Q3 2020 Earnings Call
[music].
Good day, everyone and welcome to today's conference call, which will begin shortly if you require assistance at any time. Please can you still there on your telephone and in the meantime will continue to play music and thank you feel patient.
[music].
[laughter].
Good day, everyone and welcome to the like 26 quarter any scope for which it electronics.
Hosted by.
Richardson My name is lately and I'll leave it budgets during the presentation you lots of good where they don't listen only and you can be quite assistance at any time, please keystone and your telephone.
The next you will be happy to assist you.
I would like to any Tokyo host at Richardson. Please go ahead.
Good morning, welcome to Richardson Electronics conference call for the third quarter fiscal year 2020.
Joining me today or Robert Baird, Chief Financial Officer, when do you know Chief operating officer in General manager for Richardson healthcare.
Greg <unk> General manager are powered microwave technologies group and the Andrew Burd General manager of Canada.
We're all calling you from remote locations as a reminder, this call is being recorded and will be available for audio playback.
I'd also like to remind you that we'll be making forward looking statements there based on current expectations and involve risks uncertainties.
More so than ever today.
Therefore, actual results could be materially different.
Please refer to our press release in FCC filings for an explanation of our risk factor.
I'm pleased to report we made a small profit not third quarter.
Given the health care's concerns that dominate our attention.
A testament to the Richardson team.
Particularly throughout Asia, where the Corona virus impact the critical level during the quarter.
Today more than 20% of our business comes from this region.
As we continue to monitor the Corona virus developments closely.
Health and wellbeing of our employees customers suppliers relatives and friends throughout the world.
Latest importance to us.
Being prepared and maintaining a safe work environment is critical to a sustaining our business operation.
Richardson electronics is considered into central business.
We continue to manufacture and distribute products on a global basis.
In addition to adhering to social dispensing guidelines and other health majors, we're taking unnecessary to cautions after local level to protect their employees.
They implemented work from home capabilities.
We put policies in place to ensure employees, who are not come to work.
I have no concerns about the security of their jobs.
For those with other health concerns were employing flexible policies to address individually.
Travels when securely restricted we suspended all customer and supplier visits to our facilities.
Through all of these actions were able to offer uninterrupted deliveries are products that support to our customers and suppliers.
I'll now turn the call over to barbaric, who provided detailed recap our third quarter financial then Greg when do you Yens will discuss individual business unit performance, including more details regarding the affected their corona.
Thank you, adding good morning.
I will review our financial results for our third quarter and first nine months of fiscal year 2020, followed by a review of our cash position.
First I am pleased to say that the company reported an operating income up 11000 for the third quarter fiscal 2020 as compared to an operating loss of 0.8 million in the third quarter of last year.
While total company net sales for the third quarter fiscal year, 2020 decreased 2% to 38.2 million compared to the prior years third quarter of 39.0 million.
Net sales for canvas increased for the third quarter fiscal year 2020 by zero point Threemillion were 3.5%.
Sales to semiconductor wafer fab equipment specialty products also increased from last year's third quarter.
PMT sales benefited from higher sales of power conversion and RF and microwave components, although overall sales for PMT decreased 0.7 million for 2.5%.
This was primarily due to economic softness in the power grid to market and lower sales in China due to the Corona virus.
Richardson healthcare net sales decreased 0.2 million or 11.9% as a result of lower sales of equipment in Latin America, and noncore diagnostic imaging parts.
Partially offset by higher sales of our office 750 CTG.
Which grew by 135% over the prior years third quarter.
Gross margin for the quarter improved to 33.1% of net sales compared to 31.5% of net sales in last year's third quarter.
This was primarily due to a favorable product mix and improve manufacturing performance in both PMT and Richardson healthcare.
Canvas gross margin of 32.8% was the same as last year's third quarter.
Operating expenses decreased 12.7 million for the third quarter fiscal 2020, compared to 13.1 million in the third quarter fiscal 2019.
The decrease in operating expenses resulted from lower severance legal and professional services expenses.
Partially offset by higher research and development expenses for Richardson healthcare as we invest in additional Siti X Ray two types.
As I mentioned the company reported operating income of 11000 for the third quarter fiscal 2020.
As compared to an operating loss of 0.8 million in the third quarter of last year.
This is the result of the improved gross margin and lower operating expenses.
Other income for the third quarter fiscal 2020, including interest income and foreign exchange.
Was 0.1 million.
Impaired you other income of less than 0.1 million and the third 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 the prior years third quarter.
And no us 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 US net operating losses, we can use our net operating losses to offset any cash tax liability reported at our U.S federal income tax return.
