Richardson Electronics, Ltd. (NASDAQ:RELL) Q1 2026 Earnings Call Transcript

Richardson Electronics, Ltd. (NASDAQ:RELL) Q1 2026 Earnings Call Transcript October 9, 2025

Operator: Good day, and thank you for standing by. Welcome to the Richardson Electronics earnings call for 2026. 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 11 on your telephone. You will then hear an automated message advising that your hand is raised. To withdraw your question, please press star 11 again. Please be advised that today’s conference is being recorded. I would now like to turn the call over to your speaker today, Edward Richardson, CEO. You may begin.

Edward Richardson: Good morning, and thank you all for joining us in 2026. We appreciate your continued support and interest in Richardson Electronics. Joining me today are Robert Ben, Chief Financial Officer, Wendy Diddell, Chief Operating Officer, Gregory Peloquin, General Manager of our Power and Microwave Technologies Group which includes Green Energy Solutions, and Jens Ruppert, 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 will 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.

In 2026, total sales were $54.6 million, up from $53.7 million in Q1 of last year. Driven by sales growth in both PMT and Canvas, PMT delivered notable year-over-year sales growth driven by continued strength in our semiconductor and RF power segments. It’s important to note that sales growth was partially offset by the inclusion of our Healthcare business in both the current and prior quarters. As a reminder, we sold our healthcare in 2025, so this will impact our year-over-year comparisons through the end of Q this year. The healthcare engineering and manufacturing team is making good progress finishing production of AltiTubes and finalizing repair processes for the Siemens tubes, which should result in positive operating contribution toward the end of FY 2026.

Within our GES business unit, we’re very pleased with the year-over-year growth in the wind segment. The performance provides us with growth evidence that the policies from the current administration are not hurting demand for our alternative energy solutions. We believe our wind business is protected because we’re pursuing programs strictly on land-based turbines to support global customers in providing solutions that improve the performance and efficiency of the existing fleet. While overall sales were down slightly in GES, this was driven by a large one-time order in our EV rail sector in the first quarter of last year that did not repeat this year. Backing out this sale, GES would have been up quarter over quarter. The strategic priority of the company is engineered solutions, which are products we make ourselves in LaFox.

The strategy focus, along with improved manufacturing utilization in the quarter, contributed to the higher gross margin versus the prior year. The long-term investment in our global footprint is also a strength, helping us better manage the tariff landscape. Finally, we’re pleased to report that we generated positive operating cash flow in the quarter, marking six consecutive quarters. Our cash position remains strong at $35.7 million, providing us with flexibility to support both our ongoing operations and strategic growth opportunities. I’ll now turn the call over to Robert Ben, our Chief Financial Officer, who will provide a detailed review of our first quarter results and capital position.

Robert Ben: Thank you, Edward, and good morning. I will review our financial results for our first quarter fiscal year 2026, followed by a review of our cash position. Consolidated net sales for 2026 increased 1.6% to $54.6 million compared to net sales of $53.7 million in the prior year’s first quarter. When excluding Healthcare, which the majority of assets were sold in January 2025, net sales increased by 6.8%. Please note that healthcare results, including prior periods, are consolidated into the PMT segment beginning this quarter. This was our fifth consecutive quarterly year-over-year increase in sales. First quarter net sales growth was led by a 2.8% increase in PMT sales. Excluding Healthcare, PMT sales were up 10.5% and were due to higher demand from the company’s semiconductor wafer fab customers as well as our legacy power grid tube product lines.

Canvas sales increased 8.3%, which reflected improved market conditions in Europe. Partially offsetting these increases was a 10.2% decrease in sales for our GES business unit. While revenues in the wind segment increased, they were offset by the nonrecurrence of a large EV locomotive order from the prior year’s first quarter. Consolidated gross margin for the first quarter was 31% of net sales compared to 30.6% during 2025. The 40 basis point increase in consolidated gross margin was primarily due to margin improvement in both PMT and GES. PMT’s gross margin increased to 31.3% from 30.1% as a result of a favorable product mix and improved manufacturing absorption. GES gross margin increased to 29.6% from 29.4% due to product mix, including a higher percentage of products we manufacture in LaFox.

