Richardson Electronics, Ltd. (RELL) Earnings Call Transcript & Summary

Thank you. Good day and welcome to the Richardson Electronics earnings call for the fourth quarter of fiscal year 2026. At this time all participants are in a listen only mode. After the speaker presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 1 1 on your telephone. You will then hear an automated message advising your hand has been raised. To withdraw your question, please press star 1 1 again. Please be advised that today's conference is being recorded. It is now my pleasure to introduce CEO and Chairman of the Board, Ed Richardson.

Good morning and thank you all for joining Richardson Electronics conference call for the fourth quarter and full fiscal year of 2026. We appreciate your continued support and interest in Richardson Electronics. Joining me today are Bob Benn, Chief Financial Officer, Wendy Dedell, Chief Operating Officer, Greg Peliquin, General Manager of our Power and Microwave Technologies and Green Energy Solutions Groups, and Jens Rupert, 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 are making forward-looking statements, and they're 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 delivered both a strong fourth quarter and finished the fiscal year 2026. While Bob will provide the detailed financial review shortly, I want to begin by highlighting the broader message from the year. We delivered significant year-over-year revenue growth, improved gross margin, and strengthened our operating performance. Those results reflect continued execution of the multi-year strategy we've discussed with you over the past few quarters. Our performance was not driven by a single product line, customer, or end market. We saw strength across all three of our business units from both new and existing customers. Power and microwave technologies continued to benefit from demand in semi-fab equipment, defense, healthcare, and other industrial applications. Green energy solutions continue to advance programs tied to wind, EV, power conversion, and other power management markets. Canvas remained an important and profitable part of the company with customized display solutions serving medical, industrial, and other specialized OEM customers. Importantly, we also made progress in improving the quality of our revenue. We continue to align our strategic focus on pursuing higher value engineered solutions, repeatable sales opportunities, and customer programs where our technical knowledge, application engineering, global sourcing capabilities, and inventory position create real value. The more profitable mix of business together with operating disciplines supported the margin process we achieved during the year. We've also continued to invest in our current and emerging opportunities with green energy solutions, and we are now advancing our efforts around battery energy storage. We believe this is a natural extension of our capabilities in power conversion and energy-related applications. Customers are looking for ways to manage growing power demand, improve liability, support renewable generation, and reduce exposure to grid constraints and energy cost volatility. We believe Richardson Electronics is well positioned to support those needs over time. The opportunity around battery energy storage is still developing and is strategically important. We're working to build the right supplier relationships, technical capabilities, and customer engagement model before scaling the business. We're taking a disciplined approach as we believe the market has attractive long-term potential, particularly as utilities, Commercial operators, industrial customers, data centers, and renewable energy developers look for practical solutions to improve power availability and resilience. From an overall market perspective, the global environment remains mixed and we're managing the business accordingly. Tariff uncertainty, geopolitical risks, inflation, and uneven industrial demand continue to create challenges for many companies. At the same time, we believe several long-term demand drivers are positive for Richardson Electronics. electrification, grid reliability, renewable energy integration, AI and data center power requirements, semiconductor capacity investment, defense spending, and the need for customized medical and industrial display solutions all align well with the areas we have experienced in technical capability. We remain disciplined in sourcing, pricing, inventory management, customer commitments, and operating expense control. We believe this discipline together with our strong balance sheet and technical sales organization positions us well to navigate uncertainty while continuing to pursue growth opportunities. Our growth in backlog and improved cash flow from operation highlights this disciplined approach, and we're taking Time to manage the business. The fourth quarter, our results reflected continued positive momentum and a strong close to the year. For the full year, we made meaningful progress against our strategic priorities. We believe the company is entering physical 2027 with a stronger operating platform, broader customer engagements, and improved visibility in several attractive end markets. I'll now turn the call over to Bob Ben, our Chief Financial Officer, who will provide a detailed review of our fourth quarter and full fiscal year results and capital position. Following Bob's remarks, Greg and Jens will provide updates on our business units, and then Wendy will follow with the progress we're making executing against our multiyear strategies.

