Quarterly Report for Quarter Ending August 31, 2024 (Form 10-Q)

10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended August 31, 2024

OR

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from To

Commission File Number: 0-12906

RICHARDSON ELECTRONICS, LTD.

(Exact name of registrant as specified in its charter)

Delaware	36-2096643
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

40W267 Keslinger Road, P.O. Box 393

LaFox, Illinois 60147-0393

(Address of principal executive offices)

Registrant's telephone number, including area code: (630) 208-2200

Securities registered pursuant to Section 12(b) of the Act:

Title of each class		Trading Symbol(s)		Name of each exchange on which registered
Common stock, $0.05 Par Value		RELL		NASDAQ Global Select Market

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. ☒ Yes☐ No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). ☒ Yes☐ No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of "large accelerated filer", "accelerated filer", "smaller reporting company" and "emerging growth company" in Rule 12b-2 of the Exchange Act.

Large Accelerated Filer	☐		Accelerated Filer	☒
Non-Accelerated Filer	☐		Smaller Reporting Company	☒
Emerging Growth Company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ☐ Yes ☒No

As of October 8, 2024, there were 12,331,320outstanding shares of Common Stock, $0.05 par value and 2,049,238outstanding shares of Class B Common Stock, $0.05 par value, which are convertible into Common Stock of the registrant on a share for share basis.

TABLE OF CONTENTS

			Page
Part I.	Financial Information
Item 1.	Financial Statements		2
	Unaudited Consolidated Balance Sheets		2
	Unaudited Consolidated Statements of Comprehensive Income		3
	Unaudited Consolidated Statements of Cash Flows		4
	Unaudited Consolidated Statement of Stockholders' Equity		5
	Notes to Unaudited Consolidated Financial Statements		6
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations		15
Item 3.	Quantitative and Qualitative Disclosures About Market Risk		22
Item 4.	Controls and Procedures		22
Part II.	Other Information
Item 1.	Legal Proceedings		23
Item 1A.	Risk Factors		23
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds		23
Item 3.	Defaults Upon Senior Securities		23
Item 4.	Mine Safety Disclosures		23
Item 5.	Other Information		23
Item 6.	Exhibits		24
Exhibit Index		24
Signatures		25

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

Richardson Electronics, Ltd.

Consolidated Balance Sheets

(in thousands, except per share amounts)

		Unaudited			Audited
		August 31, 2024			June 1, 2024
Assets
Current assets:
Cash and cash equivalents		$	23,035			$	24,263
Accounts receivable, less allowance for credit losses of $351and $323, respectively			30,862				24,845
Inventories, net			110,994				110,149
Prepaid expenses and other assets			2,488				2,397
Total current assets			167,379				161,654
Non-current assets:
Property, plant and equipment, net			20,612				20,681
Intangible assets, net			1,582				1,641
Right of use lease assets			2,538				2,760
Deferred income tax assets			5,555				5,500
Other non-current assets			197				209
Total non-current assets			30,484				30,791
Total assets		$	197,863			$	192,445
Liabilities
Current liabilities:
Accounts payable		$	19,758			$	15,458
Accrued liabilities			15,403				15,404
Lease liabilities current			1,107				1,169
Total current liabilities			36,268				32,031
Non-current liabilities:
Deferred income tax liabilities			79				90
Lease liabilities non-current			1,431				1,591
Other non-current liabilities			1,021				781
Total non-current liabilities			2,531				2,462
Total liabilities			38,799				34,493
Stockholders' Equity
Common stock, $0.05par value; 12,331and 12,254shares issued and outstanding on August 31, 2024 and June 1, 2024, respectively			617				613
Class B common stock, convertible, $0.05par value; 2,049shares issued and outstanding on August 31, 2024 and June 1, 2024			102				102
Preferred stock, $1.00par value, noshares issued			-				-
Additional paid-in-capital			73,315				72,744
Retained earnings			83,630				83,729
Accumulated other comprehensive income			1,400				764
Total stockholders' equity			159,064				157,952
Total liabilities and stockholders' equity		$	197,863			$	192,445

Refer to the Notes to Unaudited Consolidated Financial Statements in Part 1, Item 1.

Richardson Electronics, Ltd.

