Richardson Electronics Ltd (RELL) 2021 Q4 法說會逐字稿

Ladies and gentlemen, thank you for standing by, and welcome to Richardson Electronics Earnings Call for the Fourth Quarter of Fiscal Year 2021. (Operator Instructions) Please be advised that today's conference is being recorded. (Operator Instructions)

I would now like to hand the conference over to your host today, Edward Richardson, Chief Executive Officer. Please go ahead.

Good morning, and welcome to Richardson Electronics' Conference Call for the Fourth Quarter of Fiscal Year 2021. 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 of Canvys.

As a reminder, this call is being recorded and will be available for audio 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.

I'm pleased to announce we finished FY '21 on a high note. In Q4, sales exceeded $50 million, and operating income was $2.3 million. This was our best quarter since Q1 of FY '12. All 3 of our business units performed well in the fourth quarter. On a full year basis, sales were $177 million, up nearly $20 million over the prior year. Operating income was $4.5 million, excluding this onetime legal settlement. This is quite an accomplishment considering the obstacles created by COVID-19.

I want to thank all Richardson Electronics suppliers and employees and customers who found ways to make the business happen in spite of potential risks and closures impacting both supply and demand. We wondered a lot about our business and ourselves over the past 18 months. Our challenge now is to carry those lessons into our new fiscal year and to continue new opportunities for growth and earnings improvement.

With that, I'll turn the call over to Bob Ben, Chief Financial Officer, to review our Q4 and full year financial performance. Then Greg, Wendy and Jens will share more details about successes, 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 fourth quarter and fiscal year 2021, followed by a review of our cash position. In addition, please note that I will be discussing non-GAAP financial measures for fiscal 2021 full year results. I refer you to our fourth quarter fiscal year 2021 press release for a reconciliation of non-GAAP items to the comparable GAAP measures.

Net sales for the fourth quarter of fiscal 2021 increased to $50.5 million or 35.1% compared to net sales of $37.4 million in the prior year's fourth quarter, primarily due to higher net sales across all 3 business units. Richardson Healthcare sales increased $1.3 million or 92.3%, primarily due to an increase in demand for the ALTA750 tubes, reflecting the highest quantity sold in any quarter. In addition, parts sales increased, partially offset by lower sales of preowned CT scanners in Latin America. PMT sales increased by $9.6 million or 32.5% from last year's fourth quarter because of higher sales of semiconductor wafer fab equipment specialty products as well as power conversion and RF and microwave components. In addition, power grid tube sales increased from the fourth quarter of fiscal 2020.

Canvys sales increased by $2.2 million or 33.9% due to increased customer demand in both Europe and North America. Gross margin for the quarter was 32.4% of net sales compared to 30.4% of net sales in the last year's fourth quarter. Canvys margin as a percent of net sales increased to 35.3% from 31.0% because of its product mix and foreign currency effects.

Healthcare margin as a percent of net sales was 29.4% in the fourth quarter of fiscal 2021 compared to minus 28.6% in the prior year's fourth quarter, primarily due to improved manufacturing absorption and lower scrap and inventory reserve expense. PMT margin decreased to 32.0% from 33.2% due to a higher percentage of lower margin PMG sales.

Operating expenses were $14.0 million for the fourth quarter of fiscal 2021 compared to $12.7 million in the fourth quarter of fiscal 2020. The increase in operating expenses resulted from our normal employee compensation expenses, including incentives and annual merit increases. These increases were partially offset by lower legal and consulting expenses.

Throughout the pandemic, the company decided to support its employees through regular merit increases and incentive plans and by avoiding layoffs and furloughs. As a result, the company reported an operating income of $2.3 million for the fourth quarter of fiscal 2021 as compared to an operating loss of $1.3 million in the fourth quarter of last year. Other expense for the fourth quarter of fiscal 2021, including interest income and foreign exchange, was less than $0.1 million compared to other income of $0.2 million in the fourth quarter of fiscal 2020.

The income tax provision of $0.4 million for the quarter reflected a provision for foreign income taxes, which was higher than in the prior year's fourth quarter and the offset of a U.S. tax provision against the valuation allowance. We had a net income of $1.9 million for the fourth quarter of fiscal 2021 as compared to a net loss of $1.3 million in the fourth quarter of fiscal 2020. Earnings per common share on a diluted basis in the fourth quarter of fiscal 2021 were $0.14.

Turning to a review of the results for fiscal year 2021. Net sales for fiscal year 2021 were $176.9 million, an increase of 13.5% from fiscal year 2020 net sales of $155.9 million. Net sales increased by $18.8 million or 15.9% for PMT, by $1.8 million or 21.7% for Richardson Healthcare and by $0.4 million or 1.4% for Canvys. Gross margin increased to 33.2% from 31.9%, primarily reflecting favorable product mix in PMT and Canvys as well as improved manufacturing performance for PMT.

