Richardson Electronics, Ltd.

Good day and welcome to the Richardson Electronics earnings call for the fourth quarter of fiscal year 2026. At this time, all participants are in a listen-only mode. After the speaker presentation, there will be a question and answer session. To ask a question during the session, you will need to press star one one on your telephone. You will then hear an automated message advising your hand has been raised. To withdraw your question, please press star one one again. Please be advised that today's conference is being recorded. It is now my pleasure to introduce CEO and Chairman of the Board, Ed Richardson.

Good morning and thank you all for joining Richardson Electronics conference call for the fourth quarter and full fiscal year of 2026. We appreciate your continued support and interest in Richardson Electronics. Joining me today are Bob Ben, Chief Financial Officer, Wendy Diddell, Chief Operating Officer, Greg Peloquin, General Manager of our Power and Microwave Technologies and Green Energy Solutions Groups, and Jens Ruppert, 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 will be making forward-looking statements. and 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 Richardson Electronics delivered both a strong fourth quarter and finished the fiscal year 2026. While Bob will provide the detailed financial review shortly, I want to begin by highlighting the broader message from the year. We delivered significant year-over-year revenue growth, improved gross margin, and strengthened our operating performance. Those results reflect continued execution of the multi-year strategy we've discussed with you over the past few quarters. Our performance was not driven by a single product line, customer, or end market. We saw strength across all three of our business units from both new and existing customers. Power and microwave technologies continued to benefit from demand in semi-fab equipment, defense, healthcare, and other industrial applications. Green energy solutions continued to advance programs tied to wind, EV, power conversion, and other power management markets. Canvas remained an important and profitable part of the company with customized display solutions serving medical, industrial, and other specialized OEM customers. Importantly, we also made progress in improving the quality of our revenue. We continued to align our strategic focus on pursuing higher value engineered solutions. Repeatable sales opportunities and customer programs where our technical knowledge, application engineering, global sourcing capabilities, and inventory position create real value. A more profitable mix of business together with operating disciplines supported the margin process we achieved during the year. We've also continued to invest in our current and emerging opportunities with green energy solutions and we are now advancing our efforts around battery energy storage. We believe this is a natural extension of our capabilities in power conversion and energy related applications. Customers are looking for ways to manage growing power demand, improve liability, support renewable generation, and reduce exposure to grid constraints and energy cost volatility. We believe Richardson Electronics is well positioned to support those needs over time. The opportunity around battery energy storage is still developing and is strategically important. We're working to build the right supplier relationships, technical capabilities and customer engagement model before scaling the business. We're taking a disciplined approach as we believe the market has attractive long-term potential, particularly as utilities, commercial operators, industrial customers, data centers, and renewable energy developers look for practical solutions to improve power availability and resilience. From an overall market perspective, the global environment remains mixed and we're managing the business accordingly. Tariff uncertainty, geopolitical risks, Inflation and uneven industrial demand continue to create challenges for many companies. At the same time, we believe several long-term demand drivers are positive for Richardson Electronics. Electrification, grid reliability, renewable energy integration, AI and data center power requirements, semiconductor capacity investment, Defense Spending and the need for customized medical and industrial display solutions all align well with the areas we have experienced and technical capability. We remain disciplined in sourcing, pricing, inventory management, customer commitments, and operating expense control. We believe this discipline together with our strong balance sheet and technical sales organization positions us well to navigate uncertainty while continuing to pursue growth opportunities. Our growth in backlog and improved cash flow from operation highlights this disciplined approach and we're taking time to manage the business. The fourth quarter, our results reflected continued positive momentum and a strong close to the year. For the full year, we made meaningful progress against our strategic priorities We believe the company is entering fiscal 2027 with a stronger operating platform, broader customer engagements, and improved visibility in several attractive end markets. I'll now turn the call over to Bob Ben, our Chief Financial Officer, who will provide a detailed review of our fourth quarter and full fiscal year results and capital position. Following Bob's remarks, Greg and Jens will provide updates on our business units and then Wendy will follow with the progress we're making executing against our multi-year strategies.