Unaudited Consolidated Statements of Comprehensive Income

(in thousands, except per share amounts)

		Three Months Ended
		August 31, 2024			September 2, 2023
Net sales		$	53,725			$	52,581
Cost of sales, exclusive of depreciation and amortization			37,299				35,317
Gross profit			16,426				17,264
Selling, general and administrative expenses, inclusive of depreciation and amortization			16,112				15,792
Gain on disposal of assets			(2	)			-
Operating income			316				1,472
Other (income) expense:
Interest income			(58	)			(71	)
Foreign exchange gain			(277	)			(97	)
Other, net			3				32
Total other income			(332	)			(136	)
Income before income taxes			648				1,608
Income tax provision			58				381
Net income			590				1,227
Foreign currency translation gain (loss), net of tax			636				(41	)
Comprehensive income		$	1,226			$	1,186
Net income per share:
Common shares - Basic		$	0.04			$	0.09
Class B common shares - Basic			0.04				0.08
Common shares - Diluted			0.04				0.09
Class B common shares - Diluted			0.04				0.08
Weighted average number of shares:
Common shares - Basic			12,200				12,171
Class B common shares - Basic			2,049				2,052
Common shares - Diluted			12,431				12,539
Class B common shares - Diluted			2,049				2,052

Refer to the Notes to Unaudited Consolidated Financial Statements in Part 1, Item 1.

Richardson Electronics, Ltd.

Unaudited Consolidated Statements of Cash Flows

(in thousands)

		Three Months Ended
		August 31, 2024			September 2, 2023
Operating activities:
Net income		$	590			$	1,227
Adjustments to reconcile net income to cash provided by operating activities:
Unrealized foreign currency gain			(382	)			(37	)
Depreciation and amortization			1,044				998
Inventory provisions			139				85
Share-based compensation expense			593				483
Gain on disposal of assets			(2	)			-
Deferred income taxes			(58	)			(5	)
Change in assets and liabilities:
Accounts receivable			(5,858	)			4,462
Inventories			(124	)			(3,151	)
Prepaid expenses and other assets			(29	)			409
Accounts payable			4,164				(2,365	)
Accrued liabilities			(95	)			(1,124	)
Other			430				33
Net cash provided by operating activities			412				1,015
Investing activities:
Capital expenditures			(926	)			(1,141	)
Proceeds from sale of property, plant & equipment			7				-
Net cash used in investing activities			(919	)			(1,141	)
Financing activities:
Proceeds from issuance of common stock			144				327
Cash dividends paid on common and Class B common stock			(850	)			(843	)
Proceeds from revolving credit facility			1,000				-
Repayment of revolving credit facility			(1,000	)			-
Other			(162	)			(119	)
Net cash used in financing activities			(868	)			(635	)
Effect of exchange rate changes on cash and cash equivalents			147				(96	)
Decrease in cash and cash equivalents			(1,228	)			(857	)
Cash and cash equivalents at beginning of period			24,263				24,981
Cash and cash equivalents at end of period		$	23,035			$	24,124

Refer to the Notes to Unaudited Consolidated Financial Statements in Part 1, Item 1.

Richardson Electronics, Ltd.

Unaudited Consolidated Statement of Stockholders' Equity

(in thousands, except per share amounts)

		Common Stock			Class B Common Stock			Par Value			Additional Paid In Capital			Retained Earnings			Accumulated Other Comprehensive Income			Total
Balance June 1, 2024			12,254				2,049			$	715			$	72,744			$	83,729			$	764			$	157,952
Comprehensive income:
Net income			-				-				-				-				590				-				590
Foreign currency translation, net of tax			-				-				-				-				161				636				797
Share-based compensation:
Restricted stock			-				-				-				424				-				-				424
Stock options			-				-				-				169				-				-				169
Common stock:
Options exercised			17				-				1				140				-				-				141
Restricted stock issuance			60				-				3				(162	)			-				-				(159	)
Dividends paid to:
Common ($0.060per share)			-				-				-				-				(739	)			-				(739	)
Class B Common ($0.054per share)			-				-				-				-				(111	)			-				(111	)
Balance August 31, 2024			12,331				2,049			$	719			$	73,315			$	83,630			$	1,400			$	159,064
Balance May 27, 2023			12,140				2,052			$	710			$	70,951			$	87,044			$	615			$	159,320
Comprehensive income:
Net income			-				-				-				-				1,227				-				1,227
Foreign currency translation, net of tax			-				-				-				-				-				(41	)			(41	)
Share-based compensation:
Restricted stock			-				-				-				169				-				-				169
Stock options			-				-				-				314				-				-				314
Common stock:
Options exercised			48				-				2				325				-				-				327
Restricted stock issuance			37				-				2				(121	)			-				-				(119	)
Dividends paid to:
Common ($0.060per share)			-				-				-				-				(732	)			-				(732	)
Class B Common ($0.054per share)			-				-				-				-				(111	)			-				(111	)
Balance September 2, 2023			12,225				2,052			$	714			$	71,638			$	87,428			$	574			$	160,354

Refer to the Notes to Unaudited Consolidated Financial Statements in Part 1, Item 1.