Operating expenses were $55.9 million, and non-GAAP operating expenses were $54.3 million for fiscal year 2021 compared to $51.3 million for fiscal 2020. The increase in GAAP operating expenses included a onetime cost of $1.6 million for a legal settlement with Varex Imaging Corporation in the third quarter of fiscal 2021. In addition, the increase resulted from higher employee compensation expense and legal fees, partially offset by lower travel and consulting expenses.

Operating income for fiscal year 2021 was $2.9 million, and non-GAAP operating income was $4.5 million as compared to an operating loss of $1.7 million for fiscal year 2020. Other expense for fiscal 2021, including interest income and foreign exchange, was $0.6 million as compared to other income of $0.4 million for fiscal 2020.

The income tax provision of $0.7 million primarily reflected a provision for foreign income taxes and the offset of U.S. tax provision against the valuation allowance. We had a net income of $1.7 million and a non-GAAP net income of $3.3 million for fiscal year 2021 compared to a net loss of $1.8 million for fiscal year 2020. Earnings per common share on a diluted basis for fiscal 2021 were $0.13, and non-GAAP earnings per common share on a diluted basis were $0.25.

We continue to closely manage our cash position. Cash and investments at the end of fiscal 2021 were $43.3 million compared to $47.4 million at the end of the third quarter of fiscal 2021 and $46.5 million at the end of fiscal 2020. Cash used in both the fourth quarter and fiscal year 2021 resulted primarily from an increase in working capital that was necessary to support the significant growth in all 3 business units.

Capital expenditures were $0.8 million in the fourth quarter of fiscal 2021 compared to $0.5 million in the fourth quarter of fiscal year 2020, approximately $0.6 million related to our Healthcare business, $0.1 million was for our IT system and $0.1 million was for other projects. Total capital expenditures were $2.6 million in fiscal 2021 as compared to $1.8 million in fiscal 2020.

We paid $0.8 million in dividends in the fourth quarter of fiscal 2021 and $3.1 million in fiscal year 2021. In addition, based on our current financial position, our Board of Directors declared a quarterly dividend of $0.06 per common share, which will be paid in the first quarter of fiscal 2022.

Lastly, during fiscal 2021, we repatriated $0.9 million to the U.S. from foreign locations. Our U.S. cash and investments totaled $25.5 million as of May 29, 2021.

Now I will turn the call over to Greg, who will discuss the results for our Power & Microwave Technologies group.

Thank you, Bob, and good morning, everyone. The Power & Microwave Technologies group, or PMT, sales in the fourth quarter of fiscal year 2021 grew 32.5% to $38.9 million versus $29.3 million in Q4 of last year. In addition to an excellent sales quarter, PMT achieved a book-to-bill of 1.29. This incredible sales growth and strong booking numbers allowed us to finish FY '21 with 15.9% growth and a 1.24 book-to-bill and put us in great position for a strong start to FY '22.

Our gross margin decreased in the quarter to 32% versus 33.2% in the prior year. This was mainly due to the product mix.

We continue to have excellent growth in our Power & Microwave Group, or PMG. Our growing line of new technology partners and new products supporting RF and wireless applications like 5G infrastructure and power management applications led to this growth. With respect to 5G wireless and power management, revenues increased by double digits again in Q4. As the need continues to grow for people to work from home, the city, the country and even the car, they must be able to send and receive large amounts of data for many of these locations quickly.

In addition, we had strong sales from engineered solutions products supporting the semiconductor and wafer fab equipment market in the quarter. However, our legacy tube business also grew in the quarter, was exceeding sales in prior year.

We saw an extremely positive booking trend in PMG. Our book-to-bill in the quarter was 1.48. This was achieved by continued growth in the power management and wireless communications market. Regarding the bookings on the power management side, we saw growth in applications for wind energy, solar, EV and energy storage. New products such as our soon-to-be issued patented ULTRA3000 pitch energy module using wind turbines continues to gain traction with another excellent booking quarter. In RF and microwave, applications in 5G, microwave communications and SATCOM led the growth.

The team has done an excellent job identifying niche technology partners who collaborate and support our global demand creation model. We continue to invest and focus on resources to support these growth markets. These resources include design engineers, field engineers and manufacturing capabilities. We also have added numerous small niche suppliers to fill technology gaps. In Q4, we added Wakefield for the thermal management products and SemiQ for their silicon carbide MOSFETs. Both technology partners will be strong partners going forward as they fill technology gaps in our product offering. This strategy has been highly successful, and we will continue to use it as it adds new products, customers, revenue and profits by capitalizing on our demand creation infrastructure.

Electron Device Group, or EDG, experienced an increase in sales due to our semiconductor wafer fab customers. However, we also saw our legacy tube business begin to come back. The fourth quarter once again proved that the demand for our products and services did not go away with the pandemic. We're even more excited about the booking trends in the coming quarters.

