Q3 2024 Richardson Electronics Ltd Earnings Call

Participants

Edward Richardson; Chairman of the Board, President, Chief Executive Officer, Chief Operating Officer; Richardson Electronics Ltd

Robert Ben; Chief Financial Officer, Executive Vice President, Corporate Secretary; Richardson Electronics Ltd

Gregory Peloquin; Executive Vice President - Power and Microwave Technologies Group; Richardson Electronics Ltd

Wendy Diddell; Chief Operating Officer, Executive Vice President, Director; Richardson Electronics Ltd

Jens Ruppert; Executive Vice President and General Manager - Canvys; Richardson Electronics Ltd

Anja Soderstrom; Analyst; Sidoti & Company, LLC

Ross Taylor; Analyst; ARS Investment Partners LLC

Barry Mendel; Chief Investment Officer; Mendel Money Management

Joseph Nerges; Analyst; Segren Investments

Presentation

Operator

Good day, and thank you for standing by, and welcome to Richardson Electronics' Earnings Call for the Third Quarter of Fiscal Year 2024. At this time, all participants are in a listen only mode. After the speakers' presentation, there will be a question and answer session to ask a question. During the session, you will need to press star one one on your telephone. You will then hear an automated message. Advising your hand is raised. To withdraw your question, please press star one one. Again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Ed Richardson, Chief Executive Officer. Please go ahead.

Edward Richardson

Good morning and welcome to Richardson Electronics' conference call for the third quarter of fiscal year 2020.
For joining me today are Robert Ben, Chief Financial Officer, Wendy Dale, Chief Operating Officer and General Manager for Richardson Healthcare. Greg Peloquin, General Manager of our Power & Microwave Technologies Group, which includes the green energy solutions and yens, Rupert General Manager of Canvas. As a reminder, this call is being recorded and will be available for playback. I would also like to remind you that we'll be making forward-looking statements 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, and I'm pleased to report that we returned to profitability in the third quarter. Sales increased 18.7% sequentially, reflecting improving business conditions. Stronger demand for our Ultra 3,000 from new and existing wind customers drove higher GES. Green Energy Solutions sales as the current show, increase in sales and profitability is encouraging, reflecting the benefits of our diversification strategies as well as our team's focus on enhancing profitability and strengthening our balance sheet our net sales continued to reflect the cyclical nature of the sales to semiconductor wafer fab customers, which declined $11.5 million in sales during the quarter. We believe Q3 will be our lowest semiconductor revenue quarter. Our customers continue to tell us they anticipate growth in the back half of calendar year 2024, leading to record sales in calendar year 2025. Another highlight in the quarter was the $4 million sequential decrease in inventory, reflecting prudent strategies aimed at improving working capital levels throughout fiscal 2024. We focused on improving inventory levels to better align with the expected demand across our markets. Inventory grew primarily in response to supply chain constraints over the past several years. I'm pleased with the progress of our global teams are making the quarter marks the first time we've seen a decline in inventory in more than two years.
I'll now turn the call over to Bob Ben, our Chief Financial Officer, to review our third quarter financial performance in detail. Then Greg, Wendy and Jens will discuss our business unit performance, including an update on the new products programs and customers that continue to drive our optimism for the future.

