Release Date: April 10, 2025
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Richardson Electronics Ltd (RELL, Financial) reported significant growth in key segments, with semiconductor wafer fab sales surging by 139% and Canvys sales increasing by 39.5%.
- The company achieved positive operating cash flow for the fourth consecutive quarter, ending with no debt and $36.7 million in cash and equivalents.
- Gross margin improved to 31.0% of net sales, up from 29.5% in the previous year, driven by margin expansion in both PMT and GES segments.
- The company is well-positioned to capitalize on policies driving manufacturing back to the US, with strong vendor partnerships and a global infrastructure.
- Richardson Electronics Ltd (RELL) is focusing on growth in its Green Energy Solutions segment, with a strong backlog and expansion into new markets like Europe and Asia.
Negative Points
- The company reported a one-time $4.9 million healthcare charge due to the loss on the sale of assets, impacting overall financial results.
- Sales growth was partially offset by a $1.0 million decrease in healthcare sales and a $2.2 million decline in GES sales due to lower sales of wind turbine battery modules.
- Operating loss was $2.7 million, and net loss was $2.1 million for the third quarter of fiscal 2025.
- The healthcare asset sale resulted in a strategic shift, with potential ongoing losses from the ALTA tube manufacturing expected in FY26.
- The current operating environment is extremely fluid, with uncertainties related to tariffs and market conditions impacting business operations.
Q & A Highlights
Q: What should we expect in terms of sequential growth for the Green Energy Solutions (GES) business?
A: Gregory Peloquin, Executive Vice President - Power and Microwave Technologies Group, stated that based on their backlog and inventory position, they expect growth in the fourth quarter and in FY26. The current shipping schedule supports this expectation.
Q: Are there any cancellations or delays in the pipeline for new projects?
A: Gregory Peloquin confirmed that there are no cancellations or delays. All identified programs and products are moving forward, and they plan to invest in expediting product market entry.
Q: How is the semiconductor wafer fab business performing, and what are the expectations?
A: Gregory Peloquin noted that the semiconductor wafer fab business has seen sequential growth each quarter. They expect continued growth in the fourth quarter and for the fiscal year, although not at the same rate as the previous 139% year-over-year increase.
Q: How is Richardson Electronics navigating the impact of tariffs?
A: Wendy Diddell, Chief Operating Officer, explained that only about 5% of their purchases come from China, minimizing tariff impact. They have multiple inventory hubs to manage inventory placement and a robust duty drawback process to mitigate tariff effects.
Q: What is the strategy for capital allocation following the healthcare asset sale?
A: Wendy Diddell mentioned that the immediate focus is on investing in people and technology to expand product offerings, particularly in ultra-capacitor wind energy modules. The M&A strategy will be discussed further as it develops in FY26.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
