Q4 2022 RF Industries Ltd Earnings Call
Speaker 1: scratched the surface of our potential, we made significant headway in 2022 on the disciplined execution of our plan. Since the plan's inception in late 2017, we've nearly quadrupled in size. We're consistently profitable, and we've defined our differentiated value proposition in the market. To transform our company, we focused on several core areas. First was to build out a strong team. We've augmented an already impressive team with an enviable list, including skilled executives with strong industry experience, many of whom come from larger competitors. Most of our additions are trusted and proven former colleagues. We also bolstered our corporate governance and strategy with several director changes on our board of directors in the past few years. Second thing we focused on is quality. The goal was always to offer quality products that customers need and come back for time and time again. And early on, we discovered we could win on speed. By understanding the inventory needs of our clients, we can deliver whatever a customer needs quickly and faster than the competition through both our production capabilities and our distribution network. With a great team, quality products, and a speed advantage, you can accelerate a strong go-to-market plan. Our go-to-market strategy has been to influence the key end-user customers to include our products and solutions in their builds and material for projects and general business purposes, and then make it easy for them to purchase through whatever channel makes the most sense for them. This approach informed our decisions to add distribution and to acquire specific companies and product areas. Next is to become as valuable to our customers as they are to us. With key acquisitions, such as MicroLab in 2022,
Speaker 2: and C Enterprises and Shroftech before, on top of our custom capabilities and existing business, we've broadened and deepened our product offering to better serve our customers and solve greater problems with higher value bigger ticket items. We have additional product announcement in the coming months that we believe will be game changers for us and we will be part of the next phase of growth for the company.
Speaker 3: Then we had to move beyond commoditized products to those with technical advantages or intellectual property advantages.
Speaker 4: Through product development, like with our OptiFlex Hybrid Fiber solutions, and select acquisitions, we have and will continue to compile a more distinctive proprietary product offering.
Speaker 5: that will help us build a protective moat from competitors around our company.
Speaker 6: The next key is to look at efficiency. We continue to look for ways to achieve scale, reduce redundancy, and improve efficiency and margin.
Speaker 7: Being good stewards of money, cash flow, and redeployment of capital has been another important driver.
Speaker 8: We've consistently been solid with cash flow, but we've been equally strong in deploying our capital smartly.
Speaker 9: We've made three acquisitions in three and a half years, including our company's largest in our history last year with Microlab.
Speaker 10: using cash and low-interest loans for all of those.
Speaker 11: We haven't caused any dilution for our shareholders.
Speaker 12: A cornerstone of our business is that we manage our money well.
Speaker 13: And last but not least, we keep our eyes squarely on growth. We've nearly quadrupled our size in five years, including during a global health pandemic and with other global macro headwinds.
Speaker 14: And with 4G still in deployment and the promise of 5G not yet fully realized, our future for organic growth is bright.
Speaker 15: With smart acquisition targets, it can be even stronger.
Speaker 16: And no one here forgets growth comes in many forms. That includes paying attention to our core business, which has grown for five straight years.
Speaker 17: Now I'd like to spend a couple minutes to reiterate or restate our core value proposition.
Speaker 18: We focus on our customers' needs with quality, speed, and availability, and we always have the customer in mind, making us easy to work with.
Speaker 19: Our growth plan organically and through acquisition is to provide more of the bill of materials of Interconnect products for telecom, wireless, and industrial customer applications.
Speaker 20: This expanded offering allows customers to buy more from RF Industries across multiple product categories.
Speaker 21: which can help them reduce complexity and supply chain costs.
Speaker 22: Our go-to-market strategies and business development efforts have generated significant multi-million dollar orders from existing and new customers.
Speaker 23: which combined with our steady distribution centric core business led to much of our growth and resulted in a continued healthy backlog of $27.8 million as we entered the new fiscal year.
Speaker 24: Historically, many of the products we sell, like coaxial jumpers and fiber optic jumpers, are in very fragmented markets, which means we're up against multi-billion dollar global behemoths as well as mom and pops.
