Good day everyone, and welcome everyone to the Vicor Earnings Results for the Third Quarter Ended September 30, 2021. My name is Linda, and I am your event manager. [Operator Instructions] I would like to advise all parties that this conference is being recorded. And with that I would like to hand over to Jim Schmidt, Chief Financial Officer. Please proceed.

Thank you, and good afternoon, and welcome to Vicor Corporation’s earnings call for the third quarter ended September 30, 2021. I’m Jim Schmidt, Chief Financial Officer, and I am in Andover with Patrizio Vinciarelli, Chief Executive Officer; and Phil Davies, Vice President of Global Sales and Marketing. After the markets closed today, we issued a press release summarizing our financial results for the three months ending September 30. This press release has been posted on the Investor Relations page of our website, www.vicorpower.com. We also filed a Form 8-K today related to the issuance of this press release. I’d remind listeners, this conference call is being recorded and is the copyrighted property of Vicor Corporation. I also remind you various remarks we make during this call may constitute forward-looking statements for the purposes of the Safe Harbor provisions under the Private Securities Litigation Reform Act of 1995. Except for historical information contained in this call, the matters discussed on this call, including any statements regarding current and planned products, current and potential customers, potential market opportunities, expected events and announcements and our capacity expansion as well as management’s expectations for sales growth, spending and profitability are forward-looking statements involving risks and uncertainties. In light of these risks and uncertainties, we can offer no assurance that any forward-looking statement will, in fact, prove to be correct. Actual results may differ materially from those explicitly set forth in or implied by any of our remarks today. The risks and uncertainties we face are discussed in Item 1A of our 2020 Form 10-K, which we filed with the SEC on March 1, 2021. This document is available via the EDGAR system on the SEC’s website. Please note the information provided during this conference call is accurate only as of today, Thursday, October 21,…

Thank you, Jim. Good afternoon, everyone, and thank you for joining us. In Q3, we achieved record bookings, a record book-to-bill, and record backlog. Bookings for AI and data center, customers for factorized power solutions and 12-volt to 48-volt bridging bus converters were robust. And our visibility into production programs is longer than we have seen on previous projects. Some of the next generation programs will also run in parallel with existing programs, which is a new strategy for some of our data center customers. Next generation AI processor and data center CPU server programs in early stages of development and pre-production will provide $70 to $150 of Vicor content per board. New clustered processor AI applications offer much higher dollar content for our proprietary vertical power delivery solutions, whose IP protection and technical challenges set us further apart from our competitors. Expanding our SAM within the large data center market is always an objective for our teams and evaluation of our advanced AC to DC solutions have started at lead customers with derivative products in development that will target applications for both single phase and three phase AC to DC across the high performance computing, industrial and aerospace and defense markets. We are also engaging with customers who are deploying ASICs for high speed optical networking units, which have power delivery challenges due to major increases in core rail currents above 1000 amps. Our first major customer in this new market will be in production in Q3 2022. As the data center industry shifts to 48-volt based rack power delivery, the upcoming open compute forum will feature 48-volt power distribution and the need for a more robust ecosystem of high density modular power solutions rather than low density discreet approaches. All of which validates decisions we made to commit…

Okay. Operator, we’re ready for you to coordinate questions for us.

All right. Absolutely. [Operator Instructions] And we have two upcoming questions already. The first one is coming from Jonathan Tanwanteng [CJS Securities]. Please proceed.

Hi, good afternoon, guys. Thank you for taking my questions. That’s a really nice number you have on the sequential increase in Q4. I was just wondering, how much of that is the catch up from Q3 and how much of that, I guess is organic demand. I guess that – it’s to the upside of maybe what you had been thinking when you had said that 7% sequential increases over the next several quarters way back in Q1 and Q2.

