Richardson Electronics, Ltd.

Good day, and thank you for standing by. Welcome to the Richardson Electronics Earnings Call for the fourth quarter of fiscal year 2022. At this time, all participants are in listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 1 on your telephone. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Ed Richardson, Chief Executive Officer. Please go ahead.

Good morning, and welcome to Richardson Electronics Conference Call for the fourth quarter of fiscal year 2022. Joining me today are Robert Benn, Chief Financial Officer, Wendy Dedell, Chief Operating Officer and General Manager for Richardson Healthcare, Greg Peliquin, General Manager of our Power and Microwave Technologies Group, and Jens Rupert, General Manager of Canvas. As a reminder, this call is being recorded and will be available for playback. I'd also like to remind you that we'll be making forward-looking statements. They're based on current expectations and involve risks and uncertainties. Therefore, our actual results could be materially different. Please refer to our press release and FCC filings for an explanation of our risk factors. Fourth quarter sales were 61.6 million, the highest quarterly sales we've achieved since the sale of RFPD in 2011. Fourth quarter gross margin improved at 32.7% versus 31.8% in the third quarter. Total sales for FY22 were $224.6 million, an increase of 26.9% over the prior year. In addition, backlog rose again to $206.2 million, nearly double to where we ended FY21. This supports the continued growth we expect to achieve in FY23. While power grid tubes are still a significant and growing part of our business, our expanded focus on designing and manufacturing products has driven sales to new levels and positioned us for continued growth in the face of tougher economic conditions. Today, more than 60% of our business comes from products we either manufacture or have manufactured exclusively for us. In addition, we continue to experience year-over-year growth across all three of our business units during the fourth quarter and full year. Power management solutions that support a green environment is an important growth opportunity and strategic focus. Demand for alternative energy in the face of unprecedented fuel prices is growing. We're benefiting from this trend. From the ultracapacitor modules used in GE wind turbines to future applications, such as production of green hydrogen using microwave generators, our existing and new products are capturing attention and solving customer problems. Demand for our 6KW magnetron, a product I was told back in the 80s would not be around in five years, continues to grow exponentially, and more consumers choose man-made synthetic diamonds over traditional diamond mining. Diversification is an important component to our long-term success. It's no longer just the semiconductor wafer fabrication market driving the upside in our revenues. Although this business was particularly strong for us in the Q4, 6.7% of our business in the quarter came from new products. We also saw growth in our EDG product lines to both existing and new customers. Canvas continues to add Blue Chip customers to its list of new custom display product wins. Simply put, our business is firing on all cylinders, and I believe we're just getting started. Through a lot of hard work and dedication of our sales, engineering, and manufacturing teams, and the support of our experienced supply chain, finance, and maintenance teams, we're taking the company to new heights. In fact, Q4 was the most profitable quarter the companies had since 2007, which was prior to the sale of two of our divisions. Our challenge is growing our engineering and manufacturing capabilities quickly to take advantage of significant opportunities underway across many of our global markets. We're investing in people and our facilities to support the growth and backlog and to capitalize on new product opportunities that solidify our competitive position in the future. I'll now turn the call over to Bob Benn, Chief Financial Officer, to review our fourth quarter and full year financial performance in more detail. Then Greg, Wendy, and Jens will provide more details on our fourth quarter performance as well as our new programs.