Lower gross margin for Canvas partially offset the improvement in consolidated gross margin. Operating expenses as a percentage of net sales improved to 29.2% for 2026 compared to 30% in 2025. As a result, operating income was $1 million for 2026 compared to an operating income of $300,000 in the prior year’s first quarter. Other income totaled $1.4 million for the quarter, which was $1.1 million higher than 2025. The increase from the prior year’s first quarter was mainly due to a nonrecurring gain of $900,000 from a confidential contractual settlement. Net income was $1.9 million for 2026 compared to $600,000 in 2025. Earnings per common share diluted were $0.13 in 2026 compared to $0.04 in 2025. EBITDA for 2026 was $3.3 million versus $1.7 million in the prior year’s first quarter.

Please note that EBITDA is a non-GAAP financial measure, and a reconciliation of the non-GAAP item to the comparable GAAP measure is available in our first quarter fiscal year 2026 press release that was issued yesterday after the market closed. Turning to a review of our cash position, cash and cash equivalents at the end of the first quarter fiscal 2026 were $35.7 million compared to $35.9 million at the end of fiscal 2025. Cash flow provided from operations was $1.4 million compared to cash flow provided from operations of $400,000 in the first quarter of the prior year. Capital expenditures of $1 million in 2026 were primarily related to our manufacturing business facilities improvements and IT systems, versus $900,000 in 2025. We paid $900,000 in the first quarter for cash dividends.

In addition, based on our current financial position, our Board of Directors declared a regular quarterly cash dividend of $0.06 per common share, which will be paid in 2026. As of the end of 2026, the company had no outstanding debt on its revolving line of credit with PNC Bank. In addition, we have extended this credit agreement through October 6, 2028, with similar terms and a $20 million borrowing limit. Now I’ll turn the call over to Gregory Peloquin, who will provide more details for our PMT and GES business groups.

Gregory Peloquin: Thank you, Robert, and good morning, everyone. PMT and GES are key components of our multiyear growth plan. Coming out of FY 2025, we had a strong backlog, launched several new products, expanded our customer base, and advanced multiple development programs from beta testing to preproduction. Building on that positive momentum, in Q1 fiscal year 2026, PMT excluding healthcare grew to $37.8 million, a 10.5% increase over the prior year and a 5.1% increase over Q4 fiscal year 2025. GES sales were $7.3 million, up 35.5% over fiscal Q4 2025 and down 10.2% year over year due to a multimillion-dollar EV locomotive billing that did not occur this year and without which GES would have been up in the quarter versus the prior year’s first quarter.

However, on a positive side, the core wind turbine business grew 86.1% over the prior year and 16% over the prior quarter, supported by new customers, global expansion, and new products. Our pitch energy modules and related wind energy products lead GES quarter-over-quarter growth. We continue to gain market share with our end customers by developing new products and solutions that they are incorporating. Today, we serve dozens of wind turbine owner-operators, including exclusive partnerships with the top four owner-operators of GE wind turbines, RWE, Inver Energy, Enel, and NextEra. We also saw growth in our new multi-brand PEM turbine platforms. We continue to grow this program internationally, expanding in Europe and Asia with new products for other turbine platforms such as Suzlan, Senvion, Nordex, and SSB.

We have now received orders from customers in Australia, India, France, and Italy. Our GES growth strategy centers around power management applications. We rapidly design multiple products, secured patents, and built a strong global customer base and partnerships. Our success is evident in our growing pipeline as we capitalize on numerous growth opportunities to support new power management requirements, significant energy transformation, and wind turbine repowering projects. We’re entering Q2 FY 2026 with solid momentum. We’ve recently added key technology partners such as Kiba, Goshen, and Wulong, who will play critical roles in both wind power management and energy storage. Key initiatives include faster design-to-production cycles, supported by a new design center in Sweetwater, Texas.