So, it’s all about demand. Our backlog, as we entered the fourth quarter without any allowance for turns business, would have us up by approximately 20% and you would expect that turns business would layer on top of that a substantial incremental amount. So, the demand is there. We’re still capacity-constrained and there are still challenges with respect to, in particular semiconductor components. As Jim articulated in his prepared remarks, those challenges have to do with both the back-end processing after completion of wafer fab and they had to do with wafer allocation. So, what has improved considerably since Q3 is that the back-end bottlenecks, which were in part related in some parts of the world to COVID and other factors, those have been largely relieved. So, the components that did not show up in time because of back-end bottlenecks in Q3 have shown up or about to show up in time for our builds in Q4. And furthermore, we have recently been able to receive commitments with some more foundries that result in considerably greater allocation both within Q4 and more significantly into 2022. So, we believe that in terms of the component gates that in effect either launch within the third quarter in terms of a compounding capacity constraints. As we all know, we’re already there. We’ve made a great deal of progress. The capacity constraints are still there, but being able to start builds on schedule dates and not having to be as much hand-to-mouth with respect to availability of components will facilitate a substantial capacity increase this quarter.

Got it. Thank you for sharing with that color. And then second, I saw in the press release that was mentioned that you signed a license with some of your customers, at least one of your customers who was buying these infringing products. Can you talk a little bit more about that. Does that set the tone for the other customers out there that are doing this and kind of – what kind of benefits do you expect to see from this?

So, we’re not at liberty to say anything regarding the identity of the licensee or any of the key parameters of the licensing deal that we executed in the third quarter. I think in general terms I can tell you that it points to the beginning of new kinds of relationships on the licensing front. The industry, as we all know, is growth needs and technology needs are very compelling, and it has to say particularly at the time of capacity constraints that there is a legitimate interest on the part of customers to be able to secure their requirements and as we said that our enabling technology has only been available from Vicor that’s something that customers would like to, in various ways, be able to overcome. So, the OEM license provides customers with the ability to, with our concerns with respect to offset both exclusion orders to the importation OEM products into the U.S. procure modules, incorporate those modules into systems even though those modules would otherwise infringe Vicor patents. So, we believe there’s going to be more licenses and we view this as a complementary component of our business model to contribute to margins profitability, while providing the industry with the ecosystem that many key customers seek to have.

Okay, thank you. I’ll jump back in queue.

Thanks, Jon.

The next question is coming from Quinn Bolton [Needham & Company]. Please go ahead.

Hey, guys, congratulations on the nice bookings activity. Before I get to my bookings question, just wanted to come back to your outlook for the fourth quarter. Obviously, component availability in your manufacturing capacity are significant constraints. And I’m just curious, do you guys feel confident that where you sit today, you have enough component availability and internal manufacturing capacity to grow the business 20% quarter-on-quarter?

We do, but I want to be clear that this is not a slam dunk to put it figuratively. In that we’re at the beginning of the quarter and a lot has to happen. It’s not that we have as of today all of the semiconductor components we need in order to make the revenue plan for the quarter. They are on their way and they will be underway through the first two-thirds of the quarter. So, there are still risks out there, but we feel that the improvements have been made with respect to the back-end which in effect it made available components that were destined to us in the third quarter, but couldn’t be processed in time, that coupled with, as I mentioned earlier, the ability to achieve greater utilization of constrained capacity by not being gated by the inability to start because of lack of particular components that sets us off to a much faster start early in the quarter and it bodes well with respect to the outcome of the quarter as a whole.

Thank you, Patrizio. My second question is just on orders. Obviously, I think most of us on the line that are following the company have been very impressed with the acceleration in the bookings number, and I think most of that’s being driven by Advanced Product bookings were I think, Advanced Product bookings last quarter was probably over $90 million, this quarter it looks like you’ve booked over $100 million maybe as much as $120 million in Advanced Product bookings. My question is, how broad based is that Advanced Products booking activity over the past couple of quarters? Is it highly concentrated among just a couple of GPU, CPU, ASIC, accelerator customers, or are you starting to see very good diversification including front-end or AC to DC, including the NBM modules? Can you just give us some color on how broad based that bookings activity is? Thank you.

