RICHARDSON ELECTRONICS, LTD. — Call Transcript 2025

All right, good afternoon. Our next presenting company, glad to have back Richardson Electronics to the Southwest IDEAS Conference. Trades on the Nasdaq under the symbol RELL. Here today to handle the presentation part is Wendy Diddell, the company's Chief Operating Officer. With her here to help on the Q&A side is Edward Richardson, the company's CEO. Wendy? Thank you. Okay, good afternoon, everybody. Who's new to the Richardson story? Okay, sorry for those people who aren't. I recognize some of you, you're going to hear some information that you've heard a number of times before, but we'll try to make this as succinct as possible. Thank you both, those existing shareholders, those we've met with, as well as potential new shareholders. Richardson Electronics, this is our facility. We're located outside of Chicago, Illinois. We're out in the cornfield. It's about 45 miles west. It is cold, but we always invite you to come visit us. Just make sure you come in May through October, November timeframe. You'll be good. The focus point for Richardson Electronics and what I'm going to spend a lot of time talking about today are engineered solutions. We started the company back in 1947. Not we, I wasn't here in 1947, but the company was started in 1947. It has grown to an international company. We're almost 80 years old now, so we'll be celebrating our 80th anniversary in 2027. The picture you're seeing there, we have about a facility that's 250,000 sq ft, and it's on about 120 acres of land, of which we own all of that. People ask us all the time, you know, how are you set for growth? You can see here that within our facility, we have plenty of room to expand our business. Should we need to, it would be very easy for us to expand. You'll see why that's important as I get into the presentation. We are ISO 9001 certified. We're also ISO 13485, which is the medical certification. Today, the slide says we have 430 employees. We're more about 450 employees. About 200 and so are located in this facility. The rest are located throughout the world. Historically, we have served more than 20,000 end customers. On any given year, we probably serve between 5,000 and 10,000 of those. A lot of our business we'll talk about is MRO or repeat, which is nice because once you are in with these customers, it tends to be an annual or biannual renewal. We'll talk about that. I already mentioned we're outside of Chicago in LaFox. Globally, we have more than 60 locations. Some of those are home offices, so do not worry. We're not heavily invested in rent and other kinds of expenses like that. As a matter of fact, we've minimized that significantly over the last number of years. We have 24 legal entities, which is important for us because, as I mentioned, we serve more than 20,000 end user customers. We are the importer of records. We can get product from any one of our facilities. We have three shipping locations. We can get product anywhere to anybody within two to three days. That is important in our business because, again, a lot of our business is aftermarket. If you're running a piece of equipment and it uses a power grid tube and that tube fails, your equipment is lying down. You need to get that replacement in just as quickly as possible. We have invested heavily in our infrastructure, like I said, to make it a global company. We are able to move product around. We have customers. We conduct business in multiple currencies. We have IT systems that are designed specifically for that. We can see on any given customer, any given country, any given day, what it is we've quoted. That allows us to be very nimble and very flexible in both quoting our customers, moving inventory around, knowing where we can get it from, and how quickly we can get it to them. Today, we have three business units. For those of you who know the story, you might recall back in January, we had four. The fourth one that you do not see on the chart here was Richardson Healthcare. I'll come back to that in a minute. The three business units that we have today, the first one is the Power & Microwave Technology Group. That is our largest business unit. That contains our legacy core business, which we refer to as EDG or the Electron Device Group. Those are the power grid tubes. It is also where we recognize our revenue for the semiconductor wafer fab market. Those are our two areas of our business that are really good parts of the business. We consider ourselves exclusive in the products that we make and sell. It is a profitable kind of cash cow. At least the EDG portion of our business definitely constitutes being a cash cow and driving profits for the future. The other part of PMT is a newer part of our business called PMG or the Power & Microwave Group. That business was started in 2015. That part of the business is component distribution. We work with technology partners like Qorvo and MACOM in that part of the business. That part of the business is important because it often drives what we consider to be engineered solutions. It is also where we started the Green Energy Solutions Group. The Green Energy Solutions Group is our second business unit. You can think of that as either green energy or alternative energy. We are making components and solutions that go primarily into wind applications and EV rail applications. Now, some of you are probably sitting there thinking, "Oh, well, goodness, look at the current administration. What is that doing to your business?" In the Green Energy Solutions Group on the wind side, we do not serve any market that is offshore. We have zero exposure to offshore wind. In inshore wind, onshore wind, we serve primarily today a retrofit market. These are wind turbines that are already built. Our flagship product in this group is a module that goes into the nose cone of windmills, primarily for GE. It replaces lead-acid batteries. Lead-acid batteries, as you know, over the years have become a non-green type solution. Our modules are form fit and function replacement. You can literally go up to the nose cone, you pull out the lead-acid batteries, you drop in the Richardson module. The lead-acid batteries fail every six months to two years, depending on the environment that they're run in. The modules that we provide last up to 10 years. There is a compelling financial interest in that the turbines have their uptime as much greater. You are not experiencing times when they're not generating power or losing money that way. You are not sending people up into the towers as frequently. There are some tremendous financial advantages. That was the cornerstone of the green energy business. Since then, the product line has expanded to include other turbine manufacturers and other products, which I'll talk about in a little bit in the next couple of slides. The third part of our business is Canvas. Canvas is our display business. In Canvas, we make displays primarily for medical OEMs. We've been in the business for a long time. The majority of our customers are blue chip medical companies like Varian, Siemens, Philips, Karl Storz, Medtronic. Very high-profile names. As the name implies, what we make are custom displays. Typically in that market, we're looking at annual volumes between 1,000 and 5,000 pieces. They are one-to-one specific for a customer. We do not bring an off-the-shelf display to market and try to sell that to many. Again, our engineers work very closely with the customer to define the requirements and provide them an exacting solution. Once you get into those customers, you're typically there for five to seven years minimum. That's primarily because there's a lot of approvals that are required to get that equipment, that medical equipment to market. Our portion of that piece of equipment, it may be endoscopy, it may be guided surgery. The display is typically a smaller part of that equipment. The last thing they want to do is have to go recertify. Those are our three business units today. Where we're focused, this is what everybody was like, "Well, where are you going with the company?" Because we've been around, as I said, for almost 80 years now. Really our focus is on the green energy solutions or alternative energy solutions part of our business. That business, as I've already mentioned, was really an offshoot. You will find this is true of every business that Richardson Electronics has been in. It was an offshoot of the Power & Microwave Group. We were brought into that business because of the level of engineering expertise that we have. A former supplier who had gotten sold to our friend Elon no longer made products for a specific market. They were brought to us and said, "Hey, can you make a solution?" That was the birth of the ULTRA3000. that is where that came from. Our strategy is we start with our core business, and then we migrate and move up the food chain into engineered solutions. Our definition of engineered solutions, again, is we're exclusive, we bring engineering value, and it's not easy for somebody else to come in and replace what we do. On the ULTRA3000, for example, we have five patents today on that product. A lot of the patents are around the software that allow our unit to drop in and communicate with the GE turbine. It would be very difficult for somebody else to make a product that competes with us that would not trip over our patents. That is where we're going as a company, moving out of what you would consider core distribution. If you knew Richardson from many, many, many, many years ago, you may still think that, up into, again, engineered solutions where we develop and solve a problem for our customer. A lot of times it includes products that we distribute or components that we distribute, which is a good thing. We're able to capitalize on technology that we know well and capitalize on the expertise and relationships with the suppliers and technology partners that we have. This kind of just shows you what I was talking about. You look at our list of technology partners, and that was phase one. We moved into the modules, which is phase two. Now where we're headed with the company is taking that one step further, and we're looking at the energy storage solutions. I've talked a lot about this already, so I'm not going to go into a lot more detail on the wind turbine opportunity other than to tell you, people say, "Well, again, what about the administration? How much market share do you have? We still today have a very small market share. When I show you our revenue, I'll talk a little bit about where that can go. You can see from this slide that the opportunity is over nearly $500 million. That is just for the number of turbines that are out there and the parts that we provide that we can capture. It is a very large market opportunity. The competition is almost non-existent in terms of the areas that we compete in. This is an area that you'll hear us talk a lot about. If you listen in on our calls, a lot of our existing investors ask us how we're doing in the wind market. This is a big piece of that. What's not listed here is we just got our first orders in from a large OEM, wind turbine OEM in India. We've been talking about that for a couple of years. We are pleased to announce that we did get in our initial orders. We'll start shipping that. Now not only do we service all of the GE wind turbines, so any of the brands that are GE turbine-based, we have a module that supports them. Now we also are branching into other manufacturers. This is talking again about the energy storage solutions. I don't think any of you have picked up a newspaper or who reads newspapers anymore or looked on your phone and have not heard about energy storage and the fact that we simply, as a nation, I mean, throughout the world, don't have enough electricity today to meet the demands that are coming, especially with AI and other types of really big energy hogs, all these data centers that are going in and these distribution warehouses that are going in. What the energy storage allows you to do is just that. You get energy, you get either from you can get it from ComEd, from your regular energy sources. You can get it from solar. You can get it from wind. You collect and save that energy when you're not using it. You have the choice during a time when maybe the energy rates go up, you can pull from your own energy storage or you can sell it back. For example, we are putting our own system in in the Fox. It's not in. It'll be in after the first of the calendar year. In that case, we will get rebates from the state of Illinois that cover the cost of that box that you see there. We will store energy and sell it back to ComEd, for which we will get a premium. Our focus in this area with this product is not to try and compete against the big boys who are selling to the Amazons and those types of companies, but instead focus on that commercial industrial area that includes companies like Richardson Electronics and offer them a solution that allows them to, again, save money, capitalize on the need for more electricity. There is a lot more to follow on that. We have really just started approaching the market. We have several programs that, if everything goes according to plan, we should book between now and the year end. Then a list of ones that will follow in calendar 2026 and beyond. Huge market opportunity, $25 billion market. Makes the other part where we talked about $500 million seem very small in comparison. Very big market. We are excited and we are really investing. People say, "Well, where are you investing your money?" It's in alternative energy and it's in the energy storage solutions. Here's just a list of some of the other applications and products that we're working on. We're not a one-trick pony. We did start with the ULTRA3000, the module for GE, but we've expanded around that same technology. One good example, we bring people into the LaFox factory. They have an opportunity to see that we're fully vertically integrated. Everything from concept to design to data units, we have our own machine shop. We have all of the ability to keep everything in-house. We do source components, but we make everything and design everything in-house. Metra, who in Chicago is one of the local carriers, came in and took a tour of the facility and they saw what we did. We do our thing. Where's your pain point? Where are you really struggling? We've got these lights that are in all of our trains and they use lead-acid batteries. Those batteries are dying all the time. The lights are going out and we're constantly having to change those batteries. With them, we developed a lead-acid battery or a replacement for lead-acid batteries. That is now in its probably second or third round of testing and we'll be rolling out first to Metra and then again, there's no exclusive. We can sell it to other companies. That's an example of where somebody sees what our capabilities are. We ask them, "What's your pain point?" and we develop an engineered solution. We have a full team in LaFox and then throughout the world of engineers. They're mechanical, they're industrial, and electrical. We have become an extension of our customers' engineering and product development departments. Here is just a list of some of our key customers. Maybe you know them. Big names, RWE, Invenergy, GE, Metra. These are just a few of them that jump out. Our objective is to continue to find opportunities. Maybe we solve a problem for them and then we take that product and we sell it to a host of