Richardson Electronics (RELL) Q1 2027 Earnings Call Transcript

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DATE

Thu, Oct. 8, 2026

CALL PARTICIPANTS

• Chairman of the Board and CEO - Edward Richardson
• Chief Financial Officer - Robert Ben
• Chief Operating Officer - Wendy Diddell
• General Manager of Power and Microwave Technologies and Green Energy Solutions Groups - Gregory Peloquin
• General Manager of Canvys - Jens Ruppert

TAKEAWAYS

• Net Sales -- $64.9 million, representing an 18.9% increase compared to $54.6 million in the prior year first quarter.
• Operating Income -- $5.1 million, reflecting a fivefold increase from $1.0 million in the previous year driven by sales growth and expanded gross margins.
• Net Income -- $4.1 million, compared to $1.9 million in the first quarter of fiscal 2026.
• Diluted EPS -- $0.27, representing an increase from $0.13 in the first quarter of fiscal 2026.
• Total Backlog -- $184.4 million, an increase of $20 million since the end of fiscal 2026.
• PMT Segment Sales -- $46.6 million excluding the legacy healthcare business, a 23.1% increase driven by semiconductor wafer fab and RF products.
• GES Segment Sales -- $9.4 million approximately, representing a 27.1% increase over the prior year first quarter as more customers adopted products across broader applications.
• Canvys Segment Sales -- $8.9 million, reflecting a 7.9% increase due to higher sales in North America.
• Consolidated Gross Margin -- 34.6%, compared to 31.0% in the prior year, benefiting from a 170 basis point IEEPA Tariff Refund.
• PMT Gross Margin -- 35.4%, compared to 31.3% in the prior year first quarter, reflecting product mix and the tariff refund.
• GES Gross Margin -- 32.6%, increasing from 29.6% due to a product mix that included new systems.
• Operating Expenses -- $17.4 million, compared to $16.0 million in the prior year first quarter, resulting from higher employee compensation and travel expenses.
• Cash and Cash Equivalents -- $36.9 million, representing an increase from $31.8 million at the end of fiscal 2026.
• Operating Cash Flow -- $5.9 million, compared to $1.4 million in the first quarter of fiscal 2026.
• Capital Expenditures -- $1.7 million, primarily related to facilities improvements and IT systems.
• Inventory -- $103.3 million, remaining essentially flat compared to fiscal 2026 year-end.
• BESS Program Bookings -- $2 million, highlighting the acceleration of the energy storage strategy with nearly 50 active opportunities.
• Wind Turbine Product Shipments -- 90,000 units, representing the total count since the launch of the first wind and power management product.
• PMT Backlog -- $99.4 million, representing the largest portion of the company's total backlog.
• GES Backlog -- $43.2 million, as reported during the first quarter.
• Canvys Backlog -- $41.8 million, with a book-to-bill ratio of 1.1 at the end of the quarter.
• Quarterly Cash Dividend -- $0.06 per common share, declared for payment in the second quarter of fiscal 2027.

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RISKS

• Ruppert stated, "Tariffs, trade policy changes, logistics conditions, and customer scheduling continue to create uncertainty," noting that the quarter unfolded in an uneven global economy.
• Richardson stated, "The macro environment remains uncertain with trade policies, tariffs, geopolitical developments, energy markets, and global economic conditions creating challenges across industries," although he noted underlying demand drivers remain strong.

SUMMARY

Richardson Electronics, Ltd. (NASDAQ:RELL) reported its ninth consecutive quarter of year-over-year top-line growth, driven by demand in the semiconductor wafer fabrication and green energy markets. Management reported significant margin expansion resulting from favorable product mix and a one-time tariff refund, while maintaining a debt-free balance sheet with increased cash reserves. The company is transitioning its battery energy storage strategy from development into commercial adoption, supported by new project wins in North America and a growing international presence for its wind energy modules.

• COO Diddell reported that the company began shipments for an Alaska project involving 18 customized Battery Energy Storage Systems serving seven remote communities.
• General Manager Peloquin noted that approximately 75% of the current backlog is scheduled to ship within the current fiscal year.
• The company is implementing practical artificial intelligence use cases across sales, supply chain, and manufacturing after completing an initial readiness assessment.
• Management is expanding manufacturing capacity by adding additional shifts to meet semiconductor demand expected to persist into calendar year 2027.
• Richardson Electronics expanded its RESS product family with the introduction of the RESS 211 and RESS 422 systems during the quarter.
• The company reported exclusive partnerships with the top four owner-operators of GE wind turbines for its Pitch Energy Modules.
• CEO Richardson stated, "A strong balance sheet and debt-free position provide flexibility to invest in strategic growth while remaining the financial discipline that has been a hallmark of the company for 80 years."

