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spk24: 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.
spk26: 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.
spk11: 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.
spk13: Thank you, Bob, and good morning, everyone. We are pleased to share that in fiscal 2024 third quarter, we experienced strong quarter-over-quarter sequential growth and slight year-over-year growth for our Green Energy Solutions Group, or GES. GES sales were up 342% sequentially from $2.6 million to $11.5 million. In addition, our GES book to bill is 1.07 for the third quarter with the addition of new customers, new products, and new technology partners. As we implement our GES growth strategy and until our new products are mature, we are seeing fluctuations from quarter to quarter in terms of sales. The team continues to do a great job identifying customer requirements, establishing design and manufacturing capabilities, and launching beta site testing. In a short amount of time, we have designed numerous products, received several patents, and developed a growing list of key customers. All this will help develop a more predictable quarterly revenue stream. As a reminder, GE has benefited from several large projects last fiscal year, including electric locomotive development and large-scale rollout of pitch energy modules to the replacement of lead-acid batteries with our major owner-operators of GE wind turbines, such as Nextera, Enel, and InverEnergy. we remain confident that our market share continues to expand. Our customers repeatedly tell us we have maintained our market share for our core GES applications, identified new opportunities, and the slowdown in revenue in Q1 and Q2 was purely a timing issue. In fact, our customer pipeline and number of opportunities continue to increase as we take advantage of significant energy transformation projects globally. Our combined GES and PMT backlog remains strong at over 98 million. Given our inventory position, we believe we will continue to ship many incoming orders from stock as we were able to do in Q3. This resulted in significant inventory reduction, which we expect will convert into cash in the coming quarters as receivables are collected. We remain focused on managing our business to support our customers' needs when they are ready. So with that, let's look at the third quarter performance for both GES and PMT groups in more detail. GES sales were $11.5 million in the quarter, up from $11.4 million in the prior year's third quarter, and up over 342% from the prior quarter, driven by a larger customer base, mainly for the Altra 3000, as well as increased in new product revenue from designs with our component technology partners. We continue to grow market share with the customers needing our niche, power management-focused, patent green energy products. Beginning in Q3 FY24, we saw an increase in the budget for individual site rollouts for our wind customers. With over 53 million shipped program to date, we're excited to see this and expect to see positive trends continue in Q4 FY24. We also continue to beta test our patent pending Altra UPS 3000, which replaces lead acid batteries in the UPS system at the base or down tower of the wind turbine. The Altra UPS3000 will be used by other owner-operators of GE and Siemens wind turbines. Tests are going well, and we have led to important improvements in the product. We anticipate generating production revenue from the Altra UPS3000 product line in late September 2024 as beta testing is completed with our customers. We're also testing the Altra PEM3000, or multi-brand products, which serve the same function as the Altra 3000, but in different mechanical designs with other wind turbine platforms such as SSB, Suzlan, Senvion, and Nordex, expanding our market outside of North America. One major program I mentioned in Q2 for the UltraPEM 3000 is beta testing with Suzlan on both an OEM and replacement basis. The replacement opportunity is for more than 7,000 turbines in India alone, with several thousand more in North America and Europe. We expect to ship production orders for the Suzlan program starting in late October 2024. The Ultrapem 3000 is also in final testing with several owner-operators in Latin America and North America, which manage Suzlan SSB pitch systems. We'll be rolling out four new versions of Sendian, Suzlan, Nordex, and SSB in Europe at the Clean Energy Show in Hamburg, Germany in September 2024. In the EV locomotive segment, due to supply chain issues for piece parts for our suppliers, and design changes, our prototype superstructure builds for Long Island Railroad and BNSF electric locomotives will now be completed this quarter and into Q1 of next fiscal year. We anticipate production units will begin shipping in the third and fourth quarters of calendar 2024. We have beta orders for a patented UltraGen 3000 starter module with two large diesel and EV locomotive manufacturers. It is important to note that we are exclusive to both of these manufacturers. If all continues as planned, we anticipate production orders will begin in late July 2024. In summary, last quarter we anticipated sequential revenue growth in Q3 and Q4 with NRGES Business Unit, driven by new products, customers, and technology suppliers, and supported by the forecast and backlog from our project-based customers. We saw that large increase in sales over Q2 and year-over-year growth in Q3. We're expecting quarter-over-quarter growth again in Q4. I want to stress that despite the slow growth in the first six months of the fiscal year, we did not lose any market share. In fact, we continue to increase our market share with new products, new applications, and new customers. Turning to Powered Microwave Technologies Group, or PMT, which includes the Electron Device Group, or EDG, and our Legacy II business, and the Powered Microwave Group, or PMG, our Powered Microwave Components Group. Sales decreased 33% from 46.8 million to 31.2 million. This decline was primarily due to the slowdown in our semiconductor wafer fabrication equipment business. The decline in the semiconductor wafer fab business was slightly offset by growth in the RF and microwave power components group. We expect to see quarter-over-quarter growth for our semiconductor wafer fabrication equipment business in Q4 FY24 based on customer feedback and market predictions and with a book-to-bill of over 1.14 for PMT overall coming out of Q3. Our engineering solution strategy is led by our global technology partners. In Q3, we continue to add technology partners who fill technology gaps in our offering and support our growth, including Wolf Speed, Ideal Power, and MCI components. Often through these partnerships, we identify opportunities for new products that we design and manufacture in-house. This increases the value we provide customers and allows us to capture more revenue while expanding and diversifying our customer base. In April, we are excited to be expanding our RF and microwave portfolio with additional full-speed Cree semiconductors through our global relationship with Macom. These long-term supplier relationships are extremely strong. And when appropriate, we work with them on strategic long-term purchases to maintain proper levels of supply. We negotiate special terms, stock adjustment privileges, and shipping schedules to help improve cash flow. In addition, having inventory on hand allows us to capture and maintain market share. We collaborate with our customers and suppliers and leverage our customers' forecasts to help us strategically invest in inventory and ensure we can meet our customers' needs. Our growing customer base and strong relationships with these customers help us develop new products and opportunities. We will continue to invest in our infrastructure to support our growth. We are bringing on talented design and field engineers and making investments to enhance our manufacturing capabilities. Our growing in-house design engineering and manufacturing teams are doing a great job supporting the increased demand for current and new product designs. With this team, we'll continue to identify, develop, and introduce new product and technologies for green energy and other power management and microwave applications. I cannot stress enough the value Richardson Electronics model brings to our customers and suppliers. Our unparalleled capability and global go-to-market strategy are unique to the power energy and 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 as they arise. The execution of our strategy has never been better. There's no question our customers and technology partners mean Richardson's products and support more than ever. And with that, I'll turn it over to Wendy Dedell to discuss Richardson Healthcare.
spk27: Thanks, Greg. Good morning, everyone. Third quarter sales for the healthcare division were 3.1 million, an improvement of 29.6% compared to the third quarter of last year, and a slight increase over the second quarter. CT tube and part sales were up versus the prior year's third quarter, while system sales were down, primarily due to the timing of cash receipts from our customers in Latin America. In the quarter, we again benefited from sales of our repaired Siemens Stratton Z tubes. Healthcare's gross margin in the quarter improved to 41.6% compared to 14.8% in our most recent second quarter. Gross margin in the same period last fiscal year was 39.8%. The gross margin improvement was primarily due to a favorable product mix, including higher parts and Siemens tube sales. We also realized the benefit of restructuring done at the end of the second quarter and reallocation of resources focused on the Siemens repaired tube program. We continue to make excellent progress with the Siemens program. 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. Strat and Z sales are starting to ramp up as we have a steadier flow of production and can expand our customer base. The repaired MX series tubes are performing well in beta and life tests. While we may be able to sell a small number of repaired tubes in the next two quarters, we anticipate the full release of the MX series later this summer when we're able to replace critical components. We continue to closely monitor healthcare's financial performance with the goal of achieving a break-even point in the fourth quarter With limited sales of the repaired Siemens series, this will remain challenging, but we are taking the right steps to balance our investments with other opportunities in the company. I will now turn the call over to Jens Rupert to discuss the results of Canvas.
