Richardson Electronics(RELL) - 2020 Q3 - Earnings Call Transcript

Financial Data and Key Metrics Changes - The company reported an operating income of $11,000 for Q3 FY 2020, compared to an operating loss of $0.8 million in Q3 FY 2019 [9][15] - Total net sales for Q3 FY 2020 decreased by 2% to $38.2 million from $39.0 million in the prior year [10] - Gross margin improved to 33.1% in Q3 FY 2020 from 31.5% in Q3 FY 2019, attributed to a favorable product mix and improved manufacturing performance [13] - The company had a net loss of $0.1 million for Q3 FY 2020, an improvement from a net loss of $1.1 million in Q3 FY 2019 [17] Business Line Data and Key Metrics Changes - Canvys net sales increased by $0.3 million or 3.5% in Q3 FY 2020 [10] - PMT net sales decreased by $0.7 million or 2.5%, primarily due to economic softness in the power grid tube market and lower sales in China due to COVID-19 [11] - Richardson Healthcare net sales decreased by $0.2 million or 11.9%, with a significant decline in equipment sales in Latin America, partially offset by a 135% increase in sales of the ALTA750 CT Tube [12][35] Market Data and Key Metrics Changes - More than 20% of the company's business comes from Asia, which was significantly impacted by the Coronavirus during the quarter [5] - The company experienced a decline in sales in Latin America due to ongoing economic issues [36] Company Strategy and Development Direction - The company continues to focus on cash management and has significant cash on hand to weather the impact of COVID-19 [57] - The management believes in the solid healthcare strategy and plans to support RF and wireless technologies for critical infrastructure expansion [58] - The company is positioned to support the rollout of 5G capabilities post-COVID-19, leveraging its unique global go-to-market strategy [33] Management's Comments on Operating Environment and Future Outlook - Management acknowledges the uncertainty surrounding the COVID-19 situation and is prepared to adapt to changing market conditions [68] - There is an expectation of pent-up demand for healthcare products once the pandemic is under control [41][89] - The management is optimistic about future growth opportunities in the RF and microwave markets despite current challenges [28][52] Other Important Information - The company paid $0.8 million in dividends in Q3 FY 2020 and declared a $0.06 per common share quarterly dividend for Q4 FY 2020 [24] - Cash and investments at the end of Q3 FY 2020 were $43.9 million, down from $49.4 million at the end of Q3 FY 2019 [22] Q&A Session Summary Question: Concerns about executive compensation and cash management - A shareholder expressed concerns about the CEO's salary and suggested a reduction to set an example during tough times, to which the CEO responded that executive incentives have been cut dramatically [61][63] Question: Future cash usage amid COVID-19 - The CEO indicated a wait-and-see approach regarding cash usage and emphasized the importance of cash flow neutrality in the near term [67][68] Question: Operating profit or loss for Canvys - The General Manager of Canvys confirmed that the segment is making an operating contribution and growing year-over-year [73] Question: Synergy between Canvys and other business lines - Management acknowledged the need for better integration and mentioned ongoing improvements to the Canvys website [74][76] Question: Inventory write-downs due to demand falling - The CEO stated that there are no anticipated major write-downs outside of potential impacts from COVID-19 [84] Question: Growth in CT tube sales - Management clarified that the growth in CT tube sales is due to proactive sales efforts and not directly related to COVID-19 [88]