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RE

RICHARDSON ELECTRONICS, LTD. (RELL)·Q2 2025 Earnings Summary

Executive Summary

  • Q2 FY25 revenue increased 12.1% year over year to $49.5M with gross margin up 260 bps to 31.0%; net loss narrowed to $0.8M (-$0.05 diluted EPS), driven by strong GES (+129%) and PMT (+9.9%) contributions .
  • Backlog rose sequentially to $142.6M (+$5.2M QoQ), led by GES; management reiterated expectations for FY25 year-over-year sales growth and higher profitability .
  • Positive operating cash flow for the third consecutive quarter ($5.5M) and cash of $26.6M with no debt; quarterly dividend maintained at $0.06 per share .
  • Strategic asset sale of a majority of Richardson Healthcare on Jan 24, 2025 (post-Q2) with a 10-year global supply agreement; expected to simplify the business and support higher ROI focus areas (GES) .
  • Wall Street consensus via S&P Global was not available at the time of request; estimate comparisons are therefore not provided (see Estimates Context).

What Went Well and What Went Wrong

What Went Well

  • GES accelerated: Q2 sales +129% YoY to $6.0M, driven by wind turbine battery modules; backlog and bookings grew over 16% QoQ in GES .
  • Semiconductor wafer fab exposure improved: PMT sales +9.9% YoY; management cited rising semi demand tied to AI, data centers, 5G, and localization as a forward driver .
  • Margin expansion: consolidated gross margin rose to 31.0% (+260 bps YoY); Healthcare margin improved sharply to 35.7% on mix and manufacturing efficiencies .
  • Quote: “We achieved outstanding growth in our Green Energy Solutions business… Overall, second quarter sales reached $49.5 million, a solid 12% year-over-year increase.”

What Went Wrong

  • Canvys softness: sales -6.0% YoY amid European macro headwinds (German IFO dipped), and freight costs pressured margins (31.7% vs 33.5%) .
  • Healthcare demand lower: sales -22.8% YoY; despite margin improvements, segment sales declined across product lines .
  • Operating loss persisted: operating loss of $0.7M (vs $2.0M LY) despite improved gross margin; Opex increased on incentives tied to sales growth .

Financial Results

MetricQ4 FY24 (Jun 1, 2024)Q1 FY25 (Aug 31, 2024)Q2 FY25 (Nov 30, 2024)
Revenue ($USD Millions)$47.4 $53.7 $49.5
Diluted EPS ($)$(0.01) $0.04 $(0.05)
Gross Margin %31.1% 30.6% 31.0%
Operating (Loss) Income ($USD Millions)$(0.1) $0.3 $(0.7)
Net (Loss) Income ($USD Millions)$(0.1) $0.6 $(0.8)
EBITDA ($USD Millions)N/A$1.7 $(0.04)
Estimates (Revenue)N/AN/AN/A
Estimates (EPS)N/AN/AN/A

Notes: S&P Global consensus data was unavailable; therefore, vs-estimate comparisons are not provided (see Estimates Context).

YoY snapshot (Q2 FY25 vs Q2 FY24):

  • Revenue: $49.5M vs $44.1M (+12.1%)
  • Gross margin: 31.0% vs 28.4% (+260 bps)
  • Diluted EPS: $(0.05) vs $(0.13) (improvement)

Segment Net Sales and Gross Margin

SegmentQ4 FY24 Net Sales ($M)Q4 FY24 GM %Q1 FY25 Net Sales ($M)Q1 FY25 GM %Q2 FY25 Net Sales ($M)Q2 FY25 GM %
PMT$30.5 31.1% $34.2 29.8% $34.4 30.3%
GES$4.7 25.5% $8.1 29.4% $6.0 32.0%
Canvys$8.7 33.5% $7.6 34.3% $6.9 31.7%
Healthcare$3.5 32.5% $3.8 32.4% $2.3 35.7%
Total$47.4 31.1% $53.7 30.6% $49.5 31.0%

KPIs and Balance Sheet

KPIQ4 FY24Q1 FY25Q2 FY25
Backlog ($M)$147.8 $137.4 $142.6
Cash & Equivalents ($M)$24.3 $23.0 $26.6
Cash from Operations ($M)$6.5 FY total; $7.2 in Q4 (operating cash flow) $0.41 $5.47
Net Debt ($M)$0 (no debt) $0 $0

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
FY25 Sales & ProfitabilityFY25“Return to YoY sales growth and higher profitability in fiscal 2025” (Q4 FY24 PR) “Management expects YoY sales growth and higher profitability for FY25” (Q2 PR) Maintained
Dividend per shareQ2 FY25$0.06 (Q1 FY25 PR) $0.06 payable Feb 26, 2025 Maintained
SG&A trajectoryH2 FY25N/AIncentive-driven SG&A increase; expected to rise with sales but below ~10% YoY pace seen in Q2 New qualitative color
GES shipments/backlogCY2025N/AGES backlog ~ $44–45M scheduled to ship in CY2025; two multi-million PEM contracts to ship during CY2025 New visibility
Tax rateFY25N/AEffective tax rate was ~28.8% in Q2; no forward rate given N/A

