richardson electronics, ltd. · 2018-05-09 · richardson healthcare—growth initiative • sold...
TRANSCRIPT
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Richardson Electronics, Ltd.Investor Overview
Q3 FY18
REV 050918
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Safe Harbor Statement
During the course of this presentation, the Company may make
certain "forward-looking" statements as defined by the SEC.
Such statements regarding the Company's business which are
not historical facts represent "forward-looking statements" that
involve risks and uncertainties. Actual results could differ
materially from those contained in the forward-looking
statements due to risks and uncertainties contained under "Risk
Factors" in the Company's Annual Report on Form 10-K. The
Company assumes no responsibility to update the forward-
looking statements as a result of new information, future events,
or otherwise.
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Facts and Figures
• Global Corporate Headquarters: La Fox, Illinois; 265K
square feet facility on 100 acres
• NASDAQ: RELL
• Three Business Units: each initiated by customer
requirements and defined by product offering
• FY2017 Sales: $137 million
• Historical sales were $700M+; more than one
thousand employees
• Divested non-core security group (2007) and RFPD
commodity businesses (2011)
• Kept global infrastructure suitable for larger company
• FY18 sales are up double digits
• Our Future is Healthcare: we’ve invested more than $35
million since 2015
• Strong Balance Sheet: $60+ million in cash and
investments; currently cash flow neutral
• Employees: 415; more than half in sales, engineering
and product management
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Founded in 1947, Richardson Electronics, Ltd. has a rich and unique
history of engineering, manufacturing and distributing power grid and
microwave tubes and related consumables, and customized display
solutions.
• Locations: Global network of 60+ sales offices and stocking
locations with legal entities in 24 countries
• Customer base: 20,000 customers. Focus is aftermarket;
nearly 60% of revenue generated outside North America
• ISO 9001:2008 certified
• ISO13485 certified
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Richardson Healthcare
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Richardson Healthcare—Growth Initiative
• Sold RFPD in 2011; decided to invest proceeds in Healthcare
• Richardson Electronics wanted to buy Dunlee, a division of
Philips
• Primary interest is aftermarket replacement CT tubes—
capitalizing on our strength in tube manufacturing and
infrastructure to support customer base
• Philips wouldn’t sell the business inclusive of the technology
required to manufacture the products (license agreement only);
REL decided to invest in a greenfield project to build CT tubes
• We recruited 25 engineers and technicians from Dunlee and local
universities
• Decision taken to develop an Anode End Grounded (AEG)
platform, with the first application as a replacement for the
Toshiba/Canon Aquilion and Prime series CT scanners
• CT tube development began in early 2015
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Our Expansion into Parts/Training/Equipment
• 2015: we acquired International Medical Equipment and Services (IMES) located just outside of Charlotte, NC
• IMES is the leader in third party support for Toshiba/Canon CT, and was once the equivalent of GE Gold Seal refurbished systems for Toshiba
• Strategic addition to position REL in the Toshiba diagnostic imaging replacement parts market
• IMES Core Competencies:
• QA3 Certified Diagnostic Imaging Replacement Parts
• Accredited CT Service Training
• Refurbished CT Equipment
• 2016: we launched our first geographic expansion with a European Parts and Training Center in Amsterdam
• 2017: we launched a product line expansion into Philips CT Parts, Service Training, and Refurbished Equipment
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CT Tube Launch—Alta750
• First application is a 72KW, 0.35 second rotation replacement for
Toshiba/Canon Aquilion and Prime CT
• No third party replacement for Toshiba CT tubes; Varex makes
tube for Toshiba/Canon exclusively
• Availability of the Toshiba CT tube allows hospitals lower cost
alternative to OEM service contracts
• Performance very similar to the OEM tube with an average
lifetime between 2 and 3 years
• FDA, ISO13485, UL approvals complete
• First Beta tubes installed at customer sites in March/April 2018
• Planned launch June 2018; sales anticipated to drive
incremental revenue beginning in FY19
• Sales and growth rate dependent on speed at which Toshiba
CTs are taken off OEM service contracts
• REL now one of six companies in the world able to make CT
tubes: GE, Philips, Siemens, Toshiba and Varex
• Next up: other tubes based on the Alta platform
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By the Numbers
• Size of Replacement Parts
and Service Market: $7-8B
• All CTs Global Install Base:
60K+
• Toshiba CT Global Install
Base: 12K
• Annual Toshiba Tube
Replacement Opportunity:
3K-6K
• 70%-80% Systems still under
OEM service contract
• OEM Retail Tube Price:
$200K; $125K volume
contract price
• REL Target Tube Price:
$75K-$90K
• REL Target Tube Margin:
40%+
• REL Capacity: 1K tubes/year
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CT Tube Status Report: Production Is Up and Running!
