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spk23: Good day, and thank you for standing by, and welcome to the Richardson's Electronics Earnings Call for the second quarter of fiscal year 2024 conference call. At this time, our 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 will need to press star 11 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 11 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Edward Richardson, CEO.
spk20: Please go ahead.
spk15: Good morning and welcome to Richardson Electronics conference call for the second quarter of fiscal year 2024. 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, which includes Green Energy Solutions, 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 second quarter of the fiscal year 2024 fell short of our expectations. Economic conditions, rising interest rates, higher inventory levels, and a lagging economy in China negatively impacted customer demand for our products. As we operate over the near term with a more uncertain economic climate, we remain focused on pursuing our long-term growth strategies. These strategies position the business to take advantage of large, rapidly growing global opportunities. The expertise of our management team is a significant asset during this period. as we have successfully navigated difficult economic periods throughout our history. This is exactly why we maintain a strong balance sheet with access to additional sources of capital if necessary. We've also made the strategic decision to maintain stable levels of manufacturing employees and salespeople as many of the green energy solutions and semiconductor equipment customers expect demand to recover in calendar 2024. Therefore, maintaining continuity in our manufacturing team is important to ensure we can quickly adapt to increased orders and grow market share. Unfortunately, profitability was impacted in the second quarter as our gross margin reflects the underabsorption in our factory. Within our healthcare business, we made some changes to improve inventory and focus on strategic objectives, which Wendy will tell you about shortly. Overall, the team continues to do an excellent job managing expenses. We're focused on driving efficiencies. We simultaneously position the company for future growth. While we acknowledge revenues will be lower in FY24 than previously anticipated, we maintain our optimistic outlook and remain committed to our long-term strategy. We continue to expand our product roadmap for green energy solutions. We are adding new customers for wind, electric vehicles, and rail, and the applications that take advantage of energy transition initiatives underway across many geographies. While we're in the early innings of this transformation, we have quickly developed a compelling roadmap of products, technologies, and are establishing Richardson Electronics as a leading provider of innovative engineered solutions for global green energy markets. David Miller- Activity across our business remains extremely strong and specifically for the green energies business our pipeline of potential projects continues to increase. David Miller- In addition to public and private energy transition initiatives that are underway, we believe that the inflation reduction act of 2022 will create further opportunities for the company. One recent example is a new order from a U.S.-based technology company that's using 100-kilowatt generators to power a pilot reactor to make crystalline diamond materials for high-tech applications. Under the Inflation Reduction Act, this customer is applying for a grant to build a multi-reactor factory which will require a significant number of 100-kilowatt generators. We believe other wind and electric vehicle and rail customers will benefit from the Inflation Reduction Act, which we expect to support our higher sales forecast. As our GES business gets to scale in the coming quarters and years, much of our near-term new business is project-based and timing is not always easy to predict. I want to stress that we have not lost any opportunities and remain focused on capitalizing on market opportunities supported by the Inflation Reduction Act and other energy transition initiatives globally. We are also focused on adding suppliers that will fill our technology gaps. These relationships are critical to our business model as our partners often support new engineered solution opportunities for the company. that drive higher and more profitable sales. Our balance sheet remains strong with nearly $23 million in cash and no debt. Inventory increased in the quarter in line with purchases of TALIS products, which would support our Profitable 2 business, as well as long lead time capacitors that are required to support our green energy growth initiatives. The balance of our inventory remained flat. And the transit inventory was down, indicating we are reducing inventory purchases in line with sales. With this introduction, I'd like to turn the call over to Bob Benn, our Chief Financial Officer, to review our second quarter financial performance in detail. Then Greg, Wendy, and Jens will discuss our numerous opportunities within our business units, including the significant number of new products, programs, and customers that drive our optimism for future growth.
spk04: Thank you, Ed, and good morning. I will review our financial results for our second quarter of fiscal year 2024, followed by a review of our cash position. Net sales for the second quarter of fiscal 2024 were down 33.0% to 44.1 million, compared to net sales of 65.9 million in the prior year's second quarter. PMT sales decreased by 9.3 million from last year's second quarter, driven primarily by a decline in manufactured products for semiconductor wafer fabrication equipment customers. Sales for GES declined $9.7 million from last year's second quarter, primarily due to lower sales of ultracapacitor modules for wind turbines as a result of the project-based nature of this product line. Canvas sales decreased by $2.8 million, primarily due to customer pushouts in North America. However, Canvas backlog increased, reflecting higher overall demand. Richardson healthcare sales were comparable to the second quarter fiscal 2023, as higher CT tube and parts demand offset lower system sales. Consolidated gross margin for the second quarter was 28.4% in net sales, compared to 33.2% in last year's second quarter, due primarily to product mix and underabsorption. Without underabsorption of the company's manufacturing facility, management estimates that the company's consolidated gross margin for the second quarter of fiscal 2024 would have been 31.3 percent. PMT's gross margin decreased to 28.5 percent from 34.5 percent, primarily due to product mix, and $0.9 million of manufacturing underabsorption. GES gross margin decreased in the second quarter of fiscal 2024 to 29.2% from 33.9% in the prior year's second quarter due to product mix. Healthcare's gross margin decreased to 14.8% in the second quarter of fiscal 2024 compared to 23.2% in the prior year's second quarter as a result of a $0.3 million increase in manufacturing under absorption. Canvas gross margin increased in the second quarter of fiscal 2024 to 33.5% from 29.7% in the prior year second quarter because of product mix and lower freight costs. Operating expenses were $14.5 million for the second quarter of fiscal 2024 compared to $14.7 million in the second quarter of fiscal 2023. The decrease in operating expenses resulted from lower incentive expenses, partially offset by higher employee compensation expenses. The company reported an operating loss of $2.0 million for the second quarter of fiscal 2024 versus operating income of $7.2 million in the second quarter of last year. Other expense for the second quarter of fiscal 2024, including interest income and foreign exchange, was $0.3 million compared to other expense of $0.1 million in the second quarter of fiscal 2023. Income tax benefit was $0.5 million or a 21.6% effective tax rate versus an income tax provision of $1.5 million or a 21.5% effective tax rate for the second quarter of fiscal 2023. Net loss for the second quarter of fiscal 2024 was $1.8 million or $0.13 per diluted common share compared to net income of $5.5 million or $0.39 per diluted common share in the second quarter of fiscal 2023. Turning to a review of the results for the first six months of fiscal year 2024. Net sales for the first six months of fiscal year 2024 were $96.7 million, a decrease of 27.5%, from $133.5 million in the first six months of fiscal year 2023, which reflected lower sales across our business segments. Gross margin decreased to 30.8% from 33.6%, primarily reflecting product mix and manufacturing underabsorption in PMT, as well as increased scrap expense in manufacturing underabsorption in healthcare, which was partially offset by a favorable product mix and lower freight costs for Canvas. Operating expenses were $30.3 million for the first six months of the fiscal year, which represented an increase of $1.4 million from the first six months of the last fiscal year. The increase was due to higher employee compensation expenses associated with the higher staffing levels in fiscal 2023 combined with severance costs relating primarily to healthcare's reduction in staff. Operating loss for the first six months of fiscal year 2024 was $0.5 million as compared to an operating income of $16.0 million for the first six months of fiscal year 2023. Other expense for the first six months of fiscal 2024, including interest income and foreign exchange, was $0.1 million as compared to other expense of $0.5 million for the first six months of fiscal 2023. Income tax benefit was $0.1 million or an effective tax rate of 16.5% during the first six months of fiscal 2024 versus an income tax provision of $3.6 million or an effective tax rate of 23.4% in the prior year's first six months. The company reported a net loss of 0.6 million or 4 cents per diluted common share for the first six months of fiscal year 2024 versus net income of 11.9 million or 83 cents per diluted common share for the first six months of fiscal year 2023. Moving to a review of our cash position. Cash and investments at the end of the second quarter of fiscal 2024 were 22.8 million compared to $24.1 million at the end of the first quarter fiscal 2024. U.S. cash and investments were $8.8 million at the end of the second quarter fiscal 2024 versus $8.4 million at the end of the first quarter fiscal 2024. Capital expenditures were $1.5 million in the second quarter versus $1.3 million in the second quarter fiscal year 2023, approximately $1.1 million. related to investments in manufacturing, including facility expansion, and included final costs for the renovation of our office space. We paid $0.8 million in cash dividends in the second 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 third quarter of fiscal 2024. As of the end of the second quarter of fiscal 2024, the company had not made any draws on its $30 million revolving line of credit with PNC Bank. Lastly, the company's board of directors created new ownership requirements for outside directors. This includes owning a minimum of $150,000 of our stock after a three-year period. Now, I will turn the call over to Greg, who will discuss the results for our PMT and GES business groups.
