increased $78,142,000 to $376,197,000 at December 31, 2023 from $298,055,000 at December 31, 2022.
The ratio of current assets to current liabilities was 7.5:1 at December 31, 2024, as compared to 9.5:1 at December 31, 2023. Net working capital increased $25,017,000 to $401,214,000 at December 31, 2024 from $376,197,000 at December 31, 2023.
The significant changes in the components of "Other income (expense), net" for the years ended December 31 were as follows (in thousands): Increase 2023 2022 (decrease) Interest income, net $ 8,217 $ 1,313 $ 6,904 Rental income, net 792 792 — Foreign currency losses, net (161 ) (653 ) 492 Other, net 38 34 4 $ 8,886 $ 1,486 $ 7,400 28 Table of Contents Our exposure to market risk fluctuations in foreign currency exchange rates relates to the operations of Vicor Japan Company, Ltd.
The significant changes in the components of "Other income (expense), net" for the years ended December 31 were as follows (in thousands): 27 Table of Contents Increase 2024 2023 (decrease) Interest income, net $ 11,468 $ 8,217 $ 3,251 Rental income, net 992 792 200 Foreign currency losses, net (622 ) (161 ) (461 ) Other, net (41 ) 38 (79 ) $ 11,797 $ 8,886 $ 2,911 Our exposure to market risk fluctuations in foreign currency exchange rates relates to the operations of Vicor Japan Company, Ltd.
The increase in gross margin dollars and gross margin percentage was primarily due to higher sales volume, improved sales mix, and certain reductions in supply chain costs, including a reduction of $9,950,000 in outsourced manufacturing costs partially offset by incremental costs of bringing production in-house for certain Advanced Products, and a reduction of freight-in and tariff spending of $12,747,000 (net of approximately $6,954,000 in duty drawback recovery of previously paid tariffs in the twelve months ended December 31, 2023 and $229,000 in duty drawback recovery in the twelve months ended December 31, 2022).
The decrease in gross margin dollars was primarily the result of lower sales volume in 2024, with the increase in gross margin percentage primarily attributable to higher royalty revenue and improved production efficiencies compared to 2023 along with certain reductions in supply chain costs, including a reduction of $1,958,000 in outsourced manufacturing costs partially offset by incremental costs of bringing production in-house for certain Advanced Products, offset by slightly unfavorable sales mix and an increase in freight-in and tariff spending of $953,000 (net of approximately $1,669,000 in duty drawback recovery in 2024 and $6,954,000 in duty drawback recovery in 2023 of previously paid tariffs).
With our Brick Products, we generally serve a fragmented base of large and small customers, concentrated in aerospace and defense electronics, industrial equipment, instrumentation and test equipment, and transportation (notably in rail and heavy equipment applications). With our strategic emphasis on larger, high-volume customers, we expect to experience over time a greater concentration of sales among relatively fewer customers.
With our Brick Products, we generally serve a fragmented base of large and small customers, concentrated in aerospace and defense electronics, industrial equipment, instrumentation and test equipment, and transportation (notably in rail and heavy equipment applications).
Selling, general, and administrative expenses were $85,714,000 for 2023, a decrease of $550,000, or 0.6%, as compared to $86,264,000 for 2022. As a percentage of net revenues, selling, general, and administrative expenses decreased to 21.2% in 2023 from 21.6% in 2022.
Selling, general, and administrative expenses were $96,886,000 for 2024, an increase of $11,172,000, or 13.0%, as compared to $85,714,000 for 2023. As a percentage of net revenues, selling, general, and administrative expenses increased to 27.0% in 2024 from 21.2% in 2023.
Research and development expenses increased $7,263,000, or 12.0%, to $67,857,000 in 2023 from $60,594,000 in 2022. As a percentage of net revenues, research and development expenses increased to 16.8% in 2023 from 15.2% in 2022.
Research and development expenses increased $1,065,000, or 1.6%, to $68,922,000 in 2024 from $67,857,000 in 2023. As a percentage of net revenues, research and development expenses increased to 19.2% in 2024 from 16.8% in 2023.