This quarter, we continued to receive support from our key technology partners such as Qorvo, MACOM, Anokiwave, UnitedSiC, LS Materials and Fuji Microwave. 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 in our global semiconductor wafer fab customers. They also introduced new product designs for key growth markets such as the ULTRA3000 with our soon-to-be patented technology for the wind turbine market.

We also signed a technology partnership with BSE. This agreement includes exclusive rights to manufacturing, distribution and new design development collaboration. We'll be introducing products using ultracapacitor technologies and power management applications from this agreement beginning in Q2 FY '22.

One red flag going into Q1 FY '22 is longer semiconductor component lead times. This affects our component business and engineered solutions products, including the ULTRA3000. As these lead times continue to extend, we'll be very aggressive on our inventory and to fill the pipeline to make sure we can meet our customers' needs. We are coordinating closely with our customers and suppliers to keep everyone in alignment.

We continue to look forward extensively on how to do things differently and achieve success. We developed several unique strategies to support our customers, designs, products while working with the restrictions on travel and face-to-face meetings. As mentioned, these strategies include adding new technology partners where we have technology gaps for our key markets. We also increased communication to customer and supplier focused webinars, and we implemented a major web upgrade.

Richardson global go-to-market strategy has allowed us to grow multiple business opportunities during the pandemic through creative processes and communication procedures. We are committed not only to bounce back, but to bounce forward coming out of this pandemic. The Q4 results show excellent progress in this strategy.

Especially during and coming out of the pandemic, I cannot stress enough the value of Richardson Electronics model to our customers and suppliers. Our unparalleled capability and global go-to-market strategy are unique to the power and microwave industries. We developed a powerful business model, including legacy products and new technology partners, to go with our engineered solutions capabilities. Through our steadfast and creative focus on customers, we will survive this pandemic by taking advantage of opportunities when they arise.

The demand for our products has not gone away. Our customers and technology partners need Richardson Electronics products and support more than ever.

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

Thanks, Greg, and good morning, everyone. I am pleased to announce that the Healthcare group had another good quarter. The number of ALTA tubes sold hit a new high. Strong demand in Europe and the China reloading program positively impacted tube sales. Total sales in the quarter were $2.8 million, a 92.3% increase over sales in the same period last year. Sales of parts and tubes increased over prior year's fourth quarter. Equipment sales fell short versus Q4 last year due to the ongoing lack of used CT scanners as hospitals hold on to equipment longer. We are starting to see this loosen up in the current quarter.

FY '21 sales on a full year basis were $10.3 million, 21.7% higher than FY '20. Sales of parts and tubes increased over prior year, while equipment sales were down slightly. We are very pleased with the team's performance given the challenges created by COVID earlier in the year. The Healthcare team had the honor of working every day with people on the front lines, and we thank them for their commitment and sacrifices.

Gross margin in the fourth quarter was 29.4% versus a negative 28.6% in Q4 last year. We continue to have lingering supply chain issues related to COVID, primarily slower deliveries on raw materials and key components. This limited the number of tubes we made in the quarter. We were able to meet customer demand, but we still have additional production capacity. Gross margin on a full year basis was 25.1% versus 24.4% in FY '20. We anticipate margin will improve as we move more tube types into production and leverage our production capabilities.

As noted last quarter, we have added resources to support the growth, and we are in good shape for increased production requirements.

New tube development remains on schedule. The ALTA750G is now in beta. Full rollout based on acceptable beta site results will be late summer, early fall. We anticipate sales growth will be gradual as Canon CT scanners come off of the OEM service contracts.

We will begin shipping our first repaired Siemens type, the Straton Z, in small quantities in the fall. Additional Siemens types, the MX, MXP and MX P46 will follow in calendar year 2022. There are no third-party replacement options for Siemens tubes, and Siemens CT market share is significantly larger than Canon. While this is a repair program, we must follow all of the same development steps to ensure the product we make available exceeds customer 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 operation. We also continue our efforts to expand the number of countries in which our tubes are registered. We recently completed the initial Medical Device Single Audit Program, or MDSAP audit. This is required to sell our tubes into Canada, Japan and Australia. We hope to receive Canadian registration, our top priority, before the end of calendar year 2021.

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 sale of custom displays to original equipment manufacturers in industrial and medical markets, delivered an outstanding performance with sales of $8.8 million during the fourth quarter of fiscal 2021, an increase of 24.7% over our most recent third quarter and an increase of 33.9% over the same period last year. We set a new sales record this quarter based on increased customer demand as our customers thought to compensate supply chain uncertainties, especially in the electronic component market. On a year-to-date basis, global sales grew by 1.4% to $29.3 million in fiscal year 2021 due to the addition of new customers. This was a remarkable accomplishment considering the COVID-19 pandemic and the serious business impact.

Gross margin as a percentage of net sales was 35.3% during the fourth quarter of fiscal 2021, up from 31.0% during the fourth quarter of fiscal 2020. The increased gross margin was related to a favorable product mix and currency effects. On a year-to-date basis, our fiscal year 2021 gross margin as a percentage of sales increased to 35.0% from 32.2% versus fiscal year 2020.