Sweetwater has one of the largest concentrations of power management and wind turbine engineers in North America. Expanding our design team to accelerate enhanced design cycles prior to transitioning the work to our world-class manufacturing and test group in LaFox is one of our main strategic priorities this year. We expect to have the Sweetwater Design Center operational in Q2 FY 2026. Turning to Power and Microwave Technologies Group or PMT, which includes the electron device group, our legacy tube and semiconductor wafer fab equipment business, and RF and power microwave components group, or PMG. In the quarter, sales growth was led by increased demand in both our RF and microwave components business. As we see growth in RF and wireless applications such as SATCOM, and military applications, including radar, and drone technology.

We also saw continued growth in the fourth straight quarter among our semiconductor wafer fab manufacturing customers. Looking ahead, we’re excited about the strategic initiatives across PMT and GES, including our ESS or energy storage system program, global expansion of our green energy products, and new technology partnerships. While we are navigating a higher degree of uncertainty associated with the impacts of tariffs and market conditions, we are pursuing opportunities that may come from these disruptions. Investing in infrastructure, expanding our design and field engineering teams, enhancing our in-house design and manufacturing capabilities to support growth demand and innovation. Our field engineering team continues to identify new customers and opportunities.

Our global capabilities and global go-to-market strategy set us apart from our competition in the power management, RF microwave, and green energy markets. We have developed a business model that combines legacy products with new technology partners and solutions. Aligning with our growth strategy to deliver engineered solutions to a global customer base. This model differentiates us from our competition. Our GES products and technology partners support our niche product strategies. As it appears federal subsidies will be harder to get under this administration. Looking at our new ESS project and strategy, we are focused in key states that will continue offering large subsidies such as Illinois, Massachusetts, and California. We are expediting our efforts to expand our global market penetration of our power management products for green energy applications, focusing particularly on Europe and Asia.

As currently, about 70% of our GES sales are in North America. We are working on these initiatives alongside marketing our services to companies who need partners in the US to manufacture, test, and support products currently made in other countries. We acknowledge that there are a lot of moving parts of end nodes in this market right now. But we have successfully used our global resources and capabilities to mitigate the effect of situations like this in the past. In summary, we remain optimistic about our growing project-based business even though it remains hard to forecast. We continue to increase our technology partners, design opportunities, and engineering staff. We have new technology partners that fill technology gaps. We have a proven strategy of identifying opportunities in this multibillion-dollar market reserve.

As a result, we feel FY 2026 will be another growth year for both PMT and GES. And with that, I’ll turn it over to Jens Ruppert to discuss Canvas.

Jens Ruppert: Thanks, Gregory, and good morning, everyone. Canvas engineers, manufacturers, and sells custom displays to original equipment manufacturers across global industrial and medical markets. It is our mission to deliver high-quality display solutions tailored to our customers’ needs. Canvas reported revenue of $8.3 million in 2026, an increase from $7.6 million in the same quarter of the previous year. Our gross margin as a percentage of net sales decreased to 30.9% from 34.3% in 2025, primarily due to product mix and higher inbound freight costs. The backlog at the end of 2026 remains strong at $38.4 million, providing a robust foundation for future business. During this most recent quarter, Henley secured orders from both repeat and new medical OEM customers for a range of applications.

Our primary focus remains on robotic-assisted surgery, navigation, endoscopy, and human-machine interface solutions for the control of medical devices. Furthermore, our solutions are widely utilized in various commercial and industrial applications. For instance, our products enhance passenger information systems in trains and buses, and improve HMI technologies used in printing, vending, milling, and packaging equipment. Our initiatives focus on increasing Canvas’ visibility and market leadership by seeking new opportunities, building customer relationships, and collaborating within the industry to drive growth. Looking ahead, while the business is still project-focused and can therefore vary quarter over quarter, we are cautiously optimistic about improving demand in our markets.