RICHARDSON ELECTRONICS, LTD.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

In October 2023, the FASB issued ASU 2023-06, Disclosure Improvements: Codification Amendments in Response to the Securities and Exchange Commission's ("SEC") Disclosure Update and Simplification Initiative. The amendments in this update require modification of certain disclosure and presentation requirements for a variety of ASU topics in response to the SEC's Release No. 33-10532. The effective date for each amended topic in the ASC is the date on which the SEC's removal of the related disclosure requirement from Regulation S-X or Regulation S-K becomes effective. However, if by June 30, 2027, the SEC has not removed the related disclosure from its regulations, the amendment will be removed from the Codification and not become effective. Early adoption is permitted. The Company is currently evaluating this ASU to determine its impact on the Company's disclosures.

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OFFINANCIAL CONDITION

AND RESULTS OF OPERATIONS

Certain statements in this report may constitute "forward-looking" statements within the meaning of the Private Securities Litigation Reform Act of 1995. The terms "may," "should," "could," "anticipate," "believe," "continue," "estimate," "expect," "intend," "objective," "plan," "potential," "project" and similar expressions are intended to identify forward-looking statements. These statements are not guarantees of future performance and involve risks, uncertainties and assumptions that are difficult to predict. These statements are based on management's current expectations, intentions or beliefs and are subject to a number of factors, assumptions and uncertainties that could cause actual results to differ materially from those described in the forward-looking statements. Factors that could cause or contribute to such differences or that might otherwise impact the business include; economic, labor and political conditions; global business disruption caused by the Russian - Ukraine and Israel - Hamas wars; currency exchange fluctuations; and the ability of the Company to manage its growth and the risk factors set forth in our Annual Report on Form 10-K filed with the SEC on August 5, 2024. We undertake no obligation to update any such factor or to publicly announce the results of any revisions to any forward-looking statements contained herein whether as a result of new information, future events or otherwise.

In addition, while we do, from time to time, communicate with securities analysts, it is against our policy to disclose to them or any outside third party, any material non-public information or other confidential commercial information. Accordingly, stockholders should not assume that we agree with any statement or report issued by any securities analyst or outside third party, irrespective of the content of the statement or report. Thus, to the extent that reports issued by securities analysts contain any projections, forecasts or opinions, such reports are not our responsibility.

INTRODUCTION

Management's Discussion and Analysis of Financial Condition and Results of Operations ("MD&A") is intended to assist the reader in better understanding our business, results of operations, financial condition, changes in financial condition and significant developments. MD&A is provided as a supplement to, and should be read in conjunction with, our consolidated financial statements and the accompanying notes appearing elsewhere in this filing. This section is organized as follows:

Business Overview

Richardson Electronics, Ltd. (the "Company," "we," "our") is a leading global manufacturer of engineered solutions, power grid and microwave tubes and related consumables; power conversion and RF and microwave components; high-value replacement parts, tubes and service training for diagnostic imaging equipment; and customized display solutions. Nearly 50% of our products are manufactured at our facilities located in LaFox, Illinois, Marlborough, Massachusetts and Donaueschingen, Germany, or by one of our manufacturing partners throughout the world. 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.

Some of the Company's products are manufactured in China and imported into the United States. The Office of the United States Trade Representative ("USTR") instituted tariffs on the importation of a number of products into the United States from China. These tariffs are a response to what the USTR considers to be certain unfair trade practices by China. A number of the Company's products manufactured in China are subject to duties when imported into the United States.

Management continues to work with its suppliers as well as its customers to mitigate the impact of the tariffs on our customers. However, if the Company is unable to successfully pass through the additional cost of these tariffs, or if the higher prices reduce demand for the Company's products, it will have a negative effect on the Company's sales and gross margins.

We currently operate within the following major geographic regions: North America, Asia/Pacific, Europe and Latin America.

