Richardson Electronics, Ltd.

Good day, and thank you for standing by. Welcome to the Richardson Electronics earnings call for the third quarter of fiscal year 2026. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you'll need to press star 1-1 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 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, Chairman and Chief Executive Officer. Please go ahead.

Good morning, and thank you all for joining Richardson Electronics conference call for the third quarter of fiscal year 2026. We appreciate your continued support and interest in Richardson Electronics. Joining me today are Bob Benn, Chief Financial Officer, Wendy Dedell, Chief Operating Officer, Greg Peliquin, General Manager of our Power and Microwave Technologies and Green Energy Solutions Group, 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're 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's filings for an explanation of our risk factors. I'm pleased to report that Richardson Electronics has now delivered seven consecutive quarters of year-over-year sales growth. reflecting continued progress in executing our multi-year strategy. Our performance this quarter was led by strong momentum in PMT, particularly in EDG and the semi-fab equipment market. Third quarter sales growth was supported by continued discipline around gross margin and operating expenses. Our performance reflects the strengths of our team as we continue to invest across the organization to build depth, technical expertise, and operating performance. I believe our efforts are positioning Richardson Electronics for sustainable long-term value creation. Looking at our third quarter FY26 results, total sales were $55.5 million, up from $53.8 million in Q3 of last year. while operating income improved to $1.5 million compared with operating loss of $2.7 million in the prior year quarter. Gross margin increased to 31.9%, an increase of 90 basis points over last year. PMT sales increased to $38.7 million, up $3.4 million year over year. Green energy solutions performed in line with expectations, although below the prior year due to the timing of sales, and Canvas remained profitable with a 32.2% gross margin despite softer revenue in North America. It's important to note that this is the final quarter in which our year-over-year comparisons are affected by the sale of much of our healthcare business in Q3 of FY25. That transaction continued to impact our year-over-year sales and profitability comparisons this quarter, but it will no longer impact going forward. We also remain focused on expense discipline, working capital management, and improving inventory turns. We ended Q3 with $29.5 million in cash and cash equivalents. Our order activity remains solid, and total backlog increased to $151.2 million at quarter end, giving us confidence as we move forward into the final quarter of the fiscal year. We also closely are monitoring the developing situation in Iran, the related movement in energy markets, and the involving tariff environment. While these issues are creating real uncertainty for many companies, they've not had a significant impact on our business or markets at this point. We've remained disciplined in how we manage sourcing, inventory, pricing, and customer commitments. We believe that disciplined positions as well as to navigate changing trade environment. Over time, if higher conventional energy prices persist, that could further improve the economic case for certain alternative energy solutions. In any event, we're continuing to invest in and support a number of programs tied to global wind, EV, and other related power management markets. We believe initiatives underway can support attractive long-term growth opportunities for Richardson Electronics. I'll now turn the call over to Bob Benn, our Chief Financial Officer, who will provide a detailed review of our third quarter results and capital positions. Following Bob's remarks, Greg and Jens will provide updates on our business units, and then Wendy will follow up with the progress we're making executing against our multi-year growth strategies.

Thank you, Ed, and good morning. I will review our financial results for our third quarter and first nine months of fiscal year 2026, 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 2026 press release that was issued yesterday after the market closed. Consolidated net sales increased 3.1% to $55.5 million compared to net sales of $53.8 million in the prior year's third quarter. When excluding health care, for which the majority of assets were sold in January 2025, net sales increased by 6.0%. Please note that healthcare results, including prior periods, are consolidated into the PMT segment beginning in fiscal 2026. This was our seventh consecutive quarterly year-over-year increase in sales. Third quarter net sales growth was led by a 9.7% increase in PMT sales, driven by significant increases in semiconductor wafer fab and RF and microwave products. Excluding healthcare, PMT net sales increased by 14.5%. Sales for GES were $0.5 million below the third quarter of fiscal 2025 due to project timing. Canvas sales decreased $1.2 million, which primarily reflected project timing in North America. Consolidated gross margin for the third quarter improved to 31.9% in net sales, compared to 31.0% during the third quarter of fiscal 2025. The 90 basis point increase in consolidated gross margin was due to higher margin in PMT, partially offset by lower margin in GES and Canvas. Operating expenses were $16.2 million compared to $14.5 million in the third quarter of fiscal 2025. The increase in operating expenses resulted from higher salaries and incentives associated with critical ads to staff and in support of our existing employees, as well as related medical benefits and travel expenses. Also, the operating expenses in the third quarter of fiscal 2025 were historically low. Operating income was $1.5 million for the third quarter fiscal 2026 compared to an operating loss of $2.7 million and non-GAAP operating income of $2.2 million in the prior year's third quarter. Net income was $0.9 million for the third quarter fiscal 2026 compared to net loss of $2.1 million and non-GAAP net income of $1.6 million in the third quarter of fiscal 2025. Earnings per common share diluted were $0.07 in the third quarter of fiscal 2026 compared to net loss per common share diluted of $0.15 and non-GAAP earnings per common share diluted of $0.11 in the third quarter of fiscal 2025. EBITDA for the third quarter fiscal 2026 was 2.2 million versus negative 2.1 million in the prior year's third quarter. Adjusted EBITDA was 2.8 million in the third quarter of fiscal 2025. Turning to a review of the results for the first nine months of fiscal year 2026, net sales were 162.4 million, an increase of 3.4% from $157.0 million in the first nine months of fiscal year 2025, which reflected higher sales across our business segments. When excluding healthcare, consolidated net sales increased by 7.2% and PMT net sales increased by 8.2%. Gross margin was 31.2% of net sales, which was a 40 basis point increase from the first nine months of fiscal 2025. As a percentage of net sales, operating expenses for the first nine months of the fiscal year improved to 29.6% from 29.7% for the first nine months of the prior fiscal year. Operating income for the first nine months of fiscal year 2026 was $2.6 million as compared to an operating loss of $3.1 million and non-GAAP operating income of $1.8 million for the first nine months of fiscal year 2025. The company reported net income of 2.7 million or 19 cents per diluted common share for the first nine months of fiscal year 2026 versus a net loss of 2.2 million or 16 cents per diluted common share and non-GAAP net income of 1.4 million or 10 cents per diluted common share for the first nine months of fiscal year 2025. EBITDA for the first nine months of fiscal 2026 was 6.2 million versus negative 0.5 million in the prior year's first nine months. Adjusted EBITDA was 4.5 million in the first nine months of fiscal 2025. Turning to a review of our cash position. Cash and cash equivalents at the end of the third quarter of fiscal 2026 were 29.5 million compared to 33.1 million at the end of the second quarter of fiscal 2026. This use of cash primarily related to higher inventory associated with final buys from a critical supplier. Capital expenditures of $0.8 million in the third quarter of fiscal 2026 were primarily related to our manufacturing business, facilities improvements, and IT systems versus $0.5 million in the third quarter of fiscal 2025. We paid $0.9 million in the third quarter for cash dividends 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 2026. As of the end of the third quarter of fiscal 2026, the company had no outstanding debt on its revolving line of credit with PNC Bank. Now I will turn the call over to Greg, who will provide more details for our PMT and GES business groups.