INDUSTRY GLOSSARY

• BESS: Battery Energy Storage Systems used to store energy for later use in commercial, industrial, or utility applications.
• PMT: Power and Microwave Technologies, a business segment focusing on electron tubes and microwave components.
• GES: Green Energy Solutions, a segment focusing on products for wind, solar, hydrogen, and electric vehicle applications.
• IEEPA: International Emergency Economic Powers Act, related to the tariff refund mentioned in the financial results.
• MRO: Maintenance, Repair, and Operations, referring to the replacement parts business for existing equipment.
• RESS: Richardson Energy Storage Solutions, the company's proprietary line of energy storage platforms.
• HMI: Human-Machine Interface, technologies used in medical devices and industrial equipment.
• Pitch Energy Modules: Ultracapacitor-based modules used in wind turbines to control the angle of the blades.

Full Conference Call Transcript

Operator: Good day, and thank you for standing by. Welcome to the Richardson Electronics earnings call for the first quarter of fiscal year 2027. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Ed Richardson, Chairman of the Board and CEO. Please go ahead.

Edward Richardson: Good morning, and thank you for joining Richardson Electronics' fiscal 2027 first quarter conference call. We appreciate your continued support and interest in our company. Joining me today are Bob Ben, Chief Financial Officer; Wendy Diddell, Chief Operating Officer; Greg Peloquin, General Manager of our Power and Microwave Technologies and Green Energy Solutions Groups; and Jens Ruppert, General Manager of Canvys. As a reminder, this call is being recorded and will be available for playback. Before we begin, I would like to remind everyone that we will be making forward-looking statements. These statements are based on current expectations and involve risks and uncertainties. Actual results may differ materially from those discussed today.

Please refer to our press release and SEC filings for discussion of risk factors. I am pleased to report that we started fiscal 2027 with a strong first quarter. Higher than expected sales growth and expanded gross margin drove a 5x year-over-year improvement in operating income to $5.1 million, or 7.9% of sales. Improved profitability and proactive working capital management generated $5.9 million of cash from operating activities compared with $1.4 million in the prior year first quarter. Backlog grew to $184.4 million, up $20 million from fiscal year 2026 year-end.

While Bob will review the financial results in detail, the broader takeaways are strong execution across our global teams, growing adoption of key product lines, and positive momentum in our strategic growth priorities. Our performance was led by continuous strength in our Power and Microwave Technologies, particularly in semiconductor wafer fabrication equipment, RF and microwave components, and engineered solutions. Demand remains healthy across key end markets, including semiconductor manufacturing, defense, communications infrastructure, and industrial applications. This growth reflects favorable market conditions and our multi-year efforts to broaden our customer base, expand technology partnerships, and strengthen our engineering capabilities. We also continue to make progress in Green Energy Solutions.

Interest in power management, energy resiliency, and energy storage has strengthened as industrial, commercial, and infrastructure customers seek greater reliability, lower operating costs, and solutions for growing power requirements. We believe these long-term trends support our strategy and create attractive opportunities for Richardson Electronics. At Canvys, customer engagement remains active across medical and industrial markets. Although project timing can create quarterly variability, customer activity, requests for quote volume, and opportunities for new design wins remain encouraging. We continue to support customers with highly engineered display solutions differentiated by customization quality and long-term support. Strategically, we are seeing increased customer interest in our U.S.-based engineering and manufacturing capabilities.

Our Made in America initiative, engineering expertise, global infrastructure, manufacturing footprint, and strong balance sheet are creating opportunities in aerospace, defense, power management, and industrial applications. We expect this trend to remain favorable as customers evaluate supply chain continuity, localization, and tariff exposure in sourcing decisions. The macro environment remains uncertain with trade policies, tariffs, geopolitical developments, energy markets, and global economic conditions creating challenges across industries. However, the underlying demand drivers supporting our business remain strong, and we continue to focus on what we can control. Expansion of AI-related infrastructure, semiconductor investment, power systems modernization, defense spending, and demand for energy support markets where Richardson Electronics has recognized capability and customer relationships.

