For joining us, we have Richardson Electronics here. I would like to introduce you to Edward Richardson, CEO, and Wendy Diddell, COO. Thank you.
Hello. Well, in about another six months, this company will be 80 years old. I joined the company out of school. My dad started the company in 1947, selling surplus electronics, believe it or not. I joined him out of college in 1961. I hate to admit how many years I have been there. We started out as a distributor and saw companies like RCA and GE and Westinghouse and divisions of Varian all wanting to exit the tube business. We worked with a company called Drexel Burnham and a guy named Michael Milken. We did a convertible debenture in 1981 for $25 million. We bought National Electronics, which is where our headquarters are today. Thereafter, we did an $86 million convertible debenture, and we have bought now 21 or 22 divisions of tube companies all over the world.
The company has grown from, when we started at that time, $10 million or $15 million to, what did we do this year?
$220-some-odd million this year. I am CEO, and Wendy is Chief Operating Officer. I take credit for everything that goes on, and she does all the work. We will let her tell you about the company.
Thanks, Ed. Good afternoon. It's nice to see everybody. I see some familiar faces that I haven't seen in a while, so thank you guys for joining us. If I can figure out how to work the technology, we'll get started. All right. Just real quick, for those of you who don't know us, and Ed provided a good introduction, we are an international company. We have 24 legal entities throughout the world. Today, we have about 430 employees spread throughout that. The majority, or at least half of them, are here in La Fox, Illinois, so we're out west of the city. We serve a very wide customer base. We have more than 20,000 customers in our database. On any given year, we probably ship to 5,000 or 6,000 of those.
As I mentioned, we have not only 24 legal entities, but we have engineers and salespeople throughout the world in 60 different locations. So we're very global in scope, always have been, and our challenge has always been: how do we take advantage of the global infrastructure that we have by taking more products through to the market? Our focus has been on engineered solutions. If any of you know us from the past, you might say, "Well, aren't you a distributor? Aren't you like an Arrow or an Avnet or somebody like that type of business?" Over the years, we've been focused on controlling our own destiny by building and selling our own solutions. Today, more than 55% of our revenue comes from products that either we manufacture here in Illinois or products that are manufactured specifically for us at various factories throughout the world.
So done a really nice job of moving up the food chain, and you're going to continue to see our emphasis in that area. We have three business units, which would take me most of the afternoon to go through all the details, so let me just touch on the highlights. The largest business unit is what we call PMT, or the Power and Microwave Technologies Group. Within that, there are three subsets of the business. The first one is EDG, which is our legacy tube business that Ed was describing. So EDG is still one of our largest segments. It's about $80 million in revenue. It's very stable. The unit volume kind of goes down a little bit each year, but we more than make up for that in pricing power. Again, those are power grid tubes that we sell.
Not so much the television tubes anymore, but still used in a lot of industrial applications where semiconductor and whatnot doesn't support the application. Then we have what's called PMG, or the Power and Microwave Technologies Group. That's the second subset of PMT. That is our distribution business. So we still have some of that. We distribute for companies like Qorvo and MACOM, and that business is actually a growth part of our business. It grew nicely in FY 2026. We sell components into a number of applications, including military, including satellite communications, things like that. So that's been a nice growth engine, but it has a lower margin profile, more typical of what you would find in distribution. Then the third part of that, of the PMT business, is what everybody gets very excited about, and that's the semiconductor wafer fab market.
Our largest customers in that market include MKS, Lam Research, and that business, as all of you know, is again on fire. If you knew us in FY 2023, we are seeing a lot of the same dynamics that we saw back then with a complete ramp of our semiconductor products. In that market, we manufacture power subassemblies. It is very high mix, low volume, and our products are exclusively used by Lam Research. It is a very nice part of our business. As we exit FY 2026 and we go into, we are now finishing up our first quarter of FY 2027, we expect that that business will continue to grow nicely. We trend and kind of track along with the semiconductor wafer fab equipment manufacturers. You can look at their data, and that correlates with what you see in ours. Again, that is PMT. It is those three segments.