spk04: Thanks, Wendy, and good morning, everyone. Canvas engineers, manufacturers, and sales custom displays to original equipment manufacturers across global industrial and medical markets. Canvas sales for the third quarter of fiscal 2024 reflect certain customer pushouts primarily in North America. As a result, sales were 6.6 million for the third quarter compared to a very strong quarter last year with sales of 9.7 million. One area I'd like to highlight is our 46.2 million backlog. As you can see, our backlog remains robust, providing us with strong foundation for future revenue growth. This backlog not only demonstrates the confidence of our clients have in our products and services, but also reflect our ability to secure long-term contracts in a competitive market environment. Another notable highlight from the third quarter fiscal 2024 is the improvement in our cross margin. We are pleased to report that our cross margin as percentage of net sales increased to 34.4% compared to 32.0% during the same period last year. This improvement underscores our relentless focus on operational excellence and cost management. Through strategic initiatives and operational enhancements, we've been able to enhance our efficiency and optimize our cost structure, resulting in improved margin. During the quarter, we received several new orders from both existing and first-time medical OEM customers. Some of these applications include patient monitoring, colposcopy, surgical navigation, superpulsed laser systems, and robotic-assisted surgery. These applications underscore our commitment to providing innovative solutions that meet the evolving needs of our customers in the medical sector. Furthermore, they highlight our ability to establish and cultivate long-term relationships with both existing and new clients, positioning us for sustaining growth in these key market segments. In the non-medical space, our products are used in a variety of commercial and industrial applications. This includes displays used in the public consultation space, such as train driver consoles and passenger information monitors, air traffic control, HMI or human machine interface applications for surface inspection machines, and teleprompting and talent monitors and clocks used in the broadcast market. As we navigate through the dynamic market environment, it's important to acknowledge that some of our customers have exhibited a cautious approach due to prevailing uncertainties. However, despite this caution, we remain optimistic about the recovery of demand in the coming quarters. We've observed promising indicators and anticipate a gradual rebound as market conditions stabilize. Our ongoing dialogue with customers supports our confidence in the potential recovery ahead. One of the key drivers for optimism is the increased business stemming from new design wins. These wins underscore the recognition and acceptance of our products and solutions in the market. Our engineering teams have been diligently engaged, demonstrating a high level of activity and commitment to our strategic objectives. Despite the challenges posed by external factors, our engineering team have remained focused on innovation and product development, laying the groundwork for future growth opportunities. we've strategically positioned ourselves to capitalize on emerging opportunities, and these design wins validate the effectiveness of our approach. As we continue to leverage these wins, further penetrating target markets, we're participating a positive impact on our revenue growth and market share. 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 will focus on executing our strategic initiatives to try sustainable growth and create long-term value for our shareholders. I will now turn the call back over to Ed.
spk26: Thanks, Jens. I know customer push-outs have been a source of frustration for you and your team. But with strong backlog and recent wins, we're confident that the business will improve sequentially. Despite hindrances from economic conditions, higher interest rates, and a lagging economy in China, we maintain our optimism and remain committed to our long-term growth strategies. We continue to pursue significant projects and develop new engineered solutions that take advantage of opportunities created by recent government stimulus programs and global energy transition trends. We believe we're well positioned to capitalize on large, rapidly growing global markets. This is exactly why we maintain a strong balance sheet with access to additional sources of capital if necessary to fund this growth. We're convinced our ever-expanding product roadmap for green energy solutions to large global customers will be crucial as a part of our revenue growth going forward. The solutions we offer not only help achieve lower carbon emission goals, but they also create cost savings for our growing customer base. In the wind market, for example, lead-acid batteries must be replaced every one or two years. Our ultra-capacitor 3000 has a life expectancy of more than 10 years. Wind turbine operators may never have to replace ultra-3000 before replacing the wind turbine. This saves customers labor costs as well as ensures greater uptime resulting in more power generated. International growth opportunities as well as Expansion to other wind turbine brands within the U.S. provides more evidence that demand for ultracapacitor modules are there and growing. Last quarter, we referred to opportunities created by the Inflation Reduction Act of 2022, such as the 100-kilowatt generators to power pilot reactors to make crystalline diamond materials for high-tech applications. In this quarter, we'll ship the first generator, These generators are over $100,000 apiece. We expect this will be the first of many of the demands for large chips used in many applications such as AI and electric vehicles. This will also have a positive impact on the demand for semiconductor wafer fab equipment. Electric vehicle rail is still in its infancy, but states like California are mandating that the transition from diesel locomotives So while this may be rolling out slower than we originally anticipated, the opportunity remains significant. Other applications like mining are outside the United States, and the emphasis on alternative green solutions remains a top priority. We're working closely with customers' engineering teams that are an integral player in their supply chain. I want to stress again that our customers, products, and opportunities are growing. None of these projects or programs we've discussed have been lost or canceled. Our balance sheet remains strong with nearly $19 million in cash and no debt. We're working hard to improve our working capital position and convert inventory to cash. Our approach will remain focused on maintaining healthy cash position and a strong balance sheet while we focus on improving profitability and producing positive operating cash flow in FY25. Overall, we remain extremely excited by the direction we're headed in and the global opportunities we're pursuing to create value for our shareholders. At this time, we'll be happy to answer your questions.
spk24: 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. As a reminder, to ask a question, please press star 1-1 on your telephone and wait for your name to be announced. To withdraw your question, please press star 1-1 again. Please stand by while we compile the Q&A roster. The first question is from Anja Soderstrom from Sudoti. Your line is now open.
spk17: Good morning, Anja. Hi, Adam. Good morning. It's nice to see that sequential jump in the quarter. Was it a specific large project or was it several different projects that drove that GS business increase?
spk13: Yeah, it's actually a great increase in the customer base. A major portion of the increase was the Altra 3000 business. Just for an example, last year we had five, six customers. This past quarter, We shipped to over 12 new customers for this product as it becomes market accepted. The word gets out. People are doing it. The budget got approved. And we said from the very beginning that Q1 and Q2, they're putting their capital at CapEx together and that those two would be slow and we'd see an increase in Q3 and Q4. And that was exactly what happened. They got their CapEx approved for 2024 and they started placing orders and We had built up a stock to support that based on the forecast, and we were able to ship from stock. So it was actually an increase in the number of customers, and the largest increase in terms of a product was the Altra 3000.
spk17: Okay, and that's the one you had a press release out in March, right, that you completed at phase one of shipping 50,000 modules?
spk13: Exactly, yeah. They looked at it, and they review it, and everything's in phases. And according to them, you know, their phase one CapEx approvals, and that generated about 53,000, and we started seeing phase two and Q3 start up. So that was another reason.
spk17: And what do you think we can expect from the phase two? Is that going to be the same magnitude, or could it be an expansion since you have more customers now?
spk13: It'll be that and a little bit higher based on the forecast from these customers. Again, we started with, in a good way, the four largest owner-operators of GE wind turbines. The balance are the smaller group, but if you add them all together, it could be about the same amount. So we're expecting that plus for phase two.
spk17: Okay, thank you. And in terms of you're expecting the sequential growth to increase, In the fourth quarter, what gives you confidence in that? What kind of visibility do you have?
spk13: We're very confident about it based on the deliveries and the backlog and the inventory we have to ship to that. And so far, like we saw in Q3, the customer base, you know, are meeting their forecast, which is surprising because people can't forecast very well. No one can. So it's mainly based on our book to bill being over one. the backlog and the schedule for that backlog, and the fact that we have inventory to support it going forward.
spk17: Okay. I'm going to squeeze one more in here about the inventory. So that was a nice work done, but now when you expect the growth to continue, should we expect inventory to continue to decline in dollar amounts, or should it be staying flat, or even increase maybe in the coming quarters?