We remain disciplined in managing inventory, pricing, operating expenses, and capital allocation. A strong balance sheet and debt-free position provide flexibility to invest in strategic growth while remaining the financial discipline that has been a hallmark of the company for 80 years. Overall, we believe the company is well positioned as we move through fiscal 2027. We remain focused on growing higher value engineered solutions, improving profitability, supporting customers, and creating long-term shareholder value. With that, I will turn the call over to Bob Ben for a detailed review of the quarter's financial results.

Robert Ben: Thank you, Ed, and good morning. I will review our financial results for our first quarter of fiscal 2027, followed by a review of our cash position. Consolidated net sales increased 18.9% to $64.9 million compared to net sales of $54.6 million in the prior year's first quarter. This was our ninth consecutive quarterly year-over-year increase in sales. The first quarter was led by a 19.7% increase in PMT sales, driven by strong growth in semiconductor wafer fab and RF and microwave products. GES sales increased $2.0 million, or 27.1%, as a result of higher sales of wind products and new products, including Battery Energy Storage Systems. Canvys sales increased 7.9%, reflecting higher sales in North America.

Consolidated gross margin for the quarter was 34.6% of net sales compared to 31.0% during the first quarter of fiscal 2026. In the first quarter of fiscal 2027, gross margin benefited by 170 basis points due to an IEEPA Tariff Refund. PMT gross margin increased to 35.4% compared to 31.3% as a result of product mix and the IEEPA Tariff Refund. GES gross margin increased to 32.6% from 29.6% due to product mix that included new products. Canvys gross margin increased to 33.0% from 30.9%, primarily due to the IEEPA Tariff Refund. Operating expenses were $17.4 million compared to $16.0 million in the first quarter of fiscal 2026.

The increase in operating expenses resulted primarily from higher employee compensation expenses, including incentives driven by the strong sales growth, and higher travel expenses. As a percentage of net sales, operating expenses improved to 26.8% in the first quarter of fiscal 2027 versus 29.2% in the prior year's first quarter. Operating income increased over 400% to $5.1 million compared to an operating income of $1.0 million in the prior year's first quarter. Net income was $4.1 million for the first quarter of fiscal 2027 compared to net income of $1.9 million for the first quarter of fiscal 2026.

Earnings per common share diluted were $0.27 in the first quarter of fiscal 2027 compared to earnings per common share diluted of $0.13 in the first quarter of fiscal 2026. EBITDA was $6.0 million for the first quarter of fiscal 2027 versus $3.3 million in the first quarter of fiscal 2026. Please note that EBITDA is a non-GAAP financial measure, and a reconciliation of the non-GAAP item to the comparable GAAP measure is available in our first quarter fiscal 2027 press release that was issued yesterday after the market closed. Turning to a review of our cash position.

Cash and cash equivalents at the end of the first quarter of fiscal 2027 were $36.9 million compared to $31.8 million at the end of fiscal 2026. The increase in cash and cash equivalents related to net income adjusted for non-cash items and higher accounts payable, partially offset by higher accounts receivable. Capital expenditures of $1.7 million in the first quarter of fiscal 2027 were primarily related to facilities improvements and IT systems versus $1.0 million in the first quarter of fiscal 2026. Free cash flow was $4.2 million for the first quarter of fiscal 2027. We paid $0.9 million during the quarter for cash dividends.

In addition, based on our current financial position, our Board of Directors declared a quarterly cash dividend of $0.06 per common share, which will be paid in the second quarter of fiscal 2027. As of the end of the first quarter of fiscal 2027, the company had no outstanding debt on its revolving line of credit with PNC Bank. Now I will turn the call over to Greg, who will provide more details for our PMT and GES business groups.

Gregory Peloquin: Thank you, Bob, and good morning, everyone. We are excited by the continued progress we are making in both bookings and billings as a result of our multi-year growth strategies underway for GES and PMT. Coming into FY '27, key strategic imperatives include developing a stronger backlog, launching new products, expanding our customer base, and advancing multiple development programs from beta testing to pre-production. I am pleased to report that we are making excellent progress towards our goals in Q1 FY '27.

