Richardson Electronics Ltd (RELL) 2021 Q2 法說會逐字稿

Ladies and gentlemen, thank you for standing by, and welcome to the Richardson Electronics Earnings Call for the Second Quarter of Fiscal Year 2021. (Operator Instructions) Please be advised that today's conference is being recorded. (Operator Instructions) I would now like to hand the conference over to your speaker today, Edward Richardson, CEO. Thank you. Please go ahead, sir.

Good morning. And welcome to Richardson Electronics conference call for the Second Quarter of Fiscal Year 2021. 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 and Microwave Technologies Group; and Jens Ruppert, General Manager of Canvys. We're all calling in 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, and they're 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're pleased with our results for the second quarter of fiscal year 2021. Even though COVID continues to challenge our employees, suppliers and customers throughout the world, everyone has pulled together to deliver the best results possible. Our sales in the second quarter were 7% above our second quarter last year prior to the pandemic. In fact, our FY '21 second quarter operating income of $852,000 was our best operating quarter since the first quarter of FY '19.

The semiconductor wafer fabrication market continues to be strong. And we had good growth in the power and microwave group. We're also seeing improvement in many of our EDG product lines, including several significant wins with new OEMs. Within the Healthcare segment, we sold more ALTA750 tubes than any prior quarter. We're very excited about this trend. With Latin America system sales picking up, health care revenue improved again over the most recent quarter and exceeded last year's second quarter.

Canvys sales, while down to the prior year, remained strong, and our customer relationships are solid. We accomplished this in the face of the pandemic and a rise in the number of COVID cases. I again say thank you to the entire Richardson team for being mindful of our guidelines for staying healthy and keeping the business running without disruption. This success would not be possible without everyone working together.

I'll now turn the call over to Bob Ben, who will provide a detailed recap of our second quarter and year-to-date performance. Then, Greg, Wendy and Jens will discuss the individual business unit performance, our successes and our opportunities for the future growth.

Thank you, Ed, and good morning. I will review our financial results for our second quarter and first 6 months of fiscal year 2021, followed by a review of our cash position. Net sales for the second quarter of fiscal 2021 increased to $42.4 million or 7% compared to net sales of $39.6 million in the prior year second quarter, primarily due to higher net sales for PMT and Richardson Healthcare, partially offset by lower net sales for Canvys.

PMT sales increased by 11.2% from last year's second quarter as a result of higher sales of semiconductor wafer fab equipment specialty products as well as power conversion and RF and microwave components. Power grid tube sales continue to be negatively impacted by the pandemic. However, sales of certain product lines increased from the second quarter of fiscal 2020.

Richardson Healthcare sales increased $0.6 million or 28.2%, primarily due to a significant increase in demand for the ALTA750 tubes, which experienced a record sales quarter. In addition, equipment sales increased in Latin America.

Canvys net sales decreased by $1.2 million or 14.7% due to the temporary decreased customer demand globally related to COVID-19. Gross margin for the quarter was 33.8% of net sales compared to 32.0% of net sales in last year's second quarter. PMT margin increased to 34.2% from 31.6% due to a favorable product mix and improved manufacturing efficiencies. Canvys margin as a percent of net sales also increased to 35.5% from 32.9% as a result of its product mix.

Healthcare margin as a percent of net sales was 25.6% in the second quarter of fiscal 2021 compared to 34.3% in the prior year second quarter, primarily due to under-absorbed manufacturing expenses related to tube development and manufacturing improvements. Operating expenses were $13.5 million for the second quarter of fiscal 2021 compared to $13.2 million in the second quarter of fiscal 2020. The increase in operating expenses resulted from a $0.3 million increase in legal expense and from our normal employee compensation expenses, including annual merit increases. These increases were partially offset by lower travel and consulting expenses.

Throughout the pandemic, the company decided to support its employees through regular merit increases and incentive plans and by avoiding layoffs or furloughs. As a result, the company reported an operating income of $0.9 million for the second quarter of fiscal 2021 as compared to an operating loss of $0.5 million in the second quarter of last year. Other expense for the second quarter of fiscal 2021, including interest income and foreign exchange was $0.1 million, the same as in the second quarter of fiscal 2020.

The income tax provision of $0.1 million for the quarter reflected a provision for foreign income taxes, which was lower than in the prior year's second 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 NOLs is $17.6 million. We had a net income of $0.7 million for the second quarter of fiscal 2021 as compared to a net loss of $0.6 million in the second quarter of fiscal 2020. Earnings per common share on a diluted basis in the second quarter of fiscal 2021 was $0.05.

