Richardson Electronics, Ltd.

Good day, and thank you for standing by. Welcome to the Richardson's Electronics Earnings Call for the third quarter of fiscal year 2025. 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 this session, you will need to press star 11 on your telephone. You will then hear an automated message advising you 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, CEO. Please go ahead, sir.

Good morning, and thank you all for joining Richardson Electronics conference call for the third quarter of fiscal year 2025. Joining me today are Bob Benn, Chief Financial Officer, Wendy Dedell, Chief Operating Officer, Greg Peliquin, General Manager of our Power and Microwave Technologies Group, which includes Green Energy Solutions, and Jens Rupert, General Manager of Canvas. Today's comments include GAAP and non-GAAP financial results. A detailed reconciliation between GAAP and non-GAAP results can be found in the press release. As a reminder, this call is being recorded and will be available for playback. I'd also like to remind you that we'll be making forward-looking statements. They're based on current expectations and involve risks and uncertainties. Therefore, our actual results could be materially different. Please refer to our press release and FCC filings for an explanation of our risk factors. During the third quarter, we saw significant growth across key segments. Our semiconductor wafer fab sales surged by 139 percent, while canvas sales increased 39.5 percent. We achieved positive operating cash flow for the fourth consecutive quarter, ending with no debt and $36.7 million in cash and equivalents. While this was helped by $8.2 million from the healthcare asset sale in Q3 FY25, the company also generated cash from its ongoing business. We believe our strong balance sheet is an important competitive advantage with our customers and supports our long-term strategies. Despite the one-time $4.9 million healthcare charge representing the loss on the sale of assets, we're encouraged by our fiscal Q3 2025 results. Excluding the charge, our non-GAAP operating profit for the quarter rose to $2.2 million. up from 1 million last year. This sale marks the initial step in our strategic focus on our core businesses, particularly on green energy solution segments. The current operating environment is extremely fluid and impacting our business in different ways. Greg Jens and Wendy will provide additional details in their prepared remarks on our near and long-term expectations for our markets. Overall, we believe Richards Electronics is well positioned to capitalize on current policies intended to drive manufacturing back to the U.S. and to increase the need for U.S. content. With our global infrastructure and strong vendor partnerships, we're prepared for supply chain readjustments and will benefit from the larger policy environment. Before we discuss the sale of our healthcare business and our go-forward strategy, I'll turn the call over to Bob Ben, our Chief Financial Officer, who will provide a detailed review of our third quarter financial results and capital position. Following Bob's remarks, Greg and Jens will provide updates on our business unit performance, and then Wendy will follow up with more details on the healthcare divestiture and our future.