spk07: Thank you, Bob, and good morning, everyone. As expected, the fiscal 2024 second quarter was challenging for our green energy solutions and power and microwave technologies groups due to a fluid economic environment, the timing of some project-based orders, and a decline in sales in the semiconductor wafer fab market. For our GES business in particular, Our second quarter results reflect the startup nature of any new business. As a reminder, we are in the infancy of our GES growth strategy, having started to pursue new GES opportunities only two years ago. With new designs and customer requirements, establishing manufacturing and test, and also launching beta site testing, we expect sales to fluctuate as we get to scale and develop more predictable revenue streams. However, in a short amount of time, we have designed numerous new products received several patents and shipped over $77 million to an ever-growing list of key customers with more than $35 million in backlog going into calendar year 2024. We expect significant bookings to be received in Q3 and Q4 of FY24. So needless to say, we continue to be very excited about the next three years. Last year, GES benefited from several large projects, including electric locomotive development, and major owner-operators of GE wind turbines such as Nextera, Enel, and Inver Energy. Given the project nature of our GES business, revenue from these products are not necessarily consistent quarter to quarter. In fact, many of our customers over the past three months completed calendar year 2024 budgets, including our product, and will roll out purchases in the first half of calendar 2024. In weekly conversations with our major customers, they note it is only a matter of time until new orders are placed. Our customers repeatedly tell us we have maintained our market share for our core GES applications and have identified new product opportunities. And the decline in revenue we are experiencing is purely a timing issue. In fact, our customer pipeline and the number of opportunities continues to increase as we look to take advantage of significant energy transformation projects globally. Our GES and PMT backlogs remain strong at over $100 million. Given our inventory position, we believe we will ship many incoming orders from stock, which we expect will convert working capital into cash in the coming quarters. We are managing our GES business to support our customers' needs when they are ready. So with that introduction, let's look at the second quarter performance of GES and PMT groups in more detail. GES sales were $2.6 million in the quarter, down from $12.3 million in the prior year's record second quarter. The year-over-year decline in GES sales was due to timing on several major project-based opportunities. Last year, GES revenues included the first phase of rollouts to our wind turbine customers and prototype builds for our EV locomotive customers. During the quarter, we added several major new customers such as BP Energy, EDF Energy, and EDP Renewables. I'm pleased to report that 90% of our Ultra 3000 sales in Q2 were with new wind customers. We continue to increase our market share with the customers needing our niche patented green energy products. We believe phase two rollouts for our wind customers will begin in Q3 and Q4 of FY24, as many of these customers recently completed their 2024 budgeting process. The forecast they have provided point to growing orders, which we believe will drive stronger GE sales in our fiscal third and fourth quarters. We continue to beta site our patented pending Ultra UPS 3000, which replaces lead acid batteries in the UPS system at the base of the wind turbines. The Ultra UPS 3000 will be used by Siemens and by other owner-operators of GE wind turbines going forward. Tests are going well, and we have led to important improvements in the product. We're also testing the Altra PEM 3000, which supports other wind turbine platforms, such as Suzlan, Senvion, and Nordex. This is helping us expand our market outside of North America. One major program for the Altra PEM, or multi-brand, is beta testing with Suzlan in an OEM and replacement basis. This opportunity is for more than 7,000 turbines in India alone, and several thousand more in North America. This product is also in final testing with several owner-operators in Latin America and North America. We believe initial ultra-PEM orders will begin in Q4 of FY24. A needy locomotive segment due to supply chain issues for piece parts from our suppliers, our superstructure builds for Long Island Railroad and BNSF electric locomotives will be completed in late Q3 and Q4 of this fiscal year. We anticipate phase two for our EV locomotive customers will be in the third and fourth quarters of calendar 2024. We also have beta orders for our patented UltraGen 3000 starter module with two large diesel and electric motor manufacturers. It is important to note that these are exclusive with both manufacturers. We continue to identify other niche applications for the UltraGen 3000. We're in beta testing with several refrigeration truck manufacturers, where Ultragen is replacing lead acid batteries. There are numerous other markets that can benefit from this solution, such as construction equipment, excavators, loaders, and backhoes. These are longer-term opportunities that we expect to add incremental growth in the future periods as we leverage our leadership position utilizing ultracapacitors and other related technologies as power sources across various applications with many large companies throughout the world. In summary, We believe we will begin to see sequential revenue growth in Q3 and Q4 within our GES business, driven by new products, customers, and technology partners, all supported by the forecast and backlog from these project-based customers. I want to stress that we have not lost any market share. In fact, we continue to increase our market share with new products, applications, and customers, and our recent performance is a result of timing issues and the emerging nature of our GES business. So turning to PMT, which includes EDG, our legacy two business, and PMG, our power and microwave components group, sales decreased 22.9% to 31.3 million. This decline was mainly due to continued slowdown in our semiconductor wafer fabrication equipment business. The semiconductor wafer fabrication business has always been cyclical. We anticipated the slowdown in 2023, but maintain our expectations that the business will recover in the second half of calendar 2024. This frustration with the cyclical downturn of the wafer fabrication business was offset by strong double-digit bookings growth in our RF and wireless business, mainly supporting wireless infrastructure and communication customers. As mentioned, our engineering solution strategy is led by our global technology partners. We continue to add partners who fill technology gaps in our offering and support our growth. Often through these partnerships, we identify opportunities for new products that we design and manufacture in-house. This increase the value we provide customers and allows us to capture more revenue while expanding and diversifying our customer base. These long-term supplier relationships are extremely strong. And when appropriate, we work with them on strategic long-term purchases to maintain appropriate levels of supply. We negotiate special payment turns and shipping schedules to help improve cash flow. In addition, having inventory at hand allows us to capture and maintain market share. We collaborate. with both our customers and suppliers and leverage our customer's forecast to help us strategically invest in inventory, ensure we can meet our customers' needs. Our growing customer base and strong relationships with these customers and suppliers using our version of a customer intimacy model helps us develop new products and opportunities with our existing customer base. We also continue to invest in our infrastructure to support our growth where needed. We're bringing on talented design and field engineers and making investment to enhance our manufacturing capabilities. Our growing in-house design and engineering manufacturing teams are doing a great job supporting increased demand for current products and new product designs. With this team, we will continue to identify, develop, and introduce new products and technologies for green energy and other power management and microwave applications. I cannot stress enough the value of Richardson Electronics model to our customers and suppliers. Our unparalleled capability and global golden market strategy are unique to the power and energy in RF microwave and green energy markets. We developed a strong business model including legacy products and new technology partners that fit well with our engineered solutions capabilities. Through our steadfast and creative focus on customers, we will continue to excel by taking advantage of opportunities when they arise. The execution of our strategy has never been better. There's no question our customers and technology partners need Richardson's capabilities, products, and support more than ever. And with that, I'll turn it over to Wendy Dedell to discuss Richardson Healthcare.
spk21: Thanks, Greg. Good morning, everyone. Second quarter sales for the Healthcare Division were 2.9 million, down less than 1% compared to the second quarter of last year, and improved over our most recent first quarter. CT tubes and part sales were up versus the prior year's second quarter, while system sales were down due primarily to timing of cash receipts from customers in Latin America. In the quarter, we benefited from sales of our repaired Siemens Stratton Z tubes. Healthcare's gross margin in the quarter was very low at 14.8% compared to 23.2% last year. The reason for the decline in margin was due to underabsorption associated with our decision to produce fewer Alta tubes in the quarter as well as higher scrap costs. Throughout prior quarters, healthcare inventory has increased due in large part to our growing supply of Alta tubes. These are the replacement tubes for Canon CT scanners. We decided at the end of the quarter to reduce our staff and temporarily suspend Alta tube production, which will allow us to sell off inventory. We did retain critical resources who will focus on continual product design improvements and cost reduction opportunities but reduced production may continue to drive our overall gross margin lower than anticipated. We did not lay off resources working on the repaired Siemens tube program. In fact, we are supporting the development team by reallocating some of the employees who are focusing on the Alta tubes. We continue to make excellent progress with the Siemens program, and with a more focused team, anticipate this to continue. The Siemens repair program includes four tube types, the Stratton Z, MX, MXP, and MXP46. The repaired Stratton Z is in full production and performing well in the field. Stratton Z sales are just starting to ramp up as we have a steadier flow of production. The first repaired MX series tubes are in test, and provided our beta testing goes well, we anticipate introducing these to the market later in the third quarter. As we mentioned last period, sales of the MX series will be limited due to supply until FY25. In the quarter, we also received our GMP certification in Brazil. GMP stands for Good Manufacturing Practices. These are the standards set by the National Agency of Health Surveillance, or ANVISA, in Brazil. This paves the way for us to export our tubes to a specific customer in Brazil who will reload and sell our Alta tubes in-country. We anticipate the first shipments to this customer will be made in the quarter with limited sales in the fiscal year. Rest assured, we continue to monitor healthcare's financial performance with the goal of achieving a break-even point in the fourth quarter. This will be more of a challenge with lower production going through the plant, but we are doing the right things to balance our investments with opportunities in the business. I will now turn the call over to Jens Rupert to discuss the results for Canvas.
