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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 March 1, 2025

☐ 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 April 7, 2025, there were 12,361,870 outstanding shares of Common Stock, $0.05 par value and 2,049,238 outstanding 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 (Loss) Income	3
	Unaudited Consolidated Statements of Cash Flows	4
	Unaudited Consolidated Statement of Stockholders’ Equity	5
	Notes to Unaudited Consolidated Financial Statements	7
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	18
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	27
Item 4.	Controls and Procedures	27

Part II.	Other Information

Item 1.	Legal Proceedings	28
Item 1A.	Risk Factors	28
Item 2.	Unregistered Sales of Equity Securities, Use of Proceeds and Issuer Purchases of Equity Securities	28
Item 3.	Defaults Upon Senior Securities	28
Item 4.	Mine Safety Disclosures	28
Item 5.	Other Information	28
Item 6.	Exhibits	29
Exhibit Index		29
Signatures		30

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

Richardson Electronics, Ltd.

Consolidated Balance Sheets

(in thousands, except per share amounts)


	Unaudited
	March 1, 2025			June 1, 2024
Assets
Current assets:
Cash and cash equivalents	$	36,675		$	24,263
Accounts receivable, less allowance for credit losses of $240 and $323, respectively		24,932			24,845
Inventories, net		98,369			110,149
Prepaid expenses and other assets		3,538			2,397
Total current assets		163,514			161,654
Non-current assets:
Property, plant and equipment, net		18,138			20,681
Intangible assets, net		358			1,641
Right of use lease assets		2,035			2,760
Deferred income tax assets		5,565			5,500
Other non-current assets		200			209
Total non-current assets		26,296			30,791
Total assets	$	189,810		$	192,445
Liabilities
Current liabilities:
Accounts payable	$	22,485		$	15,458
Accrued liabilities		11,268			15,404
Lease liabilities current		986			1,169
Total current liabilities		34,739			32,031
Non-current liabilities:
Deferred income tax liabilities		74			90
Lease liabilities non-current		1,049			1,591
Other non-current liabilities		1,048			781
Total non-current liabilities		2,171			2,462
Total liabilities		36,910			34,493
Stockholders’ Equity
Common stock, $0.05 par value; 12,362 and 12,254 shares issued and outstanding on March 1, 2025 and June 1, 2024, respectively		618			613
Class B common stock, convertible, $0.05 par value; 2,049 shares issued and outstanding on March 1, 2025 and June 1, 2024		102			102
Preferred stock, $1.00 par value, no shares issued		—			—
Additional paid-in-capital		74,113			72,744
Retained earnings		79,117			83,729
Accumulated other comprehensive (loss) income		(1,050	)		764
Total stockholders' equity		152,900			157,952
Total liabilities and stockholders’ equity	$	189,810		$	192,445

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

Richardson Electronics, Ltd.

Unaudited Consolidated Statements of Comprehensive (Loss) Income

(in thousands, except per share amounts)


	Three Months Ended						Nine Months Ended
	March 1, 2025			March 2, 2024			March 1, 2025			March 2, 2024
Net sales	$	53,804		$	52,375		$	157,020		$	149,086
Cost of sales		37,131			36,939			108,595			103,844
Gross profit		16,673			15,436			48,425			45,242
Selling, general and administrative expenses		14,500			14,430			46,607			44,710
(Gain) loss on disposal of property, plant and equipment		—			—			(4	)		70
Loss on disposal of healthcare assets and related charges		4,916			—			4,916			—
Operating (loss) income		(2,743	)		1,006			(3,094	)		462
Other expense (income):
Interest income		(84	)		(67	)		(187	)		(224	)
Foreign exchange loss		456			101			616			347
Other, net		(27	)		(7	)		(28	)		43
Total other expense		345			27			401			166
(Loss) income before income taxes		(3,088	)		979			(3,495	)		296
Income tax (benefit) provision		(1,031	)		229			(1,277	)		116
Net (loss) income		(2,057	)		750			(2,218	)		180
Foreign currency translation (loss) gain, net of tax		(702	)		(205	)		(1,814	)		385
Comprehensive (loss) income	$	(2,759	)	$	545		$	(4,032	)	$	565

Net (loss) income per share:
Common shares - Basic	$	(0.15	)	$	0.05		$	(0.16	)	$	0.01
Class B common shares - Basic		(0.13	)		0.05			(0.14	)		0.01
Common shares - Diluted		(0.15	)		0.05			(0.16	)		0.01
Class B common shares - Diluted		(0.13	)		0.05			(0.14	)		0.01