Our healthy backlog, along with the numbers of projects that are currently in the engineering stage, position us well for continued growth, assuming no longer-term impact from the current supply chain obstacles. We continue dealing with extended lead times for selected components from our Asian suppliers.

We are making progress with our online awareness initiative. We are adding new application stories to our website and publishing press releases and social media footage, promoting our new product platforms such as a 10.1-inch high-definition monitor and a 15.6-inch full high-definition monitor with USB-C interface. We are confident that our online strategy will result in new leads and business growth.

During the quarter, we received several new orders from both existing and first-time medical OEM customers. Some of these applications include cryolite policy systems that break down fat cells by cooling of body fat; cataract and refractive surgical systems; laser systems for therapeutic and refractive applications of cutting-edge corneal surgery; robotic-assisted surgical platforms to improve precision and accuracy in new surgery, medical device control, capturing high-resolution images and live video from up to 2 surgical imaging devices; laser systems for the treatment of peripheral and coronary arterial disease with photo ablation; dental treatment centers where patients can review radiographic images or live video from an intraoral camera or other video feed such as educational videos or promotions; patient monitoring systems and surgical navigation systems.

In the nonmedical space, we received orders for various display products. Our products are used in commercial CT scanners for scanning luggage in airports. CT scanners and such an application of a better threat detection and much faster passenger throughput.

We also received orders for all-in-ones, monitors with an integrated PC to control high-speed, high-precision milling machines and for product expansions used in retail stores and displays for tailor prompter and talent systems for well-known new stations.

From the variety of customers and applications as well as the value of orders from existing and new customers, it is clear we offer our customers outstanding products and 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 will continue to work with our partners to help us reduce inventory while being able to meet the demand 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. Another great year for Canvys. I know you had many challenges with hospital closures in the financial condition of the health care industry. With your flexible display solutions, you were able to create new opportunities and support demand for patient monitors and other critical equipment.

As we start at the bottom of the mountain again in FY '22, I'm very excited about the future of Richardson Electronics. Our power grid tube business is as healthy as ever with continued strong operating contribution. We've always said that you can't make a business with a single tube, and Healthcare will be launching several new tubes in the next year.

The semiconductor wafer fab market continues to grow as demand for integrated circuits invades every corner of our lives. Our newest green initiative, ultracapacitor modules used to replace batteries and wind turbines and other critical applications, offers considerable upside for the company in FY '22 and is a good complement to our growing PMG business.

Our patent-pending designs are unique in the industry, and our engineering and manufacturing teams are working around the clock to ramp up production to meet demand. We're taking additional steps to control our supply chain and to increase production levels. The only thing holding us back is component supply.

In FY '21, we did not use much cash. Our goal is to protect our cash position and to continue operating frugally to ensure we have free cash flow to invest in new opportunities. We will attack, which is by controlling expenses and focusing on the margin to improve the bottom line. It's an exciting time in the company.

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

(Operator Instructions) And our first question comes from Howard Brous with Wellington Shields.

First of all, allow me to congratulate Ed, you and Wendy and the whole team on just a great quarter every way you want to look at it. So congratulations.

Thanks very much, Howard.

You're very, very welcome. And secondly, I was not able to be on the conference call last quarter. So allow me to congratulate Wendy on joining the Board of Directors.

Thanks, Howard.

You're very, very welcome. So Wall Street always is pleased about the past, but let me talk with you about going forward. And you did mention, one, in the press release; and two, just now, ULTRA3000. And you talked about increased bookings for ULTRA3000. Is this something a number that you plan on releasing quarter by quarter, year by year or not at all?

I'll let Greg address that.

Well deserved.

We had another strong quarter in bookings on the ULTRA3000 for the GE turbines in the fourth quarter. I can tell you we have a backlog of over $10 million -- north of $10 million that is scheduled to ship this fiscal year. And as I mentioned, we're dealing with component delivery. So -- but we'll serve that market very, very well.

Well, just to specifically address the market. Based on my research, there are about 350,000 wind turbines worldwide, 60,000 roughly in the United States, growing at multiples of thousands a year. Can I get a sense of what you're looking at in terms of, one, the -- your belief of your market annually, if you will? And totally, what's the TAM? Annually, what's the -- is it overall?

And then last but not least, concomitant with that -- and I know on a temporary basis, we have shortages of certain parts. That shortage will go away probably between now and the end of the year. So can you give me some sense and some information, please?

Sure. Yes, Howard, you're correct on the global TAM. It's obviously a huge opportunity, not only for the ULTRA3000, but we have other products coming out to support wind turbines that will go into the same wind turbines.

Right now, what we're focused on and winning is a very focused approach right now. Our product goes into GE turbines. GE on a global basis has about 40,000 to 50,000 turbines. We're addressing right now the North American number, and that's about 30,000. With that number, we have production orders, alpha orders, beta site orders. All that have been successful were about 40% of the installed base in North America.

