Richardson Electronics, Ltd.

Good day and thank you for standing by. Welcome to the Richardson Electronics earnings call for the second quarter fiscal year 2026. At this time, all participants are in a listen-only mode. After this speaker's presentation, we'll open up for questions. To ask a question during a session, you need to press star 11 on your telephone. You will then hear an automated message advising your hands raised. To withdraw your question, please press star 11 again. Please be advised that today's call is being recorded. I would now like to hand it over to your speaker. Ed Richardson, CEO, please go ahead.

Good morning, and thank you all for joining Richardson Electronics Conference Call for the second quarter of fiscal year 2026. We appreciate your continued support and interest in Richardson Electronics. Joining me today are Bob Benn, Chief Financial Officer, Wendy Dedell, Chief Operating Officer, Greg Peliquin, General Manager of our Power and Microwave Technologies and Green Energy Solutions Groups, and Jens Rupert, General Manager of Canvas. As a reminder, this call is being recorded and will be available for playback. I would also like to remind you that we're making forward-looking statements. They're based on current expectations and involve risks and uncertainties. Therefore, our actual results could be materially different. Please refer to our press release and SEC filings for an explanation of our risk factors. I'm pleased to report that Richardson Electronics has achieved six consecutive quarters of year-over-year growth, underscoring the progress we're making in executing our multi-year strategy. This growth reflects our continued repositioning toward higher growth end markets and the expanding contribution from our engineered solutions. Equally important, these results are driven by the strength of our people. While investors are familiar with our senior leadership team, we've been intentionally investing across the organization to build depth, diversity, and technical expertise throughout our ranks. I believe we have assembled one of the strongest and most motivated teams in the company's history, positioning Richardson Electronics for long-term sustainable value creation. Looking at our Q2 FY26 results, total sales were $52.3 million, up from $49.5 million in Q2 of last year. Driven by sales growth in our green energy and canvas businesses, operating income improved to $132,000 versus a loss of $667,000 last year. Within our GES business unit, we're very pleased with the year-over-year growth as well as sequential quarter-over-quarter growth. Both onshore wind and EV sales were up over the prior year in green energy segment, reflecting higher sales from existing customers as well as sales from new products and expanded customer base. Canvas revenue exceeded the prior year by 28% on improved demand from our medical OEMs. It's important to note that the sales growth was partially offset by the inclusion of our healthcare business in both the current year and the prior quarters. As a reminder, we sold the majority of our healthcare business in Q3 of FY25, so this will impact our year-over-year comparisons through the end of Q3 this year. We also remain focused on managing expenses and improving inventory turns. Our cash position remains strong at $33.1 million, providing us with flexibility to support both our ongoing operations and strategic growth opportunities. I'll now turn the call over to Bob Benn, our Chief Financial Officer, who will provide a detailed review of our second quarter results and capital positions. Following Bob's remarks, Greg and Jens will provide updates on our business units, and then Wendy will follow up with the progress we're making executing again on our multi-year growth strategies.

Thank you, Ed, and good morning. I will review our financial results for our second quarter and first six months of fiscal year 2026, followed by a review of our cash position. Consolidated net sales increased 5.7% to $52.3 million. compared to net sales of 49.5 million in the prior year's second quarter. When excluding health care, for which the majority of assets were sold in January 2025, net sales increased by 9.0%. Please note that health care results, including prior periods, are consolidated into the PMT segment beginning in fiscal 2026. This was our sixth consecutive quarterly year-over-year increase in sales. Second quarter net sales growth was led by a 39.0% increase in GES sales, driven by an increase in power management products. Canvas sales increased 28.1%, which primarily reflected higher sales in North America. Sales for PMT were 4.0% below the second quarter of fiscal 2025. Excluding healthcare, PMT sales were approximately flat. Consolidated gross margin for the second quarter was 30.8% of net sales compared to 31.0% during the second quarter of fiscal 2025. The slight decrease in consolidated gross margin was primarily due to lower margin in PMT and GES, partially offset by higher margin in Canvas. Operating expenses as a percentage of net sales improved to 30.5%, for the second quarter of fiscal 2026 compared to 32.3% in the second quarter of fiscal 2025. Operating income improved to $0.1 million for the second quarter of fiscal 2026 from an operating loss of $0.7 million in the prior year's second quarter. Net loss was $0.1 million for the second quarter of fiscal 2026 compared to $0.8 million in the second quarter of fiscal 2025. Net loss per common share diluted was one cent in the second quarter of fiscal 2026 compared to five cents in the second quarter of fiscal 2025. EBITDA for the second quarter of fiscal 2026 improved to 0.7 million versus break even in the prior year's second quarter. Please note that EBITDA is a non-GAAP financial measure and a reconciliation of the non-GAAP item to the comparable gap measure is available in our second quarter fiscal year 2026 press release that was issued yesterday after the market closed. Turning to a review of the results for the first six months of fiscal year 2026, net sales were 106.9 million, an increase of 3.6 million from 103.2 million in the first six months of fiscal year 2025, which reflected higher sales across our business segments except for PMT. When excluding health care, consolidated net sales increased by 7.8%, and PMT net sales increased by 5.2%. Gross margin was 30.9% in net sales, which was a slight increase from the first six months of fiscal 2025. As a percentage in net sales, operating expenses for the first six months of the fiscal year improved to 29.8%, from 31.1% for the first six months of the prior fiscal year. Operating income for the first six months of fiscal year 2026 was 1.1 million as compared to an operating loss of 0.4 million for the first six months of fiscal year 2025. The company reported net income of 1.8 million or 12 cents per diluted common share for the first six months of fiscal year 2026 versus a net loss of 0.2 million or one cent per diluted common share for the first six months of fiscal year 2025. EBITDA for the first six months of fiscal 2026 was 4.0 million versus 1.7 million in the prior year's first six months. Turning to a review of our cash position, Cash and cash equivalents at the end of the second quarter of fiscal 2026 were $33.1 million compared to $35.7 million at the end of the first quarter of fiscal 2026. Capital expenditures of $1.6 million in the second quarter of fiscal 2026 were primarily related to our manufacturing business, facilities improvements, and IT systems versus $0.5 million in the second quarter of fiscal year 2025. We paid $0.9 million in the second quarter for cash dividends. In addition, based on our current financial position, our board of directors declared a regular quarterly cash dividend of $0.06 per common share, which will be paid in the third quarter of fiscal 2026. As of the end of the second quarter of fiscal 2026, the company had no outstanding debt on its revolving line of credit with PNC Bank. Now, I will turn the call over to Greg, who will provide more details for our PMT and GES business groups.