Q1 2022 Richardson Electronics Ltd Earnings Call
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Today's conference is scheduled to begin shortly please continue to standby and thank you for your patience.
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Good day, and thank you for standing by and welcome to the Richardson Electronics earnings call for the first quarter of fiscal year 2022. At this time all participants are in a listen only mode.
Please be advised today's conference is being recorded.
After the Speakers' presentation there'll be a question answer session.
Ask a question during this session you will need to press star one on your telephone if you are a client if you require any further assistance. Please press star zero I would now like to hand, the conference over to Ed Richardson CEO.
These go ahead.
Good morning, and welcome to Richardson Electronics conference call for the first quarter of fiscal year 2022.
Joining me today are Robert Ben Chief Financial Officer, Wendy did Dell, Chief operating Officer, and General manager for Richardson healthcare.
Greg Patrick one general manager of our power and microwave technologies group.
In Yens Rupert general manager of canvas.
As a reminder, this call's being recorded and will be available for playback.
I'd also like to remind you that we'll be making forward looking statements.
They are based on current expectations and involve risks and uncertainties.
Therefore, our actual results could be materially different.
Please refer to our press release and SEC filings for an explanation of our risk factors.
Net sales for the first quarter of fiscal 2022 were 53.7 million 38, 4% higher than last year's first quarter.
We are excited about the strong start to fiscal 2022, as we achieved the highest level of quarterly sales in 11 years.
And the best quarterly earnings per share in nine years.
Sales were higher than prior year across all three business units or.
Our strong first quarter performance is a result of the growth initiatives that are starting to take hold and the ongoing strength of the semiconductor wafer fab market.
Our legacy tube and display businesses also bounce back after struggling earlier last year due to COVID-19 pandemic.
Yeah.
While we continue to face unprecedented global supply chain and logistics challenges. The team has done an excellent job serving our customers.
The first quarter ended with record backlogs for the Ultra 3000, ultra capacitor modules for GE wind turbines.
Microwave products and canvas displaced putting us in an excellent position for continued growth.
I'll now turn the call over to Bob <unk>, Chief Financial Officer to review, our first quarter financial performance in more detail.
Then, Greg Wendy and Yen's, we'll update our successes in new programs as well as our challenges in each business unit.
Thank you Ed and good morning, I will review our financial results for our first quarter of fiscal year 2022, followed by a review of our cash position.
Net sales for the first quarter of fiscal 2022 increased to $60.0 million or were up 38, 4% compared to net sales of $46.0 million in the prior years first quarter.
Due to higher net sales across all three business units.
PMT sales increased by $20.0 million or 42, 2% from last year's first quarter.
Driven by higher sales of power conversion, and RF and microwave components as well as semiconductor wafer fab equipment specialty products.
In addition sales across most of the electron tube product lines increased from the first quarter of fiscal 2021.
Canvas sales increased by $8.0 million or 25, 8% due to strong customer demand in Europe.
Richardson healthcare sales increased zero point $4 million or 22.8% year over year.
Primarily due to an increase in demand for off the 750 tubes, partially offset by lower sales of parts and.
Pre owned <unk> scanners in Latin America.
Gross margin for the quarter was 33% of net sales compared to 31, 8% of net sales in last year's first quarter.
PMT margin decreased to 31% from 33.8%.
Due to a higher percentage of lower margin PMG sales.
Canvas margin as a percent of net sales decreased to 33, 4% from 34.8% because of higher freight costs driven by the COVID-19 pandemic.
Health care margin improved as a percent of net sales to 24, 3% in the first quarter of fiscal 2022 compared to five 6% in the prior year's first quarter.
Primarily due to improved product mix and manufacturing absorption from increased production of the Alpha 750 tube.
Operating expenses were $18.0 million for the first quarter of fiscal 2022.
Compared to 13.1 million in the first quarter of fiscal 2021.
The increase in operating expenses resulted from our normal employee compensation expenses, including incentives and annual merit increases as well as higher travel expenses.
While there were some additions to staff during the quarter. The majority of the increase in our employee count.
Within manufacturing positions and included in cost of goods sold.
These increases were partially offset by lower legal expenses.
The company reported an operating income of $10.0 million for the first quarter of fiscal 2022.
As compared to an operating loss of zero point $6 million in the first quarter of last year.
Other expense for the first quarter of fiscal 2022, including interest income and foreign exchange was less than zero point $1 million.
