Q1 2020 Earnings Call
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Welcome and thank you for joining this fiscal year 2020 first quarter earnings call for Richardson electronics before we begin leaves I'm sure you've opened the webex participants in shots panels. The isn't the associated icons located at the bottom of your screen. Please note that all audio connections are muted at this time does your acquired technical assistance.
Ladies and its activity that's producer with that I'll turn the conference over 200 Richardson.
Good morning, welcome to <unk> Electronics conference call first quarter fiscal year 2020.
Joining me today, or Robert and Chief Financial Officer, When do you do del Chief operating Officer in General manager for Richardson healthcare.
Greg Pellicle, any general manager or power and microwave technologies group.
Yeah, Andrew Burd General manager Candace.
As a reminder, this call is being recorded won't be available for audio playback.
I'd also like to remind you that we'll be making forward looking statements and they're based on current expectations and involve risks and uncertainty.
Therefore, actual results could be materially different.
Please refer to our press release, that's easy filing for an explanation about respect.
Overall, I'm pleased with that business in the first quarter.
We generated net income in the quarter versus a loss in our last quarter.
The longest running all 750 he too.
Then in the field for more than 15 month and customers beginning confident.
As a result, our health care business is significantly improving.
He ended the quarter, we received European approval to use a CE, mark which opens up more sales opportunity throughout Europe .
He M.T. repeated this trend excellent growth.
He N G yields continue to increase on a perpetual basis.
Our partnerships with new technology companies gain traction.
And as I need you continue to be the workhorses of the company and contribute significantly to our overall profitability.
Yes, I mean negative in the quarter, that's semiconductor wafer fab equipment market he hasn't turned around yet.
<unk> segment added lab strong order in Q1, F. why 19.
Our teams are pushing hard for every opportunity, you're making changes to improve the efficiency throughout the organization.
We've been told that the semiconductor wafer fab market.
Well show signs of growth in the near term.
When this happens we're well prepared to support our customers and will be firing on all cylinders.
I'll now turn the call over to Bob then what was your the highlights of our first quarter and Greg Wendy and Yens will provide more details on their business units are for it.
Thank you Ed and good morning, I will review our financial results for our first quarter fiscal year 2020.
Followed by a review of our cash position.
Net sales for Richardson healthcare in Canada.
Increased for the first quarter fiscal year, 2020 by zero point, Sixmillion or 26.8%.
For health care in 0.1 million or 1.4% for canvas.
Total company net sales for the first quarter fiscal year 2020 were 40.7 million.
Compared to prior years first quarter 44.2 million.
Which was a decrease of 3.5 million or 7.9%.
BMT net sales decreased 4.2 million due in large part to the comparisons a strong semiconductor wafer fab parts sales on the first quarter fiscal 2019.
This decline was partially offset by increased revenue from our new technology partners.
Gross margin for the quarter improved to 31.9% of net sales compared to 31.6% of net sales in last year's first quarter.
This was primarily due to a favorable product mix.
Over absorption of Richardson healthcare.
Partially offset by unfavorable product mix and foreign exchange rates for Candace.
He M.T. gross margin of 31.7% of that sales was flat to prior year.
Operating expenses decreased to 12.8 million for the first quarter fiscal 2020, compared to 13.1 million and the first quarter fiscal 2019. The decrease in operating expenses resulted from lower employee benefits I T and bad debt expenses.
As a result, the company reported an operating income of 0.1 million for the first quarter fiscal 2020 compared to an operating income as 0.9 million in the first quarter fiscal 2019.
This was an improvement versus an operating loss during our most recent past quarter.
Other income for the first quarter fiscal 2020, including interest income and foreign exchange was 0.2 million compared to other expense.
0.2 million in the first quarter fiscal 2019.
The income tax provision of 0.2 million for the quarter.
Reflected a provision for foreign income taxes, which was lower than in prior years first quarter.
And no U.S. tax benefit due to the valuation allowance recorded against the net operating loss.