spk18: Thanks, Wendy, and good morning, everyone. Canvas engineers, manufacturers, and sales custom displays to original equipment manufacturers in the industrial and medical markets throughout the world. Canvas's sales for the second quarter of fiscal 2024 reflect certain customer pushouts, primarily in North America. As a result, sales were $7.3 million for the second quarter compared to $10.1 million for the second quarter last year. On the positive side, we finished the quarter with a very strong backlog of 48.2 million, which increased by 5.6 million from the first quarter of fiscal 2024. Of course, margin as a percentage of net sales improved to 33.5% during the second quarter of fiscal 2024, compared to 29.7% during the second quarter of fiscal 2023. The increase in gross margin was primarily related to a more favorable product mix and lower freight costs. During the quarter, we received several new orders from both existing and first-time medical OEM customers. Some of these applications include medical device controls within the operating room, surgical navigation, laser ablation, radiotherapy, laboratory equipment, super pulsed laser systems, robotic-assisted surgery, and microscopy. In the non-medical space, our products are used in a variety of commercial and industrial applications. This includes displays used in the public transportation space, human-machine interface applications, and teleprompting, talent monitors and clocks used in the broadcast market. Over the past couple of months, we have seen more caution in some of our customers' ordering behaviors. With a rapid rise in interest rates, continued global weakness, and expanding geopolitical uncertainty, our OEM customers have seen a slowdown in ordering, particularly in industrial and, more recently, somatic applications. Given the strong growth drivers in the various imaging markets and our customers' levels of excitement towards next-generation products, we see these current dynamics as temporary. Design cycles at Canvas are long, potentially causing sales to vary quarter by quarter. However, we remain focused on adding new customers and programs globally as we leverage and promote our best-in-class design, engineering, and service capabilities. Despite a more cautious macro outlook over the near term, we believe sales will accelerate towards the end of the fiscal year, supported by a growing backlog and the number of projects currently in the engineering stage. from the variety of customers and applications, as well as the value of orders from existing and new customers, it is clear we offer our global customers outstanding products and localized service. While our sales organization stays focused on new opportunities, I stay focused on improving the operating performance of the division. Maximizing cash flow, managing inventory, and improving cannabis' profitability is an ongoing priority. As we continue to work closely with our partners to meet the demand of our customers. I will now turn the call back over to Ed.
spk15: Thanks, Jens. We appreciate your team's efforts to manage customer push-outs without sacrificing our long-term partnerships. As you heard from Greg, Wendy, and Jens, there's much to be excited about in Richardson Electronics. We remain committed to our long-term strategy and will continue investing in our growth initiatives with an emphasis on engineered solutions that improve sustainability. We'll protect our cash and focus on improving profitability and inventory turns in the coming quarters. We're also committed to our shareholders and are pleased to announce we've implemented a program requiring our outside directors to purchase shares and maintain ownership of our stock. At this time, we'll be happy to answer your questions.
spk23: And thank you. Ladies and gentlemen, due to time constraints, we ask that you please limit yourself to one question and one follow-up. Again, we ask that you please limit yourself to one question and one follow-up until all have had a chance to ask a question, after which we will answer additional questions from you as time permits. And one moment for our first question. And our first question comes from Anja Sadersom from Sudoti. Your line is now open.
spk11: Good morning. Thank you for taking my questions. So for the ultrapan that you are working with, the Indian wind turbine, Sicilian Energy, those are in beta testing, but are you seeing – do you see any risk to those orders being pushed out as well, or –
spk07: Specific to the multi-brand, which is three different platforms of wind turbine manufacturers, we're focused on Suzlan and Senvion and Nordex. No, right now, the beta testing is going great. The opportunity, we're exclusive. The numbers they have given us for pricing and rollout are still strong, and so far, we do have received orders in North America for people servicing Suzlan wind turbines, and we're actually going to India in a few weeks to finish up the installation of the beta testing. And again, that's a working unit, so we're very excited about that opportunity. I believe I gave the numbers in my opening. So, you know, could things be delayed a quarter or two? Yes, that's just the nature of this I mean, it's an infrastructure rollout. Historically, I've had a lot of experience in a marketing director role at Motorola when we rolled out our technology into the base station arena. This wind turbine market is very similar, where when economic issues are applied in a certain area of the world or globally, for example, one of the things we're seeing in Q1 and Q2, where they have budgeted and forecasted to roll out five different sites, They only did two, but that doesn't change the opportunity or the end result of what we'll be shipping into that customer. It's just a timing thing based on budgets, economic conditions, et cetera. So the reduction would be, you know, lowering the number of sites, but the total opportunity, no, we don't see that being limited.
spk11: Okay, thank you. And in terms of the semiconductor, how is the conversation there going with LAM Research, and are you still confident in that starting to pick up in the third quarter?
spk15: Well, we listen to their vendor calls on a monthly basis, and they're telling us that they will even subsidize their vendors to maintain their capability because they think by the end of 2024 that the business will be stronger than it's ever been. So that remains to be seen. Our business is down from about 40 million to 20 million this year. But we're, you know, it's sort of like a roller coaster. It goes up and down. When it went from 3G to 4G, it went from 22 to 7 million and 4G to 5 million and went to 40 million. So we're anticipating, according to LAM, that it'll be higher than ever by the end of 2024.
spk13: Okay, thank you. And another quick, I'm sorry, yeah?
spk21: Just to add to that, we do anticipate in Q3, Q4, you know, we're not anticipating a lot of growth in the land business in Q3 and Q4. It will be starting after that, as Ed mentioned, in Q1 and Q2 of the calendar year.
spk03: They're burning off inventory.
spk21: Oh, yeah. Excuse me, Q3 and Q4 of calendar year 2024. Our Q1 and Q2 of fiscal year 2025. Sorry for the confusion. Yeah. Okay. Okay.
spk11: And just a quick one, other one for you. Wendy, you mentioned you still think you can reach break-even for the healthcare unit in the fourth quarter. What do you need in terms of revenue to break even at this point?
spk21: Well, we need to sell a lot more CT tubes, both the semen and the repaired semen tube and the ALTA 750. You know, in terms of top line, We probably need to be in about a million dollars or so more than where we were in Q2 in order to hit that Q4 breakeven point. Maybe a little bit higher than that. Depends on how our margins fare. As we mentioned, you know, we've had underabsorption in the factory, which has hurt our gross margin. We did take the actions in Q2 to reduce our costs there. and reallocate those people, some of the people, to making more of the Siemens tubes. So we should be in good shape, but we'll have to see how the margin holds up.
spk14: Okay, thank you. I'll get back in queue.
spk20: Thanks, Anya. And thank you. And one moment. One moment for our next question.
spk23: And our next question comes from DeForest Hinman from Bumbershoots Holdings. Your line is now open.
spk02: Hey, thanks for taking the questions. Can you just give us some more color on the opportunity within the GES business? I mean, just from a context perspective, you know, really good performance in 2023. It seemed like a lot of excitement a couple quarters ago. It still sounds like there's a lot of business opportunities there. but the revenue performance has just really been all over the place. I think, I don't know if it was six months ago, we were talking about growth in GDS could offset a lot of the softness within the semi-space. That really hasn't occurred. So can you just reframe what is the revenue opportunity there maybe within the next six months, within the next 12 months, and then You know, what could this business look like in 2025, your fiscal 2020-25, if, you know, things start improving?
spk07: Thank you. Yeah, thank you. Great question. So, what we saw in 2023 is the rollout of new products, absolutely new, designed, tested, manufactured. The cycle time that we brought those products to market because the customer was in such a need for it based on the cost and failures of the lead acid batteries, the team did an amazing job. And I've been in the new product introduction process my entire career. And getting that done within months versus, for example, I mentioned the Motorola part, it took us three and a half years to introduce LDMOS, which took over the infrastructure market. So that first rollout, we got budgets and forecasts from the top four owner-operators of GE wind turbines in North America, which the Altra 3000 was designed for. And that was Nextera, Inver Energy, RWE, and Enel. They gave us their forecast, and kind of the opposite of this year, they actually ordered almost 50% more than they budgeted. However, the team did an amazing job. You had all those supply chain issues, et cetera, and we were able to meet all the requirements, but we didn't have a part in stock until March of last year. And so what we saw this year is a little bit the opposite. The opportunity still, the numbers are still there. However, instead of doing, as I mentioned before, 10 sites, they've done five. But in the meantime, specific to the wind turbine business, we've done beta site testing at other key owner operators. And to this day, as of today, We have over 12 customers in North America, owner operators, people like I mentioned, I believe, in a press release in December, BP Energy, EDP, Long Road Energy Partners, Pattern, EDF. If you add up the turbines that this program represents within their company, it's over 12,498 turbines. Now, how will that rollout go? It'll go over three years. Again, we're going to see huge some year, and due to other issues, we're going to see less. But add on to that, we continue to look outside of North America, and as I mentioned before, the Suzalan opportunity in India. Also, in the meantime, we were able to become the exclusive supplier to GE Marketplace for the Altra 3000, and as new products come out, we'll be adding more and more products to that Marketplace application. So you can kind of see why we're excited about just the Ultra 3000 and the wind turbine business. In the meantime, not waiting for the market to come back or for orders to increase, the team, as I mentioned before, has designed other products, both to go into green energy applications and specifically because of these strong relationships with the wind turbine owner-operators, the Ultra UPS. Now, there's one Ultra UPS in every single turbine that I just mentioned. And that's in beta site testing. It's going very, very well. But the MPI process, there's a lot of, hey, we need to change this. There's changes with the spec. Customer needs change. But we have a very good team here that works directly with the customer on a scheduled weekly call. And of course, there's calls every day on specific items. So that's kind of the, you know, wind turbine business for the Altra 3000 and Altra UPS. On the electric locomotive side, That's another program where the customer came with needs needed to be expedited. We needed to design, manufacture, test, and build battery modules and also superstructures. And the team, again, with partnership in this case with Progress Rail, did an amazing job meeting and exceeding all the requirements. And we have now shipped all of our products that go into that electric locomotive that we finished that in the fourth quarter of last year. So now they're taking our product, and of course there are other suppliers for other products. They're building the finished unit. And according to them, they're shipping that to their end customer in our fiscal year Q4 and the beginning of FY25, Q1, and Q2. So we expect orders for that production quantities sometime in the second half of calendar year 2024. And just remember, these are prototype builds. And just last year for those prototype builds, we shipped over $24 million worth of products for the prototype builds. So again, math after that per train, the numbers that they're talking about as the electric locomotives gets accepted, like electric vehicles get accepted by the customer base, needed to say we've never been more excited. Just doing math, I've said this before, I don't know what numbers you could come up with, but easily $100 million opportunity. It's just math after that. And we continue to add new products and new customers going forward. So within that, we also have the UltraGen 3000, which is the third and fourth product we have. That product is designed, and because of our relationships with the electric locomotive market, we've designed and we have orders for over 25 trains today for starter modules for two of the top owner-manufacturers of electric diesel and electric locomotives. So that business to us is obviously very exciting. And everything I just talked about, we are exclusive with them. There's not a competitor. There's not a second source. So as these relationships grow, new products grow, we'll continue to add to that pipeline. But the pipeline as it stands today It's a timing issue as they roll out. I'm going to use the word infrastructure because that's what the wind turbine business is. It's energy infrastructure, like infrastructure for base stations, which I'm comparing it to. Makes us very, very excited on the green energy front.
