Good morning and welcome to the FY 2020 Second Quarter Earnings Call for Richardson Electronics.I will now turn the call over to your host, Mr. Ed Richardson, CEO..

Good morning and welcome to Richardson Electronics conference call for the second quarter of 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 and 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 would also like to remind you that we will 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.Sales 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 systems sale.

While the semiconductor market started to show signs of rise in the quarter, we've had to work with our vendors to pool in critical components required to build parts and assemblies.On a comparative basis, sales to customers in the semiconductor wafer fab markets were still good than 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's 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 expensed 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..

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 grew by 11.9% in the quarter.Gross margin for the quarter improved to 32.0% of net sales compared to 31.4% of net sales from last year's second quarter.

This was primarily due to the favorable product mix and Richardson Healthcare and improved manufacturing performance in both PMT and Richardson Healthcare.

Canvys gross margin was slightly higher than last year's second quarter.Operating expenses decreased to $13.2 million for the second quarter of fiscal 2020 compared to $13.4 million in the second quarter of fiscal 2019.

The decrease in our operating expenses resulted from lower severance and legal expenses partially offset by higher research and development expenses for Richardson Healthcare.As a result of the improved gross margin and lower operating expenses, the company reported the same operating loss as in the second quarter of last year, which was $0.5 million.

Other expense for the second quarter of fiscal 2020 including interest income and foreign exchange was $0.1 million compared to other income of $0.3 million in the second quarter of fiscal 2019.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 was 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 currently $15.3 million.

Overall, we had a net loss of $0.6 million for the second quarter of fiscal 2020 as compared to a net loss of $0.3 million in the second quarter of fiscal 2019.Turning to review of the results for the first six months of fiscal year 2020, net sales for the first six months of fiscal year 2020 were $80.3 million, a decrease of 6.1% from the first six months of fiscal year 2019 net sales of $85.5 million.Net sales decreased by $6.9 million for PMT, but increased by $1.5 million or 10.7% for Canvys and $0.3 million or 6% for Richardson Healthcare.Gross margin increased to 31.9% from 31.5%, primarily reflecting favorable product mix and improved manufacturing performance for Healthcare.

Operating expenses were $26.0 million for the first six months of the fiscal year which represented a decrease of $0.5 million from the first six months of the last fiscal year.

The decrease was due to lower severance, legal and IT expenses.Operating loss for the first six months of fiscal year 2020 was $0.4 million as compared to operating income of $0.4 million for the first six months of fiscal year 2019.

Other income for the first six months of fiscal 2020 including interest income and foreign exchange was $0.2 million, the same as for the first six months of fiscal 2019.The income tax provision of $0.3 million primarily reflected provision for foreign income taxes which was lower than in the prior year's first six months and no U.S.

tax benefit due to the valuation allowance recorded against the net operating loss. Overall we had a net loss of $0.5 million for the first six months of fiscal year 2020 compared to net income of $0.1 million in the first six months of fiscal year 2019.

We continue to closely manage our cash position.Cash and investments at the end of the second quarter of fiscal 2020 were $46.1 million compared to $46.5 million at the end of the first quarter of fiscal 2020 and $53.2 million at the end of the second quarter of fiscal 2019.

During the quarter, we repatriated a total of $4.4 million from Germany and the Netherlands. U.S. cash was $24.3 million at the end of the second quarter of fiscal 2020.Capital expenditures were $0.5 million in the second quarter of fiscal 2020 compared to $1.1 million in the second quarter of fiscal year 2019.

Approximately $0.2 million related to investments in our healthcare growth strategy, $0.2 million to our IT system and another $0.1 million was for facilities and other projects.On a year-to-date basis capital expenditures totaled $0.8 million as compared to $2.2 million in the first six months of fiscal 2019.

Free cash flow for the second quarter of fiscal 2020 was $0.144 million, which was an improvement from the second quarter of fiscal 2019. Lastly, we paid $0.8 million dividends in the second quarter of fiscal 2020.Now I will turn the call over to Greg, who will discuss the results for our Power & Microwave Technologies Group..