Earnings Call Themes & Trends

TopicPrevious Mentions (Q4 FY24, Q1 FY25)Current Period (Q2 FY25)Trend
AI/Semiconductor demandEarly signs of improving wafer fab demand (Q4 FY24) ; Q1 saw +16% wafer fab sales YoY PMT +9.9% YoY; mgmt optimistic about semi cap given AI, data center, 5G, localization drivers Improving
Green Energy Solutions (ULTRA3000 PEMs)Q4: GES delayed programs; Q1: +84% YoY GES sales Q2: +129% YoY; multi-million GE-platform orders; backlog +16% QoQ; shipping from inventory Accelerating bookings; shipments ramp in 2025
Canvys/Regional macroQ4: mixed; Q1: demand challenges in NA/EU Q2: Europe weakness; freight costs; German IFO 84.7 cited; backlog improved to $39.1M Near-term headwinds; backlog supportive
Healthcare strategyQ4: margin improvement, mixed demand Q2: -22.8% sales; margin + to 35.7%; post-Q2 asset sale and 10-year supply agreement with DirectMed Strategic simplification; partnership
Inventory/Thales tube transitionQ4: inventory reduction focus Q2 call: Thales exit; ~$30M tube inventory; expected depletion over ~5 years; ~$5M additional purchases in CY2025 Transition managed; cash conversion over time

Management Commentary

  • “Shipping orders from inventory on a regular basis helps improve our cash flow and expand our gross margin... we’re seeing strong momentum in our semiconductor wafer fab assembly business, rising semiconductor demand driven by advances in AI...” — Edward Richardson .
  • “GE[S] sales grew 129% to $5.9 million... exclusive partnerships with the top 4 owner operators of GE wind turbines in North America: RWE, Invenergy, Enel and NextEra.” — Greg Peloquin .
  • “Operating loss was $0.7 million... EBITDA approximately breakeven versus negative $1.2 million in the prior year second quarter.” — Robert Ben .
  • “Two multi-million dollar production contracts... for ULTRA3000® PEMs; shipments during calendar 2025.” — Company press release .
  • “Strategic asset sale of a majority of Richardson Healthcare to DirectMed... 10-year global supply agreement for repaired Siemens CT tubes.” — Company press release .

Q&A Highlights

  • GES contracts and shipment cadence: Multi-million orders (GE platforms) began shipping in December; balance to ship through CY2025; inclusion on repower bill of materials expected to expedite ULTRA3000 adoption .
  • Backlog visibility: Combined PMT+GES backlog ~$101M; ~80% scheduled to ship over next 12 months; GES backlog ~$44–45M slated for CY2025 shipments; substantial shipping from inventory (ULTRA3000) .
  • SG&A outlook: Incentives tied to sales growth drove Q2 increase; expected to rise with sales but at a lower rate than ~10% YoY seen in Q2 .
  • Locomotive programs: Electric locomotive shipment >$1M expected late Q3; starter modules forecast for 1,000 trains in CY2025, shipments commencing immediately .
  • Thales tube inventory: Current balance around $30M; expected additional ~$5M purchases in CY2025; depletion timeline shortened from ~7 to ~5 years given >$20M annual sales run-rate .

Estimates Context

  • We attempted to retrieve Wall Street consensus via S&P Global for Q2 FY25 (Revenue and EPS) but estimates were unavailable due to data access limits at the time of request. As a result, vs-consensus comparisons are not provided in this recap. If desired, we can update this section once S&P Global estimates are accessible.

Key Takeaways for Investors

  • Mix-led margin expansion and GES momentum underpin improving fundamentals; watch for CY2025 shipments from recent PEM contracts as a near-term revenue catalyst .
  • Semi wafer fab demand recovery tied to AI/data centers appears durable; PMT backlog and customer signals support sequential growth into Q3 FY25 .
  • Strategic Healthcare asset sale simplifies the model and enhances focus on higher ROI segments (GES/PMT), with cash and supply agreements mitigating transition risk .
  • Inventory strategy enables shipping from stock, improving cash conversion; Thales tube inventory represents a multi-year monetization opportunity .
  • Canvys remains exposed to European macro; backlog growth offers cushion but freight/mix may pressure margins near-term .
  • Dividend maintained ($0.06), strong balance sheet (no debt, $26.6M cash at Q2; $36.7M by Q3) supports growth investments and shareholder returns .
  • Near-term trading: catalysts include backlog conversion, locomotive shipments, and GES PEM deployments; medium-term thesis centers on engineered solutions scale in green energy and semi cap demand normalization .