others. Our fiscal year, for those of you who are new, I should have mentioned this at the beginning of the year. Our fiscal year is June 1 through May 31st. It is a little bit different than most people's fiscal year. Right now we are just finishing up Q2, finish after Thanksgiving, Q2 of FY 2026. In general for 2026, what do we expect? Everybody asks us about what are the impacts of tariffs and the current administration. I have talked about some of the challenges, opportunities on the technology side, which again, for us right now, it has not hurt our wind business whatsoever, or actually our whole Green Energy Solutions business should be up considerably in FY 2026. Tariffs have not caused us problems. Again, we are able to move our product around. We do not have to bring product in the U.S. We have a warehouse in Amsterdam. We have a warehouse in China. We have satellites in Brazil and other locations. With that, we are not really exposed to the degree that a lot of companies are. People say, "Well, what has been the impact?" On us, again, we are able to either pass it through or we do not get hit with it whatsoever. The impact would certainly be at the end user level and the impact that tariffs would have on general demand. That's something that's outside of our control. As I mentioned here, less than 5% of what we purchase actually comes from China, for example. An area where we were exposed to the highest potential tariffs, that is an area where we've minimized over the number of years our exposure in that market. Longer term, even with some of the current administration's policies, it actually opens up more doors for us. We've talked about wind turbines, another area is the Made in America program. We have a factory in LaFox, which I've shown you the pictures of. Right now we're running one shift and we have the capability to expand that. Our gross margin profile is currently somewhat exposed to an underabsorption in that factory. We launched a program for the Made in America campaign. We hired people to work with both our existing customers, our existing suppliers, and also go out locally and in the area and find additional kinds of companies that need to move their manufacturing to the United States in order to hit certain goals and incentives. We currently have several programs that we're in kind of the final stages of quoting. We just started this program a couple of months ago now. Where I see kind of the strength right now is around PCBs and board stuffing. We have the potential to do that. We have the potential to do more. It looks like we're going to win two or three of those between now and probably the end of our second or third quarter. That will help us not only top line, maybe incremental revenue that we do not enjoy today, but it will help take up some of that underabsorption, which negatively impacts our gross margin. We are excited about that opportunity. I have mentioned the steady increase of the wind turbine modules. Again, we started out with GE and the U.S. focused. We have expanded that to Nordex, Senvion, SSB, Suzlon, and those sales are now coming not only from the U.S., but throughout the world. We have a very small market share, and so there is a tremendous amount of upside in that particular market. On the EV rail side, which we have not talked about, that is another segment of our green energy solutions business. EV rail, we work very closely with a couple of large players in the locomotive business. One of our newest products, which just started shipping in Q2, we've been talking about it for a while, is what's called a Start Saver. It replaces lead-acid batteries in diesel locomotives. This is a nice opportunity. The company that we're playing with is Wabtec. They're very, very strong on the product. They're anxiously rolling it out both to their customers, but they're also selling it to other train companies. They themselves are a very proponent of selling accessories to other companies. That one, again, is just starting to show in the revenue stream. Upside there as well. The other piece of the business that we really haven't touched on to a great deal, but those of you who know us well, we love our semiconductor wafer fab equipment market. We actually make sub-assemblies for some of the largest companies that make semiconductor wafer fab equipment. Everybody knows that with AI and some other factors that that market, again, is on the upswing. It's very cyclical. Richardson Electronics, through its history, has rode that wave up and down. We're now on the upside. Fiscal year 2023 was the height of the last upside, 2024, 2025, we're in the trough, and now we're back up again. From all indications, that business will continue to grow through calendar year 2026. As a result, we will grow along with that business. We've been in that business just for what year? Since 2006. Since 2006, we sold to Novellus. Novellus was subsequently acquired by Lam Research, and they are now one of our very key and favorite customers. Let me look at the financials with you real quick here. All right. In the first quarter, which again was June, July, August, our sales were up about 2% year-over-year, quarter-over-quarter. As I mentioned, we sold our healthcare business in January of 2025. We still were and are going to be dealing with some competitive just comps. We're dealing with year-over-year comps where we had some business last year that we don't have this year. If you factor that in, if you take that out of our business, our overall business was actually up almost 7% quarter-over-quarter in Q1. Our goal is to drive increases on an annual basis in the double digits. Obviously, 7% may not excite everybody, but our goal is to have much better growth than that and we're pushing towards that. Consolidated gross margin was 31% in the first quarter. You're seeing some margin improvement. That margin improvement comes from product mix, but it really comes from our focus on two things, I think. One is engineered solutions, which again, are items that we design and manufacture or have manufactured to our specifications. Those carry higher margins. The more that we can, again, push through our factory, the better that gross margin is going to be. The third component of improvement as we go forward is in the healthcare business. The healthcare business, we started in 2015. It was a very challenging business for us. Obviously, it did not materialize the way we wanted it to, which is why we sold the majority of it at the beginning of this calendar year. We still have a supply agreement that we are dealing with that we have to supply certain CT tubes that we manufacture. Part of that we will be finished manufacturing in January, February timeframe, after which a lot of that will roll to the bottom line. Meaning today we are still losing money on healthcare. When we finish up that manufacturing between now and the end of our fiscal year, it will be very positive to our bottom line. That is something that if I were in your shoes, that is what I would be looking for. Pay attention to that. Net income for the first quarter was $1.9 million versus about a little over $500,000 last year. We were definitely moving in the right direction. As I have already mentioned, the focus is not only on gross margin and revenue improvement. What we have not talked about is inventory. If you know the Richardson story, you know our inventory for a while was creeping up. A lot of that is associated with one of our critical suppliers on the EDG tube side of our business. That company is stopping manufacturing at the end of this calendar year. We have been over the past several years acquiring inventory specifically of that particular line in order to meet demand for the next three to five years, during which time we own the majority of the technology. We will be moving that to either other locations or deciding that we have sufficient inventory and we can retire that particular line. Because of that, our inventory grew significantly. That is not a great thing. We get that, but it really caused us to take a step back and look at all of our suppliers and all of our product lines and our purchasing. When you take that one vendor out, what you will notice is that our inventory has been decreasing and our turns are improving. Inventory, particularly of that product line, again, will stop growing at the end of the first quarter in calendar year 2026, after which it will become a source of cash. All right. Speaking of cash, balance sheet-wise, we have zero debt. We have about $30 million-$35 million of cash on the books. We have a line of credit should we need it. We have not needed it, and our goal is not to need it. We have been generating operating cash flow. Without the healthcare business, again, once we finish that up, that will become even more of a, the company will become even more profitable and generate more cash. We're, again, knock on wood, looking forward to the end of making those particular tubes. We do pay a cash dividend. If that's important to you, we're a good stock to take a look at. We're very tight on SG&A and on capital expenditures. Last year was a particularly low year for us in capital expenditures. FY 2026 will be a little bit higher. There are some IT systems that, unfortunately, fortunately, we have to upgrade because Microsoft is not going to support them any longer. We're making some investment in the IT systems. We've also made investments in the PCB lines that we have because not only will it allow us to capture new business, it allows us to improve our cost profile on the ULTRA3000 modules as well as protect our supply chain. We might see a little bit of increase in FY 2026 on the CapEx side, but we're watching that closely. We continue to invest where it makes sense in working capital to support the growth initiatives. The primary area, again, is in the green energy alternative solutions part of our business. Okay. With that, we can turn it over to questions if anybody has any. I know that's a lot to digest, and we always tell people if you're new to the story, please don't hesitate to reach out. I'm Wendy D at rell.com. Ed is Ed at rell.com. We're probably two of the most approachable people you'll find in terms of dealing with our investors and potential investors. We love to talk. Let us know. Thanks, Wendy. Obviously, she knows the business extremely well. Wendy's been with us since 2003, and she's Chief Operating Officer. She does all the work, and I take all the credit. With that, we open it up to questions. Okay. I know I'm good, but not that good. I think I probably confused the heck out of everybody, and you do not even know what to ask at this point. Yeah. You made an interesting comment about the extra use of the manufacturing space being less of a drag on margin. How does it match up to your average margin? Right? You are going to be adding revenue, and are you taking the side that says any kind of margin that is less of a drag is less bad? Just the way you phrased that made it seem like it is not as attractive a margin as your normal business, but better than not having anything to add. Okay. Can you just clarify that? I can take that. Sure. Okay. My point in talking about that is, again, today we have the difference between product margin and gross margin includes under absorption. If you're overabsorbed, it's positive. If it's underabsorbed, it's negative. It's been underabsorbed. Sort of any business is good business. Now, saying that, we would look at everything carefully. The 3% margin is probably not going to make our cut, right? Our overall company gross margin is around 30%. Ideally, it would be at that 30% or better. The answer is not as clear, but my point is we have our targets, and we will work around those, but there might be some that are 25% that make sense for us to make. Thank you. You're welcome. Sorry for the confusion there. Yes. Talk about engineered solutions a good bit. Are your customers coming to you with problems and then you're developing these solutions, or does the reverse happen as well? No, we have about 20,000 customers worldwide. We have always made a policy out of what we call engineered solutions. No matter what a customer wants, if they come to us and say, "We want this particular module," or "We have this problem," we attempt with our 75 RF engineers. We try to solve those problems for us. A lot of times they're dead ends. When they have turned out well for us, like the wind turbine, for example, we have made very large profits. It is something we do. Some of it is not profitable, and some of it has turned out to be very profitable, and that is part of the business. It does work both ways. Ideally, the more we put ourselves out there and become known as a solution provider and solving people's problems, the more people that end up coming to us. You will see some of that in the EV rail space. We started out by selling a large company components, IGBTs, and a couple of other lines that we distribute. Through those conversations I have mentioned, our salespeople are trained engineers. They are asking constantly, "What are your other problems?" That is how that relationship started. They came to us and said, "You know what? We need to make this in America. We want you to help us with one of our plants in the U.S. The more we can get out there and the more we can show people what we're capable of, I think the more there will be people coming to us saying, "Hey, can you solve this for us?" $35 million in cash is no death. Who can do the cash? Invest in the boons. Right now, it is spread out. Everybody asks us this question. It is spread out amongst the legal entities. There's a certain percentage, a significant percentage within the U.S., but the rest of it is in our legal entities in foreign countries. We have repatriated as much of that cash as we can, and we continue to do that, but a lot of it has to stay there. So it's not accessible to us. You can borrow against it and play that shell game, but for the most part, we deal with the U.S. cash. At any given time, that cash is in constant motion. As we have excess cash, right now we're investing in the energy storage solutions, for example, that part of green energy. We're open to M&A, but it's most likely going to be engineering, smaller engineering companies. We're not actively out saying, "Hey, we want to look at you and you and you," but as opportunities are identified either through us or other people that we know, we'll take a look at that. That is what we're earmarking it for, is our growth strategy. To avoid having to dip into that. Yes. I'm going to look more detailed at what you do with Lam. With Lam? Was that your? That is what we've been considering other space again. Right. Lam has always been a very large customer. Years ago, we sold Novellus. That's where we started in that business in 2006. Novellus was sold to Lam, and we were making a lot of microwave devices for them. Those devices are used both in etch and also, what's the other technology? In deposition. In deposition. We have continued with those products. We make a microwave device. It's about $30,000. It looks like a 36 in stainless steel ring, and it has wave guides in it and microwave sound state products. We sell that type of product and about 100 other devices to Lam, and they have been one of our largest customers. We also sell to Tokyo Electron, to MKS. We sell some to Applied, but Applied is the largest competitor to Lam, so we favor Lam's business. That is a very important part of our business.