Speaker 25: So how do we compete?
Speaker 26: Two ways, inventory availability through stocking on site and with distributors.
Speaker 27: and through our fast turn production.
Speaker 28: as an example.
Speaker 29: If you're doing a wireless installation in downtown Los Angeles, you suddenly realize you need a thousand coaxial jumpers.
Speaker 30: You're dead in the water without them and your options are limited.
Speaker 31: You can go to a large competitor with a small order and might wait two to four weeks. Or you can come to RF Industries and we'll have it for you in a couple of days or better.
Speaker 32: That's what we do in a piece of our core business.
We are really, really good at inventory availability.
We either have it on our shelves or on the shelves of one of our six national distributors, or we can make it quickly.
and along the way we strengthen our relationships with our distributors by working together to get stocking positions correct.
That's how we create value add in our core distribution business.
And that, coupled with our custom capabilities, is why we do business with all Tier 1 wireless carriers.
That's how RF Industries' trusted reputation among customers opens the door for more business.
And that's why we've continued to add more products in that wireless bill of materials.
to become more of a one-stop shop.
Availability, speed, and quality continue to be cornerstones of who we are.
But that value proposition is evolving and becoming more powerful as we've added higher value and more proprietary products and solutions, both through product development and through acquisition.
We've been working hard to elevate our offer to create more of a moat around our business.
with those higher value proprietary products and solutions that we believe
will give us more of a competitive advantage in the market and produce higher profitability in our next phase of growth.
So as we turn to fiscal 2023.
We're confident in our ability to deliver a solid shareholder return for all the reasons that I've just outlined.
Starting this month, we're consolidating our West Coast operations with a new facility coming online in the next 30 days in San Diego.
And in our second quarter,
We'll be doing some consolidation on the East Coast in New Jersey.
This allows us to streamline operations and achieve greater scale.
Although this will create a short-term expense impact, the long-term synergies and cost savings will be measurable.
We've reached a size and scale where we can capitalize on opportunities for centralizing functions.
and realizing cost savings through integrating previous acquisitions and implementing new processes.
This year we will also be introducing a new brand strategy. As we've grown, we've acquired a number of products and brands with different names.
Some have greater awareness than others.
We've completed research to understand the power of the RF Industries brand as well as the individual brands and product names.
In 2023, we plan to roll out a new brand architecture and strategy.
that will include our overarching positioning identity, the identities of our house of brands, and the touch points that connect shareholders and customers to those brands.
such as our website and collateral.
This is an exciting development in the evolution of our company, and we look forward to sharing it with you in the coming months.
With a shared vision and strong roadmap, I believe we've barely scratched the surface of our potential.
Before I close out my remarks, I want to acknowledge and provide my sincere appreciation to our 340 employees.
our continued success and strong standing with our customers.
is due to their relentless commitment to our company's performance and serving our customers.
I'm obviously pleased with the progress that we've made in growing the business over the last five years, but as always, I believe the best is still ahead of us.
And with that, I'll now turn the call over to Peter Yin, our CFO , to delve into the details of our financials.
Peter?
Thank you, Rob, and good afternoon, everyone.
As Rob mentioned, we are pleased to report record sales and adjusted EBITDA for our fiscal year.
Before diving into the details of our fourth quarter and our year-end results, I want to note that fourth quarter results represent a more normalized reporting of our financials. However, when comparing the full fiscal year results, there are impacts from the Paycheck Protection Program loan forgiveness.
and the employee retention tax credit, both the PPP loan forgiveness and the ERC were recognized in the second and third quarter of fiscal 2021. On today's call, I will be excluding the impacts of the PPP loan forgiveness and the ERC when applicable.
to make the full fiscal year results more comparable.
Sales in the fourth quarter were $23 million, a year-over-year increase of $1.9 million, or 8.9%.
For the full fiscal year, sales increased $27.8 million or 48% to $85.3 million.
Microlab products contributed $15 million since the acquisition in March.