Starting with GES, our year-over-year sales growth and bookings trends are encouraging as we continue to grow the pipeline of opportunities through both current and new technology partners, as well as engineered solutions developed by our field engineers and design team. GES sales in the quarter grew 27.1% year-over-year, as more customers adopted our key products across a broader set of applications. Within GES, we saw continued progress across key growth opportunities. First, we experienced growth adoption of our Pitch Energy Modules across multiple wind turbine platforms. We served dozens of wind turbine owners and operators, including exclusive partnerships with the top 4 owner-operators of GE wind turbines, such as RWE, Invenergy, Enel, and NextEra.

We also saw growth from our multi-brand PEM turbine platforms. We continue to grow this program internationally, expanding into Europe, Asia, with new products for other turbine platforms including Suzlon, Senvion, Nordex, and SSB. We have now received orders outside of North America from customers in Brazil, Australia, India, France, and Italy, adding to our strong rollout in North America. Second, we booked a $2 million BESS program in Q1. This milestone highlights the accelerating momentum of our BESS strategy, supported by a growing pipeline of nearly 50 active opportunities as of today. We expect new partnerships under development will expand our depth of product offering and customer reach in the future.

We believe our competitive advantage in BESS is rooted in our ability to deliver highly engineered custom solutions for unique applications. That capability is supported by years of engineering and manufacturing expertise in niche power management products and markets, differentiating ourselves and technology partners, a U.S.-based operating footprint, and a nearly 80-year corporate history and a strong balance sheet. Together, these strengths allow us to work closely with customers to design Battery Energy Storage Systems tailored to their specific performance, operating, and application requirements. We believe our approach and platform differentiate us from emerging and more standardized off-the-shelf solutions.

Today, our pipeline includes niche commercial and industrial applications throughout North America, and we believe there are many opportunities to increase our pipeline throughout FY '27 and beyond. We are also focused on converting this growing pipeline into sales, with multiple opportunities expected to close in FY '27. Our overall GES growth strategy remains centered on power management. We have rapidly designed multiple products, secured patents, and built a strong global customer base and technology partners. Our success is evident in our growing sales pipeline as we capitalize on numerous growth opportunities tied to an evolving power management requirements and significant energy transformation initiatives. With these programs, testing and deployment continue to progress well with our key customers.

We expect continued sales growth coupled with our growing backlog to produce double-digit growth for GES in FY '27. Turning to the PMT, excluding the legacy healthcare business, sales were $46.6 million in the quarter, a 23.1% increase over the prior year's first quarter. This reflects strong growth for both our semiconductor wafer fab customers as well as our RF and wireless component product line, specifically in SATCOM, radar, and defense communication markets. This continued growth trend in Q1 allowed us to expand sales at a double-digit rate with strong growth in backlog. We are excited about the positive feedback from our semi-fab customers who are expressing ongoing optimism and continued growth well into calendar year 2027.

We continue to invest in our infrastructure, including our LaFox-based BESS demo center, while also expanding our design and field engineering teams and enhancing our manufacturing capabilities to support growing demand and innovation. Our field engineering team continues to identify new customers and opportunities across our global end markets. We continue to gain market share by developing new products and solutions that are accepted by our customers. In summary, we are encouraged by the success so far of our strategic initiatives underway across PMT and GES, including our new BESS program, global expansion of our key engineered solutions products, and new technology partnerships.

Our global capabilities and global go-to-market strategy continue to separate us from our competition in power management, RF and microwave, and green energy markets. By combining legacy products and new technology partners and engineered solutions, we believe we are well positioned to deliver continued sales growth. We believe positive momentum has continued as we enter Q2 and the second half of FY '27. With the expanding backlog, compelling new products, growing market share, and strong cost controls, we believe FY '27 will be another strong year for growth in sales and profits for both GES and PMT. And with that, I will turn it over to Jens to discuss Canvys.

Jens Ruppert: Thanks, Greg, and good morning, everyone. Canvys designs, engineers, manufacturers, and sells custom display solutions to Original Equipment Manufacturers across global medical and industrial markets. Our mission is to deliver high-quality application-specific display solutions that meet demanding customer requirements and support long product life cycles. Canvys reported first quarter fiscal 2027 revenue of $8.9 million, an increase of 7.9% compared with $8.3 million in the first quarter of fiscal 2026. Our business remains project-based and can vary from quarter to quarter based on timing of customer programs and shipments. Gross margin was 33.0% of net sales in the first quarter, compared with 30.9% in the same quarter last year.