Robert Ben

Thank you, Ed, and good morning. I will review our financial results for our third quarter of fiscal year 2024, followed by a review of our cash position. Net sales for the third quarter of fiscal 2024 were $52.4 million compared to net sales of $70.4 million in the prior year's third quarter. Pmt sales decreased by $15.7 million from last year's third quarter, primarily driven by a decline in manufactured products for our semiconductor wafer fabrication equipment customers. Sales for GES. increased $0.1 million from last year's third quarter, which included a large sale of EV locomotive battery modules that did not recur in fiscal 2024. Canvas sales decreased by $3.1 million, primarily due to short-term customer pushouts in North America, Richardson Healthcare sales increased by $0.7 million compared to the third quarter of fiscal 2023 as higher CT. two and parts demand offset lower system sales.
Backlog totaled $147.7 million at the end of the third quarter of fiscal 2024 versus $150.7 million at the end of the second quarter of fiscal 2024. The sequential decline was in PMT and Canvys GS. backlog of $36.8 million increased from the second quarter of fiscal 2024 by $1.1 million.
Consolidated gross margin for the third quarter was 29.5% of net sales compared to 31.8% in last year's third quarter, primarily due to product mix and underabsorption without under-absorption of the Company's manufacturing facility. Management estimates that the Company's consolidated gross margin for the third quarter of fiscal 2024 would have been 31.0%. Pmt's gross margin decreased to 28.3% from 32.9%, primarily due to product mix and $0.8 million of manufacturing underabsorption GS. gross margin increased in the third quarter of fiscal 2024 to 26.6% from 25.7% in the prior year's third quarter due to product mix.
Canvys gross margin increased in the third quarter of fiscal 2024 to 34.4% from 32.0% in the prior year's third quarter because of product mix, health care's gross margin increased to 41.6% in the third quarter of fiscal 2024 compared to 39.8% in the prior year's third quarter as a result have an improved product mix. Operating expenses were $14.4 million for the third quarter of fiscal 2024 compared to $14.8 million in the third quarter of fiscal 2023. The decrease in operating expenses resulted from lower incentive expenses, partially offset by higher R&D expenses in support of the Company's growth initiatives. The Company reported an operating income of $1.0 million for the third quarter of fiscal 2024 versus an operating income of $7.6 million in the third quarter of last year.
Other expense for the third quarter of fiscal 2024, including interest income and foreign exchange was less than $0.1 million compared to other income of $0.4 million in the third quarter of fiscal 2023 income tax provision was $0.2 million or a 23.4% effective tax rate versus an income tax provision of $1.7 million or a 20.7% effective tax rate for the third quarter of fiscal 2023. Net income for the third quarter of fiscal 2024 was $0.8 million, or $0.05 per diluted common share compared to net income of $6.3 million or $0.44 per diluted common share in the third quarter of fiscal 2023.
Turning to a review of the results for the first nine months of fiscal year 2024. Net sales for the first nine months of fiscal year 2024 were $149.1 million, a decrease from $203.8 million in the first nine months of fiscal year 2023, which reflected lower sales across our business segments.
Gross margin decreased to 30.3% from 33.0%, primarily reflecting product mix and manufacturing underabsorption and PMT. product mix and GS. as well as increase for scrap expense and manufacturing underabsorption in healthcare, which was partially offset by a favorable product mix and lower freight costs for Canvys operating expenses were $44.7 million for the first nine months of the fiscal year, which represented an increase of $1.0 million from the first nine months of the last fiscal year. The increase was due to higher salaries and R&D expenses, partially offset by lower incentive expenses.
Operating income for the first nine months of fiscal year 2024 was $0.5 million as compared to an operating income of $23.6 million for the first nine months of fiscal year 2023. Other expense for the first nine months of fiscal 2024, including interest income and foreign exchange was $0.2 million as compared to other expense of $0.1 million for the first nine months. Fiscal 2023 income tax provision was $0.1 million or an effective tax rate of 39.2% during the first nine months of fiscal 2024 versus an income tax provision of $5.3 million or an effective tax rate of 22.5% in the prior year first nine months, the Company reported net income of $0.2 million, or $0.01 per diluted common share for the first nine months of fiscal year 2024 versus net income of $18.2 million or $1.27 per diluted common share for the first nine months of fiscal year 2023.
Moving to a review of our cash position. Cash and investments at the end of the third quarter of fiscal 2024 were $18.9 million compared to $22.8 million at the end of the second quarter of fiscal 2024. The use of cash during the third quarter of fiscal 2024 primarily resulted from a $5.3 million increase in accounts receivable and a 4.1 million decrease in accounts payable, partially offset by a 4.0 million decrease in inventory. Us cash and investments were $5.2 million at the end of the third quarter of fiscal 2024 versus $8.8 million at the end of the second quarter of fiscal year 2024. Capital expenditures were 0.4 million in the third quarter of fiscal 2024 and relate to investments in our IT system versus a total of $2.2 million in the third quarter of fiscal year 2023, we paid 0.8 million in cash dividends in the third quarter of fiscal year 2024. In addition, our Board of Directors declared a regular quarterly cash dividend of $0.06 per common share, which will be paid in the fourth quarter of fiscal 2024. As of the end of the third quarter of fiscal 2024, the Company had no outstanding debt on its $30 million revolving line of credit with PNC Bank.
Now I will turn the call over to Greg, who will discuss the results for our PMT. and GES. business.

