Richardson Electronics Ltd. (NASDAQ:RELL) Q2 2020 Earnings Conference Call - Final Transcript

Jan 09, 2020 • 10:00 am ET

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Richardson Electronics Ltd. (NASDAQ:RELL) Q2 2020 Earnings Conference Call - Final Transcript

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Presentation
Operator
Operator

Good morning, and welcome to the FY '20 Second Quarter Earnings Call for Richardson Electronics. I will now turn the call over to your host, Mr. Ed Richardson, CEO.

Executive
Edward J. Richardson

Good morning. And welcome to Richardson Electronics conference call for the second quarter fiscal year 2020. Joining me today are Robert Ben, Chief Financial Officer; Wendy Diddell, Chief Operating Officer and General Manager for Richardson Healthcare; Greg Peloquin, General Manager of our Power & Microwave Technologies Group; and Jens Ruppert, General Manager of Canvys.

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 and they are based on current expectations and involve risks and uncertainties. Therefore, our actual results could be materially different. Please refer to our press release and SEC filings for an explanation of our risk factors.

We also in the second quarter were lower than we anticipated, due primarily to unfavorable economic conditions. This had an impact on our power grid tube business and on refurbished CT system sales. Our semiconductor market started to show signs of rising the quarter. We've had to work with our vendors to pull in critical components required to build parts and assemblies. On a comparative basis, sales to customers in the semiconductor wafer fab market were still good in the second quarter of last year. We expect to see an increase in this business later in the fiscal year. I'm also pleased that our investments in CT tube manufacturing, PMG and Canvys continued to drive revenue growth. All three areas exceeded prior year sales.

In addition to driving sales, our teams are staying focused on gross margin improvement and expense control. We continually look for ways to improve efficiency, such as reallocating headcount and sharing resources across SBUs. In the second quarter, gross margin improved and expenses decreased compared to last year. As a result, operating income was comparable to Q2 in FY '19.

I'll now turn the call over to Bob Ben who will provide a detailed recap of our second quarter financials. Then Greg, Wendy and Jens will discuss individual business unit performance.

Executive
Robert J. Ben

Thank you, Ed and good morning. I will review our financial results for our second quarter and first six months of fiscal year 2020 followed by a review of our cash position. Net sales for Canvys increased for the second quarter of fiscal year 2020 by $1.4 million or 20.9%. Total Company net sales for the second quarter of fiscal year 2020 were $39.6 million compared to prior year second quarter of $41.3 million, which was a decrease of $1.7 million or 4.1%.

Although PMT net sales benefited from much higher sales of power conversion and RF and microwave components, overall sales for PMT decreased $2.7 million or 8.4%. Richardson Healthcare net sales decreased $0.3 million or 12.6%, as a result of lower sales of equipment in Latin America, partially offset by higher sales of our ALTA750 CT tube, which