Speaker 3: All right, good afternoon. Our next presenting company, glad to have back Richardson Electronics to the Southwest IDEAS Conference. Trades on the Nasdaq under the symbol RELL. Here today to handle the presentation part is Wendy Diddell, the company's Chief Operating Officer. With her here to help on the Q&A side is Edward Richardson, the company's CEO. Wendy? All right, good afternoon. all right good afternoon Our next presenting company, glad to have back Richardson Electronics to the Southwest IDEAS Conference. our next presenting company glad to have back richardson electronics to the southwest ideas conference Trades on the Nasdaq under the symbol RELL. trades on the nasdaq under the symbol rell Here today to handle the presentation part is Wendy Diddell, the company's Chief Operating Officer. here today to handle the presentation part is wendy diddell the company's chief operating officer With her here to help on the Q&A side is Edward Richardson, the company's CEO. with her here to help on the q&a side is edward richardson the company's ceo Wendy? wendy

Speaker 5: Thank you. Thank you. thank you Okay, good afternoon, everybody. Who's new to the Richardson story? Okay, sorry for those people who aren't. I recognize some of you, you're going to hear some information that you've heard a number of times before, but we'll try to make this as succinct as possible. Thank you both, those existing shareholders, those we've met with, as well as potential new shareholders. Richardson Electronics, this is our facility. We're located outside of Chicago, Illinois. We're out in the cornfield. It's about 45 miles west. It is cold, but we always invite you to come visit us. Just make sure you come in May through October, November timeframe. You'll be good. The focus point for Richardson Electronics and what I'm going to spend a lot of time talking about today are engineered solutions. We started the company back in 1947. Okay, good afternoon, everybody. okay good afternoon everybody Who's new to the Richardson story? who's new to the richardson story Okay, sorry for those people who aren't. okay sorry for those people who aren't I recognize some of you, you're going to hear some information that you've heard a number of times before, but we'll try to make this as succinct as possible. i recognize some of you you're going to hear some information that you've heard a number of times before but we'll try to make this as succinct as possible Thank you both, those existing shareholders, those we've met with, as well as potential new shareholders. thank you both those existing shareholders those we've met with as well as potential new shareholders Richardson Electronics, this is our facility. richardson electronics this is our facility We're located outside of Chicago, Illinois. we're located outside of chicago illinois We're out in the cornfield. we're out in the cornfield It's about 45 miles west. it's about 45 miles west It is cold, but we always invite you to come visit us. it is cold but we always invite you to come visit us Just make sure you come in May through October, November timeframe. just make sure you come in may through october november timeframe You'll be good. you'll be good The focus point for Richardson Electronics and what I'm going to spend a lot of time talking about today are engineered solutions. the focus point for richardson electronics and what i'm going to spend a lot of time talking about today are engineered solutions We started the company back in 1947. we started the company back in 1947 Not we, I wasn't here in 1947, but the company was started in 1947. It has grown to an international company. We're almost 80 years old now, so we'll be celebrating our 80th anniversary in 2027. The picture you're seeing there, we have about a facility that's 250,000 sq ft, and it's on about 120 acres of land, of which we own all of that. People ask us all the time, you know, how are you set for growth? You can see here that within our facility, we have plenty of room to expand our business. Should we need to, it would be very easy for us to expand. You'll see why that's important as I get into the presentation. We are ISO 9001 certified. We're also ISO 13485, which is the medical certification. Today, the slide says we have 430 employees. Not we, I wasn't here in 1947, but the company was started in 1947. not we i wasn't here in 1947 but the company was started in 1947 It has grown to an international company. it has grown to an international company We're almost 80 years old now, so we'll be celebrating our 80th anniversary in 2027. we're almost 80 years old now so we'll be celebrating our 80th anniversary in 2027 The picture you're seeing there, we have about a facility that's 250,000 sq ft, and it's on about 120 acres of land, of which we own all of that. the picture you're seeing there we have about a facility that's 250,000 sq ft and it's on about 120 acres of land of which we own all of that People ask us all the time, you know, how are you set for growth? people ask us all the time you know how are you set for growth You can see here that within our facility, we have plenty of room to expand our business. you can see here that within our facility we have plenty of room to expand our business Should we need to, it would be very easy for us to expand. should we need to it would be very easy for us to expand You'll see why that's important as I get into the presentation. you'll see why that's important as i get into the presentation We are ISO 9001 certified. we are iso 9001 certified We're also ISO 13485, which is the medical certification. we're also iso 13485 which is the medical certification Today, the slide says we have 430 employees. today the slide says we have 430 employees We're more about 450 employees. About 200 and so are located in this facility. The rest are located throughout the world. Historically, we have served more than 20,000 end customers. On any given year, we probably serve between 5,000 and 10,000 of those. A lot of our business we'll talk about is MRO or repeat, which is nice because once you are in with these customers, it tends to be an annual or biannual renewal. We'll talk about that. I already mentioned we're outside of Chicago in LaFox. Globally, we have more than 60 locations. Some of those are home offices, so do not worry. We're not heavily invested in rent and other kinds of expenses like that. As a matter of fact, we've minimized that significantly over the last number of years. We're more about 450 employees. we're more about 450 employees About 200 and so are located in this facility. about 200 and so are located in this facility The rest are located throughout the world. the rest are located throughout the world Historically, we have served more than 20,000 end customers. historically we have served more than 20,000 end customers On any given year, we probably serve between 5,000 and 10,000 of those. on any given year we probably serve between 5,000 and 10,000 of those A lot of our business we'll talk about is MRO or repeat, which is nice because once you are in with these customers, it tends to be an annual or biannual renewal. a lot of our business we'll talk about is mro or repeat which is nice because once you are in with these customers it tends to be an annual or biannual renewal We'll talk about that. we'll talk about that I already mentioned we're outside of Chicago in LaFox. i already mentioned we're outside of chicago in lafox Globally, we have more than 60 locations. globally we have more than 60 locations Some of those are home offices, so do not worry. some of those are home offices so do not worry We're not heavily invested in rent and other kinds of expenses like that. we're not heavily invested in rent and other kinds of expenses like that As a matter of fact, we've minimized that significantly over the last number of years. as a matter of fact we've minimized that significantly over the last number of years We have 24 legal entities, which is important for us because, as I mentioned, we serve more than 20,000 end user customers. We are the importer of records. We can get product from any one of our facilities. We have three shipping locations. We can get product anywhere to anybody within two to three days. That is important in our business because, again, a lot of our business is aftermarket. If you're running a piece of equipment and it uses a power grid tube and that tube fails, your equipment is lying down. You need to get that replacement in just as quickly as possible. We have invested heavily in our infrastructure, like I said, to make it a global company. We are able to move product around. We have customers. We conduct business in multiple currencies. We have 24 legal entities, which is important for us because, as I mentioned, we serve more than 20,000 end user customers. we have 24 legal entities which is important for us because as i mentioned we serve more than 20,000 end user customers We are the importer of records. we are the importer of records We can get product from any one of our facilities. we can get product from any one of our facilities We have three shipping locations. we have three shipping locations We can get product anywhere to anybody within two to three days. we can get product anywhere to anybody within two to three days That is important in our business because, again, a lot of our business is aftermarket. that is important in our business because again a lot of our business is aftermarket If you're running a piece of equipment and it uses a power grid tube and that tube fails, your equipment is lying down. if you're running a piece of equipment and it uses a power grid tube and that tube fails your equipment is lying down You need to get that replacement in just as quickly as possible. you need to get that replacement in just as quickly as possible We have invested heavily in our infrastructure, like I said, to make it a global company. we have invested heavily in our infrastructure like i said to make it a global company we We are able to move product around. we are able to move product around We have customers. we have customers We conduct business in multiple currencies. we conduct business in multiple currencies We have IT systems that are designed specifically for that. We can see on any given customer, any given country, any given day, what it is we've quoted. That allows us to be very nimble and very flexible in both quoting our customers, moving inventory around, knowing where we can get it from, and how quickly we can get it to them. Today, we have three business units. For those of you who know the story, you might recall back in January, we had four. The fourth one that you do not see on the chart here was Richardson Healthcare. I'll come back to that in a minute. The three business units that we have today, the first one is the Power & Microwave Technology Group. That is our largest business unit. We have IT systems that are designed specifically for that. we have it systems that are designed specifically for that We can see on any given customer, any given country, any given day, what it is we've quoted. we can see on any given customer any given country any given day what it is we've quoted That allows us to be very nimble and very flexible in both quoting our customers, moving inventory around, knowing where we can get it from, and how quickly we can get it to them. that allows us to be very nimble and very flexible in both quoting our customers moving inventory around knowing where we can get it from and how quickly we can get it to them Today, we have three business units. today we have three business units For those of you who know the story, you might recall back in January, we had four. for those of you who know the story you might recall back in january we had four The fourth one that you do not see on the chart here was Richardson Healthcare. the fourth one that you do not see on the chart here was richardson healthcare I'll come back to that in a minute. i'll come back to that in a minute The three business units that we have today, the first one is the Power & Microwave Technology Group. the three business units that we have today the first one is the power & microwave technology group That is our largest business unit. that is our largest business unit That contains our legacy core business, which we refer to as EDG or the Electron Device Group. Those are the power grid tubes. It is also where we recognize our revenue for the semiconductor wafer fab market. Those are our two areas of our business that are really good parts of the business. We consider ourselves exclusive in the products that we make and sell. It is a profitable kind of cash cow. At least the EDG portion of our business definitely constitutes being a cash cow and driving profits for the future. The other part of PMT is a newer part of our business called PMG or the Power & Microwave Group. That business was started in 2015. That part of the business is component distribution. We work with technology partners like Qorvo and MACOM in that part of the business. That contains our legacy core business, which we refer to as EDG or the Electron Device Group. that contains our legacy core business which we refer to as edg or the electron device group Those are the power grid tubes. It is also where we recognize our revenue for the semiconductor wafer fab market. those are the power grid tubes. it is also where we recognize our revenue for the semiconductor wafer fab market Those are our two areas of our business that are really good parts of the business. those are our two areas of our business that are really good parts of the business We consider ourselves exclusive in the products that we make and sell. we consider ourselves exclusive in the products that we make and sell It is a profitable kind of cash cow. it is a profitable kind of cash cow At least the EDG portion of our business definitely constitutes being a cash cow and driving profits for the future. at least the edg portion of our business definitely constitutes being a cash cow and driving profits for the future The other part of PMT is a newer part of our business called PMG or the Power & Microwave Group. the other part of pmt is a newer part of our business called pmg or the power & microwave group That business was started in 2015. that business was started in 2015 That part of the business is component distribution. that part of the business is component distribution We work with technology partners like Qorvo and MACOM in that part of the business. we work with technology partners like qorvo and macom in that part of the business That part of the business is important because it often drives what we consider to be engineered solutions. It is also where we started the Green Energy Solutions Group. The Green Energy Solutions Group is our second business unit. You can think of that as either green energy or alternative energy. We are making components and solutions that go primarily into wind applications and EV rail applications. Now, some of you are probably sitting there thinking, "Oh, well, goodness, look at the current administration. What is that doing to your business?" In the Green Energy Solutions Group on the wind side, we do not serve any market that is offshore. We have zero exposure to offshore wind. In inshore wind, onshore wind, we serve primarily today a retrofit market. These are wind turbines