Richardson Electronics, Ltd. (NASDAQ: RELL) Fourth Quarter 2022 Earnings Conference Call July 21, 2022 10:00 a. m. m. ET
Participating companies
Edward Richardson – Executive Director
Robert Ben – Chief Financial Officer
Wendy Diddell, Chief Operating Officer and CEO, Richardson Healthcare
Gregory Peloquin – Managing Director of our Energy Group
Jens Ruppert, Executive Vice President and General Manager, Canvys
Conference Call Participants
Anja Soderstrom – Sidoti
Ross Taylor – ARS Investment Partners
Walter Schenker – MAZ Partners
Operator
Have a nice day and thank you for being here. Welcome to Richardson Electronics’ call for effects for the fourth quarter of fiscal 2022. Currently, all participants are in listen-only mode. Following the presentation of the speakers, there will be a question-and-answer session. [Operator Instructions].
I would now like to move on to the convention with your speaker today, Ed Richardson, Executive Director. Continue.
Edouard Richardson
Good morning and welcome to the convening of the Richardson Electronics convention for the fourth quarter of fiscal year 2022. With me is Robert Ben, chief financial officer; Wendy Diddell, chief operating officer and chief executive officer of Richardson Healthcare; Greg Peloquin, Managing Director of our Energy Group
I would also like to remind you that we will make forward-looking statements that address existing expectations and involve threats and uncertainties. As a result, our actual effects may differ materially. See our press release and sec files for an explanation. of our threat factors.
Fourth quarter sales were $61. 6 million, the quarterly sales we have achieved since the RFPD sale in 2011. Fourth-quarter gross margin increased to 32. 7% from 31. 8% in the third quarter.
Total sales for fiscal 22 were $224. 6 million, an increase of 26. 9% over last year. In addition, the order book once again returned to $206. 2 million, nearly double what we ended in FY21. This supports the continued expansion we expect in FY23.
While force grid tubes still constitute a vital and developing component of our business, our higher product design and production has driven sales to new levels and placed us for continued expansion in the phase of more challenging economic conditions.
Today, more than 60% of our business comes from products that are manufactured or manufactured exclusively for us. In addition, we continue to delight in year-over-year expansion in our 3 business sets during the fourth quarter and full year.
Energy control responds that a green environment is a vital expansion opportunity and a strategic approach. In the face of unprecedented fuel prices, the demand for choice is increasing. We are taking advantage of this trend.
From GE’s ultracapacitor modules for wind turbines to long-lasting applications such as the production of green hydrogen microwave generators. Our existing and new products capture the attention of visitors and solve problems.
The demand for our 6KW magnetron, a product I said in the 80s that wouldn’t exist in five years, continues to grow exponentially and more and more consumers are opting for man-made artificial diamonds instead of classic diamond mining.
Diversification is a vital component of our long-term success. It is no longer just the semiconductor wafer production market that is driving our earnings growth. While this activity is strong for us in the fourth quarter, 6. 7% of our activity here from new products.
We’ve also noticed an expansion in our IT product lines for existing and new consumers. Canvys continues to add top-tier consumers to its list of new tradition demonstration products. Simply put, our business is running at full capacity and we are just getting started. .
Through the hard work and determination of our sales, engineering and production groups and our experienced supply chain, finance and maintenance groups, we are taking the company to new heights. In fact, the fourth quarter was the most successful quarter the company has ever had. noticed since 2007, before the sale of two of our divisions.
Our challenge is to expand our engineering and production functions to take advantage of the significant opportunities that are occurring in many of our global markets. We are making an investment in other people and services to help expansion and accumulation and capitalize on opportunities for new products that will solidify. our competitive position in the future.
I now give the floor to Bob Ben, Chief Financial Officer, to take a closer look at our monetary functionality for the fourth quarter and full year. Next, Greg, Wendy and Jens will provide more important points about our functionality in the fourth quarter, as well as our new programs.
robert ben
Thank you Ed and good morning, I will review our monetary effects for our fourth quarter and fiscal year 2022 followed by a review of our monetary position. in the fourth quarter of last year, due to higher net sales in the 3 business units.
DMT sales increased by $10. 4 million, or 26. 8%, compared to the fourth quarter of last year, driven by a strong expansion of our new power generation and microwave partners for a variety of applications, adding force management, green force responses, and 5G infrastructure.
Sales of various electronic tube product lines as well as manufactured products for our semiconductor wafer production appliance consumers also increased in the fourth quarter of fiscal 2021.
Canvas sales increased by 0. 6 million or 7. 1% due to strong visitor demand in North America. Richardson Healthcare’s sales increased by $0. 1 million, or 4. 1%, primarily due to higher sales of portions and equipment, offset by declining sales of ALTA750 tubes.
In addition to revenue accrual, the company’s total order book increased to $206. 2 million in the fourth quarter of fiscal 2022, to $175. 6 million at the end of the third quarter of fiscal 2022 and $110. 0 million at the end of the fourth quarter of fiscal 2022. Fiscal Year 2021. This is the highest point of our order book since the sale of RFPD in 2011.
Fourth quarter gross margin 32. 7% of net sales, compared to 32. 4% of net sales in the fourth quarter of last year. PMT’s margin increased to 34. 4% from 32. 0% due to the product line, adding higher sales of the ULTRA3000 and took a step forward in production efficiency.
Canvys’ gross margin decreased from 35. 3% to 30. 7% due to higher global transport prices and currency effects. absorption point and a higher point of scrap expenses.
Operating expenses were $15. 2 million for the fourth quarter of fiscal 2022, compared to $14. 0 million in the fourth quarter of fiscal 2021. The accumulation in operating expenses is the result of higher worker reimbursement expenses, primarily due to the accumulation in incentive expenses as a result of the highest point of profitability since the fourth quarter of fiscal 2007.