Weighted average number of shares:
Common shares – Basic		12,333			12,227			12,283			12,208
Class B common shares – Basic		2,049			2,052			2,049			2,052
Common shares – Diluted		12,333			12,445			12,283			12,480
Class B common shares – Diluted		2,049			2,052			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						Nine Months Ended
	March 1, 2025			March 2, 2024			March 1, 2025			March 2, 2024
Operating activities:
Net (loss) income	$	(2,057	)	$	750		$	(2,218	)	$	180
Adjustments to reconcile net (loss) income to cash provided by (used in) operating activities:
Unrealized foreign currency loss (gain)		456			5			429			(300	)
Depreciation and amortization		978			1,104			3,037			3,218
Inventory provisions		123			173			346			450
Share-based compensation expense		320			279			1,226			1,045
(Gain) loss on disposal of property, plant and equipment		—			—			(4	)		70
Deferred income taxes		(3	)		(4	)		(82	)		42
Loss on disposal of healthcare assets and related charges		4,916			—			4,916			—
Change in assets and liabilities:
Accounts receivable		(333	)		(5,254	)		(1,470	)		998
Inventories		2,873			3,974			1,132			(2,246	)
Prepaid expenses and other assets		(382	)		151			(344	)		(58	)
Accounts payable		2,585			(4,072	)		7,249			(5,204	)
Accrued liabilities		(4,661	)		247			(4,115	)		625
Other		(214	)		116			376			464
Net cash provided by (used in) operating activities		4,601			(2,531	)		10,478			(716	)
Investing activities:
Capital expenditures		(549	)		(401	)		(1,992	)		(3,057	)
Proceeds from sale of property, plant & equipment		—			—			7			—
Proceeds from disposal of Healthcare assets		6,985			—			6,985			—
Net cash provided by (used in) investing activities		6,436			(401	)		5,000			(3,057	)
Financing activities:
Proceeds from issuance of common stock		—			—			307			342
Cash dividends paid on common and Class B common stock		(852	)		(844	)		(2,555	)		(2,532	)
Proceeds from revolving credit facility		—			3,744			1,000			3,744
Repayment of revolving credit facility		—			(3,744	)		(1,000	)		(3,744	)
Other		—			—			(159	)		(119	)
Net cash used in financing activities		(852	)		(844	)		(2,407	)		(2,309	)
Effect of exchange rate changes on cash and cash equivalents		(145	)		(113	)		(659	)		(19	)
Increase (decrease) in cash and cash equivalents		10,040			(3,889	)		12,412			(6,101	)
Cash and cash equivalents at beginning of period		26,635			22,769			24,263			24,981
Cash and cash equivalents at end of period	$	36,675		$	18,880		$	36,675		$	18,880

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 (Loss) Income			Total
Balance November 30, 2024		12,359		2,049	$	720	$	73,793		$	82,026		$	(348	)	$	156,191
Comprehensive loss:
Net loss		—		—		—		—			(2,057	)		—			(2,057	)
Foreign currency translation, net of tax		—		—		—		—			—			(702	)		(702	)
Share-based compensation:
Restricted stock		—		—		—		178			—			—			178
Stock options		—		—		—		142			—			—			142
Common stock:
Options exercised		3		—		—		—			—			—			—
Dividends paid to:
Common ($0.060 per share)		—		—		—		—			(742	)		—			(742	)
Class B Common ($0.054 per share)		—		—		—		—			(110	)		—			(110	)
Balance March 1, 2025		12,362		2,049	$	720	$	74,113		$	79,117		$	(1,050	)	$	152,900

Balance June 1, 2024		12,254		2,049	$	715	$	72,744		$	83,729		$	764		$	157,952
Comprehensive loss:
Net loss		—		—		—		—			(2,218	)		—			(2,218	)
Foreign currency translation, net of tax		—		—		—		—			161			(1,814	)		(1,653	)
Share-based compensation:
Restricted stock		—		—		—		780			—			—			780
Stock options		—		—		—		446			—			—			446
Common stock:
Options exercised		48		—		2		305			—			—			307
Restricted stock issuance		60		—		3		(162	)		—			—			(159	)
Dividends paid to:
Common ($0.18 per share)		—		—		—		—			(2,223	)		—			(2,223	)
Class B Common ($0.162 per share)		—		—		—		—			(332	)		—			(332	)
Balance March 1, 2025		12,362		2,049	$	720	$	74,113		$	79,117		$	(1,050	)	$	152,900