See Note 15 to the Consolidated Financial Statements for additional information.
See Note 16 to the Consolidated Financial Statements for additional information regarding the SynQor litigation-contingency expense.
The primary working capital changes were due to the following (in thousands): Increase (decrease) Cash and cash equivalents $ 51,608 Accounts receivable (12,798 ) Inventories 5,169 Other current assets 13,783 Accounts payable 10,107 Accrued compensation and benefits (369 ) Accrued expenses 3,511 Sales allowances (1,821 ) Short-term lease liabilities (414 ) Income taxes payable (674 ) Short-term deferred revenue and customer prepayments 10,040 $ 78,142 The primary sources of cash for the year ended December 31, 2023 were $74,528,000 of cash generated from operations and $10,602,000 of cash received in connection with the exercise of options to purchase our Common Stock awarded under our stock option plans and the issuance of Common Stock under our 2017 Employee Stock Purchase Plan.
The primary working capital changes were due to the following (in thousands): 28 Table of Contents Increase (decrease) Cash and cash equivalents $ 35,054 Accounts receivable 317 Inventories (547 ) Other current assets 7,844 Accounts payable 3,363 Accrued compensation and benefits 366 Accrued litigation (20,388 ) Accrued expenses (1,487 ) Sales allowances 1,815 Short-term lease liabilities 148 Income taxes payable 687 Short-term deferred revenue and customer prepayments (2,155 ) $ 25,017 The primary sources of cash for the year ended December 31, 2024 were $50,842,000 of cash generated from operations and $8,490,000 of cash received in connection with the exercise of options to purchase our Common Stock awarded under our stock option plans and the issuance of Common Stock under our 2017 Employee Stock Purchase Plan.
Net revenues for Advanced Products for 2023 decreased compared to 2022, primarily due to manufacturing constraints, customer demand and schedule delays. • Export sales, as a percentage of total revenues, represented approximately 63.1% in 2023 and 67.6% in 2022. • Gross margin increased to $204,929,000 for 2023, from $180,559,000 for 2022.
The decrease in net revenues for Brick Products was primarily due to reduced market demand. • Export sales, as a percentage of total revenues, represented approximately 48.2% in 2024 and 63.1% in 2023. • Gross margin decreased to $183,998,000 for 2024, from $204,929,000 for 2023.
Year ended December 31, 2023 compared to Year ended December 31, 2022 Consolidated net revenues for 2023 were $405,059,000, an increase of $5,980,000, or 1.5%, as compared to $399,079,000 for 2022.
Year ended December 31, 2024 compared to Year ended December 31, 2023 Consolidated net revenues for 2024 were $359,058,000, a decrease of $46,001,000, or 11.4%, as compared to $405,059,000 for 2023.
(2) Increase primarily attributable to annual compensation adjustments in May 2023 and higher stock-based compensation expense associated with stock options awarded in May 2023. (3) Increase attributable to net additions of furniture and fixtures and capitalization of building improvements. (4) Increase primarily attributable to an increase in computer and software expenses.
(2) Increase primarily attributable to annual compensation adjustments in May 2024 and higher stock-based compensation expense associated with stock options awarded in May 2024. (3) Increase primarily attributable to an increase in post-judgment interest relating to the SynQor litigation-contingency accrual. (4) Increase primarily attributable to an increase in computer software services relating to new internal-use software implementation.
In 2023, interest income, net increased due to higher interest rates received on the cash and cash equivalents balance held by the Company. In 2022, "Interest income, net" includes an immaterial error correction of $834,000 related to the amortization of bond premiums on available-for-sale securities. Income before income taxes was $60,244,000 in 2023, as compared to $28,687,000 in 2022.
In 2024, interest income increased due to higher balances of cash and cash equivalents held by the Company. Income before income taxes was $10,487,000 in 2024, as compared to $60,244,000 in 2023.