Compared to other expense of zero point $4 million in the first quarter of fiscal 2021.
Yeah.
The income tax provision of <unk> 2 million for the quarter.
Reflected a provision for foreign income taxes, which was higher than the prior year's first quarter.
And the offset of a U S tax provision against the valuation allowance.
Net income was $8.0 million for the first quarter fiscal 2022 as compared to a net loss of $2.0 million in the first quarter of fiscal 2021.
Earnings per common share on a diluted basis in the first quarter of fiscal 2022 or 20.
Compared to a net loss per share.
On a diluted basis of <unk> <unk> in the prior year's first quarter.
Turning to a review of our cash position.
Cash and investments at the end of the first quarter of fiscal 2022 were $40.0 million.
Compared to $46.0 million at the end of fiscal 2021.
And $47.0 million at the end of the first quarter of fiscal 2021.
Cash use in the first quarter of fiscal year 2022 resulted primarily from an increase in working capital that was necessary to support the significant year over year sales growth, we experienced across our three business units.
A large portion of the inventory growth relates to components needed to fulfill orders on hand for the Altra 3000, and other longtime lead parts for PMG.
Capital expenditures were zero point $8 million in the first quarter of fiscal 2022.
Compared to zero point $7 million in the first quarter of fiscal year 2021.
Approximately zero point $3 million related to investments in our healthcare business 0.3 million was for our it system and 0.2 million was for other projects.
We paid 0.8 million in cash dividends in the first quarter fiscal 2022.
In addition, based on our current financial position our board of directors declared a regular quarterly cash dividend of <unk> <unk> per common share.
Which will be paid in the second quarter of fiscal 2022.
Finally during the first quarter of fiscal 2022, we repatriated zero point $7 million to the U S from China or U S domiciled cash and cash equivalents balance totaled $19.0 million as of August 28.2021.
Now I will turn the call over to Greg who will discuss the results for our power and microwave technologies group.
Thank you Bob and good morning, everyone sales for the power and microwave technologies group or PMT in the first quarter of fiscal year 2022 grew 42, 2%.
43 million versus $33.0 million in Q1 last year.
In addition to an excellent sales quarter PMT achieved a book to bill ratio of 113.
Our sales growth and strong bookings Mark a solid launch to what is shaping up to be an excellent fiscal year 'twenty two.
Gross margin decreased in the quarter to 31 versus <unk>, 33% in the prior year, which was mainly due to product mix.
Looking into the PMT group, we continue to have excellent growth in our power and microwave group or PMG.
We have a growing line of new technology products.
Products targeting RF and wireless applications.
This includes <unk> infrastructure programs as well as power management and energy storage applications to support numerous green initiatives.
With respect to <unk> wireless and power management revenues increased by double digits again in Q1.
Electronic device group or EDG business unit produced strong sales and bookings in the quarter from our engineered solutions products to support the semiconductor wafer fab equipment market. Additionally.
Additionally, our legacy tube business also grew in the quarter.
Excluding the first quarter of last year.
We have increased backlog going into Q2 FY 'twenty two.
This was achieved by continued growth in power management and wireless communications.
On the power management side, we saw growth in applications for wind.
Solar electric vehicles, and energy storage new products, such as our patented ultra 3000 pitch energy module used in wind turbines continue to gain traction with increased bookings in the quarter.
We are producing the altra 3000 with great results from the field and now millions of hours of accumulated operation.
Our production quantities in the quarter did not meet our forecast due to component lead times. However in the quarter, we built a strong inventory position on these key products and we expect to increase shipments going forward throughout the balance of fiscal year 'twenty two.
Our RF and microwave business continues to benefit from positive trends associated with Phi G microwave communications and satcom applications.
As people continue to work for multiple remote locations, they must be able to send and receive large amounts of data.
Our entire team has done an excellent job of identifying niche technology partners, who collaborate with us globally.
We continue to invest in and focus on resources to support these growth markets.
These resources include design engineers field engineers and manufacturing capabilities.
We also added several small niche suppliers to fill technology gaps.
This strategy has been highly successful and we will continue to use it to develop new products customers revenue and profits by capitalizing on our demand creation infrastructure.
EDG also experienced an increase in both semiconductor wafer fab demand and large MRO to business.
We have also seen our legacy <unk> business come back strong during the last two quarters the <unk>.
First quarter of FY 'twenty to continue to prove that the demand for our products and services did not go away with the pandemic and we're even more excited about the trends in the coming quarter.
