Richardson Electronics Reports Third Quarter Fiscal 2022 Net Income of $2.9 Million and Declares Quarterly Cash Dividend

Rhea-AI Summary

Richardson Electronics, Ltd. (NASDAQ: RELL) reported net sales of $55.3 million for Q3 FY2022, up 22.3% year-over-year. All business units contributed to this growth, with backlog increasing to $175.6 million. Gross margin decreased to 31.8% due to product mix and rising freight costs. Operating income for the quarter was $3.6 million, significantly up from $0.3 million in Q3 FY2021, and net income rose to $2.9 million from $0.2 million.

The company declared a $0.06 quarterly cash dividend, reflecting confidence in continued growth.

Positive

• Net sales increased 22.3% to $55.3 million in Q3 FY2022.
• Operating income rose to $3.6 million compared to $0.3 million in Q3 FY2021.
• Net income improved to $2.9 million from $0.2 million a year prior.
• Backlog increased to $175.6 million from $146.9 million in Q2 2022.

Negative

• Gross margin decreased to 31.8% from 34.9% in Q3 FY2021 due to product mix and higher freight costs.
• Cash and investments slightly declined to $39.1 million from $39.7 million in Q2 2022.

Seventh Consecutive Quarter of Sequential Revenue Growth; All Business Units Grow Versus Third Quarter FY21

Third Quarter Highlights

• Net sales of $55.3 million were up 22.3% from last year’s third quarter.
• Sales increased for PMT, Canvys and Healthcare in the third quarter of fiscal 2022 versus the third quarter of fiscal 2021.
• Backlog increased to $175.6 million in the third quarter versus $146.9 million at the end of the second quarter and $98.7 million at the end of the third quarter of last fiscal year.
• Gross margin was 31.8% of net sales for the third quarter of fiscal 2022 versus 34.9% of net sales in the prior year’s third quarter primarily due to product mix and higher global freight costs.
• Operating expenses decreased $1.6 million to $13.9 million compared to the prior year’s third quarter. This decrease was due to the non-recurrence of a $1.6 million legal settlement in the third quarter of fiscal 2021.
• Operating income was $3.6 million for the third quarter of fiscal 2022 compared to an operating income of $0.3 million in the third quarter of fiscal 2021.
• Earnings per common share (diluted) were $0.21 for the third quarter of fiscal 2022 compared to $0.02 per common share (diluted) in the third quarter of fiscal 2021.
• Cash and investments were $39.1 million as of February 26, 2022 versus $39.7 million on November 27, 2021.

LAFOX, Ill., April 06, 2022 (GLOBE NEWSWIRE) -- Richardson Electronics, Ltd. (NASDAQ: RELL) today reported financial results for its third quarter ended February 26, 2022. The Company also announced that its Board of Directors declared a $0.06 per share quarterly cash dividend.

“In our third quarter of fiscal 2022, we produced our seventh consecutive quarter of sequential revenue growth,” said Edward J. Richardson, Chairman, Chief Executive Officer, and President. “With continued growth in our backlog in all three business units, and new customers expressing interest in our growing range of engineered solutions, we remain confident that in spite of the challenging economic environment, fiscal year 2022 will finish with strong sales and improved profitability.”

Third Quarter Results

Net sales for the third quarter of fiscal 2022 increased 22.3% to $55.3 million compared to net sales of $45.2 million in the prior year’s third quarter due to higher net sales across all three business units. PMT sales increased $8.8 million or 25.0% from last year’s third quarter. Demand within PMT was driven by strong growth from new Power and Microwave Technology partners for various applications including Power Management and 5G infrastructure, as well as increasing shipments of our patented ULTRA3000. In addition, sales for several electron tube product lines, including semiconductor wafer fabrication, increased from the third quarter of fiscal 2021. Canvys sales increased by $1.1 million or 15.0% due to strong customer demand in North America and Europe. Richardson Healthcare sales increased $0.2 million or 7.4% primarily due to an increase in parts sales and an increase in demand for the ALTA750^TM Tubes.

Gross margin was 31.8% of net sales during the third quarter of fiscal 2022 compared to 34.9% of net sales during the third quarter of fiscal 2021. PMT margin decreased to 32.2% from 34.9% primarily due to product mix. Canvys margin as a percent of net sales decreased to 32.2% from 35.2% because of higher global freight costs. Healthcare gross margin was 25.1% in the third quarter of fiscal 2022 compared to 33.0% in the prior year’s third quarter due to an increase in component scrap expense and rising freight costs.

Operating expenses were $13.9 million compared to $15.5 million in the third quarter of fiscal 2021. The decrease in operating expenses resulted from the non-recurrence of a $1.6 million legal settlement in the third quarter of fiscal 2021. In addition, lower legal fees were offset by higher employee compensation expenses.