Turning to a review of the results. For the first 6 months of fiscal year 2021. Net sales for the first 6 months of fiscal year 2021 were $81.2 million, an increase of 1.2% from the first 6 months of fiscal year 2020 net sales of $80.3 million. Net sales increased by $3 million or 5% for PMT, but decreased by $1.7 million or 11.4% for Canvys and $0.4 million or 7% for Richardson Healthcare.

Gross margin increased to 32.9% from 31.9%, primarily reflecting favorable product mix in PMT and Canvys and improved manufacturing performance for PMT. Operating expenses were $26.5 million for the first 6 months of the fiscal year, which represented an increase of $0.5 million from the first 6 months of the last fiscal year. The increase was due to higher legal and employee compensation expenses, partially offset by lower travel and consulting expenses.

Operating income for the first 6 months of the fiscal year 2021 was $0.2 million as compared to an operating loss of $0.4 million for the first 6 months of fiscal year 2020. Other expense for the first 6 months of fiscal 2021, including interest income and foreign exchange, was $0.5 million as compared to other income of $0.2 million for the first 6 months of fiscal 2020.

The income tax provision of $0.2 million primarily reflected a provision for foreign income taxes, which was lower than the prior year's first 6 months and no U.S. tax benefit due to the valuation allowance recorded against the net operating loss.

We had a net loss of $0.5 million for the first 6 months of fiscal year 2021, the same as in the first 6 months of fiscal year 2020. We continue to closely manage our cash position.

Cash and investments at the end of the second quarter of fiscal 2021 were $46.0 million compared to $42.5 million at the end of the first quarter of fiscal 2021 and $46.1 million at the end of the second quarter of fiscal 2020.

Capital expenditures were $0.6 million in the second quarter of fiscal 2021 compared to $0.5 million in the second quarter of fiscal year 2020, approximately $0.3 million related to our health care business, $0.2 million was for our IT system and $0.1 million was for our manufacturing business. On a year-to-date basis, capital expenditures totaled $1.3 million as compared to $0.8 million in the first 6 months of fiscal 2020.

Free cash flow was $3.9 million for the second quarter of fiscal 2021 compared to $0.1 million in the second quarter of fiscal 2020. We paid $0.8 million in dividends in the second quarter of fiscal 2021. In addition, based on our current financial position, our Board of Directors declared a quarterly dividend of $0.06 per common share, which will be paid in the third quarter of fiscal 2021.

Now I'll turn the call over to Greg, who will discuss the results for our Power and Microwave Technologies Group.

Thank you, Bob, and good morning, everyone. PMT sales in the second quarter of fiscal year 2021 were $32.9 million versus $29.6 million in Q2 FY '20. Our gross margin increased in the quarter to 34.2% versus 31.6% in the prior year. Gross margin improved in both EDG and PMG through new designs and engineered solutions.

In terms of revenue, our Engineered Solutions products supporting the semiconductor wafer fab equipment market had an extremely strong quarter. We also continue to see strong growth in our Power and Microwave Group. This was led by our growing line of technology partners supporting 5G infrastructure as well as alternative energy power management applications.

COVID-19 continued to hurt our MRO business. However, we did see quarter-over-quarter growth in our legacy Tube business. We saw an extremely positive booking trend in both EDG, our Electron Device Group and PMG, our Power Microwave Group. Our book-to-bill in the quarter was 1.24. The increase in EDG was driven by our Semiconductor Wafer Fab customers and our legacy Tube business coming back. The increase in PMG bookings is a combination of our new technology partners' products, our global demand creation model, numerous design wins, high-growth markets and a very unique global business model.

Even with the strong quarter results, I believe COVID-19 did have a slowdown effect on our business. I continue to use the word slowdown because we have proven again in Q2 the demand for our products and services did not go away with the pandemic. In fact, we are very excited about the booking trends again this quarter. This growth in Q2 sales and bookings was amplified as we continue to look extensively at how to do things differently to achieve success now and in the future.

We developed several unique strategies to support our global customers' designs and products, while working with the restrictions on travel and face-to-face meetings. These strategies included adding technology partners, where we have technology gaps in our current key markets. This continued in Q2 with the addition of Quantum Microwave and new products from these same key technology partners, which will be key to our customers working in 5G and microwave communication products. We also increased communication to customer and supplier-focused webinars and major web upgrades.