Although there is no tax benefit shown on our financial statements from U.S. net operating losses, we can use our net operating losses to offset any cash tax liability.
Reported in our U.S. federal income tax return.
The amount of federal handle wells is 14.9 million.
Overall, we had a net income of 0.2 million for the first quarter fiscal 2020 as compared to a net income of zero point Fourmillion in the first quarter fiscal 2019.
Earnings per common share diluted in the first quarter fiscal 2020, well once that compared to three cents per common share diluted in the prior years first quarter.
We continue to closely manage our cash position cash and investments at the end of the first quarter fiscal 2020 were 46.5 million compared to 50.0 million at the end of fiscal 2019, and 54.8 million at the end of the first quarter fiscal 2019.
U.S. cash was 23.9 million at the end of the first quarter fiscal 2020.
Capital expenditures were 0.3 million in the first quarter fiscal 2020 compared to 1.1 million in the first quarter fiscal year 2019.
Proximately 0.2 million related to our T. system at another 0.1 billion was for facilities and other projects.
Lastly, we paid 0.8 million dividends in the first quarter.
Now I will turn the call over to Greg who will discuss the results for power and microwave technologies group.
Thank you Bob and good morning, everyone.
The first quarter fiscal 2020, PMT sales were 30.6 million versus 34.8 million in Q1 of that's why 19 gross.
Gross margin stayed consistent in the quarter versus prior year I had 31.7%.
Q1 results when compared to prior year once again affected by the downturn in a semi wafer fab market. However, this market decline was partially offset by the growth in a new technology partner supporting RF and power markets.
And some market share gains in various legacy two businesses.
We continue to see major booking trends in our PMT business unit. This growth is based on our demand creation model, which capitalizes on our new technology partners products numerous design wins in our unique global business model, we're taking advantage of our long term customer relationships and our customer count continues to grow with our expanded probably.
Range.
As market conditions change, we carefully controlled yesterday and invest in key areas when needed. We continue to look at improving our efficiencies and increasing the frequency of our customer contact.
These actions will allow us to generate more opportunities in growing markets using our existing global infrastructure and headcount.
I revenue growth in our new technologies is being supported by key partners such as careful make 'em inoculating, you're not he could celadon and Fuji our core legacy business continues to be supported by the key to manufacturers in industry. That's just CPI Tele NDRC.
And for tightness.
He markets an application showing growth. This fiscal year include Fiveg wireless infrastructure Satcom power management.
Depicted the fiveg infrastructure market, where continue to gain traction throughout the world.
We have an ever increasing list of design wins in the base station mobile test equipment and Satcom application.
Our global experienced group a field design engineers are even more valuable to our customers and suppliers in this wireless infrastructure rollout.
Group, a field engineers have hundreds of ongoing designs globally.
Overall growth in these markets will help offset the cyclical sales and market for slower growth rates.
We're very excited about the booking trends that are new growth markets, but their technology partners. We can do component level design and it's about the majority of the customers board level needs.
These customers are the key Oems in the world as well as medium sized customers, they're supporting a portion of the larger OEM system.
We've invested in software that allows us to try to key customer contact and opportunities for both our MRO business and OEM designs worldwide.
Our customers welcome rails local field sales engineering team to support their design and technology partners Love our goal will reach and the ability of our field engineering resources and design of the product into true demand creation.
I can't stress enough the value of Richardson electronics, Unparalled capability and global go to market strategy that is unique to the power and RF microwave industries are will then position the manufacturing and distribution of electronic devices, both legacy equipment as well as new equipment, where starts they cannot replace tubes.
With that ill turn over to windy images and health care.
Thank you, Greg and good morning, everyone hope, they're talking about well in the new fiscal year sales increased 26.8%, especially the first quarter of ethylene 19.
That's it that's growth came from I see T X ray to than Petri revenue.
Sales also increased definitely began stop height and University t. pot lines at higher prices.
