管理層發言
Good day, and thank you for standing by. Welcome to the Richardson Electronics Earnings Call for the Second Quarter Fiscal Year 2026. Please be advised that today's call is being recorded. I would now like to hand it over to your speaker, Ed Richardson, CEO. Please go ahead.
Good morning, and thank you all for joining Richardson Electronics conference call for the second quarter of fiscal year 2026. We appreciate your continued support and interest in Richardson Electronics. Joining me today are Bob Ben, Chief Financial Officer; Wendy Diddell, Chief Operating Officer; Greg Peloquin, General Manager of our Power & Microwave Technologies and Green Energy Solutions Group; and Jens Ruppert, General Manager of Canvys. As a reminder, this call is being recorded and will be available for playback. I would also like to remind you that we're making forward-looking statements that 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. I'm pleased to report that Richardson Electronics has achieved 6 consecutive quarters of year-over-year growth, underscoring the progress we're making in executing our multiyear strategy. This growth reflects our continued repositioning toward higher growth end markets and the expanding contribution from our engineered solutions. Equally important, these results are driven by the strength of our people. While investors are familiar with our senior leadership team, we've been intentionally investing across the organization to build depth, diversity, and technical expertise throughout our ranks. I believe we have assembled one of the strongest and most motivated teams in the company's history, positioning Richardson Electronics for long-term sustainable value creation. Looking at our Q2 FY '26 results. Total sales were $52.3 million, up from $49.5 million in Q2 of last year driven by sales growth in our Green Energy and Canvys businesses. Operating income improved to $132,000 versus a loss of $667,000 last year. Within our GES business unit, we're very pleased with the year-over-year growth, as well as sequential quarter-over-quarter growth. Both onshore wind and EV sales were up over the prior year in the Green Energy segment, reflecting higher sales from existing customers as well as sales from new products and an expanded customer base. Canvys revenue exceeded the prior year by 28% on improved demand from our medical OEMs. It's important to note that the sales growth was partially offset by the inclusion of our health care business in both the current year and the prior quarters. As a reminder, we sold the majority of our health care business in Q3 of FY '25, so this will impact our year-over-year comparisons through the end of Q3 this year. We also remain focused on managing expenses and improving inventory turns. Our cash position remains strong at $33.1 million, providing us with flexibility to support both our ongoing operations and strategic growth opportunities. I'll now turn the call over to Bob Ben, our Chief Financial Officer, who will provide a detailed review of our second quarter results and capital positions. Following Bob's remarks, Greg and Jens will provide updates on our business units and then Wendy will follow up with the progress we are making executing again on our multiyear growth strategies.
Thank you, Ed, and good morning. I will review our financial results for our second quarter and first 6 months of fiscal year 2026, followed by a review of our cash position. Consolidated net sales increased 5.7% to $52.3 million compared to net sales of $49.5 million in the prior year second quarter. When excluding health care, for which the majority of assets were sold in January 2025, net sales increased by 9.0%. Please note that health care results, including prior periods, are consolidated into the PMT segment beginning in fiscal 2026. This was our sixth consecutive quarterly year-over-year increase in sales. Second quarter net sales growth was led by a 39.0% increase in GES sales, driven by an increase in power management products. Canvys sales increased 28.1%, which primarily reflected higher sales in North America. Sales for PMT were 4.0% below the second quarter of fiscal 2025. Excluding health care, PMT sales were approximately flat. Consolidated gross margin for the second quarter was 30.8% of net sales compared to 31.0% during the second quarter of fiscal 2025. The slight decrease in consolidated gross margin was primarily due to lower margin in PMT and GES, partially offset by higher margin in Canvys. Operating expenses as a percentage of net sales improved to 30.5% for the second quarter of fiscal 2026 compared to 32.3% in the second quarter of fiscal 2025. Operating income improved to $0.1 million for the second quarter of fiscal 2026 from an