Richardson's global go-to-market strategy has allowed us to grow multiple business opportunities during the pandemic through creative processes and communication procedures. We are committed not only to bounce back, but to bounce forward coming out of this pandemic. The Q2 results saw excellent progress in this strategy.

This quarter, we continue to see support from our key technology partners such as Qorvo, MACOM, Nokia wave, UnitedSiC, LS Mtron and Fuji microwave. Key 2 manufacturers in the industry, such as CPI, Thales, NJRC and Photonis, worked with us to manage customer requirements. Our in-house engineering and manufacturing teams did a great job supporting increased demand from our global semiconductor wafer fab customers, in addition to designing and introducing new products for key growth markets.

With respect to 5G and wireless sales, revenues increased by double digits again in Q2. As the need continues to grow for people to work from home, the city, the country, and their cars, they must be able to send and receive large amounts of data from any of these locations quickly. Especially during and coming out of this pandemic, I cannot stress enough the value of original electronics model to our customers and suppliers.

Our unparalleled capability and global go-to-market strategy are unique to the power and RF microwave industries. We developed a very strong business model of legacy products and new technology partners to go with our Engineered Solutions capabilities. Through our steadfast and creative focus on customers, we will survive this pandemic by taking advantage of opportunities when they arise. The demand for our products has not gone away. Our customers and technology partners need Richardson's products and support more than ever.

And with that, I'll turn it over to Wendy Diddell in Richardson Healthcare.

Thanks, Greg, and good morning, everyone. Second quarter was much stronger for the Healthcare division. Over the summer, hospitals began to reopen for elective procedures and equipment maintenance. This trend continued throughout the fall. We reported last quarter that we sold more ALTA750D tubes than any prior quarter other than Q3 of FY '20. We are pleased to announce that in our second quarter we sold more tubes than any prior quarter. As anticipated, a higher percentage of our tubes are still being sold in Europe. We also had a good mix of sales throughout the U.S. and Latin America.

In the second quarter, we restarted tube production. We are still experiencing some component delays and resource constraints due to COVID, so production was not at full capacity. We anticipate reaching our planned production levels in the third quarter. As a result, health care revenue in Q2 exceeded Q1 and also surpassed second quarter last year. Sales in the quarter were $2.8 million, an increase of 50.9% over the first quarter and 28.2% better than sales in Q2 of last year. Sales of parts, equipment and tubes, all increased over prior year's second quarter.

Gross margin improved to 25.6% from 5.6% in Q1. Margin was down versus prior year's second quarter margin of 34.3%. We're in a good stock position for Canon parts, including the newer prime scanners. We are still facing a lack of used CT scanners, which will limit our system sales throughout the year. Our system sales depend on hospitals changing out systems. This is not happening as frequently during the pandemic. Supply will continue to be constrained until the pandemic is under control and financial performance in the health care industry improves.

In the third quarter, we are launching our reloading program in China, which will drive incremental tube sales. New tube development is also going well, although we have some component delays due to COVID. Assuming there are no major setbacks, we are on track to launch the ALTA750G by the middle of calendar year 2021. We are also making good progress on our next tube program. There are 3 tubes in the series. They will be phased in as repair processes are validated. We anticipate launching these solutions later in calendar year 2021 and extending into 2022.

We are finalizing schedules with our auditors to secure registrations for our new tubes. We are also working on a schedule for our MDSAP audit. This will set the stage for tube sales in Canada and several other countries. We remain cautiously optimistic that performance will continue to improve. With rising COVID cases and a vaccine just rolling out, we know conditions can change overnight.

I will now turn the call over to Jens Ruppert to discuss the results for Canvys.

Thanks, Wendy, and good morning, everyone. Canvys, which includes the engineering, manufacture and sale of custom displays to original equipment manufacturers in industrial and medical markets delivered a good performance with sales of $6.7 million during the second quarter of fiscal 2021, a decrease of 14.7% over the same period last year. Customer demand decreased temporarily due to the coronavirus and the resulting business impact on the OEMs globally.

Gross margin as a percentage of sales was 35.5% during the second quarter of fiscal 2021, up from 32.9% during the second quarter of fiscal 2020. The increased gross margin was related to a favorable product mix and foreign currency effects. Our healthy backlog, along with a number of projects, that are currently in the engineering stage, position us well for continued growth before considering any long-term impact of COVID-19.

It is nearly impossible to predict when our business will return to normal, but we are optimistic that our business will improve in the second half of fiscal 2021. One significant headwind is panel supply. The robust demand for televisions in the U.S. and China combined with capacity reductions by the panel makers is leading to LCD panel price increases and longer lead times. The shortages of some key components, such as integrated circuit parts, could further compound the situation, pushing panel prices even higher.