spk13: I'll touch on GES. We expect sales to increase and inventory to go down specific to the GES and let the other SBU people.
spk27: Yeah, I would just add to that, Anya, that, you know, we do have the entire management team focused on it. While we wouldn't go so far as to say it's absolutely going to decrease, that is everybody's intent is to make that happen. So, we're all on board. We're pushing out where we can. We're cutting back where we can. and trying to negotiate different arrangements with certain suppliers.
spk17: Okay, thank you. I want to be respectful to the others on the call, so I'll get back in queue. Thank you.
spk23: Thanks, Anya. Thank you.
spk24: One moment for our next question. Our next question comes from the line of Ross Taylor from ARS Investment Partners.
spk07: Ed, team, congratulations on a strong operating performance in the quarter. It's nice to see you back in the green profitability-wise. Thank you. Ed, you indicated on this call that you think that we basically are at the nadir for the semi-cap equipment business, and that's been a major driver to the drop-in in profitability. You've also indicated that you expect calendar, your customers expect calendar 25 to be a record year for them in that area. So would I be right to assume you think that calendar 25, those 12 months should be producing a record level of revenues for you guys?
spk26: Yes, I mean, we're listening on a regular basis to LAM Research, who's our largest customer, but we also sell to Tokyo Electron and Applied Materials and a number of other customers in that space. And they're all telling us that in 2025, the semi-waper fab business will be higher than ever. As you know, last year, we did $40 million in that space at a very nice margin. And this year, it's less than $20 million. Uh, so if you can count on it being over 40 next year, it should be a record year.
spk07: And should you be able to do, uh, same kind of margins or better that you saw back a year ago?
spk26: Yes. I mean, we're proprietary and a lot of those products, so our margins are very good.
spk07: Yeah. Historically, there's been kind of almost like a one to one type sell through it appears, um, or correlation. Also, you indicated on this call and you've indicated previously that the green energy business is looking at a tremendous number of opportunities that come on over the next 12 to 18 months. So I would assume you would think that you guys think that the green business should be able to produce a record level of performance as well as, let's say, looking at the 12 months, the calendar 25? Yeah.
spk26: Well, we've seen a lot of push-outs in that space. You know, we think that, you know, it's a matter of when, not if. There's certainly a tremendous opportunity in all kinds of areas, not only the ultracapacitors or wind turbines, but especially with the electric locomotives and the battery starts for diesel locomotives. But it seems as if it's rolling out much slower than we anticipated.
spk23: Thank you. One moment for our next question.
spk24: Our next question comes from the line of Barry Mendel from Mendel Money Management.
spk16: Yeah, I remember. Hi, guys. I'm Wendy. I remember about a year ago you discussed Progress Rail and thought that maybe it could be your biggest customer going forward, but really haven't heard much about them. So what is going on with Progress Rail?
spk13: Well, the main thing going on currently at Progress Rail, we've met all the commitments for their initial orders for the prototypes, both in North America and Brazil. They're in customers, as I think you know, are in Australia and then Long Island Railroad and Burlington Northern. So we've built the product. We shipped it to them. They're now building up the entire train and then working with their customers through a long design-in phase. However, I think in FY25, The two main programs we have going in the locomotives market are the two starter modules that we make for the two largest owner operators, diesel locomotives. We just got a release for 25 trains. That product is designed and developed here in LaFox. So, for example, one of the owner manufacturers of diesel locomotives, there's 25,000 trains. that this product will go into over time. So if I look at FY25, we look at potentially in the fourth quarter, their end customers will start buying electric trains. But in the meantime, we've continued to identify other opportunities in the locomotive space. And in this case, it's the starter modules that we have designed for them.
spk15: So you're saying you can start shipping up in your fiscal fourth quarter?
spk13: The actual orders for the diesel locomotives that we've already shipped to our battery modules and our superstructures in our fourth quarter of FY25, yes. But going forward, we have a release starting in Q1 for our starter modules that we've designed and developed for their diesel locomotives. Obviously, the other stuff is for their electric locomotives. So we have a great relationship with them. We're finding new opportunities for them. There's some IGBT modules that we're looking at designing for them. So, yeah, there's no question. Once the electric locomotive business is accepted by their end customers and they start placing orders for those, I think you're aware of the large dollar amount content we have in those trains, that progress, those two manufacturers will be our largest customers.
spk24: As a reminder, to ask a question, please press star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again. Our next question comes from the line of Chip Rui from Rui Asset Management.
spk09: Good morning, Wendy, and thanks for taking the call. Focusing on the balance sheet a little bit, the inventories at $112.6 million combined with the cash look rock solid to me compared to the market value of the company. And given that, I wonder if you could talk a little bit about the quality of the inventory, the ability to deliver, if there's any aging issues, anything that would prevent that inventory being delivered kind of, you know, at cost on the balance sheet and, of course, better than that. And I think, you know, as of last quarter, you in the queue, it was 99 million of finished good inventories. Just wondering if you could let us know the finished good inventories percentage of inventories as you talk about, you know, really what's there on the shelf and is what on the shelf going to get taken into kind of as is versus needs to be modified or other things like that.
spk11: Hi, Chip. This is Bob Ben. We feel very good about the quality of our inventory. As you noted, we have a total of about $113 million. And right now, we have about a $5 million total reserve on that, which is reviewed every quarter. We review, just so you understand, we review every product in our inventory once a year And some more than that it might note that also that also gets reviewed by our auditors. So overall we feel very good I'm looking for the exact amount of finished goods, but as you would expect almost or most of that is finished goods And the highest amount would be in the electron device group specifically our core to business as well as Products that we have for our canvas division and in our healthcare division. And certainly, as Greg noted, our GES segment has about 15 million of inventory right now. And again, I'm sorry, I don't have it at my fingertips. We'll have it in our 10Q later today. But we do break out in the footnotes the finished goods amount. Let's see. Yeah, I just don't have that handy, but did I answer your question or did you have more specific questions on that?
spk23: Thank you. One moment for our next question.
spk24: Our next question comes from the line of Ross Taylor from ARS Investment Partners.
spk07: I have to be careful how I phrase this since we got a very severe disciplinarian on the questions. What I wanted to get at, and I think the prior questioner started to get to this, is you have a company or stock that's selling basically about a dollar above net net working capital. You're selling under book value. You have no debt on the balance sheet. You've talked on this call about monetizing inventories. You said the inventories are money good and are mostly finished goods. which means they're basically stored profitability that's sitting there, and they also reflect effectively an overstated cost impact. Looking at all of that, and at the advice of Warren Buffett, who tells people that you are supposed to buy when others are fearful, why has this company not been really aggressive in buying back its own stock? Not only are you not aggressive, you're not even buying it back yet, and it baffles me because I hear you talk about next year calendar year being what should be a record year. Your prior year was over $1.50. There were some one-time items in that, but let's call it $1.40. You're trading at $10 in here, $10, which is less than what the book value is. And I have to believe you think this company is worth more than book value. So what is keeping you I mean, you've got a long history. Your bankers have to believe that your money good. They've known you for a long time. If they don't, then get better bankers. Why aren't you putting a little debt on the balance sheet and taking advantage of this severe dislocation in front of what should be a rocket ship in 25?
spk26: Well, we talk about it every board meeting, the possibility of buying stock back. Right now, as we mentioned, we're really pushing trying to keep positive cash. and reduce the inventory to do that. And, you know, once we get to a position where cash flow positive, we'll certainly look at the possibility of buying stock. To give you some idea, when we sold our FPD in 2011, we bought $65 million worth of stock back. And every time we bought the stock back, the price of the stock would go down. So the investment people were looking at the value of the company on cash only. And all we achieved was to drive the price of the stock down. So we don't have a very good experience on buying stock back.