Thank you, Ed, and good morning. I will review our financial results for our fourth quarter in fiscal year 2026, followed by a review of our cash position. In addition, please note that I will be discussing non-GAAP financial measures. A reconciliation of non-GAAP items to the comparable GAAP measures is available in our fourth quarter fiscal year 2026 press release that was issued yesterday after the market closed. Consolidated net sales increased 27.6% to 66.2 million compared to net sales of 51.9 million in the prior year's fourth quarter. This was our eighth consecutive quarterly year-over-year increase in sales and the highest quarterly net sales since the third quarter of fiscal 2023. The fourth quarter was led by a 28.1% increase in PMT sales, driven by strong growth in semiconductor wafer fab and RF and microwave products. Sales for GES were 1.1 million or 20.4% above the fourth quarter of fiscal 2025 as a result of higher sales of wind products. Canvas sales increased 2.8 million or 29.5% reflecting higher sales in North America. Consolidated gross margin for the fourth quarter was 31.2% of net sales compared to 31.6% during the fourth quarter of fiscal 2025. The 40 basis point decrease in consolidated gross margin was due to lower margin in PMT and GES as a result of product mix, partially off offset by higher margin in Canvas due to improved freight costs as a percentage of net sales. Operating expenses were $17.6 million compared to $15.6 million in the fourth quarter of fiscal 2025. The increase in operating expenses resulted from higher salaries and incentives driven by the significant sales growth in both the fourth quarter and fiscal year 2026. Also included in operating expenses for the fourth quarter fiscal 2026 was a 0.4 million unclaimed property state audit settlement. As a percentage of net sales, operating expenses improved to 26.6% in the fourth quarter fiscal 2026 versus 30.0% in the prior year's fourth quarter. Operating income improved significantly and was $3.9 million and non-GAAP operating income was $3.5 million for the fourth quarter fiscal 2026 compared to an operating income of $0.6 million and non-GAAP operating income of $0.8 million in the prior year's fourth quarter. quarter. Net income was $3.7 million and non-GAAP net income was $3.0 million for the fourth quarter fiscal 2026 compared to net income of $1.1 million and non-GAAP net income of $1.8 million for the fourth quarter of fiscal 2025. Earnings per common share diluted were 25 cents and non-GAAP earnings per common share diluted were 21 cents in the fourth quarter of fiscal 2026 compared to earnings per common share diluted of 8 cents and non-GAAP earnings per common share diluted of 12 cents in the fourth quarter of fiscal 2025. EBITDA was $5.0 million in the fourth quarter of fiscal 2026 versus $2.9 million in the fourth quarter of fiscal 2025. Adjusted EBITDA was $4.2 million in the fourth quarter of fiscal 2026 versus $3.1 million in the fourth quarter of fiscal 2025. Turning to a review of the results for fiscal year 2026. Net sales were $228.6 million, an increase of 9.4% from $208.9 million in fiscal year 2025, which reflected higher sales across all three of our business segments. Gross margin was 31.2% of net sales, which was a 20 basis point increase from fiscal 2025. As a percentage of net sales, operating expenses for the fiscal year improved to 28.8% from 29.8% for the prior fiscal year. Operating income was $6.5 million and non-GAAP operating income was $6.1 million during fiscal 2026 compared to an operating loss of $2.5 million and non-GAAP operating income of $2.6 million during fiscal 2025. The company reported net income of $6.4 million and non-GAAP net income of $5.7 million for fiscal 2026 versus a net loss of $1.1 million and non-GAAP net income of $3.2 million during fiscal 2025. Earnings per common share diluted were $0.44 and non-GAAP earnings per common share diluted were $0.40 for fiscal 2026 compared to $0.08 net loss per common share diluted and non-GAAP earnings per common share diluted of $0.22 for fiscal 2025. EBITDA was $11.3 million and adjusted EBITDA was $10.4 million for fiscal 2026 versus EBITDA of $2.5 million and adjusted EBITDA of $7.5 million in the prior fiscal year. Turning to a review of our cash position. Cash and cash equivalents at the end of fiscal 2026 were $31.8 million compared to $29.5 million at the end of the third quarter of fiscal 2026 and $35.9 million at the end of fiscal 2025. The increase in cash and cash equivalents from the third quarter related to net income, adjusted for depreciation and amortization, and lower inventory, partially offset by higher accounts receivable. Capital expenditures of $1.0 million in the fourth quarter of fiscal 2026 were primarily related to our manufacturing business, facilities improvements, and IT systems versus $0.8 million in the fourth quarter of fiscal 2025. Total capital expenditures were $4.4 million in fiscal 2026 as compared to $2.8 million in fiscal 2025. We paid $0.9 million in the fourth quarter and $3.4 million in fiscal 2026 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 first quarter of fiscal 2027. As of the end 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 the Corporation's multiyear growth plan, and we are encouraged by the continued progress we are making. Moving into FY26, we had a number of strategic