Richardson Electronics Ltd (RELL) 2022 Q1 法說會逐字稿

Good day, and thank you for standing by, and welcome to the Richardson Electronics Earning Call for the first quarter of fiscal year 2022.

(Operator Instructions)

Please be advised that today's conference is being recorded.

(Operator Instructions)

I would now like to hand the conference over to Ed Richardson, CEO. Please go ahead.

Good morning, and welcome to Richardson Electronics Conference Call for the First Quarter of Fiscal Year 2022. Joining me today are Robert Ben, Chief Financial Officer; Wendy Diddell, Chief Operating Officer and General Manager for Richardson Healthcare; Greg Peloquin, General Manager of our Power & Microwave Technologies Group; and Jens Ruppert, General Manager at Canvys. As a reminder, this call is being recorded and will be available for playback.

I'd also like to remind you that we'll be making forward-looking statements that are based on current expectations and involve risks and uncertainties. Therefore, our actual results could be materially different. Please refer to our press release and SEC filings for an explanation of our risk factors.

Net sales for the first quarter of fiscal 2022 were $53.7 million, 38.4% higher than last year's first quarter. We are excited by the strong start to fiscal 2022 as we achieved the highest level of quarterly sales in 11 years and the best quarterly earnings per share in 9 years. Sales were higher than prior year across all 3 business units. Our strong first quarter performance is a result of growth initiatives that are starting to take hold and the ongoing strength of the semiconductor wafer fab market.

Our legacy tube and display businesses also bounced back after struggling earlier last year due to COVID-19 pandemic.

While we continue to face unprecedented global supply chain and logistics challenges, the team has done an excellent job serving our customers. The first quarter ended with record backlogs for the ULTRA3000 ultracapacitor modules for GE wind turbines. Microwave products and Canvys display is putting us in an excellent position for continued growth.

I'll now turn the call over to Bob Ben, Chief Financial Officer, to review our first quarter financial performance in more detail. Then Greg, Wendy and Jens will update our successes in new programs as well as our challenges in each business unit.

Thank you, Ed, and good morning. I will review our financial results for our first quarter of fiscal year 2022, followed by a review of our cash position.

Net sales for the first quarter of fiscal 2022 increased to $53.7 million or were up 38.4% compared to net sales of $38.8 million in the prior year's first quarter due to higher net sales across all 3 business units. PMT sales increased by $12.8 million or 42.2% from last year's first quarter, driven by higher sales of power conversion in RF and microwave components as well as semiconductor wafer fab equipment specialty products. In addition, sales across most of the Electron tube product lines increased from the first quarter of fiscal 2021. Canvys sales increased by $1.7 million or 25.8% due to strong customer demand in Europe. Richardson Healthcare sales increased $0.4 million or 22.0% year-over-year primarily due to an increase in demand for ALTA750 tubes, partially offset by lower sales of parts and preowned CT scanners in Latin America.

Gross margin for the quarter was 30.3% of net sales compared to 31.8% of net sales in last year's first quarter. PMT margin decreased to 30.1% from 33.0% due to a higher percentage of lower-margin PMG sales. Canvys margin as a percent of net sales decreased to 33.4% from 34.0% because of higher freight costs, driven by the COVID-19 pandemic.

Health care margin improved as a percent of net sales to 24.3% in the first quarter of fiscal 2022 compared to 5.6% in the prior year's first quarter, primarily due to improved product mix and manufacturing absorption from increased production of the ALTA750 tube.

Operating expenses were $13.5 million for the first quarter of fiscal 2022 compared to $13.0 million in the first quarter of fiscal 2021. The increase in operating expenses resulted from our normal employee compensation expenses, including incentives and annual merit increases as well as higher travel expenses.

While there were some additions to staff during the quarter, the majority of the increase in our employee count was in manufacturing positions and included in cost of goods sold. These increases were partially offset by lower legal expenses.

The company reported an operating income of $2.8 million for the first quarter of fiscal 2022 as compared to an operating loss of $0.6 million in the first quarter of last year. Other expense for the first quarter of fiscal 2022, including interest income and foreign exchange was less than $0.1 million compared to other expense of $0.4 million in the first quarter of fiscal 2021.

