Q1 2020 Earnings Call
[music].
Good day, everyone and welcome to the RF industries first quarter fiscal 2020 financial results.
At this time, all participants are in listen only mode.
Later, we will conduct a question answer session. As a reminder, this court order today Thursday March 12 2020.
This time I would like to return the call over to Mr., Todd Curly MK, our Investor Relations. Please go ahead Sir.
Thank you operator, good afternoon, and welcome to RF industries first quarter fiscal 2020 financial results Conference call with me on todays call or if industries, President and CEO, Rob Dawson and Chief Financial Officer, Mark curve work.
Before I turn the call over to Mark and Rob.
I'd like to cover a few quick items. This after near our industry's issued a press release announcing his first quarter fiscal 2020 financial results that releases are available on the company's website RF industries dotcom.
This call is being broadcast live over the Internet for all interested parties and the webcast will be archived on the Investor Relations page of the company's website.
I want to remind everyone that during today's call management will make forward looking statements that involve risks and uncertainties. Please note that except for the historical statements statements on this call today may constitute forward looking statements within the meaning of section 21.
At the Securities Exchange Act of 1934.
When you used the words anticipates believes expects intend future and other similar expressions identify forward looking statements. These forward looking statements reflect management's current views with respect to future events and financial performance and are subject to risks and uncertainties and actual results may differ materially from the outcome.
Contained in any forward looking statements.
Factors that could cause these forward looking statements to differ from the actual results include delays in development marketing or sales of products and other risks and uncertainties discussed in the company's periodic reports on form 10-K, and 10-Q and other filings with Securities Exchange Commission.
Well if industries undertakes no obligation to update or revise any forward looking statements.
Additionally throughout this call will be discussing certain non-GAAP financial measures today's earnings release and the related current report on form 8-K described the differences between our non-GAAP and GAAP reporting and present the reconciliation between the two for the periods reported in the release.
I'll now turn the conference over to Lopped off some president and Chief Executive Officer, Rob.
Thank you Todd good afternoon, everyone and welcome to our first quarter fiscal 2020 earnings conference call.
Overall, our fiscal first quarter, including some macro challenges and while the market headwinds weren't ideal the team did a great job on staying focused we grew sales 17% over last year in the same quarter, we're able to show a profit and slightly exceed analyst expectations on sales and non-GAAP net income for the quarter.
No for our first quarter is seasonally our most difficult November through January is typically a difficult time of year in most of our markets as I said in our December call. This year with even tougher with a late Thanksgiving and major holidays falling on Wednesday.
Hoping at a five to six week period, where the business climate seem extremely slow.
Q1 was also a shorter quarter with only 62 business days as compared to 65 in Q4.
Our Q1 results also reflect the impact of some meaningful noncash and one time expenses the hit our operating life in the quarter.
Beginning this quarter will be providing some additional financial metrics to give color on our results and make them more understandable.
While we haven't traditionally done this we recognize that with two acquisitions in the last year and the related costs and complexities of our evolving business. It would be helpful to provide more information.
Additionally, we frequently but asked by many investors to include items like adjusted EBITDA to clarify acquisition related costs and equity compensation.
Mark will provide more detail on that later in the call.
In addition to the usual seasonal factors, we felt wireless carrier capex spend slow dramatically and in some cases stop completely as 2019 was winding down and this continued into 2020.
This industry wide the spending adjustment significantly impacted our sales in the quarter as we saw very little wireless carrier project sales materialize.
Uncertainty around the proposed T mobile sprint merger and other macro spending decisions clearly affected carrier purchases in the quarter. Despite these headwinds our team remains focused on managing the elements that we were able to control. We do expect the recent decision to allow the merger should take away uncertainty and lead the spending.
The upgrade from Fourg to Fiveg is happening along with increased usage of data so the need to address capacity hasn't really changed.
Fortunately, our core distribution centric run rate business continues to be diverse and healthy that includes both the coaxial business and see enterprises.
We feel good about that business and the go to market plan, we're executing on for grow our distribution is working well.