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 (Loss)			Total
Balance December 2, 2023:		12,227		2,052	$	714	$	71,936		$	84,786		$	1,205		$	158,641
Comprehensive income (loss):
Net income		—		—		—		—			750			—			750
Foreign currency translation, net of tax		—		—		—		—			—			(205	)		(205	)
Share-based compensation:
Restricted stock		—		—		—		172			—			—			172
Stock options		—		—		—		107			—			—			107
Dividends paid to:
Common ($0.060 per share)		—		—		—		—			(733	)		—			(733	)
Class B Common ($0.054 per share)		—		—		—		—			(111	)		—			(111	)
Balance March 2, 2024		12,227		2,052	$	714	$	72,215		$	84,692		$	1,000		$	158,621

Balance May 27, 2023:		12,140		2,052	$	710	$	70,951		$	87,044		$	615		$	159,320
Comprehensive income:
Net income		—		—		—		—			180			—			180
Foreign currency translation, net of tax		—		—		—		—			—			385			385
Share-based compensation:
Restricted stock		—		—		—		513			—			—			513
Stock options		—		—		—		532			—			—			532
Common stock:
Options exercised		50		—		2		340			—			—			342
Restricted stock issuance		37		—		2		(121	)		—			—			(119	)
Dividends paid to:
Common ($0.180 per share)		—		—		—		—			(2,199	)		—			(2,199	)
Class B Common ($0.162 per share)		—		—		—		—			(333	)		—			(333	)
Balance March 2, 2024		12,227		2,052	$	714	$	72,215		$	84,692		$	1,000		$	158,621

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

RICHARDSON ELECTRONICS, LTD.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

1. DESCRIPTION OF THE COMPANY

Richardson Electronics, Ltd. (the "Company," "we," "our") is a leading global manufacturer of engineered solutions, green energy products, power grid and microwave tubes, and related consumables; power conversion and RF and microwave components including green energy solutions; tubes for diagnostic imaging equipment; and customized display solutions. Approximately 50% of our products are manufactured in LaFox, Illinois, Marlborough, Massachusetts, or Donaueschingen, Germany, or by one of our manufacturing partners throughout the world. All our partners manufacture to our strict specifications and per our supplier code of conduct. 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.

Our products include electron tubes and related components, microwave generators, subsystems used in semiconductor manufacturing and visual technology solutions. These products are used to control, switch or amplify electrical power signals, or are used as display devices in a variety of industrial, commercial, medical and communication applications.

The Company reports its financial performance for the following business segments: Power and Microwave Technologies ("PMT"), Green Energy Solutions ("GES"), Canvys and Healthcare. A description of the Company's business segments is provided in Note 11, Segment and Geographic Information.

On January 24, 2025, the Company sold a substantial portion of the assets of its Healthcare business to DirectMed Imaging, LLC (“DirectMed”), a Delaware limited liability company, and entered into an exclusive 10-year global supply agreement in which Richardson will supply DirectMed with repaired Siemens CT X-ray tubes. Additionally, the Company will continue manufacturing ALTA CT X-ray tubes for DirectMed for approximately 12 to 18 months. A description of this transaction and other decisions associated with this transaction which resulted in a total loss of $4.9 million being recorded for the three month and nine month periods ended March 1, 2025 is provided in Note 10, Disposal of Healthcare Assets and Related Charges.

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

2. BASIS OF PRESENTATION

The accompanying Unaudited Consolidated Financial Statements have been prepared in accordance with United States Generally Accepted Accounting Principles (“GAAP”) for interim financial information and the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all the information and notes required by GAAP for complete financial statements.

Our fiscal quarter ends on the Saturday nearest the end of the quarter-ending month. The third quarter of fiscal 2025 and fiscal 2024 both contained 13 weeks. The first nine months of fiscal 2025 contained 39 weeks and the first nine months of fiscal 2024 contained 40 weeks.

In the opinion of management, all adjustments, which are of a normal and recurring nature, necessary for a fair presentation of the results of interim periods have been made. All inter-company transactions and balances have been eliminated. The Unaudited Consolidated Financial Statements presented herein include the accounts of our wholly owned subsidiaries. Certain information and note disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to applicable rules and regulations. The results of our operations for the nine months ended March 1, 2025 are not necessarily indicative of the results that may be expected for the fiscal year ending May 31, 2025.