LCD panel supply was also negatively impacted by a strong earthquake in Northeastern Taiwan and the power outage impacting a key class of strap supplier in Japan. The loss of power damaged the feeders that move molded glass from the furnace to the forming process. It will take several months to repair these. This Japanese supplier is an important supplier to AUO, LG, Innolux and other well-known LCD manufacturers.

We have seen dramatic price increases on passive components and cables as well, which brings us to the value adds that Canvys offers our customers. Due to our long-term relationships with key suppliers and driven by our future commitments for relatively large and growing procurement numbers, we avoided most of the product price increases. Traditionally, we avoid any supply chain disruption by carrying components and finished goods in our inventory.

We are compensating for a lack of face-to-face customer visits and trade shows during the pandemic by focusing on web marketing. We successfully launched our new responsive website in November. The website with a new look and focus, that now also offers multiple application stories, started to attract more visitors and potential clients. We are confident that our online strategy will result in new leads and business growth.

During the quarter, we received several new orders from both existing and first-time medical OEM customers. Some of these include corneal cross-linking and minimally invasive procedure to add stiffness to cornea that has been weakened by disease or refractive surgery; radiofrequency ablation, RFA, used to interrupting pain signals, such as those coming from irritated facet joints in the spine; refractive surgery, a laser system for therapeutic and refractive applications of corneal surgery; surgical navigation, a system for tracking the location of surgical instruments throughout the procedure; intravascular imaging systems, systems that allow physicians to acquire images of diseased vessels from inside the artery; patient monitoring and robotic-assisted surgical platforms to improve precision and accuracy in spine surgery.

In the nonmedical space, we received orders for various display products. Applications include displays and all-in-ones, monitors where the PC is integrated. Our products are used to control product dispensers in retail stores and in control rooms for railway applications. They also include touchscreens designed to assist harsh environmental conditions for ticketing machines in the public transportation market.

From the variety of customers and applications as well as the value of orders from existing and new customers, it is clear, we offer our customers outstanding products and service. While our sales organization stays focused on new opportunities, I will continue to review and adjust our business strategy to improve the operating performance of the division. Maximizing cash flow is an ongoing priority. We will continue to work with our partners to help reduce inventory while being able to meet the demand of our customers, particularly during this pandemic.

I will now turn the call back over to Ed.

Thanks, Jens. Canvys has performed well in recent years, and we're confident growth will continue when the pandemic is under control. A significant percentage of your business is in the medical OEM market. As we know from our health care segment, the medical industry has been severely impacted by the coronavirus. It will be sometime before hospitals are spending on new equipment.

In spite of the potential long-term impacts of COVID and knowing we're not out of the woods yet, we're optimistic about the future. We're seeing growth initiatives, improved revenue, profitability and cash flow. This is clearly reflected in health care and PMT performance. Our challenge now is to determine what changes we've made during the pandemic that should remain as part of our ongoing strategy for growth and improve profitability. We'll continue to carefully manage expenses and maximize cash flow. We want to make sure we have funds available to support our growth initiatives and improve our financial returns.

At this point, we'll be happy to answer a few questions.

(Operator Instructions) Our first question comes from the line of [Dane Crottier], a private investor.

I was just wondering if you could provide a little bit of color on the inventory levels?

Yes, with multiple business units, it changes from one to another. Certainly, it's requiring more inventory for PMT for the semiconductor portion of the business as the business grows. And also in the tube business, we saw actual decline for a period of time, which now seems to be coming back. And in that case, we buy inventory sometimes and -- or schedule it a year in advance. So the inventories were up there.

But for the most part, I think it's -- overall blended is pretty much normal. Even Canvys, for example, has had some additional inventory that they're carrying because customers have pushed out orders. On the other hand, right now, if we had more CT tubes, we could sell more in the health care space, so the inventory levels are down there. So it's sort of a mix between the SBUs.

Okay. Is it fair to say that as the cloud of COVID sort of goes away that we shouldn't see a meaningful rise in inventory going forward? Is that a fair -- from an outsider standpoint, is that fair to say?

Well, certainly, in the EDG or the tube portion of the business, inventory levels will be reduced as the business picks up. But on the other hand, when you look at the power and microwave group in the semiconductor space, that business is growing 20%, 30% a year and it takes additional inventory to service it and also you have more payables or receivables. So it's a mix. There will be an increase in inventory. So far, we're pretty well pleased with our cash flow.