We continued to receive support from key partners, such as Corvo may come a Nokia wave, United sick, Alice materials and Fuji semiconductor.
Key tube manufacturers in the industry, such as CPI callous MGIC in photonics worked with us to manage customer requirements. Our in house engineering and manufacturing teams did a great job supporting increased demand from our global semiconductor wafer fab customers.
<unk> also supported product designs for key markets such as the Ultra 3000 with patented technology for power management in the wind turbine market.
Our engineers in partnership with better sheet energy also develop the Alta Gen 3000, which we will be introducing in the second quarter for cellular base stations and critical facilities.
I am very pleased with the progress we are making we will continue to identify.
Develop introduce products using Ultracapacitor technology for power management application.
And this portfolio of products will continue to grow throughout FY 'twenty two.
We remained challenged by longer semiconductor component lead times.
This affects our component business and engineered solutions products, including the Altra 3000, and also Gen 3000.
To compensate for this we are taking an aggressive stance on inventory to fill the pipeline ensure we can meet our customers' needs and we're working closely with our customers and suppliers to complete this.
I cannot stress enough the value of Richardson electronics' model to our customers and suppliers.
Our unparalleled capability and go to market strategy, our unique to the RF and microwave industries.
We've developed a powerful business model, including legacy products, and new technology partners that fit well with our engineered solutions capability.
Through our steadfast and create a focus on customers. We will continue to excel by taking advantage of opportunities as they arise we believe our customers and technology partners.
Need richardson's products and support more than ever.
With that I'll turn it over to Wendy to Dell and Richardson healthcare.
Thanks, Greg and good morning, everyone.
For the health care group were $5.0 million, an increase of 22% versus Q1 last year.
After a strong year end finish sales in June and July started off slow and then picked up in August we believe the slow start to the quarter was due to increase in COVID-19 cases, and the impact this had on hospitals priorities as well as people pushing off elective surgeries.
We're pleased to see tube revenues increased 92, 5% over the prior year.
Demand in Europe, and China were loading program continue to positively impact <unk> sales.
Gross margin in the first quarter was 24, 3% versus five 6% in Q1 last year.
We still have lingering supply chain issues related to COVID-19 as well as inconsistent component quality from our suppliers.
This limited the number of changes we made in the quarter and also resulted in higher scrap costs.
That customer demand that we still have additional production capacity and initiatives are underway to improve parts and tube yields.
Getting the Alt a 750 G into full production followed by the Siemens repair program will also positively impact margins.
Regarding the launch of the Alt a 750 G. We have had one tube and data and it continues to perform well we anticipated full rollout by early fall, but we have behind due to push outs with our second beta two site. We now anticipate launching the Alt a 750 G in November or December.
Sales growth will be gradual as we get the Alta 750 G into the market and canon Cte scanners to come off OEM service contracts.
We are on track to ship, our first repaired Siemens type Stratton Z in small quantities between now and the end of the calendar year additional.
Additional Siemens types, the Amex NXP and NXP 46 will follow in calendar year 2022.
There are no third party replacement options for these Siemens tight.
Siemens <unk> market share is significantly larger than canon, making this an attractive market.
While this is a repair program we follow the same development steps as the new tube to ensure our products exceed our customers expectations.
Having a broader range of tubes to offer our customers will increase our importance as a health care supplier and support our mission to help reduce healthcare costs.
It will have a positive impact on sales and improved gross margin as we leverage our manufacturing operations.
We have also started the process of identifying our next two program and are currently evaluating business plans to ensure sufficient demand.
We also continue our efforts to expand the number of countries in which our tubes are registered.
In the quarter, we shipped our first tube to Vietnam.
Also registered outside of India, we.
We anticipate sales in India will be minimal due to the smaller canon install base.
Canadian registration, which is wholly dependent on the Canadian authorities is still pending.
I'll now turn the call over to <unk> to discuss the results for canvas.
Thanks, Wendy and good morning, everyone.
Canvas, which includes the engineering manufacturing and sale of custom displays to original equipment manufacturers in industrial and medical markets delivered an outstanding performance with faith of $12.0 million during the first quarter of fiscal 2022 at.
At 25, 8% increase over the same period last year.
Increased customer demand in Europe drove the growth.
Where we experienced a nice pick up after the COVID-19 related slowdown in the previous year.
Gross margin as a percentage of net sales was 33, 4% during the first quarter of fiscal 2022 down slightly from 34.0% during the first quarter of fiscal 2021.