Gregory Peloquin

Thank you, Bob, and good morning, everyone. We are pleased to share that in fiscal 2020. For third quarter, we experienced strong quarter-over-quarter sequential growth and slight year-over-year growth for our Green Energy Solutions Group, or GESGS. sales were up 342% sequentially from $2.6 million to $11.5 million in addition, our GBS book-to-bill was 1.07 for the third quarter with the addition of new customers, new products and new technology partners are as we implement our GTS growth strategy and until our new products are mature, we are seeing fluctuations from quarter to quarter in terms of sales. And the team continues to do a great job identifying customer requirements establishing design and manufacturing capabilities and launching beta site testing in a short amount of time. We have designed numerous products, receive several patents and developed a growing list of key customers all this will help develop a more predictable quarterly revenue stream. As a reminder, G. has benefited from several large projects last fiscal year, including electric locomotive development and large-scale rollout of pitch energy modules to the replacement of lead acid batteries with our major owner operators of GE wind turbines, such as NextEra e-mail and Enbridge Energy Partners. We remain confident that our market share continues to expand our customers repeatedly tell us we have maintained our market share for our core GDS applications, identify new opportunities and the slowdown in revenue in Q1 and Q2 was purely a timing issue. In fact, our customer pipeline and number of opportunities continue to increase as we take advantage of significant energy transformation projects globally. On a combined GS. and PMT. backlog remained strong at over $98 million. Given our inventory position, we believe we will continue to ship many incoming orders from stock as we were able to do in Q3. This result in significant inventory reduction, which we expect will convert into cash in the coming quarters as receivables are collected, and we remain focused on managing our business to support our customers' needs when they are ready.
So with that, let's look at the third quarter performance for both GES. and PMT. groups in more detail. Gsi sales were $11.5 million in the quarter, up from $11.4 million in the prior year's third quarter and up over 342% from the prior quarter, driven by a larger customer base, mainly for the Ultra 3,000 as well as increased new product revenue from designs with our Component Technology Partners. And we continue to grow market share with the customers needing our niche power management focused patent green energy products. Beginning in Q three FY. 24, we saw an increase in the budget for individual site rollouts for our wind customers with over 53 million shipped program to date. We are excited to see this and expect to see positive trends continue in Q4 FY 24. We also continue to beta test our patent-pending Ultra UPS. 3,000, which replaces lead acid batteries in the UPS system at the base or down tower of the wind turbine. The Ultra UPS. 3,000 will be used by other owner operators, IGN. Siemens Wind Turbines tests are going well and we have led to important improvements in the product. We anticipate generating production revenue from the Ultra UPS 3,000 product line in late September 2024, as beta testing is completed with our customers. We're also testing the ULTRA PEM. 3,000 or multi-brand products, which serve the same function as the Ultra 3,000, but in different mechanical designs with other wind turbine platforms such as SSB. Suzlon Zenvia and in Nordics, expanding their market outside of North America. One major program I mentioned in Q2 for the Ultra PM. 3,000 is beta testing with Suzlon on both an OEM and replacement basis. The replacement opportunity is for more than 7,000 turbines in India alone with several thousand more North American Europe, and we expect to ship production orders for the Suzlon program starting in late October 2024. The Ultra PEM. 3,000 is also in final testing with several owner operators in Latin America and North America, which manage Suzlon and SSB. pitch systems will be rolling out four new versions of Senvion, Suzlon, Nordics and SSB in Europe at the clean energy show in Hamburg, Germany in September 2024 in the EV locomotive segment due to supply chain issues for peace parts for our suppliers and design changes. Our prototype superstructure builds for Long Island Railroad and BNSF electric locomotives will now be completed this quarter and into Q1 of next fiscal year. We anticipate production units will begin shipping in the third and fourth quarters of calendar 2024. We have beta orders for our patented Ultra Gen 3,000 starter module with two large diesel and easy locomotive manufacturers is important to note that we are exclusive to both of these manufacturers. If all continues as planned, we anticipate production orders will begin in late July 2024 in summary, last quarter, we anticipated sequential revenue growth in Q3 and Q4 with energy business unit driven by new products, customers and technology suppliers and supported by the forecasts and backlog from our project-based customers. We saw that large increase in sales over Q2 and year-over-year growth in Q3. We're expecting quarter-over-quarter growth again in Q4. I want to stress that despite the slow growth in the first six months of the fiscal year, we did not lose any market share. In fact, we continue to increase our market share with new products, new applications and new customers.
Turning to Power & Microwave Technologies Group or PMT., which include the Electron Device Group or EDG and our like our legacy tube business and the Power & Microwave Group or PMG, our Power & Microwave Components group sales decreased 33% from $46.8 million to $31.2 million of this decline was primarily due to the slowdown in our semiconductor wafer fabrication equipment business. The decline in the semiconductor wafer fab business was slightly offset by growth in the RF and microwave power components group, we expect to see quarter-over-quarter growth for our semiconductor wafer fabrication equipment business in Q4 FY 24, based on customer feedback and market predictions and with a book-to-bill of over 1.14 for PMC overall coming out of Q3. Our integrated solution strategy is led by our global technology partners. In Q. three. We continue to add technology partners who fill technology gaps in our offering and support our growth, including Wolfspeed, Ideal Power and MCI. components. Often through these partnerships, we identify opportunities for new products that we design and manufacture, and this increases the value we provide. Customers allows us to capture more revenue while expanding and diversifying our customer base. In April, we are excited to be expanding our RF and microwave portfolio with the addition of Wolfspeed Cree semiconductors through our global relationship with may come, these long-term supplier relationships are extremely strong. And when appropriate, we work with them on strategic long term purchases to maintain proper levels of supply. We negotiate special terms, stock adjustment, privileges and shipping schedules to help improve cash flow. And in addition, having inventory on hand, allows us to capture and maintain market share. We collaborate with our customers, suppliers and leverage our customers' forecasts to help us strategically invest in inventory and ensure we can meet our customers' needs. Our growing customer base and strong relationships with these customers help us develop new products and opportunities. We will continue to invest in our IT infrastructure support our growth. We are bringing on talented design and field engineers and making investments to enhance our manufacturing capabilities. Our growing in-house design, engineering and manufacturing teams are doing a great job supporting the increased demand for current and new product designs with this team will continue to identify, develop and introduce new product and technologies for green energy and other power management and microwave applications. I cannot stress enough the value Richardson Electronics model brings to our customers and suppliers. Our unparalleled capability and global go-to-market strategy are unique to the power energy in RF microwave and green energy markets. And we developed a strong business model, including legacy products and new technology partners that fit well with our engineered solutions capabilities through our steadfast and creative focus on customers. We will continue to excel, but taking advantage of opportunities as they arise. The execution of our strategy has never been better. And there's no question our customers and technology partners in Richardson's products and support more than ever.
And with that, I'll turn it over to Wendy Didell to discuss Richardson Healthcare.