The Company reports its financial performance based on the operating and reportable segments defined as follows:

Power and Microwave Technologies ("PMT") combines our core engineered solutions capabilities, power grid and microwave tube business with new disruptive RF, Wireless and Power technologies. As a designer, manufacturer, technology partner and authorized distributor, PMT's strategy is to provide specialized technical expertise and engineered solutions based on our core engineering and manufacturing capabilities on a global basis. We provide solutions and add value through design-in support, systems integration, prototype design and manufacturing, testing, logistics and aftermarket technical service and repair - all through our existing global infrastructure. PMT's focus is on products for power, RF and microwave applications for customers in 5G, aviation, broadcast, communications, industrial, marine, medical, military, scientific and semiconductor markets. PMT focuses on various applications including broadcast transmission, CO2 laser cutting, diagnostic imaging, dielectric and induction heating, high energy transfer, high voltage switching, plasma, power conversion, radar and radiation oncology. PMT also offers its customers technical services for both microwave and industrial equipment.

Green Energy Solutions ("GES") combines our key technology partners and engineered solutions capabilities to design and manufacture innovative products for the fast-growing energy storage market and power management applications. As a designer, manufacturer, technology partner and authorized distributor, GES's strategy is to provide specialized technical expertise and engineered solutions using our core design engineering and manufacturing capabilities on a global basis. We provide solutions and add value through design-in support, systems integration, prototype design and manufacturing, testing, logistics and aftermarket technical service and repair - all through our existing global infrastructure. GES's focus is on products for numerous green energy applications such as wind, solar, hydrogen and electric vehicles, and other power management applications that support green solutions such as synthetic diamond manufacturing.

Canvysprovides customized display solutions serving the corporate enterprise, financial, healthcare, industrial and medical original equipment manufacturers markets. Our engineers design, manufacture, source and support a full spectrum of solutions to match the needs of our customers. We offer long-term availability and proven custom display solutions that include touch screens, protective panels, custom enclosures, All-In-One computers, specialized cabinet finishes and application specific software packages and certification services. Our volume commitments are lower than the large display manufacturers, making us the ideal choice for companies with very specific design requirements. We partner with both private label manufacturing companies and leading branded hardware vendors to offer the highest quality display and touch solutions and customized computing platforms.

Healthcaremanufactures, repairs, refurbishes and distributes high value replacement parts and equipment for the healthcare market including hospitals, medical centers, asset management companies, independent service organizations and multi-vendor service providers. Products include diagnostic imaging replacement parts for CT and MRI systems; replacement CT and MRI tubes; CT service training; MRI and RF amplifiers; hydrogen thyratrons, klystrons, magnetrons; flat panel detector upgrades; pre-owned CT systems; and additional replacement solutions currently under development for the diagnostic imaging service market. Through a combination of newly developed products and partnerships, service offerings and training programs, we believe we can help our customers improve efficiency while lowering the cost of healthcare delivery.

Refer to Note 10, Segment and Geographic Information, for a discussion of the operating results by segment and geographic area.

RESULTS OF OPERATIONS

Financial Summary - Three Months Ended August 31, 2024

Net Sales and Gross Profit Analysis

Net sales by segment and percent change during the first quarter of fiscal 2025 and fiscal 2024 were as follows (in thousands):

Net Sales		Three Months Ended			FY25 vs. FY24
		August 31, 2024			September 2, 2023			% Change
PMT		$	34,202			$	35,744				-4.3	%
GES			8,086				4,394				84.0	%
Canvys			7,638				9,889				-22.8	%
Healthcare			3,799				2,554				48.7	%
Total		$	53,725			$	52,581				2.2	%

During the first quarter of fiscal 2025, consolidated net sales increased 2.2% compared to the first quarter of fiscal 2024. Sales for PMT decreased 4.3%, sales for GES increased 84.0%, sales for Canvys decreased 22.8% and sales for Healthcare increased 48.7%. The decrease in PMT was mainly due to slower sales of electron devices slightly offset by growth in our Wafer Fab and RF and Microwave component businesses. The increase in GES was mainly due to increased shipments of power management products focused on battery modules for wind turbine and electric locomotive products. The decrease in Canvys was attributable to lower sales in the North American and European markets. The increase in Healthcare reflected higher sales in all product lines.

