RICHARDSON ELECTRONICS, LTD. (RELL)

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL 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 armed conflicts in Europe and the Middle East; 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 4, 2025. 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:

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Business Overview

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Results of Operations – an analysis and comparison of our consolidated results of operations for the three month and nine month periods ended February 28, 2026 and March 1, 2025, as reflected in our Unaudited Consolidated Statements of Comprehensive Income (Loss).

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Liquidity, Financial Position and Capital Resources – a discussion of our primary sources and uses of cash for nine month periods ended February 28, 2026 and March 1, 2025, and a discussion of changes in our financial position.

Business Overview

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. More than 55% 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.

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.

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The extent to which of these changes in trade policies may impact our business will depend on various factors, including (i) when trade measures are implemented, (ii) the ultimate amount, scope, nature, and duration of tariffs and other trade measures, and (iii) the extent to which the Company can mitigate impacts and pass on any increased costs associated with these changes. In addition, the impact of trade disruptions on general economic conditions and demand for electronic components is difficult to predict.

Our results for the first nine months of fiscal 2026 were not materially impacted by the changes in trade policies implemented by the U.S. 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, including with respect to tariff refund claims. 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.

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. After the sale of certain assets to DirectMed, the Company continues to repair certain CT tubes and sells them exclusively to DirectMed pursuant to a supply agreement.

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.

Canvys provides 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.

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

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RESULTS OF OPERATIONS

Financial Summary – Three Months Ended February 28, 2026

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

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Net sales during the third quarter of fiscal 2026 were $55.5 million, an increase of 3.1%, compared to net sales of $53.8 million during the third quarter of fiscal 2025.

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Gross margin increased to 31.9% during the third quarter of fiscal 2026 compared to 31.0% during the third quarter of fiscal 2025.

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Selling, general and administrative expenses were $16.2 million or 29.2% of net sales during the third quarter of fiscal 2026 compared to $14.5 million or 26.9% of net sales during the third quarter of fiscal 2025.

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Operating income during the third quarter of fiscal 2026 was $1.5 million compared to an operating loss of $2.7 million during the third quarter of fiscal 2025.

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Net income during the third quarter of fiscal 2026 was $0.9 million compared to a net loss of $2.1 million during the third quarter of fiscal 2025.

Financial Summary – Nine Months Ended February 28, 2026

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The first nine months of fiscal 2026 and fiscal 2025 both contained 39 weeks.

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Net sales during the first nine months of fiscal 2026 were $162.4 million, an increase of 3.4%, compared to net sales of $157.0 million during the first nine months of fiscal 2025.

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Gross margin increased to 31.2% during the first nine months of fiscal 2026 compared to 30.8% during the first nine months of fiscal 2025.

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Selling, general and administrative expenses were $48.1 million or 29.6% of net sales during the first nine months of fiscal 2026 compared to $46.6 million or 29.7% of net sales during the first nine months of fiscal 2025.

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Operating income during the first nine months of fiscal 2026 was $2.6 million compared to an operating loss of $3.1 million during the first nine months of fiscal 2025.

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Net income during the first nine months of fiscal 2026 was $2.7 million compared to a net loss of $2.

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ITEM 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion should be read in conjunction with the consolidated financial statements and related notes.

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, critical accounting estimates 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

•
Results of Operations - an analysis and comparison of our consolidated results of operations for the fiscal years ended May 30, 2026, May 31, 2025 and June 1, 2024, as reflected in our Consolidated Statements of Comprehensive Income.

•
Liquidity, Financial Position and Capital Resources - a discussion of our primary sources and uses of cash for the fiscal years ended May 30, 2026, May 31, 2025 and June 1, 2024, and a discussion of changes in our financial position.

Business Overview

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. More than 55% 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.

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.

The extent to which of these changes in trade policies may impact our business will depend on various factors, including (i) when trade measures are implemented, (ii) the ultimate amount, scope, nature, and duration of tariffs and other trade measures, and (iii) the extent to which the Company can mitigate impacts and pass on any increased costs associated with these changes. In addition, the impact of trade disruptions on general economic conditions and demand for electronic components is difficult to predict.

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Our results for fiscal 2026 were not materially impacted by the changes in trade policies implemented by the U.S. 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.

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. After the sale of certain assets to DirectMed, the Company continues to repair certain CT tubes and sells them exclusively to DirectMed pursuant to a supply agreement.

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.

Canvys provides 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, 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.

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

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Results of Operations

Overview - Fiscal Year Ended May 30, 2026

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Fiscal 2026 and fiscal 2025 each contained 52 weeks.

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Net sales during fiscal 2026 were $228.6 million, up 9.4%, compared to net sales of $208.9 million during fiscal 2025.

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Gross margin was 31.2% of net sales during fiscal 2026, compared to 31.0% of net sales during fiscal 2025.

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Selling, general and administrative expenses were $65.7 million, or 28.8% of net sales, during fiscal 2026, compared to $62.2 million, or 29.8% of net sales, during fiscal 2025.

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Operating income during fiscal 2026 was $6.5 million, compared to an operating loss of $2.5 million during fiscal 2025.

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Other income during fiscal 2026 was $1.0 million, compared to other income of $0.9 million during fiscal 2025.

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Net income during fiscal 2026 was $6.4 million, compared to a net loss of $1.1 million during fiscal 2025.

Net Sales and Gross Profit Analysis

Net sales by segment and percentage change for fiscal 2026, fiscal 2025 and fiscal 2024 were as follows (in thousands):

During fiscal 2026, consolidated net sales increased by 9.4% compared to fiscal 2025. Sales for PMT increased by 9.1%, GES sales increased by 7.3%, and Canvys sales increased by 12.4%. The increase in PMT was due to strong growth in RF and Wireless Components and Semiconductor Wafer Fab market. The increase in GES was due to an increase in new customers, new power management products, and increased market share for current products. The increase in Canvys was primarily due to higher sales in the North American markets.

During fiscal 2025, consolidated net sales increased by 6.3% compared to fiscal 2024. Sales for PMT increased by 4.4%, GES sales increased by 23.6%, and Canvys sales increased by 2.2%. The increase in PMT was mainly due to increased sales of engineered solutions for the semi-wafer fabrication products and increases in RF and Wireless Components. The increase in GES was mainly due to increased market share, new products and new customer development for power management products focused on numerous green energy applications. The increase in Canvys was attributable to higher sales in the North American markets.

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Gross profit by segment and percentage of segment net sales for fiscal 2026, fiscal 2025 and fiscal 2024 were as follows (in thousands):

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 was $71.3 million during fiscal 2026, compared to $64.8 million during fiscal 2025. Consolidated gross margin as a percentage of net sales was 31.2% for fiscal 2026, compared to the 31.0% during fiscal 2025, primarily due to a favorable product mix for PM

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