Wendy Diddell

Thanks, Greg, and good morning, everyone. Third quarter sales for the Healthcare division were $3.1 million, an improvement of 29.6% compared to the third quarter of last year and a slight increase over the second quarter, CT tube and parts sales were up versus the prior year's third quarter, while system sales were down primarily due to the timing of cash receipts from our customers in Latin America. In the quarter, we again benefited from sales of our repaired Siemens, Stratton Z tubes. Health Care's gross margin in the quarter improved to 41.6% compared to 14.8% in our most recent second quarter. Gross margin in the same period last fiscal year was 39.8%. The gross margin improvement was primarily due to a favorable product mix, including higher parts and Siemens tube sales. We also realized the benefit of restructuring done at the end of the second quarter and reallocation of resources focused on the Siemens repair two program. We continue to make excellent progress with the Siemens program. The Siemens repair program includes four tumor types, the Stratton ZMXMXP. and MXP. 40 repaired strategy is in full production and performing well in the field strategy. Sales are starting to ramp up as we have a steadier flow of production and can expand our customer base repaired. Mx series tubes are performing well in beta in life tests. While we may be able to sell a small number of repair tubes in the next two quarters. We anticipate the full release of the MX series later this summer when we were able to replace critical components. We continue to closely monitor health care's financial performance with the goal of achieving a breakeven point in the fourth quarter with limited sales of the repaired Siemens series. This will remain challenging, but we are taking the right steps to balance our investments with other opportunities in the Company.
I will now turn the call over to Jens Ruppert to discuss the results of Canvys.

Jens Ruppert

Thanks, Wendy, and good morning, everyone, and this engineers manufactures and sells custom displays to original equipment manufacturers across global industrial and medical markets. And this sales for the third quarter of fiscal 2024 reflects certain customer pushouts, primarily in North America. As a result, sales were $6.6 million for the third quarter compared to a very strong quarter last year with sales of $9.7 million.
One area I'd like to highlight is our $46.2 million backlog. As you can see, our backlog remains robust, providing us with strong foundation for future revenue growth. This backlog not only demonstrates the confidence of our clients have and our products and services, but also reflect our ability to secure long-term contracts in a competitive market environment.
Another notable highlight from the third quarter of fiscal 2024 is the improvement in our gross margin. We are pleased to report that our gross margin as a percentage of net sales increased to 34.4% compared to 32.0% during the same period last year. This improvement underscores our relentless focus on operational excellence and cost management through strategic initiatives and operational enhancements, we've been able to enhance our efficiency and optimize our cost structure, resulting in improved margins.
During the quarter, we received several new orders from both existing and first-time medical OEM customers. Some of these applications include patient monitoring, colposcopy, surgical navigation, super pulse laser systems and robotic-assisted surgery. These applications underscore our commitment to providing innovative solutions that meet the evolving needs of our customers in the medical sector. Furthermore, they highlight our ability to establish and cultivate long-term relationships with both existing and new clients positioning us for sustaining growth in these key market segments.
In the nonmedical space, our products are used in a variety of commercial and industrial applications. This includes displays used in the public transportation space, such as train driver consoles and passenger information monitors, air traffic control, HMI or human machine interface applications for surface inspection machines and tailor prompting Intellon monitors and clocks used in the Pro customer.
As we navigate to the dynamic market environment. It's important to acknowledge that some of our customers have exhibited a cautious approach due to prevailing uncertainties. However, despite this caution, we remain optimistic about the recovery of demand in the coming quarters. We've observed promising indicators and anticipate a gradual rebound as market conditions stabilize. Our ongoing dialogue with customers supports our confidence in the potential recovery ahead.
One of the key drivers for optimism is increased business stemming from new design wins. These wins underscore the recognition and acceptance of our products and solutions in the market. Our engineering teams have been diligently engaged, demonstrating a high level of activity and commitment to our strategic objectives. Despite the challenges posed external factors. Our engine team have remained focused on innovation and product development, laying the groundwork for future growth opportunities. We've strategically positioned ourselves to capitalize on emerging opportunities and these design wins validate the effectiveness of our approach. As we continue to leverage these wins further penetrating target markets, we participating a positive impact on our revenue growth and market share from the variety of customers and applications as well as the value of orders from existing and new customers. It is clear we of our global customers, outstanding products and localized service, while our sales organization stays focused on new opportunities. I will focusing on executing our strategic initiatives to drive sustainable growth and create long-term value for our shareholders.
I will now turn the call back over to Ed Richardson.