spk24: Okay. I mean, that's helpful. I mean, obviously the market's not sharing your enthusiasm.
spk02: The stock's trading around probably book value at this point with no debt. So it's a two-part question. Should we, as shareholders, expect the management team to be buying stock? And then should the board be thinking about buying stock themselves and issuing a share repurchase authorization? Thank you.
spk07: I want to touch on the excitement part of it. I thought the market and the shareholders got very excited last year on the enthusiasm as what I'm going to call phase one rollout of our green energy solutions strategy. My opinion, I think they should be just as excited about phase two, which as I mentioned today, is coming. It's coming. The suppliers, the customers have confirmed that. It's project-based. but I would be just as excited about the next steps as we roll out this new product line, new products, new SBU going forward, and I'll let Ed talk about that.
spk15: We just instituted a program with our board that they're required to buy $150,000 worth of stock as part of their participation on the board, and that's just been implemented, so you'll see that go into place. You know, we have about $22 or $24 million in cash. The difficulty is we have 24 foreign subsidiaries, and only about $8 million of that cash is in the U.S. So the answer to our buying stock back is that we won't be doing that in the near future.
spk20: And thank you. And one moment for our next question. And if you would like to ask a question, that is star one. Again, if you would like to ask a question, that is star one. One moment for our next question. And again, if you'd like to ask a question, that is star one one.
spk23: Again, that is star one one. And our next question comes from P. Ross Taylor from ARS Investment Partners. Your line is now open.
spk06: Thank you. Morning. Congratulations on the move with the board and getting the board to be invested along with shareholders and management, because I think that's a very important step. I've rarely seen small companies succeed when the board doesn't have stocks, when the board doesn't have an interest along with that of investors. Second, or really the first question is, you commented saying that LAM is telling you that you should be ready for, my words, fiscal 20 or calendar 2025 being the biggest year you've seen from them. Is that correct? Yes, that's correct. And the biggest year you've had in that space was what, two years ago at $40 million or so in revenues? That's right.
spk22: Last fiscal year, Ross.
spk06: Okay. So what you're really looking at is a situation where we would expect that pretty quickly, once they get this turn going, you're going to see a pretty significant ramp up, pushing those effectively like 100% plus growth in revenues over what they're currently running at.
spk16: That's correct, yes.
spk06: Okay, and that probably carries a better than company average multiple when you get up to that level, or operating margin when you get up to that level.
spk15: You know, we make RF matches and proprietary products where the margin is better than our normal margins.
spk06: Okay. And so that alone, we're talking about $20-plus million in revenues being added at, you know, say mid-30s plus operating margin. That itself is going to be a huge driver forward.
spk17: Absolutely.
spk06: Second is you've talked about the ability to convert, you know, inventories and the like into cash. Do you have an idea, a thought process on what kind of cash generation you can get or creation you can get from drawing down your own inventories?
spk15: Well, what do we have? About 14,000 of the ultracapacitor modules already built for wind turbines. What's the total number that we have already built?
spk07: Yeah, 14,000 built and About that much on backlog with customers. All right.
spk15: So it's a matter of not if, it's when. It's all timing, when they're going to release. Normally these wind turbines, they do their maintenance in the spring of the year. And as Greg mentioned, right now they're all going through a budgeting process. So we have these orders, but they haven't released them. So it's a matter of timing.
spk06: But what we should see is the ability to convert several million dollars of inventory into cash as they convert to... Okay. Multi-million dollars. Multi-million.
spk15: Yes.
spk06: Okay. Since it's not several, I'll take multi as being a larger number than several.
spk15: That's correct. Okay. In a normal year, we do over $10 million a year with wind turbines alone.
spk06: Mm-hmm. It seems to me that listening to you guys talk, reading your release that there was a this quarter was a combination of unfortunate coral you know uncorrelated correlated events they all hit in the same quarter but at the same time that this should be the nadir for what we see going on and so we really moving beyond this quarter as you move to the second half of your year we should start to see some um incremental and then you know, what's the idea where they always say about going broke slowly first and then, and then rapidly, you know, that we should see incremental and then rapid, uh, growth in top line earnings, free cash flow generation at all. I mean, listening to this is actually the most bullish call you've had. And it's kind of ironic that it's occurring with the stock down, uh, you know, 20% on the day and, you know, trading under $10 a share.
spk15: No, we fully understand. I have a thing. You can't fall off the floor. So I, You know, with all of these things we have going, we think that the company, 50% of our business will be green energy going forward. And, you know, we think within five years, we'll be $500 million and extremely cash flow positive.
spk06: And that really, that this is, as you said, since you can't fall off the floor, this is a point from which you don't think you can fall from.
spk15: No, we're absolutely amazed that it's, you know, it's just like you've fallen off a a cliff that the business went to this level but it did and that's where we are but we you know we have the backlog we have the inventory so it's a matter of timing not if but when and can you give a little bit of background on the opportunity in hydrogen market size or yeah we're we're just starting to work in that area So they're buying 100 kilowatt generators that we make, and they're converting methane gas into hydrogen and acetylene. And actually, at this point, the acetylene has more value than the hydrogen. But a lot of companies, including Caterpillar, are talking about having their equipment run on hydrogen in the future. And one of the most profitable ways to generate that hydrogen is using 100 kilowatt microwave generators that we manufacture. They use a tube that's about $10,000 and the generator is like $100,000. So that could be a profitable business for us in the future.
spk05: And how many tubes do you need?
spk15: There's one tube in each generator. We have one customer that we mentioned that's uh, making this, uh, crystalline or synthetic diamonds for industrial applications. And they're talking about buying 200 generators over the next two years, over the next two years, several years, several years.
spk06: Um, okay. And then, so we look at this and I guess part of what that business model is, you end up, you sell the acetylene and. if you sell the acetylene and actually reduces or eliminates the cost of making the hydrogen and then you have the hydrogen as a benefit beyond it.
spk17: Yeah, that's correct.
spk06: Okay. Well, as I said, I think it's, it's fascinating. This isn't the most bullish call I've heard you guys have. And, you know, don't get discouraged by the fact that investors, you know, look at, you know, basically drive by looking at the hood of the car.
spk15: Well, we've only been around, you know, for 76 years. And in my history, the stock's been $375 and $29. So we'll get there. Just a matter of when.
spk06: Let's get back to new highs. Okay.
spk10: Thank you.
spk06: Congratulations.
spk20: And thank you. And one moment, please. One moment. Okay. One moment for our next question. And our next question comes from Ronald Richard. Your line is now open.
spk15: Good morning, Ronald.
spk09: Hey, guys. I got a question. Good morning. I saw you have those orders coming in India, and I was wondering about GE's penetration in other foreign markets, what kind of progress you're making.
spk07: Yeah, the biggest opportunity is the Suzalan multi-brand specific to it. to Suzlan in India, but that also is going to be tested at their facility to make it an OEM product, meaning it will be designed and it won't be replacing lead acid batteries in their wind turbines. It'll actually be the PEM system within their turbines. That is by far the biggest opportunity. We have numerous opportunities, not nearly as large, with Enel in Italy, with Nordex in Germany. So, you know, it's getting, because of these relationships and the new products, getting the North American GE market, not 100% exclusive, but grabbing all the market share we can now, and we continue to train our global sales force on these products, because, again, they're brand new to them, too. So we are seeing opportunity, but the biggest probably in the next 12 months is going to be SendBeyond.com. Because once we go into production for India, that will transcend to all their turbines and owner-operators throughout the world. I'm . I'm sorry.
spk08: Okay. It sounds so much alike. Okay. Thank you.
spk07: Thank you.
spk23: Okay. Thank you. And I am showing no further questions. I would now like to turn the call back over to Ed Richardson. CEO, for closing remarks.
spk15: Thanks, Justin. Well, we want to wish you all a very happy and prosperous new year, and we appreciate your investment interest in Richardson Electronics. We assure you that it's only up from here and not a matter of if but when, and we look forward to discussing our fiscal year 2024 third quarter with you in April. We're available to take your calls at any time, so don't hesitate to call us. Thanks very much.
spk23: Thank you. This concludes today's conference call.
spk20: Thanks for participating. You may now disconnect. you Thank you. Thank you. Thank you.
