September Model Shadow Stock Portfolio Update

The Model Shadow Stock Portfolio is reviewed quarterly to determine stock sales and additions, a practice put in place since the portfolio’s inception in 1993. The quarterly portfolio review cycle is tied to the standard reporting cycle of most publicly traded firms in the U.S. Companies are examined for violating the earnings, valuation, size and age rules of the Model Shadow Stock Portfolio. Click here to see the current purchase and sell rules for the portfolio.

The primary Model Shadow Stock Portfolio selection criteria target the intersection of the smallest 10% of domestic stocks as measured by market capitalization and the “cheapest” 10% of domestic stocks as measured by the price-to-book-value (P/B) ratio. These decile breakpoints are determined by examining domestic companies that are listed on the New York Stock Exchange (NYSE).

After conducting the quarterly review of the Model Shadow Stock Portfolio, REX American Resources Corp. (REX) was removed from the model portfolio. With the proceeds from the sale of REX American Resources, there was enough cash available to select two stocks that would make up an average position size. Key Tronic Corp. (KTCC) and Titan Machinery Inc. (TITN) were added to the model portfolio during regular trading hours on Tuesday, September 15, 2020.

Sell Alert

REX American Resources Corp. (REX)

REX American Resources was removed because of the Model Shadow Stock Portfolio’s negative earnings rule. On August 26, 2020, the company reported a fiscal second-quarter loss of $0.28 per share, while trailing 12-month earnings remained negative. Trailing earnings had turned negative after reporting a $1.21 loss per share for the fiscal first quarter ending April 30, 2020.

REX American Resources has interest in six ethanol production facilities in the Midwest, which in aggregate shipped approximately 660 million gallons of ethanol over the 12-month period ended January 31, 2020. REX American Resources also has an interest in a refined coal facility. Ethanol operations are highly dependent on commodity prices, especially prices for corn, ethanol, distillers grains, non-food-grade corn oil and natural gas. A number of factors contributed to weak performance recently including low demand for fuel, low oil and ethanol prices, a poor corn harvest in 2019, rail service delays and overall disruptions due to the coronavirus pandemic.

It is the policy of the Model Shadow Stock Portfolio to remove a stock once its trailing 12-month adjusted earnings go negative and the company reports a quarterly loss in a subsequent quarter while trailing earnings are still negative.

Quarterly Additions

As of September 14, nine stocks met the initial selection criteria for the Model Shadow Stock Portfolio, up from eight stocks one month ago. As noted last month, a generally strong stock market combined with weak quarterly results during the latest earnings reporting cycle has resulted in a dramatic decline in the number qualifying companies. AAII members can see and research which companies are currently passing the initial selection criteria in the Shadow Stock Ideas table on AAII.com. The list of new Shadow Stock Ideas is updated daily—Tuesday through Saturday.

One of the qualifying stocks is already held in the model portfolio, Big 5 Sporting Goods Corp. (BGFV). The remaining eight stocks were examined to ensure adequate liquidity, timely financial filings and appropriate industry and foreign considerations. For example, the Shadow Stock Portfolio Rules currently exclude companies in the rental and leasing industry. Price momentum is used as the tiebreaker among qualifying stocks. We examined both the short-term four-week relative strength rank, as well as the weighted relative strength ranking, which looks at price performance over the last year but places a higher weight on the most recent quarterly price performance.

Portfolio Addition: Key Tronic Corp. (KTCC)

Key Tronic provides electronic manufacturing services (EMS) and solutions to original equipment manufacturers (OEMs) of a range of products. The company’s service offerings include integrated electronic and mechanical engineering, precision plastic molding, sheet metal fabrication, printed circuit board (PCB) and complete product assembly, component selection, sourcing and procurement, worldwide logistics, and new product testing and production. The company was organized during 1969 in Washington state as a computer keyboard manufacturer and has expanded over the years to serve a number of industries, with facilities in the U.S., Mexico, China and Vietnam.

The annual report notes that the five largest customers accounted for 40% of net sales during 2019, with the largest customer making up 18% of sales. Key Tronic is therefore subject to concentrated risk from a few key customers. The electronic manufacturing services are also a competitive marketplace, with gross margins of 7.8% during 2020, up from 7.5% during 2019. Key Tronic serves the following sectors: industrial (42% of fiscal-2020 revenue), consumer (44%), gaming (5%), communication (4%), transportation (2%), printer (2%) and computer and peripheral (1%). Sales to foreign locations represented 24.6% of 2020 sales.