Thank you, Bob, and good morning, everyone. PMT sales in the second quarter of fiscal year 2020 were $29.6 million versus $32.3 million in Q2 of FY '19. Our gross margin improved in the quarter to 31.6% versus 31.3% in the prior year.

Q2 results when compared to prior year were once again impacted by the year-over-year sales decline with our major semiconductor wafer fab [indiscernible] customers and a slowdown in the power grid tube business.

However, this decline was partially offset by continued strong growth with our new technology partners supporting the RF and power markets.Another positive trend was our book-to-bill. The book-to-bill was 1.12 driven by strong bookings from our wafer fab customers, key tube product lines and our PMG business unit.

Our bookings growth for our EDG business unit was based on continued engineering and logistics support of the wafer fab market and global infrastructure to support our OEM and MRO customers.The growth in PMG bookings is due to our new technology partners, products, our demand creation model, our newest design wins, and our unique global business model.

We have improved our go to market strategy by investing in key development resources to greatly improve our customer contact in a more efficient manner.

As the market conditions dictate, we continue to take control of our SG&A and invest in key growth areas as I just mentioned.We also continue to implement strategies to improve our efficiencies and increase our customer contact.

These actions allow us to generate more opportunities in growing markets using our existing global infrastructure and headcount.

This was a positive impact on our performance for the balance of the year and into the future.Our revenue growth with our new technologies is being supported by key partners such as Qorvo, MACOM, Anokiwave, United Silicon Carbide and Fuji Semiconductor.

Our core legacy business continued to be greatly supported by the key tube manufacturers in the industry such as CPI, Thales, NJRC, and Photonis.Key markets and applications showing growth in this calendar year 2020 includes 5G wireless infrastructure, SATCOM, and power management.

Specific to 5G infrastructure markets, we are continuing to gain traction throughout the world. With our experienced field sales engineers we have seen hundreds of ongoing opportunities and are consistently growing our list of design wins in the base station, mobile test equipment, SATCOM, wind energy, and motor control applications.

Our global sales team is of great value to our customers and suppliers in these power and wireless infrastructure rollouts.I want to reiterate the importance of our bookings. We are very excited about the booking trends in both business units.

In our Power & Microwave Group or PMG, Power & Microwave our growth in calendar year 2020 will be in the SATCOM and numerous 5G applications such as infrastructure, test equipment, and telematics.

5G will be supported by these key suppliers including Anokiwave, MACOM, Qorvo and numerous current and new RF passive technology lines.We also have a large and growing backlog in the Power Management Group with applications including motor controls, UPS systems and wind energy products ranging from active components, United Silicon Carbide, Fuji Semiconductor, to ultracapacitors.

And finally in passive components from Semtron [ph] and Amotech [ph] make up the balance.

It is also great to see strong bookings in the quarter from our key semi-wafer fab customers along with incremental bookings growth in our tube business.I cannot stress enough the value of Richardson Electronics' unparallel capability in global go to market strategy that is unique to the Power & Microwave industries.

Our world leading positions in manufacturing and distribution of electronic devices supports the legacy equipment as well as new equipment for solid state cannot replace tubes. The combination of these two niche strategies separates us from the competition and has been proven successful.With that, I'll turn it over to Wendy at Richardson Healthcare..

Thank you Greg, and good morning everyone. Overall Healthcare sales were below prior year due to a significant decline in equipment sales. Our refurbished CT systems are sold primarily to customers throughout Latin and South America.

Given the economic and political turmoil in countries like Bolivia and Argentina, we suspended open credit terms to many of our customers in these regions. Parts revenue was also down slightly in the quarter. The number of transactions were up, but the average selling price was lower.

On a year-to-date basis, part sales are still well above prior year.Revenues generated from tube sales were up over the second quarter last year. Sales of our ALTA750 tube increased while we saw a decline in certified pre-owned tube sales. Our longest live tubes are now nearing 600-day mark.