that are already built. That part of the business is important because it often drives what we consider to be engineered solutions. that part of the business is important because it often drives what we consider to be engineered solutions It is also where we started the Green Energy Solutions Group. it is also where we started the green energy solutions group The Green Energy Solutions Group is our second business unit. the green energy solutions group is our second business unit You can think of that as either green energy or alternative energy. you can think of that as either green energy or alternative energy We are making components and solutions that go primarily into wind applications and EV rail applications. we are making components and solutions that go primarily into wind applications and ev rail applications Now, some of you are probably sitting there thinking, "Oh, well, goodness, look at the current administration. now some of you are probably sitting there thinking "oh well goodness look at the current administration What is that doing to your business?" In the Green Energy Solutions Group on the wind side, we do not serve any market that is offshore. what is that doing to your business?" in the green energy solutions group on the wind side we do not serve any market that is offshore We have zero exposure to offshore wind. we have zero exposure to offshore wind In inshore wind, onshore wind, we serve primarily today a retrofit market. in inshore wind onshore wind we serve primarily today a retrofit market These are wind turbines that are already built. these are wind turbines that are already built Our flagship product in this group is a module that goes into the nose cone of windmills, primarily for GE. It replaces lead-acid batteries. Lead-acid batteries, as you know, over the years have become a non-green type solution. Our modules are form fit and function replacement. You can literally go up to the nose cone, you pull out the lead-acid batteries, you drop in the Richardson module. The lead-acid batteries fail every six months to two years, depending on the environment that they're run in. The modules that we provide last up to 10 years. There is a compelling financial interest in that the turbines have their uptime as much greater. You are not experiencing times when they're not generating power or losing money that way. You are not sending people up into the towers as frequently. There are some tremendous financial advantages. Our flagship product in this group is a module that goes into the nose cone of windmills, primarily for GE. our flagship product in this group is a module that goes into the nose cone of windmills primarily for ge It replaces lead-acid batteries. it replaces lead-acid batteries Lead-acid batteries, as you know, over the years have become a non-green type solution. lead-acid batteries as you know over the years have become a non-green type solution Our modules are form fit and function replacement. our modules are form fit and function replacement You can literally go up to the nose cone, you pull out the lead-acid batteries, you drop in the Richardson module. you can literally go up to the nose cone you pull out the lead-acid batteries you drop in the richardson module The lead-acid batteries fail every six months to two years, depending on the environment that they're run in. the lead-acid batteries fail every six months to two years depending on the environment that they're run in The modules that we provide last up to 10 years. the modules that we provide last up to 10 years There is a compelling financial interest in that the turbines have their uptime as much greater. there is a compelling financial interest in that the turbines have their uptime as much greater You are not experiencing times when they're not generating power or losing money that way. you are not experiencing times when they're not generating power or losing money that way You are not sending people up into the towers as frequently. There are some tremendous financial advantages. you are not sending people up into the towers as frequently. there are some tremendous financial advantages That was the cornerstone of the green energy business. Since then, the product line has expanded to include other turbine manufacturers and other products, which I'll talk about in a little bit in the next couple of slides. The third part of our business is Canvas. Canvas is our display business. In Canvas, we make displays primarily for medical OEMs. We've been in the business for a long time. The majority of our customers are blue chip medical companies like Varian, Siemens, Philips, Karl Storz, Medtronic. Very high-profile names. As the name implies, what we make are custom displays. Typically in that market, we're looking at annual volumes between 1,000 and 5,000 pieces. They are one-to-one specific for a customer. We do not bring an off-the-shelf display to market and try to sell that to many. That was the cornerstone of the green energy business. that was the cornerstone of the green energy business Since then, the product line has expanded to include other turbine manufacturers and other products, which I'll talk about in a little bit in the next couple of slides. since then the product line has expanded to include other turbine manufacturers and other products which i'll talk about in a little bit in the next couple of slides The third part of our business is Canvas. the third part of our business is canvas Canvas is our display business. canvas is our display business In Canvas, we make displays primarily for medical OEMs. in canvas we make displays primarily for medical oems We've been in the business for a long time. we've been in the business for a long time The majority of our customers are blue chip medical companies like Varian, Siemens, Philips, Karl Storz, Medtronic. the majority of our customers are blue chip medical companies like varian siemens philips karl storz medtronic Very high-profile names. very high-profile names As the name implies, what we make are custom displays. as the name implies what we make are custom displays Typically in that market, we're looking at annual volumes between 1,000 and 5,000 pieces. typically in that market we're looking at annual volumes between 1,000 and 5,000 pieces They are one-to-one specific for a customer. they are one-to-one specific for a customer We do not bring an off-the-shelf display to market and try to sell that to many. we do not bring an off-the-shelf display to market and try to sell that to many Again, our engineers work very closely with the customer to define the requirements and provide them an exacting solution. Once you get into those customers, you're typically there for five to seven years minimum. That's primarily because there's a lot of approvals that are required to get that equipment, that medical equipment to market. Our portion of that piece of equipment, it may be endoscopy, it may be guided surgery. The display is typically a smaller part of that equipment. The last thing they want to do is have to go recertify. Those are our three business units today. Where we're focused, this is what everybody was like, "Well, where are you going with the company?" Because we've been around, as I said, for almost 80 years now. Really our focus is on the green energy solutions or alternative energy solutions part of our business. Again, our engineers work very closely with the customer to define the requirements and provide them an exacting solution. again our engineers work very closely with the customer to define the requirements and provide them an exacting solution Once you get into those customers, you're typically there for five to seven years minimum. once you get into those customers you're typically there for five to seven years minimum That's primarily because there's a lot of approvals that are required to get that equipment, that medical equipment to market. that's primarily because there's a lot of approvals that are required to get that equipment that medical equipment to market Our portion of that piece of equipment, it may be endoscopy, it may be guided surgery. our portion of that piece of equipment it may be endoscopy it may be guided surgery The display is typically a smaller part of that equipment. the display is typically a smaller part of that equipment The last thing they want to do is have to go recertify. the last thing they want to do is have to go recertify Those are our three business units today. those are our three business units today Where we're focused, this is what everybody was like, "Well, where are you going with the company?" Because we've been around, as I said, for almost 80 years now. where we're focused this is what everybody was like "well where are you going with the company?" because we've been around as i said for almost 80 years now Really our focus is on the green energy solutions or alternative energy solutions part of our business. really our focus is on the green energy solutions or alternative energy solutions part of our business That business, as I've already mentioned, was really an offshoot. You will find this is true of every business that Richardson Electronics has been in. It was an offshoot of the Power & Microwave Group. We were brought into that business because of the level of engineering expertise that we have. A former supplier who had gotten sold to our friend Elon no longer made products for a specific market. They were brought to us and said, "Hey, can you make a solution?" That was the birth of the ULTRA3000. that is where that came from. Our strategy is we start with our core business, and then we migrate and move up the food chain into engineered solutions. That business, as I've already mentioned, was really an offshoot. that business as i've already mentioned was really an offshoot You will find this is true of every business that Richardson Electronics has been in. you will find this is true of every business that richardson electronics has been in It was an offshoot of the Power & Microwave Group. it was an offshoot of the power & microwave group We were brought into that business because of the level of engineering expertise that we have. we were brought into that business because of the level of engineering expertise that we have A former supplier who had gotten sold to our friend Elon no longer made products for a specific market. a former supplier who had gotten sold to our friend elon no longer made products for a specific market They were brought to us and said, "Hey, can you make a solution?" That was the birth of the ULTRA3000. that is where that came from. they were brought to us and said "hey can you make a solution?" that was the birth of the ultra3000. that is where that came from Our strategy is we start with our core business, and then we migrate and move up the food chain into engineered solutions. our strategy is we start with our core business and then we migrate and move up the food chain into engineered solutions Our definition of engineered solutions, again, is we're exclusive, we bring engineering value, and it's not easy for somebody else to come in and replace what we do. On the ULTRA3000, for example, we have five patents today on that product. A lot of the patents are around the software that allow our unit to drop in and communicate with the GE turbine. It would be very difficult for somebody else to make a product that competes with us that would not trip over our patents. That is where we're going as a company, moving out of what you would consider core distribution. If you knew Richardson from many, many, many, many years ago, you may still think that, up into, again, engineered solutions where we develop and solve a problem for our customer. Our definition of engineered solutions, again, is we're exclusive, we bring engineering value, and it's not easy for somebody else to come in and replace what we do. our definition of engineered solutions again is we're exclusive we bring engineering value and it's not easy for somebody else to come in and replace what we do On the ULTRA3000, for example, we have five patents today on that product. on the ultra3000 for example we have five patents today on that product A lot of the patents are around the software that allow our unit to drop in and communicate with the GE turbine. a lot of the patents are around the software that allow our unit to drop in and communicate with the ge turbine It would be very difficult for somebody else to make a product that competes with us that would not trip over our patents. it would be very difficult for somebody else to make a product that competes with us that would not trip over our patents That is where we're going as a company, moving out of what you would consider core distribution. that is where we're going as a company moving out of what you would consider core distribution If you knew Richardson from many, many, many, many years ago, you may still think that, up into, again, engineered solutions where we develop and solve a problem for our customer. if you knew richardson from many many many many years ago you may still think that up into again engineered solutions where we develop and solve a problem for our customer A lot of times it includes products that we distribute or components that we distribute, which is a good thing. We're able to capitalize on technology that we know well and capitalize on the expertise and relationships with the suppliers and technology partners that we have. This kind of just shows you what I was talking about. You look at our list of technology partners, and that was phase one. We moved into the modules, which is phase two. Now where we're headed with the company is taking that one step further, and we're looking at the energy storage solutions. I've talked a lot about this already, so I'm not going to go into a lot more detail on the wind turbine opportunity other than to tell you, people say, "Well, again, what about the administration? A lot of times it includes products that we distribute or components that we distribute, which is a good thing. a lot of times it includes products that we distribute or components that we distribute which is a good thing We're able to capitalize on technology that we know well and capitalize on the expertise and relationships with the suppliers and technology partners that we have. we're able to capitalize on technology that we know well and capitalize on the expertise and relationships with the suppliers and technology partners that we have This kind of just shows you what I was talking about. this kind of just shows you what i was talking about You look at our list of technology partners, and that was phase one. you look at our list of technology partners and that was phase one We moved into the modules, which is phase two. we moved into the modules which is phase two Now where we're headed with the company is taking that one step further, and we're looking at the energy storage solutions. now where we're headed with the company is taking that one step further and we're looking at the energy storage solutions I've talked a lot about this already, so I'm not going to go into a lot more detail on the wind turbine opportunity other than to tell you, people say, "Well, again, what about the administration? i've talked a lot about this already so i'm not going to go into a lot more detail on the wind turbine opportunity other than to tell