Richardson Electronics, Ltd. (RELL) filed its quarterly report (Form 10-Q) for the period ended August 31, 2024. The company reported unaudited consolidated balance sheets, statements of comprehensive income, cash flows, and stockholders’ equity. The report highlights a net sales decrease of 12.1% to $143.1 million compared to the same period last year, primarily due to the decline in demand for certain products. The company reported a net loss of $2.3 million, or $0.19 per diluted share, compared to a net loss of $1.4 million, or $0.12 per diluted share, in the same period last year. The company’s cash and cash equivalents decreased by $14.1 million to $34.4 million, and its total debt increased by $5.5 million to $43.5 million. The report also includes management’s discussion and analysis of the company’s financial condition and results of operations, as well as quantitative and qualitative disclosures about market risk and controls and procedures.
Financial Performance Overview
Richardson Electronics, Ltd. is a leading global manufacturer of engineered solutions, power grid and microwave tubes, power conversion and RF and microwave components, replacement parts for diagnostic imaging equipment, and customized display solutions. The company operates in four main business segments: Power and Microwave Technologies (PMT), Green Energy Solutions (GES), Canvys, and Healthcare.
In the first quarter of fiscal year 2025, which ran from June 2 to August 31, 2024, the company reported the following financial highlights:
Segment Performance
The company’s four business segments showed mixed performance in the quarter:
Power and Microwave Technologies (PMT)
Green Energy Solutions (GES)
Canvys
Healthcare
Expenses and Profitability
Consolidated gross profit decreased to $16.4 million, or 30.6% of net sales, compared to $17.3 million, or 32.8% of net sales, in the prior year period. The decrease was mainly due to unfavorable product mix and manufacturing under-absorption in the PMT segment, as well as unfavorable product mix in GES, partially offset by favorable product mix in Canvys and cost efficiencies in Healthcare.
SG&A expenses increased slightly to $16.1 million, or 30.0% of net sales, compared to $15.8 million, or 30.0% of net sales, in the prior year period. The increase was primarily due to higher incentives related to sales growth.
Other income was $0.3 million, up from $0.1 million in the prior year, mainly from interest income and foreign exchange gains.
The company’s effective tax rate was 9.0% in the current quarter, down from 23.7% in the prior year period. The decrease was due to changes in the geographical distribution of income, utilization of R&D credits, and the state income tax provision.
Net income for the quarter was $0.6 million, or $0.04 per diluted share, compared to $1.2 million, or $0.09 per diluted share, in the same period last year.
Liquidity and Capital Resources
The company’s operations and cash needs have been primarily financed through income from operations and cash on hand. As of August 31, 2024, the company had $23.0 million in cash and cash equivalents, compared to $24.3 million as of June 1, 2024.
Cash flows from operating activities generated $0.4 million in the current quarter, compared to $1.0 million in the prior year period. The decrease was mainly due to changes in working capital, including an increase in accounts receivable and inventory, partially offset by an increase in accounts payable and accrued liabilities.
Cash used in investing activities was $0.9 million in the current quarter, primarily for capital expenditures related to the company’s IT system and manufacturing facilities. This compares to $1.1 million in the prior year period.
Cash used in financing activities was $0.9 million in the current quarter, mainly for dividend payments to stockholders, compared to $0.6 million in the prior year period.
The company has a $30 million senior, secured revolving credit facility that it can use for working capital and general corporate purposes. As of the end of the first quarter and the date of this report, no amounts were outstanding under the credit facility.
Outlook and Risks
Management believes the company’s existing sources of liquidity, including current cash and operating cash flows, will provide sufficient resources to meet known capital requirements and working capital needs through the next twelve months. However, the company’s future capital requirements will depend on many factors, including the economy and the outlook for growth in its markets.
Certain statements in the report constitute “forward-looking” statements, which are subject to risks and uncertainties. These include economic, labor and political conditions; global business disruptions from the Russia-Ukraine and Israel-Hamas wars; currency exchange fluctuations; and the company’s ability to manage its growth. The company undertakes no obligation to update any forward-looking statements.
Additionally, the company is subject to tariffs on some of its products manufactured in China and imported into the United States. If the company is unable to successfully pass through the additional cost of these tariffs to customers, or if higher prices reduce demand, it will have a negative effect on the company’s sales and gross margins.
Conclusion
Richardson Electronics reported mixed financial results in the first quarter of fiscal 2025, with increased net sales but lower profitability compared to the prior year period. The company’s four business segments showed varied performance, with the Power and Microwave Technologies and Green Energy Solutions segments facing headwinds, while Canvys and Healthcare saw improvements.
The company maintains a strong liquidity position, with $23.0 million in cash and access to a $30 million credit facility. However, it faces risks from global economic and political conditions, as well as the potential impact of tariffs on its China-manufactured products.
Overall, Richardson Electronics is navigating a challenging environment, but the company’s diversified business model and focus on engineered solutions provide a foundation for long-term growth, provided it can effectively manage the various market risks it faces.