operating loss of $0.7 million in the prior year second quarter. Net loss was $0.1 million for the second quarter of fiscal 2026 compared to $0.8 million in the second quarter of fiscal 2025. Net loss per common share diluted was $0.01 in the second quarter of fiscal 2026 compared to $0.05 in the second quarter of fiscal 2025. EBITDA for the second quarter of fiscal 2026 improved to $0.7 million versus breakeven in the prior year second 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 second quarter fiscal year 2026 press release that was issued yesterday after the market closed. Turning to a review of the results for the first 6 months of fiscal year 2026. Net sales were $106.9 million, an increase of $3.6 million from $103.2 million in the first 6 months of fiscal year 2025, which reflected higher sales across our business segments, except for PMT. When excluding health care, consolidated net sales increased by 7.8% and PMT net sales increased by 5.2%. Gross margin was 30.9% of net sales, which was a slight increase from the first 6 months of fiscal 2025. As a percentage of net sales, operating expenses for the first 6 months of the fiscal year improved to 29.8% from 31.1% for the first 6 months of the prior fiscal year. Operating income for the first 6 months of fiscal year 2026 was $1.1 million as compared to an operating loss of $0.4 million for the first 6 months of fiscal year 2025. The company reported net income of $1.8 million or $0.12 per diluted common share for the first 6 months of fiscal year 2026 versus a net loss of $0.2 million or $0.01 per diluted common share for the first 6 months of fiscal year 2025. EBITDA for the first 6 months of fiscal 2026 was $4.0 million versus $1.7 million in the prior year's first 6 months. Turning to a review of our cash position. Cash and cash equivalents at the end of the second quarter of fiscal 2026 were $33.1 million compared to $35.7 million at the end of the first quarter of fiscal 2026. Capital expenditures of $1.6 million in the second quarter of fiscal 2026 were primarily related to our manufacturing business, facilities improvements, and IT systems versus $0.5 million in the second quarter of fiscal year 2025. We paid $0.9 million in the second 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 the third quarter of fiscal 2026. As of the end of the second quarter of fiscal 2026, the company had no outstanding debt on its revolving line of credit with PNC Bank. Now I will turn the call over to Greg, who will provide more details for our PMT and GES business groups.
Thank you, Bob, and good morning, everyone. GES and PMT are key components of our multiyear growth plan. Coming out of FY '25, we had strong backlog. We launched several new products, expanded our customer base, and advanced multiple development programs from beta testing to preproduction. This momentum continued into Q1 and into Q2. Building on this progress in Q2 of fiscal year 2026, GES grew to $8.3 million, a 39% increase over the prior year and a 14% increase over this year's first quarter. As we continue to see the amazing adoption of our Pitch Energy Modules for various wind turbine platforms with owner operators and other related power management products throughout the world. PMT sales were $35.2 million in the quarter, a 4% decrease over the prior year. This reflects a slight slowdown in the electronic device MRO business, offset by growth in the RF and Wireless Components business unit. Our GES strategy centered on power management applications. We've rapidly designed multiple products, secured patents and built a strong base of customers and partners. Our success is evident in our growing sales pipeline as we capitalize on numerous growth opportunities to support new power management requirements and significant energy transformation opportunities. Our Pitch Energy Modules and related wind energy products led GES quarter-over-quarter growth. We continue to gain market share by developing new products and solutions that are accepted by our customers, and the team is doing a great job expanding this program globally. We serve dozens of wind turbine owners and operators, including exclusive partnerships with the top four owner operators of GE wind turbines such as RWE, Invenergy, Enel, and NextEra. We also saw growth from our new multi-brand PEM turbine platforms. We continue to grow this program internationally, expanding into Europe and Asia with new products for other turbine platforms such as Suzlon, Senvion, Nordex, and SSB. We have now received orders from customers in Brazil, Australia, India, France, and Italy in addition to our strong rollout in North America. We are entering the back half of FY '26 with solid momentum. We recently added key technology partners such as KEBA, Goshen, and Wulong, who play critical roles in both wind power management and energy storage systems. 