With a good inventory of the ALTA750 and as customers continue to gain confidence in the tube we are harvesting significant CT systems. This leaves us with fewer pre-owned tubes to sell.Our field sales organization is creating awareness for the ALTA750 stressing the alternative hospital fab to the OEM.

This process takes time as many systems are under multiyear contracts and customers are reluctant to change unless we have a full service option. We have a strong network of third party service partners and we are working with others to fill any gaps.

Our training programs are critical in this regard.Having our flexible P3 programs that mitigate risks like an insurance policy is also an advantage. Hospitals and third party service organizations normally won't stock spare [ph] parts, but instead they order them when a system fails. So for us staying in front of customers is critical.

While tube sales are still lower than we originally anticipated, they are certainly increasing.

Now that we have the CE Mark, we are seeing more interest for the ALTA tube in the European countries as well as countries surrounding the European Union.Our efforts to obtain regulatory approval is ongoing in other countries where demand for an alternative to the OEM is strong. We are currently working on China, Korea and Russia.

Canon continues to fight for its market share creating price pressure. This is more prevalent in the European countries. Gross margin in Q2 improved to 34.3% versus 29.4% in last year's second quarter.

Year-to-date gross margin is now 34.1% versus 24.3% last year.Our manufacturing yield is improving and we are putting more tubes in heat exchangers to stock. We still have room for improvement as we strengthen our processes and we increase production. The improvement in gross margin is also related to product mix.

System sales in Latin America tend to have a lower margin. We did sell several systems in the quarter that offset some of the margin improvement that generated cash and cleared out some old inventory.Our tube development activities continue to run according to plan. We anticipate having the ALTA750 G version in customer beta sites this summer.

Provided everything continues in this manner, full production will begin by the end of calendar year 2020. In the interim it is all about sales and staying in front of our customer base.I'll now turn the call over to Jens Ruppert to discuss second quarter 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 strong performance with sales of $7.9 million during the second quarter of fiscal 2020, an increase of 20.9% over the same period last year.

The revenue increase for the quarter was related to increased customer demand in both, North American and European markets.Gross margin increased slightly as a percentage of sales in the second quarter of fiscal 2020 to 32.9% from 32.8% in the same period last year.

The increased gross margin was related to a favorable product mix.Q2 fiscal 2020 was another strong quarter for Canvys with a book-to-bill of 1.97. We were able to increase our backlog to an all time high in recent history. Our backlog consists of purchase orders that typically shipped over one or more years.

Customers issue call off orders that vary quarter-to-quarter based on customer demand, component availability and other factors.

To help the backlog position along with a number of projects that are currently in the engineering stage, position us well for continued growth.During the quarter, we received seven new orders from both existing and first-time medical OEM customers. Applications where our displays are used are numerous.

Some of these include real-time cell analyzers to determine the metabolic phenotype, cryolipolysis systems that breakdown fat cells by cooling of body fat, corneal cross-linking, and minimally invasive procedures that combines use of UVA light and a special eye drop to add stiffness to corneas which have been weakened by disease refractive surgery femtosecond laser system for therapeutic and refractive applications of cutting edge corneal surgery.

Patient monitoring, where our monitors are installed at the patient's bed or remote locations, such as the Central Nurse Stations, DICOM complaint monochrome displays for C-arms, surgery navigation, assistant that enabled the surgeons to precisely track the location of surgical instruments throughout the procedure, laser systems for treatment of peripheral and coronary arterial disease with photoablation, and a very new project that is highly entered mass production stage in the robotic assisted surgery space, navigation data will be used to control a medical device.In the nonmedical space we received orders for various displays and [indiscernible] products.

Applications include passenger information systems used on trains and buses where special certifications are required. Product dispensers used in retail stores, displays used in control rooms in the public transportation market, and touch screens used as human machine interface for large sized billboard printers.