As described in Note 1, Description of the Company, the Company reports its financial performance based on four operating and reportable segments. The financial information contained in this report should be read in conjunction with our Annual Report on Form 10-K for the fiscal year ended June 1, 2024, which was filed with the SEC on August 5, 2024.

3. RECLASSIFICATIONS

Certain prior period amounts have been reclassified to conform to the current period reporting classifications. The reclassification was related to the unrealized foreign exchange gain (loss) on the Consolidated Statements of Cash Flows.

4. NEW ACCOUNTING PRONOUNCEMENTS - NOT YET ADOPTED

In November 2023, Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures. The amendment requires disclosures of significant segment expenses that are regularly provided to the chief operating decision maker ("CODM") and included within each reported measure of segment profit of loss, an amount and description of its composition for other segment items, and interim disclosures of a reportable segment's profit or loss and assets. The new guidance also requires that a public entity that has a single reportable segment provide all the disclosures required by the amendments in this update and all existing segment disclosures. The amendments are effective for fiscal years beginning after December 15, 2023, and for interim periods within fiscal years beginning after December 15, 2024, with early adoption permitted. Upon adoption, this guidance should be applied retrospectively to all prior periods presented. The Company is currently evaluating this ASU to determine its impact on the Company's disclosures.

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, which expands the disclosures required in an entity's income tax rate reconciliation table and requires disclosure of income taxes paid in both U.S. and foreign jurisdictions. The amendments are effective for fiscal years beginning after December 15, 2024, with early adoption permitted, to be applied on a prospective basis, with retrospective application permitted. The Company is currently evaluating this ASU to determine its impact on the Company's disclosures.

In November 2024, the FASB issued ASU 2024-03 Income Statement (Topic 220): Reporting Comprehensive Income - Expense Disaggregation Disclosures, which requires an entity to disclose on an annual and interim basis, disaggregated information about specific income statement expense categories. The guidance should be applied prospectively with the option to apply the standard retrospectively. The standard becomes effective for the annual period starting on January 1, 2027 and interim periods starting on January 1, 2028. The Company is in the process of analyzing the impact that the adoption of ASU 2024-03 will have on its disclosures.

5. SUMMARY OF ACCOUNTING POLICIES

Inventories, net: Our consolidated inventories were stated at the lower of cost and net realizable value, generally using a weighted-average cost method. Our net inventories include approximately $82.1 million of finished goods, $11.7 million of raw materials and $4.6 million of work-in-progress as of March 1, 2025, as compared to approximately $93.9 million of finished goods, $12.2 million of raw materials and $4.0 million of work-in-progress as of June 1, 2024.

Provisions for obsolete or slow-moving inventories are recorded based upon regular analysis of stock rotation privileges, obsolescence, the exiting of certain markets and assumptions about future demand and market conditions. Inventory reserves were approximately $6.0 million as of March 1, 2025 and $6.0 million as of June 1, 2024.

Revenue Recognition: Our customers are generally not resellers, but rather businesses that incorporate our products into their processes, from which they generate an economic benefit. The goods are also distinct in that each item sold to the customer is clearly identified on both the purchase order and resulting invoice. Each product we sell benefits the customer independently of the other products. Each item on each purchase order from the customer can be used by the customer unrelated to any other products we provide to the customer. Revenue is recognized when control transfers since it is not always based on delivery of the goods. The Company’s revenue includes the following streams:

•

Manufacturing/assembly

•

Distribution

•

Services revenue

Manufacturing/assembly typically includes the products that are manufactured or assembled in our manufacturing facility. These products can either be built to the customer’s prints/designs or are products that we stock in our warehouse to sell to any customer that places an order. The manufacturing business does not include a separate service bundled with the product sold or sold in addition to the product. Our contracts for customized products generally include termination provisions if a customer cancels their order. However, we recognize revenue at a point in time because the termination provisions normally do not require, upon cancellation, the customer to pay fees that are commensurate with the work performed. Each purchase order explicitly states the goods or services that we promise to transfer to the customer. The promises to the customer are limited only to those goods or services. The performance obligation is our promise to deliver both goods that were produced by the Company and resale of goods that we purchase from our suppliers. Our shipping and handling activities for destination shipments are performed prior to the customer obtaining control. As such,

they are not a separate promised service. The Company elects to account for shipping and handling as activities to fulfill the promise to transfer the goods. The goods we provide to our customers are distinct in that our customers benefit from the goods we sell them through use in their own processes.