imperatives, including developing a strong backlog, launching several new products, expanding our customer base, and advancing multiple development programs from beta testing to pre-production. I am pleased to report that we made excellent progress towards our goals throughout all FY26, and we are accelerating momentum as we experienced in the fourth quarter. Starting with GES, I'm pleased with both the year-over-year and sequential trends we are seeing. as we continue to grow the pipeline of opportunities through both current and new technology partners, products developed by our field sales engineers and design team. GES sales in the quarter grew 20.4% year-over-year, as more companies adopted our key products across a broader set of applications. The The strong fourth quarter helped us grow FY26 sales by 7.3% versus FY25. Continued sales growth, coupled with a growing backlog, positions us well going into FY27. Within GES, we saw continued progress across key growth opportunities. First, we're experiencing growth adoption of our PEM modules across multiple wind turbine platforms. We serve dozens of wind turbine owners and operators, including exclusive partnerships with the top four owner-operators of GE wind turbines, such as 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 Suzlan, Senvion, Nordex, and SSB. We have now received orders outside of North America from customers in Brazil, Australia, India, France, and Italy, adding to our strong rollout in North America. Second, we shipped our first BES program in Q4. This milestone highlights the accelerating momentum of our BES strategy. supported by a growing pipeline of nearly 50 active opportunities as of today. We believe we are attracting interest in our BES capabilities as a result of our engineering and manufacturing experience within niche power management markets. our unique technology partners our US-based footprint and nearly 80-year corporate history. Today, our pipeline includes data centers and industrial applications throughout North America, and we believe there are many opportunities to increase our pipeline throughout FY27 and beyond. We are also focused on converting this growing pipeline into sales, with several exciting opportunities expected to close shortly. In fact, we expect to announce a multi-year pipeline. multi-million dollar order for our BES systems in Q1. Our overall GES growth strategy remains centered on power management applications. We rapidly designed multiple products, secured patents, and built a strong global base of customers and technology partners. Our success is evident in our growing sales pipeline as we capitalize on numerous growth opportunities tied to evolving power management requirements and significant energy transformation initiatives. With these programs, testing and deployment continue to progress well with our key customers, and we feel that this will help us achieve stronger growth in FY27. Turning to PMT, excluding the legacy healthcare business, sales were $47.1 million in the quarter, a 31.1% increase over the prior year's fourth quarter. affects strong growth in the RF and wireless components product line, specifically in SATCOM, radar, and communication markets. and we again saw very strong growth in the semi-mictor wafer fab market. This continued quarter-over-quarter growth trend in Q4 allowed us to expand sales at a double-digit rate in FY26, finishing the fiscal year with 14.2% growth versus FY25. We are excited about the positive feedback from our Semi-Fab customers who are expressing ongoing optimism and continued growth into calendar year 2027. Across both GES and PMT, one of the most important priorities is accelerating the design to production cycles. We're expanding our design capabilities to move products more quickly from concept into manufacturing and test in LAFOX. our Sweetwater, Texas location as one of the investments we expect will accelerate product development opportunities. We're also adding experienced industry talent to help expedite growth. More broadly, 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 field engineering team continues to identify new customers and opportunities across our end markets. We continue to gain market share by developing new products and solutions that are accepted by our customer. Looking ahead, we are encouraged by the strategic initiatives underway across PMT and GES, including our new BESS program, global expansion of our key engineered solutions products, and new technology partnerships. Our global capabilities and global go-to-market strategy continue to differentiate us from our competition in the power management, RF and microwave, and green energy markets. By combining legacy products and new technology partners and engineered solutions, we believe we are well positioned to deliver continued growth. So in summary, we remain optimistic about the growing project-based business. We continue to expand our technology partners, design opportunities, and engineering resources while addressing technology gaps with our new partners and solutions. Coming out of a year with increased sales, new products, increased customer base, and new technology partners, and a 24.8% increase in the combined backlog of the two SBUs, we believe FY27 will be another year of growth for both PMT and GES. And with that, I'll turn it over to Jens to discuss Canvas.

