Good day, and thank you for standing by. Welcome to Richardson Electronics Earnings Conference Call for the First 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. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Mr. Edward Richardson, President and Chief Executive Officer. Please go ahead.

Good morning, and welcome to Richardson Electronics conference call for the first quarter of fiscal year 2024. Joining me today are Robert Ben, Chief Financial Officer; Wendy Diddell, Chief Operating Officer, and General Manager for Richardson Healthcare; Greg Peloquin, General Manager of our Power & Microwave Technologies Group and our newest business unit, Green Energy Solutions; and Jens Ruppert, General Manager of Canvys. 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. Financial results for the first quarter of fiscal year 2024 were below our expectations due to concerns regarding economic conditions, rising interest rates, a lagging China economy, and the possibility of a recession across our global customer base. It was an especially challenging period, given the downturn in the semiconductor wafer fab market and the timing of new orders in our Green Energy Solutions business. While sales were lower than anticipated, our gross margin improved from Q4 of fiscal 2023, and the team did an excellent job managing costs. Our core EDG and display businesses were in line with the prior year, and the company remained profitable in the quarter. Despite near-term challenges, we've never been more optimistic about our future. We expect the future downturn in the market demand to improve in the coming quarters, and we remain committed to our long-term strategy. Our growth plan is focused on expanding our product lines, leveraging the deep relationships we have with over 20,000 customers globally. We do this by listening to our customers and helping them solve problems. We’re clearly building a name for ourselves as the technology leader in Green Energy Solutions. In addition, we continue to hear from key customers and technology partners in the semiconductor fab equipment market that they're at the bottom of the semiconductor cycle. These companies anticipate growth in calendar year 2024 that exceeds sales levels during the 2022 cycle. We're taking steps in the interim to address the slowdown without impacting growth in these critical areas. We remain focused on increasing the percentage of our sales that come from our Green Energy Solutions business, as well as other products we manufacture. Much of this new business is project-based, and timing is not always easy to predict. The success of these strategies, however, is supported by our sales growth, improved efficiency, and higher profitability over the past several years. Our balance sheet remains strong with $25 million in cash and no debt. Throughout the company, everyone is focused on turning our inventory into cash, managing expenses, and driving toward annual positive operating cash flow next fiscal year. Bob Ben, our Chief Financial Officer, will review our first quarter financial performance. Then Greg, Wendy, and Jens will discuss numerous opportunities within our business units, including the significant number of new products, programs, and customers that drive our optimism for the future.