Operating expense as a percentage of net sales increased to 24. 6% in the fourth quarter of fiscal 2022, compared to 27. 7% in the fourth quarter of fiscal 2021. The company reported an operating revenue stream of $5. 0 million or 8. 1% of net sales for the fourth quarter of fiscal 2021. Fiscal year 2022 compared to operating profit of $2. 3 million or 4. 6% of net sales in the fourth quarter of last year.
Other expenses for the fourth quarter of fiscal 2022, adding the source of interest on income and foreign exchange, were $0. 2 million, compared to other expenses of less than $0. 1 million in the fourth quarter of fiscal 2021.
Non-cash tax savings of $3. 5 million for the fourth quarter of fiscal 2022 resulted from the initial cancellation of $4. 0 million of the tax impairment provision due to evidence of profitability for the realization of deferred tax assets in the future.
Net revenue stream $8. 3 million or 13. 4% of net sales for the fourth quarter of fiscal 2022, compared to net revenue of $1. 9 million or 3. 7% of net sales for the fourth quarter of fiscal 2021. Excluding the fiscal valuation adjustment of $4. 0 million, net revenue source for the fourth quarter of fiscal 2022 $4. 3 million or 6. 9% of net sales.
Earnings consistent with a non-unusual percentage consistent with a diluted base in the fourth quarter of fiscal 2022 were $0. 59, compared to $0. 14 consistent with an observation consistent with a diluted base percentage in the fourth quarter of last year. Excluding the adjustment to the fiscal impairment provision, earnings consistent with a non-unusual consistent percentage on a diluted basis were $0. 31 for the fourth quarter of fiscal 2022.
Let’s move on to reviewing the effects of fiscal year 2022. Net sales for fiscal 2022 were $224. 6 million, an increase of 26. 9% from $176. 9 million in fiscal 2021. Net sales increased to $40. 8 million or 29. 7% for PMT, 5. 9 million or 20. 0% for Canvys and 1. 0 million or 10. 1% for Richardson Healthcare.
Gross margin decreased to 31. 9% from 33. 2%, basically reflecting the combination of products in PMT, higher global transportation prices and foreign exchange effects in Canvys and higher health component disposal expenses.
Operating expenses were $55. 7 million for the year, a low of $0. 2 million compared to last year. The minimum is due to the non-recurrence of a $1. 6 million court settlement in fiscal year 2021 and minimum legal fees. These lows were largely offset through an accumulation in workers’ reimbursement expenses, adding more profit-sharing expenses due to solid profitability.
Operating expenses, as a percentage of net sales, increased to 24. 8% in fiscal 2022, compared to 31. 6% in fiscal 2021. Source of operating income for fiscal 2022 $16. 0 million or 7. 1% of net sales, compared to revenues of $2. 9 million or 1. 6% of net sales for fiscal 2021.
Other expenses for fiscal 2022, adding the source of interest from foreign exchange income and transactions, were $0. 2 million, compared to other expenses of $0. 6 million for fiscal 2021. The source of income tax savings of $2. 2 million resulted from the partial cancellation of $4. 0 million from the tax impairment provision.
The company reported a net profit of $17. 9 million or 8. 0% on those sales for fiscal 2022, compared to a net profit of $1. 7 million or 0. 9% on those sales for fiscal 2021. Without the adjustment of the fiscal valuation of 4. 0 million, net profit for fiscal 2022 13. 9 million or 6. 2% of net sales.
Earnings consistent with a percentage consistent with a diluted base for fiscal 2022 were $1. 31 to $0. 13 consistent with a percentage consistent with a diluted base last year. a diluted base was $1. 02 for fiscal year 2022.
Let’s move on to a review of our monetary position. Cash and investments at the end of the fourth quarter of fiscal 2022 were $40. 5 million, to $39. 1 million at the end of the third quarter of fiscal 2022 and $43. 3 million at the end of the fourth quarter of fiscal 2021.
The company continues to invest in operating capital for its expansion initiatives. Inventories exceeded $80. 4 million, compared to $73. 7 million at the end of the third quarter of fiscal 2022 and $63. 5 million at the end of fiscal 2021.
Most of the buildup for the fourth quarter and fiscal 2022 was due to part construction and ongoing work for our production activity. In addition, the accumulation of accounts receivable increased to $29. 9 million from $25. 1 million at the end of fiscal 2021, basically due to strong sales growth.
Capital expenditures were $1. 0 million in the fourth quarter of fiscal 2022 compared to $0. 8 million in the fourth quarter of fiscal 2021. Approximately $0. 7 million is similar to investments in our production operations. 0. 2 million for our healthcare business and 0. 1 million for our IT system.
Total capital expenditures were $3. 1 million in fiscal 2022, to $2. 6 million in fiscal 2021. We expect an upper point of capital expenditures in fiscal 2023. As we make more investments in our production functions and facilities.
We paid $0. 8 million in cash dividends in the fourth quarter and a total of $3. 2 million in fiscal 2022. In addition, in our current monetary position, our Board of Directors has declared a normal quarterly cash dividend of $0. 06 consistent with a non-unusual stake, to be paid in the first quarter of fiscal 2023.
Finally, in fiscal year 2022, we repatriated 1. 5 million more people to the United States from various locations abroad. Our domicile, cash balance, and monetary equivalents in the United States totaled $25. 5 million as of May 28, 2022, the same balance at the end of fiscal year 2021.
Now I’m going to pass the call on to Greg, who will talk about the effects for our Power group.
Grégory Peloquin
Thank you Bob and good morning everyone. Energy Group Sales
Our gross margin also increased in the quarter to 34. 4% from 32% last year, primarily due to the continued good fortune of our technical response products for green energy programs and an incredibly strong quarter for our semiconductor wafer production appliances business. PMT’s two business sets supported our strong expansion in bookings and turnover in the fourth quarter.