Thank you, Ed, and good morning. I will review our financial results for our third quarter and first nine months of fiscal year 2025, followed by a review of our cash position. In addition, please note that I will be discussing non-GAAP financial measures. A reconciliation of non-GAAP items to the comparable GAAP measures is available in our third quarter fiscal year 2025 press release that was issued yesterday. Consolidated net sales for the third quarter fiscal 2025 increased 2.7% to 53.8 million, compared to net sales of 52.4 million in the prior year's third quarter. This was our third consecutive quarterly year-over-year increase in sales. Third quarter net sales growth was led by a 39.5% increase in sales for our Canvas business unit, and a 6.6% increase in PMT sales, which was due to higher sales to semiconductor wafer-fab customers. Sales growth for the third quarter of fiscal 2025 was partially offset by a $1.0 million decrease in healthcare sales from lower net sales in February 2025 after the sale of the majority of healthcare assets. In addition, there was a $2.2 million decline in GES sales, reflecting lower sales of wind turbine battery modules, which are project-based and can vary by quarter. Consolidated gross margin for the third quarter was 31.0% of net sales, compared to 29.5% during the third quarter fiscal 2024. The largest component of the 150 basis point increase in consolidated gross margin was due to margin expansion in both PMT and GES. PMT's gross margin increased to 30.8% from 28.3% as a result of an improved product mix. GES gross margin increased to 32.8% from 26.6%, also due to product mix. Partially offsetting these improvements in gross margin was lower gross margin for both Canvas and healthcare compared to the prior year's third quarter. Operating expenses as a percentage of net sales improved to 26.9% for the third quarter of fiscal 2025 compared to 27.6% in the third quarter of fiscal 2024. Loss on disposal of assets of $4.9 million resulted from the sale of the majority of healthcare assets to DirectMed Imaging on January 24, 2025. Included in the loss was $1.4 million in excess components that are not needed once the exclusive supply agreement for manufacturing Alta tubes is completed. $1.1 million for intangible assets from the IMES purchase that are no longer needed. a $1.2 million margin loss on sales of ALTA tubes as detailed under the exclusive supply agreement, a $0.5 million write-down of ALTA-related fixed assets that will no longer be needed after the exclusive supply agreement ends, and $0.7 million in other directly related costs. In future periods, health care's financial results will no longer be a standalone segment and will be consolidated into the company's PMT business unit. Operating loss was $2.7 million and non-GAAP operating income was $2.2 million for the third quarter of fiscal 2025 compared to an operating income of $1.0 million in the prior year's third quarter. Net loss was $2.1 million and non-GAAP net income was $1.6 million for the third quarter of fiscal 2025 compared to a net income of $0.8 million in the third quarter of fiscal 2024. Net loss per common share diluted was 15 cents and non-GAAP earnings per common share diluted were 11 cents in the third quarter of fiscal 2025 compared to earnings per common share diluted of 5 cents in the third quarter of fiscal 2024. EBITDA for the third quarter of fiscal 2025 was a negative 2.1 million. EBITDA after adjusting to exclude the loss on sale of the majority of healthcare assets or adjusted EBITDA was 2.8 million versus 2.1 million in the prior year's third quarter. Turning to a review of the results for the first nine months of fiscal year 2025. Net sales for the first nine months of fiscal year 2025 were $157 million, an increase of 5.3% from $149.1 million in the first nine months of fiscal year 2024, which primarily reflected higher sales in PMT and GES. Gross margin was 30.8% in net sales, which was 50 basis points higher than the first nine months of fiscal year 2024, primarily due to product mix. As a percentage of net sales, operating expenses for the first nine months of the fiscal year were 29.7%, compared to 30.0% for the first nine months of the prior fiscal year. Loss on disposal of assets of 4.9 million resulted from the sale of the majority of healthcare assets to DirectMed Imaging in January 2025. Operating loss was 3.1 million, and non-GAAP operating income was 1.8 million, during the first nine months of fiscal 2025 compared to operating income of $0.5 million during the first nine months of fiscal 2024. Net loss was $2.2 million and non-GAAP net income was $1.4 million for the first nine months of fiscal 2025 versus a net income of $0.2 million during the first nine months of fiscal 2024. Net loss per common share diluted was 16 cents and non-GAAP earnings per common share diluted was 10 cents for the first nine months of fiscal 2025 compared to one cent earnings per common share diluted for the first nine months of fiscal 2024. EBITDA for the first nine months of fiscal 2025 was negative 0.5 million. Adjusted EBITDA was 4.5 million versus 3.5 million in the prior year's first nine months. Moving to a review of our cash position. Cash and cash equivalents at the end of the third quarter fiscal 2025 were $36.7 million and $28.5 million when excluding the sale of healthcare assets compared to $26.6 million at the end of the second quarter fiscal 2025. Cash flow provided from operations was $4.6 million compared to cash flow used in operations of $2.5 million in the prior year's third quarter. This was the fourth consecutive quarter of positive operating cash flow. Capital expenditures of $0.5 million in the third quarter fiscal 2025 were primarily related to our facilities and IT systems versus $0.4 million in the third quarter fiscal year 2024. As a result, free cash flow was $4.1 million for the third quarter of fiscal 2025. We paid $0.9 million in cash dividends in the third quarter of fiscal year 2025. In addition, based on our current financial position, our Board of Directors declared a regular quarterly cash dividend of $0.06 per common share, which will be paid in the fourth quarter of fiscal 2025. As of the end of the third quarter of fiscal 2025, the company had no outstanding debt on its $30 million revolving line of credit with PNC Bank. And now I will turn the call over to Greg, who will provide more details for our PMT and GES business groups.