Richardson Electronics Ltd. (NASDAQ:RELL) Q3 2019 Earnings Conference Call Transcript

Apr 10, 2019 • 10:00 am ET

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Richardson Electronics Ltd. (NASDAQ:RELL) Q3 2019 Earnings Conference Call Transcript

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Q & A
Operator
Operator

(Operator Instructions) Now we do have a few questions in the queue. Moving to our first question. Caller, your line has been un-muted.

Analyst
Howard Brous

It's Howard Brous. Ed, Wendy, how are you? Tough quarter. But let's talk about what goes on forward. In your press release, I'd quote, the majority of Toshiba's CT systems sold in the quarter included a ALTA750 tube at a premium price. Can you discuss what you mean by premium price?

Executive
Wendy Diddell

Hi, Howard. Good morning.

Analyst
Howard Brous

Hi, Wendy. Good Morning.

Executive
Wendy Diddell

We didn't know that. The systems that we sell don't have a set price. We buy them at different costs, obviously whatever they're available at the market. But on average we're able to increase the sales price for a system when we include the ALTA750 tube by about 25%. So it's a nice charge. And then as I mentioned in my presentation, it then gets the OEM tube, which we can certify and sell as a pre-owned. So overall it's a big pickup for us in terms of the margin percentage.

Analyst
Howard Brous

Alright. I understand. What do you need to do in terms of ALTA750 G to establish greater penetration in the market, and what is it going to cost you over the next year?

Executive
Wendy Diddell

Okay. So for the G, you're asking specifically about the G, that is in development as we mentioned and we're expecting the prototype sometime this summer, hopefully at June time frame. I guess the cost for that it's going to be a little bit less than what it was for the D, because there are some similarities, but we would estimate $2 million --

Executive
Edward J. Richardson

$1.5 million to $2 million.

Executive
Wendy Diddell

Yes, $1.5 million to $2 million. And then again the critical thing in terms of gaining market penetration, whether it's the D or the G is really the tube life and being able to prove out through the clinical trials and then once we have the installations that our tube lasts as long as the OEM does.

Analyst
Howard Brous

So if we've got a D and a G, is there another letter that comes after that for greater penetration of the market?

Executive
Gregory Peloquin

There are other variations. Right now the D and the G are the largest number of tubes that are used in the market. There is also an E and F and they are just minor modifications to the D and we may address that later, but right now we need the G. And we should tell you, just so that you're clear, with the clinical trials, we won't (inaudible) a market with a tube as far as production is concerned probably for a year or a year and a half.

Analyst
Howard Brous

Alright. You talked about $400,000 as your legal bill last quarter. What was that consisting of, besides the litigation, or was that all the litigation?

Executive
Robert J. Ben

That was just litigation.

Analyst
Howard Brous

Based on my discussion with my counsel about the litigation, we're assuming that you're winning, but what is the ongoing costs over the next period of time,