Good day and welcome everyone to the Vicor Earnings Results for the Fourth Quarter and year ended December 31, 2021. My name is Robin and Apigee operates yesterday. During the presentation, your lines will remain on listen only. Just anytime stars or when you found and the cards answer will be happy to assist you. I would like to advise all parties that this conference is being recorded. And now I would like to hand the call over to Jim Schmidt, Chief Financial Officer. Please proceed, sir.

Thank you, and good afternoon. Welcome to Vicor Corporation's earnings call for the fourth quarter and year ended December 31st, 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 and year ending December 31st. 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 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 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 one, 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,…

Thank you, Jim. Q4 was once again characterized by strong bookings for Advanced Products with high performance computing customers, and with anticipated lower legacy product bookings. Orders for legacy products in regions other than China remained strong. On the advanced products front, the strong bookings growth trajectory for our high performance computing business is expected to continue, with both increased demand for major customers, and new opportunities and designing activity continuing at both existing and new customers. Established OEM s and several well-known and well-funded AI start-up companies, having introduced initial relatively low current AI platforms, are now planning AI-A6, with currents approaching 1,000 amps and a turn to Vicor's lateral and lateral vertical power solutions. Our customer portfolio in high performance computing continues to grow. And we're ready in new Generation 5 technologies in control, silicon and components to continue our advances in power density, current density, efficiency, and transient response, which is critical -- which are all critical to high performance AI applications. Our Gen5 point of load products incorporating several major performance advances will be introduced in Q3 this year to early lead customers. The demand for high density power delivery solutions continues unabated across all of our target markets. With power systems engineers turning to Vicor's modular power solutions to solve their toughest design challenges, our work in the past three years in the broad industrial marketplace to find new growth applications is beginning to pay off. Due to the rapid electrification and autonomy trends with both -- within both existing and emerging industrial markets, we have identified an additional $2.5 billion of available market in the next five-years, across market segments such as light electric vehicles, robotics, battery test equipment, and UAVs. Our opportunity pipeline currently stands for $250 million for these new high-growth applications.…

Alright. Thank you. Everyone, if you wish to ask a question, [Operation Instructions]. All questions will be answered in the order of Steve Dan. You will be advised went to ask your question. We have a few questions in the queue and the first one is coming from the line of John Dillon. Please proceed. Your line is open now.

Hi, guys. Congratulations on the bookings. They look really good that you see I did have a question on the new factory is kind of -- I thought kind of that production would be starting this queue, this quarter. Can you give us little more color on what's happening with the new factory.

Yes. So the regarding start-up production in the new wing, we're actually expecting next week to start production on the new line with the capacity of one panel, which is a larger multiple modules per minute. That's the portion of the expansion with a shorter cycle time to fruition, then other portions that to do more with the package technology that is key to vertical integration. So that equipment -- actually, the three of us feel, [Indiscernible] [Indiscernible] of it on Tuesday of this week. And then equipment is bottling place, or two cranes will be there on Tuesday, lifting additional equipment is getting installed. We have tens of millions of dollars, so equipment is going in, and it's going to start going through qualification runs, later this quarter and into next quarter. In some of the process steps are going to be operational in the second quarter, but to be clear as suggested by Jim earlier, a full vertical integration, we're looking at the month of July.

Got you, So we'll still see some increased in production then for the next couple of quarters, I would imagine?

Well, in certain areas, we are looking at significant increases in production again starting next week. With respect to some of the process steps involved in the ship or convert to house in package technology, we're going to have access to some of the process that's start in Q2, but again, for a complete [Indiscernible] packaging, it will be in July.

Got you. But I mean, with total revenue -- Go ahead. For total revenue provide -- for total revenue for Vicor though, can we expect to see revenues some starting to increase the quarter after quarter? I would imagine -- I guess really what I'm asking is the supply chain constraints along with the additional new factory, will we see the revenue start increasing, or continue to increase, I should say?