The Company reported operating income of $3.6 million for the third quarter of fiscal 2022 compared to an operating income of $0.3 million in the prior year’s third quarter. Other expenses for the third quarter of fiscal 2022, including interest income and foreign exchange, were $0.1 million, compared to other expenses of less than $0.1 million in the third quarter of fiscal 2021.

The income tax provision of $0.6 million for the third quarter of fiscal 2022 reflected a provision for foreign income taxes and the offset of a U.S. tax provision against the valuation allowance. In addition, state income taxes for Illinois increased due to the suspension of net operating loss carryforwards (“NOLs”) until the end of fiscal 2023. Net income for the third quarter of fiscal 2022 was $2.9 million compared to net income of $0.2 million in the third quarter of fiscal 2021. Earnings per common share (diluted) were $0.21 in the third quarter of fiscal 2022 compared to $0.02 per common share (diluted) in the third quarter of fiscal 2021.

Cash and investments at the end of the third quarter of fiscal 2022 were $39.1 million compared to $39.7 million at the end of the second quarter of fiscal 2022 and $47.4 million at the end of the third quarter of fiscal 2021. The Company continues to invest in inventory and working capital to support its growth initiatives as well as, $0.6 million during the quarter on capital expenditures primarily related to its Healthcare and manufacturing businesses as well as its IT System, versus $0.6 million during the third quarter of fiscal 2021.

FINANCIAL SUMMARY – NINE MONTHS ENDED FEBRUARY 26, 2022

• Net sales for the first nine months of fiscal 2022 were $163.0 million, an increase of 28.9%, compared to net sales of $126.5 million during the first nine months of fiscal 2021. Sales increased by $30.4 million or 30.8% for PMT, $5.2 million or 25.6% for Canvys and $0.9 million or 12.2% for Richardson Healthcare.
• Gross profit increased to $51.5 million during the first nine months of fiscal 2022, compared to $42.5 million during the first nine months of fiscal 2021. As a percentage of net sales, gross margin decreased to 31.6% of net sales during the first nine months of fiscal 2022, compared to 33.6% of net sales during the first nine months of fiscal 2021, primarily because of product mix in PMT and higher global freight costs in Canvys, partially offset by improved manufacturing efficiencies for Healthcare.
• Operating expenses decreased to $40.6 million for the first nine months of fiscal 2022, compared to $41.9 million for the first nine months of fiscal 2021. The decrease in operating expenses resulted from the non-recurrence of a $1.6 million legal settlement in the first nine months of fiscal 2021 and lower legal fees, partially offset by higher employee compensation expenses.
• Operating income during the first nine months of fiscal 2022 was $11.0 million, compared to an operating income of $0.6 million during the first nine months of fiscal 2021.
• Other expense for the first nine months of fiscal 2022, including interest income and foreign exchange, was less than $0.1 million, as compared to other expense of $0.5 million in the first nine months of fiscal 2021.
• The income tax provision of $1.3 million during the first nine months of fiscal 2022 reflected a provision for foreign income taxes and the offset of a U.S. tax provision against the valuation allowance. In addition, state income taxes for Illinois increased due to the suspension of NOLs until the end of fiscal 2023.
• Net income for the first nine months of fiscal 2022 was $9.6 million, versus a net loss of $0.2 million during the first nine months of fiscal 2021. Earnings per common share (diluted) were $0.71 for the first nine months of fiscal 2022 compared to a net loss of $0.02 per common share (diluted) for the first nine months of fiscal 2021.
  

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 May 25, 2022, to common stockholders of record as of May 6, 2022.

CONFERENCE CALL INFORMATION

On Thursday, April 7, 2022, 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 third quarter fiscal year 2022 results.  A question-and-answer session will be included as part of the call’s agenda.

Participant Instructions

To listen to the call, please dial (USA/CANADA) (866) 784-8065 or (International) (602) 563-8684 and enter Conference ID: 8259925 approximately five minutes before the start of the call.  A replay of the call will be available beginning at 1:00 p.m. Central Time on April 7, 2022, for seven days. The telephone number for the replay is (855) 859-2056; Conference ID: 8259925. In addition, there is a webcast link: https://edge.media-server.com/mmc/p/hat5fppd

FORWARD-LOOKING STATEMENTS

This release includes certain “forward-looking” statements as defined by the Securities and Exchange Commission. Statements in this press release regarding the Company’s business that are not historical facts represent “forward-looking” statements that involve risks and uncertainties. For a discussion of such risks and uncertainties, which could cause actual results to differ from those contained in the forward-looking statements, see Item 1A, “Risk Factors” in the Company’s Annual Report on Form 10-K filed on August 2, 2021, and other reports we file with the Securities and Exchange Commission. The Company assumes no responsibility to update the “forward-looking” statements in this release as a result of new information, future events or otherwise.

ABOUT RICHARDSON ELECTRONICS, LTD.

