RICHARDSON ELECTRONICS, LTD. (RELL)·Q4 2024 Earnings Summary

Executive Summary

• Q4 FY2024 net sales were $47.4M and diluted EPS was -$0.01 as GES and PMT faced timing pushouts and weaker RF/Microwave demand; consolidated gross margin improved 320 bps YoY to 31.1% on favorable product mix, while backlog held at $147.8M .
• Cash ended at $24.3M with no debt; operating cash flow of $7.2M in Q4 reflected inventory and AR reductions, marking the first YoY inventory decline since FY2017 .
• GES bookings were strong (up 70% YoY in Q4) and GES backlog rose to $42.3M (+$5.5M seq), though shipments were pushed into Q1 FY2025; management expects a return to YoY sales growth and higher profitability in FY2025 .
• Dividend maintained at $0.06 per common share and $0.054 for Class B, with management highlighting semi wafer fab recovery expected in calendar 2025 and evaluating strategic options for Healthcare as potential catalysts .

What Went Well and What Went Wrong

What Went Well

• Gross margin expanded to 31.1% (+320 bps YoY) with all SBUs improving, led by PMT (31.1%), Healthcare (32.5%), and Canvys (33.5%) on favorable mix and lower scrap costs .
• Strong cash generation and balance sheet discipline: Q4 operating cash flow of $7.2M; cash increased to $24.3M; first YoY inventory reduction since FY2017, positioning for growth investments .
• GES commercial momentum: Q4 bookings +70% YoY; backlog up 16% sequentially to $42.3M, adding new customers/products (ULTRAGEN starter modules; pitch energy modules on Suzlon, Senvion, Nordex, SSB) and global expansion .
  • “We believe we will return to year-over-year sales growth and higher profitability in fiscal 2025.” — Edward J. Richardson .

What Went Wrong

• Revenue declined 19.5% YoY to $47.4M; PMT -$1.0M YoY, GES -$10.6M YoY due to non-recurring EV locomotive battery sale in prior year; Canvys -$0.5M YoY on medical OEM softness .
• Operating income swung to a slight loss (-$0.1M) versus $1.4M prior year; diluted EPS -$0.01 vs $0.27 prior year, with tax valuation allowance (+$0.9M expense) partially offset by R&D credits ($0.4M current; $0.5M prior years) .
• Healthcare remained below breakeven in Q4 amid supply chain challenges; full-year loss ~$3M; company evaluating strategic options for the business .

Financial Results

Segment Net Sales by Quarter ($USD Millions)

Selected KPIs

Note: Street consensus estimates from S&P Global were unavailable at time of writing due to data access limits.

Guidance Changes

Earnings Call Themes & Trends

Management Commentary

• Strategic focus: “We remain focused on pursuing significant long-term growth opportunities within our global GES markets… we believe we will return to year-over-year sales growth and higher profitability in fiscal 2025.” — Edward J. Richardson .
• PMT outlook: “Q4 FY’24 was our largest revenue quarter this year for the semi wafer fab business, up 71% over Q3… we expect to see year-over-year growth… in FY’25.” — Greg Peloquin .
• GES bookings: “Q4 was our strongest booking quarter this fiscal year, growing our backlog 16% over Q3… bookings in Q4 FY’24 were up 70% versus Q4 FY’23.” — Greg Peloquin .
• Balance sheet discipline: “We ended the year with no debt and $24.3 million in cash and cash equivalents.” — Edward J. Richardson .
• Healthcare: “We did not achieve breakeven in the quarter… the company is beginning to evaluate strategic options for the healthcare business.” — Wendy Diddell .

Q&A Highlights

• Semi-cap recovery and magnitude: Largest customer revenue -$25M YoY in FY2024; management expects return to FY2023 levels (>$40M) in CY2025 with strong margins, implying a material earnings lever .
• GES shipment timing: Sequential step-down in Q4 GES due to pushouts into Q1 FY2025; strong bookings breadth, expanding to OEM and repower programs globally (e.g., Suzlon) .
• Inventory trajectory: Strategic inventory to capture demand after supply chain constraints; ongoing reduction expected, with one vendor doing last-time builds temporarily offsetting declines .
• Healthcare profitability: Annual loss ~$3M; Q4 loss ~$0.6–0.7M; pursuing options while Siemens repaired tube program improves .
• Backlog detail: Combined backlog >$102M across GES and PMT; PMT backlog ~$60M, GES ~$42M heading into FY2025 .

Estimates Context

• Wall Street consensus (S&P Global) for Q4 FY2024 EPS and revenue was unavailable due to data access limits at time of writing; as a result, beats/misses versus consensus cannot be assessed here. Management’s qualitative guidance points to FY2025 YoY sales growth and profitability improvement based on semi-cap recovery and GES backlog strength .

Key Takeaways for Investors

• Margin resilience amid revenue volatility: Consolidated gross margin reached 31.1% on mix and cost control; as semi wafer fab and GES volumes normalize, operating leverage should improve materially .
• Bookings/backlog de-risk near-term: GES bookings +70% YoY and backlog +16% seq to $42.3M indicate strong demand; Q4 shipment pushouts likely a timing issue with sequential growth expected in Q1 FY2025 .
• Semi-cap is the core earnings swing factor: Customer commentary suggests record CY2025; PMT recovery back above FY2023 levels (> $40M) at strong proprietary margins could drive a step-change in EPS and FCF .
• Balance sheet optionality: $24.3M cash, no debt, and improved working capital set up for strategic investment and potential capital allocation as operating cash flow stabilizes .
• Healthcare strategy could unlock value: With continued operating losses and supply chain constraints, strategic alternatives may reduce drag or reshape portfolio .
• Near-term trading setup: Expectation of sequential growth in Q1 FY2025, stable backlog, and margin sustainability may support shares ahead of semi-cap inflection and GES shipment normalization .
• Medium-term thesis: Diversified engineered solutions across power management and green energy, expanding technology partner ecosystem, and global OEM/repower programs position RELL to compound beyond cyclical semi-cap tailwinds .