Richardson Electronics, Ltd.

Good day, and thank you for standing by. Welcome to Richardson Electronics Earnings Conference Call for the first quarter of fiscal year 2024. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you'll need to press star 1-1 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 1-1 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Mr. Edward Richardson, President and Chief Executive Officer. Please go ahead.

Good morning and welcome to Richardson Electronics Conference Call for the first quarter of fiscal year 2024. Joining me today are Robert Ben, Chief Financial Officer, Wendy Dedele, Chief Operating Officer and General Manager for Richardson Healthcare, Greg Peliquin, General Manager of our Power and Microwave Technologies Group, and our newest business unit, Green Energy Solution, and Jens Rupert, General Manager of Canvas. As a reminder, this call is being recorded and will be available for playback. I would 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 SEC filings for an explanation of our risk factors. Financial results for the first quarter of fiscal year 2024 were below our expectations due to concerns regarding economic conditions, rising interest rates, a lagging China economy, and the possibility of a recession across our global customer base. It was an especially challenging period given the downturn in the semiconductor wafer fab market and the timing of new orders in our green energy solutions business. While sales were lower than anticipated, our gross margin improved from Q4 fiscal 2023, and the team did an excellent job managing costs. Our core EDG and display businesses were in line with the prior year, and the company remained profitable in the quarter. Despite near-term challenges, we've never been more optimistic about our future. We expect the future downturn in the market demand to improve in the coming quarters, and we remain committed to our long-term strategy. Our strategy growth plan is focused on expanding our product lines, leveraging the deep relationships we have with over 20,000 customers globally. We do this by listening to our customers and helping them solve problems. We're quickly building a name for ourselves as the technology leader in green energy solutions. In addition, we continue to hear from key customers and technology partners in the semi-fab equipment market that they're at the bottom of the semicircle. These companies anticipate growth in calendar year 2024 that exceeds sales levels during the 2022 cycle. We're taking steps in the interim to address the slowdown without impacting growth in these critical areas. We remain focused on increasing the percentage of our sales that come from our green energy solutions business, as well as other products we manufacture. Much of this new business is project-based, and timing is not always easy to predict. The success of these strategies, however, is supported by our sales growth, improved efficiency, and higher profitability over the past several years. Our balance sheet remains strong with $25 million in cash and no debt. Throughout the company, everyone was focused on turning our inventory into cash managing expenses, and driving toward annual positive operating cash flow next fiscal year. Bob Benn, our Chief Financial Officer, will review our first quarter financial performance. Then Greg, Wendy, and Jens will discuss numerous opportunities within our business units, including the significant number of new products, programs, and customers that drive our optimism for the future.

Thank you, Ed, and good morning. I will review our financial results for our first quarter of fiscal year 2024, followed by a review of our cash position. Net sales for the first quarter of fiscal 2024 were down 22.2% to $52.6 million, compared to net sales of $67.6 million in the prior year's first quarter. PMT sales decreased by 9.6 million, or 21.2%, from last year's first quarter, driven primarily by a decline in manufactured products for our semiconductor wafer fabrication equipment customers. Net sales for GES were down by 4.1 million, or 48.4%, from last year's first quarter, primarily due to lower sales of ultracapacitor modules for wind turbines. It is important to note that the replacement of lead-acid batteries in existing wind turbines is often project-based, and the timing of orders is difficult to predict. Canvas sales decreased by 0.5 million, or 5.0%, primarily due to lower customer demand in North America. Richardson Healthcare sales decreased by 0.7 million, or 22.1%, primarily due to lower demand in the quarter for parts and equipment. Total company backlog was $148.1 million at the end of the first quarter of fiscal 2024 versus $160.4 million at the end of the fourth quarter of fiscal 2023. Gross margin for the first quarter was 32.8% in net sales compared to 34.1% in last year's first quarter. PMT's gross margin decreased to 32.2 percent from 34.3 percent, primarily due to product mix and manufacturing under absorption. Healthcare's gross margin decreased to 31.6 percent in the first quarter of fiscal 2024, compared to 36.7 percent in the prior year's first quarter, as a result of increased scrap expense and manufacturing under absorption. GES gross margin increased in the first quarter of fiscal 2024 to 36.0% from 35.5% in the prior year's first quarter due to product mix. Canvas gross margin increased in the first quarter of fiscal 2024 to 34.0% from 31.4% in the prior year's first quarter because of product mix and lower freight costs. Operating expenses were $15.8 million for the first quarter of fiscal 2024 compared to $14.2 million in the first quarter of fiscal 2023. The increase in operating expenses resulted from higher employee compensation expenses, primarily salaries. The company reported operating income of $1.5 million or 2.8% of net sales for the first quarter of fiscal 2024 versus operating income of $8.8 million or 13.0 percent of net sales in the first quarter of last year. Other income for the first quarter of fiscal 2024, including interest income and foreign exchange, was $0.1 million compared to other expense of $0.3 million in the first quarter of fiscal 2023. Income tax provision was $0.4 million or a 23.7% effective tax rate versus an income tax provision of $2.1 million or a 25.0% effective tax rate for the first quarter of fiscal 2023. Net income for the first quarter of fiscal 2024 was $1.2 million compared to net income of $6.3 million in the first quarter of fiscal 2023. Earnings per common share diluted were $0.09 compared to earnings per common share diluted of 45 cents in the first quarter of fiscal 2023. Moving to a review of our cash position. Cash and investments at the end of the first quarter of fiscal 2024 were $24.1 million compared to $25.0 million at the end of the fourth quarter of fiscal 2023. U.S. cash and investments were $8.4 million at the end of the first quarter of fiscal 2024 versus $7.6 million at the end of the fourth quarter of fiscal 2023. Capital expenditures were $1.1 million in the first quarter of fiscal 2024 versus $1.4 million in the first quarter of fiscal year 2023. Approximately $0.9 million related to investments in manufacturing including facility expansion and the renovation of our office space. We paid $0.8 million in cash dividends in the first quarter of fiscal year 2024. 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 second quarter of fiscal 2024. As of the end of the first quarter of fiscal 2024, the company had not made any draws on its $30 million to our revolving line of credit with PNC Bank. Now, I will turn the call over to Greg, who will discuss the results for our PMT and GES business groups.