The decrease in gross margin was related to increased freight cost.
That is impacting many companies across the global supply chain.
Our backlog at canvas is at an all time high.
Our customers continue to compensate for supply chain uncertainties.
This is particularly true in electronic components market.
We are also dealing with ongoing extended lead times for selected components from our agents suppliers.
The phenomenal bookings last quarter, along with a number of projects that are currently in the engineering stage position us well for <unk>.
<unk> growth, assuming no longer term impact related to the COVID-19 pandemic or worsening supply chain challenges.
I am pleased with the positive progress in our online awareness initiative.
We are adding new application stories to our website publishing.
<unk> press releases and using social media to promote our new product that funds.
We are confident that our online strategy will result in new leads and business growth in the future.
During the quarter, we received several new orders from both existing and first time medical OEM customers.
Some of these applications include endoscopy.
Quiet a policy assistance.
Pilot field ablation systems.
Enter treatment centers.
Super Pulse laser systems.
Robotic assisted surgery.
Microscopy patient.
Patient monitoring systems and such good navigation systems.
In the nonmedical space.
Our products are used in a verity of commercial and industrial applications, including city scanners to inspecting luggage at airports.
We received orders from customers in the public transportation space, where our monetarists I used on trains and buses for passenger information systems.
Driver monitors.
For security CCTV monitoring within the cabins and for control rooms.
In addition, we secured new orders for monitors that are used for process automation.
<unk> tailor prompter and talent systems.
Poor weather no one news stations.
From the verity of customers and applications.
As well as the value of orders from existing and new customers.
Is clear we offer our global customers outstanding products and service.
While our SaaS organization stays focused on new opportunities.
We continue to review and adjust our business strategy to improve the operating performance of the division.
Maximizing cash flow is an ongoing priority.
We continue to work with our partners to help reduce inventory, while being able to meet the demands of our customers, particularly during the pandemic and the challenges it brings to our supply chain.
I will now turn the call back over to Ed.
Thanks, you and it's great to see the display business in Europe coming back strong. Your team has done an excellent job managing COVID-19 and supply chain challenges canvas is record backlog, it's a testament to the team's efforts.
I remain very excited about the future of Richardson electronics, we know that we must make every day count as we continue to raise the bar on our performance.
None of US are taking the growth for granted we continually look to ways to capitalize on market opportunities, while improving our day to day operating performance.
Within EDG I'm happy to see our industrial tube business coming back strong, particularly in certain segments as avionics and marine.
Further there's a good mix between our legacy products the products, we manufacture for the semiconductor wafer fab industry and the other products such as microwave tubes.
The healthcare team continues to stay focused on tube improvements and developments.
It's a tough business that's come along much slower than we anticipated.
With more tubes and production, we will gain leverage from our state of the art facility and investments.
Our newest screen initiative is ultracapacitor modules used to replace batteries in wind turbines and other critical applications.
This technology offers considerable upside for the balance of FY 'twenty two.
Our patented designs are unique to the industry. We continue to work around the clock to ramp up production to meet demand.
We're investing in equipment and people that will give us more control over the supply chain and increase production levels.
Chip supply continues to be a gating factor.
Strong sales growth require more cash than we anticipated during the quarter to support the working capital needs.
We remain focused on maintaining a strong cash position, while continuing to control expenses and improving our operating cash flow risk.
Rest assured we're all working toward improving our income statement.
I'm encouraged by the direction, we're headed and the strong start to the fiscal year.
At this point, we'll be happy to answer a few questions.
Thank you as a reminder to ask a question you will need to press star one on your telephone to withdraw your question press the pound key please standby we compile the Q&A roster.
And our first question comes from Howard Bruce from Wellington Shields. Your line is now open.
Thank you Wendy and the group congratulations on.
It is really a great quarter.
Uh huh.
Thank you.
So I have a couple of questions. Let me first start with the inventory buildup over the last say six months, it's gone from.
Under 60% to $67 million.
What part of that is if you can comment is building an inventory for ultra 3000, that's what you mentioned earlier.
Earlier.
<unk> 3 million hours worth of additional inventory, we have the total number of ultra capacitors in stack.
Build out.
$10 million order plus other orders, we anticipate and as you know we've been waiting for integrated circuits to finish the circuit Board and we now have delivery on those.
But obviously between additional inventory in the additional working capital needed.
For receivables.
The cash has gone down.