spk12: music music Thank you.
spk23: Good day, and thank you for standing by, and welcome to the Richardson's Electronics Earnings Call for the second quarter of fiscal year 2024 conference call. At this time, our 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 will need to press star 11 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 11 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Edward Richardson, CEO.
spk20: Please go ahead.
spk15: Good morning and welcome to Richardson Electronics conference call for the second quarter of fiscal year 2024. 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, which includes Green Energy Solutions, 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 second quarter of the fiscal year 2024 fell short of our expectations. Economic conditions, rising interest rates, higher inventory levels, and a lagging economy in China negatively impacted customer demand for our products. As we operate over the near term with a more uncertain economic climate, we remain focused on pursuing our long-term growth strategies. These strategies position the business to take advantage of large, rapidly growing global opportunities. The expertise of our management team is a significant asset during this period. as we have successfully navigated difficult economic periods throughout our history. This is exactly why we maintain a strong balance sheet with access to additional sources of capital if necessary. We've also made the strategic decision to maintain stable levels of manufacturing employees and salespeople as many of the green energy solutions and semiconductor equipment customers expect demand to recover in calendar 2024. Therefore, maintaining continuity in our manufacturing team is important to ensure we can quickly adapt to increased orders and grow market share. Unfortunately, profitability was impacted in the second quarter as our gross margin reflects the underabsorption in our factory. Within our healthcare business, we made some changes to improve inventory and focus on strategic objectives, which Wendy will tell you about shortly. Overall, the team continues to do an excellent job managing expenses. We're focused on driving efficiencies. We simultaneously position the company for future growth. While we acknowledge revenues will be lower in FY24 than previously anticipated, we maintain our optimistic outlook and remain committed to our long-term strategy. We continue to expand our product roadmap for green energy solutions. We are adding new customers for wind, electric vehicles, and rail, and the applications that take advantage of energy transition initiatives underway across many geographies. While we're in the early innings of this transformation, we have quickly developed a compelling roadmap of products, technologies, and are establishing Richardson Electronics as a leading provider of innovative engineered solutions for global green energy markets. activity across all our business remains extremely strong and specifically for the green energies business our pipeline of potential projects continues to increase in addition to public and private energy transition initiatives that are underway we believe that the inflation reduction act of 2022 will create further opportunities for the company One recent example is a new order from a U.S.-based technology company that's using 100-kilowatt generators to power a pilot reactor to make crystalline diamond materials for high-tech applications. Under the Inflation Reduction Act, this customer is applying for a grant to build a multi-reactor factory, which will require a significant number of 100-kilowatt generators. We believe other wind and electric vehicle and rail customers will benefit from the Inflation Reduction Act, which we expect to support our higher sales forecast. As our GES business gets to scale in the coming quarters and years, much of our near-term new business is project-based and timing is not always easy to predict. I want to stress that we've not lost any opportunities and remain focused on capitalizing on market opportunities supported by the Inflation Reduction Act and other energy transition initiatives globally. We're also focused on adding suppliers that will fill our technology gaps. These relationships are critical to our business model as our partners often support new engineered solution opportunities for the company. that drive higher and more profitable sales. Our balance sheet remains strong with nearly $23 million in cash and no debt. Inventory increased in the quarter in line with purchases of TALIS products, which would support our profitable tube business, as well as long lead time capacitors that are required to support our green energy growth initiatives. The balance of our inventory remained flat. And the transit inventory was down, indicating we are reducing inventory purchases in line with sales. With this introduction, I'd like to turn the call to Bob Benn, our Chief Financial Officer, to review our second quarter financial performance in detail. Then Greg, Wendy, and Jens will discuss our numerous opportunities within our business units, including the significant number of new products, programs, and customers that drive our optimism for future growth.
spk04: Thank you, Ed, and good morning. I will review our financial results for our second quarter of fiscal year 2024, followed by a review of our cash position. Net sales for the second quarter of fiscal 2024 were down 33.0% to 44.1 million, compared to net sales of 65.9 million in the prior year's second quarter. PMT sales decreased by 9.3 million from last year's second quarter, driven primarily by a decline in manufactured products for semiconductor wafer fabrication equipment customers. Sales for GES declined $9.7 million from last year's second quarter, primarily due to lower sales of ultracapacitor modules for wind turbines as a result of the project-based nature of this product line. Canvas sales decreased by $2.8 million, primarily due to customer pushouts in North America. However, Canvas backlog increased, reflecting higher overall demand. Richardson healthcare sales were comparable to the second quarter of fiscal 2023, as higher CT tube and parts demand offset lower system sales. Consolidated gross margin for the second quarter was 28.4% in net sales, compared to 33.2% in last year's second quarter, due primarily to product mix and underabsorption. Without underabsorption of the company's manufacturing facility, management estimates that the company's consolidated gross margin for the second quarter of fiscal 2024 would have been 31.3 percent. PMT's gross margin decreased to 28.5 percent from 34.5 percent, primarily due to product mix, and $0.9 million of manufacturing underabsorption. GES gross margin decreased in the second quarter fiscal 2024 to 29.2% from 33.9% in the prior year's second quarter due to product mix. Healthcare's gross margin decreased to 14.8% in the second quarter fiscal 2024 compared to 23.2% in the prior year's second quarter as a result of a $0.3 million increase in manufacturing under absorption. Canvas gross margin increased in the second quarter of fiscal 2024 to 33.5% from 29.7% in the prior year second quarter because of product mix and lower freight costs. Operating expenses were $14.5 million for the second quarter of fiscal 2024 compared to $14.7 million in the second quarter of fiscal 2023. The decrease in operating expenses resulted from lower incentive expenses, partially offset by higher employee compensation expenses. The company reported an operating loss of $2.0 million for the second quarter of fiscal 2024 versus operating income of $7.2 million in the second quarter of last year. Other expense for the second quarter of fiscal 2024, including interest income and foreign exchange, was $0.3 million compared to other expense of $0.1 million in the second quarter of fiscal 2023. Income tax benefit was $0.5 million or a 21.6% effective tax rate versus an income tax provision of $1.5 million or a 21.5% effective tax rate for the second quarter of fiscal 2023. Net loss for the second quarter of fiscal 2024 was $1.8 million or $0.13 per diluted common share compared to net income of $5.5 million or $0.39 per diluted common share in the second quarter of fiscal 2023. Turning to a review of the results for the first six months of fiscal year 2024. Net sales for the first six months of fiscal year 2024 were $96.7 million, a decrease of 27.5%. from $133.5 million in the first six months of fiscal year 2023, which reflected lower sales across our business segments. Gross margin decreased to 30.8% from 33.6%, primarily reflecting product mix and manufacturing underabsorption in PMT, as well as increased scrap expense in manufacturing underabsorption in healthcare, which was partially offset by a favorable product mix and lower freight costs for Canvas. Operating expenses were $30.3 million for the first six months of the fiscal year, which represented an increase of $1.4 million from the first six months of the last fiscal year. The increase was due to higher employee compensation expenses associated with the higher staffing levels in fiscal 2023 combined with severance costs relating primarily to health care's reduction in staff. Operating loss for the first six months of fiscal year 2024 was $0.5 million, as compared to an operating income of $16.0 million for the first six months of fiscal year 2023. Other expense for the first six months of fiscal 2024, including interest income and foreign exchange, was $0.1 million, as compared to other expense of $0.5 million for the first six months of fiscal 2023. Income tax benefit was $0.1 million or an effective tax rate of 16.5% during the first six months of fiscal 2024 versus an income tax provision of $3.6 million or an effective tax rate of 23.4% in the prior year's first six months. The company reported a net loss of 0.6 million or 4 cents per diluted common share for the first six months of fiscal year 2024 versus net income of 11.9 million or 83 cents per diluted common share for the first six months of fiscal year 2023. Moving to a review of our cash position. Cash and investments at the end of the second quarter of fiscal 2024 were 22.8 million compared to $24.1 million at the end of the first quarter of fiscal 2024. U.S. cash and investments were $8.8 million at the end of the second quarter of fiscal 2024 versus $8.4 million at the end of the first quarter of fiscal 2024. Capital expenditures were $1.5 million in the second quarter versus $1.3 million in the second quarter of fiscal year 2023, approximately $1.1 million. related to investments in manufacturing, including facility expansion, and included final costs for the renovation of our office space. We paid $0.8 million in cash dividends in the second 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 third quarter of fiscal 2024. As of the end of the second quarter of fiscal 2024, the company had not made any draws on its $30 million revolving line of credit with PNC Bank. Lastly, the company's board of directors created new ownership requirements for outside directors. This includes owning a minimum of $150,000 of our stock after a three-year period. Now, I will turn the call over to Greg, who will discuss the results for our PMT and GES business groups.
