Richardson Electronics, Ltd. reported financial results for its fourth quarter and fiscal year ended May 27, 2023. The company also announced that its Board of Directors (BoD) declared a $0.06 per share quarterly cash dividend.
“Fiscal 2023 was one of the best years in our 76-year history as operating income increased year-over-year by nearly 57, on a 16.9 percent increase in net sales – reflecting the power of our financial model. Sales this fiscal year were driven by growth across all strategic business units. Most notably, GES sales in fiscal 2023 grew by over 110 percent as we expanded our customer relationships, developed new engineered solutions for new applications, and benefited from positive industry demand,” said Edward J. Richardson, chairman, chief executive officer and president.
“As expected, our fourth quarter of fiscal 2023 was challenged by a 20.8 percent decrease in PMT sales, primarily due to weaker demand from semiconductor wafer fab customers and partially offset by strong GES sales. While we expect the semiconductor wafer fab market to remain challenging over the next several quarters, we remain excited by the significant long-term opportunities we are pursuing across our business units to develop new products and expand our global customer base. This includes power management systems for wind turbines, electric locomotives, hydrogen power and synthetic diamonds. We believe continued growth from our GES business will help offset the expected fiscal 2024 sales decrease in the semiconductor wafer fabrication equipment business.”
Fourth Quarter Results
Net sales for the fourth quarter of fiscal 2023 decreased 4.5 percent to $58.8 million compared to net sales of $61.6 million in the prior year’s fourth quarter due to lower net sales in PMT, Canvys and Healthcare, partially offset by higher sales for GES. Net sales for GES increased $5.8 million or 61.7 percent from last year’s fourth 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. PMT sales decreased $8.3 million or 20.8 percent from last year’s fourth quarter primarily due to lower sales of manufactured products for our semiconductor wafer fabrication equipment customers. Canvys sales decreased by $0.3 million or 3.2 percent primarily due to the timing of customer shipments in North America. Richardson Healthcare sales decreased $0.1 million or 2.7 percent due to decreases in parts and equipment sales, partially offset by higher CT tube sales.
Gross margin was 27.9 percent of net sales during the fourth quarter of fiscal 2023, compared to 32.7 percent during the fourth quarter of fiscal 2022. PMT margin decreased to 29.0 percent from 35.2 percent primarily due to product mix. GES margin decreased to 23.4 percent from 31.1 percent also due to product mix. Canvys margin increased to 32.9 percent from 30.7 percent because of product mix and lower freight costs. Healthcare gross margin increased to 23.7 percent in the fourth quarter of fiscal 2023 compared to 10.8 percent in the prior year’s fourth quarter due to improved manufacturing absorption, partially offset by increased scrap expense.
Operating expenses were $15.0 million compared to $15.2 million in the fourth quarter of fiscal 2022. The decrease in operating expenses resulted from tight expense control and lower incentive expense from significantly lower operating income, partially offset by higher salaries expense.
The company reported operating income of $1.4 million for the fourth quarter of fiscal 2023 compared to operating income of $5.0 million in the prior year’s fourth quarter. Other income for the fourth quarter of fiscal 2023, including interest income and foreign exchange, was $0.1 million, compared to other expense of $0.2 million in the fourth quarter of fiscal 2022.
Income tax benefit was $2.6 million and Non-GAAP income tax benefit* was $0.2 million for the fourth quarter of fiscal 2023, versus an income tax benefit of $3.5 million and Non-GAAP income tax expense* of $0.5 million in the prior year’s fourth quarter. The fourth quarter of fiscal 2023 included $0.4 million for an R&D Tax Credit for the current fiscal year and a one-time total credit of $0.6 million for fiscal years 2020 through 2022. In addition, the fourth quarter of 2023 included a one-time $1.8 million income tax benefit for the reversal of the foreign tax credit valuation allowance.
Net income for the fourth quarter of fiscal 2023 was $4.1 million and Non-GAAP net income* was $1.8 million compared to net income of $8.3 million and Non-GAAP net income* of $4.3 million in the fourth quarter of fiscal 2022. Earnings per common share (diluted) were $0.27 and Non-GAAP earnings per common share (diluted)* were $0.11 in the fourth quarter of fiscal 2023 compared to earnings per common share (diluted) of $0.59 and Non-GAAP earnings per common share (diluted)* of $0.31 in the fourth quarter of fiscal 2022.
