Richardson Electronics Ltd (RELL) Q1 2025 Earnings Call Highlights: Navigating Growth Amidst ...
Net Sales: $53.7 million, a 2.2% increase from $52.6 million in the prior year's first quarter.
Gross Margin: 30.6% of net sales, down from 32.8% in the prior year.
Operating Income: $0.3 million, compared to $1.5 million in the prior year.
Net Income: $0.6 million or $0.04 per diluted share, down from $1.2 million or $0.09 per diluted share in the prior year.
EBITDA: $1.7 million or 3.1% of net sales, compared to $2.6 million or 5.0% of net sales in the prior year.
Cash and Cash Equivalents: $23.0 million at the end of the first quarter.
Operating Cash Flow: $0.4 million, compared to $1.0 million in the prior year.
Capital Expenditures: $0.9 million, primarily for facilities and IT systems.
Dividends Paid: $0.9 million in cash dividends.
GES Sales Growth: 84% increase to $8.1 million.
Healthcare Sales Growth: 48.8% increase to $3.8 million.
PMT Sales: $34.2 million, a 4.3% decrease from the prior year.
Canvys Sales: $7.6 million, a 22.8% decrease from the prior year.
Healthcare Gross Margin: Improved to 32.3% from 31.6% in the prior year.
Canvys Gross Margin: Increased to 34.3% from 34.0% in the prior year.
Release Date: October 10, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
Richardson Electronics Ltd (NASDAQ:RELL) reported a 2.2% increase in net sales for Q1 fiscal 2025, reaching $53.7 million despite having one less week compared to the previous year.
The Green Energy Solutions (GES) segment saw an impressive 84% growth in sales, driven by new programs and products.
The Healthcare division experienced a 48.8% increase in sales, with significant growth in the CT tube business.
The company maintains a strong balance sheet with $23.0 million in cash and no outstanding debt on its $30 million revolving line of credit.
Richardson Electronics Ltd (NASDAQ:RELL) anticipates launching several new products in the green energy business in the first half of calendar year 2025, which is expected to drive higher manufacturing demand and improve gross margins.
Negative Points
The gross margin for Q1 fiscal 2025 declined to 30.6% from 32.8% in the previous year, primarily due to product mix and under absorption in manufacturing.
Operating income decreased significantly to $0.3 million from $1.5 million in the same quarter last year.
Net income for the first quarter of fiscal 2025 was $0.6 million, down from $1.2 million in the first quarter of fiscal 2024.
The Canvys segment saw a 22.8% decline in sales, attributed to lower sales in North American and European markets.
Inventory levels remain high, with expectations of further increases due to strategic purchases, which could impact cash flow management.
Q & A Highlights
Q: What were the new program wins and legacy program improvements that contributed to the $3.7 million year-over-year increase in GES sales? A: Gregory Peloquin, Executive Vice President - Power and Microwave Technologies Group, explained that the biggest new program involved large repowering sites and wind turbines across North America and Europe. They booked and shipped large orders for Ultra3000 used in this repower program. Additionally, they shipped products to 19 other customers for replacing lead acid batteries in turbines and had good shipments of electric locomotive modules and starter modules.
Q: How did the first trade show in Europe for the Ultra3000 family of solutions go, and what are the key differences in selling to wind turbine operators in the Americas versus Europe? A: Gregory Peloquin noted that the need for Ultra3000 is as high in Europe as in North America, but the number of GE turbines is smaller in Europe. They have customers testing three major platforms in Europe, and the trade show confirmed strong interest. They are in a good position to take advantage of the global repower opportunity.
Q: How is the program in India progressing? A: Gregory Peloquin reported that the program in India is progressing well, with the first phase involving replacing lead acid batteries in 9,000 wind turbines. They expect production orders this quarter, with the majority of the rollout in 2025. They have also partnered with Kiba for new turbines starting in 2025, which will include their product.
Q: What is the outlook for inventory levels, and how does it relate to the company's growth initiatives? A: Wendy Diddell, Chief Operating Officer, stated that inventory related to one large vendor will continue to grow through calendar year 2025 to support long-term demand. They are also willing to invest in inventory for green energy programs. Efforts to control inventory will continue, and they expect some growth in green energy inventory as new products are brought to market.
Q: With positive cash flow and a strong outlook, is there consideration for stock repurchases? A: Edward Richardson, CEO, mentioned that while they are often asked about stock repurchases, the anticipated growth in the semiconductor wafer fab business will require substantial cash resources. They are managing cash flow carefully, especially with a significant portion of cash held in foreign subsidiaries.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
This article first appeared on GuruFocus.