Positive indicators such as increasing requests for quotes and encouraging customer feedback suggest steady growth. Our dedicated sales team continues to explore new opportunities while I focus on implementing strategic plans to ensure sustainable growth and deliver long-term value for our shareholders. I will now turn the call over to Wendy Diddell.

Wendy Diddell: Thank you, Jens, and good morning, everyone. While our healthcare business is now included in PMT, I want to provide some additional color as we go through this transition period over the next several quarters. As a reminder, we sell CT tubes exclusively to DirectMed as provided under the terms of the January 2025 sale and distribution agreements. I am pleased to convey we are making excellent progress finalizing production of our Alta tubes. We’ve also made good strides over the last quarter validating new equipment and materials required to improve our processes for the repaired Siemens tube types. Comparable healthcare sales throughout most of FY 2026 will be lower than the prior year given DirectMed acquired the healthcare parts business.

The sale concluded in January 2025, so this unfavorable comp will continue through Q3 FY 2026. We anticipate the financial impact of the retained CT tube business will turn positive in 2026 or shortly thereafter. Last quarter, after the sale of Richardson Healthcare, we discussed our focus on accelerating growth and improving efficiency. In the first quarter, we were pleased to see year-over-year growth in PMT and Canvas, as well as the wind energy portion of GES, reflecting our ongoing investments in these sectors. Of particular importance is the success we continue to see with our engineered solutions growth strategy. We also see some initial benefits from the Big Beautiful Bill. There are implications in the bill that are fostering wind turbine repowers, which lift sales of our wind turbine modules as well as sales of products from our technology partners.

Wind management companies need to upgrade their towers to receive comparable tax in coming years. In the quarter, we announced our participation in the REV Illinois program, which provides significant tax credits in return for investment in alternative energy technology development in the state of Illinois. We’re making progress developing a world-class battery energy storage demonstration site at our LaFox facility. As we’ve mentioned before, the demand for battery energy storage continues to accelerate, and our turnkey solutions position us to capitalize on that growth. Our Made in America marketing campaign recently kicked off with the addition of a dedicated business development manager. We are highlighting our capabilities on our website and through trade show attendance.

In addition, we are leveraging our existing sales organization and global customer relationships throughout the company. Finally, we are seeing increasing demand for our engineered solutions in the semiconductor wafer fab equipment market. Our large customers in this segment indicate sustained growth relating to the ongoing benefit of AI on equipment demand throughout the world. Rest assured, the management team remains focused on efficiency and cash as well. The end of the significant inventory growth in support of one of our largest suppliers who will soon terminate production of power grid tubes is in sight. In this regard, we are working closely with other partners to ensure ongoing sources of supply, but we are in a good inventory position to execute this strategy over several years.

Longer term, we remain committed to driving growth both organically and through strategic acquisitions. We’re being thoughtful in our approach. We are looking for the right opportunities to utilize our capabilities and accelerate our growth while making full use of our global infrastructure. We believe our current strategic initiatives will drive revenue and profitability growth over the next several years while we consider longer-term strategic acquisitions that further enhance our business. I will now turn the call back to Edward Richardson.

Edward Richardson: Thanks, Wendy. In closing, our results this quarter demonstrate the strength of our strategy and the resilience of our business model. By sharpening our focus on repeatable sales, driving strong cash flow, and building on diversity across power management and alternative energy solutions, we’re positioning the company for long-term success. At the same time, we remain disciplined in our commitment to improving profitability. These priorities give us confidence in our ability to deliver sustainable value for our customers, shareholders, and employees as we move forward. We will now open for questions.

Q&A Session

Operator: Certainly. 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 a follow-up until we all have a chance. For a question, after which we will answer additional questions from you as time permits. As a reminder, to ask a question, please press star 11 on your telephone. Our first question will be coming from Robert Brooks of Northland Capital Markets. Your line is open, Robert.