We continue to look for new customers through tradeshows, online marketing, referrals and cold calling.Considering all the new programs we are working on with existing as well as new customers, I'm very optimistic that we will continue growing our business.

We have proven ourselves to be highly reliable versatile technology company with ability to meet a diverse number of displays requirements as well as being in compliance with upcoming MDR. I will regularly review and adjust our business strategy with the goal of further improving the operating performance of the division.

Maximizing cash flow is an ongoing priority and we continue to focus on inventory churns and collections.We will work closely with our partners that help us reduce inventory by being able to meet the demand of our customers.I will now turn the call back over to Ed..

Thanks Jens. Congratulations on having a record quarter. We see good momentum across all three of our business units going into the second half of FY '20. PMT should benefit from continued growth within PMG and also with the semiconductor market improvement.

We anticipate Healthcare sales will improve as our tube light increases and customers gain awareness and comfort with the ALTA750 throughout the U.S. and Europe.Canvys is already performing well and the team continues to win new projects. We will closely monitor sales performance and make changes as necessary.

We will also stay focused on cash flow.At this point, we will be happy to answer a few questions..

Thank you. [Operator Instructions] Your first question comes from the line of Eric Landry, BML Capital. Please go ahead, you are live in the call..

Good morning..

Good morning..

So Greg, in EDG was there any push-outs or anything like that?.

No, our bookings were very, very strong in both. The slowdown in terms of sales like I said in the past with the PMG growth we were able to offset the decline in the silicon wafer fab business.

However, we weren’t expecting the slowdown in the tube business, but that slowdown was across the board and we didn’t lose any market share, we didn’t lose any big customers and there weren’t any big push-outs from our customers that caused that. It is just a slowdown in that type of MRO business across the board..

So does that mean in the quarters going forward here we're going to have to deal with a declining EDG business?.

No, if you look at the book-to-bill where the EDG was strong in the quarter and compared to Q2 of last year, the bookings were up 17%, so going forward Q3 and Q4 should show growth year-over-year for both EDG and of course PMG showing excellent growth..

Okay, so how long do you think it will be before the growth in the PMG channel replay, any volatility in the EDG business?.

I think that will happen this year, if not this fiscal year, definitely 2020 calendar year, majority offset any sort of declines within these large markets for EDG like the semiconductor wafer fab market.

The slowdowns in the two business are usually single digits and if I look at the backlog for example, the backlog is up close to 30% in PMG, so again quarter-over-quarter. So 2020 calendar year we should show growth quarter-over-quarter and year-over-year..

Okay, thanks.

Wendy, what happened in the field performance of the ALTA tube so far?.

It has been fairly good. We're actually pleased with the results..

So is then – there has been sort of no issues with it performing not up to standards? It's performing fine in other words..

It is performing up to standard. We have had a few, a handful of returns. We understand what the issues are, when we get them back. We've put improvements in our manufacturing and development process in place. But in general, I think that the field expectations and our customers' expectations are being met.

The tubes are as we pointed out are nearing 600 days, the longest life tube and I can't point to any single customer who is saying, no we're not going to buy your tubes because we don't trust the quality..

So then what, I mean.

Okay we blamed of the slow start, the whole slow start on the fact that there is no due available is that the sole reason that this thing is off to such a slow start?.

Well, it's a part of it, it is definitely a part of the reason, again a lot of the systems and I think we've said repeatedly that at least 80% of the systems in the U.S.

and possibly even higher as we get into Europe are under OEM contracts and those OEM contracts are usually multi-year.So a part of the slowdown is waiting for those systems to come off of contract and part of it, as we pointed out is definitely weighting on our ability to prove that we've got long life, which I think every day that goes by we're getting there.

And so it's a combination of those factors Eric..

You said in the last call that you got the CE Mark at the end of the last quarter and the initial response was "very positive." Are you having the same conversion issues in Europe that you've had here for the past four quarters?.

It's slow. As people again wait for equipment to come off the contracts, so that's still an issue and I would still say that the reception has been good. I don't see any change in that expectation. And so I can't really add anything more to that. Eric.

I think that Europe is getting started and we have a couple of large customers that have committed to using our tubes and it's just now a matter of time for equipment to fail and for them to need our tubes..

Okay, all right, thank you Wendy. I've got sort of a bigger question here for you. Obviously, the quarter was disappointing and I know that you've said many times that you believe healthcare is the future of the company.

But to us on the outside, it's hard to have confidence that this future is going to, - that the future is much more positive than in the past after quarter after quarter like we're having.

So I'd like to know if there has been any type of meaningful discussion within the company on the Board on any type of a strategic action that you could take to show your shareholder/partners that there is eventually going to be some hope of creating value here..

I think that the Board members, most of them have been CEOs of two companies in their own right. And as you know, for example, Bob Kluge was on our Board, who was CEO of Varex or at that time it was Varian's imaging business since '93 somewhere in that timeframe when he came there from GE.

And I really feel that they think we're right on the edge of starting to show some good results and actually anticipate that our investment is probably going to be larger than we thought it would be to begin with, but overall the results are good. We're seeing competition as Wendy mentioned from Canon, which is I think to be expected.

They certainly don't want to give up a huge aftermarket at very high margins if they don't have to, but overall, I think we're right on line for where we anticipated to be..

So, when you say that they think that there, you're right on the edge, I mean, is there anything that you could tell us that gives us confidence on the outside, because we obviously don't see what they're seeing, but it's hard to have confidence that you're on the edge when we keep seeing the sort of flailing quarter after quarter..

Well, I think they're seeing the yield on the tubes and the yield continues to improve. And as that happens, you know, we have a cost that's set based upon the current yield and as the yield in manufacturing improves that cost will go down and will be even more competitive. So I'm pretty sure that's what they're looking at.

And they understand it because they evolved and CEOs at two manufacturing companies in their own right..

Okay, thanks..

Thank you. [Operator Instructions] Your next question comes from the line of Marc Silk, Silk Investment Advisors. Please go ahead. You're live in the call..

Thanks for taking my questions. So, Wendy, on the CT Replacement Tubes I guess one of the issues back in the day was, the first one you implement it was - you need time to see if they work.

So the first tube that you've implemented was that been two years now?.

It's almost 600 days..

Okay, 600 days..

Around 580 to 590 days..

So, now that's not really an excuse anymore. So I'm just kind of get my - because it sounds like this is really a great growth area.

So I just want to get my arms around like your selling strategy, are there boots on the ground, are there phone sales? Do you think, if you were the CEO, would you be adding more boots on the ground to get in front of these customers because if it could be an explosive area, I would think that that's probably where the company should maybe put some more resources.

I would just hope that if you'd give me some color, that'd be great..

Well Marc, that's a good question and a fair point.

We have a very strong outside sales effort as well as an inside sales team and we've actually taken the inside sales team and we've beefed that up and added people whose sole purpose in life is to make outbound calls to the hospitals, to the third party service engineers, to really identify where all the Toshiba equipment is.

And it's really now about staying in front of those customers and reminding them on a very regular basis that we've got the tubes and stock. So when they have a failure, whether it's a tube failure or a part failure, they know immediately or they think immediately Richardson Healthcare.We've got a good solid team. We've got significant numbers.

Do I personally think if we keep throwing more people at it, it's going to change the dynamics? Not a lot, because of the other issues we've discussed. We have to wait for the systems to come off of OEM contract.

We have to wait until we've until - again we've got a broader line with the G tube that will help convince more of those customers to take their systems off of contract and it's really just having that state - the stick with it power.

We've got to just keep calling and getting in front of those customers.From a high level perspective, Ed, myself, Gerald Olson, we have Derek in the Carolinas, we have been in the Carolinas.