you people say "well again what about the administration How much market share do you have? We still today have a very small market share. When I show you our revenue, I'll talk a little bit about where that can go. You can see from this slide that the opportunity is over nearly $500 million. That is just for the number of turbines that are out there and the parts that we provide that we can capture. It is a very large market opportunity. The competition is almost non-existent in terms of the areas that we compete in. This is an area that you'll hear us talk a lot about. If you listen in on our calls, a lot of our existing investors ask us how we're doing in the wind market. This is a big piece of that. How much market share do you have? how much market share do you have We still today have a very small market share. we still today have a very small market share When I show you our revenue, I'll talk a little bit about where that can go. when i show you our revenue i'll talk a little bit about where that can go You can see from this slide that the opportunity is over nearly $500 million. That is just for the number of turbines that are out there and the parts that we provide that we can capture. you can see from this slide that the opportunity is over nearly $500 million. that is just for the number of turbines that are out there and the parts that we provide that we can capture It is a very large market opportunity. it is a very large market opportunity The competition is almost non-existent in terms of the areas that we compete in. the competition is almost non-existent in terms of the areas that we compete in This is an area that you'll hear us talk a lot about. this is an area that you'll hear us talk a lot about If you listen in on our calls, a lot of our existing investors ask us how we're doing in the wind market. if you listen in on our calls a lot of our existing investors ask us how we're doing in the wind market This is a big piece of that. this is a big piece of that What's not listed here is we just got our first orders in from a large OEM, wind turbine OEM in India. We've been talking about that for a couple of years. We are pleased to announce that we did get in our initial orders. We'll start shipping that. Now not only do we service all of the GE wind turbines, so any of the brands that are GE turbine-based, we have a module that supports them. Now we also are branching into other manufacturers. This is talking again about the energy storage solutions. What's not listed here is we just got our first orders in from a large OEM, wind turbine OEM in India. what's not listed here is we just got our first orders in from a large oem wind turbine oem in india We've been talking about that for a couple of years. we've been talking about that for a couple of years We are pleased to announce that we did get in our initial orders. we are pleased to announce that we did get in our initial orders We'll start shipping that. we'll start shipping that Now not only do we service all of the GE wind turbines, so any of the brands that are GE turbine-based, we have a module that supports them. now not only do we service all of the ge wind turbines so any of the brands that are ge turbine-based we have a module that supports them Now we also are branching into other manufacturers. now we also are branching into other manufacturers This is talking again about the energy storage solutions. this is talking again about the energy storage solutions I don't think any of you have picked up a newspaper or who reads newspapers anymore or looked on your phone and have not heard about energy storage and the fact that we simply, as a nation, I mean, throughout the world, don't have enough electricity today to meet the demands that are coming, especially with AI and other types of really big energy hogs, all these data centers that are going in and these distribution warehouses that are going in. What the energy storage allows you to do is just that. You get energy, you get either from you can get it from ComEd, from your regular energy sources. You can get it from solar. You can get it from wind. You collect and save that energy when you're not using it. I don't think any of you have picked up a newspaper or who reads newspapers anymore or looked on your phone and have not heard about energy storage and the fact that we simply, as a nation, I mean, throughout the world, don't have enough electricity today to meet the demands that are coming, especially with AI and other types of really big energy hogs, all these data centers that are going in and these distribution warehouses that are going in. i don't think any of you have picked up a newspaper or who reads newspapers anymore or looked on your phone and have not heard about energy storage and the fact that we simply as a nation i mean throughout the world don't have enough electricity today to meet the demands that are coming especially with ai and other types of really big energy hogs all these data centers that are going in and these distribution warehouses that are going in What the energy storage allows you to do is just that. what the energy storage allows you to do is just that You get energy, you get either from you can get it from ComEd, from your regular energy sources. you get energy you get either from you can get it from comed from your regular energy sources You can get it from solar. you can get it from solar You can get it from wind. you can get it from wind You collect and save that energy when you're not using it. you collect and save that energy when you're not using it You have the choice during a time when maybe the energy rates go up, you can pull from your own energy storage or you can sell it back. For example, we are putting our own system in in the Fox. It's not in. It'll be in after the first of the calendar year. In that case, we will get rebates from the state of Illinois that cover the cost of that box that you see there. We will store energy and sell it back to ComEd, for which we will get a premium. You have the choice during a time when maybe the energy rates go up, you can pull from your own energy storage or you can sell it back. you have the choice during a time when maybe the energy rates go up you can pull from your own energy storage or you can sell it back For example, we are putting our own system in in the Fox. for example we are putting our own system in in the fox It's not in. it's not in It'll be in after the first of the calendar year. it'll be in after the first of the calendar year In that case, we will get rebates from the state of Illinois that cover the cost of that box that you see there. in that case we will get rebates from the state of illinois that cover the cost of that box that you see there We will store energy and sell it back to ComEd, for which we will get a premium. we will store energy and sell it back to comed for which we will get a premium Our focus in this area with this product is not to try and compete against the big boys who are selling to the Amazons and those types of companies, but instead focus on that commercial industrial area that includes companies like Richardson Electronics and offer them a solution that allows them to, again, save money, capitalize on the need for more electricity. There is a lot more to follow on that. We have really just started approaching the market. We have several programs that, if everything goes according to plan, we should book between now and the year end. Then a list of ones that will follow in calendar 2026 and beyond. Huge market opportunity, $25 billion market. Makes the other part where we talked about $500 million seem very small in comparison. Very big market. We are excited and we are really investing. Our focus in this area with this product is not to try and compete against the big boys who are selling to the Amazons and those types of companies, but instead focus on that commercial industrial area that includes companies like Richardson Electronics and offer them a solution that allows them to, again, save money, capitalize on the need for more electricity. our focus in this area with this product is not to try and compete against the big boys who are selling to the amazons and those types of companies but instead focus on that commercial industrial area that includes companies like richardson electronics and offer them a solution that allows them to again save money capitalize on the need for more electricity There is a lot more to follow on that. We have really just started approaching the market. there is a lot more to follow on that. we have really just started approaching the market We have several programs that, if everything goes according to plan, we should book between now and the year end. we have several programs that if everything goes according to plan we should book between now and the year end Then a list of ones that will follow in calendar 2026 and beyond. then a list of ones that will follow in calendar 2026 and beyond Huge market opportunity, $25 billion market. huge market opportunity $25 billion market Makes the other part where we talked about $500 million seem very small in comparison. makes the other part where we talked about $500 million seem very small in comparison Very big market. very big market We are excited and we are really investing. we are excited and we are really investing People say, "Well, where are you investing your money?" It's in alternative energy and it's in the energy storage solutions. Here's just a list of some of the other applications and products that we're working on. We're not a one-trick pony. We did start with the ULTRA3000, the module for GE, but we've expanded around that same technology. One good example, we bring people into the LaFox factory. They have an opportunity to see that we're fully vertically integrated. Everything from concept to design to data units, we have our own machine shop. We have all of the ability to keep everything in-house. We do source components, but we make everything and design everything in-house. Metra, who in Chicago is one of the local carriers, came in and took a tour of the facility and they saw what we did. We do our thing. People say, "Well, where are you investing your money?" It's in alternative energy and it's in the energy storage solutions. people say "well where are you investing your money?" it's in alternative energy and it's in the energy storage solutions Here's just a list of some of the other applications and products that we're working on. here's just a list of some of the other applications and products that we're working on We're not a one-trick pony. we're not a one-trick pony We did start with the ULTRA3000, the module for GE, but we've expanded around that same technology. we did start with the ultra3000 the module for ge but we've expanded around that same technology One good example, we bring people into the LaFox factory. one good example we bring people into the lafox factory They have an opportunity to see that we're fully vertically integrated. they have an opportunity to see that we're fully vertically integrated Everything from concept to design to data units, we have our own machine shop. everything from concept to design to data units we have our own machine shop We have all of the ability to keep everything in-house. we have all of the ability to keep everything in-house We do source components, but we make everything and design everything in-house. we do source components but we make everything and design everything in-house Metra, who in Chicago is one of the local carriers, came in and took a tour of the facility and they saw what we did. metra who in chicago is one of the local carriers came in and took a tour of the facility and they saw what we did We do our thing. we do our thing Where's your pain point? Where are you really struggling? We've got these lights that are in all of our trains and they use lead-acid batteries. Those batteries are dying all the time. The lights are going out and we're constantly having to change those batteries. With them, we developed a lead-acid battery or a replacement for lead-acid batteries. That is now in its probably second or third round of testing and we'll be rolling out first to Metra and then again, there's no exclusive. We can sell it to other companies. That's an example of where somebody sees what our capabilities are. We ask them, "What's your pain point?" and we develop an engineered solution. We have a full team in LaFox and then throughout the world of engineers. They're mechanical, they're industrial, and electrical. Where's your pain point? where's your pain point Where are you really struggling? where are you really struggling We've got these lights that are in all of our trains and they use lead-acid batteries. we've got these lights that are in all of our trains and they use lead-acid batteries Those batteries are dying all the time. those batteries are dying all the time The lights are going out and we're constantly having to change those batteries. the lights are going out and we're constantly having to change those batteries With them, we developed a lead-acid battery or a replacement for lead-acid batteries. with them we developed a lead-acid battery or a replacement for lead-acid batteries That is now in its probably second or third round of testing and we'll be rolling out first to Metra and then again, there's no exclusive. that is now in its probably second or third round of testing and we'll be rolling out first to metra and then again there's no exclusive We can sell it to other companies. we can sell it to other companies That's an example of where somebody sees what our capabilities are. that's an example of where somebody sees what our capabilities are We ask them, "What's your pain point?" and we develop an engineered solution. we ask them "what's your pain point?" and we develop an engineered solution We have a full team in LaFox and then throughout the world of engineers. we have a full team in lafox and then throughout the world of engineers They're mechanical, they're industrial, and electrical. they're mechanical they're industrial and electrical We have become an extension of our customers' engineering and product development departments. Here is just a list of some of our key customers. Maybe you know them. Big names, RWE, Invenergy, GE, Metra. These are just a few of them that jump out. Our objective is to continue to find opportunities. Maybe we solve a problem for them and then we take that product and we sell it to a host of others. Our fiscal year, for those of you who are new, I should have mentioned this at the beginning of the year. Our fiscal year is June 1 through May 31st. It is a little bit different than most people's fiscal year. Right now we are just finishing up Q2, finish after Thanksgiving, Q2 of FY 2026. In general for 2026, what do we expect? We have become an extension of our customers' engineering and product development departments. Here is just a list of some of our key customers. we have become an extension of our customers' engineering and product development departments. here is just a list of some of our key customers Maybe you know them. maybe you know them Big names, RWE, Invenergy, GE, Metra. big names rwe invenergy ge metra These are just a few of them that jump out. these are just a few of them that jump out Our objective is to continue to find opportunities. our objective is