Thank you, Ed, and good morning. I will review our financial results for our first quarter of fiscal year 2024, followed by a review of our cash position. Net sales for the first quarter of fiscal 2024 were down 22.2% to $52.6 million, compared to net sales of $67.6 million in the prior year's first quarter. PMT sales decreased by $9.6 million or 21.2% from last year's first quarter, driven primarily by a decline in manufactured products for our semiconductor wafer fabrication equipment customers. Net sales for GES were down by $4.1 million or 48.4% from last year's first quarter, primarily due to lower sales of ultracapacitor modules for wind turbines. It is important to note that the replacement of lead-acid batteries in existing wind turbines is often project-based, and the timing of orders is difficult to predict. Canvys sales decreased by $0.5 million, or 5.0%, primarily due to lower customer demand in North America. Richardson Healthcare sales decreased by $0.7 million, or 22.1%, primarily due to lower demand in the quarter for parts and equipment. Total company backlog was $148.1 million at the end of the first quarter of fiscal 2024 versus $160.4 million at the end of the fourth quarter of fiscal 2023. Gross margin for the first quarter was 32.8% of net sales compared to 34.1% in last year's first quarter. PMT's gross margin decreased to 32.2% from 34.3%, primarily due to product mix and manufacturing under absorption. Healthcare's gross margin decreased to 31.6% in the first quarter of fiscal 2024 compared to 36.7% in the prior year's first quarter as a result of increased scrap expense and manufacturing under absorption. GES gross margin increased in the first quarter of fiscal 2024 to 36.0% from 35.5% in the prior year's first quarter due to product mix. Canvys gross margin increased in the first quarter of fiscal 2024 to 34.0% from 31.4% in the prior year's first quarter because of product mix and lower freight costs. Operating expenses were $15.8 million for the first quarter of fiscal 2024 compared to $14.2 million in the first quarter of fiscal 2023. The increase in operating expenses resulted from higher employee compensation expenses, primarily salaries. The company reported operating income of $1.5 million or 2.8% of net sales for the first quarter of fiscal 2024 versus operating income of $8.8 million or 13.0% of net sales in the first quarter of last year. Other income for the first quarter of fiscal 2024, including interest income and foreign exchange, was $0.1 million compared to other expense of $0.3 million in the first quarter of fiscal 2023. Income tax provision was $0.4 million, or 23.7% effective tax rate versus an income tax provision of $2.1 million, or 25.0% effective tax rate for the first quarter of fiscal 2023. Net income for the first quarter of fiscal 2024 was $1.2 million compared to net income of $6.3 million in the first quarter of fiscal 2023. Earnings per common share diluted were $0.09 compared to earnings per common share diluted of $0.45 in the first quarter of fiscal 2023. Moving to a review of our cash position. Cash and investments at the end of the first quarter of fiscal 2024 were $24.1 million compared to $25.0 million at the end of the fourth quarter of fiscal 2023. U.S. cash and investments were $8.4 million at the end of the first quarter of fiscal 2024 versus $7.6 million at the end of the fourth quarter of fiscal 2023. Capital expenditures were $1.1 million in the first quarter of fiscal 2024 versus $1.4 million in the first quarter of fiscal year 2023. Approximately $0.9 million related to investments in manufacturing, including facility expansion and the renovation of our office space. We paid $0.8 million in cash dividends in the first quarter of fiscal year 2024. 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 second quarter of fiscal 2024. As of the end of the first quarter of fiscal 2024, the company had not made any draws 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.