Hi, Quinn, this is Phil. So, as we’ve been talking over, I think the last 18 months, the customer base for Advanced Products in our data center AI has been broadening quite a bit from one or two companies, major companies, a couple of years ago to now well over 12, 15 type quantity of customers, which are adding to that the backlog on the bookings number. In terms of the activity there 48 to 12 as well as the bridging 12 to 48 and 48 to 12 on some of the CPU server boards it’s very strong. And we – now we are entering the phase of continued AI growth with our existing customer base, but also with the new Intel and AMD CPU platforms coming on and in data centers with some of the hyperscalers have gone 48-volts we’re seeing strength there. And also coupled with the AI accelerated growth, which are 48-volt based, we’ve seen growth in our – significant growth in our 12 to 48-volt bridging converter business, because hyperscalers that have still at 12-volts in their infrastructure, need the 12 to 48 to use the latest greatest accelerator cards and multiple cluster AI accelerated cards. So it’s very broad spread.

So just a quick follow-up, is it pretty well balanced between the types of MCM or MCD components versus the NBM bridging products or does it skew more heavily to the sort of point of load MCM, MCD components today still?

I think the 48 to 12 – 48 to load is the largest piece of it, but the NBMs doing really well in the 12 to 48 space. Because one of the reasons being is that typically in those applications, you’ve got six to eight NBMs per power board. So, that the communities add up pretty quickly and the bookings add up pretty quickly.

Got it. Thank you for the color.

Just a bit more on that. The NBM market opportunity next year is quite substantial. So, looking at it from the timing perspective it hasn’t been all that significant, but it promises to be. In fact, it has been with recent orders, just within the last couple of days $4 million order for NBMs, quite significant as we enter in the first half of next year and the middle of next year.

Thank you.

Thanks, Quinn.

The next question is coming from Richard Shannon [Craig-Hallum Capital Group]. Please go ahead.

Well, hi, guys. Thanks for taking my questions. I might follow-up on the topic of licensing. Patrizio, I understand you’re not allowed to say much about this, maybe I’ll ask a couple of questions and see if you can push the envelope here. Can you talk about any particular applications that the Fed licensee is working in? And then also, in terms of the nature of the agreement, whether there is upfront in ongoing royalties or just upfront kind of any nature of understanding there would be great, please?

So, again, I need to keep it at a very general level that would not in any way infringe on the confidentiality constraints we have with the licensee and future licensees. The license factor is fundamentally a pay as you go and the mechanism involves the placement of the license deals based on the licensees’ choice to get a license for particular products to be used in particular systems and it’s incumbent on the licensee to decide for which product – product may otherwise infringe like a patent to get the license. And so, as mentioned in the press release, not only do we get first we have license executed within the quarter. From that licensee we have received license deals and in fact revenue even though those POs will result in cash flow starting this quarter. So, I guess I think such an example of licensing opportunities to come. We have a well thought out methodology for this potential licensees and I would like to outline the side whether or not, now what we have license. They can have the wait and see attitude with expect to have that there serious risks of a potential exclusion order that could affect their systems, which are quite valuable and that should motivate them to seek a license earlier and later also because royalty terms escalate with time. So, if you said that there is passage of time that brings about transition from what we call Phase 0 to Phase 1 to Phase 2 with that comes in an escalation in royalty rate. So, we believe that having accomplished the first licensee, there’s going to be more. And we’re aware of a number of OEMs that we believe will need a license if they want to continue to access the kinds of products they need for their systems.

Okay. Patrizio, thanks for all that detail. My second question is on the gross margins. Not only for the fourth quarter, but I guess looking at it in next few quarters here as well. Jim, I think I heard you correctly, in your prepared remarks, you seem to be suggesting kind of flattening of gross margins here in the fourth quarter and until we see some throughput in sales from products in the new facility, wouldn’t – it wouldn’t go up until then. So, I want to make sure I’m understanding the dynamics here that you were suggesting in your comments and how we should look at gross margins in the next few quarters?