So with that, I always look at what the SAM is. And to me, SAM is the number that we have a product that either has a technology advantage or a pricing advantage of what we can address. And so right now, our SAM today with the product we have is about $85 million. And we're very successful. We have -- as I mentioned before, there's 4 companies that make up about 40% of that SAM. And we have active and successful design-ins, beta site design-ins and production orders from all 4. So it's really catching on. Our product is quality, 0 failures in the field, along with the fact that it is -- the patent will be confirmed on next week. So it's a very strong market, and we're doing a good job addressing it.

In the last conference call, I had read that you talked about gross margins. I think either you or Wendy talked about gross margins could have been hedged, so I apologize, in excess of 35% and the SG&A absorbed by the PMG group. Are you still comfortable, one, with that number? And then, two, if you're talking about a SAM of $85 million, do you have the capacity to build it, forgetting about the shortage of parts because that goes away certainly in the next few months?

Yes. On the capacity side, we have great suppliers that are also increasing their capabilities. As Ed mentioned, we are also doing things ourselves in terms of design engineers and capital expenditures here to subsidize any uptick in the business.

Yes. Through our LaFox manufacturing group, Howard, we are definitely adding the capacity. It'll be through multiple shifts, but to keep up with the demand that Greg's group is generating, but we feel confident with that.

So you're looking to increase capacity by doing multiple shifts.

We brought in about $0.5 million worth of pick and place equipment that's being installed. We've been outsourcing most of the Board level pick and place work, and we're going to protect ourselves. We'll take a large portion of that in-house, and that will also speed things up for us.

Compare this to batteries in terms of price structure and in terms of replacement, so prices for battery are x, yours is y? That last -- how long will yours last?

Yes. So currently, the lead acid batteries that are in these turbines last about 18 months. The ultracapacitor modules last for about 15 years. With that, there really is not a -- its cost of installation, it's very costly to get an organization together, go up 300 feet, take out the battery and replace it. Many of these things are at remote sites. Also downtime -- when a turbine is down, it is not producing energy, therefore, it's not producing any income. So they've done an ROI. And based on our pricing, we're able to make their ROI on putting these ultracapacitors in these turbines versus the lead acid. And then, of course, the environmental part of it is removing lead acid. They get subsidies from the government to do that. So it's really the ROI of the installation downtime. It's not a price for the battery versus the price for the module cell.

When you talked about the SAM, that's domestic. Is that correct?

Yes.

How do you foresee going international? And I know you have offices throughout the whole world.

Yes. So right now, one of our customers is in North America, is a company called Enel. They're based in Italy. In the second quarter, we are going to have an alpha site design going on. They'll run that for about 6 months. We are also going to roll it out at the wind show in Europe like we did here in North America 14 months ago. And whatever resources we need over there, we do have some people that are from that industry within our organization. So we're going to roll that out, meaning specifically the key customers that would use this product, starting with one that we already have a relationship with in North America called Enel.

All right. Last but not least, BSE. You're talking about having a product for Q2 this year. What type of numbers can we look at, one, in terms of the revenue per unit and the TAM or SAM as you want to wish to use?

Yes. The product cost is very similar to the cost of the ULTRA3000. This product uses 5 ultracapacitors versus 6 in the ULTRA3000. We have alpha products going out in August. With the beta site testing, we already have a letter of intent from a large service provider to test the product, and they've requested a letter of intent quote for 900 sites in Atlanta. So it's going to go through the same process as the ULTRA3000. We'll get alpha sites out in August. Beta site testing, same amount of time, usually 4 to 6 months. But they're very excited about it. We've met with AT&T, Verizon and T-Mobile.

And the same situation, Howard, in that a lot of these base stations are remote. It's very costly to replace the lead acid batteries in these generators. And then the downtime -- not only the fact that it's not being able to charge the customer. But if they lose any customer because if a person can't get a signal, the cost of churn, which is either getting a new customer or getting back an old customer, is financially a disaster for them. So they're going to do whatever they need to do to make sure that site is always running and always supporting their customers. And this product helps them do that.

Let me just go back to wind turbines. Texas wind turbines all froze as a result of the weather going back a bunch of months ago. Ultracapacitors are not heat or cold sensitive. Is that a correct statement?

Yes. In general, they had to go and replace all the batteries. Just like your car with the cold weather, they would not start up again. The ultracapacitor modules, if they were in those turbines at the time, you would have been able to start the turbines up or lead that pitch system, part of the turbine, immediately. And so that kind of -- we got a few phone calls and a few expedites after that situation.

Great quarter. Looking forward to the next one.

Howard, we might add, our intention is that as this ultracapacitor business builds up that will make it into a separate strategic business unit. We're not sure yet whether that's 1 year out or 2 years out, but we think it's a tremendous market. We're only addressing GE turbines at the moment, and Siemens has a larger nearly so market share in the rest of the world as GE and our ultracapacitors work with Siemens equipment as well. So there's a tremendous opportunity here.