Organic growth year over year accounted for $12.8 million.
which represents growth in most of our product areas, but primarily driven by the growth in our OptiFlux product line, which is our hybrid fiber solution that is used to support the build-out of wireless power sites.
Adjusted EBITDA for the fourth quarter was $1.9 million compared to $1.5 million.
22% year-over-year increase.
But just to give it a for the full fiscal year was $6.6 million, which is an increase of $3.9 million, or 143% year over year from $2.7 million.
The increase is primarily due to the higher sales along with a more favorable product mix.
primarily driven by Microlab products.
Fourth quarter gross profit margin increased to 31% from 25.3% in the fourth quarter last year.
The 570 basis point increase in our year-end margin was driven by favorable product mix.
Our sales team continues to work on increasing sales of our higher margin offerings and our operations team
It's working hard to control costs and reduce costs where we are able.
We continue to be impacted by the elevated cost of shipping and materials as a result of inflationary pressures, as well as the ongoing wage pressures we have discussed previously.
Recently, we have seen pricing for our materials start to stabilize and believe that the supply chain constraints we've been facing while still ongoing are lessening.
We believe there is room to further improve our margins as we believe our sales increase will be driven by our higher value products and solutions.
Operating income was $715,000 for the fourth quarter and net income of $451,000 or 4% per diluted share. Net income was $1.5 million or $0.15 per diluted share.
At the end of the fourth quarter, our balance sheet remains strong with cash and cash equivalents of $4.5 million, with working capital of $26.7 million, and our full $3 million revolver remains available.
Our inventory was $21.1 million up from $11.12 million from last year.
The increase in inventory is to support the increase in sales and to mitigate against supply chain dis- F.
Disruptions.
Microlab accounted for $4.9 million of the inventory increase, but it is also important to note that we have also invested to increase the inventory levels of Microlab products, which has increased $1.2 million since the acquisition.
We believe our current inventory level supports our strategic business model of inventory availability, which is essential to meet demand as we expect increased CAP expense related to the continued build-out of 4G and 5G wireless networks.
While supply chain issues have eased, the supply chain has been
Once we believe that they have resumed to more predictable levels, we will be able to lower our carried inventory, freeing up cash for other investments.
Moving on, we continue to see momentum building around new business.
Our backlog remains healthy going into fiscal 2023 with $27.8 million.
fourth quarter bookings of $20.2 million dollars and as of today our backlog currently stands at $26 million dollars.
Before I discuss our guidance for fiscal 2023, I want to take a moment to expand on something Rob discussed.
Our company has been undergoing a thorough reinvention over the course of the last few years.
We are all excited about that.
We are all excited about the potential ahead.
both from a top-line growth rate as well as the margin improvement we expect to realize.
as our sales mix shift from more traditional products to solutions that are pivotal to continued deployment of 4G and 5G networks, as well as overall infrastructure build-out.
We believe we will see increases in our operating income from economies of scale as we continue to grow, and from efficiencies and synergies we will realize when we move into two new facilities and consolidating operations in 2023.
As for fiscal 2023.
We expect the usual seasonal impact that we have experienced in our first fiscal quarter.
and we anticipate increased sales throughout the year. We expect revenues to be in the range of 90 million to 94 million for fiscal 2023.
That concludes my comments. Operators?
we are ready to open the line for questions.
Thank you.
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One moment while we poll for questions.
Our first question is from Josh Nichols with B Riley. Please proceed with your question.
Great. Good to see a strong finish to the fiscal fourth quarter here and and Guidance Outlook for next year as well too. Could you provide a little bit more color? Was there any like one large particular...
one-time orders and may have contributed to the outperformance this quarter or were things pretty well dispersed amongst the different offerings?
Yeah, thanks, Josh.