The amount of federal LLC is 15.4 million.
Overall, we had a net loss of 0.1 million for the third quarter fiscal 2020 as compared to a net loss of 1.1 million.
And the third quarter fiscal 2019.
Turning to a review of the results for the first nine months of fiscal year 2020.
Net sales for the first nine months at fiscal year 2020 were 118.5 million a decrease of 4.8% from the first nine months of fiscal year 2019, net sales of 124.5 million.
Net sales decreased by 7.7 million for PMT.
<unk> increased by 1.7 million or 8.3% for canvas.
Sales for Richardson healthcare 7 million, where the same as last year.
Gross margin increased to 32.3% from 31.5%.
Primarily reflecting favorable product mix in Richardson healthcare and improved manufacturing performance for both PMT and health care.
Operating expenses.
Were $38.7 million for the first nine months of the fiscal year.
Which represented a decrease of zero point Ninemillion from the first nine months for the last fiscal year.
The decrease was due to lower severance legal and professional services expenses.
Partially offset by higher research and development expenses for Richardson healthcare.
Okay.
Operating loss for the first nine months of fiscal year 2020 was zero point Fourmillion.
The same as for the first nine months fiscal year 2019.
Other income for the first nine months of fiscal 2020, including interest income and foreign exchange was 0.2 million the same as for the first nine months of fiscal 2019.
The income tax provision of 0.4 million for the first nine months in fiscal 2020.
Primarily reflected a provision for foreign income taxes, and know us tax benefit due to the valuation allowance recorded against the net operating loss.
Overall, we had a net loss of zero point Sixmillion for the first nine months of fiscal year 2020.
Compared to a net loss of 1.0 million and the first nine months of fiscal year 2019.
We continue to closely manage our cash position.
Cash and investments at the end of the third quarter fiscal 2020.
43.9 million.
Compared to 46.1 million at the end of the second quarter fiscal 2020.
And 49.4 million at the end of the third quarter fiscal 2019.
Capital expenditures were zero point Fourmillion in the third quarter fiscal 2020, compared to 1.0 million and the third quarter fiscal year 2019.
Approximately 0.2 million related to our IP system.
Your point 1 million was four facilities projects and another 0.1 million was for our manufacturing business.
On a year to date basis capital expenditures totaled 1.2 million as compared to 3.2 million in the first nine months in fiscal 2019.
Cash flow used in operations plus capital expenditures.
For the third quarter fiscal 2020 was 1.4 million.
Compared to 3.5 million and the third quarter fiscal 2019.
On a year to date basis. This amount was 3.6 million versus 8.4 million for the first nine months of fiscal 2019.
We paid 0.8 million and dividends in the third quarter fiscal 2020.
In addition, based at our current financial position.
Board of directors declared a six cents per common share quarterly dividend.
Which will be paid in the fourth quarter fiscal 2020.
Do you end up positive note.
During the quarter, we repatriated a total of 3.1 million from foreign locations.
Total cash repatriated for the first nine months in fiscal 2020.
Was 7.5 million.
US cash was 27.4 million at the end of the third quarter fiscal 2020.
Now I will turn the call over to Greg It will discuss the results for our power and microwave technologies group.
Thank you Bob good morning, everyone.
Key sales in third quarter fiscal year 2020.
28.9 million versus 29.7 million in Q3 airplane 19, our gross margin improved in the quarter to 32.8% versus 31.6% in the prior year and we would just curious you may in the quarter.
Q3 sales when compared to prior year, mainly impacted by the year over year sales decline in our legacy to business issues related to Golden Med team in China.
Over this decline was partially offset by continued strong growth and new technology partners supporting the RF and power markets and increased sales with our semiconductor wafer fab customers.
Another positive trend was it book to Bill.
TD was 1.13 and was driven by strong bookings from our wafer fab customers see two product lines and a PNG business unit.
Our bookings growth at UGI business unit was based on continued engineering logistic support the wafer fab market and global infrastructure to support our OEM and MRO customers the growth in PNG bookings was due to our new technology partners products demand creation model, a numerous design wins in high growth markets.
Unique global business model we.
We continue to buy global go to market strategy by investing in key business development resources to greatly improve and increase our customer contact in a more efficient manner.
As the markets conditions dictate we continue to manager as Sinead and invest in key growth areas.
Also continue to implement strategies to improve efficiencies and increased our customer contact.
The actions allows to generate more opportunities in growing markets using our existing global infrastructure and headcount.
This will have a positive impact on performance for the balance of the year and into the future.