Our gross margin improved to 33.9% persons, 28.6% prior year, and 15.3% and I know threeq past quarter.
This was primarily due to favorable manufacturing absorption as well as the drop in the one like you know Clinton payout.
There's still room for improvement as margins were held in check that older equipment and noncore CTO kids, which were sold at my margin.
We are continuing to watch our inventory purchase it carefully to ensure we turn this inventory as quickly as possible.
The ultimate Sevenfifty are fun and function replacement for the cannon Toshiba CXC everything TD continues to perform very well in the field.
Our longest we all that information so now nearing 500 day.
So those contracts that are cute with them pilot the OEM too.
More of our customers are starting to switch from the harvested oriented but they also 750.
We have also been adding resources to our proactive outbound sales organization.
The result, we are reaching more customers and receiving inquiries from company and haven't yet purchase. They also felt Mickey. This is also contributing to higher to south each quarter.
We're in discussions with several large customers who are interested in IP three programs.
These programs for life parts, Android to kind of edge excellent Wifi under three year contract.
Each program is tailored specifically to our customers requirement.
Today, we have you more of our ultra 750 to a transactional sale versus replacement I'm sure any capitated grant programs.
During the quarter, we finally received regulatory approval to use the CE, marking yet this is a significant milestone for the company as we were not able to sell the office and 15 without the Mark and yet we will see the impact of this in future quarters, although the European market is challenging given the strong held at the OEM.
Initial response at the recent International Association of medical equipment, Marketers and services Convention in Europe looks very positive and I quote activity with our anyone crazy.
We're also for saying product registration for Canada, Russia, China and several other countries.
These processes take time, and ultimately expand our sales opportunity.
Our engineering team is making good progress on our next Dan we're on track to begin beta testing next summer with the release schedule prior to the end of calendar year 2020.
Well, that's challenging the development team to what we're currently on several other program.
We remain convinced that we are the only company investing in the development of seating replacement it.
We will share more details of these programs in the coming quarters.
So a combination of product range expansion, we are investing in engineers as while increasing our manufacturing space within a box the felony.
I will now turn the call over to you answered thanks to discuss first quarter results, but Canada.
Thanks, Wendy and good morning, everyone.
And this would include the engineering manufacture and sale of cotton displays to original equipment manufacturer and industrial and medical markets delivered strong performance with payers with 7.3 million during the first quarter fiscal 2000 Twain, an increase of 1.5% over the thank you had last year.
The revenue increased for the quarter once we laid to increased cost them demand mainly through North America.
Gross margin decreased slightly as a percentage of faith in the first quarter fiscal 2020% to 31.9% from 32.2% the same period last year.
The decrease cost margin I feel very strong for display business was related to two on paper product mix and foreign currency effects.
Q1 fiscal 2020 with another strong quarter from Canada, and we were able to increase our backdrop quarter over quarter again.
Our backlog consists of purchase order.
Typically shipped over one or more years.
Customer each you call out water, that's vary quarter to quarter based on customer demand regulatory issues and other factors.
The healthy backup position along with a number of projects that are currently in the engineering stage, a vision as well for continued growth.
During the quarter, we received several new order some both existing and first time medical OEM customers.
Vacations for how it just takes a used on number.
These include.
Patient monitoring where our money thought I'd start at a remote location such as essential North basin or Cnf.
Medical device controlled capturing high resolution images and light videos from attitude does get imaging devices.
Intramuscular imaging systems can either based systems that allow physicians touch interventional cardiologist took quite a images of disease vessels from inside the agree.
Touching laser for use in general and plastic surgery and in dermatology.
So as you can robotics, we had guided.
Is provided in conjunction with navigation data.
Radio therapy, we are highly customized business I used to monetize the patients during the radiation treatment.
Micro surgery ill just based on mounted at Dunkin' microscopes, and Stanford Frieden centers, where patients can leave you radiographic images or like video from an internal right camera.
