Results reflect challenging economic conditions as well as decline in sales to semiconductor wafer fab customers and project delays across the Company’s GES business.

Backlog increased 2% over the past three months, which management believes indicates stabilizing demand.

Company implements new ownership requirements for outside directors.

LAFOX, Ill., Jan. 10, 2024 (GLOBE NEWSWIRE) -- Richardson Electronics, Ltd. (NASDAQ: RELL) today reported financial results for its second quarter ended December 2, 2023. The Company also announced that its Board of Directors declared a $0.06 per share quarterly cash dividend.

“Although our second quarter results fell short of expectations, we are confident that our current pipeline of existing projects as well as new global opportunities within our GES business will drive significant long-term value for our company,” said Edward J. Richardson, Chairman, Chief Executive Officer, and President.

“While we expect difficult economic conditions to remain over the near term, we believe the stabilization in our backlog, as well as recent customer indications, will support sequential revenue growth in the third and fourth quarters. Specifically, we anticipate improving sales trends within our GES business in the second half of fiscal 2024 to offset the continued weakness we are experiencing in the semiconductor wafer fab market. The expansion of our product roadmap for green energy solutions continues to add new customers and programs for wind, EV rail and other applications that take advantage of energy transition initiatives underway throughout the world. As we navigate a more challenging operating environment over the near-term, we are focused on controlling operating expenses, improving our operating cash flow, and prudently managing working capital requirements,” concluded Mr. Richardson.

Second Quarter Results

Net sales for the second quarter of fiscal 2024 decreased 33.0% to $44.1 million compared to net sales of $65.9 million in the prior year’s second quarter due to lower net sales in PMT, GES and Canvys. PMT sales decreased $9.3 million or 22.9% from last year’s second quarter primarily due to lower sales of manufactured products for the Company’s semiconductor wafer fabrication equipment customers. GES sales decreased $9.7 million from last year’s second quarter primarily due to lower sales of ultracapacitor modules for wind turbines as a result of the project-based nature of this product line. Canvys sales decreased by $2.8 million, or 27.7% primarily due to lower customer demand in North America. However, Canvys’ backlog increased reflecting higher overall demand. Richardson Healthcare sales were comparable for both the fiscal 2024 and fiscal 2023 second quarters as higher CT tube and parts demand offset lower system sales.

Gross margin was 28.4% of net sales during the second quarter of fiscal 2024, compared to 33.2% during the second quarter of fiscal 2023. Without the under absorption of the Company’s manufacturing facility, management estimates that the Company’s consolidated gross margin for the fiscal 2024 second quarter would have been 31.3%. PMT gross margin decreased to 28.5% from 34.5% due to product mix and $0.9 million of manufacturing under absorption. GES gross margin decreased to 29.2% from 33.9% due to product mix. Healthcare gross margin decreased to 14.8% in the second quarter of fiscal 2024 compared to 23.2% in the prior year’s second quarter as a result of a $0.3 million increase in manufacturing under absorption. Canvys’ gross margin increased to 33.5% from 29.7% because of product mix and lower freight costs.

Operating expenses were $14.5 million compared to $14.7 million in the second quarter of fiscal 2023. The decrease in operating expenses resulted from lower incentives expenses, partially offset by higher salaries and fringe expenses.

The Company reported an operating loss of $2.0 million for the second quarter of fiscal 2024 compared to operating income of $7.2 million in the prior year’s second quarter. Other expense for the second quarter of fiscal 2024, including interest income and foreign exchange, was $0.3 million, compared to other expense of $0.1 million in the second quarter of fiscal 2023.

Income tax benefit was $0.5 million or a 21.6% effective tax rate versus an income tax provision of $1.5 million or a 21.5% effective tax rate in the prior year’s second quarter.

Net loss for the second quarter of fiscal 2024 was $1.8 million compared to net income of $5.5 million in the second quarter of fiscal 2023. Net loss per common share (diluted) was $0.13 in the second quarter of fiscal 2024 compared to earnings per common share (diluted) of $0.39 in the second quarter of fiscal 2023.

Cash and investments were $22.8 million as of December 2, 2023 versus $24.1 million on September 2, 2023. The use of cash during the second quarter of fiscal 2024 primarily resulted from $1.5 million of capital expenditures related to the Company’s facilities and IT system. In the quarter, the Company’s Board of Directors created new ownership requirements for outside directors. This includes owning a minimum of $150,000 of our stock after a three-year period.

Financial Summary for the Six Months Ended December 2, 2023

• Net sales for the first six months of fiscal 2024 were $96.7 million, a decrease of 27.5%, compared to net sales of $133.5 million during the first six months of fiscal 2023. Sales decreased by $18.9 million or 22.0% for PMT, $13.8 million or 66.3% for GES, $3.3 million or 16.2% for Canvys and $0.7 million or 11.8% for Richardson Healthcare.
• Gross profit decreased to $29.8 million during the first six months of fiscal 2024, compared to $44.9 million during the first six months of fiscal 2023. As a percentage of net sales, gross margin decreased to 30.8% of net sales during the first six months of fiscal 2024, compared to 33.6% of net sales during the first six months of fiscal 2023, primarily because of product mix and manufacturing under absorption in PMT, as well as increased scrap expense and manufacturing under absorption in Healthcare, partially offset by a favorable product mix and lower freight costs in Canvys.
• Operating expenses increased to $30.3 million for the first six months of fiscal 2024, compared to $28.9 million for the first six months of fiscal 2023. The increase in operating expenses resulted from higher employee compensation expenses.
• Operating loss during the first six months of fiscal 2024 was $0.5 million, compared to operating income of $16.0 million during the first six months of fiscal 2023.
• Other expense for the first six months of fiscal 2024, including interest income and foreign exchange, was $0.1 million, as compared to other expense of $0.5 million in the first six months of fiscal 2023.
• The income tax benefit was $0.1 million or an effective tax rate of 16.5% for the first six months of fiscal 2024 compared to an income tax provision of $3.6 million or an effective tax rate of 23.4% during the first six months of fiscal 2023.
• Net loss for the first six months of fiscal 2024 was $0.6 million, versus net income of $11.9 million during the first six months of fiscal 2023. Net loss per common share (diluted) was $0.04 for the first six months of fiscal 2024 compared to $0.83 earnings per common share (diluted) for the first six months of fiscal 2023.

CASH DIVIDEND DECLARED

The Board of Directors of Richardson Electronics declared a $0.06 quarterly cash dividend per share to holders of common stock and a $0.054 cash dividend per share to holders of Class B common stock. The dividend will be payable on February 28, 2024, to common stockholders of record as of February 9, 2024.

CONFERENCE CALL INFORMATION

On Thursday, January 11, 2024, at 9:00 a.m. Central Time, Edward J. Richardson, Chairman and Chief Executive Officer, and Robert J. Ben, Chief Financial Officer, will host a conference call to discuss the Company’s second quarter fiscal 2024 results. A question-and-answer session will be included as part of the call’s agenda.

Participant Instructions

Participants may register for the call here. While not required, it is recommended you join 10 minutes prior to the event start. A replay of the call will be available beginning at 1:00 p.m. Central Time on January 11, 2024, for seven days. Registration instructions are also on our website at www.rell.com .