Vicor Corporation (NASDAQ: VICR) — FY2014 Form 10-K
Reporting period: Fiscal year ended December 31, 2014; filed March 6, 2015. The filing also reports fourth-quarter results. Vicor designs and manufactures modular power-conversion components and systems through its Brick Business Unit (BBU), VI Chip, and Picor segments.
Financial performance and position
| Metric | FY2014 | FY2013 |
|---|---|---|
| Revenue | $225.731 million | $199.160 million |
| Gross profit / margin | $97.120 million / 43.0% | $81.479 million / 40.9% |
| Operating loss | $14.763 million | $20.467 million |
| Net loss attributable to Vicor | $13.887 million; $0.36 per share | $23.640 million; $0.60 per share |
| Cash from operations | $2.191 million | $(4.690) million |
| Capital expenditures | $7.128 million | $6.179 million |
| Cash and cash equivalents at year-end | $55.187 million | $56.339 million |
| Working capital at year-end | $90.321 million | $97.869 million |
| Total liabilities at year-end | $24.990 million | $23.303 million |
- Fourth-quarter 2014 revenue was $60.735 million and gross profit was $26.116 million. Consolidated net loss was $43,000; net loss attributable to Vicor was reported as zero, with zero loss per share.
- FY2014 operating expenses were $111.883 million, including $41.479 million of R&D and $68.197 million of selling, general and administrative expense. Interest-bearing debt is not identified in the balance sheet or discussion; total liabilities include operating and other obligations.
- Current assets were $113.478 million and current liabilities $23.157 million; the reported current ratio was 4.9:1, down from 5.7:1. Backlog rose to $54.249 million from $44.659 million.
Changes and operating drivers
- Revenue increased 13.3% year over year. BBU revenue grew 13.0% to $184.224 million, VI Chip revenue declined 1.1% to $32.929 million, and Picor revenue increased 199.1% to $8.578 million.
- Management attributed stronger gross margin to higher revenue and a greater mix of higher-margin BBU and Picor products. Operating loss narrowed by $5.704 million, but Vicor remained loss-making.
- Bookings increased approximately 10.7%; second-half bookings rose 23.8% versus the prior-year period. BBU growth was supported by shipments to China. A major VI Chip customer’s transition to a new product platform reduced VI Chip sales but increased Picor demand.
- BBU generated $15.499 million of segment operating income. VI Chip recorded a $29.015 million operating loss, reflecting insufficient revenue and gross margin to cover fixed manufacturing and development costs. Picor’s operating loss narrowed to $407,000.
Outlook, risks and unusual items
- No numerical revenue or earnings guidance is provided. Management said cash and expected operating cash flow should fund operations and planned equipment purchases for the foreseeable future. 2015 capital expenditures were not expected to be materially above 2013–2014 levels.
- Management targeted commercial availability of the VIA power-management package and DCM-based VIAs around mid-2015. It expected no material 2015 change in defense-contractor orders or revenue, given budget and funding uncertainty.
- Vicor reported net losses for nine consecutive quarters as of December 31, 2014 and said it could not predict when, or whether, it would return to profitability. Risks include delayed customer adoption, concentrated demand, long sales cycles, competition and pricing pressure, supplier constraints, and weak defense and European markets. One customer represented 14.7% of FY2014 revenue; the five largest represented 32.6%.
- SynQor patent litigation remained unresolved; trial was continued indefinitely, summary judgment motions were pending, and the company could not estimate any potential loss. No loss accrual was recorded. Legal fees increased by $6.818 million in 2014.
- Vicor recorded $2.207 million of severance and related charges for consolidating Westcor manufacturing in Andover, plus approximately $303,000 of other relocation costs. A full valuation allowance against domestic deferred tax assets limited recognition of tax benefits on losses.
- A $3.0 million-par auction-rate security remained illiquid and was valued at $2.575 million using Level 3 inputs. Management did not consider the decline other-than-temporary but warned further deterioration could require an impairment charge.
- Auditors issued unqualified opinions on the financial statements and internal controls; management and the auditor reported effective internal control over financial reporting at year-end.
Important facts for investors to verify
- Whether bookings and backlog convert into shipments and revenue, particularly for new ChiP/VIA products and concentrated high-volume customers.
- Whether VI Chip can increase revenue and margins enough to reduce its substantial operating losses, and whether Picor’s third-party growth persists.
- Future SynQor litigation developments, related legal costs, and any change in the company’s assessment of potential loss.
- Liquidity and valuation developments for the failed-auction security, alongside operating cash generation and capital spending.
- Progress toward profitability, the domestic deferred-tax valuation allowance, and any material change in customer, regional, or supplier concentration.