Vicor Corporation — FY2021 Form 10-K Summary
Business context and reporting period
Vicor designs and manufactures modular power components and systems. This annual filing covers the fiscal year ended December 31, 2021; it is not a standalone fourth-quarter report. The company sells Advanced Products, increasingly focused on data centers and high-performance computing, and Brick Products serving more mature markets including defense, industrial and transportation.
Financial performance and liquidity
| Metric | FY2021 | FY2020 |
|---|---|---|
| Revenue | $359.4 million | $296.6 million |
| Gross margin | $178.2 million; 49.6% | $131.4 million; 44.3% |
| Operating income | $55.6 million | $17.4 million |
| Net income attributable to Vicor | $56.6 million; $1.26 diluted EPS | $17.9 million; $0.41 diluted EPS |
| Cash from operations | $54.4 million | $34.7 million |
| Capital expenditures | $47.8 million | $28.7 million |
At year-end, cash and cash equivalents were $182.4 million and short-term investments were $45.2 million. Working capital was $307.7 million and the current ratio was 7.3, compared with 7.8 a year earlier. Total liabilities were $53.3 million, including lease liabilities; the filing does not report borrowings or other financial debt. Inventory rose 17.6% to $67.3 million. The company generated $6.7 million of operating cash flow in excess of capital expenditures.
Changes versus the prior year
- Revenue increased 21.2%, driven by Advanced Products, up 60.1% to $170.2 million. Brick Products decreased 0.6% to $189.1 million.
- Advanced Products represented 47.4% of revenue, versus 35.8% in 2020. Growth reflected data-center and high-performance-computing demand, particularly in the U.S. and Asia Pacific.
- Gross margin increased 5.3 percentage points, attributed to higher sales, product mix, manufacturing yield improvements and lower tariff costs.
- Backlog more than doubled to $345.6 million from $147.6 million. Average quarterly “turns” volume was 19% of revenue, versus 14% in 2020.
- Operating expenses increased 7.5% to $122.6 million, slower than revenue growth.
Outlook, risks and unusual items
- Management expects China and Hong Kong demand to decline in 2022. That market represented 27.5% of 2021 revenue; total export sales were 67.0% of revenue.
- Management cited extended supplier lead times, semiconductor packaging and test constraints, and factory-capacity limits as risks to production and deliveries. Customer lead times were extended to 26–32 weeks during 2021.
- The Andover facility expansion was delayed from 2021 to 2022. Management expected approximately $36.6 million of additional spending through the first half of 2022 for the expansion and production equipment; it anticipated production from new equipment later in 2022.
- Management expects vertical power delivery products to begin shipping in 2022. No numerical revenue or earnings guidance is provided.
- Section 301 tariffs cost approximately $6.7 million in 2021, or 1.9% of revenue. Management anticipated a possible reduction in 2022 but could not quantify it.
- A $43.3 million valuation allowance remained against domestic deferred tax assets. The $0.2 million tax provision and 0.3% effective tax rate reflect, in part, stock-option exercise deductions and the valuation allowance; future release could materially increase reported income.
- The SynQor patent case remained pending, with a proposed October 2022 trial date. Vicor said it did not believe a loss was probable or reasonably possible and recorded no loss contingency.
- A long-term auction-rate security had a $2.6 million carrying value and continued to experience failed auctions. The company reported no material impact from its 2019 ransomware incident; management and KPMG concluded internal controls over financial reporting were effective.
Important facts for investors to verify
- Whether the elevated backlog converts to shipments and cash, given long lead times, customer rescheduling and supply constraints.
- Whether Advanced Products growth and improved gross margins persist, and whether Brick Products remain profitable.
- Progress, cost and production yields from the Andover expansion and in-house electroplating capacity.
- Customer and geographic concentration: one customer accounted for 14.9% of annual revenue, and China/Hong Kong for 27.5%.
- Inventory realizability and the assumptions supporting the domestic deferred-tax valuation allowance.
- Developments in SynQor litigation and the status and recoverability of the failed-auction investment.