Thank you, Bob. Good morning, everyone. In Q1 FY 2024, Power and Microwave Technologies, or PMT, and Green Energy Solutions, or GES, continued to gain market share by developing new products and new customer relationships while maintaining our market share with our existing customers. However, we did see a slowdown in revenue coming out of a record year in FY 2023, which was mainly due to the semiconductor wafer fab industry slowdown and timing of a number of very large project-based GES opportunities. PMT sales were down year-over-year by 21%, primarily based on the semiconductor industry slowdown, which started late in calendar year 2022. Again, it’s very important to note that we have not lost any market share in this business segment. And through excellent customer relationships and communication, we are hearing that sales will reaccelerate in the back half of calendar year 2024, and that 2025 is anticipated to show record demand and sales. We are well positioned to manage this business as the customer demand increases. GES sales were $4.4 million in the quarter, down $4.1 million from the prior year due to timing on several major project-based opportunities. During the quarter, we added several new customers and increased our market share with customers needing our niche patented Green Energy products. We have many highlights in Q1 for our GES Group, beginning with the wind and energy market. During the quarter, we added over $1 million in bookings with several new customers for our flagship ULTRA3000 product, increasing our backlog in this product line to over 12,000 units. All of our existing wind customers are significantly expanding their budgets for lead-acid battery replacement within their GE turbines over the next couple of years. Their market potential for the ULTRA3000 remains at more than $150 million. The product is reliable, and we are enjoying great success and continued relationships with our Tier 1 owner-operators. GE Marketplace, which targets more than 800 wind farm management companies, has also started to produce orders as we work directly with GE farm owner-operators, site managers, and technicians. With over 41,000 units in the field, three patents, and exclusive relationships with the largest owner-operators in North America, we continue to be very excited about this product, technology, and opportunities. Our beta testing of our patent pending Ultra UPS 3000 with Siemens and other owner-operators of GE and Siemens Wind Turbines is underway and going well. The Ultra UPS 3000 replaces lead-acid batteries in the uninterrupted power supply, or UPS, that sits at the base of every wind turbine. We're moving forward to testing on other wind turbine platforms, such as Senvion, Suzlon, and Nordex. Once we begin production, we anticipate expanding to other markets and applications as this product works anywhere a UPS is used. Our ULTRAPEM or multi-brand pitch energy module is in beta testing with Suzlon on an OEM basis. This opportunity is for more than 7,000 turbines in India alone and several thousand more in North America. This product is also in final testing with a number of owner-operators in Latin America and North America, which have an SSB pitch system. In the EV and diesel locomotive segment of Green Energy Solutions, due to supply chain issues our superstructure builds for Long Island railroad and Burlington Northern electric locomotives will be completed in late Q3 and Q4 of this fiscal year. We have received beta orders for a patented ULTRAGEN3000 starter module with two large diesel and EV locomotive manufacturers. We'll be doing the beta testing in 25 trains in Q3 FY 2024. It is important to note that we are exclusive with both of these customers. We continue to identify other niche applications in this patented technology. We are in beta testing with several refrigeration truck manufacturers where the ULTRAGEN is replacing lead-acid batteries. There are currently 500,000 refrigeration trucks in North America, and we estimate this market opportunity to have a TAM of $200 million. There are numerous other markets that this product will be applicable to, such as construction equipment, including excavators, loaders, and backhoes. After a record Q4 and record FY 2023, shipments slowed in Q1 and we expect this trend to continue in Q2. With bookings and new products along with the forecast and backlog from our project-based customers, we feel that Q3 and Q4 will be extremely strong for Green Energy Solutions. We have not lost any market share, and we continue to increase our market share with new products, applications, and customers. Now turning to PMT, which includes EDG, our legacy tube business, and PMG, our Power & Microwave Components Group. Sales decreased 21%. Sales were $35.7 million versus $45.3 million in Q1 last fiscal year. This decline was due to the major slowdown in the semiconductor wafer fabrication equipment business. The decline was somewhat offset by growth in our laser and broadcast tube business which remains steady. We also saw strong bookings in our RF business. The team has been supporting the semiconductor wafer fabrication business and its customers for well over 25 years. This business has always been cyclical. We anticipated the slowdown in 2023 but again expect the business to recover in the second half of calendar 2024. Our engineered solution strategy is driven by our global technology partners. Key tube manufacturers and partners include CPI, Talus, Nisshinbo Micro Devices, and Photonis. Each of our global partners helps us meet and manage customer requirements. Our team has done an excellent job identifying and cultivating these relationships. We will continue to add technology partners that fill technology gaps in our offering and support our growth. Our growth strategy has been proven to be highly successful over the years. We will continue to develop new products as well as increase our customer base, revenue, and profits by capitalizing on existing demand creation infrastructure. I cannot stress enough the value of Richardson Electronics model to our customers and suppliers. We have 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 need Richardson's products and support more than ever. We remain excited about the future as we find opportunities and build our market share for PMT and GES with new products and customers.

Thanks, Greg. Good morning, everyone. First quarter sales for the Healthcare division were $2.6 million, down 22.1% versus the first quarter of last year. Sales were down in all product categories, reflecting lower demand for parts and services throughout the most recent summer months. In the quarter, we sold all of our repaired Siemens Stratton Z tubes, helping improve our gross margin to 31.6%. While this was lower than the prior year's first quarter, this is a significant improvement from the fourth quarter margin of 23.7%. On a year-over-year basis, gross margin was negatively impacted by higher scrap costs in the quarter. We continue to make good progress on the Siemens repaired tube program. This is a series of four tube types, including the Stratton Z, MX, MXP, and MXP-46. The Siemens CT install base is considerably larger than the install base for our ALTA tubes, and there are no third-party replacement options for these tube types. The repaired Stratton Z is in full production and performing well in the field. We expect sales to rise gradually in the coming quarters as we expand our production team in the repair process and add more tubes to inventory on a consistent basis. We also continue to make good progress on the repaired Siemens MX series. We know demand is strong based on discussions with our customers. While we anticipate launching the first repaired MX series tube around the end of the calendar year, supply will be limited due to recent challenges we are experiencing in replacing a critical component. It is important that we get it right, and we believe we are on track to do so. This will delay having sufficient inventory to meet customer demand until FY 2025. While our engineers work on the Siemens repaired tube program, we continue to work our way through the local registration process for reloading tubes in Brazil. We still anticipate this program may have a small, yet positive, impact on our revenue in FY 2024. We remain cautiously optimistic that the ongoing development efforts within the healthcare business will enable the division to achieve its goal of breaking even in the fourth quarter of this fiscal year.