And also, I'm going to add to that, Howard, it's not going to be a one-hit wonder. We're in process of designing and developing other products that go into the wind turbine to function in terms of power management. So we're going to have, with the next 12 months, a really strong portfolio of products, which obviously would be led by the ULTRA3000, which is giving us the relationships with these owner operators in North America, but we're going to continue to invest, design and develop new products and have a portfolio going forward.

I just want to let you know that as a large shareholder, it is not my intention to climb up one of those wind turbines and service them. Not going to happen.

Our next question comes from Eric Landry with BML Capital.

Okay. So I just want to piggyback on the prior call here real quick. For this Battery Street Energy product that you are in trials with, I guess, all 3 of the major wireless providers, are you in competition with anyone here? Or are they just looking solely at your product?

I don't know if they're looking at others. There are other companies that have this capability. Right now, they're looking to test ours. I know but one that I talked to specifically was not testing anybody else's at this time. But yes, there's going to be competition on this.

Okay. And is it -- so are you having to go through the genset manufacturers and then to the wireless providers? Or are the wireless providers coming directly to you to pull the batteries out of the gensets and put in the ultracapacitor?

Yes. So it'll be a combination of both. Like the ULTRA3000, we're working directly with the service providers who, like the ULTRA3000, have integrators that go and do this upgrade, if you will, to their generators throughout North America. But we're also talking to the OEMs such as Coolar, Generac, Cummins, that are the key 3 providers of generators to those specific service providers in terms of making it standard equipment or designing it into their standard equipment going forward. So it's kind of a combination area.

Got it. Okay. Sounds exciting. Greg, will you talk about power management? Is that essentially ULTRA3000?

No. The power management strategy is what developed and found and got us into and recognized the ULTRA3000 opportunity. We have a very strong organization, line card, historical customers that deal in all kinds of what I'm calling power management, but I guess you'd could call it renewable energy, wind application, solar, battery charging, electric vehicle, energy storage, all those one use ultracapacitors, but they also use a lot of other products that we have. And as we go forward, I think we're going to find more and more customers. Like the key customers we're dealing with now in the ULTRA3000, they don't want to buy the ultracapacitor. They want to buy that ultracapacitor in a module that does a certain function. And then they want some company to be able to have the ability on a global basis to send that product to their 25 wind farms in North America and also to have inventory throughout the world, which we have through our distribution organization, which was started obviously by the tube business.

So the overall strategy is to support this power management, which is growing very, very fast. Green energy, of course. And it's products like this, the ULTRA3000, but we're also designing from a component point of view in a lot of applications supporting the same type of products.

Okay. I just asked because you said 1.48 B2B, that does not reference the ULTRA3000?

As I mentioned before, we did have a strong booking quarter, but that's not all of it.

Was there any ULTRA3000 sales in the quarter?

Yes. We started shipping -- yes. We started shipping in May, a very small amount in terms of -- but we're in production here in Q1. But I'm going to add what the -- it's scheduled to ship. We're still dealing with component (inaudible) go away this calendar year. We're going to deal with this probably for another 9 to 12 months. And -- but we are in production. We shipped a number of beta site products and then also some (inaudible) products.

Okay. Does the inventory number have something to do with these ultracapacitors?

Increase -- as I mentioned before, we're very aggressive. And I'm not kidding when I say if that's a Tuesday, you grab it and get it in stock and you just put it in inventory to support deliveries in 2 or 3 months because they will go to (inaudible) the next day. So this company has always been very aggressive, but it's mainly aggressive in terms of supporting the customers' needs. And so yes, we did increase our inventory. Quite a few ultracapacitors in stock right now, Eric, needless to say. So I don't know where you get...

(inaudible) the entire order.

You might get some for Christmas, just telling you.

Would be great. Would the semiconductor wafer fab product not as prominent as perhaps you were expecting? I just mentioned that because it looked like the gross margin was about, I don't know, 300 basis points lower than the prior quarter and assuming that's a decent margin product for that.

Yes, it was up substantially. Our semi wafer fab business is in excess of $22 million for the year. And the good news about that is the market is telling us that their business is going to increase 50% in the year to come. We already have very substantial backlog. So we're counting on that business. And as you know, it's quite profitable. But what takes the margin down, and I'll let Greg tell you, but it has to do with the conductor business, which is 20% margin.

Yes. It's just a product mix, Eric. The 5G business is lower margin than the wafer fab business, and it just grew so much in the quarter that it's just product mix lowered the margin a little bit but, obviously, increase the profit dollars because of the huge sales.

Right. And so for fiscal 2022, somewhere around $35 million for semiconductor wafer fab is not out of the question?

What's the number?

$35 million, that's basically 50% about '22, isn't it?