We see our daily volumes, increasing and expect we will be able to deliver solid annual sales growth from this run rate business. This year.
While spend from a wireless carriers with extremely light over the last several months, we started to see signs of improvement and more activity from our tier one carrier customers in the second quarter.
Since the end of our first quarter, our bookings have picked up meaningfully across all divisions and backlog has increased and currently stands at 6.6 million up from 5 million at the end of the quarter.
Looking at the project business that we do in the wireless carrier ecosystem, we continue to focus on providing more of the bill of materials to capitalize on the coming wireless infrastructure spend that we believe will run for quite some time.
Although the timing is still in question as to when that spend will happen in a consistent fashion, we have the products to participate in a meaningful way once that happens.
As I've noted in the past the tier one carrier space is generally project oriented and tied to capex spend with the flow of purchases being somewhat lumpy with peaks and valleys.
While the carrier spend remains a big wildcard, we continue to work hard to diversify and land more customers and product opportunities to smooth out our results.
The way, we're trying to do that is to grow both distribution business, which as I said is healthy and doing a good job and grow our project business to tap into more buckets of the wireless capex spend.
General comment here as we there once this carrier business, where we don't.
If we want we have to deal with a wild ebbs and flows and benefit from a large wins that can provide while in short periods of time. This business can wildly swing are relatively small sales numbers due to the magnitude of the spend for both good and bad.
Long term this business has provided mostly positives for us.
Our acquisition of Telecom suppliers trough technologies in November of 2019 expanded our overall offer in the small cell bill of materials. So that we can capitalize on the upcoming Fiveg densification opportunity.
More importantly, we acquired trough tech to diversify our exposure to the carriers and give us additional buckets of money to tap into within the carrier Capex spend.
Trough Tech has relationships with all four of the major wireless carriers as well as other key players in the wireless ecosystem.
As we continue to aggressively work with the carriers to win business trough that gives us more access to those carriers and gets us into a discussion earlier on in the process.
While major small cell spend didnt show up in the first quarter as we expected we began to see softex business pick up as we moved into the February timeframe.
And we believe the by mid year, we'll see a more normalized level of spend on a small cell side.
On the macro site side of the carrier Capex spend we unfortunately, just didnt see it at year end or at the beginning of the year and it normally hits, one or the other and we weren't alone. We heard the same thing from other manufacturers in our space as well as we moved into Q2, we have begun to see signs of life there.
If you will not be quarter for some clear macro market reasons, but at least we're seeing some following them a larger projects spends and we think that will continue as the year goes on.
Having said that we expect much of the wireless carrier spend to be loaded in the back half of our fiscal year more specifically, we're expecting densification efforts to be better in the short term with both das and small cell being key.
Macro sites, we expect to improve in the second half of the year and into 2021 and beyond.
Related to this we did reduce production headcount in our custom cable segment during the quarter.
Due to the slower macro site demand, but we believe we need to keep our core intact, which caused a small drag on margins.
In our business, it's critical that we keep skilled workers employed on our team even through the ebbs and flows since when the larger projects come in we need to be able to execute quickly and as both expensive and time consuming to train new resources.
Looking at Q2, it's difficult to provide specific guidance due to the uncertainty regarding the impact of a corona virus on the supply chain and on our customers.
You heard significant concerns about as potential impact within the industry from both competitors and suppliers, who are saying, maybe disruptions and delay in shipments of materials that we need to fulfill our orders.
Additionally, we are seeing some customers delayed purchasing decisions and projects for both financial and workforce reasons given.
Given the warning signs were season, we're seeing we're being conservative and won't be providing specific revenue expectations for the quarter. We're closely monitoring the situation as it develops and would hope to make up any lost revenue in the back half the year.
I guess daily updates on our supply chain and in attempts to mitigate the challenges we've placed larger orders with our suppliers expedited shipments where possible and we generally keep more inventory and materials on hand that might be expected for our company of our size.
While the economic impact of the virus may present, a short term speed bump in our growth. We continue to maintain a strong cash position and are executing on our long term growth plan.