We've got a full team of people that can go out and sit in front of sea level people, high-level people within the hospital organizations, certainly with the third party service organizations that can tell the story and give them all the good reasons why it makes sense to change from the OEM..

I know you have headwinds or probably not many people know your name.

But what will be some of the tailwinds for you guys and maybe there's other headwinds that maybe we aren't thinking of in this area?.

Okay.

Just in Healthcare?.

Just on the CT, but if you want to add more to that, that's fine..

Well, I'll start with Healthcare and if the other guys want to add something they can. But I think we've kind of covered what the headwinds and let's start with the headwinds, we know what those are.

We've talked about again the timeliness of getting systems off of OEM contracts, we've talked about longevity of tubes and so again, we've got some history behind us now and I think we'll start to see more and more of those systems being converted to go off of the OEM contracts.So I think that's good and that becomes at some point it becomes, I guess, kind of the tailwinds you're talking about and pushing us forward.

So I don't want to continue to be – to basically be repetitive, but what we've talked about so far are headwinds and again we've overcome and started really getting the name out there.I don't think Richardson Healthcare by the way is now kind of an unknown. I mean we've been out there now for several almost five years if you include IMES.

And I think people know who we are.

One of the tremendous advantages we have is when we get those customers here by the way Marc, and they can see our facilities and they understand the investments that we've put behind this healthcare organization and behind the tube manufacturing facility, they become even more confident and more impressed.So again for me, it's truly, truly about staying in front of those customers, getting them here, letting them see and touch and feel and talk to other people who are using the tube to understand that we're for real and that it's a quality product and it's a viable solution for the OEM..

Okay, that's good color.

So Ed, last conference call, as you had a losing quarter, I kind of brought up to the fact that I think your salary is extremely high for a company that's losing money and you said, well, I didn't make money back in the day so now it is like catch up, but you are also getting dividends.So you talked about this Board of CEOs and I would think that if I was on the Board, the first thing I would say is, listen, why don't you bring your salary down until you can show consistent earnings instead of losses and then we can adjust your salary, because I don't think these people are going to tell you the emperor has no clothes and I don't know if because of the dual stock, you're going to vote these guys down and you can throw them off the Board.So, I think the right thing to do is reduce your salary which helps the bottom line and then when you get to be profitable, consistently profitable and the stock moves up, you should deserve that salary.

So that's kind of my comment if you want to comment on that that's fine, but we're all in this together.

Right? So if the stock goes up, we'll all make money, but I just think maybe the buck stops at the top to maybe set an example?.

Well, I certainly appreciate your opinion. It's been stated before and now the Board takes all that into consideration and we move forward accordingly..

Thanks for taking my questions. Good luck..

Thank you. Your next question comes from the line of Brad Leonard, BML Capital Management Please go ahead. You're live in the call..

Hello and thanks for taking my questions..

Hi, Brad..

Hello.

You guys, I guess overall, you've done if we look back is a pretty good job of controlling costs and you are operating at plus or minus breakeven most quarters, which is fine, but I think if we step back at this, I think if you're going to be honest with what the company is doing, you just have to realize that you're just not making any progress.

And the Healthcare is, I mean, in my opinion there has been a box. I mean, you guys are doing, you've done $4.9 million in Healthcare sales this year, I don't know how many CT tubes you're selling, but it can't be very many.So, while it may hold promise you might think it is, you are just not making any progress.

It has been much more difficult than you thought. And it just doesn't seem like there's any incentive to really take any strategic actions to create shareholder value. And this goes to, I mean, I just don't know, Ed did you ever think about selling this company, selling off divisions and saying, hey, this is not working, what we're doing.

We've been doing it for a long time and we're just not making a lot of progress.

Maybe we should be selling this business to a larger company who can take out costs, eliminate duplicative public company costs, management salaries, et cetera, I mean has that even crossed your mind, or the Board's mind?.

No, I, it really has not. We're absolutely committed to the Healthcare business and we think we've made good progress in that area. I understand you do not, but everyone is welcome to their opinion.