We anticipated that's why we're trying to conserve the cash and we always get asked about buying stock back, but we need the cash for the growth of the business.
Oh, absolutely I agree with that.
When you talk about other orders, we know about Nextera what other orders have you booked if you will for this fiscal year.
Now I'll, let Greg address that one yeah, Hey, Howard.
In the first quarter, we booked.
As you know we're directly involved with a lot of field testing with the four top owner operators of GE wind turbines in North America and in the quarter from a bookings point of view, we were named the exclusive supplier to one of those and we received a very large booking and that product will be shipping in our.
Fiscal year also so.
It was a good quarter in terms of shipments we were able to do some great things getting piece parts in to meet the customer's request. It was also a very good quarter in terms of bookings.
Going forward, we expect to ship more.
The next three quarters $12 million to $14 million of ultra capacitors modules or GE wind turbines.
Can you comment as to your current backlog of four ultra 3000.
Howard with allocations and everything going on.
Talk daily to our suppliers and customers and because we are doing everything internally, we can to support their needs.
I don't want to give those numbers out because they can do the math themselves and right now I can will tell you that.
There is nothing I am personally.
Every week with every single long lead time supplier getting products in we have calls every week with every.
Each of those four.
A large owner operators and we're working together.
Pliers, the customer and us.
To meet their needs in terms of them getting this rolled out into their wind turbines in our fiscal year.
Alright, so the $12 million to $14 million for Q2, three and four is that a correct statement then.
Yes, that's approximately what we have in E&P based on lead times and everything else that will be for the next three quarters.
<unk> bookings.
No thats shipments.
Shipments.
In terms of potential.
Bookings will be higher than that we do we do do a booking forecast with the team.
Based on the feedback we're getting from a number of beta site testing those production orders, we feel we'll get maybe at the beginning this case December of 2021.
But more than likely in our end of our third quarter, we will get the production orders.
For a number of other owner operators, so bookings will be higher than that overall.
So we'll have a positive book to bill.
FY 'twenty two definitely.
Nextgen, where are you in terms of starting.
Production.
Yes, so nexgen we are.
Finishing up the beta site product, it's being tested.
Those will be delivered.
Have a setup.
With T mobile.
I'll be doing the first beta site testing in the last week of October.
The balance I know we have a.
Venus.
Like testing setup with AT&T and that'll be the first week of November.
So those are the two largest.
Test sites and testing that will do so.
Don't think there'll be a lot of changes to the product.
It works very well.
But we just need to get something like the ultra to thousands of field hours underneath it before we see some of the large production orders, which we fully expect.
When you talk about large production orders can you give us all of US a sense of what you're talking about.
I think phase one will be orders for example, the one that we're quoting is.
Rollout by T mobile in the Atlanta area, that's 900.
Powers.
So.
Our bookings are expected this year to between.
$5 million to $10 million in bookings.
<unk> I don't I don't have that number for you right now I don't know whether that would be.
Alright fair enough.
In terms of the tube business.
I had a conversation last quarter about a breakeven in two years, we're talking about a breakeven on a cash flow basis does that is that.
Wendy what we were referring to.
Right. So what we said was we expect the healthcare group to begin generating operating contribution.
Towards the end of FY 'twenty, four and FY 'twenty two studies two years right and that is right and when look at exiting FY 'twenty four breaking.
Breakeven to positive operating contribution and we are still doing everything possible to meet that date or pull it in.
Alright, that's all I have right now.
Thank you for thanks, Howard Thanks, Alright again congratulations.
The whole group great job. Thank you.
Thank you and our next question comes from Tony Insurance.
From key equity investors.
It is now open.
Good morning, and congratulations on a great quarter.
Thanks, Tony.
Our first question is I was just comparing the <unk>.
Fourth quarter of the last fiscal year to the current quarter and obviously.
PMT is up but canvas in health care are both down and a little bit and can you comment on that is that kind of a cyclical slowdown in each of the business units or is there something going on that we should look at.
Well normally the first quarter.
Yes.
Lois quarter of the year and Ironically, it's the best quarter, we've had in the web.
11 years, so it was even larger than the fourth quarter.
But what we see particularly in Europe and southern Europe. In August there are lot of factories that close up so normally business is down and that would impact.
Canvas.
For sure, but overall, we're really pleased with the quarter, we've never had a quarter like that in the first quarter, where we hit a higher first quarter than in the fourth quarter.
Quarter is usually our largest quarter in the year.