The second business unit, which is also a growth engine for the company, is green energy solutions. Green energy solutions we started in, I think, FY 2022. Again, we look at that. Really, there are two main sections of that business up until most recently. That is wind and EV rail. On the wind side, we have products that we manufactured and patented that are replacing lead-acid batteries in wind turbines. To date, the main product goes into GE turbines. In the U.S., there are more than 30,000, and we have probably replaced the lead-acid batteries in about 15% or so. Still lots of runway in terms of wind. There are other products that are offshoots of that, including modules that go into non-GE turbines, SSB, Alstom, Nordex, a lot of those are in Europe.
We are expanding geographically in the wind business as well as product line-wise and as well as market penetration. That kind of covers the wind segment of green energy. Then we have the EV rail segment, and our primary customers have been Progress Rail and Wabtec, Caterpillar and GE. In that part of the business, we have made superstructures, which are used in EV locomotives, and we also make starter modules, which are used in any kind of locomotive, whether it is hybrid, diesel, or electric. That part of the business grew rapidly back in FY 2023, and it has been a little bit more stable since then. The newest part of green energy, which is not on this chart, and I will be talking about it more in a couple slides, is battery energy storage. We will leave that as a teaser here in a couple minutes. All right.
The third business unit is Canvys. That is our display business unit. In that particular group, we make custom displays for primarily medical OEMs. Our customer list in this segment looks like the who's who of medical. We sell to just about everybody. Medtronic is a huge customer. Philips, Siemens, Varian used to it, Siemens now, KARL STORZ, Stryker, you name it, we primarily sell displays to them. It is a very stable business. We did about $38 million last year. We will see some growth again this year. It is one of our more profitable businesses and takes very little management time and very little capital. Kind of seems like which one of those does not fit here in this picture, but it is a good business, and that is why we have it. This just gives you an idea of the type of customers that we serve.
Within the green energy, you see Suzlon. That is a manufacturer in India of wind turbines. We just started shipping modules to Suzlon. You see everybody from Invenergy, Wabtec again. We are starting to sell lighting that is green energy lighting to Metra. A whole host of customers that I think really lend itself. The main reason for this slide is to show the credibility and the type of customers that we serve. In FY 2026, we just finished, again, our year at the end of May. Really saw a lot of good progress across all of our businesses. I am not going to read this word for word, but suffice it to say that we have seen finally are bearing some fruit from the investments we have been making in the growth areas. The fact that we have multiple types of business actually provides some cover.
If one business is down and the other one is up, then we take advantage of that. In FY 2026, we streamlined some of our operations. We shut down one location in Dubai that was not profitable for us, and we streamlined what was left of our healthcare business. Then really looking at using our capital and investing that back into our growth strategies. We also finished up a multi-year inventory purchase. A lot of you that know us, again, have been asking why is our inventory so high. We had one strategic partner that had made a decision to not make power grid tubes anymore. For the past several years, we have been adding to our inventory to cover us through 2030. We are now done with that. We finished that in March, and that now becomes a cash generation mechanism for us.
I do not think you will see, Andrew, you will be glad to know our inventory shouldn't be going up anymore. It should be going down. We listen to you. All right. Full year, as I mentioned, we finished our Q4 at the end of May. It was an incredible quarter. We came out $66 million, net income of $3.7 million versus $1.1 million in the prior year. On a full year basis, again, very strong. We grew from $208 million to $228 million, and on a net income basis, went from a loss to about $6.4 million in net income. We saw improved margins, as I already mentioned. We are now well on the way to reducing our inventory levels. Our balance sheet remains very strong, and we are investing in the growth initiatives that I mentioned earlier, primarily in the green energy space.
Another high point coming out of FY 2026 was our backlog. You will see that it finished well above FY 2025. We are not back at that FY 2022 level, but that FY 2022 level was coming out of COVID, and there were some other factors in play there, but we were very pleased to see the backlog increase across all of our businesses. Somebody asked me a good question earlier, and they said, "Well, is there a one-hit wonder in there, which inflated the numbers?" The answer is no. It is truly across all the businesses. Good to see that backlog and the high revenue. We still shipped, but we came out strong, and that bodes well as we went into FY 2027. Balance sheet, I already mentioned to you, very strong. Still no debt. We ended the year with almost $32 million in cash.