Thanks, Wendy. And good morning, everyone. Canvys engineers, manufactures and sells custom displays to original equipment manufacturers and industrial and medical markets throughout the world. Canvys’ performance remains strong with sales of $9.9 million for the first quarter of fiscal 2024, down slightly from $10.4 million during the first quarter last year, and up from $9.2 million in the fourth quarter. First quarter sales reflected stable custom demand globally, and we finished the quarter with a backlog of $42.6 million, which remains strong. Gross margin as a percentage of net sales was 34.0% during the first quarter of fiscal 2024, compared to 31.4% during the first quarter of fiscal 2023. The increase in gross margin was primarily related to a more favorable product mix. During the quarter, we received several new orders from both existing and first-time medical OEM customers. Some of these applications include: ophthalmology, laboratory equipment, video documentation systems, robotic-assisted surgery, and surgical navigation. In the non-medical space, our products are used in a variety of commercial and industrial applications. This includes large-size industrial printers, displays used in the public transportation space, human-machine interfaces for packaging machines, and industrial automation, tailor prompting, talent monitors, and clocks used in the broadcast market. Over the near term, we expect increasing interest rates and continued high inventory levels will have a short-term impact on our business. Customers are forecasting more conservatively and only placing orders when inventory is at a minimum level. We haven't lost the program, but we expect sales to vary quarter-to-quarter depending on our customers' inventory levels. Given the number of projects currently in the engineering stage, we believe sales will re-accelerate towards the end of this fiscal year. We are proud of the efforts and innovations of our talented engineering team and the ability to design products that help create productivity and value for our customers.

Thanks, Jens. We understand the near-term challenges you face, but we remain confident that Canvys will continue to grow, given its stronger relationships and recognition as a leading custom display solutions provider. To conclude, we're excited about the direction we're headed. We remain committed to our employees, our customers, our suppliers, and our shareholders. We're investing in our growth initiatives with an emphasis on engineered solutions that improve sustainability. We're a GES business just getting started. The products we manufacture are used in aftermarket applications, and we have solutions that improve operating efficiencies and help companies achieve their green energy goals. Much of our legacy business, including EDG, is recurring revenue for consumable products. Within the launch of the Siemens repaired tube program, we anticipate improvement in our healthcare business, helping strengthen our bottom line. We'll protect our cash and focus on improving inventory turns. Finally, we're confident that we'll emerge from the challenging period stronger and better positioned to grow in sales and profitability later in the year. We continue to believe it's not a matter of if, but when. At this time, we'll be happy to answer your questions.

Thank you. One moment for our first question, please. And our first question comes from Anja Soderstrom from Sidoti. Your line is now open.

Hi, and thank you for taking my questions. So first, I'm curious about the GES that came in quite softer than I had anticipated. Can you just talk about the timing there? Was it something that was just shifted into the second quarter or are these larger projects that you are seeing longer sales cycles for, or how should we think about the second quarter for GES?

Yes, it was a combination of two things. First of all, the Phase I orders that people are determining regarding their capital budgets, how many farms and how many turbines they were going to start implementing for lead-acid battery removal with our ULTRA3000. That phase was expedited. The team did an absolutely fantastic job getting the product to the customer within our fiscal year and in the needed timelines. That process was completed. They're installing them over the next couple of quarters. According to each of our key customers, we are tied in with every major owner-operator of GE wind turbines in North America. The Phase II will start early 2024. So essentially, the first quarter of calendar 2024 will start seeing the bookings for Phase II. Currently, our backlog is about the size of our sales last year. So we're looking to grow in this fiscal year. The exact timing of how much we'll ship in Q3 and Q4 is hard to predict, but feedback from our customers indicates that will guide our progress going forward.

So the second quarter is expected to be at the same level as the first quarter sort of?

It'll be very close to the first quarter shipments.

Okay, and then on the flip side, the PMT was stronger and with sub-growth sequentially. What's driving that, and how is that continuing into the second quarter?