So so.
So im sorry go ahead.
I was just going to add that with respect to the health care business.
And again, we did have a couple of slow months in June and July, which we weren't quite expecting having talked to many people throughout the industry. We weren't alone in that regard and yes, one of the biggest things that impacted our revenues in the first quarter with lack of system.
Virtually all system sale in the first quarter and that's been a problem for us and we had said earlier on it was going to continue to be a problem.
Hospital throughout Covid, we're now upgrading their cte scanners.
The number of scanners that were available to purchase and resell virtually dried up and we're starting to see that improve now, but we did take a hit on that in the first quarter.
Okay.
Something for canvas, maybe just quick I mean Q1 was <unk>.
One 8% year over year, so we have.
100% growth in Europe at all.
So because of that.
No I understand I understand thank you that's very helpful.
Not to harp on it again on the cash issue and I think youre, absolutely right to use the cash for the growth business have you given any thought to increasing the dividend at all given obviously the stock price has gone up a lot and the dividend yield has gone down which is which is a good thing obviously the business is going forward, but have you given.
<unk> thought to maybe raising the dividend slightly.
Well, we discussed it at the board meeting this week, but everyone is quite concerned that we have enough cash available to.
You know handle the growth of the company, we were all surprised that our cash use in the quarter.
It was $5 million plus.
And we'd love to have the business continue on this kind of growth, but we need to gas to support it. So I think the answer is we'll maintain the dividend where it is until we see where we're going.
Until I guess, the answer would be some more stability of earnings and cash flow and maybe la.
Our cash usage.
You would look for.
That's correct.
We anticipate by the end of the year that we may be cash flow neutral.
Certainly if we can turn healthcare on will start to be cash flow positive.
Okay.
And in terms of market share looking at the fab business and some of the how would you consider as your amount of a market share remains stable do you think youre gaining market share.
Well I think the products that we manufacture we are gaining market share in the semiconductor wafer fab industry. There are two products.
One of them is deposition, which is the older technology that used or replacement of tools and existing wafer fab.
The new one in etch and the majority of our business, probably 60% of it is deposition and we've been manufacturing those products. So since the.
The early two thousands.
So although you know when you look at the industry they talk about the industry growing 50% or 40% next year.
I don't anticipate that our growth will be that high because we have more of our products in the deposition side Alright, alright still it's it's good news I mean, we did to over $22 million in the last fiscal.
Fiscal year in that industry.
The bad news is the industry goes up and down like a roller coaster, Brian they are telling us. They had five G is going to maintain the industry growth for the next two or three years and we hope they're right.
Okay. That's very helpful. Good luck and congratulations again on an excellent quarter.
Thanks, Tony.
Thank you.
And again, ladies and gentlemen, if you have a question that is star one again, if you would like to ask a question that is star one.
Next question comes from Brad Leonard <unk> Capital Management. Your line is now open.
No.
Yes.
Hello.
Good morning, Brad Good morning, congratulations.
Congratulations on a nice quarter I have a question on the ultra three did you actually have sales in the quarter.
Yes. This is Greg.
Yeah, we were in full production we.
We had a strong.
Shipping quarter.
And.
We're going into.
Into the second and third and fourth quarters with a larger backlog than we started Q1 with.
Okay.
That's great and is the what are the margins like on that product are they similar to the group average.
Yes.
They're accretive to the.
The company's overall margins. So okay, that's great and what do you think the ultimate size of this business is going to be on.
On an annual basis.
Well based on our market share and again right now that product is focused on.
Owner operators that use J turbines over the next two to three years, it could be 40% to $50 million.
On an annual basis.
Yes.
Hey.
Good to hear that's all I had thank you.
Thanks, Brad.
Thank you.
And our next question comes from Mike Hughes from C. S. G capital. Your line is now open.
Good morning, Thanks for taking my questions.
First do you have a company wide book to Bill number.
Hi, Mike This is Bob Ben Yes, just 1.41 at the end of the first quarter for the whole company.
Okay, and then on the electron tubes business can you just talk about pricing if it's consistent with what you've seen in the past and then secondarily, where the revenue for that business stands now versus pre COVID-19.
Sure.
Then prices and.
Unfortunately in the two business go up every year.
I'd say the pricing this year are up somewhere between 5% to 10%.
The unit decline.
And the.
Price increases sort of flattened.
The industry out, but what we saw is after COVID-19 during COVID-19 a lot of equipment is shut down and to start right.