As I've said to our team we will approach the business in a call and compassionate way the safety of our team is our top priority as we work through the situation together, we have policies and processes in place designed to keep people healthy unproductive. The hardest part is keeping everyone positive and focus while it's very noisy in the world.
Finally, as always we'll continue to communicate as much as possible with our stakeholders, including the investment community.
Now back on our growth plans.
As part of the plan, we continue to actively look for potential M&A to diversify our customer set and get into new product types and add new market segments that will help us diversify our business and smoothed out our results even further.
We expect to see some good growth this year from the two acquisitions, we did last year Z enterprises and trough Tech.
With the significant resources that our balance sheet provides we're looking to do a larger acquisition in the $15 million to $30 million range. When it makes sense. We continue to pursue a robust pipeline of acquisition candidates, including those with products that complement our existing offer and target end markets. We.
We believe there's an opportunity to drive further consolidation in our space, including both large and small companies and we'd like to help lead discharge.
I think the market needs and we're hearing that from some customers also.
In closing.
We're building a platform upon which we can grow sales organically and through acquisition and do so profitably while generating solid cash flow.
We have strong balance sheet with no debt and lots of cash, which gives us flexibility to manage the business as well as whether any crazy storms like the one we're dealing with at the moment.
We've made investments in our business over the last few years that allow us to increase sales without much. Additional spent looking ahead, we remain confident in the long term prospects of our business and we're focused on executing on our growth plans.
We're optimistic about the thing we can control in our current quarter, we're keeping a positive attitude and we're holding a strong cash position.
With that I'll now turn the call over to Mark for a detailed review and discussion of the financial results for the quarter.
Sure.
Thank you, Rob and good afternoon, everyone.
Our net sales in the first quarter, who were $12.4 million, an increased 17% $120 million compared to the first quarter a year ago.
Year over year increased net sales reflects sales contribution from our acquisition shrunk technologies and see enterprises.
Bookings during the quarter were 10.2 dollars, leading us to the bank loans of $5 million at the end of Q1 compared to $6.1 million at the end of our fourth quarter.
As Rob noted since you ended the quarter, our bookings centric Doug meaningfully across all divisions and currently stands at $6.6 million.
Gross profit for the first quarter was $3.3 million compared to $3.1 million into first quarter fiscal 2019.
Gross margins grew 26.2% of net sales compared to 29.5% of net sales in the first quarter a year ago.
The decline in margins were primarily due to product mix in our custom kaizens that.
Driven by lower margin and to see enterprises Sudhir.
Total operating expenses increased $900000 to $3.3 million or 26% sales compared to $2.4 million were 22% of net sales in the first quarter last June.
The increase was primarily due to the absorption of use this no selling and general expenses of newly acquired shrunk technologies and enterprises.
Also included in total operating expenses from the first quarter.
Following through expense items burners hundred $87000 in stock based compensation expense, an increase of $73000 over the first quarter last year due in part to onetime compensation costs. We may use through the company's recently honored to grab new loans.
Secondly.
And $73000 of amortization expense the increase of $140000 over last year as a result, the acquisition of disruptive.
And lastly acquisition related costs to $20000 also due to disrupt tech acquisition, an increase of $24000 over last year.
Net income for the first quarter with $26000 or zero cents diluted share compared to $640000 or seven cents per diluted share in the first quarter fiscal 2009.
Starting this quarter. We are also combining some non-GAAP financial measures, including non-GAAP net income non-GAAP earnings per share and adjusted EBITDA.
Our earnings press release improves our reconciliation between GAAP and non-GAAP reported.
We believe these non-GAAP financial measures provide useful information to investors, which to analyze our operating trends and performance.
Non-GAAP net income for the first quarter was $241000 worth three cents per diluted share compared to seven.
Our through eight cents per diluted share improved quarter last year.
Non-GAAP net income for the first quarter fiscal 2020 excluded $187000 and stock based compensation expense and trying to balance and acquisition related costs and expenses associated with the acquisition of disruptive.
Adjusted EBITDA for the first quarter fiscal Twentytwenty was $471000 compared to $1 million in the first quarter last year.