Yeah, both the tube business and the RF and wireless component business performed well. The RF and wireless component business received a lot of strong bookings in Q3 and Q4 of last fiscal year, resulting in strong shipments. Their backlog grew and they improved year-over-year in Q1. On the tube side, we had strong growth in our laser tube market, along with significant replacement business. It is a consistent business model that tends to fluctuate around 5% or 6%. With the oncoming recession and this being replacement business, it’s not entirely recession-proof. However, since it is a repair business, we usually maintain consistent numbers throughout the year. We expect to see similar growth that we experienced in Q1 as we move into Q2 and onwards.

Thank you. Inventory appears to be well-managed for the quarter. What does that inventory consist of, and how do you plan to start building it up in preparation for these large orders in the second half?

Yes, there were two main increases in inventory, marked as strategic purchases. One was long-term, lifetime buy orders to support our customers on products that are being discontinued over the next couple of years, ensuring that our long-standing customers, some of whom we've served for 20–30 years, have a reliable source of supply. The other part involved the ULTRA3000—as of four months earlier, we had zero inventory of several GES products. We are trying to build up inventory to maintain at least a quarter's worth, as project-based orders can come at unpredictable times. Our customers typically want delivery within a month or the following week - so we've spent the last two years navigating daily calls and addressing supply chain issues to ensure we don’t let our customers down.

Okay, thank you. I'll get back in line.

Thanks, Anja.

Thank you. One moment for our next question, please. Our next question comes from the line of P. Ross Taylor with ARS Investment Partners. Your line is now open.

Thank you. I rarely get the full name. A couple of things first. Revenues were down about $10 million in the semiconductor fabrication equipment space. That typically carries some of your best margins in the firm. So, would it be safe to assume that on an operating profit basis, that probably hit you guys by around $5 million?

On the operating profit.

That's probably a fair assumption. It might be a little less than that, but that's about correct.

Okay. Do you have any ability to reduce the other costs associated below the operating profit line when you see a drop like that?

Hi, Ross, it's Wendy. We had a few layoffs that allowed us to cut some costs. Additionally, some employees chose to take voluntary furloughs. Our planned expenses were significantly higher than our actual sales, resulting in savings in incentives. We also refrained from hiring any non-essential staff. We are examining areas like travel and marketing for potential cuts. However, you will not see a $5 million reduction in SG&A.

Okay. So it's safe to say that probably cost on an operating basis $0.35, $0.40 a share. You're being told to look for fiscal 2025 that would be at record levels better than you saw last year, is that true?

So what we're anticipating is that the business will start improving again in the back half of calendar year 2024. In calendar year 2025, we're anticipating that it will be a record year.

Yes, okay. Calendar 2025, that's even better.

Calendar, not fiscal year.

Calendar, right. Okay, so looking at that setup, is there any reason to believe that you should not be able to sustain or even improve profitability as you move back to record levels of revenue in that space?

We absolutely can achieve that.

Yes, in addition to that, there are a number of large programs out there on the GES side that would help compensate for any continued recovery with that market. So there are a lot of things in the pipeline that we think will contribute to getting us back to these record profits we saw over the last year or so.

Okay. Let's move on to the GES space in Suzlon. They have about 7,000 towers. Each tower…

They currently have about 9,000 total turbines. We have a bi-weekly call with the group in India. The first Phase I will be 7,000 turbines, and those are all in India actually. We are all set up to do that beta testing in the third week of October, so end of next week or the week after. We've tested the product in a Suzlon turbine here in the states with one of our owner-operator partners and it has worked very, very well. So we're really excited about that program, getting an OEM and working with them. In addition to that, they also own a number of GE sites, which obviously the ULTRA3000 was designed for. So we look at that program to be very strong going forward, absolutely.

When we consider the demand for your ultracapacitors, on the GE side it's a one-to-one ratio. So if there are 18 batteries, that means 18 ultracapacitors. In the case of Suzlon, based on my understanding of the technology, it's more like one ultracapacitor for every two batteries. Therefore, if there are 9,000 towers, each requiring the equivalent of 18 ultracapacitors, you would need about 50,000 modules in total. Specifically, the 7,000 towers in India alone would necessitate around 42,000 modules, which comes from multiplying seven times 18. Is that correct?