Gross profit by segment and percent of net sales for the first quarter of fiscal 2025 and fiscal 2024 were as follows (in thousands):

Gross Profit		Three Months Ended
		August 31, 2024			% of Net Sales			September 2, 2023			% of Net Sales
PMT		$	10,202				29.8	%		$	11,511				32.2	%
GES			2,374				29.4	%			1,580				36.0	%
Canvys			2,621				34.3	%			3,365				34.0	%
Healthcare			1,229				32.4	%			808				31.6	%
Total		$	16,426				30.6	%		$	17,264				32.8	%

Gross profit reflects the distribution and manufacturing product margin less manufacturing variances, inventory obsolescence charges, customer returns, scrap and cycle count adjustments, engineering costs and other provisions.

Consolidated gross profit decreased to $16.4 million during the first quarter of fiscal 2025 compared to $17.3 million during the first quarter of fiscal 2024. Consolidated gross margin as a percentage of net sales during the first quarter of fiscal 2025 decreased to 30.6% when compared to 32.8% during the first quarter of fiscal 2024. This decrease was mainly due to the unfavorable product mix and manufacturing under absorption in PMT and unfavorable product mix in GES with a partial offset from the favorable product mix in Canvys and cost efficiencies in scrap and freight in Healthcare.

Power and Microwave Technologies

PMT net sales decreased 4.3% to $34.2 million during the first quarter of fiscal 2025 from $35.7 million during the first quarter of fiscal 2024. The decrease was mainly due to slower sales of electron devices slightly offset by growth in our Wafer Fab and RF and Microwave component businesses. Gross margin as a percentage of net sales decreased to 29.8% during the first quarter of fiscal 2025 as compared to 32.2% during the first quarter of fiscal 2024 due to unfavorable product mix and manufacturing under absorption.

Green Energy Solutions

GES net sales increased 84.0% to $8.1 million during the first quarter of fiscal 2025 from $4.4 million during the first quarter of fiscal 2024. The increase reflected the project-based nature of this segment and was mainly due to increased shipments of power management products focused on battery modules for wind turbine and electric locomotive products. Gross margin as a percentage of net sales decreased to 29.4% during the first quarter of fiscal 2025 as compared to 36.0% during the first quarter of fiscal 2024 due to product mix.

Canvys

Canvys net sales decreased 22.8% to $7.6 million during the first quarter of fiscal 2025 from $9.9 million during the first quarter of fiscal 2024, due to lower sales in both the North American and European markets. Gross margin as a percentage of net sales increased to 34.3% during the first quarter of fiscal 2025 from 34.0% during the first quarter of fiscal 2024 primarily due to improved product mix.

Healthcare

Healthcare net sales increased 48.7% to $3.8 million during the first quarter of fiscal 2025 from $2.6 million during the first quarter of fiscal 2024 due to increases in all Healthcare product lines. Gross margin as a percentage of net sales increased to 32.4% during the first quarter of fiscal 2025 as compared to 31.6% during the first quarter of fiscal 2024 primarily due to cost efficiencies in scrap and freight.

Selling, General and Administrative Expenses

Selling, general and administrative expenses ("SG&A") increased slightly to $16.1 million for the first quarter of fiscal 2025 when compared to $15.8 million for the year ago quarter. This increase of 2.0% from the first quarter of fiscal 2024 mainly reflected higher incentives due to sales growth. Expressed as a percentage of net sales, SG&A was 30.0% for the first quarter of fiscal 2025 and remained unchanged compared to the first quarter of fiscal 2024.

Other Income/Expense

Other income was $0.3 million during the first quarter of fiscal 2025, compared to other income of $0.1 million for the first quarter of fiscal 2024. Other income during the first quarter of fiscal 2025 included interest income and foreign exchange gains. Our foreign exchange gains and losses are primarily due to the translation of U.S. dollars held in non-U.S. entities. We currently do not utilize derivative instruments to manage our exposure to foreign currency.

Income Tax Provision

We recorded an income tax provision of $0.1 million and $0.4 million for the first three months of fiscal 2025 and the first three months of fiscal 2024, respectively. The effective income tax rate during the first three months of fiscal 2025 was a tax provision of 9.0% as compared to a tax provision of 23.7% during the first three months of fiscal 2024. The difference in rate during the first three months of fiscal 2025 as compared to the first three months of fiscal 2024 reflects changes in our geographical distribution of income (loss), which is primarily driven by a decrease in U.S. earnings for fiscal 2025 and the state income tax provision, as well as an increase in the utilization of U.S. research and development credits. The 9.0% effective income tax rate differs from the federal statutory rate of 21% as a result of our geographical distribution of income (loss), as well as the utilization of U.S. research and development credits.