Thanks, Greg, and good morning, everyone. Canvas designs, engineers, manufacturers, and sells custom displays to original equipment manufacturers across global industrial and medical markets. It's our mission to deliver high quality display solutions tailored to our customers' needs. Canvas reported revenues of $12.3 million in the fourth quarter of fiscal year 2026, up 29.5% from $9.5 million in the same quarter of the previous year. setting a new quarterly revenue record for the business. Our business remains project focused and can vary from quarter to quarter based on customer program timing. For the full fiscal year, revenues were 37.3 million, up 12.4% from 33.1 million in the comparable period last year. The gross margin was 32.3% of net sales in the fourth quarter compared with 32.1% in the same quarter last year. For the full fiscal year, cross-margin was 32.0%, down from 32.9% in the fiscal 2025. The product may continue to create pressure, but margins remain solid. The backlog at the end of the fourth quarter of fiscal 2026 increased to 40.8 million, up from 38.2 million at the end of the third quarter. With a Q4 book-to-bill ratio of 1.3, we entered the new fiscal year with a solid order book and improved visibility. Water unfolded in a resilient but uneven global economy, with tariffs, trade policy changes, and logistics conditions creating continued uncertainty. focus on disciplined execution, customer collaboration, and flexibility to support customer schedules. During the most recent quarter, Canvas 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. At the same time, our solutions continue to support a broad set of commercial and industrial applications. including passenger information systems in trains and buses, as well as HMI technologies used in printing, vending, milling, and packaging equipment. Our initiatives remain centered on increasing Canvases visibility and market leadership by developing new opportunities, deepening customer relationships, and converting our pipeline into additional design wins and production programs. We continue to strengthen our supply chain flexibility and execution capabilities so we can respond effectively as customer demand patterns and trade conditions evolve. If we look to the new fiscal year, we expect custom investment decisions to continue, varying by the market, and be subject to program timing. Even so, we are encouraged by the strength of our customer engagement, the level of request for productivity and our opportunity pipeline. Our record fourth quarter revenue, 40.8 million backlog, and Q4 book-to-bill of 1.3 provide a solid foundation for continued momentum. Our sales team remains focused on developing new opportunities while I remain committed to executing our strategic plans. sustainable growth and create long-term shareholder value. Now turn the call over to Wendy.

