Richardson Electronics (NASDAQ:RELL) Reports Strong Q4 CY2025 Results, Yet Shares Fall 10.5%

Richardson Electronics (RELL) Q4 CY2025 Earnings Overview

Richardson Electronics (NASDAQ: RELL), a distributor specializing in electronics, announced its financial results for the fourth quarter of calendar year 2025, surpassing revenue forecasts. The company reported sales of $52.29 million, marking a 5.7% increase compared to the same period last year. Its GAAP loss per share stood at $0.01, aligning with analyst expectations.

Highlights from Q4 CY2025

• Total Revenue: $52.29 million, exceeding analyst projections of $49.9 million (5.7% year-over-year growth, 4.8% above expectations)
• GAAP EPS: -$0.01, matching consensus estimates
• Adjusted EBITDA: $741,000, slightly above the $720,000 forecast (1.4% margin)
• Operating Margin: 0.3%, a notable improvement from -1.4% in the prior year’s quarter
• Free Cash Flow: -$1.71 million, down from $4.95 million a year ago
• Backlog: $135.7 million at quarter’s end, reflecting a 4.8% decline year over year
• Market Cap: $167.2 million

Edward J. Richardson, Chairman, CEO, and President, commented, “We achieved solid revenue growth of 5.7% in the second quarter of fiscal 2026, driven primarily by strong results in our Green Energy Solutions (GES) division.”

About Richardson Electronics

Established in 1947, Richardson Electronics (NASDAQ: RELL) distributes power grid and microwave tubes, along with related consumables.

Revenue Performance

Evaluating a company’s long-term growth can reveal much about its underlying strength. While short-term gains are possible for any business, sustained expansion is a hallmark of quality. Over the past five years, Richardson Electronics achieved a compound annual growth rate of 6.3% in sales, which is modest compared to industry standards and falls short of our benchmark for the industrials sector.

Although long-term trends are important, they may not capture recent shifts in the industry. Richardson Electronics experienced growth in earlier years, but over the last two years, annual revenue has declined by 3%, indicating a reversal of previous gains.

To further understand revenue trends, it’s helpful to examine the company’s backlog—the total value of unfulfilled orders. At the end of the latest quarter, the backlog stood at $135.7 million, averaging a 3.4% annual decrease over the past two years. This trend closely mirrors the company’s revenue changes, suggesting a balance between new orders and order fulfillment.

This quarter, Richardson Electronics delivered a 5.7% year-over-year increase in revenue, with its $52.29 million in sales beating Wall Street’s estimates by 4.8%.

Future Outlook

Looking forward, analysts anticipate that Richardson Electronics’ revenue will grow by 8.2% over the next year—an improvement over the recent past and above the sector average. This suggests that new products and services could drive stronger top-line results.

Profitability and Margins

While Richardson Electronics has remained profitable over the past five years, its average operating margin of 4.4% is relatively weak for an industrials company. Over this period, the operating margin declined by 4.5 percentage points, raising concerns about rising costs and the company’s ability to leverage its revenue growth for improved profitability. This suggests that expenses increased faster than the company could pass on to customers.

In the most recent quarter, the company’s operating margin improved by 1.6 percentage points year over year. This positive shift, with operating margin rising faster than gross margin, indicates better expense management in areas such as marketing, research and development, and administrative costs.

Earnings Per Share (EPS) Trends

Tracking long-term changes in earnings per share (EPS) helps assess whether growth is translating into profitability. Richardson Electronics turned its full-year EPS from negative to positive over the last five years, signaling a pivotal moment for the company.

However, in the past two years, EPS has dropped by 72.7%, outpacing the decline in revenue and highlighting challenges in adapting to reduced demand. For Q4, the company reported an EPS of -$0.01, an improvement from -$0.05 in the same quarter last year and in line with analyst expectations. Wall Street projects that full-year EPS will reach $0.05 over the next 12 months, representing a 630% increase.

Summary and Investment Considerations

Richardson Electronics delivered a quarter that exceeded revenue expectations and outperformed on EBITDA. While several key metrics were positive, the market appeared to expect even stronger results, as reflected by a 10.5% drop in the stock price to $10.45 following the report.

Is Richardson Electronics a compelling investment at its current valuation? While quarterly results matter, long-term business fundamentals and valuation are more critical when making investment decisions.