In the normal course of business, we are subject to examination by taxing authorities throughout the world. Years prior to fiscal 2015 are closed for examination under the statute of limitation for U.S. federal and U.S. state. In the Netherlands, years prior to fiscal 2019 are closed for examination. We are under examination in Germany for fiscal years 2019 to 2022. We have no current open audits in the U.S.

The Company recorded a $0.3 million liability for uncertain tax positions as of August 31, 2024. The uncertain tax positions totaled $0.1 million as of June 1, 2024. We record interest related to uncertain tax positions in the income tax expense line item within the Consolidated Statements of Comprehensive Income. Accrued interest was included within the related tax liability line in the Consolidated Balance Sheets. We have recorded a liability of less than $0.1 million for interest and penalties as it relates to the reserve of the research and development credit as of June 1, 2024 and August 31, 2024, respectively.

Net Income and Per Share Data

Net income during the first quarter of fiscal 2025 was $0.6 million, or $0.04 per diluted common share and $0.04 per Class B diluted common share as compared to net income of $1.2 million during the first quarter of fiscal 2024 or $0.09 per diluted common share and $0.08 per Class B diluted common share.

LIQUIDITY, FINANCIAL POSITION AND CAPITAL RESOURCES

Our operations and cash needs have been primarily financed through income from operations and cash on hand.

Cash and cash equivalents were $23.0 million at August 31, 2024. Cash and cash equivalents by geographic area at August 31, 2024 consisted of $4.1 million in North America, $9.9 million in Europe, $1.2 million in Latin America and $7.8 million in Asia/Pacific. No cash was repatriated to the United States in the first quarter of fiscal 2025. Although the Tax Cuts and Jobs Act generally eliminated federal income tax on future cash repatriation to the United States, cash repatriation may be subject to state and local taxes, withholding or similar taxes. See Note 8, Income Taxes, of the notes to our consolidated financial statements in Part II, Item 8 of this Annual Report on Form 10-K for the fiscal year ended June 1, 2024, filed with the SEC on August 5, 2024, for further information.

Cash and cash equivalents were $24.3 million at June 1, 2024. Cash and cash equivalents by geographic area at June 1, 2024 consisted of $7.1 million in North America, $7.3 million in Europe, $1.1 million in Latin America and $8.8 million in Asia/Pacific. We repatriated $0.3 million to the United States in the second quarter of fiscal 2024 from our entity in Mexico.

Our short-term and long-term liquidity requirements primarily arise from: (i) working capital requirements, (ii) capital expenditure needs and (iii) cash dividend payments (if and when declared by our Board of Directors). Our ability to fund these requirements will depend, in part, on our future cash flows, which are determined by our future operating performance and, therefore, subject to prevailing global macroeconomic conditions and financial, business and other factors, some of which are beyond our control.

Based on past performance and current expectations, we believe that the existing sources of liquidity, including current cash, will provide sufficient resources to meet known capital requirements and working capital needs through the next twelve months. Additionally, while our future capital requirements will depend on many factors, including, but not limited to, the economy and the outlook for growth in our markets, we believe our existing sources of liquidity as well as our ability to generate operating cash flows will satisfy our future obligations and cash requirements.

On March 20, 2023, the Company established a senior, secured revolving credit facility agreement with a three-year term in an aggregate principal amount not to exceed $30 million, including a swingline loan and a letter of credit sub-facility (collectively, the "Revolving Credit Facility") with PNC Bank. The Revolving Credit Facility is guaranteed by the Company's domestic subsidiaries. Proceeds of the borrowings under the Revolving Credit Facility are expected to be used for working capital and general corporate purposes of the Company and its subsidiaries. The Company utilized $1.0 million of the credit line to address short-term cash requirements and repaid that $1.0 million during the first quarter of fiscal 2025. As of the end of the first quarter for fiscal 2025 and the date of this report, no amounts were outstanding under the Revolving Credit Facility.

Cash Flows from Operating Activities

Cash flows from operating activities are primarily a result of our net income adjusted for non-cash items and changes in our operating assets and liabilities.