The year-over-year improvement reflected a more favorable overall product mix and disciplined execution, despite continued variability in freight, duties, tariffs, and other supply chain costs. Regional performance was mixed with lower year-over-year revenue in Europe, offset by growth in North America. This highlights the value of our diversified customer base while reflecting regional differences in customer demand and program timing. The quarter unfolded in a resilient but uneven global economy. Tariffs, trade policy changes, logistics conditions, and customer scheduling continue to create uncertainty. We remain focused on disciplined execution, customer collaboration, and supply chain flexibility to support customers' requirements and protect program continuity.

During the quarter, Canvys continued to pursue opportunities with both repeat and new medical OEM customers across robotic-assisted surgery, navigation, endoscopy and human-machine interface applications for medical devices. Our solutions also continue to support commercial and industrial applications, including passenger information systems for trains and buses, and HMI technologies used in printing, vending, milling, and packaging equipment. Our commercial initiatives remain centered on increasing Canvys' visibility and market leadership, developing new opportunities, deepening strategic customer relationships, and converting our pipeline into additional design wins and production programs. We are also continuing to strengthen supply chain flexibility and operational execution, so that we can respond effectively as customers demand patterns and trade conditions evolve.

At the end of the first quarter, backlog was $41.8 million, with a book-to-bill ratio of 1.1. These measures provide important visibility into future demand, although the timing of individual programs can cause quarterly fluctuations. Looking ahead, we expect customer investment decisions and production schedules to continue varying by market and program. We remain encouraged by customer engagement, request for quote activity, and our opportunity pipeline. With our improved first quarter profitability, disciplined execution, and continued focus on design wins, we believe Canvys is well positioned to support sustainable growth and create long-term shareholder value. I will now turn the call over to Wendy.

Wendy Diddell: Thanks, Jens, and good morning, everyone. As we have discussed previously, our corporate strategy remains centered on 2 key priorities: accelerating profitable growth, and improving efficiency. The first quarter's results show strong progress on both fronts. Customer activity and backlog continue to support our growth priorities. At the end of the quarter, PMT and GES backlog increased meaningfully from fiscal year-end, reflecting continued demand across semiconductor, power management, wind, and other engineered solution markets. We continue to view backlog as an indicator of demand and future visibility, while recognizing that shipment timing depends on product mix, customer schedules, supply, and program milestones. We also continue to focus on efficiency and cash generation.

Inventory was approximately $103.3 million, essentially flat to FY '26 year-end, as we balanced inventory discipline with the need to support semiconductor, wind, and other customer programs. Our focus remains on converting inventory and backlog into revenue and cash, improving manufacturing absorption, and directing resources toward the programs that best position us for growth and improved profitability. We also continue to manage sourcing, pricing, operating expenses, and capital commitments carefully. During the fourth quarter, we completed our initial AI readiness and opportunity assessment. In the first quarter, our emphasis shifted from identifying areas to implementing practical use cases and establishing a process for measuring results.

We are focused on business outcomes, including reduced manual work, shorter cycle times, better consistency, and improved visibility in business processes. Our use cases includes sales, supply chain, manufacturing and engineering, finance, and administrative workflows, with governance and security controls built into the process. We also continue to advance our Made in America strategy, where our U.S.-based engineering, manufacturing, testing, and quality capabilities can help customers address localization, tariffs, supply chain continuity, and speed to market. During the quarter, sales activity continued across aerospace, defense, industrial, semiconductor, and power management applications. Our LaFox operation continues to provide us with the ability to support customers from design and sample builds through production and tests.

We are seeing increased interest in programs that require the combination of technical support and domestic manufacturing capabilities. Our solid relationships with rail and wind customers are a strong testament to our Made in America strategy, as is our growing relationships with companies like C-Motive, KEBA, and Gotion. We are also working on a new program involving ultracapacitor racks. Our ultracapacitor-based energy storage platform delivers a fully integrated solution designed specifically for the demanding requirements of data centers. By combining power conversion and energy storage into a single cohesive system, we eliminate the complexity of multi-vendor architectures and deliver a streamlined high-performance backup solution. We started with contract manufacturing quotes and then continued conversations with our own products.