Well, we're not planning a number like that, but that's what the lens of the world and the MKS is that's what they're telling us. But how much of that we'll get remains to be seen. We're being rather conservative in how much we add to our business plan for next year. But if you ran the numbers, you're -- it could possibly be very (inaudible). You see a 10% to 20% increase in the semi fab business next year.

Okay. I got you. Look, Wendy, could you perhaps describe the detail a little bit more about the Siemens opportunity? Because this is -- I gather this is a different process than a can where you're going and opening the insert and replacing the, what is it, the anode and the cathode. Is the margin potential and the volume -- I guess the volume potential is much bigger for the Siemens, but is this sort of a lower tech repair for Siemens than it is for the Canon enhance maybe a lower margin product? Or how does that work?

It's a good question. The answer is it's still a very sophisticated process to repair the Siemens product. Again, there are several different types that we're working on, and that adds a layer of complexity. But we are actually going into the insert. So even though it's not a new tube, it is a repaired process. We're still following all the same developments in terms of validating the repairs, in terms of are they repeatable, can we use existing parts? We're being obviously very, very careful to avoid any patent issue. And as a result of that, like I said, it's a process that's going to take us at least through calendar year -- mid-calendar year 2022 before we feel like we have a repair process that will meet customer expectations.

As far as margins go, we feel good about that. We -- I mean there -- again, no third-party replacement for the Siemens tube, the ones that we're working on, the MX, the MXP, the MX P46 and the Straton Z. So we will have the only alternative solution to the OEM. The OEM is very expensive. They're very protective of their market. And we think, again, that we can be in that close to $80,000, $90,000 range with a fair warranty. So that's what we're looking at. The margin will be -- it's mostly labor in terms of the repair process, and I think it'll be a really good margin.

Okay. So then I guess the next question is, why do you think it is that no one has done this? If it's such a large market with decent margins, I would think that somebody would have tried this prior to you guys.

Well, it's interesting. If you look at our competitors in the third-party market space, they don't really do repairs. They only do new tube development. And there -- because of the patents, we're not doing new tubes here. These will not be new, and we will not violate those patents. And I think that's really what's kept the market more -- not with third-party replacement.

The answer, though, really is that we have $30 million worth of investment in new equipment and probably the most modern CT factory in the world, and it takes all of that equipment and the engineers behind it to come up with a repair process that's repeatable. And we've added Siemens engineers now as well, which is a big help. So -- but it's the investment to get into that business and the sophisticated technology necessary to repair the tube that keeps anyone else out.

Okay. One more before I let someone else -- the other one hug the whole call. Is $14 million somewhere around a decent run rate for this year as far as your G&A?

I'm sorry, $14 million for G&A?

(inaudible)

For the corporate outcome per quarter.

Yes. Yes. Look, that sounds about right.

Our next question comes from Anthony Chiarenza with Key Equity Investors.

Congratulations on an outstanding quarter. A couple of questions. First one, you talked about book-to-bill ratios in different sectors of the business. Do you have an overall book-to-bill ratio for the company, just to give a sense of how quickly the whole company is growing?

Yes, we can do that. Bob, do you want to...

Yes. Anthony, this is Bob Ben. Yes, for the whole company going out of the fiscal year, our book-to-bill was 1.25.

Okay. That sounds good. That sounds excellent. Second question, with regard to health care, as you look between -- from the quarter 3 to quarter 4, there's a slight drop in revenue. Is that meaningful? Or is that just normal fluctuation?

That's normal fluctuations from quarter-to-quarter.

Yes. So you'd expect that to grow as you go into the year, maybe running more like over $3 million maybe perhaps?

That is our goal, yes. And as we introduce the new tube, that will help us get there.

Okay. That sounds good. And the final question is on cash management. As we look at the share price, obviously, it's moved up some, but I think you would agree that the share price is undervalued at this point. Have you given some thought and has the Board given some thought to a share buyback program?

Well, we talk about it all the time, but the answer is if you look at our Board members, they're all have been CEOs of their own company, many of them out of the tube business. And they're very concerned that we have adequate cash to fund the growth in the future. And our goal right now is to get to the point where we're cash flow positive rather than burning cash. But in the meantime, we're going to sort of keep our powder dry and maintain the cash we have for running the business.

And then you -- at this point, you'd anticipate being cash flow positive. Given how the business is running after the fourth quarter, it looks like you will be cash flow positive going into fiscal 2022, no?

Well, I think right now, we're showing a small use of cash in our projections. But if the numbers come in the way I think, I think we'll be cash flow positive within 12 months or so.

Okay. Okay. That sounds good. So you still think the cash -- I mean you have a nice cash position at this point. Obviously, it gives you a lot of flexibility with the business. But even use of a small portion of it for share buybacks just kind of showing the market that you think you're very positive on the outlook for the company or whatever. It kind of sends a message that you believe that the company is going to continue to do well.