Okay. That's great. And then just kind of a broader capital allocation question. As the business is recovering or continuing to recover from some of the lockdowns where is the priority from a capital allocation standpoint for the Board and the executive team?

Well, certainly, we want to fund the healthcare business. We've spent about $25 million on equipment. We think we have the most modern CT manufacturing operation in the world right now. But the majority of the capital has been spent. And as you saw, the capital expenditures for health care was really moderate in both the quarter and the 6 months. So what we're hopeful is, once we can get health care to turn profitable that we go cash flow positive, but that's probably still 2 or 3 years out, something like that. But the capital expenditures that you're seeing now are pretty much normal.

Okay. So paraphrasing, it's fair to say that there shouldn't be -- are there some -- for the health care business, there isn't a need for a significant amount of additional capital. It's sort of already vacant.

No. No. Right, we're always adding new equipment, but there isn't anything substantial coming.

(Operator Instructions) Our next question comes from the line of Eric Landry from BML Capital.

So is it correct in assuming that we're basically in quarter #2 for Richardson of the wafer cycle right now?

The semiconductor wafer fab business, is that what you're making reference to?

Yes. Are we in basically the second quarter of an upturn here?

Yes. And our major customers there are predicting that in the calendar year, this calendar year, that will continue to increase. And it certainly increased for us, as you can see. So it's good news. We're -- the good news part of that is the last time this occurred business is sort of like a roller coaster. We were working 7 days a week to try to accommodate the customers' requirements. And this time, we were well ahead of that. And we are, in certain instances, working 6 days a week, but not 7. And we become -- have a new manufacturing manager since that last uptick, and he's really efficient and has cross-trained a lot of people in the assembly area. So we're well ahead of the curve, and we can handle the uptick without jeopardizing delivery.

Okay. So I know these things tend to end abruptly. But by all accounts, what your customers are telling you is that there's likely 3 to 4 quarters after this of strong growth in what is one of your most profitable businesses. Is that an accurate assessment?

Yes. Yes, it is very accurate. And the rollout of 5G, what that means that big companies like Samsung and Intel and others are adding capacity and building new wafer fabs, and that's where the tools and equipment go from our major customers. So it's all good news. And they're also retooling older equipment, which is good for us as well.

Okay. Great. Ed, did I hear correctly that you said tube sales have been a little bit restricted by inventory constraints? Is that right?

Yes. We haven't been able to build CT tubes as fast as the customers have required them. First of all, we did -- as we had mentioned in the past, we shut down manufacturing of CT tubes for a quarter or so as we were trying to improve quality, and we had a good inventory at that time. And we sort of got caught a little bit in between the -- by the time we got back into production, the requirements had picked up, and we're pretty much working hand to mouth right now.

So that to me sounds like a big change from what you were saying as recently as a quarter or 2 ago, when you were having trouble even people taking calls to buy these things. So what has changed here?

Well, we've -- we're doing really well in Europe and some of the EMEA countries and so that's picked up a lot, and it's also picked up in the United States. It's -- when we talk about large quantities, you know how expensive the tubes are. So it's not a matter of 100s, it's a matter of 10s. But at the same time, it's excellent business.

Okay. So -- okay, so a matter of 10s is going to take a long, long time to fill that factory of yours -- your brand-new fresh factory that has a capacity of 1,000 units with 3 shifts. So we're still a long way away from it. Has there been any fresh thinking on how to get that factory up and running with a decent amount of tubes so that we can somehow make some money in health care here sooner than later?

Well, we're adding people. We're adding engineers. We're working. Wendy, you might want to address this, but we're working a partial second shift. What are some of the plans, Wendy, you are on top of that on a day-to-day basis?

With the programs that we discussed in the call itself. So we've got the China reloading program coming on, and that's got good volume potential, Eric. I would also point out that that was the 1 area where I feel like we missed the opportunity to ship some tubes in the second quarter was into the -- getting that China reloading program going sooner.

Then as we pointed out, we've got the G coming online, and that will be mid this year, mid-2021, the calendar year. And then we have the new tube program, which will come online throughout the year as we validate these processes.

So those 3 programs alone are going to fully cover us in the first and possibly going in, as Ed already said, into a second shift. I think what you're looking for is have we made any progress on an OEM program where we would sell tubes to an OEM. And at this point, there is some irons in the fire, but there's nothing imminent. Our top priority right now are the 2 programs, I just mentioned, the D, the G and the new repair program.