So no, I wouldn't say there was one large order. I mean we just did still have a pretty meaningful amount of hybrid fiber ship out in the quarter which was not unexpected and sort of what we shared at the end the last quarter that we thought was going to happen. I think you know overall
It was a pretty normal quarter for us. So nothing crazy. Core business performed, steady growth over the prior year like it generally has. Sales of micro lab products were stable and kind of in the range that we've been expecting them a little better than maybe their historicals.
So the only, the biggest number in there would have been the hybrid fiber, which has been consistent over the last several quarters. Nothing out of the ordinary.
Great. And then I know you've talked a lot about not just the top line, but the margin profile, which has consistently increased throughout this year on the gross margin front. And then also some even margin targets. Is your plan next year? Do you think the company is going to be achieving?
north of 30% gross margin and any targets you could put out there at a high level for EBITDA for the year.
Sure, yeah. So we were happy to see, obviously, gross margins go up as fiscal 22 went on, and ending the way we did was great to see.
I think that's our expectation going forward is fiscal 23, we always have a kind of a funky first quarter with November , December , January being the three months of our fiscal first quarter. So short of that normal seasonality that we experience, we expect margins to continue getting better throughout the year. We think our product mix will help drive that.
Once we get into the new facilities as well, there's some early in the year expenses to help us get that done that are one-time charges. Then we expect our EBITDA margins to get better as well. So we're still aiming to be north of 30 percent on the gross profit line and to consistently get above 10 percent on the adjusted EBITDA line.
I think as we get through the year, the Ibadah piece is the one that I'm encouraged and excited to see as we start to be able to take some real synergies and savings as we get into the moves. So it'll be similar to what we've seen in the last few years, where the first quarter is a little lighter than the other three and we have growth from there.
And understanding, you know, the seasonality, the first quarter, and then things tend to pick up from there. But curious, what are you seeing in terms of carrier capex, build outs, 4G more specifically, 5G? Those have been hard to time in terms of the spend. I'm just curious what you're hearing.
down. This was one of those years where things really slowed down from a, you know, expectation of what was going to happen in, you know, in December in particular. That's normal. It's, you know, this is my fifth iteration of a major build, I think. And so...
What we expected most years, I think the thing that we've generally seen is with the overall economic uncertainty, carriers are still committed to a meaningful amount of capex.
I think there was a little bit of holding your breath as the year ended to see, okay, how do we end up and our carriers going to keep spending like they've said. We haven't seen any major pullback on that. There's still a pretty significant amount allocated.
I think I won't be surprised if there's sort of delays in acceleration as we get into early and late spring, which is normal build season when it really gets moving. The part of that that I'm most intrigued to see really is on the small sale side, do we start to see the spend that we've been expecting in a sort of the pent-up demand spend that's been going on. So, I think that's a good point. I think that's a good point. I think that's a good point. I think that's a good point. I think that's a good point. I think that's a good point. I think that's a good point.
as we get into better weather and some of those outdoor venues start to be built out.
Thanks for clarifying. And then last question for me, looking at the guidance for next year, I guess you've historically been able to secure some large orders. And to your point, I think the small sell opportunity is probably like a bit underappreciated. I'm just curious, like,
Are you still pursuing some of these large multimillion dollar orders? Is there a good pipeline of those and is much of that or, you know, a big rampant small cell included at all in the guidance that you're giving initially or is that more like an upside scenario case?
Yeah, I think that a larger small-sell spend would be an upside case. We have some of that built into our expectations. It's really hard to predict. So it's one of those things that putting an exact number on has been difficult to do, especially early in the year. I think as we get through the year, we'll get a clearer sense of what we're looking at.
you know, what does that building plan look like? But there are absolutely, in our expectations, there's some pretty significant wins that need to be in there in multiple product areas. You know, we're still shipping a lot of.
A lot of hybrid fiber, we're hoping for even more of that as we go on. That's a tough one to predict as well, kind of week to week or month to month, but we're hopeful there. And then our other kind of bigger ticket items as we get into small cell and thermal cooling, those are areas that we see large opportunities.