Our previous engineering work on other programs offered a fundamental building block. We are now looking to make these racks a standard offering to support smaller battery energy storage installs. Our capital allocation priorities remain focused on organic growth. Battery energy storage is becoming an increasingly important part of our growth strategy. During the quarter, our pipeline continued to grow across commercial, industrial, utility, and data center applications where customers need resiliency, energy management flexibility, and engineered solutions. We began shipments for our first Alaska order, a multi-million dollar project that includes 18 customized Battery Energy Storage Systems serving 7 remote communities.

This project is an important early reference point as we continue to pursue additional opportunities where reliability, customization, and technical expertise are critical. We have also started the build-out of our energy storage demonstration center at our LaFox headquarters. In addition, we continue to advance our partnership with Gotion, a leading manufacturer of lithium-ion batteries and Battery Energy Storage Systems. We have expanded our RESS product family during the quarter with the introduction of the RESS 211 and RESS 422 systems. Together with the RESS 760 and the RESS 1505 platforms, these additions broaden our ability to serve a wider range of commercial and industrial energy storage applications.

Taken together, these activities demonstrate the progress we are making as our emerging battery energy storage strategy moves from development into commercial adoption and scale. In wind and power management, demand remains supported by the global install base of wind turbines, the need for reliability and life extension solutions, and our expanding portfolio of related products. We have shipped more than 90,000 units since we launched the first product. As Greg mentioned, we also continue to make progress with geographic expansion, including the ongoing Suzlon rollout and continuing new customer testing in Europe. Margins on these products is accretive to the company's overall margin, further supporting our profitable growth strategies.

Semiconductor demand also remained an important growth driver during the quarter. Key customers have indicated continuing activity into calendar 2027. We are expanding capacity via additional shifts to support higher levels of demand. Overall, the first quarter represented a strong start to our fiscal 2027. We delivered strong sales growth, improved operating performance, increased cash, and continued to advance the strategic initiatives that support our long-term plan. With that, I will turn it back to Ed.

Edward Richardson: Thanks, Wendy. In closing, our first quarter performance reinforces our progress against multi-year strategy. The comments from Bob, Greg, Jens, and Wendy reflect solid execution across the organization and continued momentum in our chosen markets and programs. I am very proud of the Richardson team. Our priorities remain clear: execute for customers, improve profitability, manage capital with discipline, and convert our strategic initiatives into sustainable growth and long-term value for shareholders, customers, and employees. We will now open the call for questions.

Operator: [Operator Instructions] Our first question comes from Bobby Brooks with Northland Capital Markets.

Keaton Schuelke: This is Keaton Schuelke on for Bobby. Congrats on the quarter. And my first question is on backlog. We saw it grow another 12% sequentially. And I was curious if we could get a sense of visibility for backlog converting to revenues over the next 12 months. And then as you look at your pipeline for new orders, what are your expectations for backlog growth through year-end?

Gregory Peloquin: I will speak to PMT and GES. Our current backlog, I did that analysis and probably about 75% of the backlog is scheduled to ship in the quarter, I am sorry, the fiscal year. That is continued backlog growth in Q2. And based on the number of new products, number of quotes, number of new customers, we feel that we are going to have strong top-line growth and continued growth in backlog for the foreseeable future in our fiscal year 2027.

Wendy Diddell: Jens, do you want to take Canvys?

Jens Ruppert: Sure, sure. I am happy to address Canvys. Yes. So our backlog, we have a lot of orders. They go out like 2 years, 3 years, but we are expecting orders coming in like every quarter. So it is really hard to say. The majority of the backlog will ship also within the fiscal year. But again, you know, some of the orders we have like frame contracts, they carry out for 2 years or even longer.

Keaton Schuelke: Okay. And then on the IEEPA Tariff Refunds, what are your expectations for refunds going forward? Have those most of them worked through? Should we expect the benefit to continue in the next quarter?

Robert Ben: Hi, this is Bob Ben. Unfortunately, it is really hard to answer that question. We are getting these refunds sporadically and they do not even really tell us what exactly, time periods they relate to. So I wish I could give you more specific information, but unfortunately, I do not have that to give.

Wendy Diddell: Keaton, I don't think we expect the same amount that we received in Q1. I don't think we expect to receive that much.

Keaton Schuelke: Okay, okay, that is helpful. And then can you help me understand the revenue mix within GES? How much of that growth was specifically from the wind ultracapacitors versus the BESS and other new products?