So let's talk to with Q4. So Q4 will stress trading in that while we did achieve significant increasing throughput, particularly with respect to Advanced Products, I think as mentioned earlier, was about 18% sequential from the third quarter. That still fell short of our expectations for a combination of reasons, some lingering challenges on component availability side, as well as significant challenges with respect to some of the package process steps up the steel outsource. Now, we brought up another partner as [Indiscernible] stepping stone for the short capacity at least provided some relief in -- within the last month. But as suggested in the prepared remarks, we're really counting the days at this point to the other parts of the second quarter and for full integration. The beginning of our Q3 to be in the control of destiny that we need to have in order to have the low off further stability that we expect. Unfortunately, that predictability wasn't there in Q4. Just to be clear, that level of predictability isn't going to be there in this quarter. I think the access of capacity with respect to some of the process steps gives our operations team more flexibility with respect to getting their job done. But it's been very challenging for them. Again, both because of the bait tight supply chain, the challenges with respect to our SaaS processes. Just to get a little bit of what it has been with respect to that, not just in terms of throughput, but also the impact on margins. In Q4 were confronted with how the glue 5X price increase on some of this process steps. So it's been a difficult environment. And again, we're eager to get through the completion of the selection of the equipment, which is progressing well and then getting the benefit of having a top control of our destiny once all the equipment is ready for fabrication.

Got you. So from all that, can we get -- feel for I mean, you did about 90 -- you delivered $90 million in revenue this, and fourth quarter, we'll see a step-up first quarter and second quarter.

So I turn a result given that in Q4 we fell short of our target, even though earlier in the quarter we thought we were going to make a higher step up in Advanced Products revenues. We believe that until we are in control our destiny to provide guidance with respect to the level of improvement sequentially revenues [Indiscernible] for surprises, one way or the other. And so we're just going to stick to keeping it [Indiscernible]. We used to say, we got a lot of backlog. We got a lot of customers looking for more location on key products. You can be sure that our operations team is working extremely hard to bring it all about even before we get into the lower control investments that we need to have.

Got you. I completely understand that. So we're pretty far into Q1 already.

As I said earlier in the call, it's Jim here, right, we're just not going to offer up specific guidance. I think we -- what we've included in really need to have control over our own destiny, and were you could call it months, you could call it weeks away from having that visibility and having that sense of control.

Yes. This is not going to just fall short. We're gaining in greater control of our destiny. And going back to the component availability issues, in particular on the semiconductor front, we may progress. We got bigger allocation, but that landscape is still full of minds. As an example, late last year, we got 95 of an end of life on certain components and then the vendor didn't fall on our last time buy. So we're dealing with a lot of complexities by chain that make your predictability hard there, aside from the lack of vertical integration and the manufacturing processes.

Got it. I understand that. Thank you, and I will get back in the queue. Thank you so much.

Next question is coming from the line of Quinn Bolton. Please proceed. Your line is open.

Hey guys wanted to sort of follow up on John's line of questioning. And I guess my key question is. You mentioned some component constraints and then obviously some limitations on your outsourced electro plating step was the entirety of the miss really due to the outsourced manufacturing step or is it shared with component challenges still because it sounds like you'll bring that manufacturing step online or vertically integrated beginning July. But I'm trying to get a sense how much risk is there still on component availability issues? It sounds like you're making progress. So maybe that wasn't a bottleneck.

So, Quinn, there was progress in the wafer outs have been increasing. But I think as we discussed in the past, there is latency between wafer outs and components in tape of real ready for assembly. And by the way, there are two, we've taken the initiative of investing in additional facility in Rhode Island to provide vertical integration with respect to the back-end. So it's a combination of factors. The component about the issues were not as significant, but the we're still present. And they, as you heard me say in the [Indiscernible], get compounded by in effect inadequate capacity in the off-source packaging process that's -- because if -- as we say periods, or particular jobs can't be started on time due to any one component not being available to the opportunity to make that up, if you get constraints in the packaging process that is impaired by those constraints. There's slow interdependencies and we still got some work to do to get to the level of predictability, we expect we're going to have once the latency associated with substantial step up in wafer outs around cars, which is taking place this quarter. We get at least a good fracture of the packaging process steps under our belt.

Understood. Patrizio, you mentioned that the reason for the gross margin pressure, it sounds like primarily in Q4 was sort of a 5X increase in some process steps. Am I right to think that those are the outsourced process steps where you had to bring on a second supplier? But perhaps more importantly that those are the process steps that you will bring in-house beginning July with vertical integration?

Yeah, correct. Fundamentally, we had to do what we were forced to do, in order to take care of our customers. The priority was to get the capacity that was essential to have. With our regard to the cost issue, for the short-term knowing that -- that's before too long going to be behind us in our rearview mirror. The priorities to get as much capacity as we can and not worry about the short-term impact on margin.

