Richardson Electronics, Ltd.

Good day, and thank you for standing by. Welcome to Richardson Electronics' earnings call for the third quarter of fiscal year 2024. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 1-1 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 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, Ed Richardson, Chief Executive Officer. Please go ahead.

Good morning and welcome to Richardson Electronics Conference Call for the third 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 the 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. I'm pleased to report that we returned to profitability in the third quarter. Sales increased 18.7% sequentially, reflecting improving business conditions. Stronger demand for our Ultra 3000 from new and existing wind customers drove higher GES green energy solution sales. This sequential increase in sales and profitability is encouraging, reflecting the benefits of our diversification strategies as well as our team's focus on enhancing profitability and strengthening our balance sheet. Our net sales continue to reflect the cyclical nature of the sales to semiconductor wafer fab customers, which declined $11.5 million in sales during the quarter. We believe Q3 will be our lowest semiconductor revenue quarter. Our customers continue to tell us they anticipate growth in the back half of calendar year 2024, leading to record sales in calendar year 2025. Another highlight in the quarter was the $4 million sequential decrease in inventory reflecting prudent strategies aimed at improving working capital levels. Throughout fiscal 2024, we focused on improving inventory levels to better align with expected demand across our markets. Inventory grew primarily in response to supply chain constraints over the past several years. I'm pleased with the progress of our global teams are making. The quarter marks the first time we've seen a decline in inventory in more than two years. I'll now turn the call over to Bob Benn, our Chief Financial Officer, to review our third quarter financial performance in detail. Then Greg, Wendy, and Jens will discuss our business unit performance, including an update on the new products, programs, and customers that continue to drive our optimism for the future.

Thank you, Ed, and good morning. I will review our financial results for our third quarter of fiscal year 2024, followed by a review of our cash position. Net sales for the third quarter of fiscal 2024 were 52.4 million, compared to net sales of 70.4 million in the prior year's third quarter. PMT sales decreased by 15.7 million from last year's third quarter, primarily driven by a decline in manufactured products for our semiconductor wafer fabrication equipment customers. Sales for GES increased 0.1 million from last year's third quarter, which included a large sale of EV locomotive battery modules that did not recur in fiscal 2024. Canvas sales decreased by 3.1 million, primarily due to short-term customer pushouts in North America. Richardson healthcare sales increased by 0.7 million compared to the third quarter of fiscal 2023, as higher CT tube and parts demand offset lower system sales. Backlog totaled $147.7 million at the end of the third quarter of fiscal 2024 versus $150.7 million at the end of the second quarter of fiscal 2024. The sequential decline was in PMT and Canvas. GES backlog of $36.8 million increased from the second quarter of fiscal 2024 by $1.1 million. Consolidated gross margin for the third quarter was 29.5% in net sales compared to 31.8% in last year's third quarter, primarily due to product mix and underabsorption. Without underabsorption of the company's manufacturing facility, that the company's consolidated gross margin for the third quarter of fiscal 2024 would have been 31.0%. PMT's gross margin decreased to 28.3% from 32.9%, primarily due to product mix and $0.8 million of manufacturing under absorption. GES gross margin increased in the third quarter of fiscal 2024 to 26.6%, from 25.7% in the prior year's third quarter due to product mix. Canvas gross margin increased in the third quarter of fiscal 2024 to 34.4% from 32.0% in the prior year's third quarter because of product mix. Health care's gross margin increased to 41.6% in the third quarter of fiscal 2024 compared to 39.8% in the prior year's third quarter as a result of an improved product mix. Operating expenses were $14.4 million for the third quarter of fiscal 2024 compared to $14.8 million in the third quarter of fiscal 2023. The decrease in operating expenses resulted from lower incentive expenses partially offset by higher R&D expenses in support of the company's growth initiatives. The company reported an operating income of $1.0 million for the third quarter of fiscal 2024 versus operating income of $7.6 million in the third quarter of last year. Other expense for the third quarter of fiscal 2024, including interest income and foreign exchange, was less than $0.1 million compared to other income of $0.4 million in the third quarter of fiscal 2023. Income tax provision was $0.2 million or a 23.4% effective tax rate versus an income tax provision of $1.7 million or a 20.7% effective tax rate for the third quarter of fiscal 2023. Net income for the third quarter of fiscal 2024 was $0.8 million or $0.05 per diluted common share compared to net income of $6.3 million or $0.44 per diluted common share in the third quarter of fiscal 2023. Turning to a review of the results for the first nine months of fiscal year 2024. Net sales for the first nine months of fiscal year 2024 were $149.1 million, a decrease from $203.8 million in the first nine months of fiscal year 2023, which reflected lower sales across our business segments. Gross margin decreased to 30.3%. from 33.0%, primarily reflecting product mix and manufacturing underabsorption in PMT, product mix in GES, as well as increased scrap expense and manufacturing underabsorption in healthcare, which was partially offset by a favorable product mix and lower freight costs for Canvas. Operating expenses were $44.7 million. for the first nine months of the fiscal year, which represented an increase of $1.0 million from the first nine months of the last fiscal year. The increase was due to higher salaries and R&D expenses, partially offset by lower incentive expenses. Operating income for the first nine months of fiscal year 2024 was $0.5 million as compared to an operating income of $23.6 million for the first nine months of fiscal year 2023. Other expense for the first nine months of fiscal 2024 including interest income and foreign exchange was $0.2 million as compared to other expenses of $0.1 million for the first nine months of fiscal 2023. Income tax provision was $0.1 million or an effective tax rate of 39.2% during the first nine months of fiscal 2024 versus an income tax provision of $5.3 million or an effective tax rate of 22.5 percent in the prior year's first nine months. The company reported net income of $0.2 million or one cent per diluted common share for the first nine months of fiscal year 2024 versus net income of $18.2 million or $1.27 per diluted common share for the first nine months of fiscal year 2023. Moving to a review of our cash position. Cash and investments at the end of the third quarter fiscal 2024 were $18.9 million compared to $22.8 million at the end of the second quarter fiscal 2024. The use of cash during the third quarter fiscal 2024 primarily resulted from a $5.3 million increase in accounts receivable and a $4.1 million decrease in accounts payable partially offset by a $4.0 million decrease in inventory. U.S. cash and investments were $5.2 million at the end of the third quarter of fiscal 2024 versus $8.8 million at the end of the second quarter of fiscal year 2024. Capital expenditures were $0.4 million in the third quarter of fiscal 2024 and related to investments in our IT system versus a total of $2.2 million in the third quarter of fiscal year 2023. We paid $0.8 million in cash dividends in the third quarter of fiscal year 2024. In addition, our board of directors declared a regular quarterly cash dividend of $0.06 per common share, which will be paid in the fourth quarter of fiscal 2024. As of the end of the third quarter of fiscal 2024, the company had no outstanding debt on its $30 million revolving line of credit with PNC Bank. Now I will turn the call over to Greg, who will discuss the results for our PMT and GES business groups.