12 December 2025 | 11:48AM HKT Equity Research CHINA IP RETAILER AND TOY TRACKER Nov: Pop Mart sequentially increased supply; Bloks launched more female IPs; US holiday sales in focus In this note, we provide updates on China IP retailers and toy companies, including new products/IP, sales momentum, and overseas market updates. Pop Mart's online sales growth in China accelerated from Oct with more plush toy supply released; while secondary market price remained stable for most IPs (except Twinkle Twinkle wh ...

Disney's $1 billion investment in Open AI and its move to let fans make AI videos with its characters opening the door for other studios to consider similar deals or risk potentially falling behind. Here's Disney's CEO Bob Iger on CNBC with David Faber yesterday. >> We've been extremely impressed with OpenAI's growth and what Sam and his team have been able to achieve.And of course on top of that was their uh appreciation for our content and their willingness to license it and their willingness to help us p ...

Financial Data and Key Metrics Changes - Total revenues in Q3 2025 were $4.3 million, a decrease of 47.3% compared to Q2 2025 due to the conclusion of licensing revenues from Qualcomm [25] - Gross margin was 40.9% in Q3, down from 64.4% in Q2, reflecting a lower mix of high-margin licensing revenue [25] - Operating loss was $20.4 million in Q3, compared to an operating loss of $8.7 million in Q2 2025 [26] - Net loss for Q3 was $6.7 million or $0.48 per diluted ADS, compared to a net loss of $9.1 million or $3.59 per diluted ADS in Q2 2025 [27] - Cash and cash equivalents at September 30, 2025, totaled $13.4 million, down from $41.6 million at June 30, 2025 [27] Business Line Data and Key Metrics Changes - The IoT business pipeline represents about $550 million in potential revenue over three years, with a 20% increase in design win projects compared to the last reported figure [14] - In Q3, three design win projects transitioned to production, with expectations to add five more in Q4 [15] - The company anticipates entering 2026 with over 45% of design win projects generating revenue [15] Market Data and Key Metrics Changes - The company holds 3,234 Bitcoin with a market value of $365.6 million, all pledged as security for $189 million of convertible debt issued in July [27] - The company has reduced its convertible debt by half through a tactical sale of Bitcoin holdings, lowering the debt to NAV ratio closer to 35% [8][12] Company Strategy and Development Direction - The company is committed to its Bitcoin treasury strategy and has taken proactive steps to reduce debt and enhance flexibility for future financing [6][8] - A disciplined and opportunistic approach to Bitcoin accumulation will continue, with ongoing purchases funded by various means including operating cash flow [11] - The company is exploring strategic alternatives for its IoT business to enhance value and accelerate the path to breakeven [24] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in Q4 revenue exceeding $7 million, with product revenue expected to exceed $6 million and services/IP licensing contributing around $1 million [20] - The company aims to limit cash burn in 2026 to reach breakeven by Q4, implementing a 20% cost reduction program across functions [23] - Management highlighted the importance of the design win pipeline and the potential for significant revenue growth in 2026 and beyond [15][21] Other Important Information - The company has launched a new IP initiative and is shifting to a proactive go-to-market strategy for licensing its IP portfolio [22] - The company plans to execute an ADS buyback program as soon as possible, given the current share price [10][12] Q&A Session Summary Question: Were there any licensing or service revenues in Q3? - The company reported approximately $1.3 million in licensing and services revenue in Q3, with product revenues being the primary focus [37] Question: How aggressive will the company be on the buyback? - The company plans to be as aggressive as needed, with a board resolution in place for the buyback program [34][36] Question: What is the confidence level in achieving $7 million in Q4 revenue? - Management expressed confidence in the $7 million target, citing secured backlog and historical performance of customers [59][61] Question: What are the strategic priorities beyond the ATM program and share buybacks? - The company is considering various strategic initiatives, including generating yield on Bitcoin and exploring partnerships for the IoT business [70][78]