The income tax provision of $0.2 million for the quarter reflected a provision for foreign income taxes, which was higher than the prior year's first quarter and the offset of a U.S. tax provision against the valuation allowance. Net income was $2.6 million for the first quarter of fiscal 2022 as compared to a net loss of $1.1 million in the first quarter of fiscal 2021.

Earnings per common share on a diluted basis in the first quarter of fiscal 2022 were $0.20 compared to a net loss per share on a diluted basis of $0.09 in the prior year's first quarter.

Turning to a review of our cash position. Cash and investments at the end of the first quarter of fiscal 2022 were $36.4 million compared to $43.3 million at the end of fiscal 2021 and $42.5 million at the end of the first quarter of fiscal 2021. Cash use in the first quarter of fiscal year 2022 resulted primarily from an increase in working capital that was necessary to support the significant year-over-year sales growth we experienced across our 3 business units. A large portion of the inventory growth relates to components needed to fulfill orders on hand for the ULTRA3000 and other long-time lead parts for PMG. Capital expenditures were $0.8 million in the first quarter of fiscal 2022 compared to $0.7 million in the first quarter of fiscal year 2021, approximately $0.3 million related to investments in our healthcare business, $0.3 million was for our IT system and $0.2 million was for other projects.

We paid $0.8 million in cash dividends in the first quarter of fiscal 2022. In addition, based on our current financial position, our Board of Directors declared a regular quarterly cash dividend of $0.06 per common share, which will be paid in the second quarter of fiscal 2022.

Finally, during the first quarter of fiscal 2022, we repatriated $0.7 million to the U.S. from China. Our U.S. domiciled cash and cash equivalents balance totaled $18.1 million as of August 28, 2021. Now I will turn the call over to Greg, who will discuss the results for our Power and Microwave Technologies Group.

Thank you, Bob, and good morning, everyone. Sales for the Power & Microwave Technologies group or PMT in the first quarter of fiscal year 2022 grew 42.2% to $43 million versus $30.3 million in Q1 last year. In addition to an excellent sales quarter, PMT achieved a book-to-bill ratio of 1.13. Our sales growth and strong bookings marked a solid launch to what is shaping up to be an excellent fiscal year '22. Our gross margin decreased in the quarter to 30.1% versus 33% in the prior year, which was mainly due to product mix.

Looking into the PMT Group, we continue to have excellent growth in our Power & Microwave Group, or PMG. We have a growing line of new technology products targeting RF and wireless applications. This includes 5G infrastructure programs as well as power management and energy storage applications that support numerous green initiatives.

With respect to 5G wireless and power management, revenues increased by double digits again in Q1. Our Electronic Device Group, or EDG business unit produced strong sales and bookings in the quarter from our engineered solutions products to support the semiconductor wafer fab equipment market. Additionally, our legacy tube business also grew in the quarter, exceeding the first quarter of last year.

We have increased backlog going into Q2 FY '22. This was achieved by continued growth in power management and wireless communications. On the power management side, we saw growth in applications for wind, solar, electric vehicles and energy storage. New products such as our patented ULTRA3000 pitch energy module used in wind turbines continue to gain tractions with increased bookings in the quarter. We are producing the ULTRA3000 with great results in the field and now millions of hours of accumulated operation. Our production quantities in the quarter did not meet our forecast due to component lead times. However, in the quarter, we built a strong inventory position on these key products, and we expect to increase shipments going forward throughout the balance of fiscal year '22.

Our RF & Microwave business continues to benefit from positive trends associated with 5G, micro communications and SATCOM applications. As people continue to work from multiple remote locations, they must be able to send and receive large amounts of data. Our entire team has done an excellent job identifying niche technology partners who collaborate with us globally. We continue to invest in and focus on resources to support these growth markets. These resources include design engineers, field engineers and manufacturing capabilities. We also added several small niche suppliers to fill technology gaps. This strategy has been highly successful, and we will continue to use it to develop new products, customers, revenue and profits by capitalizing on our demand creation infrastructure.