The coronavirus pandemic impacted Key Tronic’s operation in many ways, as the company seeks to keep operations running safely while adapting to a changing mix of products and disruptions in supply. For example, demand for personal protection equipment such as sanitizing equipment increased this year, while gaming equipment declined.

No analysts are currently following the company, truly placing it in the shadows of Wall Street. Key Tronic’s most recent fiscal year ended June 27, 2020. For the first quarter of fiscal year 2021, the company expects to report revenue in the range of $118 million to $125 million. It warns investors that while its facilities in the US, Mexico, China and Vietnam are currently operating and rigorously following current health guidelines, uncertainty as to the possibility of future temporary closures, customer demand and costs and future supply chain disruptions during the rapidly changing pandemic environment could significantly impact operations in coming periods.

Key Tronic was previously held in the Model Shadow Stock Portfolio. It was removed at the end of 2017 due to the implementation of the four-year rule. Stocks held for more than four years need to be up 10% per year held to avoid being removed.

Based upon the current price-to-book-value limit, we suggest paying no more than $9.67 per share if you wish to acquire the company with a price-to-book ratio below 0.90. Key Tronic reported its book value as $10.74 per share as of the end of June 27, 2020. To calculate the maximum buy price based on the maximum desired price-to-book ratio, multiply the current book value per share ($10.74 for Key Tronic) by the maximum price-to-book ratio to be considered for the Model Shadow Stock Portfolio (currently 0.90). The calculation is: $10.74 × 0.9 = $9.67.

Portfolio Addition: Titan Machinery Inc. (TITN)

Titan Machinery owns and operates a network of service, agricultural and construction equipment stores in the U.S. and Europe. Titan Machinery is engaged in four principal business activities: new and used equipment sales; parts sales; repair and maintenance services and equipment rental and other activities. It has three business reporting segments: agriculture, construction and international.

Titan Machinery currently operates a network of 74 North American dealerships in North Dakota, South Dakota, Iowa, Minnesota, Montana, Nebraska, Wyoming, Wisconsin, Colorado and Arizona, as well as 33 European dealerships in Romania, Bulgaria, Serbia, Germany and Ukraine.

Titan Machinery sells new agricultural and construction equipment. It provides in-store and on-site repair and maintenance services. It also rents equipment and provides ancillary services, such as equipment transportation, global positioning system signal subscriptions and finance and insurance products.

Its agricultural equipment segment includes sales and services tied to machinery and attachments needed for large-scale farming as well as home and garden purposes. Its construction equipment segment includes heavy construction and light industrial machinery for commercial and residential construction, road and highway construction and mining operations.

Four analysts are currently following the company. Analysts expect the company to earn $0.798 per share for the current fiscal year ending in January 2021. The estimate is up from the $0.343 consensus estimate three months ago. Analysts expect earnings to expand to $0.995 per share the next fiscal year, up from $0.70 per share three months ago.

Based upon the current price-to-book-value limit, we suggest paying no more than $14.44 per share if you wish to acquire the company with a price-to-book ratio of 0.90 or below. Titan Machinery reported its book value as $16.04 per share as of the end of July 31, 2020. To calculate the maximum purchase price based on the maximum desired price-to-book ratio, multiply the current book value per share ($16.04 for Titan Machinery) by the maximum price-to-book ratio to be considered for the Model Shadow Stock Portfolio (currently 0.90). The calculation is: $16.04 × 0.9 = $14.44.

The next quarterly review of the Model Shadow Stock Portfolio will take place following the end of November 2020. Any changes to the portfolio will be announced at the time they are made in our Model Shadow Stock Portfolio Update emails (sign up at www.aaii.com/email).

Performance Update

The Model Shadow Stock Portfolio continued its strong rebound with a 9.2% gain during August 2020. The Model Shadow Stock Portfolio is now up 49.3% since the end of March but remains down 23.1% year to date. The S&P 500 index as measured by the performance the Vanguard S&P 500 Index fund (VFINX) had a gain of 7.2% during August and is now up 9.7% during the first eight months of the year. The Vanguard Small Cap Index fund (NAESX) is down 3.7% for the year after gaining 4.1% in August. The DFA U.S. Micro Cap (DFSCX) gained 4.8% during August and is down 14.4% for the year.