Our revenue growth.
New technologies is being supported by key partners, such as Korbel, Maycom Nokia Regimented sick Ellis Im trying to influence you semiconductor a core legacy business continues to be greatly supported by the key to manufacturers in the industry, such as Cpis jealous and Jesse So Thomas.
Of course covered 19 is having an effect on Q4 as of this date they have not been any large push outs or cancellations.
We are inconsistent communication with our suppliers and customers.
We're very excited about the booking trends in both business units. However, we know that there will be an adjustment period at some point, what's your customers will adjust their backlogs as they get more data on a global status of Coven 19.
It is interesting, though as I talked to all of you about size the opportunities. The past few years I spent my career rolling Threeg, Fourg and Fiveg infrastructure to increase the ability to be mobile and communicate manage data throughout the world.
Was there being a shortage of so many items would just pandemic. We're not sure does is bandwidth and wireless communications.
Wireless infrastructure was not put in over the years for this event, however, I shudder to say, what we'd be dealing with everyone will immediately work from their home and manager business and communicate with up implementation of Threeg Fourg and Fiveg infrastructure.
We were able to take our entire organization on a global basis and gets instead of the word from the safety of their homes within hours. After we implemented to stay home policy.
When we get through this I believe there will be a major to expedite of getting psyche capabilities throughout the world and Richardson isn't very well positioned to support it I can't stress enough the value of Richardson electronics, Unparallel capability and global go to market strategy that is unique to the power and RF and microwave industries.
Leading position in manufacturing and distribution of let's end devices supports legacy equipment as well as new equipment with solid state cannot replace tubes.
Combination of these two niche strategy separates us from a competition has proven successful.
Once this virus is controlled we feel we are definitely in the rate markets and have the right strategy to support the opportunities as they arise.
With that I turn it over to win new Lil.
Richardson healthcare.
Thanks, Greg and good morning, everyone revenues generated from seed.
Third quarter of Fytwenty increased 135% over last years quarter.
While we don't report the actual number two cylinder installed we're happy to note that the number of altitude fell during the quarter increased over prior year end over our most recent second quarter.
Our average selling price for the open 750 declined slightly during the quarter as they push customers you try our two other new and used LTM too.
While we were happy with the increase we all agree more would be better.
Longest life to now nearing 700 days.
Total healthcare sales in the third quarter well below prior year due primarily to continuing significant decline in equipment sales.
As a result of ongoing economic issues throughout Latin and South America.
Nearly all of our customers in these regions are made under financial pressure.
This market will come back and we'll be ready disappointed when it does.
On the engine, we speak regularly to Oliver customers throughout the region and help them with critical parts supply and technical support.
Gross margin in the third quarter was 38.3% of sales a fantastic improvement over 26.2% incurred Q3 last year.
The improvement is data product mix as wells improvements in manufacturing.
Producing seated is a very difficult business.
Can you tell them doing this for decades constantly challenge by the operational demand placed on the product.
Manufacturing kids requires extreme and congenial high levels of equipment and personnel for flex, there's very little margin for error.
With our team has experienced engineers and production technicians and majority of home came from leading CP. Two manufacturers. We are confident we will continue to find solutions to improve our internal yield and increase the performance of active.
This along with putting additional two tied into production will help drive margins in the future.
Throughout the quarter, we applied a full court press to generate sales of the ultra 750.
We reached out to every former current and potential to customer including service providers and end users.
We confirm speedy systems under contract.
Minded every one of the benefits of using I can't.
Now we wait for two to fill in a scanner that's not covered under status contract. We are prepared and we'll continue to stay ahead of our customized.
Yes, as far as several weeks and we're faced with an unprecedented challenge.
Correct 19 has gotten much of our proactive selling efforts to a halt.
Face to face meetings have been put on hold and most hospital personnel and not taking sales calls. However, this is a short term issue.
We've already there are questioning of two sales will increase whether you use the CD stands to help diagnose the virus.
In fact, right now the opposite maybe Chris.
Many of our third party service providers are telling us that they've seen a drop in service call volume in recent weeks.
At the because hospitals have cancelled all non critical surgeries and they're closing down essential medical facilities. So that all resources are ready and available for Corona virus patient.
This too is expected to be short term, whether spike in demand when carbon 19 is under control.
Again, we are ready with pricing to add.
Throughout this period, we are still offering 24, seven technical support and letting our parts hotline.
We are spending radio email reminders to everyone in our database so they know where to turn one apart or to this need it.
We are checking in with our service partners and offering is just yet.