EDG also experienced an increase in both semiconductor wafer fab demand and large MRO tube business. We have also seen our legacy tube business come back strong during the last 2 quarters. The first quarter of FY '22 continued to prove that the demand for our products and services did not go away with the pandemic. And we're even more excited about the trends in the coming quarter. We continue to receive support from key partners such as Qorvo, MACOM, Anokiwave, UnitedSiC, LS [Materials] and Fuji Semiconductor. Key tube manufacturers in the industry, such as CPI, Thales, NJRC and Photonis worked with us to manage customer requirements.

Our in-house engineering and manufacturing teams did a great job supporting increased demand from our global semiconductor wafer fab customers. The team also supported product designs for key markets such as the ULTRA3000 with patented technology for power management in the wind turbine market. Our engineers in partnership with Battery Street Energy also developed the ULTRAGen 3000, which we will be introducing in the second quarter for cellular base stations in critical facilities. I'm very pleased with the progress we are making. We will continue to identify, develop, introduce products using ultracapacitor technology for power management application. And this portfolio of products will continue to grow throughout FY '22.

We remain challenged by longer semiconductor component lead times. This affects our component business and Engineered Solutions products, including the ULTRA3000 and ULTRAGen3000. To compensate for this, we are taking an aggressive stance on inventory to fill the pipeline and ensure we can meet our customers' needs and we're working closely with our customers and suppliers to complete this. I cannot stress enough the value of Richardson Electronics model to our customers and suppliers. Our unparalleled capability and go-to-market strategy are unique to the RF and microwave industries. We have developed a powerful business model, including legacy products and new technology partners that fit well with our engineered solutions capability.

Through our steadfast and creative focus on customers, we will continue to excel by taking advantage of opportunities as they arise. We believe our customers and technology partners need Richardson's products and support more than ever.

With that, I'll turn it over to Wendy Diddell in Richardson Healthcare.

Thanks, Greg, and good morning, everyone. Sales for the Healthcare Group were $2.3 million, an increase of 22% versus Q1 last year. After a strong year-end finish, sales in June and July started off slow and then picked up in August. We believe the slow start to the quarter was due to increase in COVID-19 cases and the impact this had on hospitals' priorities as well as people pushing off elective surgeries. We're pleased to see tube revenues increase 92.5% over the prior year. Strong demand in Europe and the China reloading program continue to positively impact tube sales.

Gross margin in the first quarter was 24.3% versus 5.6% in Q1 last year. We still have lingering supply chain issues related to COVID as well as inconsistent component quality from our suppliers. This limited the number of tubes we made in the quarter and also resulted in higher scrap costs.

We met customer demand, but we still have additional production capacity and initiatives are underway to improve parts and tube yields. Getting the ALTA750G into full production, followed by the Siemens repair program, will also positively impact margins.

Regarding the launch of the ALTA750G, we have had 1 tube in beta, and it continues to perform well. We anticipated full rollout by early fall, but we are behind due to push outs with our second beta tube site. We now anticipate launching the ALTA750G in November or December.

Sales growth will be gradual as we get the ALTA750G into the market and Canon CT scanners come off OEM service contracts. We are on track to ship our first repaired Siemens type, the Straton Z in small quantities between now and the end of the calendar year. Additional Siemens types the MX, MXP and MXP46 will follow in calendar year 2022. There are no third-party replacement options for these Siemens types.

Siemens CT market share is significantly larger than Canon, making this an attractive market. While this is a repair program, we follow the same development steps as a new tube to ensure our products exceed our customers' expectations. Having a broader range of tubes to offer our customers will increase our importance as a health care supplier and support our mission to help reduce health care costs. It will have a positive impact on sales and improve gross margin as we leverage our manufacturing operations.

We have also started the process of identifying our next tube program and are currently evaluating business plans to ensure sufficient demand. We also continue our efforts to expand the number of countries in which our tubes are registered. In the quarter, we shipped our first tube to Vietnam. We also registered our tube in India. We anticipate sales in India will be minimal due to the smaller Canon installed base. Canadian registration, which is wholly dependent on the Canadian authorities is still pending.

I will now turn the call over to Jens Ruppert to discuss the results for Canvys.