Operating activities generated $0.4 million of cash during the first three months of fiscal 2025. We had a net income of $0.6 million during the first three months of fiscal 2025, which included non-cash stock-based compensation expense of $0.6 million associated with the issuance of stock option and restricted stock awards, inventory reserve provisions of $0.1 million, unrealized foreign exchange gain of $0.4 million and depreciation and amortization expense of $1.0 million associated with our property, plant and equipment and intangible assets. Changes in our operating assets and liabilities used $1.9 million in cash during the first three months of fiscal 2025, net of foreign currency exchange gains and losses included an increase in inventory of $0.1 million and an increase in accounts receivable of $5.9 million. Partially offsetting the cash utilization was an increase in accounts payable and accrued liabilities of $4.1 million. The increase in accounts receivable was primarily due to the higher level of sales for the current quarter compared to the prior quarter. The changes in accounts payable and accrued liabilities were timing related.

Operating activities generated $1.0 million of cash during the first three months of fiscal 2024. We had a net income of $1.2 million during the first three months of fiscal 2024, which included non-cash stock-based compensation expense of $0.5 million associated with the issuance of stock option and restricted stock awards, inventory reserve provisions of $0.1 million and depreciation and amortization expense of $1.0 million associated with our property and equipment as well as amortization of our intangible assets. Changes in our operating assets and liabilities used $1.8 million in cash during the first three months of fiscal 2024, net of foreign currency exchange gains and losses included an increase in inventory of $3.2 million, a decrease in accounts payable of $2.4 million and a decrease in accrued liabilities of $1.1 million. Partially offsetting the cash utilization were decreases in receivables of $4.5 million and prepayments of $0.4 million. The decrease in accounts receivable was primarily due to the lower level of sales in the current quarter. Most of the inventory increase supported the products for electron tubes and Healthcare. The decreases in accounts payable and accrued liabilities were timing related.

Cash Flows from Investing Activities

Cash used in investing activities of $0.9 million during the first three months of fiscal 2025 was due to capital expenditures. Capital expenditures were primarily related to our IT system and LaFox manufacturing and facilities. LaFox manufacturing primarily supports the Electron Device Group ("EDG") and Green Energy Solutions ("GES").

Cash used in investing activities of $1.1 million during the first three months of fiscal 2024 was due to capital expenditures. Capital expenditures were primarily related to our IT system and the LaFox manufacturing and facilities renovation. LaFox manufacturing primarily supports the Electron Device Group ("EDG") and Green Energy Solutions ("GES").

Cash Flows from Financing Activities

Cash flows used in financing activities consist primarily of cash dividends and cash flows provided by financing activities consist primarily of the proceeds from the issuance of stock. All future dividend payments are at the discretion of the Board of Directors. Dividend payments depend on earnings, capital requirements, operating conditions and such other factors that the Board may deem relevant.

Cash used in financing activities of $0.9 million during the first three months of fiscal 2025 primarily resulted from $0.9 million of dividend payments to stockholders partially offset by $0.1 million of proceeds from the issuance of stock.

Cash used by financing activities of $0.6 million during the first three months of fiscal 2024 primarily resulted from $0.8 million of dividend payments to stockholders offset by $0.3 million of proceeds from the issuance of stock.

Critical Accounting Policies and Estimates

The Company's consolidated financial statements are prepared in accordance with U.S GAAP. Preparation of these financial statements requires the Company to make estimates, assumptions and judgments that affect the reported amounts of assets, liabilities, revenue and expenses, and related disclosure of contingent assets and liabilities. The Company's most critical accounting policies and estimates are those most important to the portrayal of its financial condition and results of operations and which require the Company to make its most difficult and subjective judgments, often as a result of the need to make estimates regarding matters that are inherently uncertain. Although management believes that its estimates and assumptions are reasonable, they are based on information available when they are made and, therefore, may differ from estimates made under different assumptions or conditions.

The Company's significant accounting policies are consistent with those discussed in Note 3, Significant Accounting Policies and Disclosures, to the consolidated financial statements and the MD&A section of the Company's fiscal 2024 Annual Report on Form 10-K (the "2024 Annual Report"). During the three months ended August 31, 2024, there were no significant changes in the application of critical accounting policies.

Impact of New Accounting Standards

For information about recently issued accounting pronouncements, see Note 4, New Accounting Pronouncements - Not Yet Adopted, included in Part 1, Item 1.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Risk Management and Market Sensitive Financial Instruments

We are exposed to many different market risks with the various industries we serve. The primary financial risk we are exposed to is foreign currency exchange, as certain of our operations, assets and liabilities are denominated in foreign currencies. We manage these risks through normal operating and financing activities.

The interpretation and analysis of these disclosures should not be considered in isolation since such variances in exchange rates would likely influence other economic factors. Such factors, which are not readily quantifiable, would likely also affect our operations. Additional disclosure regarding various market risks is set forth in Part I, Item 1A, "Risk Factors" of our Annual Report on Form 10-K for the fiscal year ended June 1, 2024 filed with the SEC on August 5, 2024.