The performance of growth- versus value-oriented stocks continues to be generally slanted toward growth stocks.

In the large-cap segment, growth stocks were up 9.6% for the month, giving them a positive 26.5% gain year to date for 2020. Large-cap value stocks were up 3.6% during August and are now down 9.3% year to date.

In the mid-cap segment, growth stocks are up 3.9% for the year, after gaining 3.3% during August. Mid-cap value stocks are down 15.7% for the year, after gaining 3.8% during the month.

Small-cap growth stocks are up 6.2% year to date, while small-cap value stocks are down 17.7%. Small-cap growth stocks gained 5.9% during August, while small-cap value stocks gained 5.4% during the month.

Since its inception in 1993, the AAII Model Shadow Stock Portfolio has a compound annual average return of 12.8% versus the Vanguard 500 Index fund’s gain of 9.8% per year on average over the same period. Over the same period, the Vanguard Small Cap Index fund posted an average annual gain of 9.6%.

Model Shadow Stock Portfolio News

RCI Hospitality Holdings (RICK) was the strongest stock in the Model Shadow Stock Portfolio, with its gain of 58.2% during August. Due to the nature of the company’s business—gentlemen’s clubs and sports bars/restaurants—RCI Hospitality has been a volatile stock in 2020. Its price has swung back and forth in response to its latest business update amid the coronavirus pandemic. In reporting second-quarter earnings this month, the company noted positive trends as its locations reopened.

Bassett Furniture Industries Inc. (BSET) was the second-best-performing stock in the portfolio during the month, up 47.0%, but there was no company-specific news tied to its performance. The stock appears to have benefited from bullish sentiment toward the home furnishings industry, which has seen increased demand as people spend more time in their homes.

CPI Aerostructures Inc. (CVU) was down 15% during August, making it the worst-performing stock in the portfolio. The company finalized its restated financial statements for 2018 and 2019 and provided an update on its business trends amid the coronavirus pandemic. See the news section below for more details.

Here are some news highlights from August for the holdings in the Model Shadow Stock Portfolio:

Covenant Logistics Group (CVLG) reported second-quarter 2020 adjusted earnings per share of $0.03, compared to adjusted earnings per share of $0.35 for the second quarter of 2019. The adjusted earnings per share beat the I/B/E/S consensus estimate of $0.013 by 130.8%. Total revenue of $191.7 million decreased 11.7% over the same period.

Freight revenue of $179.6 million, excluding revenue from fuel surcharges, declined 6.8% year over year. The $17.5 million decrease in freight revenue was primarily related to an 8.7% average operating fleet reduction and a 3.2% decrease in average freight revenue per tractor. Total operating expenses, net of fuel surcharges, increased by $0.074 per mile compared to the prior-year quarter.

“For the balance of 2020, our main goals will be to reduce our fleet size and monetize a large percentage of the assets held for sale; allocate our fleet assets across our contract logistics, expedited and higher-margin irregular route operations; significantly lower our fixed costs; and return managed freight back to its pre-COVID margin percentage,” said CEO David Parker. “We believe achieving these goals will position us to enter 2021 with an improved business mix, fleet profile and cost of operation.”

CPI Aerostructures Inc. (CVU) reported that restated fourth-quarter 2019 revenue increased by 1.3% to $22.7 million year over year. Net loss for the quarter was $0.12 per share, which compares to $0.15 per share on a higher number of shares outstanding in the fourth quarter of 2018.

Revenue growth was primarily driven by organic growth as well as revenue from the Welding Metallurgy subsidiary acquired in December 2018. Gross profit increased 67% to $2.5 million year over year compared to $1.5 million in the prior-year quarter. Gross profit margin expanded by 440 basis points for full-year 2020, driven by increased production rates for key military programs. As a result, the company reported a significant increase in gross profits and reduced its net loss compared to 2018.

CPI Aerostructures expects the coronavirus pandemic to have an adverse effect on the results of the company’s operations, financial position and cash flow for full-year 2020. Since the start of the pandemic, the company has experienced some minor disruptions in its supply chain, higher-than-normal employee absenteeism, order quantity reductions or cancellations and short-term manufacturing suspensions at the company’s facilities. In an attempt to reduce coronavirus-related impacts, the company has curtailed discretionary spending, deferred all business travel, delayed hiring and taken other measures to preserve cash. Also, the company is more closely managing the flow of materials into operations in response to weakened demand in commercial programs.