Thanks, Wendy, and good morning, everyone. Canvys, which includes the engineering, manufacturing and sale of custom displays to original equipment manufacturers in industrial and medical markets, delivered an outstanding performance with sales of $8.4 million during the first quarter of fiscal 2022, a 25.8% increase over the same period last year. Increased customer demand in Europe drove the growth, where we experienced a nice pickup after the COVID-related slowdown in the previous year.

Gross margin as a percentage of net sales was 33.4% during the first quarter of fiscal 2022, down slightly from 34.0% during the first quarter of fiscal 2021. The decrease in gross margin was related to increased freight cost that is impacting many companies across the global supply chain. Our backlog at Canvys is at an all-time high. Our customers continue to compensate for supply chain uncertainties. This is particularly true in the electronic components market. We are also dealing with ongoing extended lead times for selected components from our Asian suppliers.

The phenomenal bookings last quarter, along with a number of projects that are currently in the engineering stage, position us well for continued growth, assuming no longer-term impact related to the COVID pandemic or worsening supply chain challenges. I am pleased with the positive progress in our online awareness initiative. We are adding new application stories to our website, publishing press releases and using social media to promote our new product platforms. We are confident that our online strategy will result in new leads and business growth in the future.

During the quarter, we received several new orders from both existing and first-time medical OEM customers. Some of these applications include endoscopy, cryolipolysis systems, pulse field ablation systems, dental treatment centers, super pulse laser systems robotic-assisted surgery, microscopy, patient monitoring systems and surgical navigation systems.

In the nonmedical space, our products are used in a variety of commercial and industrial applications, including CT scanners for inspecting luggage at airports. We received orders from customers in the public transportation space, where our monitors are used on trains and buses for passenger information systems, as driver monitors for security CCTV monitoring within the cabins and for control rooms. In addition, we secured new orders for monitors that are used for process automation and for tailor prompter and talent systems for well-known news stations. From the verity of customers and applications as well as the value of orders from existing and new customers, it is clear we offer our global customers outstanding products and local service. While our sales organization stays focused on new opportunities, I will continue to review and adjust our business strategy to improve the operating performance of the division. Maximizing cash flow is an ongoing priority. We continue to work with our partners to help reduce inventory while being able to meet the demands of our customers, particularly during the pandemic and the challenges it brings to our supply chain.

I will now turn the call back over to Ed.

Thanks, Jens. It's great to see the display business in Europe coming back strong. Your team has done an excellent job managing COVID and supply chain challenges. Canvys' record backlog is a testament to the team's efforts. I remain very excited about the future of Richardson Electronics. We know that we must make every day count as we continue to raise the bar on our performance. None of us are taking the growth for granted. We continually look to ways to capitalize on market opportunities while improving our day-to-day operating performance.

Within EDG, I'm happy to see our industrial tube business coming back strong, particularly in certain segments as Avionics and Marine. Further, there's a good mix between our legacy products, the products we manufacture for the semiconductor wafer fab industry and the other products such as microwave tubes. The health care team continues to stay focused on tube improvements and developments. It's a tough business that's come along much slower than we anticipated.

With more tubes in production, we'll gain leverage from our state-of-the-art facility and investments. Our newest Green initiative is ultracapacitor modules used to replace batteries in wind turbines and other critical applications. This technology offers considerable upside for the balance of FY '22. Our patented designs are unique to the industry. We continue to work around the clock to ramp up production and meet demand. We're investing in equipment and people that will give us more control over the supply chain and increase production levels.

Chip supply continues to be a gating factor. Strong sales growth required more cash than we anticipated during the quarter to support the working capital needs. We remain focused on maintaining a strong cash position while continuing to control expenses and improving our operating cash flow. Rest assured, we're all working toward improving our income statement. I'm encouraged by the direction we're headed and the strong start to the fiscal year.

At this point, we'll be happy to answer a few questions.

(Operator Instructions)

And our first question comes from Howard Brous from Wellington Shields.

Ed, Wendy and the group, congratulations on what is really a great quarter. So I have a couple of questions. Let me first start with the inventory buildup over the last, say, 6 months, it's gone from under $60 million to $67 million. What part of that, if you can comment, is building an inventory for ULTRA3000 because that's what you mentioned earlier.