Distribution typically includes products purchased from our suppliers, stocked in our warehouses and then sold to our customers. The distribution business does not include a separate service bundled with the product sold or sold on top of the product. Revenue is recognized when control of the promised goods is transferred to our customers, which is simultaneous with the title transferring to the customer, in an amount that reflects the transaction price consideration that we expect to receive in exchange for those goods. Control refers to the ability of the customer to direct the use of and obtain substantially all the remaining benefits from the goods. Our transaction price consideration is fixed, unless otherwise disclosed below as variable consideration. Generally, our contracts require our customers to pay for goods after we deliver products to them. Terms are generally open account, payable net 30 days in North America, and vary throughout Asia/Pacific, Europe and Latin America subject to customary credit checks.

Repair, installation or training activities generate services revenue. The services we provide are relatively short in duration and are typically completed in one or two weeks. Therefore, at each reporting date, the amount of unbilled work is insignificant. The services revenue accounts for less than 5% of the Company’s total revenues and is expected to continue at that level.

Contracts with customers: A revenue contract exists once a customer purchase order is received, reviewed and accepted. Each accepted purchase order identifies a distinct good or service as the Company's performance obligation. The goods include standard products purchased from a supplier and stocked on our shelves, customized products purchased from a supplier, products that are customized or have value added to them in house prior to shipping to the customer and manufactured products. Prior to accepting a customer purchase order, we review the credit worthiness of the customer. Purchase orders are deemed to meet the collectability criterion once the customer’s credit is approved. The Company receives advance payments or deposits from our customers before revenue is recognized resulting in contract liabilities. Contract liabilities are included in accrued liabilities in the Unaudited Consolidated Balance Sheets.

On occasion, the Company enters into bill-and-hold arrangements. Each bill-and-hold arrangement is reviewed and revenue is recognized only when certain criteria have been met: (i) the reason for the bill-and-hold arrangement is substantive; (ii) the product is segregated from the Company’s other inventory items held for sale; (iii) the product is ready for shipment to the customer; and (iv) the Company does not have the ability to use the product or direct it to another customer.

We sell our products to customers in diversified industries and perform periodic credit evaluations of our customers’ financial condition. Payment terms are generally on open account, payable net 30 days in North America, and vary throughout Asia/Pacific, Europe and Latin America. Estimates of credit losses are recorded in the financial statements based on monthly reviews of outstanding accounts.

Contract Balances: Contract balances were as follows (in thousands):


	March 1, 2025		June 1, 2024		May 27, 2023
Accounts receivable	$	24,932	$	24,845	$	30,067
Contract liabilities		4,545		4,520		3,283

During the three and nine months ended March 1, 2025 the Company recognized $2.3 million and $4.4 million, respectively, of revenue upon satisfaction of performance obligations related to amounts that were included in the contract liabilities balance as of June 1, 2024. During the three months ended March 2, 2024, the Company did not recognize revenue upon satisfaction of performance obligations and during the nine months ended March 2, 2024 the Company recognized $2.9 million of revenue upon satisfaction of performance obligations related to amounts that were included in the contract liabilities balance as of May 27, 2023. At March 1, 2025, the contract liability balance of $4.5 million includes $1.2 million of deferred revenue from the disposal of Healthcare assets, which will be recognized over the next 12 to 18 months.

Refer to Note 11, Segment and Geographic Information for a disaggregation of revenue by reportable segment and geographic region, which represents how our chief operating decision maker reviews information internally to evaluate our financial performance and to make resource allocation and other decisions for the Company.

Loss Contingencies: We accrue a liability for loss contingencies when it is probable that a liability has been incurred and the amount can be reasonably estimated. When only a range of possible loss can be established, the most probable amount in the range is accrued. If no amount within this range is a better estimate than any other amount within the range, the minimum amount in the range is accrued. If we determine that there is at least a reasonable possibility that a loss may have been incurred, we will include a disclosure describing the contingency.

Intangible Assets: Intangible assets are initially recorded at their fair market values determined by quoted market prices in active markets, if available, or by recognized valuation models. Intangible assets that have finite useful lives are amortized over their useful lives either on a straight-line basis or over their projected future cash flows and are tested for impairment when events or changes in circumstances occur that indicate possible impairment. Our intangible assets represent the fair value for customer relationships agreements acquired in connection with prior acquisitions. Technology represents the fair value acquired in connection with acquisitions and an exclusive license, manufacturing and distribution agreement. Intangible assets subject to amortization were as follows (in thousands):


	March 1, 2025		June 1, 2024
Gross Amounts:
Customer Relationships	$	893	$	3,396
Technology		150		380
Total Gross Amounts	$	1,043	$	3,776

Accumulated Amortization:
Customer Relationships	$	626	$	1,886
Technology		59		249
Total Accumulated Amortization	$	685	$	2,135

Net Intangible Assets	$	358	$	1,641

As described in Note 10, Disposal of Healthcare Assets and Related Charges, the Company sold certain assets related to Healthcare including intangible assets with a book value of $1.1 million.