So far our carriers are operating business as usual and we have a team of people, making sure. Our parks are ready just yet no matter what time of day, Alright Fair EBIT.
Hi, Best wishes go out to those fighting on the front lines at the pandemic, we thank them for their service and for putting themselves at rest to take care of others.
As an essential business, our engineering and production teams continue with development and manufacturing have either working remote or in the plant under social distancing guidelines.
We're working closely with our suppliers.
That was it initially close due to shelter in place directives have reopened to support essential businesses such as Alex.
It had some prototype delays data corona virus related personnel issues outside of Richardson healthcare.
We anticipate missile push testing of the GE too early fall off with our launch planned for late January 2021.
Just a short delay.
Our efforts to develop a process for preparing a third to our also underway and we are exploring ways to expedite release.
Both cases.
It is more important to get the tubes right then to launch too early.
Finally, we continue to work with regulatory bodies, and other countries, including China, Korea, and Russia, as well as smaller countries such as the Ukraine.
We're also working to ensure that we have both us and you approval strategy to at the time of launch.
We appreciate your ongoing supply as well as your patients.
At this point I will turn the call over to answer it's great to discuss third quarter results for Candice.
Thanks, Wendy and good morning, everyone canvas, which includes the engineering manufacture and sale of custom displays to original equipment manufacturers and industrial medical markets delivered strong performance with phase of $7.2 million during the third quarter fiscal 2020.
An increase of 3.5% over the same period last year.
The revenue increase for the quarter was related to increased customer demand in North America.
Gross margin as a percentage of net sales were 32.8% during the third quarter fiscal 2020, the same eschewing to third quarter fiscal 2019.
The three fiscal 2020 with another strong quarter for canvas, but with a book to bill of 1.57.
We were able to increase our backlog again to an all time high in recent history.
Our backlog consists of purchase order that typically ship.
One or more years.
Customer issue caught up with that vary quarter to quarter based on customer demand.
I wanted to availability and other factors.
Healthy backlog position along with a number of projects that are currently in engineering stage position us well for continued growth.
During the quarter.
We received several new orders from both existing at first time medical OEM customers.
Application sale displays are used on numerous.
Some of these include Cryolipolysis systems that breakdown pets aspect cooling of body fat.
Refractive surgery laser system for therapeutic and reflective applications.
Cutting edge Cornell surgery.
Patient monitoring will monetize thawed patient thats, our remote locations.
Central destinations.
Medical device controlled capturing high resolution images and life video from up to two surgical imaging devices.
Radio therapy, we are highly customized just because I used to money for the patients joined the radiation treatment.
Diagnostic monochrome displays that I come compliant.
Hi definition to space useful endoscopy applications.
Human machine interface for Electrosurgical devices, Helico surgery, it application of high frequency alternating polarity electrical current.
Biological dish tissue as a means to cut and calculate tissue precisely and with limited blood loss.
And dental treatment centers, where patients can review radiographic images are life video from an into or out camera.
Maybe to your feet such as educational videos on promotion.
The non medical space, we received orders for various displays and on one product.
Applications include displays for that embedded RF I'd leader and he was the hub youth as human machine interface with Florida surface inspection machines.
Human machine interface is protecting machines in public transportation sector.
And teleprompter, Kevin monitors and clocks youth in the focus market for popular new stations around the world.
We continue to look for new customers through quite chose online marketing referrals and cold calling.
Density flat panel industry has been hit hard by the Corona virus outbreak as China based manufacturers have major production lines and won et cetera, I ask epidemic.
Epidemic has disrupted production across almost all inflammation and communication technologies that Chris, leaving many firms without components and material supply.
The two persists inventory for example has reached a 10 year low level.
Our lead times, having impact that as well and we don't seem.
Coming back to normal soon.
The impact of the Corona virus outbreak is expected to affect a tall up to 20% and to close to flat panel output.
It is difficult to quantify the impact specifically follow this is at this time.
We do expect some customer push outs.
[music].
Slide seven of our customers are considered essentially businesses like we are.
Operating on a reduced output basis funnel, many others that closed.
Considering all the new programs, we are working on with existing outside of new customers I'm optimistic that we will continue growing old business. Once we're past the effect of the Cohen our lives.
We have proven our staff to be highly reliable versatile technology company with ability to meet a diverse number of just stay requirements FLS being in compliance with upcoming AR and VR.
We offer our key customer safety stock options, enabling them to react quickly on unexpected increase demand and having bridge interactions in the supply chain fetch Sps seeing with the Corona buys.