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 wind turbine and power management engineers in North America. Expanding our design team to accelerate and enhance design cycles prior to transitioning work to our world-class manufacturing and test group in LaFox, Illinois. This is one of our most critical strategic priorities underway. We expect to have the Sweetwater design center fully operational in Q3 of FY '26. We are also adding key people from the industry to help expedite growth. We are on schedule to complete our Illinois-based demo center in Q4 FY '26. This demo site will allow us to showcase our active BES solutions to potential customers. We are currently collaborating with numerous customers on BES systems that we can support with our current technology partners. In fact, we booked our first system at the end of December. Our GES products and technology partners support our niche product strategies as it appears federal subsidies will be harder to get under the current administration. Looking at our new ESS project and strategies, we are focused on sales in key states, and we'll continue to offer large subsidies such as Illinois, Massachusetts, and California. We are also expediting our efforts to expand global market penetration of our power management products for Green Energy applications focusing on Europe and Asia. Currently, about 70% of our GES sales are in North America. Turning to Power & Microwave Technologies Group or PMT, which includes our Electron Device Group, EDG, and our legacy tube semiconductor wafer fab equipment business and the RF and Microwave Components Group, or PMG. In the quarter, we did see some sales growth, led by increased demand in 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. While semi fab sales were flat in the quarter, we are encouraged by our customers' forecast indicating growth for the rest of the fiscal year. Looking ahead, we are excited about the strategic initiatives across PMT and GES, including our ESS program, global expansion of our key products, and new technology partnerships. While we are navigating a higher degree of uncertainty associated with the impact of tariffs and market conditions, we are pursuing opportunities that may come from these disruptions. We are investing in infrastructure, expanding our design and field engineering teams, and enhancing our in-house design and manufacturing capabilities. To support growing demand and innovation, our engineering teams continue to identify new customers and opportunities. Our global capabilities and global go-to-market strategy set us apart from our competition in power management, RF and microwave and green energy markets. We have developed a business model that combines legacy products with new technology partners and solutions allowing our growth strategy to deliver engineered solutions to a global customer base. This model differentiates us from our competition. We are working on these initiatives alongside marketing, our manufacturing design services to companies who need partners in the U.S. to manufacture, test and support products currently made in other countries. We acknowledge there are a lot of moving parts but we have successfully used our global resources, infrastructure and capabilities to mitigate the effect of these situations like this in the past. So 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 partnerships that fill technology gaps. We have a proven strategy of identifying opportunities in the multibillion-dollar markets we serve. As a result, we continue to feel FY '26 will be another growth year for both PMT and GES. And with that, I'll turn it over to Jens to discuss Canvys.
Thanks, Greg, and good morning, everyone. Canvys 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. Canvys reported revenues of $8.8 million in the second quarter of fiscal year 2026, an increase of 28.1% from $6.8 million in the same quarter of the previous year. Our gross margin as a percentage of net sales increased to 32.6% from 31.7% in the second quarter of fiscal '25, primarily due to product mix. The backlog at the end of the second quarter of fiscal 2026 remained strong at $38.0 million, providing a robust foundation for future business. During this most recent quarter, Canvys 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 (HMI) 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, billing, and packaging equipment. Our initiatives focus on increasing Canvys' 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 by 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 focused 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.