And all of the modeling that we're doing, by the way, is based on those series of tubes. And we will keep our eyes and ears open. Obviously, we've got to be able to travel in order to really effectively look at any OEMs. They have to be able to come here. We have to be able to go there. So I think that's still a ways out before we're going to see any true or meaningful effort on the OEM side.

The new tube program, is that a different manufacturers is Canon? Is that what you're talking about? Or is there something entirely different than that?

It is. It is a different manufacturer. It's a different line.

Okay. And so that is still on the design -- go ahead.

Yes, the replacement volume for that particular manufacturer is much larger than Canon.

And as we mentioned, it's 3 tubes in that series, Eric. So it will be -- that will be launched independently.

And that's a fiscal year 2022 at the earliest type of event?

Yes. I would say meaningful results. We will likely start shipping at least 1 of the 3 earlier than that. But again, we want to make sure that the product that we're putting out there works, that it meets the warranty requirements and then satisfy the customers. So to be conservative, I would say FY '22.

Okay. Last question here. You made mention of first shift, almost fully absorbed. Did I -- is that correct? Did I hear that correctly?

With full production, which we will be back in now. We're actually back in full production now. We will be fully absorbed in the third quarter. We should be fully absorbed in the third quarter with 1 shift. Going to a second shift and a third shift helps leverage some of those costs.

All right. Maybe I'm not interpreting this correctly, but that does not mean 300 x 300 tube annual pace, correct?

No, probably not. I would have to go in and count the production with all the 3 tube series. Sometimes we're running second shifts because of an equipment, we need to run scanners, for example. When we're testing the G, and we're putting that through its paces, it's very helpful to have those scanners running 24/7. So we'll have people in here at night and on the weekends running scanners and tracking tube status. We may use ovens on second shift for bake out in some of the processes that require a longer period of time.

Our next question comes from the line of [William Wilson], an individual investor.

Just ecstatic about your results there, but at the same time, I'm a little bit under-invested, and I'm just wondering how that would extrapolate to other investors that might be listening or potential investors, which brings to mind the question of whether you've been able to outreach to the investment community. Or whether that is something that because of travel with the COVID, you're still able to do. I would think that, that would present a great forward-looking opportunity once that breaks loose and you can get out the story about the company, but...

Well, that's true. In the past, we've done a lot of conferences, financial conferences and presentations and things of that nature. And of course, with the COVID issue, that's all stopped. But certainly, as the business continues to pick up and be profitable and as soon as the impact of the coronavirus is under control, and the -- there are financial conferences, again, we will be participating.

Okay, great. And then I look at the chart, when -- going back 5 years or so, when I started investing or more than that actually. And I see that we're about 50% at a minimum of what it was. And yet if I see the company correctly, and you're at least twice as good as far as size, potential markets, products, R&D, manufacturing space, et cetera, et cetera. So my question is, is my perception way off there? Or are you twice as good as you used to be 5, 10 years ago?

Well, we certainly agree with you. We think that particularly addressing some of the markets that are growing rapidly, like the health care space and also the power and microwave group for 5G and the semiconductor wafer fab business, also Canvys has a big market. We're really very optimistic about the future of the company, and we feel like you that the company is certainly undervalued as far as the market value on the street for sure.

Okay. And I'll let you go, but 1 quick last one, and this is kind of stretching it too. But south of the border, it would seem that you could only for the tubes grow by replacement, the idea of OEM would probably not come into play there. But at the same time, if you look at the giant companies, Siemens or whatever, who could potentially jump into the market and undercut your prices. Do you see sales to South America, Latin America being a long-term potential stabilizing factor there?

Yes. We sell to Latin America. Currently, we sell a fair amount of equipment and also replacement tubes, and we install our new tubes in used equipment when the equipment is sold in Latin America. The problem we have there is the economies of the various countries in South and Latin America haven't been that good, but it's certainly an excellent market. And you're correct, the -- probably, especially today, 95% of the tubes we sell are for replacement in existing equipment.

Yes. Okay. And again, we're ecstatic at this end.

Great. Well, thank you very much for the investment.

At this time, I'm showing no further questions. I would like to turn the call back over to Ed for closing remarks.

Okay. Well, thank you for joining us and for your ongoing interest in Richardson Electronics. We look forward to discussing our third quarter with you in April. And we hope by then we'll be thinking about seeing people face-to-face again. And in the interim, we wish you continued good health and success. Feel free to call us at any time.

Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect.