RICHARDSON ELECTRONICS, LTD.

Previous wording

Results of Operations – an analysis and comparison of our consolidated results of operations for the three month periods ended August 30, 2025 and August 31, 2024, as reflected in our Unaudited Consolidated Statements of Comprehensive Income.

Current wording

Results of Operations – an analysis and comparison of our consolidated results of operations for the three month and six month periods ended November 29, 2025 and November 30, 2024, as reflected in our Unaudited Consolidated Statements of Comprehensive (Loss) Income.

Previous wording

Liquidity, Financial Position and Capital Resources – a discussion of our primary sources and uses of cash for three month periods ended August 30, 2025 and August 31, 2024, and a discussion of changes in our financial position.

Current wording

Liquidity, Financial Position and Capital Resources – a discussion of our primary sources and uses of cash for six month periods ended November 29, 2025 and November 30, 2024, and a discussion of changes in our financial position.

Previous wording

Some of the Company's products are manufactured in foreign countries and imported into the United States. Accordingly, the Company’s operations are subject to tariffs and other trade protection measures. The U.S. administration has instituted certain changes, and may make additional changes, in trade policies that include the negotiation or termination of trade agreements, higher tariffs on imports into the U.S., and other measures affecting trade between the U.S. and other countries from which the Company imports. Due in part to these measures, some countries are changing their trade policies relating to goods imported from the U.S. These global trade disruptions and geopolitical tensions, together with any related downturns in the global economy, could dampen customer demand, increase market volatility, and impact currency exchange rates, all which could materially and adversely affect the Company’s financial performance.

Current wording

Some of the Company's products are manufactured in foreign countries and imported into the United States. Accordingly, the Company’s operations are subject to tariffs and other trade protection measures. The current U.S. administration has instituted certain changes, and may make additional changes, in trade policies that include the negotiation or termination of trade agreements, higher tariffs on imports into the U.S., and other measures affecting trade between the U.S. and other countries from which the Company imports. Due in part to these measures, some countries are changing their trade policies relating to goods imported from the U.S. These global trade disruptions and geopolitical tensions, together with any related downturns in the global economy, could dampen customer demand, increase market volatility, and impact currency exchange rates, all which could materially and adversely affect the Company’s financial performance.

Previous wording

The recent tariff modifications did not materially impact our results for the first quarter of fiscal 2026. However, it is possible that further tariffs may be imposed on imports of our products, including by other countries, or that our business will be impacted by changing trade relations among countries. Management continues to work with its suppliers as well as its customers to mitigate the impact of the tariffs on our customers’ markets. 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.

Current wording

The recent tariff modifications did not materially impact our results for the first six months of fiscal 2026. However, it is possible that further tariffs may be imposed on imports of our products, including by other countries, or that our business will be impacted by changing trade relations among countries. Management continues to work with its suppliers as well as its customers to mitigate the impact of the tariffs on our customers’ markets. 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.

Previous wording

The first quarter of fiscal 2026 and fiscal 2025 both contained 13 weeks.

Current wording

The second quarter of fiscal 2026 and fiscal 2025 both contained 13 weeks.

Previous wording

Net sales during the first quarter of fiscal 2026 were $54.6 million, an increase of 1.6%, compared to net sales of $53.7 million during the first quarter of fiscal 2025.

Current wording

Net sales during the second quarter of fiscal 2026 were $52.3 million, an increase of 5.7%, compared to net sales of $49.5 million during the second quarter of fiscal 2025.

Previous wording

Gross margin increased to 31.0% during the first quarter of fiscal 2026 compared to 30.6% during the first quarter of fiscal 2025.

Current wording

Gross margin decreased to 30.8% during the second quarter of fiscal 2026 compared to 31.0% during the second quarter of fiscal 2025.

Previous wording

Selling, general and administrative expenses were $16.0 million or 29.2% of net sales during the first quarter of fiscal 2026 compared to $16.1 million or 30.0% of net sales during the first quarter of fiscal 2025.

Current wording

Selling, general and administrative expenses were $15.9 million or 30.5% of net sales during the second quarter of fiscal 2026 compared to $16.0 million or 32.3% of net sales during the second quarter of fiscal 2025.