spk07: Thank you, Bob, and good morning, everyone. As expected, the fiscal 2024 second quarter was challenging for our green energy solutions and power and microwave technologies groups due to a fluid economic environment, the timing of some project-based orders, and a decline in sales in the semiconductor wafer fab market. For our GES business in particular, Our second quarter results reflect the startup nature of any new business. As a reminder, we are in the infancy of our GES growth strategy, having started to pursue new GES opportunities only two years ago. With new designs and customer requirements, establishing manufacturing and test, and also launching beta site testing, we expect sales to fluctuate as we get to scale and develop more predictable revenue streams. However, in a short amount of time, we have designed numerous new products received several patents, and shipped over $77 million to an ever-growing list of key customers, with more than $35 million in backlog going into calendar year 2024. We expect significant bookings to be received in Q3 and Q4 of FY24. So needless to say, we continue to be very excited about the next three years. Last year, GES benefited from several large projects, including electric locomotive development, and major owner-operators of GE wind turbines such as Nextera, Enel, and Inver Energy. Given the project nature of our GES business, revenue from these products are not necessarily consistent quarter to quarter. In fact, many of our customers over the past three months completed calendar year 2024 budgets, including our product, and will roll out purchases in the first half of calendar 2024. In weekly conversations with our major customers, they note it is only a matter of time until new orders are placed. Our customers repeatedly tell us we have maintained our market share for our core GES applications and have identified new product opportunities. And the decline in revenue we are experiencing is purely a timing issue. In fact, our customer pipeline and the number of opportunities continues to increase as we look to take advantage of significant energy transformation projects globally. Our GES and PMT backlogs remain strong at over $100 million. Given our inventory position, we believe we will ship many incoming orders from stock, which we expect will convert working capital into cash in the coming quarters. We are managing our GES business to support our customers' needs when they are ready. So with that introduction, let's look at the second quarter performance of GES and PMT groups in more detail. GES sales were $2.6 million in the quarter, down from $12.3 million in the prior year's record second quarter. The year-over-year decline in GES sales was due to timing on several major project-based opportunities. Last year, GES revenues included the first phase of rollouts to our wind turbine customers and prototype builds for our EV locomotive customers. During the quarter, we added several major new customers such as BP Energy, EDF Energy, and EDP Renewables. I'm pleased to report that 90% of our Ultra 3000 sales in Q2 were with new wind customers. We continue to increase our market share with the customers needing our niche patented green energy products. We believe phase two rollouts for our wind customers will begin in Q3 and Q4 of FY24, as many of these customers recently completed their 2024 budgeting process. The forecast they have provided point to growing orders, which we believe will drive stronger GE sales in our fiscal third and fourth quarters. We continue to beta site our patented pending Ultra UPS 3000, which replaces lead acid batteries in the UPS system at the base of the wind turbines. The Ultra UPS 3000 will be used by Siemens and by other owner-operators of GE wind turbines going forward. Tests are going well, and we have led to important improvements in the product. We're also testing the Altra PEM 3000, which supports other wind turbine platforms, such as Suzlan, Senvion, and Nordex. This is helping us expand our market outside of North America. One major program for the Altra PEM, or multi-brand, is beta testing with Suzlan in an OEM and replacement basis. This opportunity is for more than 7,000 turbines in India alone, and several thousand more in North America. This product is also in final testing with several owner-operators in Latin America and North America. We believe initial ultra-PEM orders will begin in Q4 of FY24. A needy locomotive segment due to supply chain issues for piece parts from our suppliers, our superstructure builds for Long Island Railroad and BNSF electric locomotives will be completed in late Q3 and Q4 of this fiscal year. We anticipate phase two for our EV locomotive customers will be in the third and fourth quarters of calendar 2024. We also have beta orders for our patented Altra Gen 3000 starter module with two large diesel and electric motor manufacturers. It is important to note that these are exclusive with both manufacturers. We continue to identify other niche applications for the Altra Gen 3000. We're in beta testing with several refrigeration truck manufacturers where Ultragen is replacing lead acid batteries. There are numerous other markets that can benefit from this solution, such as construction equipment, excavators, loaders, and backhoes. These are longer-term opportunities that we expect to add incremental growth in the future periods as we leverage our leadership position utilizing ultracapacitors and other related technologies as power sources across various applications with many large companies throughout the world. In summary, We believe we will begin to see sequential revenue growth in Q3 and Q4 within our GES business, driven by new products, customers, and technology partners, all supported by the forecast and backlog from these project-based customers. I want to stress that we have not lost any market share. In fact, we continue to increase our market share with new products, applications, and customers, and our recent performance is a result of timing issues and the emerging nature of our GES business. So turning to PMT, which includes EDG, our legacy two business, and PMG, our power and microwave components group, sales decreased 22.9% to 31.3 million. This decline was mainly due to continued slowdown in our semiconductor wafer fabrication equipment business. The semiconductor wafer fabrication business has always been cyclical. We anticipated the slowdown in 2023, but maintain our expectations that the business will recover in the second half of calendar 2024. This frustration with the cyclical downturn of the wafer fabrication business was offset by strong double-digit bookings growth in our RF and wireless business, mainly supporting wireless infrastructure and communication customers. As mentioned, our engineering solution strategy is led by our global technology partners. We continue to add partners who fill technology gaps in our offering and support our growth. Often through these partnerships, we identify opportunities for new products that we design and manufacture in-house. This increase the value we provide customers and allows us to capture more revenue while expanding and diversifying our customer base. These long-term supplier relationships are extremely strong. And when appropriate, we work with them on strategic long-term purchases to maintain appropriate levels of supply. We negotiate special payment terms and shipping schedules to help improve cash flow. In addition, having inventory at hand allows us to capture and maintain market share. We collaborate. with both our customers and suppliers and leverage our customer's forecast to help us strategically invest in inventory, ensure we can meet our customers' needs. Our growing customer base and strong relationships with these customers and suppliers using our version of a customer intimacy model helps us develop new products and opportunities with our existing customer base. We also continue to invest in our infrastructure to support our growth where needed. We're bringing on talented design and field engineers and making investment to enhance our manufacturing capabilities. Our growing in-house design and engineering manufacturing teams are doing a great job supporting increased demand for current products and new product designs. With this team, we will continue to identify, develop, and introduce new products and technologies for green energy and other power management and microwave applications. I cannot stress enough the value of Richardson Electronics model to our customers and suppliers. Our unparalleled capability and global go-to-market strategy are unique to the power and energy in RF microwave and green energy markets. We developed a strong business model including legacy products and new technology partners that fit well with our engineered solutions capabilities. Through our steadfast and creative focus on customers, we will continue to excel by taking advantage of opportunities when they arise. The execution of our strategy has never been better. There's no question our customers and technology partners need Richardson's capabilities, products, and support more than ever. And with that, I'll turn it over to Wendy Dedell to discuss Richardson Healthcare.
spk21: Thanks, Greg. Good morning, everyone. Second quarter sales for the Healthcare Division were 2.9 million, down less than 1% compared to the second quarter of last year, and improved over our most recent first quarter. CT tubes and part sales were up versus the prior year's second quarter, while system sales were down due primarily to timing of cash receipts from customers in Latin America. In the quarter, we benefited from sales of our repaired Siemens Stratton Z tubes. Healthcare's gross margin in the quarter was very low at 14.8% compared to 23.2% last year. The reason for the decline in margin was due to underabsorption associated with our decision to produce fewer Alta tubes in the quarter as well as higher scrap costs. Throughout prior quarters, healthcare inventory has increased due in large part to our growing supply of Alta tubes. These are the replacement tubes for Canon CT scanners. We decided at the end of the quarter to reduce our staff and temporarily suspend Alta tube production, which will allow us to sell off inventory. We did retain critical resources who will focus on continual product design improvements and cost reduction opportunities, but reduced production may continue to drive our overall gross margin lower than anticipated. We did not lay off resources working on the repaired Siemens tube program. In fact, we are supporting the development team by reallocating some of the employees who are focusing on the Alta tubes. We continue to make excellent progress with the Siemens program and with a more focused team anticipate this to continue. The Siemens repair program includes four tube types, the Stratton Z, MX, MXP, and MXP46. The repaired Stratton Z is in full production and performing well in the field. Stratton Z sales are just starting to ramp up as we have a steadier flow of production. The first repaired MX series tubes are in test, and provided our beta testing goes well, we anticipate introducing these to the market later in the third quarter. As we mentioned last period, sales of the MX series will be limited due to supply until FY25. In the quarter, we also received our GMP certification in Brazil. GMP stands for Good Manufacturing Practices. These are the standards set by the National Agency of Health Surveillance, or ANVISA, in Brazil. This paves the way for us to export our tubes to a specific customer in Brazil who will reload and sell our Ulta tubes in-country. We anticipate the first shipments to this customer will be made in the quarter with limited sales in the fiscal year. Rest assured, we continue to monitor health care's financial performance with the goal of achieving a break-even point in the fourth quarter. This will be more of a challenge with lower production going through the plant, but we are doing the right things to balance our investments with opportunities in the business. I will now turn the call over to Jens Rupert to discuss the results for Canvas.