Pete such as educational videos or promotion.
We are proud to support Blue chip companies with recognizable names in the medical industry.
Currently seven out of a top 10 medical device company.
Hi, propylene because our customers are displayed.
In the non medical space, we received orders for various displayed and onward.
Applications include passenger information system used on frame, we especially certifications are required.
Product is Penzance youth in retail stores.
You wouldn't machine interface for high speed high physician billing machine and displays using control rooms.
We continue to look for new customers through trade shows online marketing Refurbs and cold calling.
We continue to focus on meeting the requirements of the medical device regulation or NDR, which is required for kind of medical devices in Europe . We recently concluded the GAAP audited indifferent identify areas for improvement.
We really compared when the transition period, and and May 2020, and believe this would give us a competitive advantage in the medical display markets.
Considering all the new programs, we are watching on with existing and new customers I'm optimistic that we we continue growing August .
We have proven our south to be a highly reliable versatile technology company, we did ability to meet a diverse numbers of display requirement.
I have heard regulatory review and adjust the business strategy with the goal of father, improving the operating performance after division.
Maximizing cash flow is an ongoing priority and we continue to focus on inventory turns and collection.
We were closely with our pockets to help us reduce inventory by being able to meet the demands on our customers.
I will now trying to call back over to that.
Thanks, Yens congratulations on having another excellent quarter, particularly given the economic challenges in Europe .
All in all it was a good start to the year.
As you've heard from the team no I'm satisfied with where we are.
And with ongoing economic concerns will continue to fight for profitable revenue growth.
Healthcare is moving into right direction.
PMG continues to add top line growth.
And it's an easier healthy.
We had plenty of room to grow within our existing infrastructure.
Continue to monitor expenses and capital expenditures and use cash wisely to support our key initiatives.
At this point, we'll be happy to answer a few questions.
Hi.
Thank you in a morning free to play well underwritten on Q five I personally hone two and your telephone keypad for there's been hearing edification. When your line is I needed at which point. Please state. Your name and question you can articulate your questions in writing basin to chat box and the Webex just remember all analysts from the dropdown menu before submitting your question.
I look like we do have a couple of collars and the verbal question Hugh.
In line isn't muted.
Hi, Good morning, everyone works its key here.
Hi, Mark.
I'm going to start off with Greg if I could Greg I wondered if you could give some more color on what your seed is the five key space is there more activity in China versus North America for instance.
Yes, So China continues to.
In terms of design wins, and and getting that product or their protocol the market.
Again as you read the news ahead of us.
So the biology overall market is.
Overall again is growing slightly.
And these global trade and the terrorists or will have a disruptive effect the longer it continues.
But in terms of our business, it's still very very strong.
That's mainly because with these global tariffs and.
Trade agreements that are going on.
China is looking internally or domestically Dubai and use as much technology. They can to support their fiveg rollout the products that were focusing on the technology as we mentioned many times in the call Gan technology, and steer beam antenna technology, which will be the tenants used in these new.
Infrastructure rollout.
For 10 years away from that technology, So our designs continue to grow.
A portion of that market continues to grow.
This based mainly on the fact that we have a unique technology that's exclusive the China. So that's where that didn't <unk>, you'll see a lot in terms of the the timing of it but as forecast coming from the.
Oems in China is that the first half of calendar year 2020 will be very very strong and we have the designs in Q and we are receiving prototype orders. So we're looking to have a pretty strong second half of our fiscal year.
Okay and then.
The border gross margin despite the sales drop off you're able to keep a gross large here to see.
Is that.
Is there anything new going out there does that kind of.
Sustainable should.
Sales declines continue.
Yes, with the drop off in sales dollars, a that was driven by a number of semi fab customers and that's where also the growth was the core legacy to business is still very strong meaning.
Flat to single digit growth, which is good for the two business and those margins are very strong. The team has done a great job, keeping those margins or expanding them to offset the loss and margin dollars on the semi fan out wafer.
