Green Energy Solutions sales increase 103% over Q3 FY22; total net sales increase 27.2%
Third Quarter Highlights
- Net sales of $70.4 million were up 27.2% from last year’s third quarter driven by increases in Power and Microwave Technologies (“PMT”), Green Energy Solutions (“GES”) and Canvys business units.
- Backlog totaled $175.1 million in the third quarter versus $175.6 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 2023, the same as in the prior year’s third quarter.
- Operating income was $7.6 million in the third quarter of fiscal 2023 compared to $3.6 million for the third quarter of fiscal 2022.
- Income tax expense was $1.7 million for the third quarter of fiscal 2023, or 20.7% versus $0.6 million in the prior year’s third quarter due to the use of federal NOLs in fiscal 2022.
- Earnings per common share (diluted) were $0.44 for the third quarter of fiscal 2023 compared to $0.21 per common share (diluted) in the third quarter of fiscal 2022.
- Cash and investments were $24.6 million as of February 25, 2023, compared to $40.5 million as of May 28, 2022. The use of cash was related to higher working capital to support sales growth.
LaFox, IL, APRIL 5, 2023: Richardson Electronics, Ltd. (NASDAQ: RELL) today reported financial results for its third quarter ended February 25, 2023. The Company also announced that its Board of Directors declared a $0.06 per share quarterly cash dividend.
“We are extremely pleased with the strong financial performance resulting from capitalizing on new market opportunities and continued execution of our key growth initiatives. The third quarter of fiscal 2023 was the tenth consecutive quarter of year-over-year revenue growth and builds on our momentum for another strong financial performance in fiscal 2023. In addition, third quarter operating income increased 110% year-over-year, compared to sales growth of 27% as we benefit from significant operating leverage of fixed expenses,” said Edward J. Richardson, Chairman, Chief Executive Officer, and President. “Beginning in fiscal 2023, we started reporting a new segment, Green Energy Solutions (“GES”). With the number of opportunities in our pipeline addressing alternative energy, electric vehicles and green manufacturing, we are well positioned for significant long-term growth in this segment.”
Third Quarter Results
Net sales for the third quarter of fiscal 2023 increased 27.2% to $70.4 million compared to net sales of $55.3 million in the prior year’s third quarter due to higher net sales in PMT, GES and Canvys, partially offset by lower sales for Healthcare. PMT sales increased $8.5 million or 22% from last year’s third quarter. Sales of manufactured products for our semiconductor wafer fabrication equipment customers and distributed products for RF and Microwave applications increased from the third quarter of fiscal 2022. Net sales for GES increased $5.8 million or 103% from last year’s third quarter. GES combines our key technology partners and engineered solutions capabilities, to design and manufacture products for the fast-growing green energy market and power management applications. Canvys sales increased by $1.5 million or 19% primarily due to strong customer demand in North America. Richardson Healthcare sales decreased $0.7 million or 23.9% due to a decrease in parts sales as well as CT tubes sold in China, partially offset by an increase in equipment sales.
Gross margin was 31.8% of net sales during the third quarter of fiscal 2023, the same as during the third quarter of fiscal 2022. PMT margin increased to 32.9% from 31.8% primarily due to product mix. Healthcare gross margin increased to 39.8% in the third quarter of fiscal 2023 compared to 25.1% in the prior year’s third quarter due to improved manufacturing absorption and decreased component scrap expense. GES margin decreased to 25.7% from 34.6% primarily due to product mix. Canvys margin as a percent of net sales decreased slightly to 32.0% from 32.2% because of product mix and foreign exchange effects.
Operating expenses were $14.8 million compared to $13.9 million in the third quarter of fiscal 2022. The increase in operating expenses resulted from higher employee compensation expenses, including incentive expense from significantly higher operating income, and higher travel expenses. Operating expenses as a percentage of net sales decreased to 21.0% during the third quarter of fiscal 2023 compared to 25.2% during the third quarter of fiscal 2022 as the Company benefited from higher sales and controlled operating expenses.