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$20M
investment in
CapEx and
R&D
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Service Providers
Healthcare Providers
Richardson Healthcare Customers
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Power & Microwave Technologies (PMT)
Electron Device Group (EDG) + Power & Microwave Group (PMG)
Confidential and Proprietary
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Power & Microwave Technology (PMT)
• Largest channel to market for power grid and
microwave tubes and related consumable parts
(EDG)
• Bringing key technologies to the world for power,
microwave niche applications (PMG)
• Highly specialized in demand creation for new
technologies in power management
• Global provider and manufacturer of Engineered
Solutions focusing on industrial tube manufacturing,
microwave generators, power supplies and
customer specific parts and assemblies
• Technical service for medical, military, satellite
communication and scientific markets
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Solutions for:
• RF & Microwave Heating
• Semiconductor
• Plasma
• Scientific
• Marine & Avionics
• Laser
• Radar
• Radio & TV BroadcastMedical
• Automotive• Satellite Communications
• Alternative Energy
• Industrial Equipment
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Selected Products • Power Grid Tubes
• Magnetrons
• Klystrons
• Hydrogen Thyratrons
• Traveling Wave Tubes
• High Voltage Capacitors
• CW/Pulsed Microwave Products
• Waveguides
• Microwave Generators
• Cathode Ray Tubes
Services• CW Microwave Assembly
• High Power/High Voltage Assembly
• Application Design Assistance
• CW Microwave Design & Engineering
• Air-Wound Inductors & RF Coil Testing
• CW Microwave Testing
• Electrical Testing
• High Power/High Voltage Testing
• Electron Tube Manufacturing
• Service for Traveling Wave Tube Amplifiers and Related
Equipment, and CO2 Laser Equipment
Engineered Solutions/New
Product Development• High power, high frequency design services
• Custom microwave & RF electron devices
• Accessories, connectors & sockets
Electron Device Group (EDG)
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Power & Microwave Group (PMG)
• Brought back Greg Peloquin, former EVP of REL RFPD, in 2015 to launch niche
technology group as part of PMT
• Focus on cutting edge, disruptive technologies addressing the following markets:
• RF & Microwave
• Commercial: Radar, Wireless Communications/5G Infrastructure, VSAT, Home &
Business Connectivity
• Military: EW Command & Control, Space Qualified Drones
• Industrial, Scientific and Medical: Wafer Fab Tools, Food Preparation,
• Power Management
• Vehicular: Automotive/Hybrid Traction Vehicles, Mining, Farming, Rail Transportation
• Industrial, Scientific and Medical: Power Distribution Grid; Solar and Wind
Conversion; Motor Control, Welding; Converter/Inverter and Power Supply for MRI,
Xray, Linear Accelerator
• Built team of 15 RF engineers focused on engineered solutions and demand
creation; using existing sales organization and infrastructure to leverage expense
• Partnering with select technology companies including
– MaCom
– Qorvo
– Starpower
– Anokiwave
• Double digit revenue growth each year
• Will begin contributing to operating income in FY19
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RF & Microwave• Semiconductors - GaN, SIGe, GaAs, CMOS SOI
• Frequency Conversion
• Test & Measurement Products
• Capacitors – High Q
• Solid State Microwave Generators
• Cable Assemblies
• Connectors & Adapters
• Resistors & Terminations
• Thermal Management
• RF Amplifier Modules
Power Management• Semiconductors – IGBT, MOSFET, SCRs,
Rectifiers
• Semiconductors – SiC, GaN, Silicon
• Semiconductors – Discrete, ICs, Modules
• Capacitors – Film & Electrolytic
• Ultracapacitors
• Power Resistors
• Current & Voltage Sensors
• Magnetics
• Thermal Management
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Global Partners and Customers
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Some of Our Key Customers
Rockwell
Thales
Baxter
CPI
Arqiva
Honeywell
NBC
Huawei
Garmin
Lam Research
BT
Rohde & Schwarz
Leco
Stalam
MKS
John Deere
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Canvys – Visual Technology Solutions
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Selected Products
• Customized Displays
• Monitors and Integrated Systems
• Touchscreen and Privacy Technology
• Computing Platforms and Mounting Solutions
• Installation and Calibration Services
• Solution Consulting and Custom Engineering
CanvysCanvys develops custom display solutions for Original Equipment
Manufacturers (OEMs). We evaluate each customer's unique needs
and craft the right solution.
