Richardson Electronics' Q1 2026: Contradictions Emerge on GE Aftermarket Vendors List Approval, Semi-Wafer Fab Sales Growth, Wind Rotor Expansion, and Inventory Strategy

The above is the analysis of the conflicting points in this earnings call

Date of Call: None provided

Financials Results

• Revenue: $54.6M, up 1.6% YOY (vs $53.7M prior year)
• EPS: $0.13 per diluted share, up from $0.04 in the prior year
• Gross Margin: 31.0%, up 40 bps YOY (vs 30.6% prior year)

Guidance:

• PMT and GES expected to grow in FY2026; GES targeted to grow double digits.
• Semi wafer-fab demand: run-rate steady in Q1–Q2 FY26; strong growth expected in Q3–Q4 based on customer forecasts.
• CapEx expected at $4–$5M in FY2026.
• Operating expenses to rise slightly vs FY2025 as the company invests in engineering and international green energy.
• Healthcare CT X-ray tube business expected to turn positive by Q4 FY2026 or shortly thereafter.
• Sweetwater, TX design center expected to be operational in Q2 FY2026.
• International wind expansion underway; growing multi-brand PEM platforms.
• Company leveraging REV Illinois incentives; building a battery energy storage demo site.

Business Commentary:

* Revenue Growth Across Segments: - Richardson Electronics reported a 1.6% increase in total sales to $54.6 million in Q1 FY2026 compared to Q1 FY2025. - This growth was driven by sales increases in both the Power and Microwave Technologies (PMT) and Canvas segments, offset by a decline in the Green Energy Solutions (GES) segment.

• Power and Microwave Technologies Growth:
• PMT sales grew to $37.8 million, a 10.5% increase year-over-year, with a 5.1% increase over Q4 FY2025.

• The growth was primarily due to increased demand from semiconductor wafer fab customers and legacy power grid tube product lines, despite the impact of excluding the healthcare business from comparisons.

• Green Energy Solutions Challenges:

• GES sales were $7.3 million, down 10.2% year-over-year but up 35.5% over Q4 FY2025.

• The decline year-over-year was due to the non-recurrence of a large EV locomotive order from the prior year, while the quarter-over-quarter increase was driven by growth in the wind segment.

• Operating Income and Cash Flow:

• Operating income for the first quarter of fiscal 2026 was $1.0 million, more than tripled from $0.3 million in the prior year's first quarter.

• The increase was primarily due to a non-recurring gain of $0.9 million from a confidential contractual settlement and improved gross margin driven by product mix and manufacturing absorption.

• Expansion and Global Footprint:

• Richardson Electronics is investing in its global footprint to manage tariff landscapes and is expanding its design capabilities, with plans for a new design center in Sweetwater, Texas.
• These investments are part of the company's strategy to enhance its global go-to-market strategy and differentiate it from competitors in the power management, RF microwave, and green energy markets.

Sentiment Analysis:

• Sales up 1.6% YOY with fifth consecutive YOY quarterly increase; gross margin rose to 31.0% (up 40 bps); operating income increased to $1.0M from $0.3M; six consecutive quarters of positive operating cash flow and $35.7M cash, no revolver debt. Management expects FY2026 growth in PMT and GES (double-digit for GES) and stronger semi-fab demand in Q3–Q4.

Q&A:

• Question from Robert Ben (Northland Capital Markets): Status of Ultra 3000s on GE’s approved aftermarket vendor list?
  Response: Engineering has approved; awaiting final legal signatures in 1–2 weeks, followed by a safety audit; management expects Q2 approval.

• Question from Robert Ben (Northland Capital Markets): Semi-fab sales were up strongly YOY—how should we think about the trajectory through FY2026?
  Response: Q1 last year was the trough; expect similar run-rate in Q1–Q2 FY26, with strong growth in Q3–Q4 per customer forecasts.

• Question from Anya Soderstrom (Fidelity): How meaningful are wind sales outside the U.S. and what is the outlook?
  Response: Global rollout is progressing with alpha/beta completed and orders from Australia, India, France, and Italy; expanding to Nordex/Senvion/Suzlon/SSB; 70% of sales are in North America, so international is incremental upside.

• Question from Anya Soderstrom (Fidelity): What is FY2026 CapEx given LaFox expansions and the Texas center?
  Response: CapEx is guided to $4–$5M; REV Illinois focus this year is on people/R&D with limited CapEx; demo-site and related investments qualify for incentives.

• Question from Brendan Kenny (Private Investor): What was the $0.9M non-recurring gain?
  Response: Other income from a confidential contractual settlement; operating income excludes it.

• Question from Chip Rui (ROOF Asset Management): Expand on repower initiatives and the 'Big Beautiful Bill' impact on wind.
  Response: Repowering favors aftermarket; customers replacing lead-acid with Richardson PEMs; management expects order pull-ins over 2–3 quarters and double-digit GES growth in FY2026.

• Question from Chip Rui (ROOF Asset Management): How will operating leverage/expenses trend this year?
  Response: SG&A will rise only modestly vs FY2025 while investing in engineering and international green energy; expense discipline continues.

• Question from Chip Rui (ROOF Asset Management): Outlook for legacy RF and semi businesses?
  Response: Tube business roughly flat with ample inventory as a key supplier exits; semi-fab demand strengthening with room to grow; solid-state RF up on defense/SATCOM/drone demand.