The amortization expense associated with intangible assets subject to amortization for the next five years is presented in the following table (in thousands):


Fiscal Year	Amortization Expense
Remaining 2025	$	15
2026		59
2027		60
2028		60
2029		58
Thereafter		106
Total amortization	$	358

The weighted average number of years of amortization expense remaining is 7.1 years.

Income Taxes: We recognize deferred tax assets and liabilities based on the differences between financial statement carrying amounts and the tax bases of assets and liabilities. We regularly review our deferred tax assets for recoverability and determine the need for a valuation allowance based on a number of factors, including both positive and negative evidence. These factors include historical taxable income or loss, projected future taxable income or loss, the expected timing of the reversals of existing temporary differences and the implementation of tax planning strategies. In circumstances where we, or any of our affiliates, have incurred three years of cumulative losses which constitute significant negative evidence, positive evidence of equal or greater significance is needed to overcome the negative evidence before a tax benefit is recognized for deductible temporary differences and loss carryforwards.

Accrued Liabilities: Accrued liabilities consisted of the following (in thousands):


	March 1, 2025		June 1, 2024
Compensation and payroll taxes	$	3,638	$	3,495
Accrued severance		557		506
Professional fees		628		487
Contract liabilities		4,545		4,520
Other accrued expenses		1,900		6,396
Accrued Liabilities	$	11,268	$	15,404

Warranties: We offer assurance type warranties for the limited number of specific products we manufacture. We estimate the cost to perform under the warranty obligation and recognize this estimated cost at the time of the related product sale. We record expense related to our warranty obligations as cost of sales in our Unaudited Consolidated Statements of Comprehensive (Loss) Income. Each quarter, we assess actual warranty costs incurred on a product-by-product basis and compare the warranty costs to our estimated warranty obligation. With respect to new products, estimates are based generally on knowledge of the products and warranty experience.

Warranty reserves are established for costs that are expected to be incurred after the sale and delivery of products under warranty. Warranty reserves are included in accrued liabilities on our Unaudited Consolidated Balance Sheets. The warranty reserves are determined based on known product failures, historical experience and other available evidence. Warranty reserves were approximately $0.8 million as of March 1, 2025 and approximately $0.7 million as of June 1, 2024.

6. REVOLVING CREDIT FACILITY

The Company entered into a Credit Agreement (as amended by the First Amendment to the Credit Agreement dated April 9, 2025 the "Credit Agreement") for a three-year Revolving Credit Facility with PNC Bank N.A. on March 20, 2023 (the "Revolving Credit Facility"). The Revolving Credit Facility will mature on March 20, 2026.

The First Amendment to the Credit Agreement modified the definition of “Consolidated EBITDA” to take into account the non-recurring non-cash loss in the amount of $4,920,000 recognized by the Company in connection with the Asset Purchase Agreement, dated January 24, 2025, between the Company and DirectMed Imaging, LLC.

Borrowings under the Revolving Credit Facility, including the swingline loan and letter of credit sub-facility extended to the Company thereunder, are secured by (i) a continuing first priority lien on and security interest in and to substantially all of the assets of the Company and its domestic subsidiaries and (ii) a continuing first priority pledge of the Pledged Collateral of the Company and the Guarantors identified in the Security Agreement and the Pledge Agreement executed in connection with the Revolving Credit Facility. The combined maximum borrowings under the Revolving Credit Facility are $30 million. Proceeds of borrowings may be used for working capital and general corporate purposes. The Company utilized $1.0 million of the credit line and repaid that $1.0 million during the first quarter of fiscal 2025. There was no utilization of the credit line in the second or third quarter of fiscal 2025. As of March 1, 2025, no amount was outstanding under the Revolving Credit Facility.

The Credit Agreement provides that the Company must maintain compliance with a maximum consolidated leverage ratio covenant and a minimum consolidated fixed charge coverage ratio, each as determined in accordance with the Credit Agreement. The Credit Agreement also contains affirmative, negative and financial covenants customary for financings of this type, including, among other things, limitations on certain other indebtedness, loans and investments, liens, mergers, asset sales, and transactions with affiliates, as well as customary events of default for financings of this type. The Company was in compliance with financial covenants under the Credit Agreement as of March 1, 2025.