spk07: I hate to tell you, but I think it was Edison made that famous quote about how many times he failed inventing the light bulb, and he kept trying. I mean, the idea that it didn't work in the past, to me, I mean, just honestly, if you hear a sudden thud, it's me banging my head on the desk. The fact that it didn't work, you're not that business. You have a much more have a broader base of business you have a lot more growth opportunities if your board can't see that you're a different company today than you were then and if you can't yourself see it then we need a different board we need a board who actually has some vision and has a little bit of courage i mean i think we brought warren buffett into one of your board meetings he would lecture you guys on how you're literally letting a golden opportunity go go by and what happened in the past That's the type of thing that doesn't advance progress. That stifles it, Ed. And I've talked to you. We know each other. You're a very bright man. You know better than to think that something that happened in the past under a different collection of holders in a different business environment with a different company is an effective measure of what you are today and what you should be doing today. Right?
spk19: Well, we certainly appreciate your opinion. Thank you.
spk23: Thank you. One moment for our next question. Our next question comes from the line of Joseph Nerges from Segrant Investments.
spk14: Good morning. Thank you for taking my question. I was very interested in a press release from last month when you signed that global distribution agreement with Ideal Power. And I guess my key question here is, do we have any plans to develop proprietary products around their bi-directional technology?
spk13: Absolutely. We have two calls a month specific to that. And that really fits right into the model that we built here when I came back. technology partners who have some disruptive technology that is focused on our two key markets, which is power management and RF. And Ideal Power does fit all that. They have disruptive technology. It's unique. We're exclusive. We're global. And we're already talking to them about a couple of their products for one of our designs that we're looking at. So absolutely, they'll be both designing in their components into our suppliers A lot of our battery manufacturers could use this technology for their modules, obviously into our customers, and then to use it internally for our engineered solutions. And there's a couple of products that we're working on right now that I can't announce by any means at this point, but we'll absolutely be using Ideal Power for that. And they've been great. We have a great engineering relationship already. That is exactly what we do when you see a press release with a company like this that has a disruptive technology. It's threefold. It's to design it into our suppliers, design it into our customers, and then also use it for our engineering solutions opportunities as they come to fruition.
spk14: Well, again, it's great. I mean, the applications on their technology seem to be very widespread and i'm i'm thinking of uh we have a uh a ups product that we also ups 3000 that and i'm just wondering can we enter against these are some pretty big competitors in these markets but do you think we can successfully enter let's say the data center market with a ups product or something similar to that because yes
spk13: Yeah, the UPS product and that technology can be used in so many applications. I will tell you, it is a major, major program. It's an inverter application for one of our key customers that we will be using Ideal Power for. And again, it's a new relationship. It's a few months, but although we've talked to them and we know the people there, it's a small and incestuous market. So I've worked with many of the people that are there in other capacities over the years. But the answer to your question is yes, and specifically there is one right now that's a major program. It's for an inverter application, an inverter module, that this will be the product that we're using. And we think with their technology, it'll separate the spec sheet from anything that's out there today. So, yeah, we're excited about that. And also all of our technology partners. That's the process we go through.
spk14: Well, I look forward to seeing what you guys come up with in the next several months. Thank you. Thanks again for answering my question.
spk24: Thank you. One moment for our next question. Our next question comes from the line of Barry Mendel from Mendel Money Management.
spk16: Yeah, a follow-up on the progress rail and WattTech. What's the ASP on the starter modules?
spk13: Yeah, we have NDAs with them. I can't share our costs or our resales to those applications or even those type of customers. Too many competitors out there listening.
spk16: Okay. And in terms of ideal power, how... big or how important could that be for you? Is there any dollar amount you could put on there? And actually, Andrew, isn't it somewhat of a distribution agreement as well?
spk13: Yeah, it's both. It's all based on the number of new products they introduce. Right now, their portfolio is very limited. They are developing a module and they have a couple of discrete devices. But if you just look at the markets that they go into, it's millions of dollars. But You know, I've had a lot of experience with technology partners and this type of go-to-market strategy. And, you know, if one of these programs that we're doing from an engineering solutions point of view, it's millions, right? From a discrete point of view, it's peer MPI process, you know, new product introduction process. But with our global capabilities, I feel the best in the world at bringing technology technology companies to to get them to market as they invest in technology and we have the infrastructure to bring it to market but um it's millions of dollars i can't come up with a number um but i've seen companies like this that we started with uh that became corvo and we know how big they are um so guys limit but it's the thing that excites us about this is the markets that they're developing product for us are growth markets You know, I know it's inverters and industrial, but it's great for these green energy as people need to reduce the input on their emissions. So I can't put a dollar amount on it, but it's millions of dollars. It could be one product that we design internally or one major, you know, electric vehicle charging station that we end up designing the product into.
spk16: Yeah, I know. I talked to them yesterday, actually, and they spoke highly of what you're doing for them already.
spk13: Yeah, like I mentioned before, I don't have a lot of attributes. One of them has never been patients. And day one, we trained the global field sales engineers. We trained our design engineers. And we immediately, within 24 hours, had their product in front of customers. One of the things I'll just add on the call, which is unique to us, so I want to say it. Every one of our customers we can assign application codes to, so up to five. And so when a customer like Ideal Power comes out with a new product for a specific application, our global field sales engineers can sort their entire customer base and identify anyone who's ever built an inverter or an electric charging station. And that product and those samples and those sales tools get to that customer within, I always say, within 24 hours. So yeah, we're excited about Ideal Power. And again, like I mentioned before, we know the people there because it's a small and market. So great. Thanks.
spk19: You bet.
spk24: Thank you. One moment for our next question. Our next question comes from the line of David Schneider.
spk08: Hi. Hi, guys. First of all, I wanted to give an A-plus to Ross Taylor. And he hit the nail right on the head, but actually left out a few things. But there's no need to go over that territory again. I'm wondering, you know, the stock has, over the past years, you've gone up and down because of the cyclicality, the semiconductor cap equipment business. Is it possible that things like the relationship with Ideal Power can smooth some of that out? And, you know, your company is being valued as literally a no-growth company at this point. Could the new product applications from Ideal Power change the trajectory and maybe the perception of your company so that maybe you could become valued as a growth company again?
spk13: think that the model that we have with ideal power and the list of other technology partners and you've seen obviously as this business developed press releases on the people were signing I think as they apply to engineered solutions and you know you've heard about all the engineered solutions opportunities and I think as I mentioned before the, in the call, you know, reducing new products, SUSELON, Nordic, Sembian, SSB, but all that together, absolutely, it will subsidize the, you know, rollercoaster ride that the semiconductor manufacturing equipment industry has had for 20 years. We know it's coming. Some are higher than others, but that's kind of the goal a little bit. that we're doing this for the profitability and growth in the stock price of the company, but it does help subsidize the rollercoaster ride that we've all experienced for 20, 30 years of the semiconductor wafer fab market. So, yes, IDEA will be part of that, but that's the whole list of technology partners and the new products in these new high-growth markets like green energy and power management, et cetera, so. And we've done it, obviously, you know, a lot of this business turned to green energy in the past two and a half years, you know, that's $40 million, right, a year or so. That alone subsidized a lot of it. But the downturn the past year has been so severe, just like the upturn was so severe in a positive way in 2023, 2022, just couldn't make up all of it. And that's why you're seeing flat to down in overall sales.
spk24: Thank you. At this time, I would now like to turn the conference back over to Ed Richardson for closing remarks.
spk26: Well, thank you again for joining us today. We appreciate your investment and interest in Richardson Electronics. We look forward to our ongoing discussions and sharing our fiscal 2024 with you in July. please don't hesitate to give us a call at any time. We're happy to talk to you directly if you wanna set up an appointment. Thanks very much.
spk24: This concludes today's conference call. Thank you for participating. You may now disconnect. you Thank you. Thank you.
spk21: Thank you.
spk24: 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.
spk23: Please go ahead.
spk26: 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 Dedele, 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 percent sequentially, reflecting improving business conditions. Stronger demand for our Ultra 3000 from new and existing wind customers drove higher GES green energy solution sales. The 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.