Thank you, Jens, and good morning, everyone. While the remainder of our health care business, including the manufacture and repair of certain CT tubes is included in PMT, I want to continue providing key highlights as we go through this transition period over the remaining quarters of FY '26. As a reminder, we sell CT tubes exclusively to DirectMed as part of the January 2025 sale and distribution agreements. Over the last quarter, we continued to make excellent progress finishing production of our ALTA tubes. We should wrap this up by the end of the third quarter of this fiscal year. We've also made good strides during the recent quarter repairing Siemens Straton Z tubes. We are preparing to launch the repaired Siemens MX series as early as the fourth quarter of this fiscal year. Given the health care transaction occurred in Q3 FY '25, Q2 and Q3 of FY '26 will continue to show unfavorable comparisons. However, the combination of completing the production of the ALTA tubes and expanding our Siemens program for DirectMed will result in an improvement to our bottom line beginning in FY '27. Switching to an overview of our multiyear strategy. We continue to focus on accelerating growth and improving efficiency. In the second quarter, we had significant growth in our Green Energy business unit, reflecting our ongoing investment in this sector and the benefit of new products generating revenue. Today, we are shipping our Pitch Energy Modules for nearly all GE manufactured turbines to an expanded customer and geographic mix. There are several additional products in development and testing that should start contributing to revenue growth in calendar year 2027. We also continue to make progress developing a world-class battery energy storage design center at our LaFox facility. As we've mentioned before, the demand for battery energy storage continues to accelerate, and our turnkey solutions and technology partners position us to capitalize on that growth. In the quarter, we added several projects to our pipeline, including one that closed at the end of December. Our made in America activities are also generating interest. We are utilizing existing customer and supplier relationships to promote our engineering and manufacturing capabilities here in the U.S. We've reached the quoting and prototype stage on several programs, primarily taking advantage of our PCB facility as well as our battery knowledge. This isn't a fast process but the upside of new programs will play a key role in fully utilizing our factory and resources. Finally, we are expecting stronger demand for our engineered solutions within the semiconductor wafer fab equipment market, well into calendar year 2026 and beyond. This growth is tied to the ongoing benefit of AI on equipment demand throughout the world. We are well positioned to benefit from growth in memory-related applications. This growth takes advantage of our existing resources and manufacturing facilities as well. We remain focused on efficiency and cash generation. The period of elevated inventory investment relating to a single critical supplier is nearing completion as that supplier prepares to exit production of powergrid tubes. We expect final inventory receipts of approximately EUR 1.5 million in the first quarter of calendar year 2026, after which inventory levels should normalize and cash conversion improve. This inventory provides product coverage through 2030. We have identified alternative supply sources with sufficient time to ensure continuity, quality, and fulfillment of customer demand. Outside this area of growth, we continue to focus on controlling inventory and improving turns. We have also initiated a disciplined cost-controlled effort to explore the benefits of AI by creating an enterprise-wide AI steering committee. This effort is expected to create a road map focused on practical high ROI applications across our global operations. The goal is to drive efficiencies, improve decision-making, and reduce manual workload while maintaining strong governance around security, data privacy, and responsible AI use. Importantly, this initiative is designed to leverage our internal teams with clear milestones and tight scope controls, ensuring we capture meaningful benefits without significant incremental cost. Longer term, we remain focused on driving growth through a combination of organic initiatives and a disciplined approach to acquisitions. We continue to evaluate opportunities thoughtfully with an emphasis on leveraging our existing capabilities and global infrastructure to support sustainable growth. We believe our current strategic initiatives position us well to drive revenue and profitability over time while we remain patient and selective as we consider potential longer-term acquisition opportunities. I'll now turn the call back over to Ed.
Thanks, Wendy. In closing, our results this quarter demonstrate the strength of our strategy and the resilience of our business model. It also reflects the talent of this management team to adjust to constantly changing market conditions. By sharpening our focus on repeatable sales, driving strong cash flow, and building on our scale 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 the confidence in our ability to deliver sustainable value for our shareholders, customers, and employees as we move forward. We'll now open the call for questions.
分析師問答
Our first question will come from Bobby Brooks from Northland.
You mentioned how overall GES backlog declined, but that core backlog grew. Could you just discuss what would be considered core backlog versus noncore?
Sure, Bobby. This is Greg. Sales were up 39%, and the backlog decreased by $57,000, which isn’t too bad. Growing at 39% while only seeing a minor decrease in backlog is a positive sign. When I mention core backlog, I’m referring to the products we've discussed, like the Pitch Energy Modules, along with other products. We also have a smaller group of customers purchasing components for Green Energy products, which we categorize as noncore, and that book-to-bill declined. However, focusing on the core business, which makes up 95% of our operations, the book-to-bill ratio was 1.10 with a 39% growth, significantly exceeding our expectations. We are very excited about the core business and the products driving that growth.