Our electronics organization or EDG has had an incredibly physically powerful quarter and reserves as we continue to increase our market share against our competition and locate new programs for legacy products, especially magnetrons used in the progression of artificial diamonds and other eco-friendly solutions.
We also continue to delight in the expansion of our Power
This includes 5G infrastructure systems, as well as systems committed to ever-increasing garage and energy control programs than green projects in our global markets.
When it comes to 5G and force management, revenue grew by double digits again in the fourth quarter with a very high order-to-turnover ratio. PMG has experienced an exceptional increase in demand for green energy applications, such as wind power, electric locomotives, and power storage.
Our recently introduced products, such as the patented ULTRA3000 step power module employing wind turbines, continue to gain ground and increase sales and reserves during the quarter. We produced the ULTRA3000 with noticeable cash effects and millions of cumulative operating hours, shipping over 22,000 sets in FY22. We have also noticed a significant increase in reserves with Enel, Inver Energy, Evans and many other GE wind turbine owner-operators.
We are in discussions with a major wind turbine OEM for personal label progression of many of the products we expect to announce in the current part of Fiscal Year 23. During the fourth quarter, we also won an order of $18 million for our used force control module. in electric locomotives. This module, along with products such as our ULTRA3000 and ULTRAGEN3000, strengthens our leadership position through additional state-of-the-art force control responses that employ technologies to upgrade lead-acid batteries in many markets and applications.
Our patent-finished ULTRAGEN3000 design for cellular turbines and base stations in critical services has been a wonderful good fortune in Alpha product testing. upload new products to our portfolio and are not scheduled to introduce new products and fiscal generation partners 23.
Our RF and microwave factors business, which is also part of PMG, continues to take advantage of the strong demand for programs related to 5G, [microbe] (Ph) and SATCOM communications. The use of those programs is driven by other people running remotely, which requires the ability to send giant amounts of data.
Our entire team did a wonderful job of identifying niche generation partners collaborating with us globally and we added more small, cutting-edge vendors in the fourth quarter. We also continue to invest and focus on the resources for our growth, adding design engineers, box engineers, and production functions throughout our organization.
Our expansion strategy has been a success over the years, and we will continue to expand new products as well as increase our visitor base, profits and profits through capitalizing on existing infrastructure construction.
We are very happy to see that over the past year, our classic tube business has noticed a sharp decline in terms of bookings and turnover. The fourth quarter of Fiscal 22 continued to result in demand for our products and facilities not disappearing with the pandemic. And we’re even more excited about the trends and reserves that will generate strong earnings expansion in the next fiscal year.
We continue to source from our key partners such as Qorvo, MACOM, Nokia Wave, LS Materials, Amogreentech and Fuji Semiconductor. Industry-leading tube brands such as CPI, Thales, NJRC and Photonis paint with us to manage our customers’ requirements.
Our in-house engineering and production in development have done a wonderful job of assembling demand in existing product development and new product designs. ULTRAGEN3000 slope and force control modules for electric locomotives.
I am with the progress we are making. We will continue to identify, expand and introduce new products and technologies for green energy and other energy control applications.
We continue to face longer lead times for semiconductors and the global supply chain. This affects both our parts business and our engineering response products. the desires of consumers while running strongly with our consumers and suppliers.
Starting with the launch of the effects of the first quarter of fiscal year 23 in October. This organization is made up of PMT and will be controlled through PMT as we continue to focus on the energy control programs that green energy markets globally.
I can’t stress enough the price of Richardson Electronics’ style for our consumers and suppliers. Our unmatched capability and global go-to-market strategy are unique to the energy and microwave industries.
We have developed a strong business model, adding legacy products and next-generation partners that align well with our engineering response capabilities. Thanks to our consistent and artistic clients, we will continue to excel by taking advantage of opportunities as they arise.
Our order book has never been more powerful and the execution of our strategy has never been better. There is no doubt that our consumers and generation partners want Richardson products more than ever.
And with that, I’m going to give the floor to Wendy Diddell to talk about Richardson Healthcare.
Wendy Diddel
Thank you, Greg. Hello everyone. Fourth-quarter sales for the healthcare organization were $2. 9 million, up 4. 1% from the fourth quarter of fiscal 21. These sales were lower than in the last quarter and year, basically due to declining sales in China and Ukraine, while sales of spare portions and systems were strong.
Unfortunately, we had a significant supplier factor in the quarter, forcing us to scrap several lenses and five tubes before temporarily postponing production. As a result, gross margin in the fourth quarter was 10. 8% compared to 29. 4% in the fourth. last year’s quarter. Although we are disappointed with this factor, we have been able to discover the root cause and are now back in full production.
Full-year healthcare sales were $11. 4 million in FY22, up 10% from FY21 sales of $10. 3 million, and pipe and portion sales increased. System sales remained stable due to limited supply. carry out an elegant release of the tube. We are still waiting for EC approval, which is necessary to sell the GE-Tube in Europe and Canada. This is the time of the tube in the Canon series and it works on the new Canon CT scanner models.
Sales expansion will be slow as we bring the ALTA750 G to market and canon CT scanners implement OEM service contracts. We expect sales of our ALTA750 D as new scanners become available. device license, which allows our CT ALTA750 D tube to be sold in Canada.
We continue to advance Siemens’ repaired pipe program. It is a series of 4 types of lamps, to which are added the Stratton Z, MX, MXP and MX P46. Siemens’ installation base is significantly larger than Canon’s and there are no third parties. replacement features for those types of tubes.
We are on track to launch the repaired Stratton Z later in calendar year 2022. The MX and MXP series will continue in 2023. Siemens’ program is a fundamental detail to achieve our purpose of providing an operational contribution to the company during the fourth quarter. of the Prosecutor 24.
I will now turn the call on to Jens Ruppert to talk about the canvys results.