And the last thing, as I mentioned a minute ago, is from a venue perspective, with the add of MicroLab into our offer, when a large venue like a football stadium in particular gets built out and we're specced in there, those are hundreds of thousands of dollars in one PO just for passives. We can now throw.
So I'll hop back in the queue. Thanks, Josh.
Our next question is from Aaron Martin with AIGH Investment Partners. Please proceed.
Hi Rob, congratulations on a strong EPS print here. You mentioned some costs around consolidation on the West Coast, East Coast, and then savings. Is this valuable?
was the first question and then can you sort of quantify the amount of expenses around that and then
the amount of cost savings down the line.
Sure. I'll tackle the general concept of consolidation. I'll let Peter give a sense of the costs and then I'll come back and maybe share what we think that's going to be longer term.
So the consolidation is its operations, its production, its inventory. We're starting with the West Coast. We're combining our legacy RF Industries product line, the coaxial offer, and the fast turn fiber offer that we acquired at Sea Enterprises a few years ago. So
Those two are being combined production offices, corporate staff, and then our corporate headquarters is moving there as well to one new facility.
help us, I think, take advantage of our scale and maybe take some synergies out as well. Peter, maybe you can share a little bit on what we think the one-time costs are related to the relocations.
Hey, Martin. Thanks for the call. So the one-time cost, a big chunk of that is going to be just the moving expenses associated with that. To another beta, something we use a existingor construct or data structure to anything within the measure you can call the center. The center as an example without a compression mechanism.
Am I coming through okay here?
Yeah.
Okay, I'm getting a lot of feedback on my end. So just moving costs related to that, that's the biggest probably one-time charge we see. And then there's going to be some leasehold improvements that will, as we're getting into there, having that kind of get fixed from a cost savings perspective.
Aaron, I don't think there's much to share quite yet. We look forward to being able to share that kind of once we get into the building and things iron out a little bit more. So I think those cost savings would be a little bit premature to share here on the call.
Yeah, the one thing I'll add to that, Peter, is just I think that from a production team perspective and...
some of the higher level roles, what do we really need when we get two large operations folded to one? You know, we have 130 people call it in Southern California, 135. I think our expectation is that we can get better at doing our production in a slightly more lean scenario and handling inventory maybe in a healthier way also. So I think.
As we get into the first quarter and talk again in March, I think you'll hear more quantification of what those dollars are, but we think they're material to the business as we go on.
Okay, and on the expense side, you know talking about a couple hundred thousand dollars less than that
Yeah, I think we're talking about between, call it $250,000 and $500,000 from a move expense. I think it's going to be a little higher than that if things don't always go perfectly
It's not a not a crazy number, but it's not free So I think we're expecting to spend you know several hundred thousand dollars to get relocated into these facilities where we can really recognize some savings from that.
Thank you. Thank you.
continue the conversation. Thank you.
The next question is coming from David Wright with Henry Investment Trust. Please proceed.
Rob, Peter, good afternoon.
Hey, David.
And looking at your
I'll take the midpoint of your revenue guidance for next year, has revenues up 8%. Can you talk at all about how pricing is factored into those projections?
Yeah, good question. Thanks, David. So we've taken a little bit of price increases. Some of that already printed through in results that we're sharing now, depending on the timing under which we took those increases in the prior year.
I think there's a little bit of it. I mean, it's certainly not the full 8 percent, but call it a percentage point or two that we would tie to.
price increases based on product mix.
We weren't able to take price increases on everything that we sell. That's what makes it a little harder to predict
some of our items just we just don't have that kind of pricing power others it's it's more standard just annual increases that we generally take so I think we're putting a little bit of weight into the the price increase piece on that but the majority of that growth is just going to be from
increased sales of some of the newer product areas. And we may have to offset some slower sales of some of the big project items we've done over the last few years. It's hard to know if all the projects that we're doing, specifically on the hybrid fiber side, are gonna stay at the exact same level. What our expectation is, those will continue to be robust.
maybe not at the same level they were last year, and we need some other product areas to increase, to offset that, to give us the growth.