Sure. So, first of all, I do have to say that it’s our practice to not provide any specific guidance on gross margin in out quarters. I didn’t mean to imply by that statement about waiting until the new factories online that we have to wait for gross margin improvement, per se. We have volume increases drive gross margin leverage, that’s a fact in the industry. It’s not something – that’s actually not just true for Vicor, it’s true for anybody. But – so we’re not – I didn’t – that’s comment is actually comment that I made last quarter as well. It’s just a standard comment we want to make that highlights the fact that we’re all very anxious to get our own factory online. And as that comes online we get all kinds of efficiencies. There is no outsourcing of some of the process steps. We get more leverage and the volume goes up, greater efficiency inside the factory. So, that’s really going to be a significant milestone for us.

I’ll add to that. Looking at it in terms of the past, the rearview mirror, I think I’m not saying anything that wasn’t expected, but we’re saying, in Q3 the margins, the gross margins and the profit margins would have been substantially higher, if not for the fact that we had the shortfall in revenue. That cost us several points of margin within Q3, right. That’s a fact, unfortunate fact. To Jim’s point the rising revenues immediately will bring about better margins even before we get the full leverage of the new facility.

Okay, great. Thank you for all the detail, guys. That’s all from me. Thanks.

Thanks, Richard.

The next question is coming from John Dillon [D&B Capital]. Please go ahead.

Hey, congratulations guys on the bookings in the backlog, really great numbers. Phil, I do have a question on the bookings number. I’m just wondering if the increase in bookings was due to customer securing a place in line or customers priming the pump or are those bookings numbers sustainable?

So, the programs that we’re involved in now, John, and the visibility we have, we’re seeing increased demand for the AI accelerator cards across the data centers. The deployment of those cards is significantly increasing with all the hyperscalers on a global level. So, that’s a very strong robust business. And as I mentioned, along with that increase, a lot of the rack systems are still 12-volt based. So, they need the 12 to 48 to power those cards and so we’re getting sort of a double whammy if you like by having the best high density bus converter in the industry available today. So, we’re winning on both ends, as it were, with both the hyperscalers deploying the AI and also with the, the guys actually with the AI cards. So, it’s strong right now.

So, I think what I’m hearing is the bookings are sustainable and even growing, do you see that in the future?

With Advanced Products, yes, absolutely. Yes.

And then along with that then, I would imagine you have pretty good pricing power. Are you guys raising prices?

Well, we’re always looking to price on value. That’s what we do. We look at the value that we bring to our end customers and we do that with the whole portfolio. It isn’t just on Advanced Products but even on our Brick or legacy business. We adjust prices regularly and again we do that on a case by case basis or product family or market or customer, but we really do try to price on value.

Got it. And then a follow-up would be, yes, you mentioned the 12 to 48-volt, so I’m going to scratching my head. Why would customers want to do that? Why customers and why they’re going from high-voltage down 12 voltage back up to 48? One thing, Patrizio, you kind of mentioned this in the last call, but I mean, aren’t you can see a huge conversion to all 48-volt racks or do you see that coming?

So, well, I don’t think coming, but it doesn’t happen overnight. So, fundamentally key developments turning points in the industry bring about adoption, but then adoption requires time to get implemented and it is to say the absurdity of, to your point, going all the way down to 12 to go back up to 48 to go down to 1.8-volt or sub-1-volt as the case may be, that will provide even greater motivation for the balance of the hyperscalers to convert to 48-volt racks and there’s plenty of motivation, but not just coming from the absurdity of unnecessary stages of conversion to voltages that are too low for efficient power distribution, back up to voltages they are necessary in order to achieve what should be done downstream within the rack.