Thanks Jens and good morning everyone. Let's begin with a quick CT tube update. As I mentioned last quarter, we're now focused entirely on repairing Siemens tubes. We continued to ship a limited number of repaired Stratton Z tubes during the quarter. We also completed life testing on the MX series. At the end of the quarter, we repaired several Siemens MX beta tubes. have recently shipped and will be deployed for final review prior to full release. During In the fourth quarter of fiscal 2026, we sold most of our assets dedicated to the Altitude Program. completed production on this program in March of 2026. We also downsized our CT healthcare team. We remain optimistic that bottom line results from this program will be significantly improved in FY27. Stepping back to our multi-year strategy, we remain focused on two primary operating priorities, accelerating growth and improving efficiency. Accelerating growth is evident by our revenue trends and growing backlog. Even though a portion of our revenue is booked and shipped during the quarter, we view backlog as an important indicator of demand and future revenue visibility. A growing backlog is directionally positive because it reflects customer orders that are already committed or scheduled, and it gives us greater confidence in the pipeline. At the same time, backlog does not convert to revenue on a perfectly linear quarterly basis. The timing of conversion depends on product mix, customer delivery schedules, supply availability, and program schedules. So, while we view backlog as an indicator of underlying demand and future revenue, we do not use backlog in isolation as a precise quarterly sales forecast. Turning to efficiency and cash generation, in addition to downsizing our CT healthcare team at the end of the quarter, we also closed our PowerLink Dubai operations, with all work being transferred to our PowerLink UK location. Our fourth quarter performance also reflects the culmination of the TALIS inventory build, an ability to generate cash from on-hand inventory. It also reflects our ongoing efforts to take a conservative approach to new inventory. entire management team continues to look for ways to free up cash for our critical growth initiatives by becoming more efficient in our core operations. During the quarter, we completed the 90-day AI Advisory Engagement focused on AI readiness, building internal capabilities, and identifying practical use cases across the company. The engagement included four working groups, supply chain, manufacturing and engineering, sales, and finance, and resulted in 47 AI opportunities being identified and triaged. Of those, 32 were classified as ready to execute using our existing AI tools, with no additional technology investment required. 11 were identified as potential future agent build opportunities. We also saw meaningful AI adoption across the company during the engagement period. Users increased by 46%, message volume increased by 60%, and the use of projects expanded significantly. It is clear employees are beginning to incorporate AI into their daily work. Six initial pilot programs have been validated and are ready for execution, including use cases in at-risk account analysis. RMA tracking, supplier compliance, performance review support, and change log analysis. We believe this work establishes a practical foundation for using AI to improve productivity, strengthen workflow consistency, and support process improvement over time. We continue to advance our Made in America strategy with a focus on opportunities where US-based manufacturing, engineered solutions, and power management capabilities create a competitive advantage. This position is increasingly relevant to customers seeking a more reliable supply chain, reduced tariff exposure, faster response times, and stronger quality control. During the quarter, we converted several customer discussions into commercial activities across aerospace, unmanned defense systems, Defense Electronics, and U.S.-based Industrial Manufacturing. the broader pipeline remains active. Key opportunities include a US-made self-checkout kiosk program for a major national restaurant chain that is currently under final consideration. Also, we have confirmed competitive pricing and received initial approval to begin work tied to a major U.S. defense program. These opportunities are expected to convert to revenue beginning later in the fiscal year. The key takeaway is that our Made in America initiative is moving from prospecting into execution. we are converting customer interest into sample builds, purchase orders, and supplier onboarding activity. Our near-term focus is to stabilize early production, close open approvals, and continue building momentum in aerospace, defense, industrial, and power management applications while maintaining the financial flexibility and operating capacity needed to support project-specific purchases, technology partner requirements, and potential facility expansion. Looking further out, we remain focused on driving growth through organic initiatives while maintaining a disciplined and selective approach to capital allocation. While acquisitions are not a near-term priority, should the right opportunity arise, particularly one that supports growth and power management or expands our engineered solutions capabilities, would evaluate it thoughtfully. At this stage, our priority is to maintain a strong cash position to support growth in battery energy storage, including key purchases tied to projects and potential facility expansion to accommodate increased demand with our technology partners. We are encouraged by the direction we are headed and believe initiatives underway position as well to continue revenue growth and improve profitability over time.