Got it. That's helpful and really good to hear. So what's the right way to think about the timing of orders turning into backlog and then revenues within GES? Are there specific product lines that can be booked and shipped during the quarter? Could that have been a factor in the strong GES sales this quarter?
Exactly, Bobby. So as these products come out, they go from alpha beta to production, and then once that happens, you see we have new customers every quarter, new sales. And so that business is what led to the growth. And as you know, we're expanding that model, which is about 85% North America, expanding it into Europe. So we had wins in Europe that we booked and then wins in Asia that we booked. So that core business that we talk about that's growing quite heavily, and we continue to get new customers and backlog. So we're starting to understand what the annual usage is. And so we're trying to get ahead of the game and build products for stock. It's a guessing game. They do give us a forecast, but they're terrible forecasts. So in Q2, we did ship a lot of product from stock. So that's a book-to-bill of 1. That's flat bookings or backlog, and that's where you saw it. So the team has done a great job working with these key customers, trying to develop their annual needs. And then when they come in for 1,000 units, just kind of out of the blue Bobby, I know a couple of those were able to ship from stock. So that's how it's working. And we're continuing to try to make sure we have inventories so we can ship from stock. But in a very positive way, we're seeing higher demand than what we're building.
Our next question will come from the line of Anja Soderstrom from Sidoti.
I'm curious about the GE approval list for the ULTRA1000. What kind of opportunity could that present?
Say it again, Anja. For the what product?
The ULTRA1000 for the GE approval list.
I think Anja is asking about the GE, where do we stand with GE getting approval for the ULTRA3000.
We have received GE approval and our product is now featured on their website. This initiative is driven by their customers, specifically NextEra and Invenergy, who are advocating for GE because they are using GE services for maintenance at several locations. We are prepared to send some product to GE for them to conduct tests aimed at enhancing safety and performance in their turbines, which has already been approved. We have negotiated an NDA which has been signed and returned to them. However, these companies are not waiting around; we have booked significant business as they have opted to handle installations of the Ultra3000s themselves, rather than relying on GE services that we've been using for several years. Currently, I don’t see any slowdown; in fact, we have sufficient business and potential upside. The cost savings and issues resolved by this product are compelling enough that I believe they won't delay. While we're providing support, the momentum is clearly being driven by GE's customers. We plan to send the products this quarter for testing, after which their service group will proceed with installations. It's noteworthy that some owners are already taking the initiative to install the products themselves or outsource the installation.
Okay. That was helpful. And then what's kind of margin impact does the medical have. What kind of opportunity do you see there as you conclude that supply agreement?
Okay. So this is Wendy. Year-to-date, the overall hit to the gross margin in PMT has been almost negligible. It's about a 0% gross margin, so we're not experiencing a huge hit there. It's the addition of the SG&A. And on a year-to-date basis, while we're doing better than we anticipated with that, we still are losing money. As we mentioned in the call, we anticipate finishing up the ALTA tube production in the third quarter. And when we conclude that, and we're focusing then strictly on the repair of the Siemens tubes. We expect that to turn to a profitable bottom line contribution. So I'm estimating, we're estimating at this point that, that will begin in Q1 of FY '27, but we're going to do everything we can to pull that into Q4.
And then you're sitting on some cash, and we expect cash flow to improve as you are finishing building up the inventory for the powergrid tubes. What do you plan to do with all the cash?