Jens Rupert
Thank you, Wendy and good morning everyone. Canvys designs brands and sells traditional machinery to original appliance brands in the commercial and medical market around the world. Canvys delivered exceptional functionality and set a new quarterly record with sales of $9. 5 million in the fourth quarter of fiscal 2022. Strong tradition required globally led to a 7. 1% increase in sales over the same time last year.
Global sales increased 20. 0% to $35. 2 million in fiscal 2022. The highest gain since fiscal year 2013, due to increased demand globally and the addition of new consumers and programs. This is a remarkable achievement given that long-term business has an effect on the COVID-19 pandemic.
Gross margin as a percentage of net sales 30. 7% in the fourth quarter of fiscal 2022, down from 35. 3% in the fourth quarter of fiscal 2021. Our gross margin for fiscal 2022 as a percentage of sales decreased to 32. 0%, from 35. 0% as of fiscal 2021. The reduction in gross margin similar to higher component prices, higher shipping prices and monetary effects, which affected many companies around the world such as Canon.
Extended lead times on several key pieces remain an issue. However, our close relationships with our consumers and partners allow us to acquire parts over the long term, which helped us maintain our order book at last quarter’s record point of $52. 4 million. Canvys’ order book increased by 52. 3% year-over-year.
Our consumers pre-order product availability and we have ongoing orders that will ship within 3 years. It is important to note that we serve a highly specialized clientele, for whom it is complicated and expensive to replace components.
We are incredibly proud to count many of the 10 most sensible medical device corporations in the world among our traditional long-term. In fact, 76% of our profits in FY22 came from medical OEMs and all of our products are traditionally designed to meet your needs.
It takes years to bring the product to market, however, when we are the chosen supplier, we are designed for many years to come. All visitor orders are binding and we will end up in an overstocking position.
While we expect the order book closing to stabilize in the near term, we are confident that strong demand for our traditional monitors, touchscreens, and all-in-one systems will continue. We recently introduced our 32-inch 4K monitor platform and the point of interest is encouraging. The product offers superior brightness, a wide color gamut and a plastic housing to optimize the overall weight of the monitor.
This platform can be customized with a 12G-SDI interface, PCAP touch functions and a 3D polarizer. This high-end product meets medical needs and complies with DICOM. We are robotic navigation and minimally invasive surgery area with this new platform and are confident that our product strategy will result in new leads and advertising growth.
During the quarter, we won seven new orders from new and existing OEM customers. Some of them come with P heart rate ablation, femtosecond laser, laser step therapy and intense soft pulse, colposcopy, surgical navigation, CRM, laser lithotripsy, fully incorporated medical devices and operating rooms, robot-assisted surgery, point surgical documentation, laser atherectomy, and endoscopy.
In the non-medical space, our products are used in a variety of advertising applications. This includes CT scanners for baggage inspection at airports, passenger data systems on buses and trains, human-machine interface for procedure automation, steel 3D printing, and product dispenser for retail applications. We are very satisfied with the functionality of our equipment.
Our strong dating of visitors, as well as the record position of the e-book orders, as well as long-term growth. From the variety of visitor programs and the price of orders from new and existing visitors, it is evident that we have exceptional products and local service for our global visitors.
While our sales organization remains focused on new opportunities, I remain focused on improving the division’s operating performance, maximizing money and improving Canvys’ likelihood, which is a consistent priority. We continue to work intensively with our partners to meet the demand of our customers. , that is, with the demanding situations posed by supply chain delays across the industry.
Now I’ll call Ed back.
Edouard Richardson
Thank you, Jens. Another amazing quarter and year for Kansas. As you can see, a lot is happening at Richardson Electronics and I am encouraged by the momentum our business is experiencing. From traditional presentations used by corporations like Medtronic and Green, to highly complicated CT tubes, our business is growing.
We conscientiously maintain our cash flow so that we can invest in our other people and services to meet the positive demand we are experiencing for engineering solutions. Right now, we’re not seeing the effect of the recession on demand. our products. But we are very attentive to the expansion of activity and the ordering of e-books in our global markets and will react temporarily if necessary.
At the end of the first quarter, we will begin signing a fourth business unit for Green Energy Solutions. This will highlight the profit expansion generated through our new responses, as well as the eco-friendly applications of existing products. Our product roadmap is strong and we plan to increase sales of new customers, new products and new applications.
We look forward to sharing more main points with you in the coming quarters. At that time, we will be happy to answer a few questions. Thank you.
Q&A session
Operator
Thank you. [Operator Instructions] Our first comes from Anja Soderstrom with Sidoti. Your line is now open.
Anja Söderström
Hello and thank you for responding to my emails and congratulations on an exceptional quarter. A lot of exciting things are happening. The first will be about health care and more or less. Can you explain what weighs on margins there and what we can expect in the coming quarters in this regard?
Wendy Diddel
Hi, Anja, I’m Wendy Diddell. So, yes, we were noticeably disappointed in the quarter with the margin and that, as I mentioned in the presentation, was similar to a source factor where a key component of the tube we used, there was a replacement in the procedure to lose the two goals and the five tubes, so the margin after the fourth quarter was reduced by about 10%, this was also affected because we had to avoid production.
I will mention this when production in the fitness sector closes. We were able to move many other people to other spaces of the company so as not to lose them completely. We were able to leverage their skills and have them working at LA Fox. production area, which runs in the wind turbine program and our onshore program. So that’s a silver lining.
But what we can expect in the future is that we are back in production. In the first quarter, we had no significant problems with suppliers or devices, so I expect gross margin to return to the top half. twenty years, except for unforeseen cases that may occur in the next six weeks or so. . .
Anja Söderström
Merci. Et I think you discussed something about Ukraine and China, in terms of the fitness sector. And do you expect that to continue or what you’ve done now?
Wendy Diddel
It is ok. Good question. So, as far as Ukraine is concerned, one of our vital consumers was there and started shopping again. So, I would expect to see progressive sales from them. They are temporarily located in Poland and can therefore still use CT equipment.