Yes, that's close. So the Suzlon module is based on the ULTRA3000 technology, but it is a redesign specific for Suzlon, and there are six modules in every Suzlon turbine versus 18 modules in every GE turbine. However, this product is a little more expensive than the ULTRA3000. So, six times 7,000, which is what you came up with, about 42,000 of these.

42,000. And so we're looking at that project, that opportunity alone, is probably something in the neighborhood of $34 million, $40-something million of revenues and operating profits, something like $14 million to $18 million out of that project alone.

Yes.

Okay. How long would it take you to fulfill an order for 42,000 ultracapacitors?

With the new manufacturing area, it’s all about resources. Right now we can produce probably 5,000 to 6,000 a month, so it wouldn't take that long.

So you can easily fulfill that inside a year and if you ramp up, you could fulfill it in five months, six months, or less type of situation.

Absolutely. The large order we received when we started this program involved selecting sites and completing a full repower, which means replacing all the lead-acid batteries with our product. For some other owner-operators, one unique aspect of our product compared to the competition is that you can install it in a turbine and maintain it. If you choose to install two, you can leave the other 16 batteries in the turbine until either the warranty expires or the batteries fail. This allows for a replacement as the batteries fail instead of doing a complete replacement. It's just a matter of timing, but it's a solid business, a promising program, and an excellent product.

Okay. The technology with Siemens is a little different, is it not? You're saying it's like one at the base, but it's probably a much bigger, more powerful unit than what we're seeing— the economics might not be the same as times 18 for GE or maybe times six for Suzlon, but I would assume that's a pretty valuable unit at the base of each Siemens tower.

Yes, so the UPS product is a different technology than the ULTRA3000. The ULTRA3000 is a pitch energy module. The UPS is an uninterrupted power supply. So there's only one per turbine, but it's five times the amount of an ULTRA3000. So that's the Siemens design we're working on right now. It's for the UPS, not the ULTRA3000.

And that's a similar margin?

Yes.

Okay. So, I mean, that's really setting up well. We've got a market here that seems to be focused on looking at its speed and concerned about what's going on, which leads to my next area. I know I said I would only ask two questions, but Ed and Wendy know me, so they know that I'm not going to only ask two questions.

That's okay.

So one of the things I'm looking at is that this point in time, this company is actually selling at net-net working capital. The market is assigning a zero value to the business. It's literally saying that Richardson is worth nothing other than what you can liquidate its current assets for. When I look at that, it tells me that there's something really just kind of wrong with the thinking. And now, Ed, you've done an amazing job of changing this company. I mean, this company, going back a number of years, was highly cyclical and really focused into one primary area, and you've diversified it. And I think your dad would be really proud of what you've done with it. To be honest, what I'm hearing on this call, I think in two years, your dad is going to be beyond satisfied with you. I think he'd be enthusiastic, because I'm hearing you guys talk about putting these pieces together. We're looking at a return to not just the level of earnings you had last year, but earnings that can be meaningfully higher than that, meaning, when I model it out I get $1.82 a share in fiscal 2025 for you. And I think the inability of the market to appreciate that is problematic. But I also want to say that I think that there are some things that we can do with that. One is, in the past you've indicated that your banking accord doesn't allow you to buy back stock. When you're selling at net-net working capital and I've talked to my bankers, I have one of the guys I golf with who is a vice chairman of one of the world's four or five biggest financial institutions. They don't bank down at this level, but he tells me it's absolutely asinine you can't buy back stock in your bank accord, given your balance sheet. I for one would argue we need to get a bank accord that reflects what Richardson is today and where it is going, which is that it will go parabolic and become a massive free cash flow generator. There is no risk to a bank in lending you money. So it's time that we start to get banks that respect us and give us that type of opportunity. So that's my comment at the moment on your banking situation. I do think that if you do that, we're looking at a stock that's down a lot this year. You have $5 million plus, you have 100 acres plus in unused land, that's a zero asset right now; really just being farmed.

Correct.

What kind of...

That's correct. We think that ultimately the electric locomotives with Progress Rail will be a huge business, and we want to keep space that we can expand backwards. We're on 25 acres in the front of the 120-acre property, and we want to keep space to expand.