I will ready already review and adjust our business strategy with a goal of further improving the operating performance of the division taking into consideration any changes that resulted from an extended epidemic.
For now we remain ready to serve our customers and play an important rolling and supply chain management for critical industries, such as healthcare manufacturing and transportation.
I will now turn the call back over to at.
Thanks, the answer and excellent quarter.
I wanted to thank all the Richardson employees globally for continuing to focus on the business, while paying attention to the safety precautions established by the CDC and the World Health organization.
As an essential business, we're asking a lot from our employees.
We continue to work through this extraordinary time.
To support our customers are we likely experienced a decline in demand in the near term our flexibility and willingness to work closely with our customers and suppliers will put us in a very strong positions that fluid or whether corona viruses defeated.
Now more than ever will continue to stay focused on cash management.
We have significant cash on hand, or whether they're corona virus, but that doesn't mean, we won't feel the impact.
We will review all capital expenditure requests will adjust research is based upon significant changes in demand.
There's a tremendous amount of pressure for us to buy our stock back.
Well, we agree it severely undervalued our priority is maintaining cash to support our growth initiatives for long term shareholder benefit.
We are convinced our health care strategy soured standards. So continue to win new to spray programs and our investment RF wireless technologies for critical infrastructure expansion will pay off.
Supporting these initiatives will be a good use of our cash position of the position of our board has not changed in this regard.
At this point, we'll be happy to answer a few questions.
Please note were owned different locations, so bear with us.
Thank you everyone to your question and answer session will now begin if you wish to ask a question just still Edwin I know Telisa. If you want to withdraw your question it started.
Just to remind you we still ask your question. It Star then one I know telephone.
Okay.
And we do have a question. It comes from the line of Marc Silk you alive in the call Mark. Please go ahead.
Thanks for taking my call on Mr. Richardson, you mentioned cash management, the capital expenditures cash a few times.
No actually near cash go from 60 million a few years ago down to 43.9 I brought this up before and I think now what's going on in the World I think it makes sense that.
I think you salaries excessive I think the right thing to do even if you can you salary and half is still a very healthy.
Salary and I think you had to the right thing and so an example that youre sacrificing just like everybody else in the company. So I'd like to hit that comment because last time, we talked about this you said you haven't paid yourself in a long time.
Sounds to me like last few years between that and dividends you've been doing very well, it's very hard for me to add to my position when you're using this as a piggy bank. So I would like you to comment on that I think other shareholders feel the same way. So thank you for taking my call and good luck.
Thanks, Mark what we certainly appreciate your opinion.
What we have done during this period of time and where are you doing it again the incentives for the executive team had been cut dramatically.
And.
And that's continued.
So even though it's a total gross number it looks.
To be quite large to you I understand that.
Less than what we've been team.
So we'll take your your comment under consideration alright, thanks, and on the buyback you're going to hold off and out correctly I think having cash is very important.
That is correct here, we are not met your anybody Marcia.
At this juncture sounds good thank you.
Okay. Thank you. Your next question comes from the line as a heavy sours utilizing the cool. Please go ahead.
Thank you will first off congratulations on a quarterly profit I was a bit concern.
For some time, there and that brings me a little bit of hoping to shareholder here as well as your continued commitment.
To the quarterly dividends.
As you discuss with Mark I mean, your stock's trading at these ridiculously depressed levels, but I understand that of course, having cash is important.
How do you expect that cash is going to be used in light of this situation say if it were to continue on for another year.
Well I don't think.
Any base really have an idea whats going to happen with the.
Grown a virus issue.
At this juncture, we want to take sort of a wait and see and be prepared.
Please.
I think as we do better with the to bear the C manufacturing.
Under absorption continues to go down in the the cost frankly of the two goes down so the margins will go up and I believe in near term if we get back to normal that we will grow cash flow neutral.
And there would be a wonderful situation to have but at the moment, we're going to take a wait and see attitude.
Definitely as shareholder I agree with you that would be a wonderful situation to say.
Pulled up some statistics. This morning that suggested that the average CEO of an electronic manufacturing company earns a bit over 200000 salary.
From the Bureau of Labor Statistics, what makes you Mr. Richardson worth nearly four times that.
Plus performance bonuses.
Well.
Dan.
The amount of salary good I've taken its been pretty.
Pretty much common now it since the company's going public years ago.
As I mentioned currently we're taking.
Our cash incentive reductions so I appreciate your.
Your opinion on it it's going to affect our life, where the company and I don't see a changing in the future you.
Well I did the offer an opinion there I asked what makes you work.
Okay.
I guess.
50 years experience in the business, which doesn't exist anywhere else in the two business.