And in China, it’s a matter of time. We have already won and shipped a giant order in the first quarter. Therefore, there is no doubt about the call or any other challenge there. It’s just a matter of time. So I think we’re going to see that come back in the first quarter.
Anja Söderström
It is ok. Thus has just moved away in the fourth quarter, the disorders with Ukraine and China.
Wendy Diddel
No, Ukraine is variable. Obviously, we’ll have to wait and see how things play out there.
Anja Söderström
It is ok. And then, with the PMT business, he talked about the wind business there, and he has his big order with NextEra. When can you anticipate a follow-up order from them and what to expect in terms of that?
Edouard Richardson
Yes. Greg, do you want to answer that?
Grégory Peloquin
Of course. So we have weekly calls with NextEra. We are working on a number of other products for their wind turbines that we will announce here at this time of year. We will finish Phase I at the end of the summer and will most likely get the Phase II order, which will have a similar, if not longer, duration in our current quarter. And that was the prestigious morning. So he’s a wonderful companion.
But the smart news is that in the last 18 months, we now have nine other customers, wind turbine owners-operators buying this product. Therefore, we have definitely become the owner of this product in the industry, especially in North America. gained the quarter, amplifying the strong quarter of bookings, exclusive orders and shipments to Inver Energy and Enel, which are now 3 with NextEra, 3 of GE’s top wind turbine owner operators in North America. Therefore, it goes very fast.
Anja Söderström
It is ok. And then, as far as beta testing for strength plants is concerned, when do they conclude?I wonder if I will expect some orders from there.
Grégory Peloquin
So we got an order for 12 mobile towers from T-Mobile whose existing beta tests are being done right now and there are services in Phoenix, Arizona, similar to the ULTRA3000 capacitor, it takes them about six months to do all the research and get the beta test. So in terms of production orders, I would expect the third quarter of our fiscal year starting with T Mobile.
Anja Söderström
It is ok. And then on the progress rails, it turns out that you’re just scratching the surface. What can we expect there and are there other types of usage instances that you can use them with as well?
Edouard Richardson
Well, a progression rail belongs to Caterpillar and what are the advantages of this total program, we continue to see other opportunities for other products for the progression rail and for Caterpillar. The schedule to date is that we recorded an order of $18 million the quarter, as I mentioned. This product is the lithium module that we ship to Brazil and they put it together in the design of the electric locomotive and then send it to consumers outside the gates of North America.
Meanwhile, over the past six months, we have developed a date when we will be the production arm and design arm for sale to North American customers, such as Union Pacific, Long Island Railroad.
We placed an order for $3. 5 million to build not only the lithium module, but also the so-called superstructure, which is the center of the electric locomotive. Well, this shipment that advances the rails will then send it to your customers. expecting an additional order to this, in the first quarter, of a similar amount of approximately $3. 5 million.
In terms of content, the 3. 5 million, our content is about 1. 2 million for which it is locomotive compatible. Therefore, any visitor in North America asks, in some cases, for the same amount of content, whether it’s construction, meeting verification support or in North America and with Richardson’s features here, Progress Rail chose us in the fourth quarter to do this program with them. We’re very excited about that and, as you noted in some press releases, Union Pacific is taking orders for 20 locomotives. this fiscal year.
Anja Söderström
And then there are other instances of use with Caterpillar?
Edouard Richardson
Yes, but for other products. Just to be a demonstration and an agreement as a design and production arm for a company like Caterpillar that puts it in a position where, for example, with Progress Rail, we have a call every week and there are about 20 engineers in the calls.
And the opportunities are just amazing, as everyone tries to go green and we have those niche strength control features here at Richardson to take credit for some of those niche apps. They are big enough for us, yet for others, it is their type. niche
So I raised that if I could have that call, because when you hear the 20 engineers talk, anyone who thinks we’re a tube distributor will realize very temporarily that we’re back and much more.
Anja Söderström
It is ok. Well, thank you for this color. And then, as far as Canvys is concerned, it’s been a very strong expansion for you. Is it more catching up with the pandemic or do you think it will be sustainable?
Jens Rupert
Of course. Hello, that’s Jens. Je I surely think it’s sustainable. We will continue to grow. We have many new opportunities on the way. And as I also mentioned in my script, getting to market takes a long time. Sometimes we communicate with engineers for three, four or five years to get it all started. it’s not a short-term thing. This is anything in the medium and long term. Therefore, we definitely have new opportunities to paint, so I hope this business will continue to grow.
Anja Söderström
OK thanks. And then, what kind of currency has an effect on you?Can you simply overlook the buying and selling characteristics and how do we deserve to think that this will have an effect on your bottom line in the coming year?
Edouard Richardson
Bob, do you want to communicate about that, please?
robert ben
Of course. Well, you saw that there was more effect on the currency in the fourth quarter, basically because of the rise of the euro against the dollar, and we expect that to continue. On the other hand, all the forecasts I’ve read, coming in fiscal year 23, may go the other way around with the dollar falling. So you’re going to see ups and downs. So, I’d be expecting that in the first quarter we would probably see an effect similar to what we had in the fourth quarter, but after that, I’d be expecting an improvement.
Anja Söderström
So, is the euro the currency or the partnership?
robert ben
Yes. Our biggest exposure is the right kind. Yes, that’s fine.
Anja Söderström
It is ok. And then he also mentioned, I mean, that it constitutes his services here in the U. S. If you’re in the U. S. and expecting superior CapEx this year, can you quantify that?
robert ben
Yes, we’re probably going to spend $2 million or something. What we are doing with the COVID situation, more and more of our workers are fleeing home. So we have a lot of space, especially in the first piece of land we have. they are in the process of transforming into production and moving all personal offices to the top floor. The construction was built in 1986. So, this is the first time we’ve done a primary renovation and it will take two or three years, but the capital expenditures will probably be $3 to $5 million during that period.