spk11: 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% in the prior year's first nine months. The company reported net income of $0.2 million or $0.01 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.
spk13: Thank you, Bob, and good morning, everyone. We are pleased to share that in fiscal 2024 third quarter, we experienced strong quarter-over-quarter sequential growth and slight year-over-year growth for our Green Energy Solutions Group, or GES. GES sales were up 342% sequentially from $2.6 million to $11.5 million. In addition, our GES book to bill is 1.07 for the third quarter, with the addition of new customers, new products, and new technology partners. As we implement our GES growth strategy, and until our new products are mature, we are seeing fluctuations from quarter to quarter in terms of sales. The team continues to do a great job identifying customer requirements, establishing design and manufacturing capabilities, and launching beta site testing. In a short amount of time, we have designed numerous products, received several patents, and developed a growing list of key customers. All this will help develop a more predictable quarterly revenue stream. As a reminder, GE has benefited from several large projects last fiscal year, including electric locomotive development and large-scale rollout of pitch energy modules to the replacement of lead-acid batteries with our major owner-operators of GE wind turbines, such as Nextera, Enel, and InverEnergy. we remain confident that our market share continues to expand. Our customers repeatedly tell us we have maintained our market share for our core GES applications, identified new opportunities, and the slowdown in revenue in Q1 and Q2 was purely a timing issue. In fact, our customer pipeline and number of opportunities continue to increase as we take advantage of significant energy transformation projects globally. Our combined GES and PMT backlog remains strong at over 98 million. Given our inventory position, we believe we will continue to ship many incoming orders from stock as we were able to do in Q3. This resulted in significant inventory reduction, which we expect will convert into cash in the coming quarters as receivables are collected. We remain focused on managing our business to support our customers' needs when they are ready. So with that, let's look at the third quarter performance for both GES and PMT groups in more detail. GES sales were $11.5 million in the quarter, up from $11.4 million in the prior year's third quarter, and up over 342% from the prior quarter, driven by a larger customer base, mainly for the Altra 3000, as well as increased in new product revenue from designs with our component technology partners. We continue to grow market share with the customers needing our niche, power management-focused, patent green energy products. Beginning in Q3 FY24, we saw an increase in the budget for individual site rollouts for our wind customers. With over 53 million shipped programmed to date, we are excited to see this and expect to see positive trends continue in Q4 FY24. We also continue to beta test our patent-pending Altra UPS 3000, which replaces lead-acid batteries in the UPS system at the base or down tower of the wind turbine. The Altra UPS3000 will be used by other owner-operators of GE and Siemens wind turbines. Tests are going well, and we have led to important improvements in the product. We anticipate generating production revenue from the Altra UPS3000 product line in late September 2024 as beta testing is completed with our customers. We're also testing the Altra PEM3000, or multi-brand products, which serve the same function as the Altra 3000, but in different mechanical designs with other wind turbine platforms such as SSB, Suzlan, Senvion, and Nordex, expanding our market outside of North America. One major program I mentioned in Q2 for the UltraPEM 3000 is beta testing with Suzlan on both an OEM and replacement basis. The replacement opportunity is for more than 7,000 turbines in India alone, with several thousand more in North America and Europe. We expect to ship production orders for the Suzlan program starting in late October 2024. The Ultrapem 3000 is also in final testing with several owner-operators in Latin America and North America, which manage Suzlan SSB pitch systems. We'll be rolling out four new versions of Sendian, Suzlan, Nordex, and SSB in Europe at the Clean Energy Show in Hamburg, Germany in September 2024. In the EV locomotive segment, due to supply chain issues for piece parts for our suppliers, and design changes, our prototype superstructure builds for Long Island Railroad and BNSF electric locomotives will now be completed this quarter and into Q1 of next fiscal year. We anticipate production units will begin shipping in the third and fourth quarters of calendar 2024. We have beta orders for our patented UltraGen 3000 starter module with two large diesel and EV locomotive manufacturers. It is important to note that we are exclusive to both of these manufacturers. If all continues as planned, we anticipate production orders will begin in late July 2024. In summary, last quarter we anticipated sequential revenue growth in Q3 and Q4 with NRGES Business Unit, driven by new products, customers, and technology suppliers, and supported by the forecast and backlog from our project-based customers. We saw that large increase in sales over Q2 and year-over-year growth in Q3. We're expecting quarter-over-quarter growth again in Q4. I want to stress that despite the slow growth in the first six months of the fiscal year, we did not lose any market share. In fact, we continue to increase our market share with new products, new applications, and new customers. Turning to Powered Microwave Technologies Group, or PMT, which includes the Electron Device Group, or EDG, and our Legacy II business, and the Powered Microwave Group, or PMG, our Powered Microwave Components Group, Sales decreased 33% from 46.8 million to 31.2 million. This decline was primarily due to the slowdown in our semiconductor wafer fabrication equipment business. The decline in the semiconductor wafer fab business was slightly offset by growth in the RF and microwave power components group. We expect to see quarter-over-quarter growth for our semiconductor wafer fabrication equipment business in Q4 FY24 based on customer feedback and market predictions and with a book to bill of over 1.14 for PMT overall coming out of Q3. Our engineering solution strategy is led by our global technology partners. In Q3, we continue to add technology partners who fill technology gaps in our offering and support our growth, including Wolf Speed, Ideal Power, and MCI components. Often through these partnerships, we identify opportunities for new products that we design and manufacture in-house. This increases the value we provide customers and allows us to capture more revenue while expanding and diversifying our customer base. In April, we are excited to be expanding our RF and microwave portfolio with additional full-speed Cree semiconductors through our global relationship with Macom. These long-term supplier relationships are extremely strong. And when appropriate, we work with them on strategic long-term purchases to maintain proper levels of supply. We negotiate special terms, stock adjustment privileges, and shipping schedules to help improve cash flow. In addition, having inventory on hand allows us to capture and maintain market share. We collaborate with our customers and suppliers and leverage our customers' forecasts to help us strategically invest in inventory and ensure we can meet our customers' needs. Our growing customer base and strong relationships with these customers help us develop new products and opportunities. We will continue to invest in our infrastructure to support our growth. We are bringing on talented design and field engineers and making investments to enhance our manufacturing capabilities. Our growing in-house design engineering and manufacturing teams are doing a great job supporting the increased demand for current and new product designs. With this team, we'll continue to identify, develop, and introduce new product and technologies for green energy and other power management and microwave applications. I cannot stress enough the value Richardson Electronics model brings to our customers and suppliers. Our unparalleled capability and global go-to-market strategy are unique to the power energy and 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 as they arise. The execution of our strategy has never been better. There's no question our customers and technology partners mean Richardson's products and support more than ever. And with that, I'll turn it over to Wendy Dedell to discuss Richardson Healthcare.
spk27: Thanks, Greg. Good morning, everyone. Third quarter sales for the healthcare division were 3.1 million, an improvement of 29.6% compared to the third quarter of last year, and a slight increase over the second quarter. CT tube and part sales were up versus the prior year's third quarter, while system sales were down, primarily due to the timing of cash receipts from our customers in Latin America. In the quarter, we again benefited from sales of our repaired Siemens Stratton Z tubes. Healthcare's gross margin in the quarter improved to 41.6% compared to 14.8% in our most recent second quarter. Gross margin in the same period last fiscal year was 39.8%. The gross margin improvement was primarily due to a favorable product mix, including higher parts and Siemens tube sales. We also realized the benefit of restructuring done at the end of the second quarter and reallocation of resources focused on the Siemens repaired tube program. We continue to make excellent progress with the Siemens program. 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. Strat and Z sales are starting to ramp up as we have a steadier flow of production and can expand our customer base. The repaired MX series tubes are performing well in beta and life tests. While we may be able to sell a small number of repaired tubes in the next two quarters, we anticipate the full release of the MX series later this summer when we're able to replace critical components. We continue to closely monitor healthcare's financial performance with the goal of achieving a break-even point in the fourth quarter With limited sales of the repaired Siemens series, this will remain challenging, but we are taking the right steps to balance our investments with other opportunities in the company. I will now turn the call over to Jens Rupert to discuss the results of Canvas.