Borrowings under the Revolving Credit Facility will bear interest at a rate per annum selected by the Company from the following options: (a) Term SOFR Rate (for the applicable Interest Period) plus the SOFR Adjustment (for the applicable Interest Period) plus 1.25%; (b) Base Rate plus 0.25% or (c) Daily Simple RFR (for Euros) plus the RFR Adjustment plus 1.25%. Letters of credit issued under the letter of credit sub-facility will have a letter of credit fee equal to 1.25% per annum. The fee for the unused portion of the credit line is 0.10%.

7. LEASE OBLIGATIONS

The Company leases real and personal property in the normal course of business under various operating leases. The Company uses operating leases for facility space and automobiles. Most of the leased facility space is for sales and general office use. Automobile leases are used throughout the Company.

Several leases include renewal clauses which vary in length and may not include specific rent renewal amounts. The Company will revise the value of the right of use assets and associated lease liabilities upon a remeasurement event.

The net assets and liabilities related to operating leases were as follows (in thousands):


Lease Type	March 1, 2025		June 1, 2024
Right of use lease assets	$	2,035	$	2,760

Lease liabilities current		986		1,169

Lease liabilities non-current		1,049		1,591

The components of lease costs were as follows (in thousands):


		Three Months Ended
		March 1, 2025		March 2, 2024
Consolidated operating lease expense	Operating expenses	$	386	$	457


		Nine Months Ended
		March 1, 2025		March 2, 2024
Consolidated operating lease expense	Operating expenses	$	1,240	$	1,328

The approximate future minimum lease payments under operating leases at March 1, 2025 were as follows (in thousands):


Fiscal Year	Operating Leases
Remaining 2025	$	293
2026		1,015
2027		476
2028		228
2029		142
Total lease payments		2,154
Less imputed interest		119
Net minimum lease payments	$	2,035

The weighted average remaining lease terms and interest rates of leases held by the Company as of March 1, 2025 and March 2, 2024 were as follows:


Operating Lease as of:	Weighted Average Remaining Lease Term in Years	Weighted Average Interest Rate
March 1, 2025	4.5	4.9%
March 2, 2024	2.8	4.4%

The cash activities associated with our leases for the three month and nine month periods ended March 1, 2025 and March 2, 2024 were as follows (in thousands):


		Three Months Ended
Cash Flow Source	Classification	March 1, 2025		March 2, 2024

Operating cash flows from operating leases	Operating activities	$	317	$	354

		Nine Months Ended
Cash Flow Source	Classification	March 1, 2025		March 2, 2024

Operating cash flows from operating leases	Operating activities	$	1,013	$	977

8. INCOME TAXES

We recorded an income tax benefit of $1.3 million and an income tax provision of $0.1 million for the first nine months of fiscal 2025 and for the first nine months of fiscal 2024, respectively. The effective income tax rate during the first nine months of fiscal 2025 was a tax benefit of 36.5% as compared to a tax provision of 39.2% during the first nine months of fiscal 2024. The difference in rate during the first nine months of fiscal 2025 as compared to the first nine months of fiscal 2024 reflects changes in our geographical distribution of income (loss) and the discrete item related to the sale of healthcare assets resulting in a loss in the third quarter of fiscal 2025. The 36.5% 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 book loss on the sale of healthcare assets and the utilization of the U.S. research and development credit.

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 Netherlands, years prior to fiscal 2020 are closed for examination. We are under examination in Germany for fiscal years 2019 to 2022. During the third quarter of fiscal 2025, we received a notice from the State of Illinois for an income tax audit covering the period from June 2021 to May 2023. We have no other current open audits in the U.S.

We have historically determined that certain undistributed earnings of our foreign subsidiaries, to the extent of cash available, will be repatriated to the U.S. The deferred tax liability on the outside basis difference is now primarily withholding tax on future dividend distributions. The deferred tax liability related to undistributed earnings of our foreign subsidiaries was less than $0.1 million as of March 1, 2025 and June 1, 2024.

The Company recorded $0.3 million for uncertain tax positions as of March 1, 2025 as compared to $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 Unaudited 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 and penalties as it relates to the reserve of the research and development credit as of March 1, 2025 and June 1, 2024, respectively.