John, this is Phil. I mean, data centers are going to go through major changes over the next three to seven years. If you just look at the amount of AI that’s being added, they’re just not equipped to get the data in and out with the speeds that they want. So, there’s huge networking changes that are going to come in terms of moving from gigabytes to terabytes of moving data in and out to support autonomous driving and another machine learning applications. So, the data center footprints that have all of the renewables to power them, because you’re talking tens of megawatts for these things. You can’t move a data center to a different location. You’ve got to refurbish it. You’ve got to take it to the next level of capacity and capability. So, all of this stuff is going to change, including 48-volts in the rack, more AI, higher performance, optical networking. It’s really going to go through a significant change over the next three years to seven years. It’s going to be quite amazing to watch.

By the way, another element of the reengineering of the racks beyond the electric part of it that has to do with switching over from 12-volt distribution to 48-volt distribution is to do with thermal management. So, the power levels within the rack that justify or motivate transition to the most efficient power distribution voltage 48-volt which is in reality 54-volts, they feel safe. That motivation brings about also thermal management challenges that before too long will have a number of these racks should be cooled by liquid cooling as opposed to air. In that regard, we should point out that within the third quarter recently, we have delivered first units of a very high-density liquid cooled front end to a lead customer for that particular capability and this solution, again, liquid cooled three-phasing 50 to 54-volts out is order of magnitude more than anything else out there.

Guys. This is really exciting. Thank you so much. I’ll get back in the queue. Great quarter. Great visibility. Thank you. Thank you.

Thanks, John.

The next question is coming from Gus Richard [Northland Securities]. Please go ahead.

Yes, thanks for taking my question. I just wanted to circle back on your constraints. Is the plating capacity still constraint, and do you need the new facility to come up to relieve that?

To your point that’s the key capacity bottleneck. We’re working it in a number of ways. So, we are complementing the capability of our plating partner by – to a high degree, deploying our own human resources within their facility to enhance the available capacity. We have also recently taken steps to bring about in other partner actually closer to Vicor main manufacturing facilities. In a matter of a couple of weeks, we expect to turn that second partner on for further step up in capacity. And these are stepping stones to the deployment of some very high volume state-of-the-art plating capability within our own facility. And by the way, one thing surprising is tempting to think of something that is relatively low tech, that’s far from being the case here, right. What I’m referring to is about $25 million worth of equipment on 40,000 square feet, which will be state-of-the-art for this class of products.

Got it. That’s very helpful. Thank you. And then on the gross margin pressure, it sounds like it’s primarily absorption, but I was wondering if there was any influence from higher input costs or, and or mix.

There is no real pressure from mix. It turns out that our Brick Business is actually fairly decent gross margin. So, it’s – and higher input cost, what we’ve done there, generally speaking, even before I arrived at Vicor, we were not accepting inflation costs in our raw materials without passing those costs on in many cases to our facility. So, we’re absorbing that, but I hope that answers your questions.

It does. Thank you. And then the last one for me is just looking at the backlog and given the supply constraints in the world. Are you seeing any aging in that backlog? Is some of that moving is it some of it scheduled further out to normal or has the distribution backlog remained the same over the last few quarters?

So, we have obviously implemented longer lead time. So, we have a lot more visibility. So, it ranges from 20 weeks out to 30 weeks for different types of product families. But the backlog is I get asked people double ordering and all that and we don’t see that. It’s real demand. We have a very unique product. It’s not a commodity product. It’s not a pin-for-pin compatible type of the market for our stuff. So, we have very dedicated unique customers that buy our stuff. They have done for many years on the legacy side. On the advanced product side, we’ve got – we’re building a whole new business there in data center and AI. So, we have good visibility into that and the end market demand and the growth there. So, I’m very confident in the backlog that we have in terms of the validity of it and the reality of it.

To be clear, it’s within 12 months.

Yes.

Everything is scheduled within 12 months. So, that’s what we define to be the backlog.

Got it. Got it. Perfect. Thank you so much. That’s it for me.

Thanks, Gus.

We have another question from Jonathan Tanwanteng [CJS Securities]. Please proceed.