Edward Richardson

I know customer push-outs have been a source of frustration for you and your team. While our strong backlog and recent wins, we're confident that the business will improve sequentially despite headwinds from economic conditions, higher interest rates and a lagging economy in China, we maintain our optimism and remain committed to our long-term growth strategy. We continue to pursue significant projects and develop new engineered solutions that take advantage of opportunities created by recent government stimulus programs and global energy transition trends. We believe we're well positioned to capitalize on large, rapidly growing global markets. This is exactly why we maintain a strong balance sheet with access to additional sources of capital if necessary to fund this growth. We're convinced our ever-expanding product roadmap for green energy solutions to large global customers will be crucial as a part of our revenue growth doing going forward. And the solutions we offer not only help achieve lower carbon emission goals, but they also create cost savings for our growing customer base in the wind market. For example, lead acid batteries must be replaced every one or two years our ultra capacitor 3,000 has a life expectancy of more than 10 years. Wind Turbine offers may never have to replace the Ultra 3,000 before replacing the wind turban. This saves customers' labor cost as well as ensures greater uptime resulting in more power generated international growth opportunities as well as expansion to other wind turbine brands within the U.S. provides more evidence that demand for ultracapacitor modules is there and growing. Last quarter, we referred to opportunities created by the inflation Reduction Act of 2022, such as the 100 kilowatt generators to power pilot reactors to make Chrysalin diamond materials for high-tech applications. And this quarter will ship the first generator. These generators are over $100,000 apiece. We expect this will be the first of many of the demands for a large chips used in many applications such as AI and electric vehicles. This will also have a positive impact on the demand for semiconductor wafer fab equipment. Electric vehicle rail is still in its infancy, but states like California are mandating that the transition from diesel locomotives. So while this may be rolling out slower than we originally anticipated. The opportunity remains significant. Other applications like mining are outside the United States and the emphasis on alternative green solutions remains a top priority. We're working closely with customers' engineering teams and are an integral player in their supply chain. I want to stress again that our customers' products and opportunities are growing. None of these projects or programs we've discussed have been lost or canceled. Our balance sheet remains strong with nearly $19 million in cash and no debt. We're working hard to improve our working capital position and convert inventory to cash. Our approach will remain focused on maintaining healthy cash position and a strong balance sheet. While we focus on improving profitability and producing positive operating cash flow in FY 25. Overall, we remain extremely excited by the direction we are headed in and the global opportunities we're pursuing to create value for our shareholders. At this time, we'll be happy to answer your questions.

Question and Answer Session

Operator

Thank you. Ladies and gentlemen, due to time constraints, we ask that you please limit yourself to one question and one follow-up. Again, we ask that you, please limit yourself to one question and one follow-up. Until we have had a chance to ask until all have had a chance to ask a question after which we will answer additional questions from you as time permits. As a reminder to ask a question, please press star one one on your telephone and wait for your name to be announced to withdraw your question, please press star one one. Again. Please stand by while we compile the Q&A roster. The first question is from Anja Soderstrom from Sidoti. Your line is now open.

Anja Soderstrom

Bonnie, I know you haven't seen Good morning. It's nice to see a sequential jump in that quarter and what was that? Was it a specific large project?

Edward Richardson

There was several different projects that that group that's committed and drove that the GS business increase, it's actually a great increase in the customer base. A major portion of the increase was the Ultra 3,000 business. Just for example, last year we had five six customers. This past quarter. We shipped to over 12 new customers for this product as it becomes market accepted. The word gets out, people are doing it, the budget got approved. And we said from the very beginning that Q1 and Q2, they're putting their capital at CapEx together and that those two would be slow and we see an increase in Q3 and Q4. And that was exactly what happened. They got their CapEx approved for 2024, and they started placing orders in. We have built up a stock to support that based on the forecast and we are able to ship from stock. So it was actually an increase in the number of customers and the largest increase in terms of our product was the Ultra 3,000.

Anja Soderstrom

Okay. And that's the one you had a press release out in March, right that you have completed a Phase one of that shipping 50,000 modules executive?

Edward Richardson

Yes, they looked at it. They review it. They everything's in phases according to them. The other Phase one CapEx approvals and that generated about 53,000, and we started seeing Phase two in Q three start-up. So that was another reason. And look, what do you think we can expect from the Phase two, is that going to be the same magnitude or could it be an expansion since you have more customers now it be you know that in a little bit higher based on the forecasts from these customers. Again, we started with a good way. The four largest owner operators of GE wind turbines balance are a smaller group, but if you add them all together could be about the same amount. So we're expecting that plus for Phase two.

Anja Soderstrom

Okay, thank you. And in terms of are you expecting that sequential ad growth to increase So continuing in the fourth quarter and what gives you confidence in that? What kind of visibility do you have?

Edward Richardson

We are very careful about it based on the deliveries on the backlog and the inventory we have to ship to that. And so far, like we saw in Q three, the customer base, meaning their forecast, which is surprising because people can't forecast very well known Cam. So it's mainly based on our book to bill being over one, the backlog and the schedule for that backlog and the fact that we have inventory to support it going forward.

Anja Soderstrom

Okay. I'm going to squeeze one more in here about the inventory. And so that was a nice work down. But now when you expect the growth to continue, should we expect inventory to continue to decline in dollar amount versus staying flat or even increase maybe in the coming quarters?

Edward Richardson

Yes. I'll touch on GES., we expect the sales to increase and inventory to go down specific to the GES. and look the other SBU people.