Understood, and this is my last question. Sorry for asking a third, but I think it's important. Do you feel like any of your customers have been -- you've left them short to such a point where they may look to try to find alternative sources to Vicor? Or do you think some of the steps you've taken paying the higher prices for the process steps that you're satisfying their critical demands? Obviously as you ramp Andover, you will be able to supply more of their demand.

So Quinn, this is Phil. So I think with the major customers that we have, we are obviously in very close communication with them, almost daily planning shipments to them and to their contract manufacturers with the very integrate set of [Indiscernible] on that task, as it were. So they are very aware with the steps that we're taking and we're not surprising them at all. There's no surprises in terms of what we're doing that we're very intricately involved in their planning and supporting them. But to the Future, what we're seeing is that the AI market, particularly high performance computing, the demand profiles, they are significantly increasing over the next year to three years. What we're seeing is a big shift in the market of the hyperscalers actually buying in solutions that would embed in racks that they already have and then having a very much higher compute density within their pilot power profile that they have for their data centers, which is pretty much fixed. So the demand is going significantly up with a lot of our end customers to service that need. Yes, I think that number of these customers are going to be looking for second sources, but Vicor, I can assure you is going to play a big role in servicing that demand still. We've got close partnerships with these companies developed over many years. They need our solutions, they need our performance. I'm confident that we will stay with them, stay on track to meet our commitments that we do make. Then as Patrizio mentioned, ramp up in the second half of this year, with step-up in delivery and be able to meet the demand that we're planning with them for next year and beyond. I'm very confident in that, as I mentioned in my prepared remarks.

Thank you for the additional detail, Phil.

The next question is coming from the line of James Liberman. Please proceed.

Thank you. So it's a pleasure listening into the progress you are making. Could you make some comments on the developments regarding licensing and also -- and how the AC-DC converter market opportunities open up to you. What kind of color you could give to us in your participation in that area?

So we're having discussions with [Indiscernible] of licensees or potential licensees. And as discussed in the past that these are developments with the longest [Indiscernible], so we don't have anything to say today and when we are -- will go public with it. But, the licensing opportunity in a variety of end markets for our five portfolio and technology are very substantial. I think as discussed in the past, it's the [Indiscernible] that they're going to make a significant contribution to the margin, to the bottom line and to a significant degree also to revenue as a whole. But I think we need to be passionate with respect to making the right engagements on these fronts and making the most of your opportunity with respect to picking the right partners in the niche of the key end-markets.

Now, that makes sense absolutely. And can you comment on the AC-DC opportunities for you, down the road.

We have very significant opportunities, as we speak I think kit that, beyond that -- the customers that we referenced in the past, installations that are beginning. Now, we have a broader market opportunity for high-density liquid cool, AC-to-DC products that we are pursuing. And this is to in fact, enable solutions with very, very high density in racks and other systems which more and more require liquid [Indiscernible] at the cost point that makes them generally attractive while providing us with a strong margin opportunity. So that's -- those are VIP products that are probably in advance development that represent in effect low-hanging [Indiscernible] as a follow-on to the efforts that's already been completed. They use the same building blocks that have been proven to perform to the level of power density efficiency, and ease of thermal management that we've demonstrated with our lead customers.

Thank you very much. Appreciate it.

Thank you.

The next question is coming from the line of John Dillon. Please proceed. Your line is open.

On your vertical power delivery system, I'm just wondering how comprehensive your patent protection is? And specifically, I was wondering if someone delivers power from underneath, like you do, is that either licensing our product sale from Vicor? Is your patent protection good enough that you can protect anyone from doing underneath? Or is it just your whole solution that's patented?

So for obvious reasons, I'm not going to give you a very detailed answer to your question. It's okay to say that the innovation that we brought about with our [Indiscernible] initiative is effectively protected by multiplicity of balance. Some become public domain, other ones have not yet. But as you know, we take good care ensuring that our innovation, intellectual property are effectively protected. I think it's fair to assume that anybody is taking chances. So with respect to following our tracks on [Indiscernible] technology, as you might have heard me say in the past, you've said being on a minefield and this is not an advisable course of action.

And then Phil, I was in Vegas and I saw these LED signs and I thought of Vicor and I'm just wondering how big of a market that is compared to the data center. And if you could read like point-of-load in the data center High performance computing, and then maybe front-end products and then LED lighting. Can you give me a sense of how they relate to each other, the size of each of them?