Okay.
Thank you Sir so regarding your canvas business segment, what is the operating profit or loss worldwide.
Oh, yes, you want to address that.
Yes Hello.
Yes, I mean, I think we share the numbers and Nick that during the call right. So we are.
Operating contribution.
And we're growing the business year over year.
No. So I think it's very positive business development right now.
Mhm.
Im having a bit of trouble you're seeing the synergy of canvas with your other business lines of PMT and healthcare I guess aside from the integration healthcare displays.
And to be quite frankly, the canvas dotcom website.
It looks like it was made in 2003 and not updated sets.
The don't you think that when thanks, a business with better business synergies and more ability to inject cash into growing candace might be a better but.
So I lived up to add to answer back thanks, or making new after the website, we actually working on our website right now and refreshing it and make it nicer and appearing more likely healthcare and the rest of the company. So I think many years.
Actually.
Sorry.
And so thats really thank you I'm glad to hear that.
Yes, and many years back you know there was a strategic position of great Justine before was higher by several display companies and then most them together and I think thats, that's paying off so we're pretty happy with our production.
Locations in Europe in Germany, and also on the East Coast in America, and global supply chain that works for us.
Yes other areas. So we work closely together with the Richardson healthcare team picks up we have global certification, we have the ISO 13.5 globally, we have.
Quite you system and that is clearly in place for so well medical devices. So we all benefit from that I think it to predict himself.
Sure right and you want to ask.
Yes, I mean, we looked at it for years or new business with map profitable and frankly, we set it up as a very independent company, so if and when.
It made sense for us to devise through the business that we could do that.
Fortunately, we were able to attract.
Ends to come to work for us.
A number of years ago, and with his knowledge of the medical industry in the display industry.
And also his hands on ability to manage people and reduce cost he's done a fantastic job when you listen to what the backlog.
Is now and what the future it looks like in that business.
I wish all of our businesses, we were doing as well as the display business canvas is doing.
We certainly intend to have it as a critical part of our future.
Yes.
Well I'm glad to doing good job in that regard that I, certainly don't disagree with that right.
Right, but especially if we need cash.
And the need to campus customers and employees.
Might be better served by somewhere with more capital to inject into it.
I guess, you and I have just gonna have to agree to.
Disagree on that point.
Over the timing and for sure.
If you're calling certain parts of Richardson healthcare quote noncore.
Why do not hired an investment banker to divest those parts and refocused on your core operations.
Are we really arent, calling any portion of Richardson healthcare non core I.
If you are.
You came with a waiver that impression.
He wasn't intended we think it whether that would that was a direct quote.
From this call.
If if it's not noncore.
I can understand that but there were parts of it that were referred to as encore here.
Ed maybe I will answer that.
Alright, alright.
Yes that was I think only the comment.
The sale decline was partially due to non core hi.
And when referring to there.
The majority of our business as everyone knows is focused on canon and in the path we had a few other.
Vendors and product line, and the MRI space and coil space.
Where we had some sale, but those programs work, particularly efficient in terms that our investments in inventory dollars. So those are the ones. When we look at quarter over quarter comparison, we had some sales alone last year not a lot as I mentioned that didnt repeat this year, because we discontinued dose.
Sorry.
But our core business being the can imply speak to et cetera that those are performing very well. So I probably all right. Thanks. That's very helpful. For me then thank you.
You do you anticipate any inventory write downs due to demand following.
Maybe I would reserve that only a again because it's corona virus issue, we have no idea, what's going to happen or next few months, but other than that we don't we don't see any major write downs, we have normal reserves that are established.
Their northern enough to cover.
The inventory write downs at this point.
And.
Do those same statements apply to your accounts receivable.
Yes, we've done our finance team has done an excellent job in.
Keeping the accounts receivable current and getting the collections in our current fair.
I really do if I definitely see you have very few doubtful accounts as of now, but I do understand that it's been a concern and a lot of businesses.
Our house accounts receivable not being able to be collected so well it could happen again in are with us.
Corona virus thing people were going to say Gee, we've been closed for two or three months you can't expect us to pay on time.
So far we haven't seen that but who knows what's going to happen in that area.
Directly that has not been are probably the business.
And what do you attribute the SIFI tube sales growth.
Because.
Historically, the growth has been a little bit up and down.
Well I believe were up 130%.
Against this quarter over last year.
You may not due to the impact of the Corona virus at all.
No Wendy we want to answer that question.
Yes, so no that due to the current environment at this point in time again, it's more a factor we've been saying since we launched the outages that we see that the growth would be linear and.