Gregory Peloquin: Yes, the majority of it was in the wind and associated products. As you have seen over the last 4 calls, we currently have seen or continue to have over 23 customers that are using our product, and we have over 10 different products that we are selling into the wind turbine platforms today that, where they are obviously, we started the group, so that is the majority of it on the wind side.

Operator: [Operator Instructions] Our next question comes from Anja Soderstrom with Sidoti.

Anja Soderstrom: Congratulations on the great quarter. I am Just curious, with a backlog, how much of that is GES?

Gregory Peloquin: $43.2 million for GES, $99.4 million for PMT.

Anja Soderstrom: Okay, and then within PMT, how much of that revenue is from the semiconductor wafer fab, and what do you see in terms of that growing sequentially? What is your visibility for the second quarter there?

Gregory Peloquin: I do not know if we could say what that is for backlog, but the forecast, the input from the customer base. We have numerous customers in the semi-wafer fab space. They look at this type of growth that we are seeing in Q1 to continue well into definitely the rest of our fiscal year 2027, but even into further for calendar year 2027. Very positive feedback from the customers.

Anja Soderstrom: Okay, thank you. And then within the Suzlon opportunity, that is really in its early innings, what kind of opportunities do you see there? How big can that be?

Gregory Peloquin: The Suzlon platform, is that what you said? Yes. So we had very strong shipments in Q1 for Suzlon, for the replacement business of their lead acid batteries. It was, I think, about $1.5 million. But the good news there is we are working on their new platform for their new turbines called the [ S9X ], and we have been confirmed our product will be installed on an OEM point of view versus the MRO. So we will have both the MRO business worldwide on all Suzlon turbines, but then we will also be standard equipment, if you will, on their new platforms as they introduce new turbines. So it has been a very good relationship.

It has been a long one, a lot of work, but like Richardson's DNA, we have done every sort of unique need that they had for that product to work in their turbine over what is going on in about 2 years. So a very good example of Richardson's capabilities there, for sure.

Anja Soderstrom: Okay, thank you. And just one last one for me. How do you anticipate the high interest rates to affect?

Robert Ben: Well, first of all, we do not have any debt, as you know. There really is not any impact there. Were you thinking something more specific?

Anja Soderstrom: Yes, I know. I do not expect it to affect you directly, but it might affect your customers' demand, I would assume, given they are so capital-intense.

Robert Ben: Yes. Maybe Greg can speak to the wind customers as well.

Gregory Peloquin: Yes, the interest rates obviously will affect anyone borrowing money. But what we have seen is in a positive and negative, in that this administration has greatly reduced the subsidies and grants that they get for putting in new wind turbines or even new solar, which falls well for us because what people are doing, and we did see a huge increase with one of our largest, I call them the four sisters, and we mentioned them in our presentation notes, they repower. So they take apart the turbine and just rebuild it with all new products to make it last for another 10 to 15 years. And our ultracapacitor or Pitch Energy Modules work perfect for that.

Because once they do the repower, that would be the last time they have to put a battery in the turbine. So in a way, the benefit to us is the reduction in grants and subsidies in terms of interest rates and, people borrowing money. I do not know if it has a direct effect on our business, but anyone that has to borrow money to do that, it would.

Operator: Our next question comes from Ross Taylor with ARS Investment Partners.

Ross Taylor: Congratulations. Good quarter. I wanted to ask you guys more of a philosophical question. We have often, Wendy, had discussions about, the desire to build kind of repeat business and, a lot of what Richardson is expert at is things that are limited runs, smaller runs. Are you guys making or do you see progress and opportunity to have business that really becomes more repeat so we can basically, effectively build a core business that covers the operating costs and makes a reasonable return, over the next few years?

Wendy Diddell: Certainly that is true. I will jump in first and other people can add to it. Certainly that is true of our tube business. The tube business is, you know, EDG is MRO and that is very much repeat business, long-term repeat business, very steady.

Gregory Peloquin: Yes, and so you have that base business that is very consistent, very measurable. And then, we have to pick opportunities that we can win at. And we have found so far that these opportunities are very niche, very unique. And so they are not really what I will call consumer goods at all. And there is so much project-based. So, we have seen over time that the Pitch Energy Module business somewhat getting more and more consistent each quarter. We will get a large order, every other quarter that is starting to get consistent, but it is project-based. Most of these other programs that we are working on.