Robert Brooks: Hey. Good morning, guys. I wanted to ask you on where we are with the Ultra 3000s getting onto GE’s approved aftermarket vendors list. On your fourth quarter call earlier this summer, you had said that you did a final test in June, and the engineering team sent it to GE Legal, and it was sitting there. But all indications were that the service agreements were not going to be jeopardized if the Ultra 3000s are used. And so I just wanted to hear where that’s sitting or any new developments on that.

Gregory Peloquin: Yeah. Hi, Bobby. They update me every week. We actually talk to GE about other things, this included. So we’re in communication with them. Their engineering team has signed off on it, and the last communication, which was last week, was that it’s final signatures from legal. They’re still waiting on it. And it was promised to us here in the next week or two. That’s the status of it. Once we get that final signature from their legal team, we will send them a number of units. They’ll test them, mainly for safety, not for function, but for safety because their installers will be working with it. And so, once that’s done, they’ll approve it, and then along with that, not only are we pushing, if you will, GE, but also two of our largest owner-operators are also pushing it.

Because they have both TSAs and their own repair. So the short answer, which I just went long on, is we expect it to be signed in the next couple of weeks. They’ll do the audit of it for quality, safety. And we fully expect sign-off here in Q2 at some point.

Robert Brooks: Got it. And then the semi fab sales were up 52% year over year, which was great to see. But I just wanted to make sure I’m thinking about it right. Wasn’t Q1 last year we were at, like, a trough level for those sales? And then the follow-up is, would you expect that year-over-year growth rate to continue through your fiscal 2026 or maybe at the minimum, the nominal level of semi wafer fab sales in Q1 stay consistent through fiscal 2026?

Gregory Peloquin: Yeah. You’re correct, Bobby. Q1 of last year was the lowest quarter of the year for Lam. Although they recovered very well. And we don’t get a lot of visibility from them. But the most recent information that they’ve put in the portal looks like these larger numbers they’ve been talking about now, which seems like a year or two, we should start seeing strong, strong growth in Q3 and Q4 of our fiscal year. But we’ll kind of be at the same run rate here in Q1 and Q2. With large growth in Q3 and Q4 based on their forecast, which is a forecast.

Robert Brooks: Thank you.

Operator: And our next question will be coming from Anja Soderstrom of Sidoti. Your line is open.

Anja Soderstrom: Hi. Thank you for taking my questions. So I’m just curious where the wind orders you noted from several countries around the world. How meaningful were they, and how do they compare to the actual opportunity there?

Gregory Peloquin: Yeah. So we’ve launched it hard to produce this product globally with our customer base. It’s a smaller market than North America, but still a very strong market for us. We’ve been able to do a great job in introducing four new platforms, which will be more popular in Europe than GE, Nordex, Senvion, Suzlon, and SSB. We’ve done already in part of Q1 alpha and beta testing with customers in Australia, India, France, and Italy. And they’ve approved that, and we’ve already received orders in our Q1 from customers in those four countries. And we look at this every week. If I look at the document that we track, all the opportunities that we’re currently working on in terms of our teams worldwide, it’s getting up to two or three pages.

So it’s active. It’s just an education process for these customers that it’s available. And this product is available for their specific turbines. And then, of course, like we did with North America, you’ll have alpha testing, beta testing, and then final production. But I would say it’s not going as fast as we’d like. Nothing ever does. But we’re getting some good traction expanding this capability, if you will, outside of North America. Because as you know, 70% of our business is currently in North America, so it’s pretty much nothing but upside outside of North America.

Anja Soderstrom: Okay. Thank you. And what do you expect in terms of CapEx for the year given your expansions in LaFox and the Texas Center?

Robert Ben: So I’ll take that one, Anja. We’re estimating it’ll probably be in that $5 million range. So a little bit higher than last year, but last year was very low because there were some programs that were pushed into FY 2026. So, again, we’ll stick with that $4 to $5 million range.

Anja Soderstrom: Okay. Let me also add something. Yes.