Previous wording

Operating income during the first quarter of fiscal 2026 was $1.0 million compared to an operating income of $0.3 million during the first quarter of fiscal 2025.

Current wording

Operating income during the second quarter of fiscal 2026 was $0.1 million compared to an operating loss of $0.7 million during the second quarter of fiscal 2025.

Previous wording

Net sales by segment and percentage change during the first quarter of fiscal 2026 and fiscal 2025 were as follows (in thousands):

Current wording

Net sales by segment and percentage change during the second quarter and first six months of fiscal 2026 and fiscal 2025 were as follows (in thousands):

Previous wording

During the first quarter of fiscal 2026, consolidated net sales increased 1.6% compared to the first quarter of fiscal 2025. Sales for PMT increased 2.8%, sales for GES decreased 10.2% and sales for Canvys increased 8.3%. The increase in PMT was mainly due to increased semiconductor and electron tube products. The decrease in GES reflected the project-based nature of this segment and was mainly due to the non-recurrence of a large EV Locomotive order from the year ago quarter. The increase in Canvys was attributable to sales in the European markets.

Current wording

During the second quarter of fiscal 2026, consolidated net sales increased 5.7% compared to the second quarter of fiscal 2025. Sales for PMT decreased 4.0%, sales for GES increased 39.0% and sales for Canvys increased 28.1%. The decrease in PMT was mainly due to a decline in Electron Device and Healthcare products partially offset by higher RF and Microwave products. The increase in GES was mainly due to sales of Power Management products. The increase in Canvys was attributable to higher sales in the North American markets.

Previous wording

Gross profit by segment and percentage of net sales for the first quarter of fiscal 2026 and fiscal 2025 were as follows (in thousands):

Current wording

Gross profit by segment and percentage of net sales for the second quarter and first six months of fiscal 2026 and fiscal 2025 were as follows (in thousands):

Previous wording

Consolidated gross profit increased to $16.9 million during the first quarter of fiscal 2026 compared to $16.4 million during the first quarter of fiscal 2025. Consolidated gross margin as a percentage of net sales during the first quarter of fiscal 2026 increased to 31.0% when compared to 30.6% during the first quarter of fiscal 2025. This margin increase was mainly due to favorable product mix and improved manufacturing absorption in PMT and favorable product mix in GES with a partial offset from unfavorable product mix and higher freight costs in Canvys.

Current wording

Consolidated gross profit increased to $33.0 million during the first six months of fiscal 2026 compared to $31.8 million during the first six months of fiscal 2025. Consolidated gross margin as a percentage of net sales during the first six months of fiscal 2026 increased to 30.9% when compared to 30.8% during the first six months of fiscal 2025. This margin increase was mainly due to favorable product mix in PMT, unfavorable product mix in GES and unfavorable product mix and higher freight costs in Canvys.

Previous wording

PMT net sales increased 2.8% to $39.1 million during the first quarter of fiscal 2026 from $38.0 million during the first quarter of fiscal 2025. The increase was due primarily to increased sales of engineered solutions for the semiconductor wafer fabrication market and higher sales of electron tubes. The decline in healthcare sales, which only include CT tubes, was due to the sale of assets to DirectMed in the third quarter of fiscal 2025, partially offset the sales growth for semiconductor and electron tube products. Gross margin as a percentage of net sales increased to 31.3% during the first quarter of fiscal 2026 as compared to 30.1% during the first quarter of fiscal 2025 due to product mix and improved manufacturing absorption.

Current wording

PMT net sales decreased 4.0% to $35.2 million during the second quarter of fiscal 2026 from $36.7 million during the second quarter of fiscal 2025. The decrease was due primarily to a decline in the Electron Device and Healthcare products partially offset by increased growth in our RF and Microwave component products. The decline in Healthcare sales, which only included CT tubes, was due to the sale of assets to DirectMed in the third quarter of fiscal 2025. Gross margin as a percentage of net sales decreased to 30.4% during the second quarter of fiscal 2026 as compared to 30.7% during the second quarter of fiscal 2025 due to product mix and lower manufacturing absorption.

Previous wording

Canvys net sales increased 8.3% to $8.3 million during the first quarter of fiscal 2026 from $7.6 million during the first quarter of fiscal 2025, due to higher sales in the European markets. Gross margin as a percentage of net sales decreased to 30.9% during the first quarter of fiscal 2026 from 34.3% during the first quarter of fiscal 2025 primarily due to product mix and higher freight costs.