Wendy Diddell

Yes, I would just add to that, that we do have the entire management team focused on it. Well, we wouldn't go so far as to say it's absolutely going to decrease. That is everybody's intent is to make that happen. So we're we're all on board. We're pushing out where we can. We're cutting back where we can and trying to negotiate different arrangements with certain suppliers.

Anja Soderstrom

Again, thank you. And I want to be respectful to the others on the call, so I'll get back in queue. Thank you.

Operator

Yes, thank you. One moment for our next question. Our next question comes from the line of Ross Taylor from ARS Investment Partners.

Ross Taylor

Let me add my congratulations. Congratulations on a strong operating performance in the quarter. Nice to see you back in the grain profitability wise. And as you if you indicated on this call and on that, you think that we basically are at the nadir for the semi-cap equipment business, and that's been a major driver to the drop in profitability. You've also indicated that you expect calendar your customers expect calendar 25 to be a record year for them in that area. So would I be right to assume you think that calendar 25, those 12 months should be producing a record level of revenues for you guys?

Edward Richardson

Yes. I mean, we're listening on a regular basis to Lam Research, who is our largest customer, but we also saw the Tokyo Electron and Applied Materials and a number of other customers in that space. And they're all telling us that in 2025, the semi wafer fab business will be higher than ever. As you know, last year we did $40 million in that space at a very nice margin. And this year it's less than 20. So if you can count on it being over 40 next year, should be a record year.

Ross Taylor

And should you be able to do the same kind of margin competitor that you saw back a year ago?

Edward Richardson

Yes. I mean, we're proprietary and a lot of those products. So our margins are very good Yes.

Ross Taylor

Historically, there's been kind of almost like a one to one type sell through. It appears from our correlation. Also, you indicated on this call, and you've indicated previously that the green energy business is looking at a tremendous number of opportunities that come on over the next 12 to 18 months. So I would assume you would think that you guys think that the green business should be able to produce a record level of performance as well as, let's say, looking at the 12 months of calendar 25, well, we've seen a lot of pushouts in that space.

Edward Richardson

And we think that it's a matter of when not if there's certainly a tremendous opportunity in all kinds of areas, not only the ultracapacitors for wind turbines, but especially with the electric locomotives and the battery storage for diesel locomotives. But it seems as if it's rolling out much slower than we anticipated.

Operator

Yes. Thank you. One moment for next question. Our next question comes from the line of Barry Mendel from Mendel Money Management.

Barry Mendel

You saw Progress Rail, but that maybe could be the biggest customer going forward. I've really heard much about them. So look, what is driving our progress there. But the main thing going on currently progress?

Edward Richardson

Well, we've met all the commitments for their initial orders for the prototypes, both in North America and Brazil during customers, as I think you know, are in Australia and then Long Island Railroad and Burlington Northern. So we've built the product, we shipped it to them. They're now building up the entire train and then working with those customers through a long design in phase. However, I think in 2020, FY 25, the two main programs we have won in the locomotive market are the two starter modules that we make for the two largest owner operators. We sell locomotives. We just got a release for 25 trains. That product was designed and developed here in the Fox com. So for example, one of the owner manufactures of these locomotives, there's 25,000 trains. This project will go into overtime. So if I look at FY 25, when we look at potentially in the fourth quarter on their end, customers will start buying electric trains. But in the meantime, we continue to identify other opportunities in the locomotive space. And in this case, it's the starter modules that we have designed for them. When you say you start shipping it in your fiscal Q4, the the actual orders for the diesel locomotives that we've already shipped to our battery modules in our super structures in our fourth quarter of FY 25.
But going forward, we have a release starting in Q1 for our starter modules that we've designed and developed for their diesel locomotives. Obviously, the other stuff is for their electric locomotive. So we have a great relationship with them. We're finding new opportunities for them there are some IGBT modules that we're looking at designing for them. So yes, there's no question once the electric locomotive business is accepted by the their end customers and they start placing orders for those. I think you where the large dollar amount content we have in those trains that progress from those two manufacturers will be our largest customers.

Operator

As a reminder, to ask a question, please press star one one on your telephone and wait for your name to be announced. To withdraw your question, please press star one one. Again, our next question comes from the line of [Chip Rui] from Rui Asset Management.

Just focusing on the balance sheet a little bit. The inventories at 112.6 million, combined with the cash on hook rock solid to me compared to the market value of the company. And given that I want I wonder if you could tell talk a little bit about the quality of the inventory, the ability to deliver if there's any aging issues on anything that would prevent that inventory being delivered kind of now at costs on the balance sheet and of course, better than that. And I think as of last quarter, you in the Q it was $99 million of finished goods inventories. Just wondering if you could let us know the finished good inventories, some percentage of inventories as you talk about really what's there on the shelf and is what on the shelf going to get taken kind of as is VERSUS needs to be modified or other things like that?