The components of the $550,000 decrease in selling, general, and administrative expenses were as follows (dollars in thousands): Increase (decrease) Legal fees $ (6,000 ) (41.9 )% (1 ) Travel expense 303 13.8 % (2 ) Depreciation and amortization 348 8.1 % (3 ) Advertising expenses 605 14.0 % (4 ) Commissions 792 27.4 % (5 ) Outside services 1,253 46.5 % (6 ) Compensation 1,592 3.4 % (7 ) Other, net 557 7.0 % $ (550 ) (0.6 )% 27 Table of Contents (1) Decrease primarily attributable to a decrease in activity related to the SynQor litigation offset by increases in certain corporate legal matters.
The components of the $11,172,000 increase in selling, general, and administrative expenses were as follows (dollars in thousands): Increase (decrease) Legal fees $ 10,854 130.3 % (1 ) Compensation 1,575 3.2 % (2 ) Litigation, other 992 100.0 % (3 ) Information technology expense 289 11.3 % (4 ) Professional services fees 285 10.7 % (5 ) Consultants 220 5.5 % (6 ) Commissions (3,483 ) (94.5 )% (7 ) Other, net 440 2.9 % $ 11,172 13.0 % 26 Table of Contents (1) Increase primarily attributable to an increase in activity related to corporate legal matters, including the assertion of our intellectual property rights.
(5) Increase primarily attributable to an increase in the use of consultants. (6) Decrease primarily attributable to an increase in deferred costs capitalized for certain non-recurring engineering projects for which the related revenues had been deferred. Litigation-contingency expense was $6,500,000 for 2022, which related to the SynQor litigation, as compared to $0 for 2023.
(5) Increase attributable to net additions of furniture and fixtures and capitalization of building improvements. (6) Decrease in engineering supplies. (7) Decrease primarily attributable to decreased prototype development costs for Advanced Products. Litigation-contingency expense was $19,500,000 for 2024, which related to the SynQor litigation, as compared to $0 for 2023.
If the positive operating results continue, and the Company’s concerns about industry uncertainty and world events, supply and factory capacity constraints, program adoption and process issues with the production of Advanced Products are resolved, and the amount of tax benefits the Company is able to utilize to the point that the Company believes future taxable income can be more reliably forecasted, the Company may release all or a portion of the valuation allowance in the near-term.
If the positive operating results continue, and our concerns about the unpredictability of customer orders in certain markets, product transitions, new program introductions and adoption times of new technology offerings are resolved, and we believe future taxable income can be more reliably forecasted, we may release all or a portion of the valuation allowance in the near-term.
This operating uncertainty also makes it difficult to predict the availability and utilization of tax benefits over the next several years.
Despite recent positive operating results, we face uncertainties in forecasting our operating results due to the unpredictability of customer orders in certain markets, product transitions, new program introductions and adoption times of new technology offerings. This operating uncertainty also makes it difficult to predict the availability and utilization of tax benefits over the next several years.
The components of the $7,263,000 increase in research and development expenses were as follows (dollars in thousands): Increase (decrease) Project and pre-production materials $ 3,632 42.3 % (1 ) Compensation 2,685 6.6 % (2 ) Depreciation and amortization 352 14.5 % (3 ) Computer and software expense 331 31.1 % (4 ) Outside services 291 42.0 % (5 ) Deferred costs (231 ) (63.2 )% (6 ) Other, net 203 2.8 % $ 7,263 12.0 % (1) Increase primarily attributable to increased prototype development costs for Advanced Products.
The components of the $1,065,000 increase in research and development expenses were as follows (dollars in thousands): Increase (decrease) Compensation $ 1,417 3.3 % (1 ) Overhead absorption 1,194 56.2 % (2 ) Waste disposal 871 100.0 % (3 ) Facilities allocations 366 11.9 % (4 ) Depreciation and amortization 366 13.1 % (5 ) Supplies (1,091 ) (41.9 )% (6 ) Project and pre-production materials (2,175 ) (17.8 )% (7 ) Other, net 117 2.0 % $ 1,065 1.6 % (1) Increase primarily attributable to annual compensation adjustments in May 2024 and higher stock-based compensation expense associated with stock options awarded in May 2024.