Okay, and then on that line, is it possible to at all characterize
you know, what have you have your price increases been able to keep up with your your you know cost increases or are you having to absorb some of those?
Yeah, good question. I think on the customer side.
Sorry, on the cost of goods side, we've generally been able to keep up as the cost of goods have moderated a bit in the last several weeks or a couple of months.
the piece of this that's been harder for us to...
control overall is just wage pressures. We see consistent increases on.
all of our folks, our production teams, et cetera. So there's room for us to get a little sharper there, I think, to find some additional savings and some opportunities.
We've had initiatives in place for some time to take costs out of the business. We think we're going to be able to offset.
most if not all of the increases that we've experienced from a wage perspective with those initiatives. So we think it's sort of we're starting at a
with a clean slate and now it's about growing the business and recognizing some of those better margin items to help us print through to the better profit.
I appreciate those answers, Rob, and good luck as you continue to implement your 2023 plan.
Great. Thanks, David. Thank you.
Our next question is from Hal Grainger with Great Quarter Research. Please proceed.
Thank you for taking my question, Rob. I'm wondering about your product launches in this fiscal year, and in particular I'm wondering about the timing of those launches and whether there have been any lags of revenues on rose Lee.
with those new products you've got coming in and whether it's a fiscal 23 revenues or whether it's whether it'd be later than that.
Yeah. Hey, Hal, thanks for the question.
So we have multiple things that we're going to be launching. I think the good news here is from our last couple of acquisitions, we've added some solid engineering talent and some product roadmap capabilities. So we have small cell and thermal cooling offers. We have micro lab products that are
on the docket and we've kind of always got new versions of hybrid fiber that are coming out as well. Historically, there's not a lot of product launches from us because we weren't very product roadmap centric. We were more looking at market opportunities or responding to customer needs and then coming to market with something. This is a more proactive approach.
the majority of the things that we plan to launch and announce.
already have customer trials either completed or ongoing, and we expect there to be in most cases revenue during fiscal 2023 to coincide with those launches. I'm not much of a send out a press release because we have something that we think is cool kind of guy. I prefer to send out something when.
We think it's cool, customers think it's cool, and we can actually quantify some dollars around it. So you can expect that when we do launch something, our expectation is that there's a revenue stream tied to it that we can also speak about at that time.
Okay, great. Thank you. And another, I think my final question is kind of a broader question regarding mergers acquisitions.
Two part question. One is your past acquisitions, most recently MicroLab. Have you completed a sufficient amount of integration that you're now actively looking?
for new acquisitions. And with respect to potential new acquisitions, the environment's changed a lot over the past year, right? With higher interest rates, there's a potential recession people are talking about.
Funding availability has changed a bit, I suppose. And there may be greater willingness on the part of potential targets to enter into discussions with you. Can you talk about...
about that.
Sure, yeah. So the first piece, so MicroLab is also generally integrated, if not fully integrated. The only thing remaining there is getting into a new facility for them from where they're located currently. So just moving down the street, but I need a little bit of additional space to do some other things in the future.
to be actively looking at deal flow and acknowledging deals. It's not that we're not doing that. We are looking and the pipeline continues.
at a deal flow and acknowledging deals. It's not that we're not doing that. We are looking and the pipeline continues to sort of...
build and evolve, but we're pretty cautious about doing M&A in an environment like this, making sure that we've got the right acquisition target, the right size and scale. As always, I think as everyone's learned, I care a lot about the price we pay for it and try to be.
conservative on that and make sure that we're allocating capital wisely. So there's nothing imminent. I'm not rushing into any deals. And whether that continues to be the case this full year or not, we'll have to wait and see. But I don't think it's a very – while people are interested in talking about M&A, it's a –
It's a little bit of a funky environment to be going out to find capital. We've done a great job of using cash and low interest debt in the past.
where our stock sits today, I'm not terribly interested in using that equity as a...
using that paper to do an acquisition either. So I think we'll continue looking at deals if something great comes along. We can always get creative and figure it out, but I think at the moment, we got a lot on our plate with getting.
integration of these new facilities and starting to print through the savings that we believe will come out of it over the course of time, along with the sales initiatives and the big operational initiatives that we've had ongoing for several quarters. So not to say we won't look and continue to look, but we're definitely going to be, I think, you know, continuing to look at the new
conservative about our approach to M&A, at least right now.
