Richardson Electronics(US:RELL)2022-10-06 18:48Financial Data and Key Metrics Changes - Net sales for Q1 FY2023 increased by 25.8% to $67.6 million compared to $53.7 million in Q1 FY2022, driven by higher sales across all business units, including the new Green Energy Solutions segment [12][20] - Gross margin improved to 34.1% in Q1 FY2023 from 30.3% in Q1 FY2022, with PMT's margin increasing to 34.3% from 30.1% and GES margin rising to 35.5% from 28.9% [16][20] - Operating income was $8.8 million or 13.0% of net sales for Q1 FY2023, compared to $2.8 million or 5.3% in the prior year [18] - Net income for Q1 FY2023 was $6.3 million or 9.4% of net sales, up from $2.6 million or 4.9% in Q1 FY2022 [20] Business Line Data and Key Metrics Changes - PMT sales increased by $4.9 million or 12.2% year-over-year, driven by strong growth in semiconductor wafer fabrication equipment [13] - GES sales surged by $5.9 million or 230.7% compared to the previous year, reflecting the fast-growing alternative energy storage market [13] - Canvys sales rose by $2.0 million or 23.4% due to strong demand in North America [14] - Richardson Healthcare sales increased by $1.0 million or 45.5%, with improvements across all product lines [14] Market Data and Key Metrics Changes - Total company backlog was $199.2 million in Q1 FY2023, down from $206.2 million at the end of FY2022 but up from $126.5 million at the end of Q1 FY2022 [15] - Canvys experienced a sequential decline in backlog, while PMT and GES backlog slightly grew [73] Company Strategy and Development Direction - The company is focusing on growth initiatives, particularly in the Green Energy Solutions segment, which aims to capitalize on market opportunities in sustainable energy [5][6] - Investments in engineering and manufacturing resources are being made to support the development of solutions for a healthier environment, including alternatives to lead-acid batteries [6][7] - The company is expanding its product line for energy storage products and plans to announce several new products in the second half of FY2023 [29][30] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the future, citing a strong backlog and the potential for significant sales and profit growth in FY2023 [10][56] - The company is addressing supply chain challenges and is focused on maintaining strong operating performance [36][56] - Management highlighted the importance of partnerships with major OEMs and the ongoing demand for power management solutions [30][36] Other Important Information - Cash investments at the end of Q1 FY2023 were $35.6 million, down from $40.5 million at the end of FY2022 [21] - Inventory increased to $89.1 million, primarily due to components and work in process for PMT and GES [22] - Capital expenditures were $1.4 million in Q1 FY2023, with expectations for higher levels in FY2023 to support growth initiatives [24] Q&A Session Summary Question: Opportunities within the new GES segment - Management discussed the significant opportunity in the wind turbine market, with a potential market size of $370 million and ongoing partnerships with major operators [61][62] Question: Electric locomotives market potential - Management indicated that they are working with ProgressRail on multiple products for electric locomotives, forecasting a $40 million to $50 million business over the next three years [66][68] Question: Demand in the wafer fab market - Management noted that demand remains strong, with no slowdown in forecasts from key customers [72] Question: Gross margin outlook for Healthcare - Management highlighted improvements in gross margin due to steady production and reduced scrap, projecting a gradual upward trend [74][106] Question: Overall growth expectations - Management expressed confidence in achieving significant revenue growth, projecting about $255 million in revenue for the year, with potential for continued growth in the coming years [109]