Cash and investments were $25.0 million as of May 27, 2023 versus $24.6 million on February 25, 2023 and $40.5 million on May 28, 2022. The use of cash during the fiscal year related to higher working capital to support significant sales growth. The company invested $2.4 million during the quarter in capital expenditures primarily related to its manufacturing business and facility renovation, versus $1.0 million during the fourth quarter of fiscal 2022.
Fiscal 2023 Results
Net sales for fiscal 2023 were $262.7 million, an increase of 16.9 percent, compared to net sales of $224.6 million during fiscal 2022. Sales increased by $8.9 million or 5.7 percent for PMT, $25.0 million or 110.5 percent for GES, $4.1 million or 11.8 percent for Canvys and $0.1 million or 0.5 percent for Richardson Healthcare.
Gross profit increased to $83.7 million during fiscal 2023, compared to $71.7 million during fiscal 2022. As a percentage of net sales, gross margin was 31.9 percent of net sales during fiscal 2023, the same as during fiscal 2022.
Operating expenses increased to $58.7 million for fiscal 2023, compared to $55.7 million for fiscal 2022. The increase in operating expenses resulted from higher employee compensation and travel expenses, including additional incentives expense due to strong profitability. Operating expenses as a percentage of sales decreased to 22.4 percent during fiscal 2023 as compared to 24.8 percent during fiscal 2022.
Operating income during fiscal 2023 was $25.0 million, compared to an operating income of $16.0 million during fiscal 2022.
Other income for fiscal 2023, including interest income and foreign exchange, was less than $0.1 million, as compared to other expense of $0.2 million in fiscal 2022.
Income tax expense was $2.7 million and Non-GAAP income tax expense* was $5.0 million for fiscal 2023. The income tax benefit of $2.2 million for fiscal 2022 resulted from the $4.0 million partial reversal of the tax valuation allowance due to evidence of profitability for realizing a portion of the deferred tax assets in the future. The Non-GAAP income tax expense* for fiscal 2022 was $1.8 million.
Net income for fiscal 2023 was $22.3 million and Non-GAAP net income* was $20.0 million, versus net income of $17.9 million and Non-GAAP net income* of $13.9 million during fiscal 2022.
Earnings per common share (diluted) were $1.55 and Non-GAAP earnings per common share (diluted)* were $1.39 for fiscal 2023 compared to earnings per common share (diluted) of $1.31 and Non-GAAP earnings per common share (diluted)* of $1.02 for fiscal 2022.
*Please refer to Unaudited Reconciliation between GAAP and Non-GAAP Financial Measures below for a reconciliation of Non-GAAP items to the comparable GAAP measures.
CASH DIVIDEND DECLARED
The BoD 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 August 23, 2023, to common stockholders of record as of August 4, 2023.
NON-GAAP FINANCIAL MEASURES
In addition to the results reported in accordance with generally accepted accounting principles in the U.S. (GAAP) included throughout this press release, the company has provided information regarding “Non-GAAP income tax benefit or expense,” “Non-GAAP net income,” and “Non-GAAP earnings per common share (diluted)” (each, a Non-GAAP financial measure). Each of these Non-GAAP financial measures reflects the exclusion of a one-time tax benefit related to a reversal of a tax valuation allowance and a one-time total R&D Tax Credit from fiscal years 2020 through 2022 from the most directly comparable financial measure calculated and presented in accordance with GAAP income tax benefit or expense, GAAP net income, and GAAP earnings per common share (diluted). Detailed reconciliations of the Non-GAAP financial measures to the most directly comparable GAAP financial measures are set forth in the Form 10-K.
Management believes that the disclosure of these Non-GAAP financial measures provides useful information to investors in assessing the company’s financial performance before items that are not considered by the company to be indicative of the company’s ongoing results. Our management uses these Non-GAAP financial measures along with the most directly comparable GAAP financial measures in evaluating our financial performance and when planning, forecasting and analyzing future periods. The Non-GAAP financial measures presented herein, as determined and presented by the company, may not be comparable to related or similarly titled measures reported by other companies. The Non-GAAP financial measures incorporated herein are not intended to be used as a substitute for the related GAAP measurements. The Non-GAAP financial measures should be viewed in addition to, and not as an alternative for, our reported results prepared in accordance with GAAP.