Wendy Diddell: Real quick. On the REV Illinois program and, Greg, you can jump in here. The CapEx requirements themselves are not significant in this fiscal year. What we’re looking at is some equipment that will help improve our manufacturing efficiencies and position us for new opportunities primarily and particularly in the ESS solution. So what we’ll be looking at, the REV Illinois program allows us to account for people, in addition to CapEx, in addition to other R&D related expenses. And that’s where we’re focused on right now with making sure we’ve got the engineering resources we need, the program managers we need, so that when we get our facility built here in FY 2026, we’ll be ready to efficiently and effectively market that.

Gregory Peloquin: Yep. Yeah. I mean, this good example is the demo site. That all that development and goes towards the number that we’ve been to attain to get all the subsidies and rebates. And just one thing in the REV Illinois program. You know, we’re going to apply for every single subsidy and tax credit we can get with this green energy program. Luckily, the state of Illinois has even better than California, the most rebates and tax incentives for people doing wind, solar, energy storage, green energy itself. So we found out about this from some local contacts. We applied. You have four years to do it. And it’s approximately $8 million in total investment and a number of headcount. But we have four years to do it. So we’re not doing things to get that credit. We’re doing things to grow the business and increase shareholders’ value. But our estimate is we’ll hit those numbers very easily, so we might as well take advantage of it.

Anja Soderstrom: Okay. Great. Thank you. That was all for me.

Operator: Thanks, Anja. And our next question will be coming from Brendan Kinney, Private Investor.

Brendan Kinney: Hello. Can you hear me?

Robert Ben: Yes. I can hear you, Brendan.

Brendan Kinney: Hi. So just one quick question. The operating income, you know, it was mainly due to a nonrecurring gain of $900,000. Could you just fill in a bit more detail about what that was?

Robert Ben: Hi, Brendan. This is Robert Ben. First of all, the operating income, as I stated in my remarks, was $1 million, and that did not include the nonrecurring gain, that’s below in other income. Just to clarify. So operating income for the quarter more than tripled from last year’s first quarter. But to specifically address your question on the $900,000 nonrecurring gain, you know, as I stated in my remarks, that’s from a confidential contractual settlement. So, unfortunately, I’m not really allowed to say much about it other than that.

Brendan Kinney: Okay. I missed that. Yeah. Thank you.

Operator: Thank you. Thanks, Brendan. Star 11 on your telephone and wait for your name to be announced. Our next question will be coming from Chip Rui of Roe Asset Management. Your line is open.

Chip Rui: Good morning, guys. Good quarter. I have three questions, so maybe I’ll just lay them out. And you can divvy them up. First, I think the when do your comment on the repower initiatives and the Big Beautiful Bill. Could you expand on that? I think the sentiment has been kind of misplaced on you guys around wind anyway because you’re not OE. You’re pretty much all aftermarket. So now that there’s a potential positive from the administration on repowering, I just like to dig into that a little bit more. Secondly, the operating leverage looked great. On the operating income, can you just give us some thoughts on how the rest of the year will play out? Can we continue to see muted expense growth that would contribute to good leverage to the year?

And last, maybe, Edward, I’d like the comments on kind of I mean, clearly, the semi business and PMT is a really positive thing to hear. The outlook there. But maybe dig into the other side, the legacy RF business seems like it’s perking up too, so maybe some details there.

Gregory Peloquin: Thanks, Chip. Hey. I’ll Chip, I’ll just talk about the first question you had. It’s a great question. So and you hit it on the head. You understand it very well that almost all of our business other than Suzlon is aftermarket. And so with this administration kind of removing a lot of the subsidies you get for new turbines, kind of like your old car in college, can’t afford a new one, so you refurbish and fix up your current one. What’s kind of going on, and the term in the industry is called repowering. Where they, in some cases, drop the turbine to the ground and then replace everything they can, and then they’ll have a turbine that’s good for another ten to fifteen years. At that time, instead of putting lead acid batteries back into the turbines, many of our customers and some of those larger orders we got in terms of our large, you know, get a 1.25 book to bill in FY 2025.