Yeah I think it's safe to say that the whole datacenter opportunity for ACDC and DPTC point of load is massive compared to the LED market. I mean, the LED market, display market, particularly which other big high-performance displays is a very good market for us on the broad industrial front?

Yeah. We're involved on big installation there in Vegas. And there may be others to follow, you know, they are talking about London and other places for those types of entertainment domes. So I think we will be participating that, that will be part of our broad industrial portfolio, but estimate the -- maybe the available market there to be in the range of about maybe a $150 million, somewhere around there.

Gotcha. I figured it'd be limited, but it was interesting. I thank you very much, guys. Looking forward to the progress next quarter.

Yes. So let me make a short comment regarding that. The opportunity there, even though incrementally, is relatively small relative to AI into the centers. It's an opportunity that leverages the same building blocks throughput that we developed for AI into the center. So we have a big unicar into the center space AI with the liquid called PSU, on the one hand. And remarkably, the same modules that provide the key functionality within that solution. Our deploy is exactly the same module in the in the lighting, [Indiscernible] 10 megawatts. So it's a different scale in terms of all power requirement, different kind of environment. But the synergy of our modular power system methodology and IP is [Indiscernible] that if we can incrementally pursue these diverse market opportunity, reusing the same building blocks, and that's very unique to our methodology.

Yes, it sounds like you can scale to different markets very easily with very little engineering, and that's a real benefit for a lot of people out there, people outside the data center. Great. Okay. That's sounds great, that's really good. Thank you.

Thank you.

The next question is coming from the line of Jon Tanwanteng, please proceed.

Hi, thanks for taking my questions. I was wondering if you could give us a little bit more color regarding the bottlenecks at your -- that's what's plating partner. It had been COVID in prior quarters. Is there something new going on now and what is happening to -- I guess improve the throughput there as we go through the next couple of quarters before you ramp up your vertical duration?

I'm not sure I can give you a lot more color on that other than to say that it's been very frustrating in many respects. Again, as a said, they're literally counting today slap to being control of our destiny. We've been able to get incremental capacity in month after month, quarter-after-quarter, but not to scale that would have been necessary in order to expand the volume Advanced Products, as -- would it be necessary to fully support the demand from customers. So, we are not hopeful that any team dramatic in terms of incremental improvements with outsourcing can be made to up and in the few months left to the phenomenal fully integrated capacity of our own. We have brought on a second partner, but frankly, there limitations with both of these partners with respect to what they can do and the degree which we can predictably rely on their output. It got its ups and down from week-to-week, and it really makes our life very complicated in this remaining timeframe between essentially the middle of Q1 and the end of Q2. Even though as I mentioned earlier, as some of the equipment gets turns down, the number of process steps for which we've been relying on this outsources, will be going down and that gives our operation team more latitude, more flexibility with respect to getting their job done.

Got it. Thank you for that. And then you mentioned a surprise price increase that one of your outsourced partners. But are you seeing other general inflationary pressures? First of all, and second, are you able to pass those on in any way, shape, or form through pricing? I know you said you didn't want to touch on this big surprise on. But just in other terms -- in other places everyone's raising prices. I'm wondering if you're able to get the same tailwind behind you in terms of pricing?

So I'll answer the first part of your question regarding the food chain upstream of us and Phil will take the second part regarding our customers. So with respect to process steps, we had -- we'll drill it by a 5X out of the blue. If there was a big impact in many ways. That's a very extreme example of the kind of challenge that we've been seeing over the last year. I think there are more down to earth mundane examples that become a routine particularly in the semiconductor Area with increases of the order of 15%, 20%, 25%. In not the level of the same case that I was referencing earlier. This pressures are going to stay with us for the foreseeable future, when facing the industry fee comes to an end, is to TBD. I heard [Indiscernible] to the things could begin to turn around, as we all know [Indiscernible] has got basis fall by [Indiscernible] as more [Indiscernible] come online. I barely forecast it could happen as early as the end of this year. But then again, we already have events that could get in the way of that. So Phil on --

Yeah, on the pricing front, John, we are actually -- pretty much every year we take a look at our legacy products, our advanced products, and strategically, price increase, certain families and through different channels and things like that. We just recently completed one that will help us certainly with any increases in cost of components from our side. That was wide ranging right across legacy and advanced, ranging from 5% to 15% somewhere in that range. We've even done some price increases with some of our very big customers in the last couple of years as well. They understand that, they understand the challenges and they want to still obviously, via good supply to them and they understand that helping us with our profitability is important for the long haul. So they've been very collaborative partners with us as well, so yes, we've been doing that.