Robert Ben

Hey, Chip. This is Bob, that we feel very good about the quality of our inventory. As you noted, we have a total of about $113 million, and right now we have about a $5 million. Our total reserve on that, which is reviewed every quarter we review just so you understand we review every product in our inventory once a year and some more than that, I might note that also that also gets reviewed by our auditor. So overall, we feel very good. I'm looking for the exact amount of finished goods, but as you would expect, almost or most of that is finished goods and the highest amount would be in the Electron Device Group, specifically our core to business as well as some products that we have for our canvas division in our Healthcare division. And certainly, as Greg noted, our GES. segment has about a $15 million of inventory right now. And again, I'm sorry, I don't have it at my fingertips of it. We'll have it in our 10 Q later today, but we do break out in the footnotes to the finished goods amount.
Yes, yes, I just don't have that handy. But Tom, did I answer your question or did you have more specific questions in and then thank you.

Operator

One moment for Next question. Our next question comes from the line of Ross Taylor from ARS Investment Partners.

Ross Taylor

I think the prior question or start to get to this is you have a company or started selling basically about $1 above net net working capital. You're selling under book value. You have no debt on the balance sheet. You've talked on this call about monetizing inventory. As you said, the inventories are money good and are mostly finished goods, which means they're basically store profitability that's sitting there. And they also reflect effectively an overstated cost impact looking at all of that and at the advice of Warren Buffett tells people that you are supposed to buy when others are fearful, why has this company not been really aggressive and buying back its own stock, not only or not aggressive. You not even buying it back.
And then it just baffles me because I hear you talk about next year calendar year being that should be a record year. Your prior year was over $1.50 and there were some one-time items in that, but that's call it $1.40, you're trading at 10 bucks in here $10, which is less than what the book value than I have to believe you think this company is worth more than book value. So what is keeping you? I mean, you've got a long history, your bankers have to believe that your money good, they've known you for a long time that they don't then get better bankers. Why aren't you putting a little debt on the balance sheet and taking advantage of the severe dislocation and funnel, what should be a rocket ship in 25?

Edward Richardson

Well, we talk about it every Board meeting the possibility of buying stock back right now, as we mentioned, we really pushing trying to keep positive cash and reduce the inventory to do that. And once we get to a position where cash flow positive, we'll certainly look at the possibility of buying stock. It gives you some idea when we sold our FPD. in 2011, we bought $65 million with the stock back in every time we bought the stock back, the price of the stock would go down. So the investment people were looking at the value of the Company on cash only in all we achieved or to drive the price of the stock down. So at Fitch, we don't have a very good experience on buying stock back.

Ross Taylor

I hate to tell you but I think was Edison made a famous quote about how many times you've failed genuine lightbulb. Any kept trying. I mean, the idea that it didn't work in the past to me. And then just honestly, if you hear a sudden started to me banging my head on the desk, the fact that it didn't work that you lost that business, you have much more of a broader base of business. You have a lot more growth opportunities. If your board can't see that you're a different company today than you were then. And if you can't yourselves see it, then we need a different board. We need a bold to actually have some vision that has a little bit of courage. I mean, I think we brought Warren Buffett into one of your Board meetings. He would like to hear you guys on how you're literally letting a golden opportunity gold go by and what happened in the past that type of thing that that doesn't advance progress at Stifel, that and you'll have to talk to you, we know, which are Europe very bright man, you know, better than I think that something has happened in the past under a different collection of holders of different business environment with a different company is an effective measure of what you are today. And what you should be doing today right now.

Edward Richardson

I certainly appreciate your opinion.

Operator

Thank you. One moment for our next question. Our next question comes from the line of Joseph mergers from segment investments.

Joseph Nerges

Good morning. Thank you for taking my question. And I'm sorry, it's very interested in a press release from last month when you signed that global distribution, we would Ideal Power. And I guess my key question here is do we have any plans to develop proprietary products around or bidirectional love wave technology?

Wendy Diddell

Absolutely. We have to call the month specific to that. And that's really it's right into the model that we've built here when when I came back, we sign technology partners who have some disruptive technology that is focused on our two key markets, which is power management and the RF and Ideal Power does and all that they have disruptive technology. It's unique or exclusive are global, and we're already talking about a couple of their products for one of our designs that we're looking at. So absolutely, there will be both and designing and their components into our suppliers. A lot of our battery manufacturers could use this technology for their modules, obviously into our customers and then they use it internally for our engineered solutions. And there is a couple of products that we're working on right now that I can't announce by any means at this point, but we'll actually be using Ideal Power for that and they've been great. We have a great engineering relationship already. And that is exactly what we do. When we when you see a press release with a company like this, that has a disruptive technology, it's threefold. It's to design it into our competitors. I mean our suppliers, design it into our customers and then also use it for our engineered solutions opportunities as they come to fruition. Well, again, great.

Edward Richardson

I mean the applications on there technology seem to be very widespread and I'm thinking of we have a UPS product that will be also UPS. 3,000 and I'm just wondering, and we ended up against some pretty big gap competitors in these markets. But do you think we can successfully enter, let's say, the data center market with a UPS price or something similar to that because.