Shut off like that.
<unk> hired all the time, so we really had in the last few quarters, we had a large increase in the aftermarket for power tools, particularly that are used for instance.
Laser equipment for cutting steel parts and for dielectric heating laminating plastics in plywood and heat treating steel parts things of that nature.
The other side of the business as we manufacture microwave tubes magnet trends that are used in.
So a lot of industries that are growing going into new equipment.
These are applications like synthetic diamonds for example.
In all kinds of industries or turning carbon.
Into building materials for example in the newest.
Industry is.
High power $24.0, megahertz magnet trends up to 100 kilowatts are being used for producing hydrogen.
So they take methane gas.
And they hit it with really high power microwaves and they come up with acetylene and hydrogen.
And it appears that hydrogen is going to be the fuel of the future of AD industry is on fire and frankly, we have more orders for Mega trends that we manufacturer then we can deliver right now.
So there is you know we sell 20000 customers all over the world. So the two business.
It's really spread out in a lot of different applications, we saw mega trends for avionics and marine applications and after Covid.
My pleasure boats were being retrofitted again with new equipment, So our business with companies like garment and Honeywell is through the roof.
So it's really a good time.
We're so excited about the growth of the business, which we haven't seen in years.
Okay. What portion of that are the PMT revenue streams from the Mega trends.
Uh huh.
They are both CW mega trends.
Used for industrial heating applications and for the.
Generating diamonds and then their magnet trends that are folks that are used in our radar.
That we sell to companies like Garmin and Honeywell.
Within JRC alone, we do about $12 million a year I'd say, it's close to $20 million right now.
Okay. So the pickup in the hydrogen market, which is getting a lot of attention just on the ESG front right. Now is it do you think that that's material enough to move the needle for the company overall, meaning could it out a few million dollars a quarter in revenue or is it not that large.
Oh, yes, absolutely it's going to take time.
But there are a number of companies that are addressing their production of hydrogen and we're in touch with all of them and they not only by the tubes that they buy the complete generator and we manufacture the generators as well.
Okay. So just the that business overall, the elektron to business.
Has it completely recovered from Covid at this point and from a revenue standpoint, where is there still more recovery ahead.
Well in the aftermarket business the replacement business, it's recovered, but there is the.
Tremendous amount of.
Growth potential in the microwave area, Okay, Okay, and then the semi cap.
Wafer business you touched on this that you did $22 million last year.
On the last call I think you indicated that business could be up 10% to 20%. This year is that still a good number to think about.
Yeah, I think thats right on and probably 20%.
Okay. Good and then the health care business I think in the last year or so you said that the operating loss for that business on an annualized basis is about $5 million is that still ballpark.
Yes, that's correct. Unfortunately.
Okay and then.
Last question for you just a point of clarification.
Think there was a discussion around our cell sites in Atlanta.
The potential for.
$5 million to $10 million on bookings was that specifically for sell side business is that what was being referred to.
Yes.
The next product based on the.
Ultra capacitor project, we are working on so you use a similar technology the product does.
The ultra 3000, which replaces these lead acid batteries and wind turbines.
With every cell site and Theres a generator. That's also using lead acid batteries to this product would replace those.
At a cell site and that's a new product design again, though based on.
Ultracapacitor technology that were.
Able to get to market very fast.
<unk> design team here and we already have a letter of intent from T mobile and there'll be doing that beta site testing at sites in Atlanta at the end of this month.
And so I think it was.
Mainly in reference to the status of the new product, which is called the ultra Gen 3000, Gen meeting generator.
Terrific and I actually did have one last question for you I think you said Pmt's book to Bill was 113.
And then you said companywide was 1.41, the PMT business as the majority of the revenues. So mathematically, it's really hard to get to 1.41.
If you know.
75% to 70% of your revenue has a book to Bill of 113, so what's the disconnect there.
Hi, Mike its Bob and again, the canvas businesses has a very high book to Bill at the end of the first quarter.
So that makes up the difference health care is also over one.
Okay. So so the canvas business must have a book to bill North of two.
Around two.
Okay and just in the 1.13 are you, including the ultra capacitor business in that metric.
And the bookings and billings absolutely yes.
Okay, Alright, thank you very much.
It's part of that we have a backlog now of $131.0 million. So you can see.
Next year, it looks pretty good.
I'm sorry, it was what business was that for what was the backlog number you just cited and total backlog for the company right now is $131.0 million.