ITEM 4. CONTROLSAND PROCEDURES

(a) Evaluation of Disclosure Controls and Procedures

Management of the Company, with the participation of the Chief Executive Officer and the Chief Financial Officer, evaluated the effectiveness of the design and operation of the Company's disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as amended (the "Exchange Act")) as of August 31, 2024.

Disclosure controls and procedures are intended to provide reasonable assurance that information required to be disclosed in the Company's Exchange Act reports is recorded, processed, summarized and reported within the time periods specified by the Securities and Exchange Commission's rules and forms, and that such information is accumulated and communicated to management, including the Company's Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure. Based on this evaluation, the Company's Chief Executive Officer and Chief Financial Officer have concluded that the Company's disclosure controls and procedures were effective as of the end of the period covered by this report.

(b) Changes in Internal Control over Financial Reporting

There were no changes in the Company's internal control over financial reporting identified in connection with the evaluation required by paragraph (d) of Exchange Act Rules 13a-15 or 15d-15 that occurred during the first quarter of fiscal 2025 that have materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting.

PART II. OTHERINFORMATION

ITEM 1. LEGALPROCEEDINGS

ITEM 1A. RISK FACTORS

There have been no material changes to the risk factors previously disclosed in our Annual Report on Form 10-K for the fiscal year ended June 1, 2024, filed with the SEC on August 5, 2024.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

None.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

Not applicable.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

ITEM 5. OTHERINFORMATION

a) Form 8-K disclosures for the quarter covered by this Form 10-Q:

Submission of Matters to Vote of Security Holders

We held our annual meeting of stockholders on October 8, 2024. At the annual meeting, our stockholders (i) elected each of the nominees listed below to the Company's Board of Directors to serve for a term expiring at the 2025 Annual Meeting; (ii) ratified the selection of BDO USA, P. C. as our independent registered public accounting firm for fiscal 2025; and (iii) approved, on an advisory basis, the compensation of the Company's named executive officers.

The final results for the votes regarding each proposal are set forth below:

Nominee		For			Abstain/Withhold			Broker Non-Votes
Edward J. Richardson			25,048,700				3,048,851				1,932,766
Wendy S. Diddell			27,837,126				260,425				1,932,766
Jacques Belin			24,935,122				3,162,429				1,932,766
James Benham			24,935,237				3,162,314				1,932,766
Kenneth Halverson			24,936,927				3,160,624				1,932,766
Robert H. Kluge			26,111,151				1,986,400				1,932,766
Paul J. Plante			23,137,263				4,960,288				1,932,766

b) Not applicable.

c) 10b5-1 trading arrangements:

None.

ITEM 6. EXHIBITS

ExhibitIndex

Exhibit Number		Description
3.1		Amended and Restated Certificate of Incorporation of the Company (incorporated by reference to Annex III of the Proxy Statement dated August 22, 2014).
3.2		Amended and Restated By-Laws of the Company (incorporated by reference to Exhibit 3.1 to the Company's Current Report on Form 8-K filed with the SEC on June 15, 2017).
31.1		Certification of Edward J. Richardson pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2		Certification of Robert J. Ben pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32		Certifications pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101		The following financial information from our Quarterly Report on Form 10-Q for the first quarter of fiscal 2025, filed with the SEC on October 10, 2024, formatted in Inline Extensible Business Reporting Language (iXBRL): (i) the Unaudited Consolidated Balance Sheets, (ii) the Unaudited Consolidated Statements of Comprehensive Income, (iii) the Unaudited Consolidated Statements of Cash Flows, (iv) the Unaudited Consolidated Statement of Stockholders' Equity and (v) Notes to Unaudited Consolidated Financial Statements.
101.INS		Inline XBRL Instance Document - the instance document does not appear in the Interactive Data File because XBRL tags are embedded within the Inline XBRL document.
101.SCH		Inline XBRL Taxonomy Extension Schema With Embedded Linkbase Documents.
104		Cover Page Interactive Data File (embedded within the Inline XBRL document).

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	RICHARDSON ELECTRONICS, LTD.
Date: October 10, 2024	By:	/s/ Robert J. Ben
		Robert J. Ben Chief Financial Officer and Chief Accounting Officer (on behalf of the Registrant and as Principal Financial Officer)

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