spk18: Thanks, Wendy, and good morning, everyone. Canvas engineers, manufacturers, and sales custom displays to original equipment manufacturers in the industrial and medical markets throughout the world. Canvas's sales for the second quarter of fiscal 2024 reflect certain customer push-outs, primarily in North America. As a result, sales were $7.3 million for the second quarter compared to $10.1 million for the second quarter last year. On the positive side, we finished the quarter with a very strong backlog of 48.2 million, which increased by 5.6 million from the first quarter of fiscal 2024. Of course, margin as a percentage of net sales improved to 33.5% during the second quarter of fiscal 2024, compared to 29.7% during the second quarter of fiscal 2023. The increase in gross margin was primarily related to a more favorable product mix and lower freight costs. During the quarter, we received several new orders from both existing and first-time medical OEM customers. Some of these applications include medical device controls within the operating room, surgical navigation, laser ablation, radiotherapy, laboratory equipment, super pulsed laser systems, robotic-assisted surgery, and microscopy. In the non-medical space, our products are used in a variety of commercial and industrial applications. This includes displays used in the public transportation space, human-machine interface applications, and teleprompting, talent monitors and clocks used in the broadcast market. Over the past couple of months, we have seen more caution in some of our customers' ordering behaviors. With a rapid rise in interest rates, continued global weakness, and expanding geopolitical uncertainty, our OEM customers have seen a slowdown in ordering, particularly in industrial and more recently, somatic applications. Given the strong growth drivers in the various imaging markets and our customers' levels of excitement towards next-generation products, we see these current dynamics as temporary. Design cycles at Canvas are long, potentially causing sales to vary quarter by quarter. However, we remain focused on adding new customers and programs globally as we leverage and promote our best-in-class design, engineering, and service capabilities. Despite a more cautious macro outlook over the near term, we believe sales will accelerate towards the end of the fiscal year, supported by a growing backlog and the number of projects currently in the engineering stage. from the variety of customers and applications, as well as the value of orders from existing and new customers, it is clear view of our global customers outstanding products and localized service. While our sales organization stays focused on new opportunities, I stay focused on improving the operating performance of the division. Maximizing cash flow, managing inventory, and improving cannabis' profitability is an ongoing priority. As we continue to work closely with our partners to meet the demand of our customers. I will now turn the call back over to Ed.
spk15: Thanks, Jens. We appreciate your team's efforts to manage customer push-outs without sacrificing our long-term partnerships. As you heard from Greg, Wendy, and Jens, there's much to be excited about in Richardson Electronics. We remain committed to our long-term strategy and will continue investing in our growth initiatives with an emphasis on engineered solutions that improve sustainability. We'll protect our cash and focus on improving profitability and inventory turns in the coming quarters. We're also committed to our shareholders and are pleased to announce we've implemented a program requiring our outside directors to purchase shares and maintain ownership of our stock. At this time, we'll be happy to answer your questions.
spk23: And thank you. Ladies and gentlemen, due to time constraints, we ask that you please limit yourself to one question and one follow-up. Again, we ask that you please limit yourself to one question and one follow-up until all have had a chance to ask a question, after which we will answer additional questions from you as time permits. And one moment for our first question. And our first question comes from Anja Sadersom from Sudoti. Your line is now open.
spk11: Good morning. Thank you for taking my questions. So for the ultrapan that you are working with, the Indian Wind Turbine, Sicilian Energy, those are in beta testing, but are you seeing – do you see any risk to those orders being pushed out as well, or –
spk07: Specific to the Maltar brand, which is three different platforms of wind turbine manufacturers, we're focused on Suzlan and Senvion and Nordex. No, right now, the beta testing is going great. The opportunity, we're exclusive. The numbers they have given us for pricing and rollout are still strong, and so far, we do have received orders in North America for people servicing Suzlan wind turbines, and we're actually going to India in a few weeks to finish up the installation of the beta testing. And again, that's a working unit, so we're very excited about that opportunity. I believe I gave the numbers in my opening. So, you know, could things be delayed a quarter or two? Yes, that's just the nature of this I mean, it's an infrastructure rollout. Historically, I've had a lot of experience in a marketing director role at Motorola. We rolled out our technology into the base station arena. This wind turbine market is very similar where when economic issues are applied in a certain area of the world or globally, for example, one of the things we're seeing in Q1 and Q2 where they had budgeted and forecasted to roll out five different sites They only did two, but that doesn't change the opportunity or the end result of what we'll be shipping into that customer. It's just a timing thing based on budgets, economic conditions, et cetera. So the reduction would be, you know, lowering the number of sites, but the total opportunity, no, we don't see that being limited.
spk11: Okay, thank you. And in terms of the semiconductor, how is the conversation there going with Lamb Research, and are you still confident in that starting to pick up in the third quarter?
spk15: Well, we listen to their vendor calls on a monthly basis, and they're telling us that they will even subsidize their vendors to maintain their capability because they think by the end of 2024 that the business will be stronger than it's ever been. So that remains to be seen. Our business is down from about 40 million to 20 million this year. But we're, you know, it's sort of like a roller coaster. It goes up and down. When it went from 3G to 4G, it went from 22 to 7 million and 4G to 5 million and went to 40 million. So we're anticipating, according to LAM, that it'll be higher than ever by the end of 2024.
spk13: Okay, thank you. And another quick, I'm sorry. Yeah.
spk21: Just to add to that, we do anticipate in Q3, Q4, you know, we're not anticipating a lot of growth in the land business in Q3 and Q4. It will be starting after that, as Ed mentioned, in Q1 and Q2 of the calendar year.
spk03: They're burning off inventory. Oh, yeah.
spk21: Excuse me. Q3 and Q4 of calendar year 2024. Our Q1 and Q2 of fiscal year 2025. Sorry for the confusion. Yeah. Okay. Okay.
spk11: And just a quick one, other one for you. Wendy, you mentioned you still think you can reach break-even for the healthcare unit in the fourth quarter. What do you need in terms of revenue to break even at this point?
spk21: Well, we need to sell a lot more CT tubes, both the repaired Siemens tube and the Alta 750. You know, in terms of top line, We probably need to be in about a million dollars or so more than where we were in Q2 in order to hit that Q4 breakeven point. Maybe a little bit higher than that. Depends on how our margins fare. As we mentioned, you know, we've had underabsorption in the factory, which has hurt our gross margin. We did take the actions in Q2 to reduce our costs there. and reallocate those people, some of the people, to making more of the Siemens tubes. So we should be in good shape, but we'll have to see how the margin holds up.
spk14: Okay, thank you. I'll get back in queue.
spk20: Thanks, Anya. And thank you. And one moment. One moment for our next question.
spk23: And our next question comes from DeForest Hinman from Bumbershoots Holdings. Your line is now open.
spk02: Hey, thanks for taking the questions. Can you just give us some more color on the opportunity within the GES business? I mean, just from a context perspective, you know, really good performance in 2023. It seemed like a lot of excitement a couple quarters ago. It still sounds like there's a lot of business opportunities there. but the revenue performance has just really been all over the place. I think, I don't know if it was six months ago, we were talking about growth in GDS could offset a lot of the softness within the semi-space. That really hasn't occurred. So can you just reframe what is the revenue opportunity there maybe within the next six months, within the next 12 months, and then You know, what could this business look like in 2025, your fiscal 2020-25, if, you know, things start improving?
spk07: Thank you. Yeah, thank you. Great question. So, what we saw in 2023 is the rollout of new products, absolutely new design, tested, manufactured. cycle time that we brought those products to market because the customer was in such a need for it based on the cost and failures of the lead acid batteries the team did an amazing job and i've been in the new product introduction process my entire career and getting that done within months versus uh for example i mentioned the motorola part it took us three and a half years to introduce ld moss which took over the infrastructure market so that first rollout we got budgets and forecasts from the top four owner-operators of GE wind turbines in North America, which the Altra 3000 was designed for. And that was Nextera, Inver Energy, RWE, and Enel. They gave us their forecast, and kind of the opposite of this year, they actually ordered almost 50% more than they budgeted. However, the team did an amazing job. You had all those supply chain issues, et cetera, and we were able to meet all the requirements, but we didn't have a part in stock until March of last year. And so what we saw this year is a little bit the opposite. The opportunity still, the numbers are still there. However, instead of doing, as I mentioned before, 10 sites, they've done five. But in the meantime, specific to the wind turbine business, we've done beta site testing at other key owner operators. And to this day, as of today, We have over 12 customers in North America, owner operators, people like I mentioned, I believe, in a press release in December, BP Energy, EDP, Long Road Energy Partners, Pattern, EDF. If you add up the turbines that this program represents within their company, it's over 12,498 turbines. Now, how will that rollout go? It'll go over three years. Again, we're going to see huge some year, and due to other issues, we're going to see less. But add on to that, we continue to look outside of North America, and as I mentioned before, the Suzalan opportunity in India. Also, in the meantime, we were able to become the exclusive supplier to GE Marketplace for the Altra 3000, and as new products come out, we'll be adding more and more products to that Marketplace application. So you can kind of see why we're excited about just the Ultra 3000 and the wind turbine business. In the meantime, not waiting for the market to come back or for orders to increase, the team, as I mentioned before, has designed other products, both to go into green energy applications and specifically because of these strong relationships with the wind turbine owner-operators, the Ultra UPS. Now, there's one Ultra UPS in every single turbine that I just mentioned. And that's in beta site testing. It's going very, very well. But the MPI process, there's a lot of, hey, we need to change this. There's changes with the spec. Customer needs change. But we have a very good team here that works directly with the customer on a scheduled weekly call. And of course, there's calls every day on specific items. So that's kind of the, you know, wind turbine business for the Altra 3000 and Altra UPS. On the electric locomotive side, That's another program where the customer came with needs needed to be expedited. We needed to design, manufacture, test, and build battery modules and also superstructures. And the team, again, with partnership in this case with Progress Rail, did an amazing job meeting and exceeding all the requirements. And we have now shipped all of our products that go into that electric locomotive that we finished that in the fourth quarter of last year. So now they're taking our product, and, of course, there are other suppliers for other products. They're building the finished unit. And according to them, they're shipping that to their end customer in our fiscal year Q4 and the beginning of FY25 Q1 and Q2. So we expect orders for that production quantities sometime in the second half of calendar year 2024. And just remember, these are prototype builds. And just last year for those prototype builds, we shipped over $24 million worth of products for the prototype builds. So again, math after that, per train, the numbers that they're talking about as electric locomotives gets accepted, like electric vehicles get accepted by the customer base, needed to say we've never been more excited. Just doing math, I've said this before, I don't know what numbers you could come up with, but easily $100 million opportunity. It's just math after that. And we continue to add new products and new customers going forward. So within that, we also have the UltraGen 3000, which is the third and fourth product we have. That product is designed, and because of our relationships with the electric locomotive market, we've designed and we have orders for over 25 trains today for starter modules for two of the top manufacturers of electric diesel and electric locomotives. So that business to us is obviously very exciting. And everything I just talked about, we are exclusive with them. There's not a competitor. There's not a second source. So as these relationships grow, new products grow, we'll continue to add to that pipeline. But the pipeline as it stands today is a timing issue as they roll out. I'm going to use the word infrastructure because that's what the wind turbine business is. It's energy infrastructure, like infrastructure for base stations, which I'm comparing it to. Makes us very, very excited on the green energy front.