For the first quarter adjusted EBITDA excluded.
Under new 7000 zones of stock based compensation expense and $22 and acquisition related costs and expenses as described above.
Adjusted EBITDA for the first quarter 2020 also excluded $173000 of amortization expense, an increase of $104000 compared to $69000 in the first quarter last year.
No. It was due in times of acquiring shrunk.
During the first quarter encompassing provider on shareholder return on investment in the form of into two cents per share Tas dividends. In addition at our March.
2020 meeting our board declared a quarterly cash dividend of two cents per share pay on new product as a team.
Our balance sheet remains strong with no debt and total cash cash equivalents of $14.4 million as in previous quarter.
$12.5 million at the end of the preceding fourth quarter.
Additionally, during the first quarter two company generated cash from 5.6 million gallons from operations well in excess of the $3.9 million asset.
For the purchase on structure.
Lastly on the Investor Relations from this Monday March 16, Robin and what we can start the virtual one on one meeting with investors as R&D through the Simpsons Annual Roth Conference.
Although we will not be giving a slide presentation, we amended our current investor presentation available to everyone on our website for your convenience.
With that I would like to open up the word two questions operator, we're ready to take our Bruce question.
Thank you, ladies and gentlemen, I do wish to ask a question Keith signaled by pressing star one.
That sees ensure the mute function on your telephony switched off to allow your signatory chocolate.
Not at Starwood.
And our first question today comes from and then.
Gladney of B. Riley FBR. Please go ahead.
Hey, guys and thanks for taking my question.
Are you able to break out the revenue contribution from Sharav and then also see enterprise for the quarter.
Yes. So in total I think if you were to look of the three businesses that we would have had last year at this time declined a little bit related to the carrier spend. So we were I don't know 95 million call it that and we got.
The other.
The remaining dollars of 3 million roughly or a little more than that from from those two.
Overall, so thats kind of the general breakout with.
Shop has had a soft quarter, we weren't surprised by that but.
They came in around 1.2 million I think in total so profitable at that level, which was helpful. But.
And we expect to their first quarter to be the kind of the slowest either so you saw call it nine to half from.
The existing businesses and roughly 3 million and acquired business.
Got it Okay and then.
We are booking and backlog flooded numbers for the quarter.
Yes, the backlog ended up just over 5 million, though subsequent to that I think it's important to note as we've talked about little bit is that backlog now stands at 6.6 million so while well during our first quarter with a little slower than what we might like overall from a bookings perspective it.
It has picked up.
Has come up from from 5 million at the end of the quarter to 6.6 total Mark what were the total bookings in in Q1, two is 10.2 million for the first quarter.
Got it Okay, and then AG can you talk about the cross selling opportunity that you might be seeing.
Sure off specifically and where are you seeing that opportunity that selling to cross existing customer base to or in from shock to our filed legacy customers.
Yes. So it's interesting if it were actually were attempting to go both directions on that and we're seeing some success where were building a nice pipeline, we've only had them onboard.
Call. It four month at this point and so we've done both we've gotten out in front of.
Troughs existing customer base, where possible and they've been helping us.
The strong team has been helping us pull through some of the other products in our in our portfolio as part of their broader solution. So we're we're certainly seeing some successes there I think even better and our opinion is we're getting our distribution channels trained on the schropp offering that others. There's a subset of their offer that make sense for distribution.
At least identifying opportunities there.
The other thing is.
We have sort of separate contacts you how that disrupt team has most of their contacts area in the small cell side or kind of related.
In the various carriers and or neutral host folks and power companies then at our traditional relationships have been with a different group of folks because we've been selling different product areas. So it allows us to sort of go up a level, let's say add to a higher level decision maker or.
Think even better we have a a real solution to talk about and I think thats a direction that we're trying to go with a company is going in from solving a problem for an entire solution versus one one or two product category, we want to have more of that.
Offer so I think we're seeing opportunities from a pipeline perspective in both and it's a real time activity, we're getting out.
Our existing sales team and.
