Chip Rui

Chip Rui of Rui Asset Management asked for an expansion on the impact of repower initiatives and the "Big Beautiful Bill" on the wind business, noting the company's aftermarket focus. He also inquired about the outlook for operating leverage and muted expense growth for the remainder of the year. Finally, he asked for details on the reported pickup in the legacy RF business.

Answer

Greg Peloquin, General Manager of Power and Microwave Technologies Group, explained that government decisions to remove subsidies for new turbines are driving repowering efforts, which benefit the company's aftermarket pitch energy modules. He anticipates double-digit growth for GES in FY 2026 due to these trends. Wendy Diddell, Chief Operating Officer, stated that operating expenses for the full year are expected to be up only slightly over FY 2025, as the company continues to manage SG&A levels effectively while investing in growth programs. Ed Richardson, CEO, clarified that the RF tube business remains stable and profitable, with the company managing inventory as a major supplier exits the market. Greg Peloquin added that growth in the solid-state RF side is driven by increased demand in military, defense, RF communications, drones, and SATCOM applications.

Chip Rui of Rui Asset Management asked for an expansion on the impact of repower initiatives and the 'Big Beautiful Bill' on Richardson Electronics' aftermarket wind business. Rui also inquired about the outlook for operating leverage and whether muted expense growth is expected to continue through the rest of the year. Finally, he asked for more details on the positive outlook for the semiconductor wafer fab equipment business and any signs of a pickup in the legacy RF business.

Answer

Greg Peloquin, General Manager of Power and Microwave Technologies Group, confirmed that the administration's policies, by removing subsidies for new turbines, encourage repowering existing ones, driving demand for their pitch energy modules and other parts. He noted that the 'Big Beautiful Bill' could allow companies to retain current rebates and tax credits, supporting double-digit growth for GES in FY2026. Wendy Diddell, Chief Operating Officer, stated that the full-year forecast for operating expenses would be slightly up over FY2025 due to investments, but emphasized the company's focus on managing SG&A levels. Ed Richardson, CEO, discussed the RF tube business's stability and growth opportunity in the semi-fab equipment manufacturing business. Peloquin added that the RF solid-state side saw growth due to increased demand in military, defense, RF communications, drones, and SATCOM applications globally.

Asked for a breakdown of inventory by business segment, assurance on its quality and lifecycle, and questioned the company's stance on initiating share repurchases given positive cash flow.

Answer

About 21.5% of the $111M inventory is for green energy; a semi-specific breakdown was not provided. The company is confident in the inventory's quality, noting much of the increase is a strategic build for a legacy product line. Regarding buybacks, management is prioritizing cash to fund the expected significant growth in the high-margin semiconductor wafer fab business and to maintain liquidity for its extensive foreign operations, where most of the cash is held.

Chip Rui requested a more detailed breakdown of inventory by business segment, particularly for semiconductors and green energy, and sought assurance on its quality and lifecycle. He also asked about the possibility of initiating a stock repurchase program given the return to positive operating cash flow.

Answer

COO Wendy Diddell stated that of the $111 million in inventory, about 21.5% is for green energy, but a semi-specific breakdown for PMT was not available. She affirmed confidence in the inventory's quality, noting strong controls and return agreements. On share repurchases, Executive Edward Richardson explained that the anticipated recovery in the semiconductor wafer fab business will require significant cash to fund growth. CFO Robert Ben added that most of the company's cash ($19.5M of $23M) is held in foreign subsidiaries and needed for operations.