Wendy Diddell

Yes, yes, the UPS product that technology can be used in so many applications. I will tell you it is a major major program it's an inverter application for one of our key customers that we will be using Ideal Power for. And again, it's a new relationship. It's a few months, but although we've talked to them. And we know that people there to small and in specialist market. So I've worked with many of the people that are there in other capacities over the years, but the answer to your question is yes. And specifically, there is one right now that see a major program for an inverter application inverter module that this will be the product that we're using and we think with their technology, it will separate the spec sheet from anything that's out there today. So yes, I think we're excited about Azure Power and also all of our technology partners. That's the process we go through and well, I look forward to seeing what you guys come up within the next several months. Thank you.

Operator

Thank you. One one moment. Our next question comes from the line of Barry Mendel from Mendel Money Management.

Barry Mendel

Follow on quarters room and water was CASC. on the Arm & Hammer and solar modules for them?

Edward Richardson

Yes, we have NDAs with them. I can't share our our cost to our resellers to those applications or even on those type of customers too many competitors out there listening.

Barry Mendel

Okay. And in terms of some of your power hub of the home figure, how important would it be for you? It's a journey dollar money to put on an extra bedroom is in somewhat of a distribution agreement as well?

Wendy Diddell

Yes, it's both. And it's all based on the number of new products they introduced right now, their portfolio is very limited and they are developing a module and they have a couple of discrete devices. But if you just look at the markets that they go into millions of dollars. But you know, I've had a lot of experience with technology partners and this type of go-to-market strategy. And if one of these programs that we're doing from an engineered solutions point of view, it's millions right from industry point of view. It's pure NPI process, new product introduction process, both our global capabilities are I feel the best in the world of bringing technology companies to get them to market as they invest in technology. And we have the infrastructure to bring it to market, but dumb, it's millions of dollars. I can't come up with a number, but I've seen companies like this that we started with that became Qorvo and we know how big their meal guys limit. But the thing that excites us about this is the markets that they're developing product for our growth markets. I know it's inverters and industrial, but it's great for these green energy as people need to reduce the input on their emissions. So I can't put a dime on it, but it's millions of dollars. It could be one one one product that we designed internally or one major from electric start vehicle charging station that we end up designing their product into.

Barry Mendel

Yes, I know I talked to them yesterday actually and they they spoke highly of what you're do for them already.

Edward Richardson

Yes, we like I mentioned before, you have what I don't have a lot of attributes. One of the Zimmer and patients. And they want to have We we we trained the global field sales engineers. We trained our design engineers. And we immediately within 24 hours had their product in front of customers.
One of the things I'll just add on the call, which is unique to us. So I want to say at every one of our customers, we can assign application codes to So up to five. And so when a customer like Ideal Power comes out with a new product for a specific application, our global field sales engineers, concert their entire customer base and identify anyone who's ever built an inverter or electric charging station and that product and those samples and those sales tools get to that customer within ICF within 24 hours from South mile?
Yes, we're excited about Ideal Power. And again, like I mentioned before, we know the people there because it's a small and concessions market savvy Great. Thanks you back.

Operator

Thank you. One moment for Next question. Our next question comes from the line of David Schneider.

First of all, I want to give an A-plus to Ross Taylor and Eaton already. They already have, but actually left out a few things, but there's no need to go over the territory. Again, I'm wondering the stock has over the past years on you've gone up and down because of the cyclicality of the semiconductor capital equipment business. Is it possible that things like the relationship with ideal power consuming some of that out. And Tom, you know, it's being your company is being valued as literally no growth company at this point, could the new product applications from Ideal Power to change the trajectory and maybe the perception of your company so that maybe you can become valued as a growth company?

Wendy Diddell

Again, I think that the model that we have with Ideal Power and the list of other technology partners. And you've seen obviously is this business have developed some press releases on them and the people were signing. I think as they apply to Engineered Solutions. And you've heard about all the engineered solutions opportunities. And I think, as I mentioned and before the call reducing new products, Suzlon, Nordic, semi and SSB, but all that together?
Absolutely. It will subsidize the roller coaster ride that the semiconductor manufacturing equipment industry has had for 20 years. We know what's coming. Some are higher than others, but that's kind of the goal a little bit and that we're doing this for the profitability and growth in the stock price of the company. But it does help subsidize the roller coaster ride as we've all experienced for 2030 years of the semiconductor wafer fab market. So yes, ideal will be part of that. But that's the whole list of technology partners and the new products in these new high-growth markets like green energy and power management, et cetera. So and so we've been we've done it. Obviously, um-hum love this business are turned to green energy in the past 2.5 years genomics, that's $40 million, right? A year or so. That alone subsidizes a lot of it. But the downturn the past year, it has been so severe, just like the upturn was so severe in a positive way in 2023 and 2022. I'm just couldn't make up all of it. And that's why you're seeing flat to down in overall sales.

Operator

Thank you. At this time, I would now like to turn the conference back over to Ed Richardson for closing remarks.

Edward Richardson

Well, thank you again for joining us today. We appreciate your investment and interest in Richardson Electronics. We look forward to our ongoing discussions and sharing our fiscal 2024 with you in July, and please don't hesitate to give us a call at any time. We're happy to talk to you directly if you want to set up an appointment. Thanks very much.

Operator

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