And the trough team and then sort of cross pollinating or cross selling between the different contacts and people are excited about the conversation I can tell you that.
Cause of the different beginning reaction to the conversation because it is a can be a more custom.
Offering, but it's also easier solving a very clear problem. If you can resolve some of the either.
Thermal cooling challenges, if you will may have or or small cell designs. So we're seeing it both ways.
Got it. Thank you I, it's one more question for me.
Are you seeing come to Fiveg and ask specifically small small.
Sell deployment.
You think your visibility in general as improve now that most of the major the wireless carriers analogy reported there by be Capex for 2020.
Yes, I think we have a better sense of as one of the things that.
I mentioned in my comment is we expect the small cell and kind of the densification efforts to be happening earlier in the year than the traditional macro tower sites and that sort of what we've had play out so far we've seen more opportunities or.
Bookings increase on not only to small cell side, but what I think densification. We're also talking about das deployments theres a lot of stadiums and other venues that are being built out right now that we're playing in in several of those mostly through our distribution channel on the on the das side, but we're having some successes there. So we feel good about.
So that Densification business increase in first I think the part that we're hopeful for and looking to see pick up in the Capex numbers ennio, including Verizon CEO just afternoon I was talking about increasing their spend on on Fiveg deployments. That's great. We're hopeful for that I think we've been expecting that.
In the second half of the year and end the into 2021, where we really start to see the bigger tower sites that rooftop sites being deployed kind of an traditional format.
For each of the carriers and the.
Getting a sprint T mobile merger.
Completed I've said for per month look one way or the other we need a resolution there. So we can we can execute kind of on the next phase of a plan in the market overall that caused some of the slowdown in spending I think in total, but we're hopeful and our expectation is that you get to the second half of this calendar year, we should start to see the cap.
Thanks picked up on the on the macro site.
Got it thank you I'll jump back into queue. Thank you.
Thank you.
Our next question comes from Josh Nichols of B. Riley FBR.
Yes. Thanks for taking my question I, just want to jump in and have real quick obviously, a lot of uncertainty on the market but.
You guys continue to execute pretty well in a tough operating environment, but I did want to ask one.
The current environment side from the uncertainty is this a opportunity for you potentially just trying to an attractive acquisition in these types of uncertain times into.
Given that this is a very fragmented industry that is do you think that there's some opportunity for RF to really take some share since you're able to do you have a better balance sheet able to have more inventory and and maybe get some new customers that you didnt have previously.
Yes, Thanks, Josh I appreciate both those question so on the on the first one from an M&A perspective, I do think Theres an opportunity here you know I'm I'm as I've said for several quarters I'm, a big believer in bringing together some of these companies both small and large for some consolidation I think.
What we're hearing more from customers that they'd love it if people add more more bill of materials available. So we're working towards that I think theres going to be some opportunities not everyone have a balance sheet like ours. So there's going to be some need out there. Unfortunately, the current environment is probably going to make that even that much more obvious, but we do view this as a potential.
Opportunity.
Well, we want to make good good acquisitions like so I think we've done with the last two would be smart about it and pragmatic about our approach.
The second piece.
The the fragmented kind of overall marketplace.
Yes.
We think we've been taking share I think our growth.
Overall in the last couple of years in our kind of core run rate business.
As weve branched out into more distributors I feel like we're displacing maybe some incumbents or filling in gaps that said that people had that were even more fragmented maybe to they realize where they didnt have an incumbent.
And we've made that easier for them and tried to fill in some of those gaps with distributors in particular.
No question on the carrier side the business that we've won and that it's been in consistent at times and it has its historical challenges based on timing, but I think we've we've proven we can jump in and be a player and take some share from others or at least position ourselves to benefit from it so the.
With the market conditions the way they are we as I mentioned, we purposely taken our inventory position up in things that have short lead times. We're hopeful we can maintain that the supply chain as a it's a question mark for everyone going forward, but assuming we can maintain that we think we've positioned ourselves with the right distributors on the right.
Opportunities and relationships to take some of that share.
Thanks, Rob and then last question for me.