That's very helpful. Thank you.

The next question is coming from the line of Richard Shannon. Please proceed.

Well, thanks, guys for taking my questions. Jim, maybe a quick two - parter for you. Do you have any 10% customers for 2021? And can you quote the lead times that you had exiting fourth quarter or, at least, compare them to what was the quarter before.

The lead time that we're quoting is still consistent with what we had said previously.

32 weeks, 20 weeks [Indiscernible]

Advanced Products in 26 when they [Indiscernible]. So it's still lengthy, but it is the case that with the Brick Products we generally have a bit more ability to deal with turns business, in capture turns business.

Subject to component availability.

Subject to component availability but without generally the outsource constraint that we've talked about. And I think that it's probably -- I don't know that it's the case that we have a routinely 10% customer to that question. You're talking about in terms of revenue or?

Yes.

We have distributors that -- 10% customers and we have -- a couple of large OEMS.

Okay. Fair enough. Then let me ask you a follow-up question here on the automotive space. Phil, I think you said you mentioned you had three design wins. I think that's one more than last quarter here along with ten collaborations, I can't remember how many you had before on that one. Maybe you can give us a sense of dynamics there. Maybe if you can touch on applications within the automotive architectures that you're focused on, were you having success?

Yes. So the collaborations have increased by four -- four to five in the quarter Q4. 2021 was outstanding in terms of building the pipeline. It's over a billion dollars now. So, significant opportunity, it's about converting now those opportunities into design wins start-up production dates, and we're working really hard to do that over the next couple of quarters. In terms of where we're playing, we play in the charging 800, 400 volt onboard charging systems. We have a significant pilot density over competing, you know, sort of discrete-based solutions, silver box solutions, almost 10X, smaller, much, much higher efficiency. So we're getting a lot of interest there and collaborative interest in developing some early prototype systems for evaluation. Then we're playing in the classic 800-volt down to 48 to 12 and then 400-volt down to 48 to 12, working with several lead OEMs on battery delete projects, either the 12-volt battery or even the 48-volt battery, getting rid of it, which saves cost and weight, and increases range. So yes, it's right across that charging and down-conversion, I would -- I would call it in several large OEMs around the world.

Okay. Great. Appreciate that detail, that's all from me.

Next question is coming from the line of Alan Hicks. Please proceed.

Good afternoon. In the areas High Performance and Super Computing, I know this can be very large orders, like 10 million up and upwards. Is that -- have you been able to deliver on those, some of those big orders? Or is that the reason your backlog is risen so dramatically?

So we've had a steady ramp through the different quarters of last year. As Patrizio mentioned, we've increased delivery on some of our larger power modules, what we call NBMs to 48 to 12, 12 to 48 volt bridging applications. Those are steadily increased. But we certainly as to go to the next level of ramp as we've talked about, we're going to need our new factory to come online for treats. You talked about some of the early equipment that's going to help us do some of that. But in terms of getting fully integrated, that's what we really need to ramp up production in the second half of this year, but we are increasing. We have been increasing shipments to our lead customers there quarter-on-quarter.

So take as an example, Q4, right? It felt short of our target and expectation. But when it comes to mass products, it was still 18% ahead of the prior quarter. Even to the prior quarter, that was unfortunately also a disappointment. That too was double-digits sequential increase in advance product shipments relative to the quarter before as the same comment was applied to that. So it has been compounding at 15% to 20% per quarter sequentially, to get it to higher rates. We can't be relying on unpredictable support from partners with -- the capacity, which is [Indiscernible], wasn't designed to support our specific needs. It was really architect support, general marketing. So it's not really in every respect the right infrastructure for our unique package technology needs.

So with the Super Computing area is that -- is it across the board? Or is it more -- can you say some of these very large orders from Super Computing during the backlog is? Or is that Data Center and across-the-board?

Yeah, it ranges from, as I mentioned, hyperscaler integration of 48-volt AI systems that they purchase to 48 to 12 in new server blade with new CPU products, to AI accelerated cards, to AI pods and server-based system. So, it is right across the board and even into the more government military type of supercomputers where we're ramping our business there as well. We've got a very good footprint in the high-performance computer industry. It is across many customers now and many different types of applications.