The Board thinks we're making excellent progress as we are able to bring the yield improvement up the costs will come down and makes us even more competitive in the marketplace. We're absolutely committed to Healthcare going forward..

Well, if you look at the Healthcare sales in if the Board thinks you're making progress, your sales were $2.2 million versus $2.5 million quarter-over-quarter. That's not progress. So you can say this, the Board we've got ex-CEOs and all this. I mean the Board really has no say in this. You've got voting control.

The Board is just there as placeholders in a public company.They are - and I agree with the past caller saying, we should adjust the salary. I mean if you're really in this, you really want to drive shareholder value, your salary should be much less and your incentive comp should be much higher.

I would pay you three times as much if it was 20% salary 80% incentive comp based on profitability and progress, we're not making it. I think you're all working hard.

I think you are confident people, I think you are probably honest people, but you're not making any progress shareholders are not being rewarded.I mean it's just, it's a stagnant company that is just existing and it trades below net current assets for a reason because you guys are just unwilling to take the steps necessary to drive value.

And I mean we - I mean I don't, it's not lack that you're trying. It's just not working. I mean at some point, you just have to step back and say, hey, what we're doing is not really working. We're not making any money as a company.

We're not driving an increased stock price, which is baffling to me that you own $2 million shares and you don’t want to take any actions to drive the stock price higher.It is just status quo with the existing what we're doing.

And so, I don't know, I think it would really benefit shareholders if you, because the Board doesn't really have any say, if you would think about selling this business, selling off a division..

Well, I heard your opinion before and you know it's been shared with the Board and fortunately we don't think like that. We're absolutely committed to the Healthcare business and we think….

Fortunately, you don’t think like that? Fortunately? Ed, the stock price hasn’t moved forever. I mean, unfortunately for shareholders you don't think like that. I mean, it's just like I don't even need to hear anymore. Well, I think we've heard enough and shareholders have probably heard enough, but thanks for your time and best of luck..

Thank you..

Thank you. Your next question comes from the line of Kevin Rendino, 180 Degree Capital. Please go ahead. You're live in the call..

Hey Ed, hi, it’s Kevin Rendino. I thank the rest of your team for their comments on the business. It sounds like very smart people that know what they're doing and I certainly appreciate the dialogue around that. I have to just chime in here that somebody said earlier the quarter was disappointing.

It is not the quarter that was disappointing Ed, literally the entire tenure of your ownership of this business has been disappointing. And another caller sort of asked or said we are all in this together. We're not in this together. You own $2 million shares, you take out $0.5 million a year just in dividends.

You don't own stock.So you don't care about the stock. The Board doesn't own stock, so they don't care about the stock.

You've literally committed a fraud against your shareholders for a very long period of time and I think you should just be honest about all of this and instead of continuing to perpetuate this fraud over your shareholders and pretending that you care what they care about, you should just take the company private.And do what you want, as you have been doing for the last 20 years.

Don't hide behind the Board. The Board has no say. The Board has no gumption. They're not doing anything that they should be doing which is looking at strategic alternatives.

And if you are going to be honest about all of this, you should just take the company private and do what you want to do and nobody could have any voice in saying or giving you any opinions of what you should be doing because quite frankly Ed, you don't care and just admit that you don't care, just say it, so we can all move on. Thanks..

Well, again, we certainly appreciate your opinion and we choose to disagree with it and think that what we're doing in Healthcare is going to be our future and that's where we're making our investments..

That's great Ed. You've been a failure. The business has been a failure for 20 years. You've created no value for two decades. You don't, you should listen to other people other than yourself and the Board.

You should welcome an investment banker to come in there and give you some advice because the advice that you're giving yourself isn't working, thanks..

Thank you. We have no further questions..

Okay. Mark, thank you very much. We appreciate it. If anyone has further questions, give us a call after the call. Thanks..

Thank you. That concludes your conference call for today. You may now disconnect. Thank you for joining and enjoy the rest of the day..