Thank you, Ed, and good morning. I will review our financial results for our fourth quarter and fiscal year 2022 followed by a review of our cash position. Net sales for the fourth quarter fiscal 2022 increased 22.1% to 61.6 million, compared to net sales of 50.5 million in the prior year's fourth quarter, due to higher net sales across all three business units. PMT sales increased by 10.4 million, or 26.8% from last year's fourth quarter, driven by strong growth from our new power and microwave technology partners for various applications, including power management, green energy solutions, and 5G infrastructure. Sales for several electron tube product lines, as well as manufactured products for our semiconductor wafer fabrication equipment customers also increased from the fourth quarter of fiscal 2021. Canvas sales increased by 0.6 million, or 7.1%, due to strong customer demand in North America. Richardson Healthcare sales increased 0.1 million, or 4.1%, primarily due to increases in parts sales and equipment sales, partially offset by lower sales of Alta 750 tubes. In addition to higher revenues, total company backlog increased to 206.2 million in the fourth quarter of fiscal 2022, from $175.6 million at the end of the third quarter of fiscal 2022 and $110.0 million at the end of the fourth quarter of fiscal 2021. This is the highest level our backlog has been since the sale of RFPD in 2011. Gross margin for the fourth quarter was 32.7% of net sales compared to 32.4% of net sales in last year's fourth quarter. PMT's margin increased to 34.4%. from 32.0% due to product mix, including higher sales of the Altra 3000 and improved manufacturing efficiencies. Canvas gross margin decreased to 30.7% from 35.3% because of higher global freight costs and foreign exchange effects. Healthcare's gross margin was 10.8% in the fourth quarter of fiscal 2022 compared to 29.4% in the prior year's fourth quarter. due to a lower level of absorption and higher level of scrap expense. Operating expenses were $15.2 million for the fourth quarter of fiscal 2022 compared to $14.0 million in the fourth quarter of fiscal 2021. The increase in operating expenses resulted from higher employee compensation expenses, primarily due to increased incentive expense resulting from the highest level of profitability since the fourth quarter of fiscal 2007. Operating expenses as a percentage of net sales improved to 24.6% during the fourth quarter of fiscal 2022 compared to 27.7% during the fourth quarter of fiscal 2021. The company reported operating income of 5.0 million or 8.1% of net sales for the fourth quarter of fiscal 2022 versus operating income of 2.3 million or 4.6% of net sales in the fourth quarter of last year. Other expenses for the fourth quarter of fiscal 2022, including interest income and foreign exchange, were $0.2 million compared to other expenses of less than $0.1 million in the fourth quarter of fiscal 2021. The non-cash income tax benefit of $3.5 million for the fourth quarter fiscal 2022 resulted from the $4.0 million partial reversal of the tax valuation allowance due to evidence of profitability for realizing a portion of the deferred tax assets in the future. Net income was 8.3 million or 13.4% of net sales for the fourth quarter fiscal 2022 as compared to a net income of 1.9 million or 3.7% of net sales in the fourth quarter fiscal 2021. Without the 4.0 million tax valuation adjustment, net income for the fourth quarter fiscal 2022 was 4.3 million or 6.9% of net sales. Earnings per common share on a diluted basis in the fourth quarter of fiscal 2022 were 59 cents compared to 14 cents per common share on a diluted basis in the prior year's fourth quarter. Excluding the tax valuation allowance adjustment, earnings per common share on a diluted basis were 31 cents for the fourth quarter of fiscal 2022. Turning to a review of the results for fiscal year 2022. Net sales for fiscal year 2022 were $224.6 million, an increase of 26.9% from $176.9 million in fiscal year 2021. Net sales increased by $40.8 million or 29.7% for PMT, $5.9 million or 20.0% for Canvas, and $1.0 million or 10.1% for Richardson Healthcare. Gross margin decreased to 31.9% from 33.2%, primarily reflecting product mix and PMT, higher global freight costs and foreign exchange effects in Canvas, and increased component scrap expenses for healthcare. Operating expenses were $55.7 million for the fiscal year, which represented a decrease of $0.2 million from the last fiscal year. The decrease was due to the non-recurrence of a $1.6 million legal settlement in fiscal 2021 and lower legal fees. These decreases were mostly offset by higher employee compensation expenses, including additional incentive expense due to the strong profitability. Operating expenses as a percentage of net sales improved to 24.8% during fiscal 2022 as compared to 31.6% during fiscal 2021. Operating income for fiscal year 2022 was $16.0 million or 7.1% of net sales as compared to an operating income of $2.9 million or 1.6% of net sales for fiscal year 2021. Other expenses for fiscal 2022, including interest income and foreign exchange, were $0.2 million as compared to other expenses of $0.6 million for fiscal 2021. The income tax benefit of $2.2 million resulted from the $4.0 million partial reversal of the tax valuation allowance. The company reported net income of $17.9 million or 8.0% in net sales for fiscal year 2022 versus net income of $1.7 million or 0.9% in net sales for fiscal year 2021. Without the $4.0 million tax valuation adjustment, net income for fiscal 2022 was 13.9 million or 6.2% of net sales. Earnings per common share on a diluted basis in fiscal 2022 were $1.31 compared to 13 cents per common share on a diluted basis in the prior year. Excluding the tax valuation allowance adjustment, earnings per common share on a diluted basis were $1.02 for fiscal 2022. Moving to a review of our cash position. Cash and investments at the end of the fourth quarter of fiscal 2022 were 40.5 million compared to 39.1 million at the end of the third quarter of fiscal 2022 and 43.3 million at the end of the fourth quarter of fiscal 2021. The company continues to invest in working capital to support its growth initiatives. Inventory grew to 80.4 million from 73.7 million at the end of the third quarter of fiscal 2022 and 63.5 million at the end of fiscal 2021. The largest portion of the increase for both the fourth quarter and fiscal year 2022 was due to increases in components and work in process for our manufacturing business. Also, accounts receivable increased to $29.9 million from $25.1 million at the end of fiscal 2021, primarily due to the high sales growth. Capital expenditures were $1.0 million in the fourth quarter fiscal 2022, versus 0.8 million in the fourth quarter fiscal year 2021. Approximately 0.7 million related to the investments in our manufacturing business, 0.2 million was for our healthcare business, and 0.1 million was for our IT system. Total capital expenditures were 3.1 million in fiscal 2022 as compared to 2.6 million in fiscal 2021. We expect the higher level of capital expenditures in fiscal year 2023 as we make additional investments in our manufacturing capabilities and facility. We paid $0.8 million in cash dividends in the fourth quarter and a total of $3.2 million in fiscal year 2022. In addition, based on our current financial position, our board of directors declared a regular quarterly cash dividend of $0.06 per common share, which will be paid in the first quarter of fiscal 2023. Finally, during fiscal 2022, We repatriated $1.5 million to the U.S. from several foreign locations. Our U.S. domiciled cash and cash equivalents balance totaled $25.5 million as of May 28, 2022, the same balance at the end of fiscal 2021. Now, I will turn the call over to Greg, who will discuss the results for our Power and Microwave Technologies Group.