Can you give me onto the floor.
Can you give us a little context, where it was last quarter or a year ago.
We ended the fourth quarter at about $26.0, a year ago.
Sure.
$76 million at the end of the first quarter of last year. It was $76 million at the end of the first quarter last year.
Okay. Okay. So the backlog went from 125 to 126 five sequentially in a quarter thats typically seasonally a little bit soft out right.
Right right.
Super Thank you very much.
Thanks, Mike.
Thank you.
And our next question comes from Eric Landry BMO capital. Your line is now open.
Good morning.
Good morning, Eric.
Hey, Thanks, I appreciate you taking two questions from the same shop, but.
Actually I think Mike asked the two important ones that I was going to ask you about the the book to Bill math and whatnot. So thank you for clearing that up and then I.
I guess related to that my other question was.
Yes, I wanted to know how materially increase was in backlog.
Canvas, but I guess that was also answered so let me let me ask Wendy.
This.
I think.
Alluded to the fact that the G is a little behind schedule.
But I don't recall hearing whether or not the Siemens stuff is behind schedule.
No the Siemens is not behind schedule.
Starting to ship.
And between now and the end of the calendar year in small quantities will be shipping one of the tight.
Which is what we had intended to do and we are on schedule with a full release of all four.
Calendar year 2022.
But we feel good about that.
Okay.
I guess, that's it thank you very much.
Thanks, Eric.
And thank you and I am showing no further questions I would now like to turn the call back over to Ed Richardson CEO for closing remarks.
Oh I apologize, we do have one question coming from Michael Michael Coolest private investor.
Okay.
Hey, Michael just wondering that's your ultra.
Altra 3000, it sounds like.
Really a groundbreaking product and I was just wondering if there is.
Any application for replacing lead acid batteries.
The auto industry at all and.
If you could address that I'd appreciate it.
Yeah, the automotive industry is looking at using ultra capacitors.
And that industry the ultra capacitors in the supplier we have are.
Much higher.
Voltage and power levels, so there'd be for more larger applications and critical facilities.
In wind turbines et cetera, but we look at that market and if we see an opportunity that our design team.
Our suppliers can come up with a product to support that market, which obviously.
There's a huge market.
We'll look at it but right now we have.
For products in the pipeline.
B J.
Like I mentioned, we'll be introducing the ultra Gen. In Q2, then we have a UBS universal power supply Ultracapacitor system that we'll be introducing in Q4.
And then another product that we hope to introduce in Q1.
Next year. So the main goal is to.
Get as much market share as we can because you hit it on the head. This product is the most proven.
Sure.
Most user friendly product in the industry. So we just want to maximize that but also have numerous products in the funnel.
So we can have a portfolio of products supporting many of these.
Green initiatives and we just seem to have found a niche.
Both from a component point of view and a design point of view market. Okay. One more technical question was since you're replacing the lead acid batteries are there any nasty metals in the capacitors that are.
Not entirely friendly and very very mentally friendly.
No in fact, that's one of the listing of attributes and this is coming from a couple of our customers.
Just the cost that this in terms of downtime et cetera, or the cost of going and doing a remote replacement of lead acid batteries in wind turbines going up 300 feet in some remote field.
Is huge cost to them in this product last 15 years.
But one of the other large cost that they have is the amount of cost it takes them to dispose of lead acid batteries because of the chemicals is huge I mean, theres huge graveyards that they have to taken to meet you.
Higher metal standards, the Ultracapacitor technology is electrical and so it can just be.
Uh huh.
You don't have all the environmental issues that you do with the lead acid battery and getting rid of them is much less expensive.
Then if.
If you will these literally car batteries that are that are out there now.
Okay. Thank you for the insight it sounds that sounds exciting.
It is we are excited about it. Thank you thanks, Mike.
Thank you and I'm showing no further questions I will turn the call back to Ed Richardson CEO closing remarks.
Thanks, Justin.
Well, thanks to all of you for your interest in Richardson electronics, and after achieving the highest quarter in sales and 11 years, we're really optimistic about our future.
And I hope you are as well if.
If you'd like to discuss our results. Please feel free to call us at any time any one of us are available to talk to you.
We're also going to be attending the LD micro main event next week in Los Angeles, and we also participate in the Sidoti Virtual conference in December.
We look forward to discussing our second quarter performance with you in January Thank you.
You very much.
Thank you.
This concludes today's conference call. Thank you for participating you may now disconnect.
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