to continue to find opportunities Maybe we solve a problem for them and then we take that product and we sell it to a host of others. maybe we solve a problem for them and then we take that product and we sell it to a host of others Our fiscal year, for those of you who are new, I should have mentioned this at the beginning of the year. our fiscal year for those of you who are new i should have mentioned this at the beginning of the year Our fiscal year is June 1 through May 31st. our fiscal year is june 1 through may 31st It is a little bit different than most people's fiscal year. it is a little bit different than most people's fiscal year Right now we are just finishing up Q2, finish after Thanksgiving, Q2 of FY 2026. right now we are just finishing up q2 finish after thanksgiving q2 of fy 2026 In general for 2026, what do we expect? in general for 2026 what do we expect Everybody asks us about what are the impacts of tariffs and the current administration. I have talked about some of the challenges, opportunities on the technology side, which again, for us right now, it has not hurt our wind business whatsoever, or actually our whole Green Energy Solutions business should be up considerably in FY 2026. Tariffs have not caused us problems. Again, we are able to move our product around. We do not have to bring product in the U.S. We have a warehouse in Amsterdam. We have a warehouse in China. We have satellites in Brazil and other locations. With that, we are not really exposed to the degree that a lot of companies are. People say, "Well, what has been the impact?" On us, again, we are able to either pass it through or we do not get hit with it whatsoever. Everybody asks us about what are the impacts of tariffs and the current administration. everybody asks us about what are the impacts of tariffs and the current administration I have talked about some of the challenges, opportunities on the technology side, which again, for us right now, it has not hurt our wind business whatsoever, or actually our whole Green Energy Solutions business should be up considerably in FY 2026. i have talked about some of the challenges opportunities on the technology side which again for us right now it has not hurt our wind business whatsoever or actually our whole green energy solutions business should be up considerably in fy 2026 Tariffs have not caused us problems. tariffs have not caused us problems Again, we are able to move our product around. again, we are able to move our product around We do not have to bring product in the U.S. we do not have to bring product in the u.s We have a warehouse in Amsterdam. we have a warehouse in amsterdam We have a warehouse in China. we have a warehouse in china We have satellites in Brazil and other locations. we have satellites in brazil and other locations With that, we are not really exposed to the degree that a lot of companies are. with that we are not really exposed to the degree that a lot of companies are People say, "Well, what has been the impact?" On us, again, we are able to either pass it through or we do not get hit with it whatsoever. people say "well what has been the impact?" on us again, we are able to either pass it through or we do not get hit with it whatsoever The impact would certainly be at the end user level and the impact that tariffs would have on general demand. That's something that's outside of our control. As I mentioned here, less than 5% of what we purchase actually comes from China, for example. An area where we were exposed to the highest potential tariffs, that is an area where we've minimized over the number of years our exposure in that market. Longer term, even with some of the current administration's policies, it actually opens up more doors for us. We've talked about wind turbines, another area is the Made in America program. We have a factory in LaFox, which I've shown you the pictures of. Right now we're running one shift and we have the capability to expand that. Our gross margin profile is currently somewhat exposed to an underabsorption in that factory. The impact would certainly be at the end user level and the impact that tariffs would have on general demand. the impact would certainly be at the end user level and the impact that tariffs would have on general demand That's something that's outside of our control. that's something that's outside of our control As I mentioned here, less than 5% of what we purchase actually comes from China, for example. as i mentioned here less than 5% of what we purchase actually comes from china for example An area where we were exposed to the highest potential tariffs, that is an area where we've minimized over the number of years our exposure in that market. an area where we were exposed to the highest potential tariffs that is an area where we've minimized over the number of years our exposure in that market Longer term, even with some of the current administration's policies, it actually opens up more doors for us. longer term even with some of the current administration's policies it actually opens up more doors for us We've talked about wind turbines, another area is the Made in America program. we've talked about wind turbines another area is the made in america program We have a factory in LaFox, which I've shown you the pictures of. we have a factory in lafox which i've shown you the pictures of Right now we're running one shift and we have the capability to expand that. right now we're running one shift and we have the capability to expand that Our gross margin profile is currently somewhat exposed to an underabsorption in that factory. our gross margin profile is currently somewhat exposed to an underabsorption in that factory We launched a program for the Made in America campaign. We hired people to work with both our existing customers, our existing suppliers, and also go out locally and in the area and find additional kinds of companies that need to move their manufacturing to the United States in order to hit certain goals and incentives. We currently have several programs that we're in kind of the final stages of quoting. We just started this program a couple of months ago now. Where I see kind of the strength right now is around PCBs and board stuffing. We have the potential to do that. We have the potential to do more. It looks like we're going to win two or three of those between now and probably the end of our second or third quarter. We launched a program for the Made in America campaign. we launched a program for the made in america campaign We hired people to work with both our existing customers, our existing suppliers, and also go out locally and in the area and find additional kinds of companies that need to move their manufacturing to the United States in order to hit certain goals and incentives. we hired people to work with both our existing customers our existing suppliers and also go out locally and in the area and find additional kinds of companies that need to move their manufacturing to the united states in order to hit certain goals and incentives We currently have several programs that we're in kind of the final stages of quoting. we currently have several programs that we're in kind of the final stages of quoting We just started this program a couple of months ago now. we just started this program a couple of months ago now Where I see kind of the strength right now is around PCBs and board stuffing. where i see kind of the strength right now is around pcbs and board stuffing We have the potential to do that. we have the potential to do that We have the potential to do more. we have the potential to do more It looks like we're going to win two or three of those between now and probably the end of our second or third quarter. it looks like we're going to win two or three of those between now and probably the end of our second or third quarter That will help us not only top line, maybe incremental revenue that we do not enjoy today, but it will help take up some of that underabsorption, which negatively impacts our gross margin. We are excited about that opportunity. I have mentioned the steady increase of the wind turbine modules. Again, we started out with GE and the U.S. focused. We have expanded that to Nordex, Senvion, SSB, Suzlon, and those sales are now coming not only from the U.S., but throughout the world. We have a very small market share, and so there is a tremendous amount of upside in that particular market. On the EV rail side, which we have not talked about, that is another segment of our green energy solutions business. EV rail, we work very closely with a couple of large players in the locomotive business. That will help us not only top line, maybe incremental revenue that we do not enjoy today, but it will help take up some of that underabsorption, which negatively impacts our gross margin. that will help us not only top line maybe incremental revenue that we do not enjoy today but it will help take up some of that underabsorption which negatively impacts our gross margin We are excited about that opportunity. I have mentioned the steady increase of the wind turbine modules. we are excited about that opportunity. i have mentioned the steady increase of the wind turbine modules Again, we started out with GE and the U.S. focused. again we started out with ge and the u.s focused We have expanded that to Nordex, Senvion, SSB, Suzlon, and those sales are now coming not only from the U.S., but throughout the world. we have expanded that to nordex senvion ssb suzlon and those sales are now coming not only from the u.s but throughout the world We have a very small market share, and so there is a tremendous amount of upside in that particular market. we have a very small market share and so there is a tremendous amount of upside in that particular market On the EV rail side, which we have not talked about, that is another segment of our green energy solutions business. on the ev rail side which we have not talked about, that is another segment of our green energy solutions business EV rail, we work very closely with a couple of large players in the locomotive business. ev rail we work very closely with a couple of large players in the locomotive business One of our newest products, which just started shipping in Q2, we've been talking about it for a while, is what's called a Start Saver. It replaces lead-acid batteries in diesel locomotives. This is a nice opportunity. The company that we're playing with is Wabtec. They're very, very strong on the product. They're anxiously rolling it out both to their customers, but they're also selling it to other train companies. They themselves are a very proponent of selling accessories to other companies. That one, again, is just starting to show in the revenue stream. Upside there as well. The other piece of the business that we really haven't touched on to a great deal, but those of you who know us well, we love our semiconductor wafer fab equipment market. One of our newest products, which just started shipping in Q2, we've been talking about it for a while, is what's called a Start Saver. one of our newest products which just started shipping in q2 we've been talking about it for a while is what's called a start saver It replaces lead-acid batteries in diesel locomotives. it replaces lead-acid batteries in diesel locomotives This is a nice opportunity. this is a nice opportunity The company that we're playing with is Wabtec. the company that we're playing with is wabtec They're very, very strong on the product. they're very very strong on the product They're anxiously rolling it out both to their customers, but they're also selling it to other train companies. they're anxiously rolling it out both to their customers but they're also selling it to other train companies They themselves are a very proponent of selling accessories to other companies. they themselves are a very proponent of selling accessories to other companies That one, again, is just starting to show in the revenue stream. that one again is just starting to show in the revenue stream Upside there as well. upside there as well The other piece of the business that we really haven't touched on to a great deal, but those of you who know us well, we love our semiconductor wafer fab equipment market. the other piece of the business that we really haven't touched on to a great deal but those of you who know us well we love our semiconductor wafer fab equipment market We actually make sub-assemblies for some of the largest companies that make semiconductor wafer fab equipment. Everybody knows that with AI and some other factors that that market, again, is on the upswing. It's very cyclical. Richardson Electronics, through its history, has rode that wave up and down. We're now on the upside. Fiscal year 2023 was the height of the last upside, 2024, 2025, we're in the trough, and now we're back up again. From all indications, that business will continue to grow through calendar year 2026. As a result, we will grow along with that business. We've been in that business just for what year? Since 2006. Since 2006, we sold to Novellus. Novellus was subsequently acquired by Lam Research, and they are now one of our very key and favorite customers. Let me look at the financials with you real quick here. All right. We actually make sub-assemblies for some of the largest companies that make semiconductor wafer fab equipment. we actually make sub-assemblies for some of the largest companies that make semiconductor wafer fab equipment Everybody knows that with AI and some other factors that that market, again, is on the upswing. everybody knows that with ai and some other factors that that market again is on the upswing It's very cyclical. it's very cyclical Richardson Electronics, through its history, has rode that wave up and down. richardson electronics through its history has rode that wave up and down We're now on the upside. we're now on the upside Fiscal year 2023 was the height of the last upside, 2024, 2025, we're in the trough, and now we're back up again. fiscal year 2023 was the height of the last upside 2024 2025 we're in the trough and now we're back up again From all indications, that business will continue to grow through calendar year 2026. from all indications that business will continue to grow through calendar year 2026 As a result, we will grow along with that business. as a result we will grow along with that business We've been in that business just for what year? we've been in that business just for what year Since 2006. since 2006 since 2006 Since 2006, we sold to Novellus. since 2006 we sold to novellus Novellus was subsequently acquired by Lam Research, and they are now one of our very key and favorite customers. novellus was subsequently acquired by lam research and they are now one of our very key and favorite customers Let me look at the financials with you real quick here. let me look at the financials with you real quick here All right. all right In the first quarter, which again was June, July, August, our sales were up about 2% year-over-year, quarter-over-quarter. As I mentioned, we sold our healthcare business in January of 2025. We still were and are going to be dealing with some competitive just comps. We're dealing with year-over-year comps where we had some business last year that we don't have this year. If you factor that in, if you take that out of our business, our overall business