Net revenues, by product line, for the years ended December 31 were as follows (dollars in thousands): Increase (decrease) 2023 2022 $ % Advanced Products $ 223,893 $ 243,321 $ (19,428 ) (8.0 )% Brick Products 181,166 155,758 25,408 16.3 % Total $ 405,059 $ 399,079 $ 5,980 1.5 % The decrease in net revenues for Advanced Products was primarily due to manufacturing constraints, customer demand and schedule delays.
Net revenues, by product line, for the years ended December 31 were as follows (dollars in thousands): Decrease 2024 2023 $ % Advanced Products including Royalty Revenue $ 197,329 $ 223,893 $ (26,564 ) (11.9 )% Brick Products 161,729 181,166 (19,437 ) (10.7 )% Total $ 359,058 $ 405,059 $ (46,001 ) (11.4 )% The decrease in net revenues for Advanced Products was primarily due to continued softness in underpenetrated markets, partially offset by increased royalty revenue.
The increase in net revenues for Brick Products was primarily due to favorable market conditions and pricing, and available capacity for manufacturing Brick Products. Gross margin for 2023 increased $24,370,000, or 13.5%, to $204,929,000 from $180,559,000 in 2022. Gross margin as a percentage of net revenues increased to 50.6% in 2023 from 45.2% in 2022.
The decrease in net revenues for Brick Products was primarily due to reduced market demand. Gross margin for the twelve months ended December 31, 2024 decreased $20,931,000, or 10.2%, to $183,998,000 from $204,929,000 for the twelve months ended December 31, 2023.
Removed
Our quarterly consolidated operating results can be difficult to forecast and have been subject to significant fluctuations. We plan our production and inventory levels based on management’s estimates of customer demand, customer forecasts, and other information sources.
Added
With our strategic emphasis on larger, high-volume customers, we expect to experience over time a greater concentration of sales, including from intellectual property licensing among relatively fewer customers. Our quarterly consolidated operating results can be difficult to forecast and have been subject to significant fluctuations.
Removed
While we continue to make progress in moving outsourced manufacturing steps in-house to the Company, we are still experiencing long lead times on certain raw material components, and uncertainty of output from our outsourced manufacturing supplier.
Added
Net revenues for Advanced Products for 2024 decreased compared to 2023, primarily due to continued softness in underpenetrated markets, partially offset by increased royalty revenue associated with intellectual property licensing.
Removed
The increase was primarily in sales of Brick Products due to favorable market conditions and pricing, and available capacity for manufacturing Brick Products.
Added
Litigation-contingency expense was $19,500,000 for 2024, which related to the litigation with SynQor, Inc. ("SynQor"), as compared to $0 for 2023.
Removed
Despite recent positive operating results, the Company faces uncertainties in forecasting its operating results due to vendor supply and factory capacity constraints, certain process issues with the production of Advanced Products and the unpredictability in certain markets, product transitions, new program introductions and adoption times of new technology offerings.
Added
See Note 16 to the Consolidated Financial Statements for additional information regarding the SynQor litigation-contingency expense. • We reported net income for 2024 of $6,129,000, or $0.14 per diluted share, compared to net income of $53,595,000, or $1.19 per diluted share, for 2023. • In 2024, as a result of a full year of activities in our expanded manufacturing facility and the related capital equipment being placed in service during the year, depreciation and amortization totaled $18,626,000, and capital expenditures were $23,602,000, compared to $17,240,000 and $33,452,000, respectively, for 2023. • Inventories decreased by approximately $547,000, or 0.5%, to $106,032,000 at the end of 2024, as compared to $106,579,000 at the end of 2023.
Removed
(2) Increase primarily attributable to an increase in travel by the Company’s sales and marketing personnel. (3) Increase attributable to net additions of furniture and fixtures and capitalization of building improvements. (4) Increase primarily attributable to increases in sales support expenses, direct mailings, and advertising in trade publications.
Added
Gross margin, as a percentage of net revenues, increased to 51.2% for the twelve-month period ended December 31, 2024, as compared to 50.6% for the twelve-month period ended December 31, 2023.