The Company reported operating income of $7.6 million for the third quarter of fiscal 2023 compared to operating income of $3.6 million in the prior year’s third quarter. Other income for the third quarter of fiscal 2023, including interest income and foreign exchange, was $0.4 million, compared to other expense of $0.1 million in the third quarter of fiscal 2022.
Income tax expense was $1.7 million for the third quarter of fiscal 2023 or 20.7% versus $0.6 million in the prior year’s third quarter due to the use of federal NOLs in fiscal 2022.
Net income for the third quarter of fiscal 2023 was $6.3 million compared to net income of $2.9 million in the third quarter of fiscal 2022. Earnings per common share (diluted) were $0.44 in the third quarter of fiscal 2023 compared to $0.21 per common share (diluted) in the third quarter of fiscal 2022.
Cash and investments at the end of the third quarter of fiscal 2023 were $24.6 million compared to $40.5 million at the end of fiscal 2022. The Company continues to use cash to support the working capital requirements associated with the significant sales growth over the past ten quarters. The Company invested $2.2 million during the quarter on capital expenditures primarily related to its manufacturing business, facilities, and Healthcare business, versus $0.6 million during the third quarter of fiscal 2022. Subsequent to the end of the third quarter of fiscal 2023, the Company entered into a three-year, $30 million revolving line of credit with PNC Bank for additional liquidity as necessary.
FINANCIAL SUMMARY – NINE MONTHS ENDED FEBRUARY 25, 2023
- Net sales for the first nine months of fiscal 2023 were $203.8 million, an increase of 25.1%, compared to net sales of $163.0 million during the first nine months of fiscal 2022. Sales increased by $17.1 million or 14.8% for PMT, $19.1 million or 145.7% for GES, $4.5 million or 17.3% for Canvys and $0.1 million or 1.6% for Richardson Healthcare.
- Gross profit increased to $67.3 million during the first nine months of fiscal 2023, compared to $51.5 million during the first nine months of fiscal 2022. As a percentage of net sales, gross margin increased to 33.0% of net sales during the first nine months of fiscal 2023, compared to 31.6% of net sales during the first nine months of fiscal 2022, primarily because of a favorable product mix in PMT and decreased component scrap expense and improved manufacturing absorption in Healthcare. These increases were partially offset by an unfavorable product mix and foreign currency effects in Canvys and unfavorable product mix for GES.
- Operating expenses increased to $43.7 million for the first nine months of fiscal 2023, compared to $40.6 million for the first nine months of fiscal 2022. The increase in operating expenses resulted from higher employee compensation and travel expenses.
- Operating income during the first nine months of fiscal 2023 was $23.6 million, compared to an operating income of $11.0 million during the first nine months of fiscal 2022.
- Other expense for the first nine months of fiscal 2023, including interest income and foreign exchange, was $0.1 million, as compared to other expense of less than $0.1 million in the first nine months of fiscal 2022.
- The income tax provision was $5.3 million during the first nine months of fiscal 2023 or 22.5% versus $1.3 million in the prior year’s first nine months due to the use of federal NOLs in fiscal 2022.
- Net income for the first nine months of fiscal 2023 was $18.2 million, versus $9.6 million during the first nine months of fiscal 2022. Earnings per common share (diluted) were $1.27 for the first nine months of fiscal 2023 compared to $0.71 per common share (diluted) for the first nine months of fiscal 2022.
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 24, 2023, to common stockholders of record as of May 5, 2023.
CONFERENCE CALL INFORMATION
On Thursday, April 6, 2023, 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 2023 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 April 6, 2023, for seven days. Registration instructions are also on our website at www.rell.com.
In addition, the webcast link is available here.
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 1, 2022, 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, green energy products, power grid and microwave tubes, and related consumables; power conversion and RF and microwave components including green energy solutions; 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 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 common stock trades on the NASDAQ Global Select Market under the ticker symbol RELL.