Okay. Then, could you just comment on -- you mentioned that generation technology coming out in the third quarter, is that -- what opportunity is that going to provide for you beyond what you have now?

We're very excited about that, because it will raise the bar significantly relative to the key figures I made of our existing [Indiscernible] solution for AI and that [Indiscernible]. In one measure which is effective switching frequency and the transfer response time it's a threefold step-up in performance. It's a significant step up in terms of condensity, power density and scalability, as well as cost-effectiveness. Our fifth-generation control system has been under development for Chrome. Sometime, we recently got them a key component of this special action product, a little solution, at the wafer level, it looked great, we're waiting where within about ten days. getting cost in type of real that we can do probably on some of the platforms of the 5G platforms being raised to accept these devices. Would be characterizing this next rational solutions really starting in two or three weeks. And we have a complement of 5G controllers, some that's taping out the next two weeks, some other ones that are a few weeks behind them. And these play in a complementary way in different applications. Some of them support solutions for automotive is an example with our 5G technology, we get pulled by directional control of the power system. Let me tell you know, incremental costs, no incremental component count. And that's a key feature for some good automotive solutions that year was referencing earlier, or this is accomplished that in a fraction of the silicone area. So we're achieving essentially 2x increase in the control systems density. And with that, even that, the cost of ceiling on is first of all dependent on area, the 2x reduction in cost. Subject to what's happening with respect to cost trends. When it comes to wafers, sorry, which is under the current environment, paving higher. But negating that the impact of shortages within the industry and price pressures within the industry as we get to our 5G system, we're going to have a major cost reduction, and a significant density improvement owing to the current innovation is built within. I'm not sure if it's control reduction.

So the new factory, we'd be able to handle this new technology.

The new factory can [Indiscernible].

Yes. So this is life test. So the same packaging technology that we've developed with our 4G solutions, with CAISO, without any novelty in terms of packaging technology as we deploy the next-generation silicon. This is sort of plug and play, right? The component that was referencing earlier, which has been characterized that the wafer level is about to be characterized in actual net reduction platforms. That's an opportunity to raise the bar on performance and cost-effectiveness. separate apart from some of the new controllers that becoming available as the year progresses. And again, some of these is for center and AI, other innovation relates to automotive type applications.

So that's part of the reason you expect gross margins to improve substantially after you get the factory up and clean?

Yeah. Again, we are frustrated and disappointed with what we had to do in Q4. It was certainly not what we expected without them. But, you've had to be that way in order to get the increase in Advanced Products volumes that we matched to realize in the fourth quarter. I would fully expect that with these kinds of a [Indiscernible] that the trend with respect to margins remains very positive. And we should see a significant improvement this quarter and the quarter after there. There again, once we get in total control of our destiny and we leverage with the economies and the scale of a new facility with a billion-yearly-revenue capability. The whole of Intel working all the business model when it comes to improving margins and improving bottom line, I think they're going to be unleashed.

Okay. Thank you very much.

Thank you.

And I think with that, we should take maybe just one more question, please, Operator.

All right. The next question is coming from the line of Jon Tanwanteng. Please proceed.

Hi, guys. Thanks for taking my follow-up. I was just wondering when the factory, the new facility does come online, how quickly can you catch up on the backlog that I can think maybe you just did, the revenue from leaving on the table because of the supply chain and capacity issues,. Is it going to be a matter of quarters or will it takes some time to ramp up that capacity to something where it can quickly catch up on that.

Well, so step functions don't happen in the real world when it comes to these capabilities. We are going to be walking before we run. But the new factory, as you heard me say in the past has the capacity for over $1 billion per year worth of revenues, essentially all Advanced Products. And obviously that level of capacity would be [Indiscernible] to catch up with the backlog relatively quickly, but I think we're not yet at the point of where we can make a statement as to the rate of progress. I think it's right to say that as suggested earlier, to extent in spite of all of the challenges, the obstacle course that our operations team has had to run through over the last several quarters, they've been able to deliver if we look at the glass half full. Again, 15% to 20% sequential Advanced Products unit growth. I think that number, comes the third quarter should begin to take a significant step up.

Got it. Thank you.

Thank you.

Thanks very much. So, Operator, I think we're ready to conclude the call.

All right. Thank you. In that case, everyone thank you very much for joining us in this conference call, and have a nice day.

Thank you.

Bye.