I’ll start, and then Ed and Bob can add their thoughts. First, it's important to note that our cash is distributed globally, with approximately 70% located outside the United States in various legal entities. That cash needs to remain in those locations. Although $33 million is a significant figure and we aim to increase it, it’s crucial to remember that some of it is not in the U.S. We will keep focusing on growth initiatives, primarily in the alternative or green energy sector. As Greg highlighted, we are enhancing our Sweetwater, Texas facility and improving our new product development cycle. We are also considering additional sales and engineering resources to support that growth. Our strategy is to reserve the cash we have in the U.S. for these types of investments. We remain open to small acquisitions that would integrate easily, mainly in alternative or power management sectors, particularly those that can add unique engineering or exclusive products to our portfolio. Those are the areas where we're prioritizing our cash. Ed and Bob might want to elaborate on this.
I can add to that. We have cash on hand that we're not using daily. We have invested in various money markets, yielding an average of about 4% right now, with just under $10 million of our total cash in those investments. This appears on the income statement as investment income, listed in the other income section.
And then a last question in terms of the semiconductor. What do you see there? And do you still expect that to pick up in the second half of '26?
In the semi fab equipment market. Is that your question Anja?
Yes.
Yes, absolutely. From all of our customers in that market segment, they are anticipating solid growth through the rest of calendar year 2026 and beyond. And we're starting to see some of that in our more near-term forecast.
Our next question will come from the line of Chip Rui from Rui Asset Management.
I want to follow up on the semi question that was just asked. I mean it seems memory has gone from dead on arrival to the hottest thing out there. I know you've not exclusively memory on your both sides. But has there been a cadence shift with what your customers have talked about? I know last quarter, Ed said you would finally kind of work through kind of end customer inventory. Can you just give us a little bit more visibility on perhaps a cyclical recovery there? It seems you're still a little low from a revenue and earnings point of view, but historically a large contributor for the company. So kind of when you say there's a better outlook, is it inflected positively? Or are you still hoping it will inflect positively? A little more color on that would be great.
So I'll start on that, Chip. So as I mentioned, we're starting to see stronger forecast for our Q3 and Q4. Bear in mind that the forecasting is not always the best and it tends to bounce around a lot as we've been discussing really for the last couple of years. But we do see, again, across multiple customers within that channel, their input to us is get ready. We are ready. We have the resources. We have the space. It's not going to cost us a lot of money in terms of realizing upside. I also want to point out that on a year-to-date basis, Q1, Q2, we're still up considerably over prior year's first two quarters. So we are cautiously to more than cautiously optimistic about Q3 and Q4, and we're ready. So I don't know if that answers your question, maybe you could follow up if you have anything more you want to know.
No, that's helpful. I know it's up a little bit, but it seems like the industry is gearing up for a significant upcycle. Even though your numbers are up, they're still below where they were a couple of years ago. Hopefully, there's some upside. Regarding the buyback, I've never pressured you about it. I understand your global cash situation, but everyone on this call was optimistic this morning. The energy sector looks promising, it seems like semiconductors are improving, and there's new product development. It appears that the enterprise is showing positive growth on several fronts, yet your stock is once again down, and analysts are focused on backlog and sequential margins. I know you don't have a lot of cash, but a few million dollars could represent a couple of percent of your market cap. You also have an undrawn revolver in the U.S. My recommendation is to seize the moment. If there's a time to buy stock, it's when prices are down and when people aren't seeing the vision you do. If what you're saying becomes reality, this is an incredible opportunity. I'll leave that as a comment.
Thanks, Chip. We appreciate the input.
Our next question will come as a follow-up from Bobby Brooks from Northland Capital.
Could we maybe just discuss the growth initiatives that you guys launched a couple of quarters ago and kind of how those are progressing in a little bit more detail? Just curious to hear more on that.
Are you referring specifically to the made in America program or specific products under Green Energy?
Could you provide an overview of any growth initiatives that stemmed from the cash generated by the health care business?