spk04: Thanks, Wendy, and good morning, everyone. Canvas engineers, manufacturers, and sales custom displays to original equipment manufacturers across global industrial and medical markets. Canvas sales for the third quarter of fiscal 2024 reflect certain customer pushouts primarily in North America. As a result, sales were 6.6 million for the third quarter compared to a very strong quarter last year with sales of 9.7 million. One area I'd like to highlight is our 46.2 million backlog. As you can see, our backlog remains robust, providing us with strong foundation for future revenue growth. This backlog not only demonstrates the confidence of our clients have in our products and services, but also reflect our ability to secure long-term contracts in a competitive market environment. Another notable highlight from the third quarter fiscal 2024 is the improvement in our cross margin. We are pleased to report that our cross margin as percentage of net sales increased to 34.4% compared to 32.0% during the same period last year. This improvement underscores our relentless focus on operational excellence and cost management. Through strategic initiatives and operational enhancements, we've been able to enhance our efficiency and optimize our cost structure, resulting in improved margin. During the quarter, we received several new orders from both existing and first-time medical OEM customers. Some of these applications include patient monitoring, colposcopy, surgical navigation, superpulsed laser systems, and robotic-assisted surgery. These applications underscore our commitment to providing innovative solutions that meet the evolving needs of our customers in the medical sector. Furthermore, they highlight our ability to establish and cultivate long-term relationships with both existing and new clients, positioning us for sustaining growth in these key market segments. In the non-medical space, our products are used in a variety of commercial and industrial applications. This includes displays used in the public consultation space, such as train driver consoles and passenger information monitors, air traffic control, HMI or human machine interface applications for surface inspection machines, and teleprompting and talent monitors and clocks used in the broadcast market. As we navigate through the dynamic market environment, it's important to acknowledge that some of our customers have exhibited a cautious approach due to prevailing uncertainties. However, despite this caution, we remain optimistic about the recovery of demand in the coming quarters. We've observed promising indicators and anticipate a gradual rebound as market conditions stabilize. Our ongoing dialogue with customers supports our confidence in the potential recovery ahead. One of the key drivers for optimism is increased business stemming from new design wins. These wins underscore the recognition and acceptance of our products and solutions in the market. Our engineering teams have been diligently engaged, demonstrating a high level of activity and commitment to our strategic objectives. Despite the challenges posed by external factors, our engineering team have remained focused on innovation and product development, laying the groundwork for future growth opportunities. We've strategically positioned ourselves to capitalize on emerging opportunities, and these design wins validate the effectiveness of our approach. As we continue to leverage these wins, further penetrating target markets, we're participating a positive impact on our revenue growth and market share. 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 will focus on executing our strategic initiatives to try sustainable growth and create long-term value for our shareholders. I will now turn the call back over to Ed.
spk26: Thanks, Jens. I know customer push-outs have been a source of frustration for you and your team, but with strong backlog and recent wins, we're confident that the business will improve sequentially. Despite handwinds from economic conditions, higher interest rates, and a lagging economy in China, we maintain our optimism and remain committed to our long-term growth strategies. We continue to pursue significant projects and develop new engineered solutions that take advantage of opportunities created by recent government stimulus programs and global energy transition trends. We believe we're well positioned to capitalize on large, rapidly growing global markets. This is exactly why we maintain a strong balance sheet with access to additional sources of capital if necessary to fund this growth. We're convinced our ever-expanding product roadmap for green energy solutions to large global customers will be crucial as a part of our revenue growth going forward. The solutions we offer not only help achieve lower carbon emission goals, but they also create cost savings for our growing customer base. In the wind market, for example, lead-acid batteries must be replaced every one or two years. Our ultra-capacitor 3000 has a life expectancy of more than 10 years. Wind turbine operators may never have to replace ultra-3000 before replacing the wind turbine. This saves customers labor costs as well as ensures greater uptime resulting in more power generated. International growth opportunities as well as Expansion to other wind turbine brands within the U.S. provides more evidence that demand for ultracapacitor modules are there and growing. Last quarter, we referred to opportunities created by the Inflation Reduction Act of 2022, such as the 100-kilowatt generators to power pilot reactors to make crystalline diamond materials for high-tech applications. In this quarter, we'll ship the first generator. These generators are over $100,000 apiece. We expect this will be the first of many of the demands for large chips used in many applications such as AI and electric vehicles. This will also have a positive impact on the demand for semiconductor wafer fab equipment. Electric vehicle rail is still in its infancy, but states like California are mandating that the transition from diesel locomotives So while this may be rolling out slower than we originally anticipated, the opportunity remains significant. Other applications, like mining, are outside the United States, and the emphasis on alternative green solutions remains a top priority. We're working closely with customers' engineering teams that are an integral player in their supply chain. I want to stress again that our customers, products, and opportunities are growing. None of these projects or programs we've discussed have been lost or canceled. Our balance sheet remains strong with nearly $19 million in cash and no debt. We're working hard to improve our working capital position and convert inventory to cash. Our approach will remain focused on maintaining healthy cash position and a strong balance sheet while we focus on improving profitability and producing positive operating cash flow in FY25. Overall, we remain extremely excited by the direction we're headed in and the global opportunities we're pursuing to create value for our shareholders. At this time, we'll be happy to answer your questions.
spk24: 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. As a reminder, to ask a question, please press star 1-1 on your telephone and wait for your name to be announced. To withdraw your question, please press star 1-1 again. Please stand by while we compile the Q&A roster. The first question is from Anja Soderstrom from Sudoti. Your line is now open.
spk17: Good morning, Anja. Hi, Adam. Good morning. It's nice to see that sequential jump in the quarter. Was it a specific large project or was it several different projects that drove that GS business increase?
spk13: Yeah, it's actually a great increase in the customer base. A major portion of the increase was the Ultra 3000 business. Just for an example, last year we had five, six customers. This past quarter, We shipped to over 12 new customers for this product. As it becomes market accepted, the word gets out, people are doing it, the budget's got approved. And we said from the very beginning that Q1 and Q2, they're putting their capital at CapEx together and that those two would be slow and we'd see an increase in Q3 and Q4. And that was exactly what happened. They got their CapEx approved for 2024 and they started placing orders and We had built up a stock to support that based on the forecast, and we were able to ship from stock. So it was actually an increase in the number of customers, and the largest increase in terms of a product was the Altra 3000.
spk17: Okay, and that's the one you had a press release out in March, right, that you completed at phase one of the shipping 50,000 modules?
spk13: Exactly, yeah. They looked at it, and they review it, and everything's in phases. And according to them, you know, their phase one CapEx approvals, and that generated about 53,000, and we started seeing phase two and Q3 start up. So that was another reason.
spk17: And what do you think we can expect from the phase two? Is that going to be the same magnitude, or could it be an expansion since you have more customers now?
spk13: It'll be that and a little bit higher based on the forecast from these customers. Again, we started with, in a good way, the four largest owner-operators of GE wind turbines. The balance are the smaller group, but if you add them all together, it could be about the same amount. So we're expecting that plus for phase two.
spk17: Okay, thank you. And in terms of you're expecting the sequential growth to increase, Continue in the fourth quarter. What gives you confidence in that? What kind of visibility do you have?
spk13: We're very confident about it based on the deliveries and the backlog and the inventory we have to ship to that. And so far, like we saw in Q3, the customer base, you know, are meeting their forecast, which is surprising because people can't forecast very well. No one can. So it's mainly based on our book to bill being over one. the backlog and the schedule for that backlog, and the fact that we have inventory to support it going forward.