Richardson Electronics, Ltd. is a leading global manufacturer of engineered solutions, power grid and microwave tubes and related consumables; power conversion and RF and microwave components; high-value replacement parts, tubes, and service training for diagnostic imaging equipment; and customized display solutions. More than 60% of our products are manufactured in LaFox, Illinois, Marlborough, Massachusetts, or Donaueschingen, Germany, or by one of our manufacturing partners throughout the world. All of our partners manufacture to our strict specifications and per our supplier code of conduct. We serve customers in the alternative energy, healthcare, aviation, broadcast, communications, industrial, marine, medical, military, scientific and semiconductor markets. The Company’s strategy is to provide specialized technical expertise and “engineered solutions” based on our core engineering and manufacturing capabilities. The Company provides solutions and adds value through design-in support, systems integration, prototype design and manufacturing, testing, logistics and aftermarket technical service and repair through its global infrastructure. More information is available at www.rell.com.

Richardson Electronics, Ltd. common stock trades on the NASDAQ Global Select Market under the ticker symbol RELL.

Richardson Electronics, Ltd. 
Consolidated Balance Sheets
(in thousands, except per share amounts)

	Unaudited				Audited
	February 26, 2022				May 29, 2021
Assets
Current assets:
Cash and cash equivalents	$	39,147			$	43,316
Accounts receivable, less allowance of $149 and $202, respectively		31,605				25,096
Inventories, net		73,673				63,508
Prepaid expenses and other assets		3,362				2,385
Total current assets		147,787				134,305
Non-current assets:
Property, plant and equipment, net		16,839				17,067
Intangible assets, net		2,077				2,270
Lease ROU asset		3,502				2,570
Non-current deferred income taxes		481				541
Total non-current assets		22,899				22,448
Total assets	$	170,686			$	156,753
Liabilities
Current liabilities:
Accounts payable	$	20,744			$	16,979
Accrued liabilities		15,975				14,182
Lease liability current		1,164				1,066
Total current liabilities		37,883				32,227
Non-current liabilities:
Non-current deferred income tax liabilities		235				242
Lease liability non-current		2,113				1,358
Other non-current liabilities		844				1,366
Total non-current liabilities		3,192				2,966
Total liabilities		41,075				35,193
Stockholders’ Equity
Common stock, $0.05 par value; issued and outstanding 11,608 shares on February 26, 2022 and 11,160 shares on May 29, 2021		580				558
Class B common stock, convertible, $0.05 par value; issued and outstanding 2,053 shares on February 26, 2022 and 2,097 shares on May 29, 2021		103				105
Preferred stock, $1.00 par value, no shares issued		—				—
Additional paid-in-capital		65,831				62,707
Retained earnings		60,557				53,297
Accumulated other comprehensive income		2,540				4,893
Total stockholders’ equity		129,611				121,560
Total liabilities and stockholders’ equity	$	170,686			$	156,753

Richardson Electronics, Ltd. 
Unaudited Consolidated Statements of Comprehensive Income
(in thousands, except per share amounts)

	Three Months Ended								Nine Months Ended
	February 26, 2022				February 27, 2021				February 26, 2022				February 27, 2021
Net sales	$	55,308			$	45,235			$	162,991			$	126,465
Cost of sales		37,739				29,469				111,468				83,997
Gross profit		17,569				15,766				51,523				42,468
Selling, general and administrative expenses		13,946				15,457				40,550				41,924
Loss (gain) on disposal of assets		—				(6	)			2				(6	)
Operating income		3,623				315				10,971				550
Other expense (income):
Investment/interest income		(11	)			(15	)			(36	)			(48	)
Foreign exchange loss (gain)		121				65				(2	)			650
Other, net		17				(25	)			39				(61	)
Total other expense		127				25				1				541
Income before income taxes		3,496				290				10,970				9
Income tax provision		609				62				1,326				239
Net income (loss)		2,887				228				9,644				(230	)
Foreign currency translation gain (loss), net of tax		69				353				(2,353	)			2,966
Comprehensive income	$	2,956			$	581			$	7,291			$	2,736
Net income (loss) per share:
Common shares - Basic	$	0.22			$	0.02			$	0.73			$	(0.02	)
Class B common shares - Basic		0.19				0.02				0.66				(0.02	)
Common shares - Diluted		0.21				0.02				0.71				(0.02	)
Class B common shares - Diluted		0.19				0.02				0.64				(0.02	)
Weighted average number of shares:
Common shares – Basic		11,497				11,111				11,320				11,097
Class B common shares – Basic		2,074				2,097				2,089				2,097
Common shares – Diluted		12,027				11,183				11,724				11,097
Class B common shares – Diluted		2,074				2,097				2,089				2,097
Dividends per share:
Common share	$	0.060			$	0.060			$	0.180			$	0.180
Class B common share		0.054				0.054				0.162				0.162