Anja Söderström
It is ok. Thank you. That’s it for me. Thank you so much.
Edouard Richardson
Thank you Anja.
Operator
The next one comes from [Gokul Kannan with Infosys] (Ph). Your line is open. The next one comes from shareholder [Dennis Emato] (Ph). Your line is open.
unidentified analyst
Hello, thank you for taking the call. I need to raise my congratulations. It’s a wonderful quarter. I only had two questions. One, more or less general, given the smart quarter and the very smart order book figures. Do you have any idea why the market reaction is so negative today?
Edouard Richardson
We don’t know. The company has never done more than now. I think in our 75-year history, by the way, this is our 75th year. And I’m about 60 years old. This is the most successful year and quarter we’ve had, and with an order book of $206 million, it looks like we’re going to be successful at $250 million to $255 million next year without any problems. So I think we’re on track to be a $500 million corporation here in the next five years and incredibly successful.
unidentified analyst
Oui. Je I was just wondering if I had heard anything from analysts or shareholders, which would imply why anyone would have been disappointed with the results.
Edouard Richardson
I think what’s happening is that we have significant shareholders who have been on the board for 10 years and despite everything, they can make a profit from their assets and you can’t blame them for that. And I think that’s what happens, there are those who give up. But the good news is that, for every percentage sold, there is also a buyer.
unidentified analyst
It is ok. My query at the moment is for Bob Ben, it turns out that this quarter you separated currencies and investments for the first time, instead of all currencies and their equivalents. Can you comment on two things?What is the investment component?And now, since we still have positive interest rates on short-term Treasuries, etc. go back to all the coins you have?
robert ben
You just noticed that we have transferred some of our cash to investments, especially those on the CD and as rates rise, we will continue to look into this. I would expect that, given some of the increases we’ll be expecting this year through the end of the fiscal year, we would in fact have to get a greater source of revenue investment than we’ve had recently.
unidentified analyst
It is ok. It turns out that 90-day-an-hour Treasuries at about two and a half years are actually higher than CD rates and more liquidity. Is it conceivable to invest more of that other cash in short-term Treasuries?
robert ben
Oui. Il that capability exists and we’re still at it. We have an investment committee that reviews this quarterly. So, let’s definitely take a look at it. But as I mentioned in my remarks, we have over $25 million in money in the United States and about $15 million overseas. Therefore, we constantly have opportunities and we will in the future.
unidentified analyst
It is ok. Those are my questions. Thank you.
Edouard Richardson
Thank you so much.
Operator
Our next comes from [David Schneider] (Ph)Private Investor. Your line is now open.
unidentified analyst
Hello, thank you for answering my call. Looking at the May quarter and the overall fiscal year. Just looking for the operating money for the year’s total, it was, let’s say, a very small percentage of the net income. And I wonder what points could replace that in the long run so that the company gets more money from operations relative to net income?
Edouard Richardson
Bob, do you want to communicate about it, please?
robert ben
Of course. Well, obviously, with the money from trading, there’s quite a bit there. The main drivers are, of course, net income, depreciation, accounts receivable, inventory and accounts payable. And as we saw in FY22, we had significant increases in accounts receivable and inventory specifically and, as I mentioned in my comments, the accumulation of accounts receivable was largely due to sales growth. We upgraded our DSO to a moderate charge of approximately 39 days. So it was actually a service like an increase in sales.
With regard to inventories, we have talked about it. Greg mentioned, in his particular box, that we buy everything we can get in terms of components, so we can buy and ship our new products as temporarily as possible. In addition, our production company, as I mentioned, does things and has a lot of paints in progress, especially in the semiconductor wafer production box.
So I expect that to continue, albeit perhaps at a lower rate of expansion in fiscal year 23. And, in fact, I expect the top net source of revenue to contribute to that. So I think it’s a mix of higher net income source of income and optimal control of our current capital. But as we pointed out, for reasons similar to the source chain and a very high rate of expansion of the company, it is a bit complicated to keep this under control. But in fact we are doing our best.
unidentified analyst
Yes, at least how do I actually calculate their exceptional day stocks, for the end. It’s been pretty flat for the last five quarters, it’s recovering a little bit. But I think I discovered pretty much the same thing with the money conversion cycle of unpaid days and days payable, the way I calculate it 153 days in the May quarter. Pretty solid over the last five quarters. So I guess it does. Excuse me.
robert ben
No, I was just going to say that we expect an improvement, however, in FY23 and in the flow of operating money. So I don’t think I said that in particular, but I actually hope for an improvement.
unidentified analyst
It is ok. Well, that’s smart news. And as for the word Ukraine, it gave the impression on the call, once or twice and given the unfortunate scenario there. If we were to take the worst-case scenario and just give it a 0 in the future, how applicable would that be?be for the company?
robert ben
It is very small. That’s a few hundred thousand dollars.
unidentified analyst
It is ok. I just looked to get that out. Well, that’s it for me.
Edouard Richardson
Thank you.
Operator
The next one comes from Ross Taylor, ARS Investment Partners. Your line is now open.
ross-taylor
I must say that it exceeded my estimate compared to my expectations for the quarter. If I had to guess, I’d say I think promotion is almost like a retail business where other people are looking for something. And they get exhausted because they don’t necessarily perceive what they have. Far from this very quickly. You discussed some things that I found very interesting, and no one followed up. He spoke of a white label opportunity in the wind turbine box. Are you a domestic or foreign visitor for whom you would be in white label?
Edouard Richardson
Greg, do you want to answer that?
Grégory Peloquin
Of course. The personal stamp we talked about with a primary wind turbine manufacturer would be a global agreement. The products are used in all its wind turbines. We’ve already shown beta sites. As I mentioned earlier, we are still in the design stage. But it will be: starting with North America, India and Spain will be the 3 sites that will verify the product for them.
ross taylor
And I’m sure you can’t tell us who the visitor is. But is it the visitor and the American national player or the European player?
