VICR

Vicor Corporation (VICR)

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Vicor Corporation (VICR)

Q3 2008 Earnings Call Transcript

November 6, 2008, 5:00 pm ET

Executives

Jamie Simms – VP, CFO and Secretary

Patrizio Vinciarelli – Chairman, President and CEO

Analysts

Ron Opel [ph] – Marston Capital

John Dillon – JB Associates

Richard Baxter – Ardour Capital Investments

Dick Feldman – Monarch Capital

Jim Bartlett – Bartlett Investors

Dan Gorman [ph]

Robert Katz – Senvest

Don McKenna – D.B. McKenna & Company

Presentation

Operator

Good day, ladies and gentlemen, and welcome to the Vicor 2008 third quarter earnings result conference call. My name is Jerry, and I will be your coordinator for today. At this time, all participants are in a listen-only mode, and we will be facilitating a question and answer session towards the end of this call. (Operator instructions) I would now like to turn the presentation over to your host for today's call, Mr. Jamie Simms, CFO of Vicor Corporation. Please proceed, sir.

Jamie Simms

Thank you. Good afternoon everyone, and welcome to Vicor's quarterly conference call. I am Jamie Simms, Chief Financial Officer; and with me today is our Chief Executive Officer, Patrizio Vinciarelli, our Chief Accounting Officer, Dick Nagel, and our Treasurer, Mark Glazer. Earlier this afternoon, we issued a press release outlining our financial results for the quarter ended September 30, 2008.

The press release is available on the Investor page of our Web site, Vicorpower.com. We also have filed a Form 8-K with the SEC in association with issuing this press release. Before I begin, I remind all of you, today's conference call is being recorded and is the copyrighted property of Vicor Corporation. Any rebroadcast, reproduction or other transmission of this conference call in whole or in part without the prior written consent of Vicor is prohibited.

In addition, I also remind you various remarks we may make during this call about future expectations, trends, plans, and prospects for the company and its business constitute forward-looking statements for purposes of the Safe Harbor provisions under the Private Securities Litigation Reform Act of 1995.

Forward-looking statements are denoted by such words as will, would, belief, should, expect, outlook, estimate, plan, anticipate, and similar expressions that look toward future events or performance. These forward-looking statements merely reflect our current beliefs, expectations and estimates, which we share with you during our quarterly conference calls.

Forward-looking statements are based on current information that, by its nature, is dynamic and subject to rapid and even abrupt changes. Our forward-looking statements are subject to risks and uncertainties, which may cause actual results to differ materially from those projected or implied in our statements. Such risks and uncertainties are discussed in today's press release as well as our most recent reports on forms 10-K and 10-Q filed with the SEC.

A replay of this conference call will be available beginning shortly upon its conclusion through November 21, by calling 888-286-8010 and using the pass code 63602476. In addition, a webcast replay of the conference will be available on the Investor Relations page of our Web site, beginning shortly upon its conclusion. However, the information provided during the call is accurate only as of the date of the call. Vicor undertakes no obligation to update any of the statements made during this call, and you should not rely upon them after the conclusion of the call. Patrizio and I have each prepared remarks, after which we will take your questions. Patrizio?

Patrizio Vinciarelli

Thanks, Jamie. Good afternoon everyone, and welcome to our third quarter conference call. As stated in the afternoon’s press release, despite the weakening global economy, consolidated revenues for the third quarter increased by 7.5% to approximately $51 million, compared to $47.7 million for the third quarter 2007. Sequentially, revenue increased 4% on a quarter over quarter basis from the $49.3 million generated in the second quarter of 2008.

On a year to date basis, nine months revenue for 2008 was 8.6% ahead of revenue for the corresponding nine months of 2007. The consolidated book to bill ratio for the third quarter of 2008 expanded to 1.2 to 1.0 as compared to essentially 1 to 1 for the second quarter 2008. Backlog at the end of the third quarter of 2008 was $56.4 million as compared to $46.3 million at the end of the second quarter.

As a caution before, our quarterly book to bill ratios and backlog levels are not necessarily accurate predictors of sequential quarterly performance. Nevertheless, we are pleased to have had relatively strong booking for the third quarter, up 24% quarter over quarter sequentially, which contributed to a healthy backlog at the end of the third quarter.

Allow me to turn to the third quarter performance and outlook for each of our business units. Revenue from our brick business unit, which represented approximately 90% of consolidated revenue for the third quarter decreased slightly sequentially and over revenue for the third quarter 2007. The brick unit experienced a 32% [ph] increase in orders for the third quarter, but once again, I caution listeners to not interpret this increase as an indicator of sustained revenue growth as some of the bookings contributed to the substantial increase were from certain customers placing single orders in the third quarter for volumes of product that we anticipated would be ordered in future quarters. So, over the next few quarters, we expect lower bookings from the same customers.

We do not disclose the share of any particular market we compete in, but I can highlight that the brick business unit is doing virtually well domestically reflect in industrial and defense markets with a wide range of products. While, domestically we are doing well, our international business shows signs of weakness. European order flow, in particular, slowed early in the third quarter. Similarly, we are experiencing softening of order flow in Japan and China. While we also do not disclose profitability of our individual business units, I am pleased to say the bricks units’ gross margin as a percentage of revenue was stable sequentially, and on a year to date basis remained higher than the gross margin achieved through the third quarter of 2007. The increase in revenue and improved product mix, and the continuous improvement in manufacturing efficiency supported the bricks unit third quarter gross margin.

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