The company entered into a Sixth Amendment and Waiver to certain Amended and Restated Credit Agreement. The availability under the revolving note was permanently reduced by $6 million to $24 million, and the outstanding principal amount under the term note was increased to approximately $7.93 million.

Cumulus Media Inc. (CMLS) reported a loss per share of $1.79 for the second quarter of 2020, which compared year over year to earnings per share of $2.11. The loss beat the I/B/E/S consensus estimate for a net loss per share of $2.357. Net revenue of $146.0 million declined 47.8% year over year.

Total broadcast radio revenue decreased by 51.6% year over year to $114.2 million, while digital revenue of $20 million increased by 0.7% year over year. On a same-station basis, total broadcast revenue fell 50.6% and digital revenue increased 3.6%.

Cumulus Media ended the second quarter of 2020 with nearly $200 million in cash. The company generated over $90 million in cash during the quarter through expense actions, strong working capital management and the completion of the sale of land in Bethesda, Maryland. In addition, Cumulus Media entered into an agreement with Vertical Bridge to monetize its tower portfolio and related assets for $213 million of gross proceeds. The company expects the funds from the deal to permit substantial debt paydown and provide additional liquidity. It expects to close at least 85% of proceeds in an initial closing in the fourth quarter of 2020.

“Our demonstrated ability to rise to a challenge, strong liquidity position and resilient balance sheet are critical assets as we operate through this uncertain environment, and we believe we remain very well-positioned to drive long-term shareholder value through continued aggressive debt reduction and the execution of our growth initiatives,” said CEO Mary Berner.

Hallador Energy Co. (HNRG) reported second-quarter earnings of $0.25 million, or $0.01 per share, missing the I/B/E/S consensus estimate of $0.02 per share by 50%. Year over year, the company reported net loss of $3.4 million, or a loss of $0.11 per share.

The second quarter saw a 9% production cost reduction quarter over quarter to $28.94 per ton despite shipment delays resulting in lower sales volumes. As of the reporting date, Hallador Energy’s liquidity was $52.6 million, and its leverage ratio was just below 3.0 times.

“Hallador was profitable, despite the pandemic, which wreaked havoc on energy markets,” said CEO Brent Bilsland. “We further lowered our cost structure and debt levels, while focusing on helping customers manage inventory levels. We are cautiously optimistic as coal shipments, energy markets and hopefully the world has begun a recovery.”

Hibbett Sports Inc. (HIBB) reported second-quarter diluted earnings per share of $2.95 in August, up 2,369% year over year and beating the I/B/E/S consensus estimate of $0.76 per share by 288%. E-commerce sales grew 212.2% year over year and made up 15.7% of total net sales for the quarter. At quarter-end, inventory was at $182 million, a 32.7% decrease year over year. This quarter the company opened three stores, rebranded four existing stores to City Gear stores and closed eight stores.

Looking to the second half of fiscal 2021, the company believes there will be permanent closures of the competitors, accelerating consumer adaption of e-commerce and an increase in traffic in their brick and mortar stores. Hibbett Sports is forecasting diluted earnings per share in the range of $0.85 to $1.00 and comparable sales increases in the mid-single digits.

“I am extremely proud of the Hibbett team and the strong results they were able to deliver. With the strength of our team and the changes to the competitive landscape, we are optimistic about our ability to continue to capitalize on existing and prospective opportunities in the second half of this fiscal year,” said president and CEO Mike Longo.

Kimball Electronics Inc. (KE) reported fourth-quarter adjusted diluted earnings per share of $0.34, beating the I/B/E/S consensus estimate of $0.20 per share by 75%. Net sales for the quarter were $286 million, down 10% year over year and the adjusted net income totaled $8.5 million.

Sales in the medical vertical market increased 23% year over year and were up 42% over the previous quarter. Capital expenditures totaled $11 million for the quarter and the company’s cash conversion days clocked in at 77 days, the same as the previous quarter.

At the end of the month, the company hired Douglas A. Hass as associate general counsel and assistant secretary. Hass was previously general counsel and secretary of Lifeway Foods Inc. and is no stranger to the technology industry as he graduated college with an undergraduate degree in computer science/business.