We do have a line of credit with PNC Bank. We do not use it, so that is all outstanding. I already mentioned that our inventory should become cash generation moving forward. We pay a dividend. We will continue to pay a dividend. I mentioned also that the cash that we have on the balance sheet, we really are holding that close to the vest. A lot of it is outside the U.S., and people automatically say, "Well, you got $31 million. Why are not you buying your shares back?" A lot of it is outside of the U.S. and has to stay there. The other is meant to support both working capital requirements and fund the investments that we want to make in battery energy storage, as well as in the other green energy solutions segments. I already talked about capital allocation.
Let me just dive real quick into some of the growth strategies just a little bit more. Why are we investing in these areas to begin with? When you look at wind power management, I think it is important to a couple of things that I want everybody to understand. First of all, in the wind segment, we have no exposure to offshore wind. Everything we do is onshore, and up to this point, it has all been MRO. The unique part of what we provide is that we offer a solution that is not only green, but it will extend the life of the batteries that are used in the wind turbines from about 12 to 18 months to up to 10 years. You do not have people crawling up turbines. The ROI is very attractive for the end users.
You see that everybody is talking about power management. Everybody is talking about power sources. There is not enough power. The AI centers are using all the power. We need wind, we need solar, we need gas turbines, we need traditional sources. All of them are going to have a role in our future, whether we agree with how we generate the power or not. Wind and power management is a big area for us and an area of growth. Energy storage, again, battery energy storage, one of the hottest buzzwords out there right now. A huge market opportunity, $35 billion growing to over $100 billion over the next number of years. Again, as you look at data centers and the amount of power consumption, how many people use AI today? How many people use it a lot?
If you are anything like me, I cannot live without it anymore, and I am probably still considered a neophyte in that market. The AI centers, the data centers are not. We can put moratoriums and we can find better ways to manage it, which I agree we should do, but they are going to be there. Battery energy storage is a critical part of that because they require very reliable power sources. Very large market. We are focused more on the commercial industrial, going up into the data center. Think of it as more on the business side. When I say that, versus we are not building utility farms. That is not who we are.
We just put a press release out, for example, last week about our most recent program win, which was for an Alaskan tribal community where they bought 18 small systems that they will use to help manage their power conditions up in their markets. Energy storage, another market tailwind that is going to support the growth of Richardson Electronics. Semi wafer fab, I don't think I need to speak a lot about that. Everybody knows that's a huge market opportunity. Everybody says, "Well, when do you guys think it's-- When's the downturn?" If I knew that, I probably wouldn't be standing here. I'd be gambling somewhere or doing something incredibly profitable in terms of generating cash. We don't know. But what we're seeing is calendar year 2026, calendar year 2027, very strong. That's not from us.
You can look at the semiconductor wafer fab estimates to come up with your own decision there. But we are very optimistic and bullish on that market. The final tailwind that we're looking at is the Made in America initiatives, and we're starting to see some real green shoots there in our own business in terms of companies that want to have products or want to have support in the U.S. C-Motive was one that came to us recently. There was a press release out on that. We'll be making products for them. We have another partnership with a company called KEBA. They're out of Germany. Same thing. We're working very closely with them on some new programs as well. So stay tuned for that.
If you've been to our facility out in La Fox, you know we have a very large manufacturing facility right now between wind, the wind modules, the EV rail modules in the semiconductor market. We are very fully loaded. We've been adding second shifts, but we can still add a third. So if you know anybody who wants anything made in the U.S., you can also give us a call. I'm not going to talk anything more about the wind other than to say what I did before, which is, at best, we're at about a 15% market share. So still lots of runway for increased revenue there. We do hold the patents on these wind turbine modules for the GE units, and makes it nearly impossible for anybody to have an alternative solution. Energy storage, we mentioned that, and I told you it was a very large market opportunity.