Financial Data and Key Metrics Changes - Vicor recorded product revenues and licensing income for Q3 2025 of $110.4 million, down 21.7% sequentially from Q2 2025, which was $141 million, but up 18.5% from Q3 2024, which was $93.2 million [5] - Gross profit margin for Q3 was 57.5%, a decrease of 780 basis points from the prior quarter, primarily due to a $45 million patent litigation settlement in Q2 [6] - Net income for Q3 totaled $28.3 million, with GAAP-diluted income per share at $0.63 based on a fully diluted share count of 44,930,000 shares [8] - Cash and cash equivalents increased to $362.4 million at Q3, up $23.8 million sequentially [8] Business Line Data and Key Metrics Changes - Advanced product revenue increased 8.2% sequentially to $65.5 million, while brick product revenue increased 26.6% sequentially to $44.9 million [5] - Advanced product share of total revenue decreased to 59.3% compared to 63.1% in Q2 2025, with brick product share increasing to 40.7% [5] - Book-to-bill ratio for Q3 was 0.98, and one-year backlog increased 1.5% from the prior quarter, closing at $152.8 million [9] Market Data and Key Metrics Changes - Shipments to stocking distributors increased 39% sequentially and 46% year over year [5] - Exports as a percentage of total revenue decreased to approximately 42.8% from 51.9% in the prior quarter [5] Company Strategy and Development Direction - Vicor aims to substantially expand its licensing business over the next two years, particularly in AI applications, with a licensing revenue run rate of nearly $90 million per year [10] - The company is focused on innovation and customer engagement, particularly in the AI and data center markets, where power delivery networks are critical [12][17] - The second-generation vertical power delivery (VPD) solution is expected to meet the specifications of major customers and is progressing towards production launch in Q1 2026 [16] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in achieving record results in 2025, despite uncertainties in the timing of additional license deals [11] - The company highlighted the challenges faced by conventional power distribution technologies and the need for innovative solutions to meet the demands of AI processors [13][14] - Management noted that the current economic environment presents both uncertainty and opportunity for growth [10] Other Important Information - The effective tax rate for Q3 was negative 21.4%, positively impacted by the One Big Beautiful Bill Act, allowing for immediate expensing of domestic R&D investments [8] - Total operating expenses decreased 8.9% sequentially to $42.6 million, primarily due to a reduction in selling, general, and administrative expenses [6] Q&A Session Summary Question: What drove the increase in IP licensing revenue? - Management indicated that the increase was due to a compromise with an existing licensee who took an additional license for two years, including catch-up payments for previous months [20] Question: Are there other licensees contributing to the sequential jump in revenue? - Management confirmed that there were multiple factors, including a substantial hyperscaler signed in January and a settlement with a respondent in the ITC case [27] Question: How many customers are currently licensed, and what are the expectations for future licenses? - Management expects to sign up each OEM and hyperscaler in the AI and data center space over the next couple of years, leveraging their comprehensive patent portfolio [34] Question: What is the expected tax rate for Q4 and next year? - Management indicated that the fourth quarter would have a low single-digit tax rate expectation [64] Question: Are there concerns about not having a second source for production? - Management acknowledged the issue but stated they are prepared to address it through flexible licensing arrangements and potential shared ownership of fabs [56]

Core Insights - Vicor Corporation reported financial results for Q3 2025, showing an 18.5% year-over-year increase in product revenues and licensing income, totaling $110.4 million, but a 21.7% sequential decrease from Q2 2025 due to a prior patent litigation settlement [2][4]. Financial Performance - Gross margin for Q3 2025 was $63.5 million, up from $45.7 million year-over-year, but down from $92.1 million sequentially. The gross margin percentage increased to 57.5% compared to 49.1% a year ago, but decreased from 65.3% in Q2 2025 [3]. - Operating expenses rose to $42.6 million in Q3 2025 from $40.4 million a year ago, but decreased from $46.7 million in Q2 2025 [3]. - Net income for Q3 2025 was $28.3 million, or $0.63 per diluted share, compared to $11.6 million or $0.26 per diluted share a year ago, and down from $41.2 million or $0.91 per diluted share in Q2 2025 [4]. - Cash flow from operations was $38.5 million in Q3 2025, up from $22.6 million year-over-year, but down from $65.2 million in Q2 2025 [5]. Backlog and Market Position - The backlog for Q3 2025 was $152.8 million, a 1.5% increase from $150.6 million year-over-year, but a 1.5% sequential decrease from $155.2 million at the end of Q2 2025 [6]. - CEO Dr. Patrizio Vinciarelli highlighted that licensing revenue reached a record rate in Q3 2025 following a litigation settlement, indicating strong growth potential in Vicor's IP licensing practice [7]. Capital and Investments - Capital expenditures for Q3 2025 totaled $4.0 million, down from $8.4 million year-over-year and $6.2 million in Q2 2025 [5]. - Cash and cash equivalents increased by 7.0% sequentially to approximately $362.4 million as of September 30, 2025, compared to approximately $338.5 million as of June 30, 2025 [5]. Company Overview - Vicor Corporation designs, develops, manufactures, and markets modular power components and complete power systems, serving various markets including high-performance computing, industrial equipment, telecommunications, and aerospace [11].

Core Insights - Vicor Corporation's intellectual property (IP) is crucial for performance in high-growth markets such as AI, automotive, and industrial sectors, with licensing being essential for supply chain resilience and scalability [1][2] Licensing and Revenue Impact - The International Trade Commission issued a Limited Exclusion Order (LEO) in 2025, banning the importation of infringing bus converters and related computing systems, which is expected to contribute nearly $300 million to Vicor's revenues through 2026 [2] - Vicor's licensing revenues in Q3 surpassed its quarterly investment in R&D, indicating a strong focus on innovation compared to competitors who rely on copying [4] Growth Strategy - Vicor is enhancing its IP licensing practice, led by General Counsel Andrew D'Amico, supported by an in-house team and external legal partners [3] - The company anticipates that its IP licensing practice will grow to represent a larger portion of its module business, driven by the demand from OEMs and hyperscalers for licenses and renewals [5] Product Development and Market Position - Vicor's high-density power systems, including bus converters and Vertical Power Delivery (VPD), are critical for high-performance computing, positioning the company favorably in the market [5] - The company designs and manufactures modular power components and complete power systems, serving various sectors including enterprise computing, industrial automation, telecommunications, and aerospace [6]