So if you sold off 50 acres and you got that $55,000 you did before and you take that and buy 10-year treasuries, you'd literally increase the income off that land by a factor of four or five. And so I'd suggest — and you could use that — I mean, that's in this environment and that still leaves you a lot of land to expand; leaves you 50 acres to expand into. But it does strike me as in some ways you're on the cusp of something major here. The market isn't smart enough to figure it out. But there's a reason why I; my career is based on the stupidity of the market. I like to tell my daughter —

Well, we certainly agree with you and we had a long discussion with the board when they were here this week about buying stock, and that's under consideration. We agree, we think this company will be $500 million in the next three to five years. And we have $25 million in cash today. We'll go cash flow positive in 2025. So all the things you say, we agree with, and we appreciate your opinion.

Thanks, Ross. We're going to move on. Okay.

Thank you. Our next question will come from the line of Barry Mendel with Mendel Money Management. Your line is now open.

Yes. A couple of things. One, when do you expect your backlog to start increasing? Because I think that would be a catalyst for the stock. I know you expect the big locomotive orders, at least last quarter you said, sometime in the third or fourth quarter of this year. So when do you expect the backlog to kind of bottom out?

Yes, on the GES side and the PMT side, we look at the backlog to start having some of these project-based businesses the end of Q2, the very beginning of our Q3, and then we expect the delivery to occur over the next six months after that. So by the end of Q2, based on some beta testing we have and the customer's forecast. Q3 should be a very strong booking quarter.

You're fiscal Q3?

Our fiscal Q3, yes.

Okay. In terms of the semi space, because I recall last quarter I believe you mentioned the semi space expected to improve in the first half of calendar 2024, not just setting the second half of calendar 2024. What's the reason for that shift?

Hi, it's Wendy. We — I think we've been consistent in saying it's — our customers have been forecasting improvement in the second half. We are hoping that maybe we would see some of that start to come in in the first half, but it's always been consistent that they were not anticipating significant or really any recovery until the second half of calendar year 2024.

Okay. And regarding the magnetrons. What's going on with that business?

With magnetrons, yes. We're building new test equipment. We've improved the carbonization of the filament on the tube. There's a huge demand out there, probably over 5,000 tubes a year, and we're trying to build our capacity to take advantage of that. We have monthly progress in that area. Plus the 915 megahertz magnetron at 100 kilowatts has a huge market for creating synthetic diamonds and then they make hydrogen out of methane gas, which is another big application. So the magnetron business is strong and well with our restriction being how fast we can develop higher power magnetrons and improve the quality of the ones we manufacture.

As I recall, you increased capacity in that business earlier this year, in the spring or early summer?

Yes, we're still having difficulties in quality. The problem is that tube-type equipment is custom-made and we've geared up now, where we can build about 240 a month, but we need to get to 500 a month on the YJ1600, which is the 6-kilowatt tube. But we're making progress. It's slow.

When do you expect to get to 500 a month?

I would say six months out.

Okay. That’s clear. Thank you.

Thank you.

Thank you. One moment for our next question please. Our next question comes from the line of Ron Richards. Your line is now open, sir.

Hi. I was wondering, in light of all the problems that Siemens is having, I know that you're in beta testing right now. Do you have any guesses as to when we might start receiving some orders from Siemens?

Yes, I think it's similar to the other ones based on how they structure their capital request and funding. They put in for it. The part's been successful in testing. For us, Q3 and Q4 of our fiscal year is when we think we’ll be getting production orders. We've already received orders for beta testing and alpha testing, but production orders will probably come in Q3 and Q4 based on what they're telling us.

Great. Okay, is this your fiscal Q3, Q4?

Yes.

And that particular product, Ron, is the ULTRA UPS 3000, which is also in testing with other large wind turbine companies. Greg, do you want to comment on that?

Yes, it's again a base design that we're working on for Siemens. Additionally, we have beta testing going on with Nextera and RWE, so it's — and again, it goes in every one of their turbines, so we're excited about that product.

And they're for aftermarket. So Siemens might be an OEM opportunity, but the other ones are aftermarket.

They're both aftermarket.