The nice thing for us, everybody's like, "Well, why are you in this?" It's very similar, again, to the compartments that we made, the superstructures that we made for Progress Rail and their EV locomotives. It's just bigger. The battery energy storage units are bigger. But the technology, we've got the engineers, we've got the background. We have the technology partnerships, which are critical to us. You put all that together with our experience. Ed mentioned we're turning 80. We've got zero debt. We've got cash. We're in the right space, technology-wise, financially, longevity, to make a real play in the battery energy storage market. We're starting out more as a distributor in terms of reselling product with one of our technology partners, very quickly moving up the food chain, where we will do our own assembly of these units, and then adding our own technology components.
So all good, heading in the right direction. This shows what we do versus our technology partners. You can see we partner with people. We do not make our own battery cells, for example. We will not make the containers. We will buy those. But as we move up that food chain, we will be adding in these other elements. More importantly, when you get to the far right side of the chart, you will see that there are things that we do with our flexibility, with our more of a niche marketing approach, taking care of our customers, holding their hands, helping them find out where they can get the money, where the rebates are, how much it is, and then, of course, putting together the right solution for them. We are not a one-size-fits-all like some of the other larger companies are.
We do work closely with the customers to design the right kind of system, and I think the Alaska project is a really good example of that. Here we are in 2027. As I mentioned, we are finishing our first quarter on Friday. Our expectations for the full year, obviously, we anticipate that the semiconductor market will continue to grow, and we will gain advantage from that growth. We see the steady, and it is not only steady, but increasing demand for the wind turbine modules. As I mentioned, we have been playing very strongly in the U.S. in the GE side of things. We are expanding geographically. There are other OEMs like SSB Wind Systems and Alstom and Nordex, and we are starting to get units going into those systems. Then we have the Suzlon opportunity, which is in India.
That one is our first OEM other than GE, where they are going to be using our modules in new builds. So it becomes an MRO and an OEM opportunity. But in addition to that, there are new products that sell to the same customers. They go into wind turbines. We do not have to invest in more market penetration. It is getting those new products into the market. The battery energy storage pipeline, again, in FY 2027, we are talking more about pipeline and opportunities. These programs take a good amount of time. Once you sell them, that is kind of step one, but getting all the permits that you need and getting everything lined up can take six months, 12 months, and that is what we are learning. So I have been telling other people, if I am in your shoes as an investor, I say, "Richardson, what does your pipeline look like?
What does your backlog look like?" Looking towards meaningful revenue growth in our FY 2028. So 2027 is a big selling year and really getting everything in place so that we can take advantage of this incredible market opportunity. Longer term, we are still, like I said, capitalizing on the onshoring regulations and activities. We will continue to do that. We have got the footprint, and we have got the manpower to accommodate additional growth in our manufacturing facility. Of course, like everybody else, we will continue to monitor the whole global economic situation, the changing in regulation and tariffs. So far, Tapwood, it has not been a significant threat to us. Let us just put it that way. All in all, we expect FY 2027 to be a very strong year. You will see revenue growth, you will see margin improvement, and you will see bottom-line operating income improvement as well.
I think I've left about over 10 minutes, and Ed or I'll be glad to take any questions that you have. Yes.
You put out a certain wafer revenue from anticipate them to be in 2027?
Did you say what do I insist they be? I didn't understand your question.
You said you got the wafer business.
Yes.
What were the revenues?
In 2026?
In 2026, and what are you expecting?
We do not really forecast at that level for everybody, but I will tell you, we did about $32 million in FY 2026, and we fully anticipate, again, being ahead of that $40 million that we did in FY 2023. We expect being ahead of that in FY 2027. You guys are easy today.
Where's La Fox?
Where's La Fox? Do you know St. Charles, Geneva?
Yeah.
We're right there.
Okay.
Right at Keslinger and Bunker and Randall Road.
We don't get out that far.
Oh, okay. Yeah, far west. We're in the cornfields.
Okay.
Yeah. Beautiful area. Come visit us.
Okay.
It's easier, we know that for the size of company we are, that we're quite complex. It is a lot easier to show you how everything goes together if you come visit us.