So down so it's a pricing and you know actually part of customers and keeping our margin on the core legacy business very strong.
Okay. Thanks.
Switching to healthcare.
What do you have you guys.
Publicly stated right you see.
The.
Sort of the gross margin potential is healthcare your had almost 34% though.
You know you know based had reached lets say reasonable sales growth.
Have you guys give it a number.
Yeah, I think we've been consistently put out a number in the low to mid fortys well production and into sales increased that's what we'll see yes.
Okay, and then just to clarify how many.
To serve the market right now.
Well, we know we don't provide that information, okay. I mean, there's a bottle model types.
Oh, so from the teams that we are producing here just the Alpha 750 D. And then we also sell on CPR certified pre owned and harvested too.
Okay, and then you're expecting to launch a new too by the end up 2020.
That's correct.
Okay as it does that have basically could save or a similar sales profile as the 750.
Yes, what it will help us too is to sell more of the alpha 750, because it.
In order for a lot of the hospitals to switch from the OEM to either aid in house not all third party service model and they have to be able to have to just for all of their cannon system and this will allow us to get much closer to that level of coverage a little.
<unk> increased the sales and the Alpha 750, as well then it.
Okay great.
Finally, I, yes, if I could just ask you about canvas could you say that the backlog.
So sequentially.
Right up for catalyst.
What was that year over year, yes.
Also.
Lee.
Yeah, it's the highest backlogs ends at least.
Three quarters Yep.
Okay great.
Okay. That's it for me thank you.
Oh, My God Tears.
The next caller on the question I'm showing that to be done as a model.
<unk>.
Morning.
I just wanted to first started up by congratulating you on managing what obviously was a somewhat.
Difficult quarter from the topline, but to make you manage successfully.
Oh, that's a challenge.
I've been acquired in the past.
I think you have answered.
Properly regarding why you don't.
Use some of your excess cash to repurchase stock.
I think I understand your long term strategy and I can accept that.
The problem I am having is is after reviewing.
Your most recent proxy statement I discovered that with the exception of Mr. Richardson not one director.
<unk> when you take out stock options not one director hones, even one share of stock and of your for named executives.
Only to own stock.
And when I add it up all the stocked with its own out right.
I was dismissed defines it I own more stocks in all nine put together.
And you've got to admit that that's not exactly you vote of confidence in the long term strategy, especially when.
Your stock is yielding over 4%, which.
I'm sure nobody can get there.
Short term investments. So can you can you provide some type of explanation and.
Give shareholders some kind of comfort as to why there's so little interest.
From directors and management.
The stock.
Oh I couldn't really tell you that I frankly, you agree with sure I think they should be buying the stock I am.
Their position.
But.
You know, they're all have their own no financial responsibilities in their own curve portfolios and are heavily in this invested probably in the companies that they were Ceos, though before retiring in joining our board.
And some boy I guess, we should ask them and they could comment.
Well I mean, most companies have some requirement minimal requirement for.
Directors.
Some stock.
They're receiving compensation.
Some of that shouldn't be stuck at this point go into to buying the stock in.
I mean, you can see the message it sends you telling shareholders to have confidence in the company.
It's extreme that did not one director has purchased outright.
Even one share [laughter] that that's a terrible message to send to the investment community.
I would really encourage you to.
They have directors and officers at least do some some purchasing stock options are nice, but they're given to them that doesn't show any any confidence and the company. So.
That's my.
Yes my question.
Short form is.
Well find out find out why there there's there's no more confidence in that because you can't expect shareholders. They have confidence if management and directors don't.
Now I understand Dennis and I will pass the word along to the board for sure but.
Me tell you that in the downturn with the executive staff, we got incentives substantially so.
Normally our she management team as a 50% incentive over their base salary based upon financial achievements and because the company over the last few years was not Crocker, what we cut that down.
First the 25% cut in half and then I believe this year. It was back up to what 37 side, we still haven't gone up so what we did in places that was we gave stack grants.