was actually up almost 7% quarter-over-quarter in Q1. Our goal is to drive increases on an annual basis in the double digits. Obviously, 7% may not excite everybody, but our goal is to have much better growth than that and we're pushing towards that. Consolidated gross margin was 31% in the first quarter. In the first quarter, which again was June, July, August, our sales were up about 2% year- over- year, quarter- over- quarter. in the first quarter which again was june july august our sales were up about 2% year- over- year quarter- over- quarter As I mentioned, we sold our healthcare business in January of 2025. as i mentioned we sold our healthcare business in january of 2025 We still were and are going to be dealing with some competitive just comps. we still were and are going to be dealing with some competitive just comps We're dealing with year-over-year comps where we had some business last year that we don't have this year. we're dealing with year-over-year comps where we had some business last year that we don't have this year If you factor that in, if you take that out of our business, our overall business was actually up almost 7% quarter- over- quarter in Q1. if you factor that in if you take that out of our business our overall business was actually up almost 7% quarter- over- quarter in q1 Our goal is to drive increases on an annual basis in the double digits. our goal is to drive increases on an annual basis in the double digits Obviously, 7% may not excite everybody, but our goal is to have much better growth than that and we're pushing towards that. obviously 7% may not excite everybody but our goal is to have much better growth than that and we're pushing towards that Consolidated gross margin was 31% in the first quarter. consolidated gross margin was 31% in the first quarter You're seeing some margin improvement. That margin improvement comes from product mix, but it really comes from our focus on two things, I think. One is engineered solutions, which again, are items that we design and manufacture or have manufactured to our specifications. Those carry higher margins. The more that we can, again, push through our factory, the better that gross margin is going to be. The third component of improvement as we go forward is in the healthcare business. The healthcare business, we started in 2015. It was a very challenging business for us. Obviously, it did not materialize the way we wanted it to, which is why we sold the majority of it at the beginning of this calendar year. We still have a supply agreement that we are dealing with that we have to supply certain CT tubes that we manufacture. You're seeing some margin improvement. you're seeing some margin improvement That margin improvement comes from product mix, but it really comes from our focus on two things, I think. that margin improvement comes from product mix but it really comes from our focus on two things i think One is engineered solutions, which again, are items that we design and manufacture or have manufactured to our specifications. one is engineered solutions which again are items that we design and manufacture or have manufactured to our specifications Those carry higher margins. those carry higher margins The more that we can, again, push through our factory, the better that gross margin is going to be. the more that we can again push through our factory the better that gross margin is going to be The third component of improvement as we go forward is in the healthcare business. the third component of improvement as we go forward is in the healthcare business The healthcare business, we started in 2015. the healthcare business we started in 2015 It was a very challenging business for us. it was a very challenging business for us Obviously, it did not materialize the way we wanted it to, which is why we sold the majority of it at the beginning of this calendar year. obviously it did not materialize the way we wanted it to which is why we sold the majority of it at the beginning of this calendar year We still have a supply agreement that we are dealing with that we have to supply certain CT tubes that we manufacture. we still have a supply agreement that we are dealing with that we have to supply certain ct tubes that we manufacture Part of that we will be finished manufacturing in January, February timeframe, after which a lot of that will roll to the bottom line. Meaning today we are still losing money on healthcare. When we finish up that manufacturing between now and the end of our fiscal year, it will be very positive to our bottom line. That is something that if I were in your shoes, that is what I would be looking for. Pay attention to that. Net income for the first quarter was $1.9 million versus about a little over $500,000 last year. We were definitely moving in the right direction. As I have already mentioned, the focus is not only on gross margin and revenue improvement. What we have not talked about is inventory. If you know the Richardson story, you know our inventory for a while was creeping up. Part of that we will be finished manufacturing in January, February timeframe, after which a lot of that will roll to the bottom line. part of that we will be finished manufacturing in january february timeframe after which a lot of that will roll to the bottom line Meaning today we are still losing money on healthcare. meaning today we are still losing money on healthcare When we finish up that manufacturing between now and the end of our fiscal year, it will be very positive to our bottom line. when we finish up that manufacturing between now and the end of our fiscal year it will be very positive to our bottom line That is something that if I were in your shoes, that is what I would be looking for. that is something that if i were in your shoes, that is what i would be looking for Pay attention to that. pay attention to that Net income for the first quarter was $1.9 million versus about a little over $500,000 last year. net income for the first quarter was $1.9 million versus about a little over $500,000 last year We were definitely moving in the right direction. we were definitely moving in the right direction As I have already mentioned, the focus is not only on gross margin and revenue improvement. as i have already mentioned the focus is not only on gross margin and revenue improvement What we have not talked about is inventory. what we have not talked about is inventory If you know the Richardson story, you know our inventory for a while was creeping up. if you know the richardson story you know our inventory for a while was creeping up A lot of that is associated with one of our critical suppliers on the EDG tube side of our business. That company is stopping manufacturing at the end of this calendar year. We have been over the past several years acquiring inventory specifically of that particular line in order to meet demand for the next three to five years, during which time we own the majority of the technology. We will be moving that to either other locations or deciding that we have sufficient inventory and we can retire that particular line. Because of that, our inventory grew significantly. That is not a great thing. We get that, but it really caused us to take a step back and look at all of our suppliers and all of our product lines and our purchasing. A lot of that is associated with one of our critical suppliers on the EDG tube side of our business. a lot of that is associated with one of our critical suppliers on the edg tube side of our business That company is stopping manufacturing at the end of this calendar year. that company is stopping manufacturing at the end of this calendar year We have been over the past several years acquiring inventory specifically of that particular line in order to meet demand for the next three to five years, during which time we own the majority of the technology. We will be moving that to either other locations or deciding that we have sufficient inventory and we can retire that particular line. we have been over the past several years acquiring inventory specifically of that particular line in order to meet demand for the next three to five years during which time we own the majority of the technology. we will be moving that to either other locations or deciding that we have sufficient inventory and we can retire that particular line Because of that, our inventory grew significantly. because of that our inventory grew significantly That is not a great thing. that is not a great thing We get that, but it really caused us to take a step back and look at all of our suppliers and all of our product lines and our purchasing. we get that but it really caused us to take a step back and look at all of our suppliers and all of our product lines and our purchasing When you take that one vendor out, what you will notice is that our inventory has been decreasing and our turns are improving. Inventory, particularly of that product line, again, will stop growing at the end of the first quarter in calendar year 2026, after which it will become a source of cash. All right. Speaking of cash, balance sheet-wise, we have zero debt. We have about $30 million-$35 million of cash on the books. We have a line of credit should we need it. We have not needed it, and our goal is not to need it. We have been generating operating cash flow. Without the healthcare business, again, once we finish that up, that will become even more of a, the company will become even more profitable and generate more cash. When you take that one vendor out, what you will notice is that our inventory has been decreasing and our turns are improving. when you take that one vendor out what you will notice is that our inventory has been decreasing and our turns are improving Inventory, particularly of that product line, again, will stop growing at the end of the first quarter in calendar year 2026, after which it will become a source of cash. inventory particularly of that product line again will stop growing at the end of the first quarter in calendar year 2026 after which it will become a source of cash All right. all right Speaking of cash, balance sheet-wise, we have zero debt. speaking of cash balance sheet-wise we have zero debt We have about $30 million-$35 million of cash on the books. we have about $30 million-$35 million of cash on the books We have a line of credit should we need it. we have a line of credit should we need it We have not needed it, and our goal is not to need it. we have not needed it and our goal is not to need it We have been generating operating cash flow. we have been generating operating cash flow Without the healthcare business, again, once we finish that up, that will become even more of a, the company will become even more profitable and generate more cash. without the healthcare business again once we finish that up, that will become even more of a the company will become even more profitable and generate more cash We're, again, knock on wood, looking forward to the end of making those particular tubes. We do pay a cash dividend. If that's important to you, we're a good stock to take a look at. We're very tight on SG&A and on capital expenditures. Last year was a particularly low year for us in capital expenditures. FY 2026 will be a little bit higher. There are some IT systems that, unfortunately, fortunately, we have to upgrade because Microsoft is not going to support them any longer. We're making some investment in the IT systems. We've also made investments in the PCB lines that we have because not only will it allow us to capture new business, it allows us to improve our cost profile on the ULTRA3000 modules as well as protect our supply chain. We're, again, knock on wood, looking forward to the end of making those particular tubes. we're again knock on wood looking forward to the end of making those particular tubes We do pay a cash dividend. we do pay a cash dividend If that's important to you, we're a good stock to take a look at. if that's important to you we're a good stock to take a look at We're very tight on SG&A and on capital expenditures. we're very tight on sg&a and on capital expenditures Last year was a particularly low year for us in capital expenditures. last year was a particularly low year for us in capital expenditures FY 2026 will be a little bit higher. There are some IT systems that, unfortunately, fortunately, we have to upgrade because Microsoft is not going to support them any longer. fy 2026 will be a little bit higher. there are some it systems that unfortunately fortunately we have to upgrade because microsoft is not going to support them any longer We're making some investment in the IT systems. we're making some investment in the it systems We've also made investments in the PCB lines that we have because not only will it allow us to capture new business, it allows us to improve our cost profile on the ULTRA3000 modules as well as protect our supply chain. we've also made investments in the pcb lines that we have because not only will it allow us to capture new business it allows us to improve our cost profile on the ultra3000 modules as well as protect our supply chain We might see a little bit of increase in FY 2026 on the CapEx side, but we're watching that closely. We continue to invest where it makes sense in working capital to support the growth initiatives. The primary area, again, is in the green energy alternative solutions part of our business. Okay. With that, we can turn it over to questions if anybody has any. I know that's a lot to digest, and we always tell people if you're new to the story, please don't hesitate to reach out. I'm Wendy D at rell.com. Ed is Ed at rell.com. We're probably two of the most approachable people you'll find in terms of dealing with our investors and potential investors. We love to talk. Let us know. We might see a little bit of increase in FY 2026 on the CapEx side, but we're watching that closely. we might see a little bit of increase in fy 2026 on the capex side but we're watching that closely We continue to invest where it makes sense in working capital to support the growth initiatives. we continue to invest where it makes sense in working capital to support the growth initiatives The primary area, again, is in the green energy alternative solutions part of our business. the primary area again is in the green energy alternative solutions part of our business Okay. okay With that, we can turn it over to questions if anybody has any. with that we can turn it over to questions if anybody has any I know that's a lot to digest, and we always tell people if you're new to the story, please don't hesitate to reach out. i know that's a lot to digest and we always tell people if you're new to the story please don't hesitate to reach out I'm Wendy D at rell.com. i'm wendy d at rell.com Ed is Ed at rell.com. ed is ed at rell.com We're probably two of the most approachable people you'll find in terms of dealing with our investors and potential investors. we're probably two of the most approachable people you'll find in terms of dealing with our investors and potential investors We love to talk. we love to talk Let us know. let us know