There's about $3 million worth of additional inventory. We have a total number of ultracapacitors in stock to build out the $10 million order plus other orders we anticipate, and as you know, we've been waiting for integrated circuits to finish the circuit board, and we now have delivery on those, but obviously, between additional inventory and the additional working capital needed for receivables, the cash has gone down, which we anticipated that's why we're trying to conserve the cash, and we always get asked about buying stock back, but we need the cash for the growth of the business.

No, absolutely, I agree with that. When you talk about other orders, we know about [NextEra], what other orders have you booked, if you will, for this fiscal year?

I'll let Greg address that one.

Yes. Hi, Howard, in the first quarter, we booked -- as you know, we're directly involved with a lot of field testing with the 4 top owner operators of GE wind turbines in North America. And in the quarter, from a bookings point of view, we were named the exclusive supplier to one of those, and we received a very large booking and that product will be shipping in our fiscal year also. So it was a good quarter in terms of shipments. We were able to do some great things getting piece parts in to meet the customer's request. It was also a very good quarter in terms of bookings. And going forward, we expect to ship over the next 3 quarters, $12 million to $14 million of ultracapacitors, modules for GE wind turbines.

Can you comment as to your current backlog for ULTRA3000?

You know, Howard, with allocations and everything going on, we talk daily to our suppliers and customers. And because we're doing everything internally we can to support their needs, I don't want to give those numbers out because they can do the math themselves. And right now, I can -- will tell you that there's nothing I'm personally on every week with every single long lead time supplier, getting products in, we have calls every week with every -- each of those 4 large owner operators, and we're working together with suppliers, the customer enough to meet their needs in terms of them getting this rolled out into their wind turbines in our fiscal year.

All right. So the $12 million to $14 million is for Q2, 3 and 4. Is that a correct statement then?

Yes, that's approximately what we have and it's based on lead times and everything else, that will be for the next 3 quarters.

That's bookings.

No, that's shipments.

That's shipments. In terms of potential...

Bookings will be higher than that. We do do a booking forecast with the team based on the feedback we're getting from a number of beta site testing those production orders, we feel we'll get maybe at the beginning, in this case, December of 2021, but more than likely in our -- end of our third quarter, we'll get the production orders for a number of other owner-operators. So bookings will be higher than that overall. So we'll have a positive book-to-bill in FY '22 definitely.

NextGen, where are you in terms of starting production?

Yes. So NextGen, we are finishing up the beta site product. It's being tested. Those will be delivered. We have a setup with T-Mobile. They'll be doing the first beta site testing the last week of October. The balance, I know we have a beta site testing set up with AT&T, and that will be the first week in November. So those are the 2 largest test sites and testing that we'll do. So I don't think there'll be a lot of changes to the product. It works very well, but we just need to get some [ULTRA3000] some field hours underneath it before we see some of the large production orders which we fully expect.

When you talk about large production orders, can you give all of us a sense of what you're talking about?

I think Phase 1 will be orders, for example, the one that we're quoting is a roll-out by T-Mobile in the Atlanta area, and that's 900 towers. So it -- our bookings are expected this year between $5 million to $10 million in bookings. The shipments I don't have that number for you right now. I don't know what that will be.

All right. Fair enough. In terms of the tube business, we had had a conversation last quarter about a breakeven in 2 years. We're talking about a breakeven on a cash flow basis. Is that, Wendy, what we were referring to?

Right. So what we said was that we expect the health care group to begin generating operating contribution towards the end of FY '24. So we're in FY '22. So the 2-year estimate is right, and we'll look at exiting FY '24 breakeven to positive operating contribution. And we are still doing everything possible to meet that date or pull it in.

And our next question comes from Tony Chiarenza from Key Equity Investors.

Congratulations on a great quarter.

The first question is, I was just comparing the fourth quarter of the last fiscal year to the current quarter. And Obviously, PMT is up, but Canvys and health care are both down a little bit. And can you comment on that? Is that kind of a cyclical slowdown in each of the business units? Or is there something going on that we should look at?