I can provide some insights into the PMG, PMT, and GES businesses. As you know, our growth initiatives included expanding internationally, implementing our energy storage system program, and continually adding new products. These efforts have been successful over the last two quarters. Regarding global expansion, we've secured and shipped orders to Asia and Europe. We’re also planning to launch two new products in Q2 from our Sweetwater design center, which are currently in beta testing with a few large owner-operators. We expect to start receiving bookings for these products. On the energy storage system front, we have developed partnerships and booked our first order in December with the City of Goleta, California, for their water waste treatment facility, for which we will also provide solar panels. This experience has reinforced our strategy of targeting utility-scale projects, specifically the comparatively smaller 2-megawatt systems. We have additional projects we are quoting, which are quite detailed. We are very optimistic about our strategy and technology partnerships, as our Engineered Solutions business is also growing with new product additions. In Illinois, we believe that once our demo center is operational, it will enable people to understand how our systems work and the incentives available from the state, which are among the best in the nation. These are our main initiatives, and we are seeing progress. I tend to be impatient, but we are making steady strides each month, with indications that we are on the right path with our strategy, technology partners, and niche focus in these large market segments.
And Bobby, I would just add to that, go ahead.
No, you go. You go.
I wanted to add some insights on our investment areas. You'll notice that our SG&A remains relatively unchanged, and our headcount is also stable. As we experience normal turnover, we're reallocating resources to the high-growth areas that Greg mentioned earlier. Therefore, no one should anticipate a significant increase in SG&A due to these investments. We've discussed our ongoing expenditure on the Thales inventory, which is expected to increase. That's one area where we are continuing to invest. Regarding CapEx, Bob mentioned necessary improvements to our facilities and IT. We have also added a second PCB layout facility that aligns well with our made in America initiative launched a few quarters ago. Overall, you can expect us to shift resources around while rationalizing and improving efficiency with the talent and assets we already possess.
That's great to hear. I would like some clarification, Greg. In your opening remarks, you mentioned some positive factors in the PMT business as well as some challenges that arose during the quarter. Could you elaborate on that a bit more? I might have missed something.
I don't believe there are any significant tailwinds in PMT. We clearly understand the semiconductor market and have experienced strong revenue and bookings in the RF and wireless sectors. Previously, that group was valued at $0.5 billion before we sold it. We are well-acquainted with that market and maintain excellent relationships, along with some of the top RF and wireless suppliers globally. We're also noticing positive developments this quarter in the SATCOM and drone markets, which has contributed to PMT's sales. Although it's a lower-margin business focused on demand creation, our technology partners supply the components. This could represent a tailwind reflecting the growth we observed in PMT and the potential for future growth. By the way, I'm at the Mayo Clinic right now, as I need to meet with my surgeon. The last time I was here, three and a half years ago for hip replacement surgery, I received a $10 million order from NextEra just thirty minutes post-surgery, so I might stick around this weekend to see if I can secure another deal.
Thanks, Greg.
Our next question will come from the line of Ross Taylor from ARS Investment Partners.
I have a couple of quick questions. First, regarding the semi-cap equipment space, have you developed a prebuilt product for that, or is it something you are still working on or have in your finished goods inventory? It seems you've been preparing for this for some time, but there appears to be a delay in the pull-through.
Yes, we do that where we can. We've previously described the business as having a very high mix and low volume. It's not like the ULTRA PEMs or the ULTRA3000s where we can produce them all in the same way. We don't maintain the kind of inventory that you might expect, with thousands ready to go. However, we have a good understanding of the demand and a solid track record. We are certainly doing everything possible to ensure that when orders come in, they are shipped almost immediately. So, it's a bit of a mixed answer for you.
Okay. Historically, this has been your highest margin business, and I would assume that if you return to more aggressive run rates, that margin should also return.
It's a good business for us.
Can you provide more details about the battery storage opportunities? What kind of scale and timeline should we anticipate in this area? It appears to be a significant sector, especially with the rise of AI data centers and other factors related to the grid.