Well, we look at it every quarter, but the answer normally from the Board is no, keep the cash for investing in the business. But it's something that it's a topic of discussion every quarter. So we talk about it.

And on the related front, is there any thought to actually raising the dividend? That's another way to send a message to sort of the market that you're believing that your earnings are good and you'd be able to think it'd be consistent. It's kind of a strong way to make the statement to the market.

I understand. I don't think for the foreseeable future that we'll be raising the dividend either.

Congratulations again on a fantastic quarter.

Thank you very much. We really appreciate it.

Our next question comes from Mike Hughes with SGF Capital.

On the tube business, I think the medical equipment manufacturers in the past have said to the customers, if you don't use our tubes, you risk the warranty. And President Biden a few weeks ago signed an executive order, I think it's called the right to repair order. I think it was mainly consumer-oriented. But as your general counsel looked at that, does that potentially help your case and prevent the Siemens of the world from doing that and invoking that threat?

Mike, that's a good suggestion, and we certainly followed along with it. And we're waiting to see -- we've read a lot of it ourselves that doesn't have a lot of TVs at this point. It's more a concept, but we think the concept works in our favor. And so we're very anxious to see where the government goes with this. And yes, it will help us.

Okay. Great. And then on the ultracapacitor ramp, I think you said $10 million in revenue for this fiscal year. I know it's tough to know given the supply chain issues, but how does that kind of ramp throughout the year? Meaning, do we start with a couple of million dollars? Or is the number more nominal early in the year and then really hockey sticks later in the year? How do you envision that unfolding?

Yes. The component issues of lead times and allocations is so fluid, it is very hard, as you mentioned. However, on paper, it is scheduled. On paper, a large percent of it, 75% of it is scheduled to ship this calendar year and the balance in the fiscal year.

Okay. And kind of evenly by quarter, is that how to think about it?

Yes. For the most part, they -- it's interesting, they taken -- we'll ship to 12 or 13 different sites for their installation. So it's a lot of scheduling on their side to make sure they're integrated are there to do it. But on paper, yes, it's for the most part equal each month.

Okay. In that business, the ultracapacitor business has gross margins kind of consistent with the PMT business, is that right?

Yes. Actually, it's accretive to the company's business, overall margin. So it'll be accretive.

Okay. Okay. So just kind of stepping back, you just put up $50 million in revenue. And it sounds like kind of on a go-forward basis, the ultracapacitor business is going to contribute maybe $1 million to $2 million a quarter in revenue. It sounds like the semi-cap equipment business is going to step up a little bit. The PMG business, I assume that, that is going to continue to perform at the level that you just reported. The Healthcare business is getting a little bit better. So just on a go-forward basis, is it safe to think that the $50 million for the next few quarters at least is kind of a floor and maybe you put up a number in the mid-50s over the next few quarters?

Well, I think if you look at the total year that will come close to making the $50 million average for each quarter, we're looking for an increase in the coming year to be something like what we did in the past year. And so that would almost get you there.

The percentage increase similar to the year you just finished. Is that what you're saying?

That's correct. Yes.

And our next question comes from [William Wilson] with [Richardson Electric].

Just a quick question or speculation of a question. I'm not sure what, but I'm trying to rationalize the price drop as I look at the screening today. And I'm just wondering...

We certainly don't understand.

I'm ecstatic at the direction of the company, and I'm kind of thinking that maybe the company is in limbo between a value proposition or value managers and growth. And so my question is whether -- considering the number of green funds in the market and the excitability for that, what society needs you would probably command maybe 5x what the price of the stock is today fully recognized and if that's where you're going. So I'm just wondering if there will be any outreach to some of those new funds or managers. I know with the COVID, it's kind of difficult. But at the same time, it seems there's such -- I know the managers have been picking up shares, but I'm wondering if they've got it completely on a computer program to squeeze out individuals like myself to capture those shares. And it's quite disconcerting to see that disconnect. I think you're heading in the growth, the clear growth, but one that should be greatly rewarded for what you're doing. And so I'm just hoping that there will be more outreach.

We certainly agree. We're going to do a small financial conference, it's virtual, but in August and see if we can get the story out there a little more to some new investors. At the same time, I -- as I mentioned earlier, in the coming years, we'll break out the ultracapacitor business as a separate SBU because I think the -- that will get attention of the investors that are looking for green investments, and it certainly fits that category. We think that'll probably help as well.

Do you think that could be a spin-off or something like that?

No, not today.

Not today.

We'd like to get the whole company to be very successful before we spin anything off.

All right. Thank you for your investment and for your questions.

Thank you. I'm not showing any further questions at this time. I would now like to turn the call back over to Edward Richardson for closing remarks.

Okay. Well, thank you for your ongoing interest in Richardson Electronics. And we're certainly optimistic about the future and hope you are as well.

If you have any other questions, please give us a call. We're here and happy to answer those questions. We look forward to hosting our annual shareholder meeting and discussing our first quarter performance with you in October. Thank you very much.

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