With that, I'll turn it back to Ed. Thanks, Wendy. In closing, fiscal 2026 was an important year for Richardson Electronics. delivered significant year-over-year revenue growth, improved gross margin, and strengthened operating performance, as well as continuing to invest in areas that we believe can support sustainable long-term growth. We're encouraged by the strength across all three business units and by the market trends supporting demand for power management, electrification, energy storage, data center infrastructure, semiconductor manufacturing, defense, and customized solutions. We also recognize that the macro environment remains uncertain. We'll continue to manage the business with discipline. With a strong balance sheet, a growing base of higher value engineered solutions, a continued focus on repeatable sales, and a team that's executing well, we believe Richardson Electronics is well positioned to build on the progress we made in fiscal 2026. We remain committed to improving profitability and creating sustainable value for our shareholders, customers and employees,.

we move forward. We'll now open the call for questions. Please press star 1 1 on your telephone and wait for your name to be announced. To withdraw your question, please press star 1 1 again. And due to time constraints, we ask participants to limit themselves to one question and one follow-up. a question please press star 1 1 one moment please Our first question comes from the line of Anya Soderstrom with Sidoti.

Hi, good morning. Good morning. Congratulations on the slump quarter. And thank you for taking my questions. I'm just curious for the SEMA Ways to Stab demand. What kind of visibility do you have there? And what do you see now into the first quarter?.

Yes, we still have limited visibility. You know, people have a hard time forecasting, but The feedback we're getting from our customers in that space and then their customers and customers is very, very positive. We saw, as you know, excellent growth in Q3 and Q4, and that, according to the customer and their end customers, should continue throughout FY27.

And sort of what lead time do you have there if something comes up in quarter?.

Lead time in terms of building the product for a new order? Yes. Yes, the team, we're very aggressive on inventory. We try to make sure we actually, you know, have weekly, monthly calls with the customer. So we have the piece parts in stock and just waiting for releases from the customer.

Okay, thank you. And then at Canvas was quite the surprise with a record quarter. What's the price there and do you see that continuing into the first quarter?.

So, I mean, I'm really pleased with that record quarter, you know, we had and then a book to build to 1.3, you know, when you have a record quarter and the book to build is up. It's really a great momentum. Obviously our business is, you know, project driven. So, you know, we have sometimes larger call offs, you know, really project business. It's really hard to say, but. obviously, you know, we all foresee a cross next year. Okay, thank you. I'll get back into queue.

Thanks, Anya. Thank you. Our next question comes from the line of Bobby Brooks with Northern Capital. Pardon me. Are you with us?.

Please check your mute button, Bobby. Hey, can you guys hear me now? Sorry about that. You must be sleep-deprived, Bobby. That happens. Yes, I appreciate it. Thank you guys for taking my question. So, Ed, you talked about pursuing higher-value engineered solutions and your prepared remarks, and maybe I'm wrong here, but I feel like that's been a focus for the business for several years. So, if that is the case and it seems like this is kind of turning the corner maybe just like could you expand on like what it can it seems like something really kind of clicked in the quarter or over the last several months that's kind of helped unlock growth with that just just was curious to hear more expanded view there.

Well, I think the thing that we're seeing is lots of new opportunities in new areas. Let Greg tell you about some of the new products that we're working on. Yes, I think Ed's comment was based on from an investment point of view going forward, it will be focused on these higher inputs. engineered solution type products. And we continue to get, first of all, the existing products that we've introduced over the years are gaining market share globally, as I said in my comments. But in addition to that, we're getting more and more opportunities from customers that we did work for. For example, on the electric locomotive, we now have gotten number of opportunities for other products for progress world caterpillars so some of these um are are different than we've currently done, and they might take a different piece of equipment, maybe a different type of person in terms of engineer, software engineer, mechanical, electrical. So I think that's what we talk about here in terms of long-term three or five year growth is where do we invest in and that investment would be in these um you know, higher technology and higher integrated type products.

Got it. That makes a lot of sense. Then I know last quarter, the ultracapacitor, your ultracapacitor replacements for the GE turbines, those became an approved product for GE service turbines, right? And so I was just curious to hear how that opportunity developed there during the quarter.