Thank you, Ed, and good morning. I will review our financial results for our fourth quarter in 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 fourth quarter fiscal year 2026 press release that was issued yesterday after the market closed. Consolidated net sales increased 27.6% to 66.2 million compared to net sales of 51.9 million in the prior year's fourth quarter. This was our eighth consecutive quarterly year-over-year increase in sales, and the highest quarterly net sales since the third quarter of fiscal 2023. The fourth quarter was led by a 28.1% increase in PMT sales driven by strong growth in semiconductor wafer fab and RF and microwave products. Sales for GES were 1.1 million or 20.4% above the fourth quarter of fiscal 2025 as a result of higher sales of wind products. Canvas sales increased 2.8 million or 29.5% reflecting higher sales in North America. Consolidated gross margin for the fourth quarter was 31.2% of net sales compared to 31.6% during the fourth quarter of fiscal 2025. The 40 basis point decrease in consolidated gross margin was due to lower margin in PMT and GES as a result of product mix Partially offset by higher margin in Canvas due to improved freight costs as a percentage of net sales. Operating expenses were $17.6 million compared to $15.6 million in the fourth quarter of fiscal 2025. The increase in operating expenses resulted from higher salaries and incentives driven by the significant sales growth in both the fourth quarter and fiscal year 2026. also included in operating expenses for the fourth quarter fiscal 2026 was a $0.4 million unclaimed property state audit settlement. As a percentage of net sales, operating expenses improved to 26.6% in the fourth quarter fiscal 2026 versus 30.0% in the prior year's fourth quarter. Operating income improved significantly and was $3.9 million and non-GAAP operating income was $3.5 million for the fourth quarter fiscal 2026 compared to an operating income of $0.6 million and non-GAAP operating income of $0.8 million in the prior year's fourth quarter. Net income was $3.7 million and non-GAAP net income was $3.0 million for the fourth quarter fiscal 2026 compared to net income of $1.1 million and non-GAAP net income of $1.8 million for the fourth quarter of fiscal 2025. Earnings per common share diluted were $0.25 and non-GAAP earnings per common share diluted were $0.21 in the fourth quarter of fiscal 2026 compared to earnings per common share diluted of $0.08 and non-GAAP earnings per common share diluted of $0.12 in the fourth quarter of fiscal 2025. EBITDA was $5.0 million in the fourth quarter fiscal 2026 versus $2.9 million in the fourth quarter of fiscal 2025. Adjusted EBITDA was $4.2 million in the fourth quarter of fiscal 2026 versus $3.1 million in the fourth quarter of fiscal 2025. Turning to a review of the results for fiscal year 2026. Net sales were $228.6 million, an increase of 9.4% from $208.9 million in fiscal year 2025, which reflected higher sales across all three of our business segments. The gross margin was 31.2% of net sales which was a 20 basis point increase from fiscal 2025. As a percentage of net sales, operating expenses for the fiscal year improved to 28.8% from 29.8% for the prior fiscal year. Operating income was $6.5 million and non-GAAP operating income was $6.1 million during fiscal 2026. compared to an operating loss of $2.5 million and non-GAAP operating income of $2.6 million during fiscal 2025. The company reported net income of $6.4 million and non-GAAP net income of $5.7 million for fiscal 2026 versus a net loss of $1.1 million and non-GAAP net income of $3.2 million during fiscal 2025. Earnings per common share diluted were $0.44 and non-GAAP earnings per common share diluted were $0.40 for fiscal 2026 compared to $0.08 net loss per common share diluted and non-GAAP earnings per common share diluted of $0.22 for fiscal 2025. EBITDA was $11.3 million and adjusted EBITDA was $10.4 million for fiscal 2026. versus EBITDA of $2.5 million and adjusted EBITDA of $7.5 million in the prior fiscal year. Turning to a review of our cash position. Cash and cash equivalents at the end of fiscal 2026 were $31.8 million compared to $29.5 million at the end of the third quarter of fiscal 2026 and $35.9 million at the end of fiscal 2025. The increase in cash and cash equivalents from the third quarter related to net income adjusted for depreciation and amortization and lower inventory partially offset by higher accounts receivable. Capital expenditures of $1.0 million in the fourth quarter of fiscal 2026 were primarily related to our manufacturing business, facilities improvements, and IT systems versus $0.8 million in the fourth quarter of fiscal 2025. Total capital expenditures were $4.4 million in fiscal 2026 as compared to $2.8 million in fiscal 2025. We paid $0.9 million in the fourth quarter and $3.4 million in fiscal 2026 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 first quarter of fiscal 2027. As of the end 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.