Okay.
Yeah?
I thought I heard you involved in developing diamond substrate in semi-graphite wafer.
Yeah.
Can you talk about that a little bit?
Sure. We're not developing the machinery. I wish we were. One of our customer partners is a company called Great Lakes Crystal Technologies, and they actually build the equipment that makes the substrate. What we do is we provide the microwave generators that are used in those systems. So, microwave tubes, core business, that's something that, again, has found a new life in these new generators that make that substrate.
This is outside the [inaudible]?
Yes. Definitely outside the Lam. Great Lakes Crystal Technologies is partnering with one of the Michigan universities, and they have a lot of programs that are with top-secret organizations. Their intent, again, is to use diamond substrates as a cooling mechanism, because the properties are much better.
These replacements for the turbines or whatever.
Do the newer ones already have a different battery or technology in them or?
GE, that is our primary OEM that uses our equipment. Siemens and Vestas, they have different technology, and they do not use lead-acid batteries in their nose cones at all. Suzlon has indicated that they are going to start building new turbines with these modules. GE, by the way, real quick, has approved the use of our modules in the repair and replacement cycle.
Well, going several years in the future, what do you see? Just continuing to grow the company by greater sales or acquisitions? Being acquired? Private equity? What's the future here?
Yeah, that's a good question. We definitely see growth. Ed would be the first one to tell you he doesn't want to go out a C player. He wants to go out an A player. So, our objective is to grow that business, make it more profitable, improve that bottom line operating margin. We're not actively pursuing acquisitions at this time, but if the right kind of a small engineering type opportunity were to come to us, we would take a very hard look at that. But I think, again, the idea is to grow the company, not necessarily sell it to private equity. Yeah.
Are you capacity constrained on the semi core components?
Say it one more time.
Are you capacity.
Yeah. Oh, yeah. No. We are right now staffing second shifts to keep up with the demand, so we could still go to a third. I was telling somebody earlier, the nice thing is, it doesn't expand our, it actually makes our whole P&L better and stronger because it leverages the corporate structure that we have. We don't have to add corporate structure, we don't have to add purchasing, we don't have to add any of those elements. It's only the cost of sales that, those kind of people that are impacted.
You're letting others use your capacity then?
Well, we're selling that capacity, yes.
Okay, because.
Yes. We also have, what, 120 acres, so if we ever need to expand, we already own that property. It is right there. We could easily do that. But right now, we want to make sure that we are using every inch of our space that we have wisely. People would be the only thing, right? You have to find enough people to staff the second and third shifts.
Is that an issue?
It is not as easy. Not a lot of people want to work the second and third shifts, but we are doing okay. We are holding our own. When the semi market crashed after FY 2023, we did not decimate our organization like a lot of companies did. We actually flexed people, moved them around, and as a result of that, we have been in good shape coming back. Yeah.
What kind of background do employees have for this type of work?
Ooh, which type?
Whatever you are doing.
The reason I say that with that look is, okay, let's say you want to talk battery energy storage. We have recently hired some very, very strong people from that industry, but that is a whole different skill set than people that build semiconductor product, right? In the semiconductor market, as we add manufacturing labor, then we are talking about people that might have machining experience. A lot of them are positions that we can train, but CNC programmers and things like that become a little bit more challenging. Other than that, we are always hiring engineers, so degreed engineers.
I think you'd find it interesting that within the company you have three generations of family within the company. A lot of the people have been trained within the company and have stayed with the company. That's the benefits that we offer.
We also lock them into the corn field, and we don't let them out. Okay.
That's the best one.
I know. Final questions? We have a few minutes, so I don't want to rush anybody, but all right. We appreciate everybody's attention today, and if it hasn't come across, we are very excited about the future of Richardson Electronics. Various markets, again, that we're tapping into to help kind of always balance the ups and the downs. We're very accessible. Ed is ed@rell.com, and I'm wendyd@rell.com. Just give us a shout, and we'll be glad to talk your ears off in case that wasn't obvious. But thank you, and enjoy the rest of your show.