Okay, great. Thanks for the color. Appreciate it.

Thank you.

Thank you. One moment for our next question, please. Our next question comes from the line of Michael Hughes of SGF Capital Markets. Your line is now open.

Good morning. Thanks for taking my questions. First one, can you just break out the backlog by segment for the quarter, please?

Yes. Hi, Michael. This is Bob Ben. Yes, so again the total backlog at the end of the quarter was $148.1 million. Of that, approximately $67.4 million was PMT, $36.5 million was Green Energy Solutions, $42.6 million was Canvys, and the remaining $1.6 million was healthcare.

Okay. And then, Wendy, I think you referenced an issue with a critical component for the Siemens tube program. Can you elaborate on that a little bit?

A little bit. I don't want to get into too much detail on this call, but it is a part that we thought we could use a refurbished part or a part that's already been used on another tube, and unfortunately, that method is not going to work, so we have a need to wait until the patent expires. In the interim, there are a number of the MX series that we can repair without replacing that specific component, and that's what we'll focus on. Which is why I say we'll have limited supply until next summer.

When does the patent expire?

During the summer of 2024.

Okay, right, right. Okay, that makes sense. And then last question for you. I'm not sure if you'll disclose the precise number, but was the semi-cap equipment revenue up or down sequentially?

It was down certainly. It’s pretty much flat.

Yes, it's running about $4 million or $5 million a quarter.

Okay, great. Thank you very much. I appreciate it.

Thanks, Michael.

Thank you. One moment for our next question. Our next question comes from the line of Andrew Rem with Odinson Partners. Your line is open.

Hey, guys. Thanks a lot. Just on the beta test coming up in October, what needs to be proven in that beta test?

They just — they run it. They take the turbine and shut it down so there’s an electrical fault to see if it works. They just — for the most part want to run it in a specific turbine for a period of time. It varies. Some want to do it for a year. Some for six months. Some for three months. But it's just a — the beta testing we've done includes almost all the tests you can get in-house, but when we go to large orders, these significant customers average between three months to a year. They just want to run it for a certain period to ensure it works.

Okay. So now if I take kind of the…

Go ahead.

Go ahead.

I was just going to say, in beta testing, there might be mechanical issues, meaning, the way it fits into the box that we might have to tweak here and there, but it's really the performance of it. They just need to run it for a certain time frame.

Okay, setting aside the nuance with the mechanical box piece, just if we try to think reasonably, knowing that the beta test could take six months plus, it probably wouldn't be until the back half of calendar 2024 where you might start seeing kind of full rollout of that kind of deployment. Is that a fair assessment?

Yes. And that's specific to the Suzlon opportunity in India. If everything goes perfectly, yes, we'll see shipments in our Q4 and the early part of fiscal year 2025. But based on history and the way such processes work, and I've been conducting new product introductions for almost 40 years, the second half of 2024 calendar year will be the period when we see large production orders rolling in.

All right. I want to tag on. I think the questioner a couple of people ago, I think his name is Ross, mentioned this comment about stock buyback. I want to pile onto that comment by suggesting you might want to take a look at foregoing dividend payments and doing a stock buyback, because that would be a much higher return profile for investors. So it's a way to both pay investors back efficiently as investors don’t have to pay taxes on this. And obviously, you should be able to — if you realize what you guys are trying to do here, obviously, the stock should be significantly higher. So that would be a great return on investments for you and shareholders. Also, what he said about the board, I would double down on that in terms of ownership. So I guess, that's two votes for a couple of suggestions there. Lastly, just Ed, it sounds like maybe you have a cold; hope you get well soon. Thanks a lot, guys.

Thank you.

Thank you. I would now like to turn the conference back over to Mr. Richardson for closing remarks.

Well, we appreciate all your comments and we appreciate your investment and interest in the company, Richardson Electronics. We look forward to our ongoing discussions and sharing our fiscal 2024 second quarter results with you in January. Please do not hesitate to give us a call anytime. We're happy to take your calls and talk to you individually. Thanks, Noma. It was a very good question-and-answer period.

Thank you. This concludes today's conference call. Thank you for your participation. You may now disconnect. Everyone have a wonderful day.