Grégory Peloquin
It’s a global player, but basically European.
ross taylor
Well, very big. It’s very exciting. That’s not what I started the way I imagined you were. I didn’t think you would answer that question that way. Very well. So, let’s take a look at other things. Obviously, you just commented on the fact that you have put combined inventories. This is not unusual for me to notice in many of my businesses, given the uncertainty and other people who are contemplating immediate increases. What do we want to see in your source chain to get it, so that it’s comfortable to return stocks to more historic grades and thus convert them into caches next year.
Edouard Richardson
Well, I think we have a lot of problems, especially in the built-in circuits that we use in the ultracapacitor module. The delivery is like 48 weeks, and we are a little up to date. So every time we have the opportunity to do an action, we do it. And, for example, with ultracapacitors, we buy all ultracapacitors, with the anticipation that we know we have orders for us. And we will continue to do so as long as there is a shortage, we have a lot of stock to be able to meet the demand of our consumers and, as you know, we have $40 million in cash. That’s been a problem.
ross taylor
No, and that’s what you do is careful. It’s just that it looks like at some point we’ll eventually come up with a more standardized supply chain. And while that’s going on, we hope to see, I think the money conversion can be significant overall.
Edouard Richardson
No, I think that’s fine. I think this year we are pretty unbiased in terms of money flow, spending maybe a few million dollars, and then in the next few years, we will have a positive money flow and raise a lot of money.
ross taylor
Great. Now that you’ve talked about a stylish launch at the time of success of the Canon series. What do you think, those tubes have been kind of a holy grail there, since you have a wonderful product, you haven’t actually been able to slip the more sensible line that you hoped to drag Canon?Do you see a reaction in the market position regarding who you are?And what kind of influence do you think we deserve to see when you put the tube in position for the moment and perhaps more tubes during this exercise?
Wendy Diddel
So we like that, we expect the expansion to be gradual. However, we expect a fairly smart point of expansion our fiscal year in this sector of activity. And it will be in part of the G the two new. Some of that will come from the extra details.
Now that we have G and D, we can cover the Canon market more. Therefore, other people who might have hesitated to remove their systems from service contracts with Canon can now do so and know that they can get almost all of their systems covered through a third-party service company. So, with that, we expect some expansion in sales. But for us again, the biggest driving force of expansion will be this Siemens program.
ross taylor
It is ok. And you commented: yes, obviously, and what kind of time horizon do you think Siemens is visualizing?
Wendy Diddel
So we hope to launch the first one, which is the Stratton Z. We hope to launch it before the end of this year calfinishar. We have some who are in a position right now and will first go through a shutdown. frifinish, check its location. And then, if they work as we expect, we’ll move on to see them do it for them.
And if all goes well, again, we’ll see those releases in the next 3-6 months. Most of the diversity is the MX series, it has 3 tubes and this will be the calendar year 2023. We’re still a little bit on the road to that.
ross taylor
And when they introduced them, he said, he thinks he’s getting a medium to high operating margin in the recovery after what happened in the last quarter. Do you think that at the time you submitted them, the operating margin could remain the same?Do you think you grow it? These divisions then operate some of the company’s other spaces.
Wendy Diddel
In fact, we rely on this Siemens program to help us: when it says operating margin, are you talking about gross margin?
ross taylor
Yes she is.
Wendy Diddel
Yes. We expect this to pile up for any of the reasons. The first is that when we sell them, we have a large margin. And then, secondly, it takes up some of the excess capacity that we have in our plan. We told him before that we have the ability to make up to 1,000 tubes in 3 shifts, and we make less than 300. So, the more tubes we can produce, the lower the load consistent with the tube. So, it’s a win in turnover and it’s a win at the gross margin line.
ross taylor
Sounds fantastic. And can you – two other areas. Can we communicate about the potential market of T-Mobile and others in the wireless space?
Edouard Richardson
Greg, do you want to communicate about it?
Grégory Peloquin
Of course. I think it’s going to be the same. It will start notoriously with North America. We have Verizon and AT
I’ll go up on top of that that we’re doing a giant program with a critical facility, a network of hospitals, here in Illinois, that will also use this product for the same generator, the same kind of situation. But it will also be anything we will get a noticeable score for the third or fourth quarter.
But we continue to load customers, we continue to do the beta testing and again, as I mentioned earlier, similar to the ULTRA3000 where we surely had the right effects in terms of testing the beta and flawlessly, we placed it with that as well. So I think it’s going from 0 to a hundred like ULTRA3000 did, but I don’t think it’s until the third or fourth quarter of this fiscal year.
ross taylor
It’s okay. But obviously, it’s a pretty exciting area. Do you need to communicate or are you cautiously communicating about the profit per site you expect from this?
Edouard Richardson
Well, I’m not going to communicate about numbers. But, for example, the ULTRA3000, there are 18 turbine compatible with that in terms of moving tower. There is only one compatible with mobile tower. But obviously, there are enough moving towers, so it’s a bit of a mix.
ross taylor
It is ok. And let’s move on to the railway locomotive, the electric railway locomotive. So basically what’s there is about $1. 2 million consistent with the rail or consistent with the engine. Is that what we’re in now?
Edouard Richardson
That’s pretty much our content. Now, as they build them, those are what I’ll call commuter trains and they’re used in shipyards or between Fox and Chicago. What they’re going up now, what we’re doing on those calls, is obviously for long-distance trains. , the transportation of goods through the United States. Our content with that, obviously, claims much more, because you’re going to want a lot more lithium modules. But right now, 1. 2 million is roughly our current content.
ross taylor
So, 1. 2 million is a bit like what you think, as you said, like a traveler exercise or a switch-like motor. So how much? I mean, obviously, the engines you’re talking about, I guess you use the one to see when you’re in the west and the exercises of about two kilometers. What kind of use are you talking about?