Well, normally, the first quarter is the lowest quarter of the year. And ironically, it's the best quarter we've had in 11 years. So it was even larger than the fourth quarter. But what we see, particularly in Europe and Southern Europe in August, there are a lot of factories that close up. So normally, business is down, and that would impact Canvys for sure. But overall, we are really pleased with the quarter. We've never had a quarter like that in the first quarter where we hit a higher first quarter than the fourth quarter. The fourth quarter is usually our largest quarter in the year.

So -- I'm sorry, go ahead.

I was just going to add that with respect to the health care business, again, we did have a couple of slow months in June and July, which we weren't quite expecting and having talked to many people throughout the industry, we weren't alone in that regard. And one of the biggest things that impacted our revenues in the first quarter were lack of systems. We had virtually no system sales in the first quarter. And that's been a problem for us. And we had said earlier on, it was going to continue to be a problem because hospitals throughout COVID, were not upgrading their CT scanners. So the number of scanners that were available to purchase and resell virtually dried up. And we're starting to see that improve now, but we did take a hit on that in the first quarter.

Okay.

Can I add something for Canvys, maybe just quick. I mean Q1 was up 25.8% year-over-year. So we had almost 100% growth in Europe alone in Q1. So business is up.

Yes, I understand. I understand. That's very helpful. And not to harp on it again, on the cash issue. And I think you're absolutely right to use the cash for the growth of the business. Has -- you've given any thought to increasing the dividend at all given, obviously, the stock price has gone up a lot and the dividend yield has gone down, which is a good thing, obviously, the business is going forward. But have you given some thought to maybe raising the dividend slightly?

Well, we discussed it at the Board meeting this week, but everyone is quite concerned that we have enough cash available to handle the growth of the company. We were all surprised that our cash used in the quarter was $5 million plus, and we'd love to have the business continue on this kind of growth, but we need the cash to support it. So I think the answer is we'll maintain the dividend where it is until we see where we're going.

Okay. Until -- I guess the answer would be more stability of earnings and cash flow and maybe a lower cash usage is what you would look for?

That's correct. And we anticipate by the end of the year that we may be cash flow neutral. And certainly, if we can turn health care on, we'll start to be cash flow positive.

Okay. In terms of market share, looking at the fab business and some of the -- how would you consider it has your market share remained stable? Do you think you're gaining market share?

Well, I think the products that we manufacture, we're gaining market share in the semiconductor wafer fab industry, there are 2 products, and one of them is deposition, which is the older technology that's used for replacement of tools and existing wafer fabs and the new one is etch. And the majority of our business, probably 60% of it is deposition and we've been manufacturing those products since the early 2000s.

So although when you look at the industry, they talk about the industry growing 50% or 40% next year, we don't anticipate that our growth will be that high because we have more of our products on the deposition side. Still, it's good news. I mean we did over $22 million in the last fiscal year in that industry. The bad news is the industry goes up and down like a roller coaster. And they're telling us that 5G is going to maintain the industry growth for the next 2 or 3 years, and we hope they're right.

(Operator Instructions)

And our next question comes from Brad Leonard from BML Capital Management.

Congratulations on a nice quarter. I had a question on the ULTRA3000. Did you actually have sales in the quarter?

Yes. This is Greg. Yes, we were in full production. We had a strong shipping quarter. And we're going into the second and third, fourth quarters with a larger backlog than we started Q1 with.

Okay. That's great. And is the -- what are the margins like on that product? Are they similar to the group average?

Yes. They're accretive to the company's overall margins. So...

Okay. That's great.

And what do you think the ultimate size of this business is going to be on an annual basis?

Well, based on our market share, and again, right now, that product is focused on owner-operators that use GE turbines. Over the next 2 to 3 years, it could be $40 million to $50 million.

On an annual basis?

Yes.

And our next question comes from Mike Hughes from SGF Capital Management.

First, do you have a company-wide book-to-bill number?

Hi, Mike, this is Bob Ben. Yes, it's 1.41 at the end of the first quarter for the full company.

Okay. And then on the electron tubes business, can you just talk about pricing, if it's consistent with what you've seen in the past? And then secondarily, where the revenue for that business stands now versus pre-COVID?