I think one of the.
Things about this company is its ability.
Flex up and down with the variable cost structure as you've mentioned before just how much flex do you have on that if you were to one get a larger order for like a macro or small cell site in the second half of this year or if there's going to be a little bit of additional softness in to Q. How are you able to to manage adds to that you could continue to kind of.
Remain fairly profitable for throughout the year.
Yes, I think on the on the on the downside. So if things were to continue being down and we have some pressure in the second quarter, which we're feeling somewhat we're trying to manage through it.
I think we try to give a good job keeping a breakeven number at all locations. So we know even as we reduce headcount we got to keep keep people in c. So that when these orders hits and we know they will it's just the timing of it we can't afford to not have people ready to do production. So I think our ability to flex down you got a good example of that in.
The quarter that we just presented the I wouldn't call that.
A massive sales quarter for us and we manage to make money and still come through looking good on on the upside if things were a greatly increase we've invested in a given the company in the last few years to.
Increased production at all locations, where needed and our ability to flex up is significant.
I was asked by an investor here to do 20 million a quarter and smooth it out at $80 million year, how much investment would be required and I said listen if we can smooth it out of 20 million a quarter were good we don't need to do any investments other than the variability of people that so I think we've got great ability to flex up the real challenge or the topic.
Around that comes down to how consistent those results flow in and we're seeing it we're doing a great job of throwing off cash in our distribution centric business. Its run rate, it's become somewhat of an annuity the booking numbers daily look great and are way up from where they've been historically.
The the harder part is on the project side when that spend hits.
We're ready to consume it we think we'll be able to flex up very very easily around that that kind of.
That movement or that variability in the numbers as the one part of it that's hard to predict quarter to quarter, but we feel we feel good about our ability to flex either way.
Okay, well, thanks for that like good to see the company kicking off you know over 5 million of operating cash flow in the quarter I look forward to speaking with you guys next quarter, Robyn Mark have going on.
Thanks, So much ask you to thank John.
Again it is fair one if you just ask the question. Our next question comes from Hallow Granger of Great quarter Research.
Hi, Thanks for taking my question, Rob and Mark.
I'd like to quarter, so congratulations on that.
Thanks out and what do you want to ask you.
Organic sales now that you have see enterprises and trust Tech.
And understanding that Theres, a lot of lumpiness when it comes to macro.
What do you view your organic sales.
Going forward and also understand this quarter is going to be kind of a mess because of corona buyers. What's what's your long term organic sales rate growth across I do think.
Yeah, So I think is.
Assigned the Corona buyers impact I think what we've seen in in what we're now talking about our kind of core run rate or distribution centric business. That's been really steady in 10, 15, and even seen 20% kinds of growth depending on.
Timeframe that we're looking and that really impacts our traditional colfax business. The RF collection connector business and see enterprises, which weve as I mentioned on the last quarterly call. We've combined those sales teams and the other customers said kind of our regional and national approach to those accounts again those are those.
Were mostly distributors if not all distributors.
Thats, becoming annuity it is producing exactly what we expect double digit kind of growth numbers on its healthy and good and the margins are improving because we can manage the workload in the related.
<unk> expense of the people of the other variable variable production folks.
Within that so that business is growing double digits as we expect.
Trucks that we think.
As a as kind of a standalone entity, where were expecting it to be steady they had through the first nine months of of last year. They were 5.8 million I think in sales. So we looked at them of the $70 million year kind of business.
Their margins are solid we think that I'll start to print through in the coming couple of quarters as we get more impact from them. They have some seasonality around capex spend and we know they were impacted by the overall capex pull back at the end of the year and beginning here as well, but we're expecting that business to the kind of grow off of that again I think there's low low does.
Digit growth in that business the rest of the Cubs custom cable in segment is heavily influenced by carrier Capex and major projects. That's the one that when I try to give projections or put together models or any any investor says I drop in this into my model difficult. That's the one it's difficult for us when it when it goes.
It's hugely successful and throws off a ton of cash and put a lot of cash on our balance sheet and gives us a lot of health, which has happened in the last few years.