spk17: Okay. I'm going to squeeze one more in here about the inventory. So that was a nice work done, but now when you expect the growth to continue, should we expect inventory to continue to decline in dollar amounts, or should it be staying flat, or even increase maybe in the coming quarter risks?
spk13: I'll touch on GES. We expect sales to increase and inventory to go down specific to the GES and let the other SBU people.
spk27: Yeah, I would just add to that, Anya, that we do have the entire management team focused on it. While we wouldn't go so far as to say it's absolutely going to decrease, that is everybody's intent is to make that happen. So we're all on board. We're pushing out where we can. We're cutting back where we can. and trying to negotiate different arrangements with certain suppliers.
spk17: Okay, thank you. I want to be respectful to that or send a call, so I'll get back in queue. Thank you.
spk23: Thanks, Anya. Thank you. One moment for our next question.
spk24: Our next question comes from the line of Ross Taylor from ARS Investment Partners.
spk07: Hello. Ed, team, congratulations on a strong operating performance in the quarter. It's nice to see you back in the green profitability-wise. Thank you. Ed, you indicated on this call that you think that we basically are at the nadir for the semi-cap equipment business, and that's been a major driver to the drop in profitability. You've also indicated that you expect calendar, your customers expect calendar 25 to be a record year for them in that area. So would I be right to assume you think that calendar 25, those 12 months should be producing a record level of revenues for you guys?
spk26: Yes, I mean, we're listening on a regular basis to LAM Research, who's our largest customer, but we also sell to Tokyo Electron and Applied Materials and a number of other customers in that space. And they're all telling us that in 2025, the semi-waper fab business will be higher than ever. As you know, last year we did $40 million in that space at a very nice margin, and this year it's less than $20 million. Uh, so if you can count on it being over 40 next year, it should be a record year.
spk07: And should you be able to do, uh, same kind of margins or better that you saw back a year ago?
spk26: Yes. I mean, we're proprietary and a lot of those products, so our margins are very good.
spk07: Yeah. Historically, there's been kind of almost like a one to one type sell through it appears, um, or correlation. Also, you indicated on this call and you've indicated previously that the green energy business is looking at a tremendous number of opportunities that come on over the next 12 to 18 months. So I would assume you would think that you guys think that the green business should be able to produce a record level of performance as well as, let's say, looking at the 12 months, the calendar 25? Yeah.
spk26: Well, we've seen a lot of push-outs in that space. You know, we think that, you know, it's a matter of when, not if. There's certainly a tremendous opportunity in all kinds of areas, not only the ultracapacitors or wind turbines, but especially with the electric locomotives and the battery starts for diesel locomotives.
spk19: But it seems as if it's rolling out much slower than we anticipated.
spk23: Thank you. One moment for our next question.
spk24: Our next question comes from the line of Barry Mendel from Mendel Money Management.
spk16: Yeah, I remember. Hi, guys. I'm Wendy. I remember about a year ago you discussed Progress Rail and thought that maybe it could be your biggest customer going forward. But we haven't heard much about them. So what is going on with Progress Rail?
spk13: Well, the main thing going on currently at Progress Rail, we've met all the commitments for their initial orders for the prototypes, both in North America and Brazil. Their end customers, as I think you know, are in Australia and then Long Island Railroad in Burlington, Northern. So we've built the product. We shipped it to them. They're now building up the entire train and then working with their customers through a long design-in phase. However, I think in FY25, The two main programs we have going in the locomotives market are the two starter modules that we make for the two largest owner-operators of diesel locomotives. We just got a release for 25 trains. That product is designed and developed here in La Fox. So, for example, one of the owner-manufacturers of diesel locomotives, there's 25,000 trains that this product will go into over time. So if I look at FY25, we look at potentially in the fourth quarter, their end customers will start buying electric trains. But in the meantime, we've continued to identify other opportunities in the locomotive space. And in this case, it's the starter modules that we have designed for them.
spk15: So you're saying you can start shipping up in your fiscal fourth quarter?
spk13: The actual orders for the diesel locomotives that we've already shipped to our battery modules and our superstructures in our fourth quarter of FY25, yes. But going forward, we have a release starting in Q1 for our starter modules that we've designed and developed for their diesel locomotives. Obviously, the other stuff is for their electric locomotives. So we have a great relationship with them. We're finding new opportunities for them. There's some IGBT modules that we're looking at designing for them. So, yeah, there's no question. Once the electric locomotive business is accepted by their end customers and they start placing orders for those, I think you're aware of the large dollar amount content we have in those trains, that progress, those two manufacturers will be our largest customers.
spk24: As a reminder, to ask a question, please press star 1-1 on your telephone and wait for your name to be announced. To withdraw your question, please press star 1-1 again. Our next question comes from the line of Chip Rui from Rui Asset Management.
spk09: Good morning, Wendy, and thanks for taking the call. Focusing on the balance sheet a little bit, the inventories at 112.6 million combined with the cash look rock solid to me compared to the market value of the company. And given that, I wonder if you could talk a little bit about the quality of the inventory, the ability to deliver, if there's any aging issues, anything that would prevent that inventory being delivered kind of, you know, at cost on the balance sheet and, of course, better than that. And I think, you know, as of last quarter, you in the queue, it was 99 million of finished good inventories. Just wondering if you could let us know the finished good inventories percentage of inventories as you talk about, you know, really what's there on the shelf and is what on the shelf going to get taken into kind of as is versus needs to be modified or other things like that.
spk11: Hi, Chip. This is Bob Ben. We feel very good about the quality of our inventory. As you noted, we have a total of about $113 million. And right now, we have about a $5 million total reserve on that, which is reviewed every quarter. We review, just so you understand, we review every product in our inventory once a year. And some more than that it might note that also that also gets reviewed by our auditors. So overall we feel very good I'm looking for the exact amount of finished goods, but as you would expect almost or most of that is finished goods And the highest amount would be in the electron device group specifically our core to business as well as Products that we have for our canvas division and in our healthcare division. And certainly, as Greg noted, our GES segment has about 15 million of inventory right now. And again, I'm sorry, I don't have it at my fingertips. We'll have it in our 10Q later today. But we do break out in the footnotes the finished goods amount. Let's see. Yeah, I just don't have that handy, but did I answer your question or did you have more specific questions on that?
spk23: Thank you. One moment for our next question.
spk24: Our next question comes from the line of Ross Taylor from ARS Investment Partners.
spk07: I have to be careful how I phrase this since we got a very severe disciplinarian on the questions. What I wanted to get at, and I think the prior questioner started to get to this, is you have a company or stock that's selling basically about a dollar above net net working capital. You're selling under book value. You have no debt on the balance sheet. You've talked on this call about monetizing inventories. You said the inventories are money good and are mostly finished goods. which means they're basically stored profitability that's sitting there, and they also reflect effectively an overstated cost impact. Looking at all of that, and at the advice of Warren Buffett, who tells people that you are supposed to buy when others are fearful, why has this company not been really aggressive in buying back its own stock? Not only are you not aggressive, you're not even buying it back. And it baffles me because I hear you talk about next year calendar year being what should be a record year. Your prior year was over $1.50. There were some one-time items in that, but let's call it $1.40. You're trading at $10 in here, $10, which is less than what the book value is. And I have to believe you think this company is worth more than book value. So what is keeping you I mean, you've got a long history. Your bankers have to believe that your money good. They've known you for a long time. If they don't, then get better bankers. Why aren't you putting a little debt on the balance sheet and taking advantage of this severe dislocation in front of what should be a rocket ship in 25?
spk26: Well, we talk about it every board meeting, the possibility of buying stock back. Right now, as we mentioned, we're really pushing trying to keep positive cash. and reduce the inventory to do that. And, you know, once we get to a position where cash flow positive, we'll certainly look at the possibility of buying stock. To give you some idea, when we sold our FPD in 2011, we bought $65 million worth of stock back. And every time we bought the stock back, the price of the stock would go down. So the investment people were looking at the value of the company on cash only. And all we achieved was to drive the price of the stock down. So, you know, we don't have a very good experience on buying stock back.