Mesa Air Group (MESA) reported third-quarter fiscal-2020 results of $0.10 per diluted share, beating the I/B/E/S consensus estimate for a loss of $0.26 per share by 138.5%. The company reported quarterly net income of $3.4 million, up $0.4 million from last quarter.

Mesa Air’s total operating expenses decreased by 64.5% year over year, down to $57.9 million due to fewer flights during the coronavirus pandemic. The company received a $43 million federal grant in response to the pandemic which helped to offset the lack of demand.

“Given the difficult operating environment, we are extremely pleased to be reporting both a profit and positive cash flow,” said CEO Jonathan Ornstein. “We believe this is the result of our relentless focus on low costs and reliable operations, the construct of our agreements with our major partners and the dedication and hard work of all our employees.”

New Home Company Inc. (NWHM) reported a loss of $1.32 per diluted share for second-quarter earnings , down 1,750% year over year. The company ended the quarter with a debt to capital ratio of 51.5% and repurchased 817,300 shares of common stock for $1.5 million or $1.80 per share. The company also reduced its workforce by 20% in the second quarter and averaged 3.7 homes sales per month with a gross margin of –9.6%.

The company estimates that third-quarter 2020 home sales revenue will be between $100 million and $115 million, with an average selling price of $725,000 per home. New Home Company also believes that it will realize a gross margin between 12.0% and 12.5% based on the backlog of homes.

Later in the month, the company partnered with Zillow Offers to help new homebuyers sell their current house to Zillow without showings or repairs to manage and make it easier to move into a new house. Additionally, the company debuted Russell Ranch in Folsom, California, and led socially distanced tours. New Home Company has sold 58 homes in that community to date. Lastly, this month, the company named Matt Gibson, former vice president of Watt Communities, as corporate vice president of land acquisition.

Olympus Steel Inc. (ZEUS) reported net loss of $6.5 million for second-quarter 2020, a loss of $0.56 per diluted share, missing the I/B/E/S consensus estimate of a loss of $0.40 per share by 40%. This loss is a 411% decrease from second-quarter 2019 results of $0.18 per share. Sales for the quarter totaled $248 million, down 42% year over year.

The company ended the quarter with total debt of $197 million and an available $86 million through its asset-based revolving credit facility. CFO Rich Manson ended the call by saying “We are very proud of the Olympic Steel team and the resilience in responding to the ongoing challenges, as it is with their support and dedication that we can operate our business efficiently in these unprecedented times.”

During the earnings call the board of directors also approved a quarterly cash dividend of $0.02 per share, in line with the previous declaration. The dividend is payable on September 15 to shareholders of record as of September 1.

Penn Virginia Corp. (PVAC) reported adjusted earnings per share of $1.29 for the second quarter of 2020, down 38% year over year. Adjusted earnings per share beat the I/B/E/S consensus estimate for earnings per share of $0.911. Total revenue of $45.5 million was down year over year from total revenue of $122.8 million.

Average daily production of barrels of oil equivalent (BOE) was down 12% year over year for the quarter, with aggregate pricing with hedging down to $40.41 per BOE from $45.87 per BOE. Penn Virginia said that it mitigated the financial impact of the coronavirus pandemic and the fallout of the OPEC-Russia price war with put contracts, which allowed the company to profit despite falling oil prices.

Looking forward, Penn Virginia expects third-quarter production in the range of 17,000 barrels to 19,000 barrels of oil per day for the third quarter of 2020. The company expects capital expenditures of $11 million to $15 million.

Perion Network Ltd. (PERI) reported a loss per share of $0.08 for the second quarter of 2020, compared to earnings per share of $0.11 in the same period one year ago. The results for the quarter beat the I/B/E/S consensus estimate for a loss per share of $0.09. Total revenues of $60.3 million declined year over year by 5%.

Advertising revenues were down 12% year over year to $18.7 million for the quarter and search and other revenues were down 1% over the same period to $41.7 million. Reductions in ad spending across all sectors—travel and automobile in particular—impacted the quarter’s advertising results, though Perion Network said it is starting to see some recovery. Based on the cost reductions and growth strategy of the company’s acquisitions, Perion Network believes the worst of the financial impacts are behind it.

“Despite a more than 15% industry-wide decline in paid search advertising in the first half of 2020, our search business grew by 8% year over year,” said CEO Doron Gerstel. “While the decline in paid search rates has overshadowed the continued and growing momentum in our search business, we are confident that as paid search rates begin to show signs of stabilization, our search business results will improve in the second half of this year.”