So Greg just dropped off, Ross, that would be an area for him to address. But what we can tell you is that his list of opportunities continues to grow. They range right now in size, magnitude anywhere between maybe $0.5 million on the small end to a couple of million or more on the large end. He is focused and the team is focused heavily in the industrial and commercial market, more of the let's look at it as kind of Tier 2, not the data AI centers per se. Those might be a little bit bigger than what we're planning to build. But it's an area where we've seen a lot of strong interest, particularly in the states that Greg mentioned where the states are still providing a lot of incentives. But I don't think anybody can pick up anything and read anything without seeing the growth in energy storage requirements. So we fully plan to take advantage of that. And we'll try to bring some more color to that in the next call.
And do you think, philosophically, that one of the challenges this company has faced is its historical focus on project-based business? Do you see the opportunities we’re discussing evolving into consistent run rate businesses that would lead to a more stable annual flow in both revenue and profit?
I think you can already see that. It's definitely evident in EDG. We've discussed this before, and I believe you're noticing it in the green energy sector, particularly with wind. I expect that growth to continue as we expand both our customer base and the geographic areas we serve. I refer to these as essential components of our business. I appreciate them because, as you mentioned, they occur regularly. Some aspects, like the EV rail and the starter modules, will contribute to a more consistent revenue stream. However, we are always focused on developing products that can appeal to a wider market, rather than just one customer or one specific program.
And obviously, success there would be, I think, important. It would take away a lot of the volatility in earnings. And I will offer my comment on buyback. I think my position on it is well known. It's been voiced many times on these calls in the past. What I would say is, I can't believe that your Board doesn't think this company is worth substantially more than book value and you're currently trading at or under book with a substantial 20% of that being cash here or overseas? And so I know what I'd be saying if I sat on your Board, I'd be arguing that this company is worth a lot more than book, and you should be quite comfortable buying it back at under and even around book. So that's coming from, I think, from a long-term shareholder, but someone who really would love to see you guys start to actually become a little more proactive. Don't be so afraid of a tiny little level of debt. So I support the earlier comment that even going into your revolver to buy back $4 million or $5 million worth of stock would be, I think, greatly appreciated by the market and would be reflected in the share price.
Thanks, Porter. We appreciate your perspective.
Our last question will come from Brett Davidson, a private investor.
I realize Greg has dropped off the line, but I'm hoping somebody can provide some level of update on the electric locomotive product lines and the manufactured diamond product lines.
All right. I'll start with that. So let's take the latter one first on the diamond. What we've seen there in that market, and I think, again, everybody has read about is that market became very quickly saturated, oversaturated the synthetic diamond market. And as a result of that, we've seen a slowdown in the demand for those magnetrons that are used in the equipment that manufactures the diamond. When Greg referred earlier to some of the other elements of Green Energy Solution being down, that's one of them. So in that area, it's still out there. We're still selling them. It's just again, an overcapacity of equipment already on the market and certainly an overcapacity of the synthetic diamonds. All right, in terms of the EV rail market, I think Progress Rail recently put out some of its own press that they have recently shipped 2 of the large trains to Australia. So we're pleased to see that. You may recall in FY '23, we shipped a significant amount of batteries that are used in those trains. So we're going to sit back on the sidelines and see how those 2 trains perform in Australia and what that means for the future. On a more steady cadence basis, as I just referred to in my answer to Ross Taylor, is that we are now shipping on a regular run rate, the starter modules, and we expect to see some upside there. So in general, I would say that the EV rail market certainly is favoring more of a hybrid approach. This is outside of Richardson. This is the general market. More of a hybrid approach, but our starter modules, they are used in any train, whether it's diesel, electric or hybrid. So we remain optimistic about growth in that segment of the business as well.
Thank you. And I'm not showing any further questions in the queue. I would now like to turn the call back over to Ed Richardson for closing remarks.
Thanks, Victor. Well, thanks again for joining us today and for your questions during Q&A. We look forward to discussing our performance with you in April. And until then, please don't hesitate to call us at any time. Thank you very much.
Thank you for your participation in today's conference. This does conclude the program. You may now disconnect. Everyone, have a great day.