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 $2.2 million as of March 1, 2025 and June 1, 2024. The current valuation allowance is recorded on deferred tax assets in foreign jurisdictions where historical taxable losses have been incurred ($1.1 million) and state NOLs ($1.1 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.

9. EARNINGS PER SHARE

We have authorized 17,000,000 shares of common stock and 3,000,000 shares of Class B common stock. The Class B common stock has 10 votes per share and has transferability restrictions; however, Class B common stock may be converted into common stock on a share-for-share basis at any time. With respect to dividends and distributions, shares of common stock and Class B common stock rank equally and have the same rights, except that Class B common stock cash dividends are limited to 90% of the amount of common stock cash dividends.

Our Class B common stock is considered a participating security requiring the use of the two-class method for the computation of basic and diluted earnings per share. The two-class computation method for each period reflects the cash dividends paid per share for each class of stock, plus the amount of allocated undistributed (loss) earnings per share computed using the participation percentage which reflects the dividend rights of each class of stock. Basic and diluted earnings per share were computed using the two-class method. The shares of Class B common stock are considered to be participating convertible securities since the shares of Class B common stock are convertible on a share-for-share basis into shares of common stock and may participate in dividends with common stock according to a predetermined formula which is 90% of the amount of common stock cash dividends.

The allocation of undistributed (loss) earnings between common stock and Class B common stock is based on the relationship of the weighted shares outstanding for the respective stock class (common or Class B) to the total of the weighted shares outstanding for common stock and 90% of the weighted shares outstanding for Class B common stock. The adjustment to the number of outstanding Class B common stock shares reflects the limitation of Class B common stock dividends to 90% of common stock dividends.

The earnings per share (“EPS”) presented in our Unaudited Consolidated Statements of Comprehensive (Loss) Income for the third quarter of fiscal 2025 and 2024 was based on the following amounts (in thousands, except per share amounts):


	Three Months Ended
	March 1, 2025						March 2, 2024
	Basic			Diluted			Basic			Diluted
Numerator for Basic and Diluted EPS:
Net (loss) income	$	(2,057	)	$	(2,057	)	$	750		$	750
Less dividends:
Common stock		742			742			733			733
Class B common stock		110			110			111			111
Undistributed loss	$	(2,909	)	$	(2,909	)	$	(94	)	$	(94	)

Common stock undistributed loss	$	(2,531	)	$	(2,531	)	$	(82	)	$	(82	)
Class B common stock undistributed loss		(378	)		(378	)		(12	)		(12	)
Total undistributed loss	$	(2,909	)	$	(2,909	)	$	(94	)	$	(94	)

Denominator for Basic and Diluted EPS:
Common stock weighted average shares		12,333			12,333			12,227			12,227
Effect of dilutive securities
Dilutive stock options					—						218
Denominator for diluted EPS adjusted for weighted average shares and assumed conversion					12,333						12,445
Class B common stock weighted average shares and shares under if-converted method for diluted EPS		2,049			2,049			2,052			2,052

Net (loss) income per share:
Common stock	$	(0.15	)	$	(0.15	)	$	0.05		$	0.05
	$	-
Class B common stock	$	(0.13	)	$	(0.13	)	$	0.05		$	0.05

Note: There were 266 common stock options that were antidilutive and not included in the diluted earnings per share in the third quarter of fiscal 2025. There were no common stock options that were antidilutive and not included in the diluted earnings per share for the third quarter of fiscal 2024.

The EPS presented in our Unaudited Consolidated Statements of Comprehensive (Loss) Income for the first nine months of fiscal 2025 and 2024 was based on the following amounts (in thousands, except per share amounts):


	Nine Months Ended
	March 1, 2025						March 2, 2024
	Basic			Diluted			Basic			Diluted
Numerator for Basic and Diluted EPS:
Net (loss) income	$	(2,218	)	$	(2,218	)	$	180		$	180
Less dividends:
Common stock		2,223			2,223			2,199			2,199
Class B common stock		332			332			333			333
Undistributed loss	$	(4,773	)	$	(4,773	)	$	(2,352	)	$	(2,352	)

Common stock undistributed loss	$	(4,150	)	$	(4,150	)	$	(2,043	)	$	(2,049	)
Class B common stock undistributed loss		(623	)		(623	)		(309	)		(303	)
Total undistributed loss	$	(4,773	)	$	(4,773	)	$	(2,352	)	$	(2,352	)

Denominator for Basic and Diluted EPS:

RICHARDSON ELECTRONICS, LTD. 10-Q