Hi guys, thanks for the follow-up. Just another question on the capacity in the constraints that you have. I guess that you’re putting a lot of good plating capacity in the plate this quarter and especially the new facility next quarter and in Q1. I was just wondering how confident you are and increasing your wafer allocations and the other component in the chain that you need as we get into the first half of next year, because I know in many other places these things are getting worse and not better. So, I’m just wondering what’s your visibility into the things that you can’t control as you head in the next year.

So, we have visibility and we’ve been allocated significant step up in wafer outs in November and even more so in December. The numbers for next year are not casting concrete yet, but we have been informed that we’re going to get the numbers that we need. As you can imagine, we do have quite a bit of leverage with respect to getting wafer capacity because of the critical programs that are chips support and this obviously a factor of play with respect to getting access to what’s necessary for us to be able to make the products that make AI and data center systems operate.

Got it. That’s helpful. And I was wondering if you could give us an update just on the auto business. How many platforms do you have at this point? Are there more coming into the pipeline? Just give us an update on, I guess, when do you think that will become significant for you as a source of profit and revenue?

So again, we are starting production at the end of 2023 or mid-2023 with some early customers there, but we have more collaborations. That’s what I was talking about in my remarks. We’ve got more collaborations that occurred in Q3. Those collaborations typically take six to nine months to work through in terms of building prototype systems and testing them and then we’re now moving the customer really to a stage where we call the conversion stage, which is where we move to a commitment for a start-up production date. So that’s what we’re always shooting for. At this point in time, we have two large OEMs with start of production dates and we have a whole host of collaborations that are moving towards SOP dates in the next six months to nine months. So, it’s a very exciting funnel we have in automotive.

Got it. Thanks. And again congrats on the such a big backlog.

Thanks, Jon.

And we have a question from Alan Hicks [Ainsley Capital Management]. Please proceed.

Yes, good afternoon. You’ve invested over $0.5 billion on these new products and it now looks like you’re going to be solidly profitable for you as far as I can see. Where are you at in terms of tax loss carry-forwards, and how do you expect – when do you expect to get back to a normal tax rate?

Hi Alan, Jim Schmidt here. So, at this point we’re not going to comment on next year. I will tell you that the current year is status quo. So, we expect the tax rate, I know it’s toggling between 4% or minus 7%. We have a tax benefit often times because of stock option exercising that’s going on. We’re not going to comment at this time on next year, but stay tuned. The next call I think we’ll be more in a position to talk about that going forward, but that’s what we’re prepared to say now.

Okay. What are you at in terms of your tax loss carry-forwards. I think was in the $30 million range?

I think that’s right. Yes. And that’s still on the books. We’re not – it’s a fairly complicated topic. We’re working with our product lenders on that and we’re ready to say status quo for the balance of the year. After that, we’ll talk again in January.

Okay. But I would anticipate that you probably used that up next year. I would think if you’re going to make at least $30 million profits next year.

It’s more complicated than that. I mean, people are putting the numbers to cut routinely and their stock option exercises that are tax benefit and other pieces of the puzzle in there.

Okay. And then also there was talk a few quarters ago about getting some of the tariffs that were paid applying them back and I think they were, if I remember, six months ago they were $4 million range, I think, and it’s been growing since.

Well, what we said in this – yes, in my prepared remarks, as we said the tariff expense in the P&L and cost of sales was $1.9 million, which is approximately what it was last quarter. We are making progress on license and tariff expense. To total, it’s actually significant amount of time people are spending on that activity right now and we did have – we did make progress. It’s incremental. Sometimes it’s a bit slow incoming, because we’re talking about product from SAM [ph]. So – but it’s work in progress on it.

Okay. So you still expect to get that money back by this question?

Yes.

It’s not a matter of if, it’s a matter of when.

It’s a matter of when. Yes.

Yes. Okay, good. Okay. Thank you very much.

And we have another question from John Dillon [D&B Capital]. Please proceed.

Hey, guys. Patrizio, you said that you’ve got some front-end products, I think you delivered this quarter, but I’m wondering if you could give some more color on all the front-end products. Are you guys actually actively booking orders for that? How’s it going? Are they going into the same markets? So, maybe you can give us little color on that. How are you doing?