Current wording

Canvys net sales increased 17.7% to $17.0 million during the first six months of fiscal 2026 from $14.5 million during the first six months of fiscal 2025, due to higher sales in both North American and European markets. Gross margin as a percentage of net sales decreased to 31.8% during the first six months of fiscal 2026 from 33.1% during the first six months of fiscal 2025 primarily due to product mix and higher freight costs.

Previous wording

Selling, general and administrative expenses (“SG&A”) decreased to $16.0 million for the first quarter of fiscal 2026 when compared to $16.1 million for the year ago quarter. This decrease of $0.1 million or less than 1% from the first quarter of fiscal 2025 mainly reflected lower travel costs. Expressed as a percentage of net sales, SG&A was 29.2% for the first quarter of fiscal 2026 compared to 30.0% in the first quarter of fiscal 2025.

Current wording

Selling, general and administrative expenses (“SG&A”) decreased to $15.9 million for the second quarter of fiscal 2026 when compared to $16.0 million for the year ago quarter due to lower travel expenses. Expressed as a percentage of net sales, SG&A was 30.5% for the second quarter of fiscal 2026 compared to 32.3% in the second quarter of fiscal 2025.

Previous wording

Other income during the first quarter of fiscal 2026 totaled $1.4 million compared to $0.3 million for first quarter of fiscal 2025. The increase from the year ago quarter was mainly due to a non-recurring gain of $0.9 million.

Current wording

Other expense during the second quarter of fiscal 2026 totaled $0.3 million compared to other expense of $0.4 million for second quarter of fiscal 2025. The decrease from the year ago quarter was mainly due to higher interest income.

Previous wording

We recorded an income tax provision of $0.4 million and $0.1 million for the first three months of fiscal 2026 and the first three months of fiscal 2025, respectively. The effective income tax rate during the first three months of fiscal 2026 was a tax provision of 18.1% as compared to a tax provision of 9.0% during the first three months of fiscal 2025. The difference in rate during the first three months of fiscal 2026 as compared to the first three months of fiscal 2025 reflects changes in our geographical distribution of income (loss). The 18.1% effective income tax rate differs from the federal statutory rate of 21% as a result of our geographical distribution of income (loss) and the utilization of the U.S. research and development credit.

Current wording

We recorded an income tax provision of $0.3 million and an income benefit of $0.2 million for the first six months of fiscal 2026 and the first six months of fiscal 2025, respectively. The effective income tax rate during the first six months of fiscal 2026 was a tax provision of 16.2% as compared to a tax benefit of 60.4% during the first six months of fiscal 2025. The difference in rate during the first six months of fiscal 2026 as compared to the first six months of fiscal 2025 reflects changes in our geographical distribution of income (loss). The 16.2% effective income tax rate differs from the federal statutory rate of 21% as a result of our geographical distribution of income (loss) and the utilization of the U.S. research and development credit.

Previous wording

The Company recorded a $0.3 million uncertain tax position as of August 30, 2025 as compared to $0.3 million as of May 31, 2025. 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 as of August 30, 2025 and May 31, 2025.

Current wording

The Company's reserve for uncertain tax positions totaled $0.3 million as of November 29, 2025, and May 31, 2025. We record interest related to uncertain tax positions in the income tax expense line item within the Consolidated Statements of Comprehensive (Loss) 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 as of November 29, 2025 and May 31, 2025.

Previous wording

The Company maintains a valuation allowance representing the portion of the deferred tax asset that management does not believe is more likely than not to be realized. The valuation allowance was $2.9 million as of August 30, 2025 and $2.8 million as of May 31, 2025. The valuation allowance relates to state NOLs ($1.7 million) and deferred tax assets in foreign jurisdictions where historical taxable losses have been incurred ($1.2 million). The amount of the deferred tax asset considered realizable, however, could be adjusted if estimates of future taxable income during the carryforward period are increased, or if objective negative evidence in the form of cumulative losses is no longer present and additional weight may be given to subjective evidence such as our projections for growth.