Sure. The prices, unfortunately, in the tube business go up every year. And I'd say the pricing this year are up somewhere between 5% to 10%. The units decline and the price increases sort of flatten the industry out. So what we saw is after COVID -- during COVID, a lot of equipment is shut down and tubes don't like to be shut off. They like to run hot all the time, so we really had in the last few quarters, we had a large increase in the aftermarket for power tubes particularly that are used, for instance, in laser equipment for cutting steel parts and for dielectric heating, laminating plastics and plywood and heat treating steel parts, things of that nature.

The other side of the business is we manufacture microwave tubes, magnetrons that are used in a lot of industries that are growing, going into new equipment, and these are applications like synthetic diamonds, for example, in all kinds of industries for turning carbon into building materials, for example. And the newest industry is high-power 915-megahertz magnetrons up to 100 kilowatts are being used for producing hydrogen.

So they take methane gas and they hit it with really high-power microwave and they come up with acetylene and hydrogen. And it appears that hydrogen is going to be the fuel of the future. So that industry is on fire. And frankly, we have more orders for magnetrons that we manufacture than we can deliver right now. So it's -- there's -- we sell 20,000 customers all over the world, so the tube business is really spread out in a lot of different applications. We sell magnetrons for avionics and marine applications and after COVID, all the pleasure boats were being retrofitted again with new equipment. So our business with companies like Garmin and Honeywell is through the roof. So it's really a good time. We're so excited about the growth of the business, which we haven't seen in years.

Okay. What portion of that the PMT revenue stream is from the magnetrons?

They are both CW and magnetrons that are used for industrial heating applications and for the generating diamonds. And then there are magnetrons that are pulse that are used in radar that we sell to companies like Garmin and Honeywell. With NJRC alone, we do about $12 million a year. I'd say it's close to $20 million right now.

Okay. So the pickup in the hydrogen market, which is getting a lot of attention just on the ESG front right now, is it -- do you think that that's material enough to move the needle for the company overall, meaning could it add a few million dollars a quarter in revenue? Or is it not that large?

Yes, absolutely. It's going to take time. But there are a number of companies that are addressing the production of hydrogen and we're in touch with all of them. And they not only buy the tubes but they buy the complete generator, and we manufacture the generators as well.

Okay. So just that business overall, the electron tube business, has it completely recovered from COVID at this point from a revenue standpoint? Or is there still more recovery ahead?

Well, in the aftermarket business, the replacement business, it's recovered, but there's a tremendous amount of growth potential in the microwave area.

Okay. Okay. And then the semi cap -- wafer business, you touched on this that you did $22 million last year. On the last call, I think you indicated that business could be up 10% to 20% this year. Is that still a good number to think about?

Yes. I think that's right on, probably 20%.

Okay. Good. And then the health care business, I think in the last year or so, you said that the operating loss for that business on an annualized basis is about $5 million. That's still ballpark?

Yes, that's correct, unfortunately.

Okay. And then last question for you. Just a point of clarification. I think there was a discussion around cell sites in Atlanta, and the potential for $5 million to $10 million in bookings. Was that specifically for cell site business? Is that what was being referred to?

Yes. That's the next product based on the ultracapacitor project we are working on. So it uses a similar technology, the product does that the ULTRA3000, which replaces these lead acid batteries in wind turbines, well, with every cell site, there's a generator that's also using lead acid batteries. So this product would replace those at a cell site. And that's a new product design, again, though, based on ultracapacitor technology that we're able to get to market very fast, amazing design team here. And we already have a letter of intent from T-Mobile and they'll be doing that beta site testing at sites in Atlanta at the end of this month. And so I thought it was mainly in reference to the status of the new product, which is called the Ultra Gen 3000, gen meaning generator.

Terrific. And I actually did have one last question for you. I think you said PMT's book-to-bill was 1.13. And then you said company-wide was 1.41. The PMT business is the majority of your revenues. So mathematically, it's really hard to get to 1.41 if 75% to 70% of your revenue has a book-to-bill of 1.13. So what's the disconnect there?

Hi, Mike, it's Rob Ben again. The Canvys business has a very high book-to-bill at the end of the first quarter. So that makes up the difference. Health care is also over 1.

Okay. So the Canvys business must have a book-to-bill north of 2.