Richardson Electronics, Ltd. 
Unaudited Consolidated Statements of Cash Flows
(in thousands)

	Three Months Ended								Nine Months Ended
	February 26, 2022				February 27, 2021				February 26, 2022				February 27, 2021
Operating activities:
Net income (loss)	$	2,887			$	228			$	9,644			$	(230	)
Adjustments to reconcile net income (loss) to cash (used in) provided by operating activities:
Depreciation and amortization		872				849				2,560				2,595
Inventory provisions		88				265				228				717
Share-based compensation expense		142				150				514				529
Loss (gain) on disposal of assets		—				(6	)			2				(6	)
Deferred income taxes		26				3				38				(50	)
Change in assets and liabilities:
Accounts receivable		(4,209	)			(837	)			(7,355	)			(1,004	)
Inventories		(3,113	)			133				(12,295	)			(875	)
Prepaid expenses and other assets		(2	)			428				(1,058	)			156
Accounts payable		1,902				496				4,204				(2,027	)
Accrued liabilities		563				873				2,075				4,285
Other		(370	)			216				(13	)			(222	)
Net cash (used in) provided by operating activities		(1,214	)			2,798				(1,456	)			3,868
Investing activities:
Capital expenditures		(554	)			(555	)			(2,161	)			(1,835	)
Proceeds from maturity of investments		—				—				—				16,000
Purchases of investments		—				—				—				(9,000	)
Net cash (used in) provided by investing activities		(554	)			(555	)			(2,161	)			5,165
Financing activities:
Proceeds from issuance of common stock		1,906				—				2,630				—
Cash dividends paid		(806	)			(780	)			(2,384	)			(2,340	)
Payment of financing lease principal		(45	)			(45	)			(136	)			(136	)
Net cash provided by (used in) financing activities		1,055				(825	)			110				(2,476	)
Effect of exchange rate changes on cash and cash equivalents		195				(34	)			(662	)			1,315
(Decrease) increase in cash and cash equivalents		(518	)			1,384				(4,169	)			7,872
Cash and cash equivalents at beginning of period		39,665				37,023				43,316				30,535
Cash and cash equivalents at end of period	$	39,147			$	38,407			$	39,147			$	38,407

Richardson Electronics, Ltd. 
Unaudited Net Sales and Gross Profit
For the Third Quarter and First Nine Months of Fiscal 2022 and 2021
($ in thousands)

By Strategic Business Unit:
Net Sales
	Q3 FY 2022								Q3 FY 2021				% Change
PMT	$	44,032							$	35,237				25.0	%
Canvys		8,141								7,078				15.0	%
Healthcare		3,135								2,920				7.4	%
Total	$	55,308							$	45,235				22.3	%
	YTD FY 2022								YTD FY 2021				% Change
PMT	$	128,778							$	98,418				30.8	%
Canvys		25,732								20,491				25.6	%
Healthcare		8,481								7,556				12.2	%
Total	$	162,991							$	126,465				28.9	%
Gross Profit
	Q3 FY 2022				% of Net Sales				Q3 FY 2021				% of Net Sales
PMT	$	14,163				32.2	%		$	12,308				34.9	%
Canvys		2,618				32.2	%			2,493				35.2	%
Healthcare		788				25.1	%			965				33.0	%
Total	$	17,569				31.8	%		$	15,766				34.9	%
	YTD FY 2022				% of Net Sales				YTD FY 2021				% of Net Sales
PMT	$	41,080				31.9	%		$	33,530				34.1	%
Canvys		8,348				32.4	%			7,156				34.9	%
Healthcare		2,095				24.7	%			1,782				23.6	%
Total	$	51,523				31.6	%		$	42,468				33.6	%

For Details Contact:		40W267 Keslinger Road
Edward J. Richardson	Robert J. Ben	PO BOX 393
Chairman and CEO	EVP & CFO	LaFox, IL 60147-0393 USA
Phone: (630) 208-2320	(630) 208-2203	(630) 208-2200 | Fax: (630) 208-2550

FAQ

What were Richardson Electronics' net sales for Q3 FY2022?

Net sales for Q3 FY2022 were $55.3 million, reflecting a 22.3% increase from the previous year's quarter.

How did Richardson Electronics' operating income change in Q3 FY2022?

Operating income increased to $3.6 million in Q3 FY2022, compared to $0.3 million in the same quarter last year.

What is the current backlog for Richardson Electronics?

The current backlog is $175.6 million, up from $146.9 million at the end of Q2 2022.

What is the declared cash dividend for Richardson Electronics?

Richardson Electronics declared a quarterly cash dividend of $0.06 per share.

How has gross margin changed for Richardson Electronics in Q3 FY2022?

Gross margin for Q3 FY2022 decreased to 31.8%, down from 34.9% in Q3 FY2021.