With people ordering parts for this repowering program. So they will put in our pitch energy modules, which will last up to fifteen years instead of the lead acid batteries. And so that decision by the government, which is getting a lot of press, actually, in a roundabout way, supports us and hopefully will expedite some of the large orders we have on our books in terms of pulling them in over the next two to three quarters. The last thing with that and the Big Beautiful Bill, Wendy’s talking about if they get it done by the end of this calendar year, they can put some of that money to the side or keep the current rebates and tax credits that they have now. So we’re working a lot of our owner-operators to get their forecast between now and the end of the year.

So we again, we grew 23% in FY 2025. Fully expect based on the forecast and some of these other things that GES will grow double digits in FY 2026.

Wendy Diddell: And then, I guess, operating leverage. I’ll take that one. Okay. So in terms of leveraging and operating expenses, you know, I’m looking at our forecast for the full year. It’ll be up just a little bit, not a lot over FY 2025. As we invest in some of the programs that Greg has mentioned, you know, in terms of additional engineers, additional people outside the US focusing on green energy growth. But, Chip, one of the things we do well as a company is really managing our SG&A level and keeping that increase under control. So I would not anticipate a significant increase over FY 2025. Does that answer your question?

Chip Rui: Yes. And then just thoughts on the RF side.

Edward Richardson: Right. Well, our RF tube business still remains about $85 million. We’re going through a period where our largest supplier is actually going to exit the business over the next three to five years. And a lot of that equipment and technology we own, so we’re in the process of trying to determine if we move it back here or work with other tube manufacturers around the world. But it’s put us in a position where we built up our inventory very substantially. On the other hand, that inventory tubes are like good or fine wine. You know, they under vacuum, and they last forever. So we have no issue as far as obsolescence on the tubes, but our difficulty at this point is finding other manufacturers or making a decision to bring some of that manufacturing back here.

But what you’ll see over the next three or four years is our inventory go down dramatically as far as that’s concerned. But the business stays extremely profitable, and we’re pleased to be pretty much sole source on tubes around the world.

Chip Rui: Okay. That’s great. Did you see I thought you said you saw a pickup in the kind of that core business in the quarter and some more positive signs.

Edward Richardson: In the tube business, I think it’s just about level. What we are seeing is a pickup in the semis to have equipment manufacturing business. You know, we follow Lam’s quarterly vendor meetings and listen to them, and they’re talking about a very positive increase in their business going forward. In the best year, we did about $40 million with Lam and people in that business. And I think right now, we’re running in the low twenties, Wendy, somewhere. So we see an opportunity to grow substantially in that business going forward.

Gregory Peloquin: And then on the RF solid-state side, if you bring to that because that was, you know, business that we were in before, that also grew. And we’re seeing a large uptick in military defense, RF communications, drones, and then, of course, SATCOM, globally, to get 5G to all these remote areas. That’s the business that picked up, and that’s where the growth was on the solid-state side.

Chip Rui: Okay. That’s what I was asking. Thanks for the clarification. And that sounds like that sector, the defense side, it’s pretty hot across the board. Do you see kind of accelerating participation into that end market?

Gregory Peloquin: Yeah. And it’s, you know, because of this global infrastructure that Edward put in place decades ago, it really is a benefit to a company like us. We’re seeing a lot of the drone manufacturers are in Europe, and we have a great team there. But, you know, it’s military too, but what we’re seeing also, you know, urban development, homeland security, disaster management, forest fires. I mean, drone technology is expanding very, very fast, and we have some of the, if not the best, technology partners like 3R Wave that have great products for that. So we’re participating in it, and that’s where the growth is on the solid-state RF and microwave side.

Chip Rui: Okay. Thank you.

Operator: And I would now like to turn the conference back to Edward Richardson for closing remarks.

Edward Richardson: Well, we want to thank you very much for following our progress and growth. We’re really pleased with the performance of the company, and if you have further questions, please feel free to call us at any time. Thank you very much.

Operator: And this concludes today’s conference call. Thank you for participating. You may now disconnect.