Around 2.

Okay. And just in the 1.13, are you including the ultracapacitor business in that metric?

In the bookings and billings, absolutely, yes.

As part of that, we have a backlog now of $126.5 million. So you can see next year looks pretty good.

I'm sorry, I was -- what business was that for? What was the backlog number you just cited?

Total backlog for the company right now is $126.5 million.

Can you give us a little context like where it was last quarter or a year ago?

We ended the fourth quarter at about $125 million and a year ago, Bob, have you got a number?

$76 million at the end of the first quarter last year.

It was $76 million at the end of the first quarter last year.

Okay. So the backlog went from $125 million to $126.5 million sequentially in a quarter that's typically seasonally a little bit softer.

Right.

And our next question comes from Eric Landry, BML Capital.

I appreciate you taking 2 questions from the same shop. But actually, I think Mike asked the 2 important ones that I was going to ask about the book-to-bill math and whatnot. So thank you for clearing that up. And then I guess related to that, my other question was, I wanted to know how material the increase was in backlog in Canvys, but I guess that was also answered. So let me ask Wendy this. I think you alluded to the fact that the GE is a little behind schedule, but I don't recall hearing whether or not the Siemens stuff is behind schedule.

No. The Siemens is not behind schedule. We are starting to ship between now and the end of the calendar year in small quantities we'll be shipping one of the types which is what we had intended to do and we are on schedule with the full release of all 4 types in calendar year 2022. So we feel good about that.

Thank you. And I am showing no further questions. I would now like to turn the call back over to Ed Richardson, CEO for closing remarks. I apologize, we do have one question coming from [Michael Colis], Private Investor.

Just wondering that your ULTRA3000 sounds like a really a groundbreaking product. And I was just wondering if there's any application for replacing lead acid batteries in the auto industry at all? And if you could address that, I'd appreciate it.

Yes. The automotive industry is looking at using ultracapacitors to -- in that industry. The ultracapacitors and the supplier we have are much higher voltage and power levels. So they'd be for more larger applications in critical facilities and in wind turbines, et cetera. But we look at that market, and if we see an opportunity that our design team, our suppliers can come up with a product to support that market, which obviously is a huge market, we'll look at it. But right now, we have 4 products in the pipeline. We'll be introducing -- like I mentioned, we'll be introducing the Ultra Gen in Q2. Then we have a UPS universal power supply ultracapacitor system that we'll be introducing in Q4 and then another product that we hope to introduce in Q1 of next year. So the main goal is to get as much market share as we can because you hit it on the head. This product is the most proven, most user-friendly product in the industry. So we just want to maximize that, but also have numerous products in the funnel, so we can have a portfolio of products supporting many of these green initiatives. And we just seem to have found a niche both from a component point of view and a design point of view, Michael.

Okay. One more technical question was since you're replacing the lead acid batteries, are there any nasty metals in the capacitors that are not environmentally friendly?

No. In fact, that's one of the listing of attributes, and this is coming from a couple of our customers. Just the cost that this in terms of downtime, et cetera, or the cost of going and doing a remote replacement of lead acid batteries in wind turbines going up 300 feet in some remote field is huge cost to them. And this product lasts 15 years. But one of the other large costs that they have is the amount of cost it takes them to dispose of lead acid batteries because of the chemicals is huge. I mean there's huge graveyards that they have to take, and to meet environmental standards. The ultracapacitor technology is electrical. And so it can just be -- you don't have all the environmental issues that you do with the lead acid battery and getting rid of them is much less expensive than the, if you will, these literally car batteries that are out there now.

And I'm showing no further questions. I'll turn the call back to Ed Richardson, CEO, for closing remarks.

Thanks, Justin. Well, thanks to all of you for your interest in Richardson Electronics. And after achieving the highest quarter in sales in 11 years, we're really optimistic about our future and hope you are as well. If you'd like to discuss our results, please feel free to call us at any time. Any one of us are available to talk to you.

We're also going to be attending the LD Micro main event next week in Los Angeles, and we'll also participate in the Sidoti Virtual Conference in December. We look forward to discussing our second quarter performance with you in January. Thank you very much.

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