So, as of now, we have two major programs that share common denominator three-phase input high power 48-volt, 52-volt, 54-volt outputs. These programs are representative of the general market needs that we are getting up to address. The lead customers provided us with an opportunity to do what was necessary to, as suggested earlier, deliver state-of-the-art solutions. In one case, it’s natural convection cooled is a solution that doesn’t require either a fan or liquid cooling, which is in effect at one extreme. In the other cases, as I was suggesting earlier, it’s an extremely high-density solution, which is liquid cooled and plugs into rack system, delivering 20 kilowatts in a footprint that is about the size of an iPad. So, just imagine a very thick and very heavy iPad. But in the sectionwide footprint 20 kilowatts going from three-phase AC to 52, 54-volts. So, that’s the kind of solutions that adverse case [ph] are going to need in years to come. In order to get their racks from the low 10s of kilowatts to the much higher power levels that, as suggested by Phil earlier, they’re going to need in order to get much greater bandwidth within the footprint of their existing facilities.

Hey, John, this is Phil. We haven’t really stepped on the gas yet with that product. We are obviously got some early customers, we’re working on some derivatives, as I mentioned, single-phase and three-phase. But I think it will be Q2 probably next year before we really put our foot on the gas and start moving with that stuff.

So Q2 you’ll start really start the bookings aspect of…

Really, you’ll see a lot of marketing from us, a lot of activity in the customer base worldwide. We’re really going to put our foot in the gas with this stuff, because it’s very special.

Yes. It’s very exciting. So, along those lines, until you talked about the bookings, the numbers and you see they’re increasing, if I do my math right, you guys are going to be filling up the new factory very quickly, so you must be looking at a new factory. So, I’m just wondering what are your plans for a new factory and what’s the timing of that new factory?

So, Jim and I were together with Mike, our Head of Operations visiting one such candidate that just within the last 10 days. But frankly, I feel that is still premature to take that step. I believe that we have quite a bit of capacity within the expanded factory. I have had two tours of the expanded factory within the last 10 days. I’ve been very impressed with what the team has done in terms of laying the foundation for the expansion. And by the way it wasn’t mentioned earlier, but it should be mentioned, within the third quarter a lot of equipment got relocated within the existing walls of the factory, and in fact, within the first week of the third quarter. We have no throughput because we actually took the whole factory down to make a new facilities for electric power delivery. So, there is a lot of work has been going on within the factory to set the stage for a level of capacity that I think may well exceed the goals that the team has set and we’ve reported. So, with that, I think we got a little bit of time to take the right step for the next incremental capacity. I think is critically important that over the next six months our focus be strictly on realizing the major capacity expansion is about to come online, starting with a contribution to capacity in the first quarter and then a bigger contribution to capacity in Q2. I think once that has happened then we can take the next step.

Great. So it sounds like you’re going to beat your goal of $715 million and then with a new wing sounds like you’re – it looks like, you can beat that number.

I think we can. I think that this factory will be very efficient. And it’s got a more capacity potential that we have targeted, some of that as to do with the mix of the products. So a case in point our budget in terms of capacity was predicated on some of the early chips that are relatively thick if that they take more time to pro than thinner chips, and a lot of the design wins going forward are going to be for thinner chips, and those thinner panels. You can think of them in some respects as wafers with fewer layer that can process faster. So, I think we have a variety of degrees of freedom up play to improve efficiency, improve capacity, and being focused on that at this point in time is more important than securing the next increment of brick and mortar.

Very good. Very good. I love it. Thank you so much. I’m looking forward to it. It’s really exciting times. Great job guys.

Thanks, John. And I think we’re going to have to close out now. So operator, we’re going to have to close the call and thanks everyone for participating.

Thank you very much everyone. That concludes your conference call for today. You may now disconnect. Thank you for joining. And enjoy the rest of your day.