Engineered Solutions
• Consultation
• Custom Display Engineering
• Prototype Design
• Display Manufacturing Integration Facilities
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Canvys
• Medical OEM
• Automation and Industrial OEM
• Marine Radar
• Aviation
• Military Defense and Aerospace
• Retail/POS
• Financial/Stock Exchanges
• Transportation
Markets
SELECT CUSTOMERS
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Medical Grade
Fully Embedded
Custom Designs
Rack Mount and
Chassis Designs
Canvys Product Examples
True Flat Series
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Financials
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FY18 Quarterly Financial Performance(in thousands)
Reported Q1 Reported Q2
ReportedQ3
Net sales $ 36,995 $ 39,082 $ 41,645
Cost of sales 24,847 25,708 27,578
Gross margin 12,148 13,374 14,067 gross margin % 32.8% 34.2% 33.8%
SG&A expenses 12,324 12,602 13,097
% of net sales 33.3% 32.2% 31.4%
Gain on disposal of assets (191) - 3
Gain on sale of business - - -
Operating income (loss) 15 772 967 % of net sales 0.0% 2.0% 2.3%
Total other expense (income) 63 68 (48)
Income (loss) before taxes (48) 704 1,015
Income tax provision 64 532 488
Income (loss) from continuing operations $ (112) $ 172 $ 527
% of net sales -0.3% 0.4% 1.3%
Income from discontinued operations - 1,496 -
Net income (loss) $ (112) $ 1,668 $ 527
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FY18 YTD Q3 and Comparative Results(in thousands)
Sales Trends Fiscal 2015 - 2018YTD Q3 FY18 YTD Q3 FY17 YTD Q3 FY16 YTD Q3 FY15
Actual Reported Reported ReportedNet sales $ 117,722 $ 99,513 $ 102,448 $ 102,011 Cost of sales 78,133 67,617 71,001 71,091 Gross margin 39,589 31,896 31,447 30,920 gross margin % 33.6% 32.1% 30.7% 30.3%
SG&A expenses 38,023 37,697 37,938 36,366 % of net sales 32.3% 37.9% 37.0% 35.6%
Gain on disposal of assets (188) - (244) (5)
Operating income (loss) 1,754 (5,801) (6,247) (5,441)% of net sales 1.5% -5.8% -6.1% -5.3%
Investment/interest income (378) (129) (433) (744)
Foreign exchange loss 475 311 108 (285)
Other, net (14) - (53) (22)
Total other (income) expense 83 182 (378) (1,051)
Income (loss) before taxes 1,671 (5,983) (5,869) (4,390)
Income tax provision 1,084 820 742 (965)
Income (loss) from continuing operations $ 587 $ (6,803) $ (6,611) $ (3,425)% of net sales 0.5% -6.8% -6.5% -3.4%
Income from discontinued operations, net of tax 1,496 - - 87
Net income (loss) $ 2,083 $ (6,803) $ (6,611) $ (3,338)
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Balance Sheet Highlights(in thousands)
Mar 3, Dec 2, Sept 2, May 27, Feb 25, Nov 26, Aug 27,
2018 2017 2017 2017 2017 2016 2016
Cash & Investments:
Cash 59,882$ 54,453$ 56,429$ 55,327$ 51,386$ 54,111$ 57,488$
ST investments 199 4,136 2,424 6,429 6,399 6,307 6,392
LT investments - 686 2,514 2,419 2,395 2,343 2,410
Total 60,081$ 59,275$ 61,367$ 64,175$ 60,180$ 62,761$ 66,290$
Working Capital:
Accounts Receivable 21,893$ 21,016$ 19,260$ 20,782$ 21,240$ 20,480$ 21,545$
Inventories 49,129 48,059 46,136 42,749 42,860 43,078 45,187
Accounts Payable (15,846) (15,224) (13,382) (15,933) (12,328) (11,507) (12,581)
Working Capital 55,176$ 53,851$ 52,014$ 47,598$ 51,772$ 52,051$ 54,151$
FY 2018 FY 2017
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Potential Revenue Split Between SBUs(in thousands)
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FY19-20 Revenue Growth Assumptions
• CT Tube Sales growth as market acceptance grows and scanners come off OEM service contracts
• Incremental Replacement Parts Sales driven by availability of CT tube
• PMG Sales Growth driven by 5G
• No decline in semiconductor wafer fab demand
Percent of Revenues
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Thank You