You know to compensate for some of their financial awhile. So there's more there that meets the eye as far as the executives in the company are concerned.
Okay, well, if you would pass it onto a board that shareholders are watching them.
They.
The other current shareholders are prospective shareholders that sends a message that I don't think you want us.
No I hear you and we're happy to do that will pass it along.
<unk>.
Thank you.
Well go to the next caller and the question I believe that to be Mark.
Please go ahead.
Morning.
Thanks for taking my questions I'm watching your stock for quite a bit so I had a few questions. The first one is.
How would the terrorists or potentially a or the increasing of terrorists kindle affect your best be relevant businesses going forward.
Well the majority of the the tariffs did impact us are already in place its possible of which I'm not aware there may be more semiconductors now affected but certainly did too.
The the tariffs that were placed on tubes were done initially and pretty much covered the game it.
Yet.
Frankly, we.
We I Oh.
I don't know our total sales, let's put it that way of products made in China are probably three or $4 million total it may be I.
And so they the impact a tariff is is not large and and we've been able to pass it along most of those tubes, where proprietary on it doesn't make sense I mean, they put tariffs and some tubes that haven't been made in the United States for 35 years.
In some of those tubes, we moved manufacturing, which I know this into term favorite thing, we moved manufacturing from France to China.
And now we're bringing some of their manufacturing back due to the tariffs and.
Some ethics issues I will say, but it has very little impact on the biggest impact. It does have is the administrative cost and trying to monitor those terrorists make sure. We're collecting them properly then do all the duty drawback on everything that sold outside the United States 60.
The percent of our sales are outside the United States. So we bring their product in and we tested packages and so forth year and re ship it to Europe and elsewhere in the world and on those we leave a duty drawback.
Oh, but it's complicated it's very expensive to <unk> to monitor and that's the biggest across two is immunity ministry to.
Cost of trying to monitor that.
So on that note would you look at maybe a Vietnam Amar a cheaper alternate ever they don't have the technology or the wherewithal to.
To do that.
Well, yeah, what we chose to do this year you know this operation.
Fox, Illinois near Chicago is always been into manufacturing facility.
And with our production down on semiconductor wafer fab products, we actually laid off some of the a employees that were involved in that but what we've decided to do because of the tariffs. We had one factory that we set up the manufactured for us.
We move production from a factory in France that factory, two or three years ago, and they they've given us problems with not.
You know not complying with the agreement as far as selling products.
<unk>.
Entities, Besides us and then where the tariff combined.
We're moving some of that manufacturing back here, but not today. So if you answered Vietnam no.
Okay.
Hi, My soul start.
Product so cost is an issue, but availability in quality is more of an issue.
So you mentioned semiconductor so you talked about the earnings impacting based on the declines the P.M.T. semiconductor wafer fab equipment business can you give us more color on what you are seeing in the semiconductor industry as a whole and and how that impacts you guys because the more.
I've been looking at a conference calls and the more honest Ceos are semiconductor companies, saying, it's not great out there and then there's other people who are try though like you know maybe a giving them more optimistic when it doesn't really look that way. So I. Appreciate your insight because you have kind of on the phone lines.
Yeah. This is Greg.
Yes overall, the market for semiconductors, a slowdown versus prior year, even even our numbers I have slowed down, but there's still growing and you look at the overall semiconductor market. It's.
Everything from handset business to the cloud all the way I mean, it's huge and we're such a small niche version of that the specific customers and products that we designed into when those markets. Those are growing and we are growing our market share within those.
Customers in markets.
That does it look last year, but again, we're just starting from a smaller number. So we continue to gain market share in Canada design wins and these are strong growth markets mean, fiveg is happening it's going to happen.
And also the power management market to support a lot of the Fiveg applications is also going so.
Those are two markets, we are addressing and we're doing very well in from an overall for central again, we're starting from a small number we have a very small percentage of that market right now.
So that's very helpful. So basically if I look at the whole semiconductor various I know there's lot of people that are going to inventories you'd have to kind of in each market. So I shouldn't just.
Group you guys then if they are having issues in the whole semiconductor space.
Exactly yeah, and again, you're exactly right and.
The overall stuck in a market. These applications some of the markets that they address is slowing down to maybe even negative but the specific markets, we address a and they really specific to RF and wireless microwave Fiveg and then power management.
Those markets again, I want to make sure like you said they've slowed down since last year, but weve continued to gain market share and able to grow those markets.
It's encouraging I know you have all these different businesses, but gross margins were kinda like what where can I see these gross margins, we always where would you be happy are really where we have is it realistic to see the gross margin in 2020 and beyond I know things are lumpy and sometimes a some business is higher than in quarters and lower but.
Maybe on an average that would make make things helpful to me.
Well a lot of it depends on how fast Greg grows his portion of it Oh.
PMT the BMG business, because this lower margin business.
You should also be infrastructures to support it is much less cost than the other businesses, particularly in manufacturing.
If you looked at the manufacturing portion of our business in Canada, certainly a probably 30 fives or you know the low thirtys at 35% is where we should end up.
That's fair and a semester whats isn't I see that your cash has gone from like 54.8 to 46.5, an i. I love cash rich fallen Angels, which you are part of that and you also give a dividend where would your cash has to go in that low side figure to stay let me just hold off the table that until we start generating it's a lot of cash that's going on the other direction.
Well, we look at it all the time every quarter, we talk about it and the and I would tell you. The board is more concerned about cash flow than anything else. We're doing it they'll use gentlemen have all been ceos or their own right and run divisions at two companies for the most part or health care.
Companies.
So there really are concentrate on the availability of cash and we all know how tough it is the borrowing the money, especially adhere marginally profitable. So that's it it's an issue and we'll continue to look at it. We're hopeful that is healthcare continues the way it did in the last quarter.
That in the not too distant future. We can go at least cash flow neutral is not cash flow positive. So that's the that's the objective.
And at the same time weve reduced the amount of capital that we're spending on health care, we have most of the equipment in place.
We have capacity to build a thousand students here with the equipment we have.
So it'll be a while before we invest a lot more capital equipment in health care. So I think you'll see it tail off and hopefully a with health care coming along we'll start to get cash flow neutral if not positive.
So I'm looking at your whole definition I'm not going to hold you to this if they're part of the are very out I think from the conference call I kind of customize but do you see any part of your business that you could see like some hockey stick pet growth that can just like dominate your business or yeah. So diversified you don't necessarily see that.
Well you have two segments health care for sure I mean that the total market for a replacement parts and service.
Oh for diagnostic imaging applications is something like $9 billion. So you know we are so small and have the opportunity with what we're doing everything were.
We think we really sort of have an exclusive position in the design and development over replacement C. D to compete with the Oems.
As a tremendous opportunity there I guess that one time that they were 60000 scanners worldwide with a CTG to set our you know 100000 hours a decent them then and that's our target market.
And then those terms of replaced about depending upon the manufacturer every three years or so so on the other hand, I always called Greg's, that's because he's the one that scope it in the past and building it again, but PMG as a tremendous.
Opportunity for growth when Greg when we sold the company. Greg was you know general manager of Iris D. In 2011. It was 370 million and then Greg went to arrow for three years.
And then.
Wisely [laughter] back to it but when he left arrow it was 500 million.
So that would give you some idea of the opportunity for those products and we wish we were anywhere close to that but we've got a long long way to go to get to that size again, so there's while doing that two of them in and you know canvas is doing quite well last year a yes.
So there is 30% so.
The markets out there it's just a.
Right now he's doing a great job in a very poor academy in Europe of milk in the business and we're getting better operating a contribution out of canvas now than ever so.
At the moment, where you we love that business [laughter]. Thank you.
You see any light at the end of the tunnel in Europe or it could be.
2021 type of phenomenon [noise].
Yes, you I comment on that you so [laughter] market better now I.
I think.
We receive mixed signals out of the markets and the good thing as you know 70% of our business, we give them medical related I mean, you know that's a much better ability in the market than that.
We believe that down this is a phentermine only right now and.
Got over this so as that still growth in the market, we have a lot of new opportunities walking on downtown and others that we are working on 70 years that will come to fruition.
Maybe this year next year, so there's a lot of across potential absolutely. So.
I'm staying being optimistic here [laughter].
Just got to more so a year ago. Your stock is about $10 or 40 cents, an i. I understand what moved it up and you know as far as earnings and moving it down was running so what we're still compelling for someone to buy your stock at 10 40.
And.
Yes, all those factors still in place now as your stock has been cut in half.
Well I think the you know we did a maybe we're a little bit early but we were very optimistic on they health care business and then as usual excuse me, but the financial market gets in patient in a hurry and we you know the numbers Didnt increase they actually drop where are we.
We had some difficulty getting traction with the sale of the all to do and some of the other two.
Yes, you know typically <unk>. They synergies you told us that there is a great opportunity. A 90 days later is not a great opportunity and they sell stock.
Oh, I mean, you guys know the market value.
I'm aware of that.
That's fair answer.
On the last last in the last person, who calm who made this comment I kind of a great. It's nice to see insiders buying is as I, you know potentially gonna be new investor.
It's it's again, it's nice to see that they see more than anybody season for them that fit in their hands cannot buy something when it's on sales. It makes me nervous so no disrespect mr., Richard sand, but I've invested a lot of small caps. It's been over 25 years now I dunno at a time is gone, but you know your salary looks a little high for small company and I don't.
Again, no disrespect, but do I comment on that.
[laughter] Oh, I think if you.
If you really look that they history you'd see that its a.
Sort of balancing out so I don't want to tell you added in the.
Past years, my salary was quite well.
All right and hopefully we'll be able talk on offline at some point and thank you for taking my questions.
Okay. Thank you appreciate the investment yeah.
We did get a written question that came in a webex from Alex lift men. It says Mr. Richardson, what do you think about switching to buying own shares from paying dividends because I'm sure. It is very difficult to find alternative investments with the same potential return as bouncers now.
Okay well this is a again the discussion that we have with the board every quarter.
And what we've looked at it yes, we have a $46 million in cash at the ended the quarter.
But a high percentage of that cash is still trap with our foreign entities.
And we repatriated as much of that cash as we can and we're still doing some more but there's certainly a a fixed amount that we can't bring back the United States as was mentioned earlier in the.
The call you know we went from 50 million in May.
And a 46 million to support the growth of the company.
In in one quarter. So their board continues to be very very concerned that I know they did the math for me. This last board meeting that.
No we have 20 million 25 million drugs in the U.S. to support growth year, and that's where all the investment is for the most part.
I'm in on that basis. If you took the last couple of years history, we're gonna be cash or in two years, and so they're more concerned about that and buying our own stock back.
My answer to that was what I said earlier was if we can get some traction out of healthcare I think instead of using cash that will go Castro neutral for sure if not positive in a short term and that's our objective.
I'd anyway. The question is the board.
You know constantly.
Looking at the value of buying stock versus the getting cash and so you know obviously when we have a lot of cash and bank alone your money when you don't and you're right it's really profitable.
They device away in the winter.
So we're trying to conserve our cash.
All right I'm not showing any other questions at this time.
All right well. Thank you very much for joining us interior ongoing interest in Richardson electronics are we look forward to discussing our fiscal 2022nd quarter results with you in January .
Thanks to you guys then we'll open it up or we yes, we've got all the questions. So just thank everybody for their questions enjoyed in Mcallen give us a call later, if you've got further questions.
All right that concludes our conference they keep using ATP event conferencing enhance you may now disconnect.