Richardson Electronics, Ltd. Q4 FY2025 earnings call

Management Statement and Operational Highlights

• Fiscal 2025 saw improved financial results, including 4 consecutive quarters of year-over-year sales growth and 5 consecutive quarters of positive operating cash flow.
• Fourth quarter 2025 total sales were $51.9 million, up from $47.4 million in the prior year's fourth quarter.
• Gross margin improved 50 basis points to 31.6% in Q4 2025, reflecting disciplined pricing and operational improvements.
• PMT delivered strong sales growth driven by semiconductor and RF power segments. GES saw growth due to increased demand for wind turbine modules. Canvys posted solid results exceeding plan and prior year performance.
• Strategic initiatives include global technology partnerships, expanding Green Energy products, and developing an ESS program. Focus on managing SG&A carefully while investing in talent and growth opportunities.

Segment Performance

• PMT (Power & Microwave Technologies Group): Fourth quarter sales increased 17.8%, with FY '25 sales at $137.8 million, up 7% year-over-year. Driven by strength in semiconductor and RF power segments. Revenue contribution from PMT was significant in FY '25.
• Green Energy Solutions (GES): Fourth quarter sales rose 14.1%, with FY '25 sales at $28.7 million, a 23.6% increase year-over-year. Growth due to increased demand for wind turbine modules. Revenue contribution from GES was strong in FY '25.
• Canvys: Fourth quarter sales were $9.5 million, up from $8.7 million in the prior year. FY '25 sales were $33.1 million, a 2.2% increase year-over-year. Backlog remained strong at $33.9 million at the end of FY '25.

Guidance

• Expect growth in FY '26 with strategic initiatives across PMT and GES, including global expansion of Green Energy products and new technology partnerships.
• Monitoring the impact of new tariffs and market conditions, pursuing opportunities from disruptions.
• Confident in organic growth opportunities and considering strategic acquisitions for longer-term growth.

Risks

• Elevated inflation in key markets.
• Ongoing supply chain pressures.
• Growing global instability, particularly in Europe and Asia.
• Impact of ongoing tariff negotiations and other market constraints.

Q: When asked about selling ultracapacitor products to GE turbines under service contracts, Greg Peloquin stated they met with GE, needed an NDA and test NDA, dealing with paperwork issues but making progress.

A: Gregory Peloquin mentioned it could increase the service available market by 35% as soon as customers start using the products.

Q: Anja Marie Soderstrom asked about competitors in PMT. Gregory Peloquin discussed competitors like standard industrial distributors and local rep companies, noting PMT's global infrastructure and design capabilities as advantages.

A: He mentioned competitors like Avnet and TTI, but PMT's model of demand creation and design with global infrastructure sets it apart.

Q: Mark Mandell discussed stock repurchase. Edward Richardson stated they are cautious about stock buybacks due to past experiences where stock price didn't reflect buybacks.

A: He mentioned valuing cash for business expansion over stock repurchase.

Q: Chip Rui asked about GES growth and semiconductor CapEx. Gregory Peloquin discussed GES growth being project-based but expecting continued growth with strategic initiatives. Edward Richardson talked about semiconductor wafer fab business improving as Lam absorbed inventory, expecting growth as Lam grows.