When it pulled back it's always a short term difficult comparison I think long term you look at the comparison and it kind of makes sense that business will be.
Down one quarter platform quarter, then we could have a huge up or down within that.
But we're not looking for the Lions share of our growth to come from that we just can't we're having to diversify in a way to where we're getting away from just being reliance on macro site carrier Capex spend that's the one that's really hard for me to answer around that question, which is the reason why when I try to give goals for the year, we built some tough gold into that.
That business and expect them things from that sales team. It really comes down to carrier Capex and whether that's going to come through or not I'm thankful, we positioned ourselves to benefit from that capex, but find any business that is reliant upon that capex in particular, and you'll see quarter to quarter year to year. Some some pretty wild fluctuations I think just last thing on that.
How is the thing for me to under underscore is I'm trying to talk more each quarter, including the last couple of quarters.
About our run rate distribution centric business that is continuing to grow and it. Unfortunately, it gets overshadowed by the while moves on the other side of our business.
What were part of our M&A approach is to try to get more capex opportunities tapping into different buckets of that money both in the wireless space side, Datacenters and traditional telco, but they're all areas that we're focused on trying to get into which we hope some of the seasonality will start to kind of smoothed out as we diversify.
Yeah.
Okay great.
Let me ask you to questions.
As one.
When you mentioned that the core run rate 10 15, 20%.
I imagine that you are.
At represents.
Growth in your business relative to competitors or relative to the industry and ends and then related part of that Matt The macro you mentioned.
I think you said no signs of life in the first quarter.
Can you can you provide some color on why macro I understand it's lumpy.
But was there any particular reason why why macro was slow in the first quarter and why you expected to pickup in the second half of this year and also fiscal 21.
Sure yes. Thanks so.
Yes, as part of the kind of run rate business. We think we're taking share there. There is growth. The one area that seems to be growing as you know das and public safety, whether that's public safety das or otherwise those are areas, where there is additional buildouts happening. So it's incremental dollars that are available, but I think if you go back a couple of years, we weren't position to get.
That span.
Kind of broadly across the different end user customers, that's or distributors. We we've east distributor has had some strength areas and we love that the distributions of a space I understand reasonably well for my time that I spend there and you have to recognize that not every distributor is going after the same size opportunities are they.
The same submarkets or segments within those those markets and so we I think we've done a good job of positioning ourselves with the right distributors were growing when all of them and that kind of points to the idea that we have to be taken some share I can't imagine that every market that every distributor plays in is growing.
We're just seeing more opportunities and I think we've aligned our team in a in a better way there.
On your second question.
Related to the kind of slow macro sites spend.
The year wound down one of the Big stories, which we think is resolved itself here in coming weeks of T mobile and sprint getting that merger completed finally, and it has approval and we're hearing early April and Thats. What everyone is earned from a one that them all closed.
With them not spending and when I say not spending it wasn't even license. Some days. There was there was no significant happening in some cases, we weren't alone and Thats something that you could have easily read about in a whole bunch of different places from from different suppliers or even from the company's themselves I think the impetus for any other carrier to want to spend fiveg is going to be a tough.
We know that.
Apologies a little different via the radio said in the hardware is a little bit different and it's meant to future prove us for a long time, but that's the big.
We upgrade and it's going to be very expensive and have a long deal through with this is not a kind of whats happened then it's going to start I think it a heavier weights in the second half of this year's simply because we've been talking about a long time and.
Densification is not going to go away, but we know that we got to have coverage everywhere, but in order to supplement that street level coverage.
The over the top play of people cutting the cord and going all wireless networks available.
To make that happen. So I think our expectation is it was it was somewhat validated by Verizon. This afternoon, where they said look where we have to keep spending on fiveg you expect to start cranking up that focus even more I love hearing that I think thats. The right approach, we've kind of reach that inflection point, where we're going to.
Do if we can't just get away with street level networks that have small pockets of coverage, we have to make it a more broad based footprint or consumers aren't going to be that interested in in a device or any kind of connectivity in five to you need coverage in more places to do that.