Current wording

The Company maintains a valuation allowance representing the portion of the deferred tax asset that management does not believe is more likely than not to be realized. The valuation allowance was $2.9 million as of November 29, 2025, and $2.8 million as of May 31, 2025. The valuation allowance relates to state NOLs ($1.7 million) and deferred tax assets in foreign jurisdictions where historical taxable losses have been incurred ($1.2 million). The amount of the deferred tax asset is not considered realizable, however, could be adjusted if estimates of future taxable income during the carryforward period are increased, or if objective negative evidence in the form of cumulative losses is no longer present and additional weight may be given to subjective evidence such as our projections for growth.

Previous wording

We have considered the impact of the One Big Beautiful Bill Act("OBBBA") on the Company’s annual effective tax rate. The impact of OBBBA on the annual effective tax rate includes the reduction in the research and development credit from the Section 280c election. These changes did not have a significant impact to the annual effective tax rate. However, the enactment of the OBBBA introduced several significant tax law modifications that, while not affecting the annual effective tax rate, do have other implications for the Company. The OBBBA makes permanent key elements of the 2017 Tax Cuts and Jobs Act, including 100% bonus depreciation and domestic research cost expensing pursuant to IRC §174 for fiscal years beginning after December 31, 2024. The Company is currently evaluating the future impact of OBBA on its financial position and these changes are anticipated to have an impact on the results of operations and cash flows.

Current wording

We have considered the impact of the One Big Beautiful Bill Act (“OBBBA”) on the Company’s annual effective tax rate. The impact of OBBBA on the annual effective tax rate includes the reduction in the research and development credit from the Section 280c election. These changes did not have a significant impact to the annual effective tax rate. However, the enactment of the OBBBA introduced several significant tax law modifications that, while not affecting the annual effective tax rate, do have other implications for the Company. The OBBBA makes permanent key elements of the 2017 Tax Cuts and Jobs Act, including 100% bonus depreciation and domestic research cost expensing pursuant to IRC §174 for fiscal year beginning after December 31, 2024. The Company is currently evaluating the future impact of OBBBA on its financial position.

Previous wording

Net income during the first quarter of fiscal 2026 was $1.9 million, or $0.13 per diluted common share and $0.12 per Class B diluted common share as compared to a net income of $0.6 million during the first quarter of fiscal 2025 or $0.04 per diluted common share and $0.04 per Class B diluted common share.

Current wording

Net income during the first six months of fiscal 2026 was $1.8 million, or $0.12 per diluted common share and $0.11 per Class B diluted common share as compared to a net loss of $0.2 million during the first six months of fiscal 2025 or $0.01 per diluted common share and $0.01 per Class B diluted common share.

Previous wording

Cash and cash equivalents were $35.7 million at August 30, 2025. Cash and cash equivalents by geographic area on August 30, 2025 consisted of $16.5 million in North America, $10.1 million in Europe, $1.0 million in Latin America and $8.1 million in Asia/Pacific. No cash was repatriated to the United States in the first three months of fiscal 2026. 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 9, Income Taxes, of the notes to our consolidated financial statements in Part II, Item 8 of our Annual Report on Form 10-K for the fiscal year ended May 31, 2025, filed with the SEC on August 4, 2025, for further information.

Current wording

Cash and cash equivalents were $33.1 million at November 29, 2025. Cash and cash equivalents by geographic area on November 29, 2025 consisted of $10.5 million in North America, $12.5 million in Europe, $0.8 million in Latin America and $9.3 million in Asia/Pacific. No cash was repatriated to the United States in the first six months of fiscal 2026. 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.

Previous wording

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 N. A. This Credit Agreement was amended by the First Amendment to the Credit Agreement dated April 9, 2025. The Revolving Credit Facility is guaranteed by the Company's domestic subsidiaries. Proceeds of the borrowings under the Revolving Credit Facility, if any, are expected to be used for working capital and general corporate purposes of the Company and its subsidiaries. There were no drawings or repayments under the Revolving Credit Facility as of August 30, 2025 and through the report release date. As of August 30, 2025 and through the report release date, no amounts were outstanding under the Revolving Credit Facility.