spk07: I hate to tell you, but I think it was Edison made that famous quote about how many times he failed inventing the light bulb, and he kept trying. I mean, the idea that it didn't work in the past, to me, I mean, just honestly, if you hear a sudden thud, it's me banging my head on the desk. The fact that it didn't work, you're not that business. You have a much more You have a broader base of business. You have a lot more growth opportunities. If your board can't see that you're a different company today than you were then, and if you can't yourself see it, then we need a different board. We need a board who actually has some vision and has a little bit of courage. I mean, I think we brought Warren Buffett into one of your board meetings. He would lecture you guys on how you're literally letting a golden opportunity go by. And what happened in the past is, That's the type of thing that doesn't advance progress. That stifles it, Ed. And I've talked to you. We know each other. You're a very bright man. You know better than to think that something that happened in the past under a different collection of holders in a different business environment with a different company is an effective measure of what you are today and what you should be doing today. Right?
spk19: Well, we certainly appreciate your opinion.
spk23: Thank you. One moment for our next question. Our next question comes from the line of Joseph Nerges from Segrin Investments.
spk14: Good morning. Thank you for taking my question. I was very interested in a press release from last month when you signed that global distribution agreement with Ideal Power. And I guess my key question here is, do we have any plans to develop proprietary products around their bidirectional technology?
spk13: Absolutely. We have two calls a month specific to that. And that really fits right into the model that we built here when I came back. technology partners who have some disruptive technology that is focused on our two key markets, which is power management and RF. And Ideal Power does fit all that. They have disruptive technology. It's unique. We're exclusive. We're global. And we're already talking to them about a couple of their products for one of our designs that we're looking at. So absolutely, they'll be both designing in their components into our suppliers. A lot of our battery manufacturers could use this technology for their modules, obviously into our customers, and then to use it internally for our engineered solutions. And there's a couple of products that we're working on right now that I can't announce by any means at this point, but we'll absolutely be using ideal power for that. And they've been great. We have a great engineering relationship already. um that is exactly what we do um when we when you see a press release with a company like this that has a disruptive technology it's threefold it's to design it into our competitors i mean our suppliers design it into our our customers and then also use it for our engineered solutions opportunities as they come to fruition well again it's great i mean the applications uh on their technology seem to be
spk14: very widespread and I'm I'm thinking of we have a UPS product that we also UPS 3000 that year and I'm just wondering can we enter against these are some pretty big competitors in these markets but do you think we can successfully enter let's say the data center market with a UPS product or something similar to that because yes
spk13: Yeah, the UPS product and that technology can be used in so many applications. I will tell you, it is a major, major program. It's an inverter application for one of our key customers that we will be using Ideal Power for. And again, it's a new relationship. It's a few months, but although we've talked to them and we know the people there, it's a small and incestuous market. So I've worked with many of the people that are there in other capacities over the years. But the answer to your question is yes, and specifically there is one right now that's a major program. It's for an inverter application, an inverter module, that this will be the product that we're using. And we think with their technology, it'll separate the spec sheet from anything that's out there today. So, yeah, we're excited about it. And also all of our technology partners. That's the process we go through.
spk14: Well, I look forward to seeing what you guys come up with in the next several months. Thank you. Thanks again for answering the question.
spk24: Thank you. One moment for our next question. Our next question comes from the line of Barry Mendel from Mendel Money Management.
spk16: Yeah, a follow-up on the progress rail and Bob Tech. What's the ASP on the starter modules?
spk13: Yeah, we have NDAs with them. I can't share our cost or our resales to those applications or even those type of customers. Too many competitors out there listening.
spk16: Okay. And in terms of ideal power, how do you How important could that be for you? Is there any dollar amount you could put on there? And isn't it somewhat of a distribution agreement as well?
spk13: Yeah, it's both. It's all based on the number of new products they introduce. Right now, their portfolio is very limited. They are developing a module, and they have a couple of discrete devices. But if you just look at the markets that they go into, it's millions of dollars. know i've had a lot of experience uh with technology partners and this this type of go-to-market strategy and um you know if one of these programs that we're doing from an engineer solutions point of view it's millions right uh from a discrete point of view it's peer um mpi process you know new product introduction process with our global capabilities where i feel the best in the world of bringing technology companies to get them to market as they invest in technology and we have the infrastructure to bring it to market. But it's millions of dollars. I can't come up with a number, but I've seen companies like this that we started with that became Corvo and we know how big they are. So sky's the limit, but The thing that excites us about this is the markets that they're developing product for are growth markets. I know it's inverters and industrial, but it's great for these green energy as people need to reduce the input on their emissions. So I can't put a dollar amount on it, but it's millions of dollars. It could be one product that we design internally or one major – know electric start uh vehicle charging station that that we end up designing their product into yeah i know i talked to them yesterday actually and they they spoke highly of what you're doing for them already yeah we uh like i mentioned before you know we i don't have a lot of attributes one of them's never been patients and uh day one we uh we we trained the global uh field sales engineers we trained our design engineers uh and we immediately within 24 hours um have their product in front of customers. One of the things I'll just add on the call, which is unique to us, and so I want to say it, every one of our customers we can assign application codes to, so up to five. And so when a customer like Ideal Power comes out with a new product for a specific application, our global field sales engineers can sort their entire customer base and identify anyone who's ever built an inverter or electric charging station. And that product and those samples and those sales tools get to that customer within, I always say, within 24 hours. So, yeah, we're excited about Ideal Power. And again, like I mentioned before, we know the people there because it's a small and accessious market. So, great. Thanks.
spk19: You bet.
spk24: Thank you. One moment for our next question. Our next question comes from the line of David Schneider.
spk08: Hi. Hi, guys. First of all, I wanted to give an A-plus to Ross Taylor. And he hit the nail right on the head, but actually left out a few things. But there's no need to go over that territory again. I'm wondering, you know, the stock has, over the past years, You've gone up and down because of the cyclicality, the semiconductor cap equipment business. Is it possible that things like the relationship with Ideal Power can smooth some of that out? And your company is being valued as literally a no-growth company at this point. Could the new product applications from Ideal Power change the trajectory and maybe the perception of your company so that maybe you could become valued as a growth company again?
spk13: I think that the model that we have with Ideal Power and the list of other technology partners. And you've seen, obviously, as this business has developed, press releases on the people we're signing. I think as they apply to engineered solutions, and you've heard about all the engineered solutions opportunities, and I think, as I mentioned, before the, in the call, you know, reducing new products, SUSELON, Nordic, Sembian, SSB, but all that together, absolutely, it will subsidize the, you know, rollercoaster ride that the semiconductor manufacturing equipment industry has had for 20 years. We know it's coming. Some are higher than others, but that's kind of the goal a little bit. that we're doing this for the profitability and growth in the stock price of the company, but it does help subsidize the rollercoaster ride that we've all experienced for 20, 30 years of the semiconductor wafer fab market. So, yes, IDEA will be part of that, but that's the whole list of technology partners and the new products in these new high-growth markets like green energy and power management, et cetera, so. And we've done it, obviously, you know, a lot of this business turned to green energy in the past two and a half years, you know, that's $40 million, right, a year or so. That alone subsidized a lot of it. But the downturn the past year has been so severe, just like the upturn was so severe in a positive way in 2023, 2022, just couldn't make up all of it. And that's why you're seeing flat to down in overall sales.
spk24: Thank you. At this time, I would now like to turn the conference back over to Ed Richardson for closing remarks.
spk26: Well, thank you again for joining us today. We appreciate your investment and interest in Richardson Electronics. We look forward to our ongoing discussions and sharing our fiscal 2024 with you in July. Please don't hesitate to give us a call at any time. We're happy to talk to you directly if you want to set up an appointment. Thanks very much.
spk24: This concludes today's conference call. Thank you for participating. You may now disconnect.
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