Richardson's Q1 2026 Earnings Call: Contradictions Emerge on GE Approval, Wind CapEx, and Global Expansion

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

Date of Call: October 9, 2025

Financials Results

• Revenue: $54.6M, up 1.6% YOY (vs $53.7M); up 6.8% YOY excluding Healthcare
• EPS: $0.13 per diluted share, vs $0.04 in the prior year
• Gross Margin: 31.0%, up 40 bps YOY (30.6% prior year)

Guidance:

• GES expected to grow double digits in FY26.
• PMT and GES anticipated to grow in FY26.
• Semi wafer fab sales to be steady in Q1–Q2 FY26, with stronger growth in Q3–Q4 (customer forecasts).
• Sweetwater, TX design center to be operational in Q2 FY26.
• ULTRA3000 GE approval expected in coming weeks; final sign-off and audit anticipated in Q2 FY26.
• Healthcare CT tube business expected to turn positive in Q4 FY26 or shortly thereafter.
• FY26 CapEx expected at $4–5M, slightly above FY25.

Business Commentary:

* Revenue Growth and Segment Performance: - Richardson Electronics reported total sales of $54.6 million for Q1 FY 2026, an increase from $53.7 million in Q1 of the previous year. - Sales growth in both the Power & Microwave Technologies (PMT) and Canvys segments contributed to this increase. - The growth was driven by higher demand from semiconductor wafer fab customers and improved market conditions in Europe.

• Positive Cash Flow and Financial Strength:
• The company generated positive operating cash flow for the sixth consecutive quarter, marking a significant financial milestone.
• Richardson Electronics maintained a strong cash position of $35.7 million, providing flexibility for ongoing operations and strategic growth opportunities.

• The positive cash flow was due to effective cash management and optimization of operational expenses.

• Wind Energy Segment Expansion:

• The wind energy segment within the GES business unit reported an 86.1% year-over-year growth and 16% quarter-over-quarter growth.
• This growth was primarily driven by new customer acquisitions and global expansion, particularly into Europe and Asia.

• Policies from the current administration that did not negatively impact demand for alternative energy solutions also contributed to the growth.

• Operational Efficiency and Margin Improvement:

• The consolidated gross margin increased to 31.0% of net sales, up from 30.6% in the previous year.
• Improved product mix and manufacturing absorption in both PMT and GES segments contributed to this margin increase.
• The focus on engineered solutions and improved manufacturing utilization was key to enhancing operational efficiency.

Sentiment Analysis:

• Net sales increased 1.6% YOY; gross margin expanded 40 bps; operating income rose to $1.0M from $0.3M. Positive operating cash flow for 6 consecutive quarters. Management expects FY26 growth in PMT and GES, with GES double-digit growth. Semi wafer fab demand outlook indicates stronger H2 (Q3–Q4). Sweetwater design center to open in Q2 FY26 and ULTRA3000 approval expected shortly. Canvys backlog remains strong at $38.4M.

Q&A:

• Question from Robert Brooks (Northland Capital Markets): Status of ULTRA3000 on GE’s approved aftermarket vendor list and any new developments?
  Response: GE engineering has signed off; awaiting final legal signatures within weeks, then GE will conduct safety/quality audit; approval expected in Q2.

• Question from Robert Brooks (Northland Capital Markets): Semi wafer fab sales were up 52% YOY—was last year’s Q1 a trough, and how should FY26 trend?
  Response: Yes, last year’s Q1 was the trough; expect similar run rate in Q1–Q2 FY26 and stronger growth in Q3–Q4 per customer forecasts.

• Question from Anja Soderstrom (Sidoti & Company, LLC): How meaningful are the international wind orders and how do they compare to the opportunity?
  Response: International is smaller than North America but growing; launched multi-brand platforms, completed alpha/beta tests in AU/IN/FR/IT, and booked Q1 orders; substantial upside outside NA.

• Question from Anja Soderstrom (Sidoti & Company, LLC): What is expected CapEx for the year given La Fox and the Texas center?
  Response: FY26 CapEx targeted at $4–5M; REV Illinois near-term focus is staffing/R&D with limited FY26 CapEx; demo site build underway.

• Question from Brendan Kinney (Private Investor): Details on the $0.9M nonrecurring gain that boosted results?
  Response: It was other income from a confidential contractual settlement; operating income excludes it.

• Question from Chip Rui (Rui Asset Management): Impact of repower initiatives and the ‘Big Beautiful Bill’ on wind business?
  Response: Aftermarket focus benefits from repowering; customers replacing lead-acid with long-life PEMs; strong FY25 bookings (1.25 book-to-bill) and expected pull-ins next 2–3 quarters; GES to grow double digits in FY26.

• Question from Chip Rui (Rui Asset Management): Can operating leverage continue with muted expense growth through the year?
  Response: SG&A will rise modestly to support growth (engineering and international), but expense discipline remains; no significant increase vs FY25.

• Question from Chip Rui (Rui Asset Management): Outlook for legacy RF and related businesses?
  Response: RF tube business ~$85M remains profitable; managing supplier exit with inventory and sourcing options. Semi equipment demand improving; solid-state RF seeing strong growth in defense, drones, and SATCOM.