Removed
(5) Increase primarily attributable to an increase in net revenues subject to commissions. (6) Increase primarily attributable to an increase in the use of consultants. (7) Increase primarily attributable to annual compensation adjustments in May 2023 and higher stock-based compensation expense associated with stock options awarded in May 2023.
Added
(5) Increase primarily attributable to an increase in audit and tax fees. (6) Increase primarily attributable to an increase in the use of consultants and outside services relating to new internal-use software implementation. (7) Decrease primarily attributable to the fact that the Company no longer uses outside sales representatives.
Removed
The November 2000 Plan authorizes us to make such repurchases from time to time in the open market or through privately negotiated transactions. The timing of such repurchases and the number of shares purchased in each transaction are at the discretion of management based on its view of economic and financial market conditions.
Added
(2) Increase primarily attributable to a decrease in research and development personnel incurring time on production activities, compared to research and development activities. (3) Increase primarily attributable to an increase in waste disposal activities of Advanced Products related to improving production process capabilities. (4) Increase primarily attributable to an increase in utilities and building maintenance expenses.
Removed
We did not repurchase shares of Common Stock under the November 2000 Plan during the year ended December 31, 2023. As of December 31, 2023, we had approximately $8,541,000 remaining for share repurchases under the November 2000 Plan.
Added
The Company's tax expense and the rate for the year ended December 31, 2024 continues to be negatively impacted by the capitalization of research and development expenses under Section 174 in the U.S., which given the Company's performance, is having an outsized impact on the rate by increasing the taxable income position, which causes a significant tax expense.
Added
This is further compounded by the Company not getting a deferred tax benefit from temporary differences due to the full valuation allowance on net domestic deferred tax assets.
Added
In July 2024, our Board of Directors authorized the repurchase of up to $100,000,000 of our Common Stock (the “New Repurchase Authorization”). The New Repurchase Authorization replaces the November 2000 Plan in its entirety and no further repurchases will be made pursuant to the November 2000 Plan.
Added
As of December 31, 2024, we had approximately $99,503,000 remaining available for repurchases of our Common Stock under the New Repurchase Authorization. The timing and amounts of Common Stock repurchases under the New Repurchase Authorization are at the discretion of the Company's President and Chief Executive Officer based upon economic and financial market conditions.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeShould we conclude a decline in the fair value of the Failed Auction Security is other than temporary, such losses would be recorded through earnings as a component of “Other income (expense), net”. We do not believe there was an “other-than-temporary” decline in value in this security as of December 31, 2023.
Biggest changeShould we conclude a decline in 29 Table of Contents the fair value of the Failed Auction Security is other than temporary, such losses would be recorded through earnings as a component of “Other income (expense), net”. We do not believe there was an “other-than-temporary” decline in value in this security as of December 31, 2024.
As of December 31, 2023, our long-term investment portfolio, recorded on our Consolidated Balance Sheet as “Long-term investment, net”, consisted of a single auction rate security with a par value of $3,000,000, 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.
As of December 31, 2024, our long-term investment portfolio, recorded on our Consolidated Balance Sheet as “Long-term investment, net”, consisted of a single auction rate security with a par value of $3,000,000, 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.
We estimate our annual interest income would change by approximately $30,000 in 2023 for each 100 basis point increase or decrease in interest rates.
We estimate our annual interest income would change by approximately $30,000 in 2024 for each 100 basis point increase or decrease in interest rates.
Relative to our Yen exposure as of December 31, 2023, we estimate a 10% unfavorable movement in the value of the Yen relative to the U.S. Dollar would increase our foreign currency loss by approximately $48,000. The functional currency of all other subsidiaries in Europe and other subsidiaries in Asia is the U.S. Dollar.
Relative to our Yen exposure as of December 31, 2024, we estimate a 10% unfavorable movement in the value of the Yen relative to the U.S. Dollar would increase our foreign currency loss by approximately $49,000. The functional currency of all other subsidiaries in Europe and other subsidiaries in Asia is the U.S. Dollar.

Other VICR 10-K year-over-year comparisons