RCI Hospitality Holdings (RICK) reported a loss per share of $0.74 for the second quarter of 2020 compared to earnings per share of $0.59 in the same period one year ago. RCI Hospitality’s loss per share missed the I/B/E/S consensus estimate for a loss per share of $0.69. Total revenues of $14.7 million were down year over year from total revenues of $47.0 million.

In line with government regulations, all locations remained closed in April, a number reopened in May and June, and some of those had to close temporarily before quarter-end. Total revenues consisted of $156,000 in April, $5.7 million in May and $8.9 million in June. Bombshells restaurants had record two-month revenues for May through June, and quarterly segment operating margin of 22.3% that exceeded the company’s target for the year. The company said its nightclubs performed well, considering the operating environment.

“Even with no sales in April, we ended [third-quarter 2020] with small but positive operating cash flow, sufficient working capital and open locations that should provide us with ample staying power,” said CEO Eric Langan. “When more locations open, such as our larger Florida and New York units, we believe our new cost structure and marketing should generate noticeably increased cash flow even with COVID-related restrictions.”

Rocky Brands Inc. (RCKY) declared a regular quarterly dividend of $0.14 per share, in line with the previous declaration. The dividend is payable on September 16 to shareholders of record as of September 2.

Strattec Security Corp. (STRT) reported an adjusted loss per share of $2.59 for the fourth quarter of 2020 compared to adjusted earnings per share of $0.73 in the same period one year ago. The loss missed the I/B/E/S consensus estimate for a loss per share of $1.42. Net sales for the quarter were $43.1 million, compared to net sales of $128.7 million.

The higher net loss was primarily attributed to customers shutting down their assembly plant operations during April and May relating to the coronavirus pandemic that reduced net sales in the fourth quarter by approximately $72 million. Sales to all customer groups in the current-year quarter in comparison to the prior-year quarter were significantly lower due to the coronavirus pandemic.

“Our new products are often used on truck and SUV vehicle segments that are currently growing faster than the overall market,” said CEO Frank Krejci. “During the quarter, we intentionally built inventory when possible as we anticipated facing the welcomed challenges of meeting strong customer orders during the months of July and August 2020 resulting from product mix and customers replenishing dealer inventories.”

Townsquare Media Inc. (TSQ) reported an adjusted loss per share of $0.40 for the second quarter of 2020, compared to earnings per share of $0.38 in the same period one year ago. The loss missed the I/B/E/S consensus estimate for a loss per share of $0.36. Net revenue over the same period decreased 34.5% to $74.1 million.

Compared to the same period last year, advertising net revenue decreased 37.5% to $57.1 million, Townsquare Interactive net revenue increased 10.5% to $16.9 million and live events net revenue decreased 99.5% to $0.03 million. Excluding political revenue, advertising net revenue decreased 38.2% to $56.3 million. Townsquare Media said that advertising revenue—its largest segment taking the brunt of the pandemic’s impact—was improving sequentially throughout the quarter.

“The pandemic placed a spotlight on the need to double down on executing our existing long-term strategy,” said CEO Bill Wilson. “We believe that our Local First strategy, together with our talented team and diversified and differentiated product offering, ensures that Townsquare will emerge from this crisis well positioned for the future, and will return to our market-leading performance as soon as this crisis abates.”

Vishay Precision Group Inc. (VPG) reported adjusted earnings per share of $0.19 for the second quarter of 2020, compared to adjusted earnings per share of $0.45 in the same period one year ago. Adjusted earnings per share beat the I/B/E/S consensus estimate for earnings per share of $0.015. Revenues of $59.1 million declined 16.5% from a year ago.

Revenues declined across all three of the company’s segments year over year: foil technology products was down 3.7% to $31.8 million; weighing and control systems was down 14.3% to $18.4 million; and force sensors was down by 45.5% to $8.9 million.

As of July, all of the company’s facilities are operating without limitations with some employees working remotely where possible, though long-term forecasts are still hard to make. “Given our order rates and the ongoing uncertainties and economic impacts of the global pandemic, we expect net revenues to grow sequentially and be in the range of $59 million to $65 million for the third fiscal quarter of 2020, at constant second-fiscal-quarter 2020 exchange rates,” said CEO Ziv Shoshani.