Quarter over quarter that trend is just that it going up dislocation that as deep as everybody would like it to be that each quarter we've shown.
One or two exceptions, we've shown.
Growth in the number two.
In the lab and.
Quarter, 120 days or so we've gone out very aggressively and making sure that we're positioned to win every opportunity that we kind of okay and so thats why I think we're seeing some of the growth now.
Mhm.
Do you anticipate any demand slowing in those due to the drawn buyers yes, right now we do we're seeing a decline again in a number of Hello.
We've been talking to the third party service companies that we partner with and they are seeing at dramatic drop off in their call volumes and the reason for that is because all non essential non critical.
Surgeries and procedures and I'll be postponed and many equipment maintenance any new wins, so those kinds of things.
Well because the hospital, what any disruption they don't like visitors in their facility.
So we think that going to end up being pent up demand when the credit virus is under control that we'll see the reverse to that.
And your shortly how material with that decline b.
I don't know I don't look I can't really define that at this point.
Alright, well in that case.
I think thats about all light help thank you good.
Thanks Mark.
Thank you and we have no further questions, but just as a reminder, if you do wish to ask a question is just still then well.
Thank you Jennifer.
Okay.
And we do have a bit further question. It comes from Eric Laundry Your line in the call any could please go ahead.
Good morning.
Hi, Eric how are you.
Okay, all right. Thank all things considered.
So Ed and Wendy yet I'd like to have a short discussion here about the healthcare.
Segment.
And Ed use you mentioned earlier in the call that you believe the healthcare strategy is solid.
And you made that comment.
More or less now for the past two years.
And you've been open for business for over a year and a half now and.
In the business and stands now.
Is I.
I think we'd all agree significantly less.
Accessible or solid.
Than we had all hope.
A year and a half ago.
Well I'm wondering when you and Wendy and the board.
I would consider pivoting to more of a.
Strategy that involves some old E manufacturing so that you can.
Bill what to me looks like a gorgeous facility with nice modern equipment and lots of no Paul.
Inside a factory.
It appears to be pretty good at building tubes, yet nobody wants tubes that nobody wants to buy.
At this point, so if either of you could.
Comment on whether or not there's been any thought.
Two pivoting the strategy just something that might involve some more volume, but perhaps maybe lower margins.
You could absorb some of those costs, a little bit better than what I am assuming or is being absorbed right now.
Well I I'll try to answer some of it and then where the you're welcome to add your thoughts.
First of all we're well aware for instance on the the canon.
Also sevenfifty too that the two is sold its made by.
VERYX as you know.
Imaging units sold the candidates or.
In the room at $30000 there.
II more or less.
And quite frankly, our manufacturing costs today on that too.
Approaches for that so there would be for us to enter the OEM business that try to compete with Derek.
To sell it to the canon.
Be practically no profit.
And so we are total strategy with a company going back as long as I've been with the company has to compete with the Oems are the aftermarket business.
Thats why we got into the CD manufacturing business.
To compete.
Very xsan can.
For the replacement business at a much higher margin.
It's possible in the OEM business.
Again, basically it's a matter of costs than.
When market conditions that we haven't gone into OEM for that reason.
When do you want to add your comments on that.
Sure so.
I think we mentioned and as you know that we havent, we haven't completely ruled it out edge right. It would be very difficult for us to sell the Oems because the pricing is so low.
Not just a matter as you know thing that we would take lower margin it whether we could make any margin at all.
Having said that we have been talking to you and in the past 12 months, we've been talking to different company.
And so if the opportunity presents itself and it's a good one where we can help develop a new OEM solutions, where we can make some money doing it I think we would consider it Eric I don't think we're rolling it out.
The insurance, while we do that in and the sales team is focused on not just the OEM in the in the healthcare state similar Jupiter also use in industrial applications, our security application.
Well I can't say anything imminent.
Not that those conversations now being held we absolutely are looking at some of those opportunities.
Now in the interim as we've talked about what we will do which kind of has the same impact is again look at what are the additional to.
The end user like Ed said, where we can provide attitude in the aftermarket and we're working on as you know the Jay.
And were.
So starting a new project or different brand and I guess on two different you tight.
Understood as we know more and we're comfortable with the schedule will will start you talk a little bit more about that right now I wouldn't want to played out there until we can confession date.
And then finally, we're looking at other items and accessories. The go hand in hand.
You know, we make the heat exchanger.
In the same facility, we do Brasil that we're now looking at high voltage multiplier. So there's other things that maybe not huge quantities throughout the OEM business legally concede that but there are other glargine products that we're looking at that can utilize the same resources and as you said the gorgeous facility the new equipment that we have.