spk24: Okay. I mean, that's helpful. I mean, obviously the market's not sharing your enthusiasm.
spk02: The stock's trading around probably book value at this point with no debt. So it's a two-part question. Should we, as shareholders, expect the management team to be buying stock? And then should the board be thinking about buying stock themselves and issuing a share repurchase authorization? Thank you.
spk07: I want to touch on the excitement part of it. I thought the market and the shareholders got very excited last year on the enthusiasm as what I'm going to call phase one rollout of our green energy solutions strategy. My opinion, I think they should be just as excited about phase two, which as I mentioned today, is coming. It's coming. The suppliers, the customers have confirmed that. It's project-based. but I would be just as excited about the next steps as we roll out this new product line, new products, new SBU going forward, and I'll let Ed talk about that.
spk15: We just instituted a program with our board that they're required to buy $150,000 worth of stock as part of their participation on the board, and that's just been implemented, so you'll see that go into place. You know, we have about $22 or $24 million in cash. The difficulty is we have 24 foreign subsidiaries, and only about $8 million of that cash is in the U.S. So the answer to our buying stock back is that we won't be doing that in the near future.
spk20: And thank you. And one moment for our next question.
spk23: And if you would like to ask a question, that is star one. Again, if you would like to ask a question, that is star one.
spk20: One moment for our next question. And again, if you'd like to ask a question, that is star one one.
spk23: Again, that is star one one. And our next question comes from P. Ross Taylor from ARS Investment Partners. Your line is now open.
spk06: Thank you. Good morning. Congratulations on the move with the board and getting the board to be invested along with shareholders and management, because I think that's a very important step. I've rarely seen small companies succeed when the board doesn't have stocks, when the board doesn't have an interest along with that of investors. Second, or really the first question is, you commented saying that LAM is telling you that you should be ready for, my words, fiscal or calendar 2025 being the biggest year you've seen from them. Is that correct? Yes, that's correct. And the biggest year you've had in that space was, what, two years ago at $40 million or so in revenues? That's right.
spk22: Last fiscal year, Ross.
spk06: Okay. So what you're really looking at is a situation where we would expect that pretty quickly, once they get this turn going, you're going to see a pretty significant ramp up, pushing those effectively like 100% plus growth in revenues over what they're currently running at.
spk16: That's correct, yes.
spk06: Okay, and that probably carries a better than company average multiple when you get up to that level, or operating margin when you get up to that level.
spk15: You know, we make RF matches and proprietary products where the margin is better than our normal margins.
spk06: Okay. And so that alone, we're talking about $20-plus million in revenues being added at, you know, say mid-30s plus operating margin. That itself is going to be a huge driver forward. Absolutely. Second is you've talked about the ability to convert, you know, inventories and the like into cash. Do you have an idea, a thought process on what kind of cash generation you can get or creation you can get from drawing down your own inventories?
spk15: Well, what do we have? About 14,000 of the ultracapacitor modules already built for wind turbines. What's the total number that we have already built?
spk07: Yeah, 14,000 built and About that much on backlog with customers. All right.
spk15: So it's a matter of not if, it's when. It's all timing, when they're going to release. Normally, these wind turbines, they do their maintenance in the spring of the year. And as Greg mentioned, right now, they're all going through a budgeting process. So we have these orders, but they haven't released them. So it's a matter of timing.
spk06: But what we should see is the ability to convert several million dollars of inventory into cash as they convert to... Okay. Multi-million dollars. Multi-million.
spk15: Yes.
spk06: Okay. Since it's not several, I'll take multi as being a larger number than several.
spk15: That's correct. Okay. In a normal year, we do over $10 million a year with wind turbines alone.
spk06: Mm-hmm. It seems to me that listening to you guys talk, reading your release that there was a this quarter was a combination of unfortunate coral you know uncorrelated correlated events they all hit in the same quarter but at the same time that this should be the nadir for what we see going on and so we really moving beyond this quarter as you move to the second half of your year we should start to see some um incremental and then you know, what's the idea where they always say about going broke slowly first and then, and then rapidly, you know, that we should see incremental and then rapid, uh, growth in top line earnings, free cash flow generation at all. I mean, listening to this is actually the most bullish call you've had. And it's kind of ironic that it's occurring with the stock down, uh, you know, 20% on the day and, you know, trading under $10 a share.
spk15: No, we fully understand. I have a thing. You can't fall off the floor. So I, You know, with all of these things we have going, we think that the company, 50% of our business will be green energy going forward. And, you know, we think within five years, we'll be $500 million and extremely cash flow positive.
spk06: And that really, that this is, as you said, since you can't fall off the floor, this is a point from which you don't think you can fall from.
spk15: No, we're absolutely amazed that it's, you know, it's just like you've fallen off a a cliff that the business went to this level but it did and that's where we are but we you know we have the backlog we have the inventory so it's a matter of timing not if but when and can you give a little bit of background on the opportunity in hydrogen market size or yeah we're we're just starting to work in that area So they're buying 100-kilowatt generators that we make, and they're converting methane gas into hydrogen and acetylene. And actually, at this point, the acetylene has more value than the hydrogen. But a lot of companies, including Caterpillar, are talking about having their equipment run on hydrogen in the future. And one of the most profitable ways to generate that hydrogen is using 100 kilowatt microwave generators that we manufacture. They use a tube that's about $10,000 and the generator is like $100,000. So that could be a profitable business for us in the future.
spk05: And how many tubes do you need?
spk15: There's one tube in each generator. We have one customer that we mentioned that's making this crystalline for synthetic diamonds for industrial applications. And they're talking about buying 200 generators over the next two years.
spk06: Over the next two years? Several years. Several years. Yeah. Okay. And then, so we look at this, and I guess part of what that business model is, you end up, you sell the acetylene and if you sell the acetylene and actually reduces or eliminates the cost of making the hydrogen, and then you have the hydrogen as a benefit beyond it.
spk17: Yeah, that's correct.
spk06: Okay. Well, as I said, I think it's, it's fascinating. This isn't the most bullish call I've heard you guys have, and, you know, don't get discouraged by the fact that investors, you know, look at, you know, basically drive by looking at the hood of the car.
spk15: Well, we've only been around, you know, for 76 years. And in my history, the stock's been $375 and $29. So we'll get there. Just a matter of when.
spk06: Let's get back to new highs.
spk15: Okay.
spk10: Thank you.
spk06: Congratulations.
spk23: And thank you.
spk20: And one moment, please. One moment. Okay. One moment for our next question. And our next question comes from Ronald Richard. Your line is now open.
spk09: Good morning, Ronald. Hey, guys. I got a question. Good morning. I saw you have those orders coming in India, and I was wondering about GE's penetration in other foreign markets, what kind of progress you're making.
spk07: Yeah, the biggest opportunity is the Suzalan multi-brand specific to it. to Suzlan in India, but that also is going to be tested at their facility to make it an OEM product, meaning it will be designed and it won't be replacing lead acid batteries in their wind turbines. It'll actually be the PEM system within their turbines. That is by far the biggest opportunity. We have numerous opportunities, not nearly as large, with Enel in Italy, with Nordex in Germany. um so you know it's it's getting uh because of these relationships and the new products um getting the north american ge market um not 100 exclusive but grabbing all the market share we can now and we continue to train our global sales force on these products uh because again they're they're they're brand new to them too um so we are seeing opportunity but the biggest probably the next 12 months is going to be send beyond Because once we go into production for India, that will transcend to all their turbines and owner-operators throughout the world. I'm . I'm sorry.
spk08: Okay. It sounds so much alike. Okay. Thank you.
spk07: Thank you.
spk23: Okay. Thank you. And I am showing no further questions. I would now like to turn the call back over to Ed Richardson. CEO, for closing remarks.
spk15: Thanks, Justin. Well, we want to wish you all a very happy and prosperous new year, and we appreciate your investment interest in Richardson Electronics. We assure you that it's only up from here and not a matter of if but when, and we look forward to discussing our fiscal year 2024 third quarter with you in April. We're available to take your calls at any time, so don't hesitate to call us. Thanks very much.
spk23: Thank you. This concludes today's conference call. Thank you for participating. You may now disconnect.
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