Okay, great I'd like to hearing Verizon CEO, Hans Vestberg talking about the increasing their spend as you mentioned earlier in the call.
Yes that would occur Jackie.
[laughter] right that's good.
Can you talk about the supply chains and you import from Asia.
I guess contractual connectors and some cable.
Can you talk about about and Thats been what's been big problem in certain areas in Asia, but but things seem to be improving.
Dramatically.
Can you talk about your experience with with sourcing.
From from Asia.
What your outlook is for that.
Sure Yeah, I think that the supply chain coming out of Asia is one that we have a broadly a lot of exposure to and we are monitoring it closely if I go back several weeks.
Our co acts business in particular, we bring in a lot of items from Asia, mostly Taiwan and other places we do have exposure to mainland China on coaxial cable that's an area in particular, where one of the largest incumbency in collects Campbell in U.S. networks is in China, That's where their factory is we've been in touch.
Them consistently I get daily updates from our team.
On production levels are those facilities back online.
We've heard similar to what others have that when when people went home for Chinese new year, there was a shutdown and it was difficult to get people back.
Because the quarantines or otherwise.
We feel like we positioned ourselves pretty well with a a larger inventory position in the states.
We feel comfortable with that we're being told that the dates we expected our next orders, which we increase the magnitude of on purpose I. We've been told those are going to be in line with what we expected.
You don't really know until it gets through customs and shows up Unfortunately, but I think we're we're encouraged at least by the.
The improvements that we've heard about in the last couple of weeks as as those companies get back up on online and get running the.
The one wildcard and this is even even other places in Asia or domestic suppliers that we buy partly by a lot of materials in the space.
When we asked them, where they buy their raw materials or otherwise invariably China is a pretty common answers so the the.
The fear if there is one is that.
We're all drawing on the same resources coming out of China.
And we think those facilities are back up online and running an okay.
There can be one item that just materializes required whether thats, a small piece of rubber plastic or copper.
That can hold up in an entire shipment or it and higher order. So we need those raw materials to the flow through and show up for US we're monitoring copper very closely and some of the more rubberized boots and other things Weatherproofing lives that we do bring out of Asia.
We're keeping a close eye on and hopeful that.
The impact will be small, but planning of though it could be a significant one in the short term and trying to mitigate that as much as we can.
Okay.
Well.
You did a great job I guess for Mark you did a great job, bringing down the accounts receivable dramatically from from year end can you talk about what went into that.
What was going on there.
Sure.
We knew we were going to have some large receivables at you ran primarily because of our agreements with some of our customers.
Since then we were able to go into some.
Thanks doing agreement, which was industry Mary Anne.
Brings to launching we've got to receive ones coming more in terms, we have been so.
We anticipate that you were not to do on for that reason and improve our cash flow going forward.
I think just one other thing on that Alethia, we were in a lucky position, where we don't have a lot of challenges collecting and so when our receivable did increase at the end of last quarter, we don't view receivables or cash really any differently.
Matt perspective, because we don't have collection challenges, which has been.
A nice thing for us over over many years in that case.
Our finance team did a great job of just making sure that we can get it flowing a little more readily and that was a little bit of a log jam there at the end of the of the fiscal year that.
Cleared itself up and we expected that but it was it was still nice to see obviously increase cash always helps.
Right and that's so thats one of the.
One of the Super appealing aspects of your company, you've got you've got a lot of cash you have no debt.
And and Undrawn credit line, if you needed so so thats really great.
And then that's the that's the end of my questions. Thanks, a lot guys.
Thanks I appreciate it thank you.
[noise] domains and gentlemen that concludes the question answer session I would now like turn the call backs your host for any additional for closing remarks.
Thank you and thanks, everyone for your interest in support of RF industries, Mark and I look forward to reporting our fiscal 2022nd quarter results in June and hopefully seeing some of you at our Investor Conference presentations. Before then thanks again for joining our call. Please stay safe and have a great day.
Ladies and gentlemen that concludes today's conference call. Thank you for this meeting you may now disconnect.
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