Yes, so as you know, Bobby, we kind of worked with them. They wanted to do some testing. GE site installers could use these products. our product passed with flying colors. In fact, based on the data, it was proven safer than dealing with the discharge of the current lead acid batteries in the turbine. That was very, very positive. So what GE decided to do, and we have no control over that, we've done our job, we've created a product that works and is safe and is in high demand by owner-operators it's site specific and so yes they've approved a site in Canada for this because it's up to your owner operators now to go back to GE and say, hey, this thing's now been approved by you. We'd like to install it, but it's going to be site specific and we have no control over that. But anyway, yes, they released an order for a site in Canada to one of our large owner operators We did shift that in Q1. It was a nice start to Q1, so it's not even in the fourth quarter numbers.

That's great to hear. And then I just wanted to maybe get a little bit more context around the battery energy storage solutions and in its relation to the data center opportunity. It seems like you guys kind of spoke to that a little bit more today than in the past quarters. So is that like for my contacts and other people on the call, like you're not necessarily focusing on these like mega projects where it's, you know, folks are looking to secure like 700 megawatts, a gigawatt plus of power, but maybe kind of smaller installations? or maybe I'm off base, but I was thinking that or under the impression that your better energy solutions are more like. like single digit megawatt or maybe even kilowatt size. Could you just refresh us there and maybe just frame what type of data centers you'd be looking to service there? Sure.

Yes, so Bob, you're correct. The mega data centers is not really our focus today. It's more the C&I, commercial and utility. type products and applications. Our first offering as we develop these relationships with technology partners such as Goshen and others, will be one product is 760 kilowatts, and the other one is five megawatts. And so somebody wants to take my watch, it just stacks up. But it's a smaller niche applications that, not surprisingly, the current people involved in this market, what nothing to do with. And that opportunity I mentioned that we have now booked is for 17 units containers, but it's It's a unique facility. It's actually, the press release will come out. It's for a federal reservation in Alaska, and they'll put one or two in each of the towns on that reservation to help balance a grid, give them backup power, et cetera. So the opportunities we have in our pipeline, and we're now over 50, are mainly for municipal buildings. That was the first one we booked, with Galeta in California for their municipal building. utility applications, commercial applications, and the demo center that we're putting here in LaFox is actually a working unit, and it is for us to use to keep backup power, but also store, balance the grid, and sell it back to the grid, and to make some money that way, which the state of Illinois has the best subsidy these in grants. So you're exactly right. Right now there's more than enough opportunities for these smaller niche, I'll call them niche applications, that we seem to have a With our global capabilities, with being around 75 years, a lot of people that go after these smaller opportunities are LLCs. Just in 2025, over 100 LLCs went bankrupt. So these companies are really happy to work with a company that's been around for 80 years, no debt. and will service these niche applications with these products.

that's very helpful, Greg. And I think that's a great point on the niche of where you're playing. And then the competition that you're facing, you have a significant advantage over them. It seems I'll, I'll jump back into the queue and congratulations on the, on a really strong quarter. Thanks.

Thanks Bobby. Thank you. And congratulations to you on the baby.

Thank you. And our next question comes from the line of Joseph Midkiff, Independent.

Hey, good morning. Congrats on the excellent quarter and really a long-term positive trajectory. I am a long-term retail of shares. And my question was really about capital and capital deployment. I was curious as to whether there's been any consideration made to returning additional capital to shareholders. I know the company has historically had a very conservative approach. approach to the market and I'm sure there's some strategic purpose but I wondered if you could speak to what that strategic purpose may be and whether any indicators in the business would give you confidence to deploy additional capital into buybacks or dividends thank you.

That's a question that we hear every quarter, and every quarter when the board gets together, we talk about it. We've always come to the same conclusion that we're better off to employ our capital and new opportunities such that Greg was talking about rather than buying our own stock back.

Is there anything in the business or their particular hallmarks that would lead you to reevaluate that? not that we presently have visibility to. Okay. Thank you very much. And, again, congrats on the great quarter and the fantastic long-term run.