Edouard Richardson
Two miles or more. It is far-reaching. And it’s, again, when I discussed earlier on callArray if you will, if we have those kinds of shows, I mean, we’re talking about this show, and then the moment part of the call is about new products. And that would be for what’s called long-range electric locomotives. And right now, the content will be well above 1. 2. It’s amazing how many cells we’re talking about right now to run this locomotive so far away.
ross taylor
Would it be to think that it can be only an order of magnitude?
Edouard Richardson
Yes, I still don’t know what the order of magnitude would be. I don’t know, if it’s five times six. Until I’m comfortable with what it will be, I’ll share it with an obvious percentage, as we get closer to a program.
ross taylor
It is ok. It’s an incredibly exciting opportunity to replace the rear, as this is a huge market for the number of engines in operation.
Edouard Richardson
Well, as you can say, everyone has initiatives, either internally or within the government, to reduce their emissions to certain degrees until 2030 and 2050. So, it’s one of the markets where, it’s not a matter of when, I mean no. a query if, it doesn’t matter when. And so it’s alone, you hit him in the head, it’s exciting to be here in the fox, in the center of the fox and running with those kinds of programs.
And then read the press releases, where those massive railroads announce how many electric locomotives you’re going to buy. And he knows he’ll get more than one part. Progress Rail. We are associated with Progress Rail.
ross taylor
It’s okay, and like I said, you’re dropping the canopy here. As I said, I agree, I don’t quite understand why the market is slipping away. As if you have just seen a mouse, but I think it provides the opportunity for those who do not have compatibility, because I do not only listen to you. I think at the time of achieving 500 million, they deserve to be able to maintain or increase their operating margins while pushing in that direction.
Edouard Richardson
Absolutely.
ross taylor
It is ok. Well, it’s getting huge. Especially in a small part, he says. Okay, I’ll pass it on to whoever needs to resume.
Edouard Richardson
Thank you so much.
ross taylor
Thank you. Take care.
Operator
Thank you. [Operator Instructions] The next one comes from Walter Schenker with MAZ Partners. Your line is now open.
walter schenker
Ed, you indicated again, I think you said, the revenue from the existing fiscal year. That may just be my number, yet he said it over 250 million. At the beginning of the year, the outlook is good. It’s a quarter of more than $60 million. So, to get to 250, you need, on average, $60 plus a million rooms. This quarter, he had some problems, positive and negative, a buildup in freight, a complicated quarter for the doctor. But the question is, if I look at the success that this quarter has had with over $60 million in revenue, is it moderate to say that’s how you expect, and that’s the point of overall profitability, a lot of moving parts?Are you expecting quarters of $60 million to $65 million?
Edouard Richardson
Yes she is.
walter schenker
I urge you to make a forecast, which you don’t need to do. But I can ask you questions that you may need to answer.
Edouard Richardson
Yes, I think the profitability point will stay pretty much where it is now. And with an order book of $206 million for the year, we’re pretty confident that we can succeed on that 250, 255 figure without too much trouble.
walter schenker
It is ok. Not that it wasn’t great, but there were moving parts. Is it possible to get additional or cumulative costs in some way to compensate you and everyone else for having problems with transportation costs?Are there things you can do to get some of that back or not?
Edward Richardson
Jens, do you want to fix that, because most of your cargo disorders are in Canvys?
Jens Rupert
Of course, thank you. So, of course, we have contracts with our consumers, and as soon as they expire, we raise prices, of course. We will pass on increases in transport prices to our partners and carriers. And we are very transparent there, our consumers, for example, say that they can make it cheaper, we make cash on freight, we are satisfied that they take care of the import.
But other than that, we have, I think Freightways is very smart overall, because we have boxes all the time going from Asia to Europe to North America, okay. So we collect from suppliers and deserve to have very fair freight rates anyway. , they are, like everyone else, frankly. The question, yes, we will see opportunities where we can pass it on to our customers. Absolutely.
Wendy Diddel
Hey, definitely. The dog likes to transport goods.
Jens Rupert
Good about me.
walter schenker
No, the dog is because someone works on my terrace, and she hates it. I am sorry. But the last comment, this is not a query. I know that Ed and Wendy, every time we meet, I recommend that the board at some point buy back. If inventory stays around those levels, it’s a little more than 11 times, maybe annualized, in the fourth quarter. Again, I know that in the afterlife you have looked for a way to be unbiased with positive money flows, however, over the course of this year you deserve to get there and would do so again as a shareholder, recommending that a use of money is the redemption of at least one inventory in the future. It’s that I keep saying and you keep smiling at me.
Edouard Richardson
This is a topic of discussion at each and every board meeting. That’s all I can tell you.
walter schenker
Well, thank you very much Ed and Wendy.
Edouard Richardson
Thank you so much.
Wendy Diddel
Thank you Walter.
Operator
The next one comes from [Gokul Kannan with Infosys] (Ph). Your line is now open.
Gokul, check your mute button. The next one comes from [Marcus – with FactSet] (Ph). Your line is now open. Marcus, please check your mute button. And lately I’m not showing up in any other s right now. I’d like to speak with Ed Richardson again for closing remarks.
Edouard Richardson
Thank you, [Shannon] (Ph). We appreciate your patience and support. It’s been a long road, but we’re excited about the future. Getting to this point of functionality has indeed taken longer than expected, but we are very happy with what is happening and the huge buildup we have.
We perceive that history is complex. So at any time call us and we will be happy to answer your questions. Well, it is better for him to come and see us, it is less difficult to show him what we are doing than to tell him. Take a look at our functionality in the first quarter of fiscal 2023 in October. Thanks a lot.
Operator
This concludes the convening of today’s convention. Thank you for participating. You can now log out.