Current wording

On October 7, 2025, the Company executed a three-year extension to the PNC Credit Agreement through the Second Amendment to the Credit Agreement with a maximum borrowing limit of $20 million. The terms of the new agreement are similar to the previous Credit Agreement. See Note 5, Revolving Credit Facility, included in Part I, Item 1 for further information. The Revolving Credit Facility is guaranteed by the Company's domestic subsidiaries. Proceeds of the borrowings under the Revolving Credit Facility, if any, are expected to be used for working capital and general corporate purposes of the Company and its subsidiaries. There were no drawings or repayments under the Revolving Credit Facility as of November 29, 2025 and through the report release date. No amounts were outstanding under the Revolving Credit Facility as of November 29, 2025, and through the report release date.

Previous wording

Operating activities generated $1.4 million of cash during the first three months of fiscal 2026. We had a net income of $1.9 million during the first three months of fiscal 2026, which included non-cash share-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 $0.5 million, 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 utilized $1.8 million in cash during the first three months of fiscal 2026, net of foreign currency exchange gains and losses, included an increase in accounts receivable of $2.7 million, an increase in inventories of $0.6 million and an increase in accounts payable and accrued liabilities of $1.5 million. The increase in accounts receivable was primarily due to the higher level of sales compared to the fourth quarter of fiscal 2025. The change in accounts payable and accrued liabilities was timing related.

Current wording

Operating activities generated $1.3 million of cash during the first six months of fiscal 2026. We had a net income of $1.8 million during the first six months of fiscal 2026, which included non-cash share-based compensation expense of $1.0 million associated with the issuance of stock option and restricted stock awards, inventory reserve provisions of $0.2 million, unrealized foreign exchange gain of $0.2 million, depreciation and amortization expense of $1.9 million associated with our property, plant and equipment and intangible assets. Changes in our operating assets and liabilities utilized $3.4 million in cash during the first six months of fiscal 2026, net of foreign currency exchange gains and losses, included an increase in accounts receivable of $3.2 million, an increase in inventories of $1.5 million, an increase in prepaid expenses and other assets of $2.9 million and an increase in accounts payable and accrued liabilities of $4.4 million. The increase in accounts receivable was primarily due to the higher level of sales. The changes in accounts payable and accrued liabilities were timing related.

Previous wording

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 share-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.

Current wording

Operating activities generated $5.9 million of cash during the first six months of fiscal 2025. We had a net loss of $0.2 million during the first six months of fiscal 2025, which included non-cash stock-based compensation expense of $0.9 million associated with the issuance of stock option and restricted stock awards, inventory reserve provisions of $0.2 million, unrealized foreign exchange gain of $0.2 million and depreciation and amortization expense of $2.1 million associated with our property, plant and equipment and intangible assets. Changes in our operating assets and liabilities generated $3.2 million in cash during the first six months of fiscal 2025, net of foreign currency exchange gains and losses, included an increase in accounts payable and accrued liabilities of $5.2 million, an increase in accounts receivable of $1.1 million and an increase in inventories of $1.7 million. The increase in accounts receivable was primarily due to the higher level of sales. The changes in accounts payable and accrued liabilities were timing related.

Previous wording

Cash used in investing activities of $1.0 million during the first three months of fiscal 2026 was due to capital expenditures. Capital expenditures were primarily related to our IT system and LaFox manufacturing and facilities. LaFox manufacturing primarily supports the PMT and GES segments.

Current wording

Cash used in investing activities of $2.6 million during the first six months of fiscal 2026 was due to capital expenditures. Capital expenditures were primarily related to our IT system and LaFox manufacturing and facilities. LaFox manufacturing primarily supports the PMT and GES segments.

Previous wording

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 PMT and GES segments.

Current wording

Cash used in investing activities of $1.4 million during the first six 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 PMT and GES segments.

Previous wording

Cash used in financing activities of $0.9 million during the first three months of fiscal 2026 primarily resulted from $0.9 million of dividend payments to stockholders partially offset by $0.1 million of proceeds from the issuance of stock.

Current wording

Cash used in financing activities of $1.6 million during the first six months of fiscal 2026 primarily resulted from $1.7 million of dividend payments to stockholders partially offset by $0.2 million of proceeds from the issuance of stock.

Previous wording

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.

Current wording

Cash used in financing activities of $1.6 million during the first six months of fiscal 2025 primarily resulted from $1.7 million of dividend payments to stockholders partially offset by $0.3 million of proceeds from the issuance of stock.