Speaker 4: Thanks, Wendy. Obviously, she knows the business extremely well. Wendy's been with us since 2003, and she's Chief Operating Officer. Thanks, Wendy. thanks wendy Obviously, she knows the business extremely well. obviously she knows the business extremely well Wendy's been with us since 2003, and she's Chief Operating Officer. wendy's been with us since 2003 and she's chief operating officer She does all the work, and I take all the credit. With that, we open it up to questions. She does all the work, and I take all the credit. she does all the work and i take all the credit With that, we open it up to questions. with that we open it up to questions

Speaker 5: Okay. I know I'm good, but not that good. I think I probably confused the heck out of everybody, and you do not even know what to ask at this point. Yeah. Okay. okay I know I'm good, but not that good. i know i'm good but not that good I think I probably confused the heck out of everybody, and you do not even know what to ask at this point. i think i probably confused the heck out of everybody and you do not even know what to ask at this point Yeah. yeah You made an interesting comment about the extra use of the manufacturing space being less of a drag on margin. How does it match up to your average margin? Right? You are going to be adding revenue, and are you taking the side that says any kind of margin that is less of a drag is less bad? Just the way you phrased that made it seem like it is not as attractive a margin as your normal business, but better than not having anything to add. You made an interesting comment about the extra use of the manufacturing space being less of a drag on margin. you made an interesting comment about the extra use of the manufacturing space being less of a drag on margin How does it match up to your average margin? how does it match up to your average margin Right? right You are going to be adding revenue, and are you taking the side that says any kind of margin that is less of a drag is less bad? you are going to be adding revenue and are you taking the side that says any kind of margin that is less of a drag is less bad Just the way you phrased that made it seem like it is not as attractive a margin as your normal business, but better than not having anything to add. just the way you phrased that made it seem like it is not as attractive a margin as your normal business but better than not having anything to add Okay. Okay. okay Can you just clarify that? Can you just clarify that? can you just clarify that I can take that. I can take that. i can take that

Speaker 4: Sure. Sure. sure

Speaker 5: Okay. My point in talking about that is, again, today we have the difference between product margin and gross margin includes under absorption. If you're overabsorbed, it's positive. If it's underabsorbed, it's negative. It's been underabsorbed. Sort of any business is good business. Now, saying that, we would look at everything carefully. The 3% margin is probably not going to make our cut, right? Our overall company gross margin is around 30%. Ideally, it would be at that 30% or better. The answer is not as clear, but my point is we have our targets, and we will work around those, but there might be some that are 25% that make sense for us to make. Okay. okay My point in talking about that is, again, today we have the difference between product margin and gross margin includes under absorption. my point in talking about that is again today we have the difference between product margin and gross margin includes under absorption If you're overabsorbed, it's positive. if you're overabsorbed it's positive If it's underabsorbed, it's negative. if it's underabsorbed it's negative It's been underabsorbed. it's been underabsorbed Sort of any business is good business. sort of any business is good business Now, saying that, we would look at everything carefully. now saying that we would look at everything carefully The 3% margin is probably not going to make our cut, right? the 3% margin is probably not going to make our cut right Our overall company gross margin is around 30%. our overall company gross margin is around 30% Ideally, it would be at that 30% or better. ideally it would be at that 30% or better The answer is not as clear, but my point is we have our targets, and we will work around those, but there might be some that are 25% that make sense for us to make. the answer is not as clear but my point is we have our targets and we will work around those but there might be some that are 25% that make sense for us to make Thank you. Thank you. thank you You're welcome. Sorry for the confusion there. You're welcome. you're welcome Sorry for the confusion there. sorry for the confusion there

Speaker 4: Yes. Yes. yes Talk about engineered solutions a good bit. Talk about engineered solutions a good bit. talk about engineered solutions a good bit Are your customers coming to you with problems and then you're developing these solutions, or does the reverse happen as well? Are your customers coming to you with problems and then you're developing these solutions, or does the reverse happen as well? are your customers coming to you with problems and then you're developing these solutions or does the reverse happen as well No, we have about 20,000 customers worldwide. We have always made a policy out of what we call engineered solutions. No matter what a customer wants, if they come to us and say, "We want this particular module," or "We have this problem," we attempt with our 75 RF engineers. We try to solve those problems for us. A lot of times they're dead ends. When they have turned out well for us, like the wind turbine, for example, we have made very large profits. It is something we do. Some of it is not profitable, and some of it has turned out to be very profitable, and that is part of the business. No, we have about 20,000 customers worldwide. no we have about 20,000 customers worldwide We have always made a policy out of what we call engineered solutions. we have always made a policy out of what we call engineered solutions No matter what a customer wants, if they come to us and say, "We want this particular module," or "We have this problem," we attempt with our 75 RF engineers. no matter what a customer wants if they come to us and say "we want this particular module," or "we have this problem," we attempt with our 75 rf engineers We try to solve those problems for us. we try to solve those problems for us A lot of times they're dead ends. a lot of times they're dead ends When they have turned out well for us, like the wind turbine, for example, we have made very large profits. when they have turned out well for us like the wind turbine for example, we have made very large profits It is something we do. it is something we do Some of it is not profitable, and some of it has turned out to be very profitable, and that is part of the business. some of it is not profitable and some of it has turned out to be very profitable and that is part of the business

Speaker 5: It does work both ways. It does work both ways. it does work both ways Ideally, the more we put ourselves out there and become known as a solution provider and solving people's problems, the more people that end up coming to us. You will see some of that in the EV rail space. We started out by selling a large company components, IGBTs, and a couple of other lines that we distribute. Through those conversations I have mentioned, our salespeople are trained engineers. They are asking constantly, "What are your other problems?" That is how that relationship started. They came to us and said, "You know what? We need to make this in America. Ideally, the more we put ourselves out there and become known as a solution provider and solving people's problems, the more people that end up coming to us. ideally the more we put ourselves out there and become known as a solution provider and solving people's problems the more people that end up coming to us You will see some of that in the EV rail space. you will see some of that in the ev rail space We started out by selling a large company components, IGBTs, and a couple of other lines that we distribute. we started out by selling a large company components igbts and a couple of other lines that we distribute Through those conversations I have mentioned, our salespeople are trained engineers. They are asking constantly, "What are your other problems?" That is how that relationship started. through those conversations i have mentioned our salespeople are trained engineers. they are asking constantly "what are your other problems?" that is how that relationship started They came to us and said, "You know what? they came to us and said "you know what We need to make this in America. we need to make this in america We want you to help us with one of our plants in the U.S. The more we can get out there and the more we can show people what we're capable of, I think the more there will be people coming to us saying, "Hey, can you solve this for us?" We want you to help us with one of our plants in the U.S. we want you to help us with one of our plants in the u.s The more we can get out there and the more we can show people what we're capable of, I think the more there will be people coming to us saying, "Hey, can you solve this for us?" the more we can get out there and the more we can show people what we're capable of i think the more there will be people coming to us saying "hey can you solve this for us?" $35 million in cash is no death. Who can do the cash? $35 million in cash is no death. $35 million in cash is no death Who can do the cash? who can do the cash

Speaker 4: Invest in the boons. Invest in the boons. invest in the boons

Speaker 5: Right now, it is spread out. Everybody asks us this question. It is spread out amongst the legal entities. There's a certain percentage, a significant percentage within the U.S., but the rest of it is in our legal entities in foreign countries. We have repatriated as much of that cash as we can, and we continue to do that, but a lot of it has to stay there. So it's not accessible to us. Right now, it is spread out. right now it is spread out Everybody asks us this question. everybody asks us this question It is spread out amongst the legal entities. it is spread out amongst the legal entities There's a certain percentage, a significant percentage within the U.S., but the rest of it is in our legal entities in foreign countries. there's a certain percentage a significant percentage within the u.s but the rest of it is in our legal entities in foreign countries We have repatriated as much of that cash as we can, and we continue to do that, but a lot of it has to stay there. we have repatriated as much of that cash as we can and we continue to do that but a lot of it has to stay there So it's not accessible to us. so it's not accessible to us You can borrow against it and play that shell game, but for the most part, we deal with the U.S. cash. At any given time, that cash is in constant motion. As we have excess cash, right now we're investing in the energy storage solutions, for example, that part of green energy. We're open to M&A, but it's most likely going to be engineering, smaller engineering companies. We're not actively out saying, "Hey, we want to look at you and you and you," but as opportunities are identified either through us or other people that we know, we'll take a look at that. That is what we're earmarking it for, is our growth strategy. To avoid having to dip into that. You can borrow against it and play that shell game, but for the most part, we deal with the U.S. cash. you can borrow against it and play that shell game but for the most part we deal with the u.s cash At any given time, that cash is in constant motion. at any given time that cash is in constant motion As we have excess cash, right now we're investing in the energy storage solutions, for example, that part of green energy. as we have excess cash right now we're investing in the energy storage solutions for example that part of green energy We're open to M&A, but it's most likely going to be engineering, smaller engineering companies. we're open to m&a but it's most likely going to be engineering smaller engineering companies We're not actively out saying, "Hey, we want to look at you and you and you," but as opportunities are identified either through us or other people that we know, we'll take a look at that. we're not actively out saying "hey we want to look at you and you and you," but as opportunities are identified either through us or other people that we know we'll take a look at that That is what we're earmarking it for, is our growth strategy. that is what we're earmarking it for is our growth strategy To avoid having to dip into that. to avoid having to dip into that

Speaker 4: Yes. Yes. yes I'm going to look more detailed at what you do with Lam. I'm going to look more detailed at what you do with Lam. i'm going to look more detailed at what you do with lam With Lam? Was that your? With Lam? with lam Was that your? was that your That is what we've been considering other space again. That is what we've been considering other space again. that is what we've been considering other space again Right. Right. right Lam has always been a very large customer. Years ago, we sold Novellus. That's where we started in that business in 2006. Novellus was sold to Lam, and we were making a lot of microwave devices for them. Those devices are used both in etch and also, what's the other technology? In deposition. In deposition. We have continued with those products. We make a microwave device. It's about $30,000. It looks like a 36 in stainless steel ring, and it has wave guides in it and microwave sound state products. We sell that type of product and about 100 other devices to Lam, and they have been one of our largest customers. We also sell to Tokyo Electron, to MKS. We sell some to Applied, but Applied is the largest competitor to Lam, so we favor Lam's business. Lam has always been a very large customer. lam has always been a very large customer Years ago, we sold Novellus. years ago we sold novellus That's where we started in that business in 2006. that's where we started in that business in 2006 Novellus was sold to Lam, and we were making a lot of microwave devices for them. novellus was sold to lam and we were making a lot of microwave devices for them Those devices are used both in etch and also, what's the other technology? those devices are used both in etch and also what's the other technology In deposition. in deposition in In deposition. in deposition We have continued with those products. we have continued with those products We make a microwave device. we make a microwave device It's about $30,000. it's about $30,000 It looks like a 36 in stainless steel ring, and it has wave guides in it and microwave sound state products. it looks like a 36 in stainless steel ring and it has wave guides in it and microwave sound state products We sell that type of product and about 100 other devices to Lam, and they have been one of our largest customers. we sell that type of product and about 100 other devices to lam and they have been one of our largest customers We also sell to Tokyo Electron, to MKS. we also sell to tokyo electron to mks We sell some to Applied, but Applied is the largest competitor to Lam, so we favor Lam's business. we sell some to applied but applied is the largest competitor to lam so we favor lam's business That is a very important part of our business. That is a very important part of our business. that is a very important part of our business