Okay. When you think thank you that's somewhat comforting.
But I still don't think I got an answer for what why you think.
We're still think that the health care strategy.
Is solid so let me just go back.
The Big reason that we bought the stock is of course because of the two business and is it appeared to us that there was demand for the two.
Yes, when we got to the point, where it was time to sell the two nobody wanted to buy the tubular all kinds of reasons for that I guess.
The OEM is is a more stringent competitor than what everybody thought and is that the other.
Hi, I'm, a little bit concern that there's a lot of hopes being in the GE to being manufactured.
Fearful that.
The situation with the due to may be similar to the situation with the D. today. So the.
We will have to tubes to sell but that will just mean.
Few people want to buy both tubes is that just just the one too so I'd like to know.
[music].
What is it makes you feel more comfortable that with this GE to view, we will all the sudden have a viable business year, whereas at this point it doesn't appear to be all that viable.
Well I think first of all none of us think that one two or two too.
Makes a business in the C area.
And as Wendy mentioned, we're going forward to look at other manufacturers.
Tubes as well.
And over the next few years, you'll see us release, a number of tubes for other manufacturers. So they were not just oh.
I wanted to.
To shop, if you will.
But at the same time, yes, as you well know that former.
CEO variances on our board.
I get a kick out of listening here.
Mark about very exit it took them 20 years actually to develop the the altitude before they could actually get it to market on a reliable basis and.
And he feels and we've spent a lot of money, obviously, but he feels or just right around the corner from having a successful business in the aftermarket space with the some of the new tubes, we're bringing on it and.
Right, it's not a two year business and.
Hi, guys. If we'd led you to believe it was a two year business going here, it's Matt you know its.
It's a five year business plus.
Before we can.
Being a breakeven kind of position it's.
Certainly not what the investment world looks looks for two or three year term.
Okay. Thanks, Ed it's interesting that you mentioned.
Board member.
Which I'm assuming is is mr. calutzi.
And you said that his opinion is that.
Brighter days or are right around the corner.
It would be helpful gives investors could hear that from him.
Because his actions.
Sure don't indicate that he sees any type of a brighter future right around the corner.
And I am.
Referring specifically to.
Stock purchases or in this instance, significant lack thereof, because he has been.
Very inactive meaning zero purchases of stock that I can see.
And it appears that use the person somewhat considerable means and could afford to buy the stock. So if investors could hear from his model that he believes that this is a very viable business in the not too distant future I think that that white.
Override some concerns that maybe people have that this is a guy who has been on the board for two years and Hasnt bought one share of stock. So I guess, what I'd say to wrap it up is that actions.
Peak louder than words.
Stephens you as even given that it would be helpful to hear from his mouth and then maybe even to have some insider buying on his behalf.
I would also be somewhat helpful.
No I understand and you've expressed that opinion before.
He will be in for the annual shareholder meeting and we talked about this and he said we'd be happy to answer your questions at that time, So I can't answer the question for.
Okay, that'd be great I tried to Tocumen last at the last meeting and you left early siding.
I didn't get a chance.
Last thing I, just want to make clear that both yens and Greg.
I guess in Wendy everybody is expecting.
Material Pushouts this quarter because of the virus correct.
I think we don't know what to expect I think thats the answer.
Okay and.
The semiconductor business is that does that appear to be affected as heavily as the other so.
No there also.
Considered a.
The essential business and as a matter of fact around a conference call with them tomorrow, where they're going to give us an update.
They are really concerned that.
They have to make deliveries on products and.
I wanted to make sure that we're up to speed and.
Dan handily requirements, so they're putting all their major vendors on conference calls to tell them.
What we need to do to fill their requirements.
We listen there.
In good times their biggest customer that's for sure.
Okay that industry, all right thats figures customer yes.
Thank you.
Okay Im sorry to interrupt we are running at this time, so now let's turn the call back to it.
Alright, thank you.
Thanks, Leslie Oh, thanks to all of you for joining us and for your ongoing interest in Richardson electronics.
We wish everyone. Good health. During these are unprecedented times, there and best wishes oligos actually by the Corona virus.
We look forward to discussing our fiscal 2024th quarter and full year results with you in July.
Thanks, very much any of your welcome to comment later, we're happy.
Skus more details with you at that time thanks.
Thank you Adam Thank you Julian speakers and thank you everyone that concludes your conference call for today you may now disconnect. Thank you for joining and enjoy the rest of today.
[music].