And so we are going to see, large bookings and then booking slowed down a little bit as we build and ship the product to these 1-year contracts for backlog. So, really, we do not look for, we look at opportunities where we can win at. And over time, for a good example, the Pitch Energy Modules were project-based, but we have now added, you know, almost a dozen new products in that so we can kind of get a more steady stream of revenue, with the customers we have today as opposed to just the repower, which is a 3-month program or a 6-month program.

Wendy Diddell: Plus, in those markets that we serve that Greg just mentioned, our market share is still fairly low. We have a lot of runway left to, expand our penetration when you look at, for example, the GE wind turbines in the United States, we are not even at that 20% level. So we have a long way to go, Ross, where we'll continue to sell these units.

Ross Taylor: Okay, so basically with that what I am hearing you say is on those areas you can, you will basically be able to get both market share growth and then over time, you will that will basically become a recycling business where perhaps every 10 years or so customers might need to replace the module and you will be able to pick up that as a cash flow business?

Can you answer, I am going to slide 2 questions into 1, which is talk about the opportunities in both battery storage and also we saw, a competitive or competitor in the electric locomotive space makes them deliver some engines, I think, down into L.A. or further, I think, the Union Pacific Yard. Can you talk about where you guys stand, how you see the electric opportunity, locomotive opportunity?

Gregory Peloquin: Yes, so right now we are still very active in electric locomotives and diesel locomotives. As you know, we have large programs for starter modules, working on an IGBT module for locomotive management. So, we are still hearing from our customers, and we have finished the large order for Burlington Northern Santa Fe that they expect that they will be building and getting more contracts for electric locomotives. So we are just waiting on them. We do not have a lot of input on that for the electric locomotives part. What was the other question?

Ross Taylor: The other part was the battery -- and I have you on the electric motor -- the electric locomotives. Can you talk about the economics in the starter modules as well and compare those to the electric locomotives themselves? What do we look at on a unit basis?

Gregory Peloquin: You mean, in terms of cost and resale?

Ross Taylor: Yes. What you sell it for and does it carry kind of corporate average margins, better or worse?

Gregory Peloquin: Yes, I mean, we make strong margins, corporate average margins on the starter modules. It is obviously a much smaller number within the diesel locomotive itself, but it is good margin, we have a niche, and we can expand that technology and other products that we are working on. But, it does not offset the, electric locomotive modules that we make and have installed today.

Ross Taylor: What is the cost of a starter module for a diesel?

Gregory Peloquin: Yes, I am not going to share that. I have got too many customers and competitors listening. I give them the family discount. They know that. All right.

Ross Taylor: Okay, and then the battery storage space?

Gregory Peloquin: Yes, we really, and it has been confirmed by customers, by integrators, by industry people, this microgrid growth. That is what the current order is with [ BESS ] in Alaska. There are small microgrids in 7 different towns on a federal property. The next one that we will be coming up with is for a large energy company in California, due to NDA, I cannot give you the name, but I am sure you can figure it out, Ross. And we will be receiving an order to support them with the battery, hence the container. Somebody else will be putting in the whole infrastructure and the build-out of these microgrids.

But about 10 to 20 different projects that we will be supporting this company on over the next 2 years. It will be about $10 million. The products we work on, because there are too many people involved and companies involved and margins lower on these huge data centers. These microgrids really fit a niche that we are doing. Our product seems to fit that. Our engineering and value-added capabilities allow us to take a product and design it to that really specific site of anything between 200 kilohertz and 5 megawatts. And we are just seeing so many opportunities for that.

And with our relationship with our technology partners, our own internal engineering capabilities, to be honest with you, we are winning more than I thought. It has really defined our strategy. We thought it would work and so far it has. Obviously, you can see with the bookings and shipments in a very short amount of time, and the funnel continues to grow.

Operator: [Operator Instructions] I am showing no further questions at this time. I would now like to turn it back to Ed Richardson for closing remarks.

Edward Richardson: Thanks again for joining us today and for your questions during the Q&A portion of the call. We appreciate your continued interest in Richardson Electronics and we look forward to speaking with you again in the next quarter. Until then, please feel free to call us at any time. We are happy to answer your questions.

Operator: This concludes today's conference. Thank you for participating. You may now disconnect.

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