Okay, great. Thank you, Rob.
Thanks, Hal.
Once again, if there are any remaining questions, please press star 1 on your touch tone phone. The next question is from Ryan Hirschman with AIGH Investment. Please proceed.
Hi, it's Warren Hirschman. How are you?
Congratulations on the progress. Good, thank God.
So just a few questions. So on TravTech there were some very large trials or decent-sized trials going on in the cooling.
did any of those trials mature into
sales or are they maturing into sales and did you have to revamp anything in terms of what the customers wanted? Just give us a quick update on that.
Sure. Yeah, so trials have all gone well. We expect—
Expect to see some nice wins this fiscal year from that, both from those trials as well as just kind of the general
uptake of our product line. The team, the engineering team did a great job of, I think, reinventing an existing product line. So I'm not gonna say we started from scratch, but we certainly added some enhancements and some key things.
really right in the middle of COVID over the last few years to redevelop a product line that had a little more longevity to it and was more future looking. So those enhancements are definitely helping. And I think the general belief and reaction from customers in the market is they're positive on our solution.
really right in the middle of COVID over the last few years to redevelop a product line that had a little more longevity to it and was more future looking. So those enhancements are definitely helping. And I think the general belief and reaction from customers in the market is they're positive on our solution. And as I said a second ago, I think we expect.
We expect some meaningful opportunities to come to fruition this fiscal year. Okay. In terms of the small-cell strategy, I know it's not – it's upside you've mentioned for this coming year. You're not counting on it. Are you still missing any pieces in the puzzle?
for what you offer the customer? Yes, good question. I don't think we are. I think the bill of materials there is generally filled out. The two areas that we don't offer today in that bill of materials that we could or we could review and it's part of both are.
openly publicly stated acquisition strategy as well as organic development is, we don't have antennas from a broad-based perspective today and there's a power requirement in small cell applications that could be a nice adder as well. I think finding the right fit there is something.
belief is.
we can design, engineer, and build a fully integrated small cell shroud of varying shapes and sizes and types using products of our own and helping integrate those from others. So I don't think there's anything missing from our offer to service what a customer might want.
On that note, let's say for the antenna, are you buying from outside vendors on the antenna because the customer wanted to come in one finished box?
So generally there's going to be a manufacturer of record on the bill of materials. So someone will be named or some ones will be named as the.
as the spec position for antennas. So generally those are things that we're told to use based on the carrier, the location, the region, the type of shroud that's being...
So yeah, we're either buying them or we're having them supplied to us to help integrate into those cabinets.
Okay, and finally on the gross margin.
You know, there's definitely on a component level things are improving, you know, of course many many many companies that we speak to in the last month or two, notably.
The company on a gross margin basis, even before it took in the higher gross margin micro lab, years ago it had been higher, it had been in the mid 30s. You mentioned that for various competitive reasons it may not get back there. Even if the base business gets back to a number with a three in front of it and you have micro labs on top of that.
And it would imply a gross margin, we do get back to a gross margin in the mid 30s.
we do get back to a gross margin in the mid 30s. Can you see a path to do that again?
Yeah, good question.
I think we absolutely see a path to getting to the mid-30s. I think product mix in the short term makes that harder to say specifically when. I like to be able to give.
pretty specific guidance on timing and numbers and quantify it when talking about those results. So we absolutely see, I think the way you characterized it is correct. If our core business, if we start to see some things normalized there, some of the costs come down a hair, both on cost of goods and cost of labor.
we can start to see better gross margins there. And then with the new product areas, whether that's MicroLab or others, if the mix starts to swing heavier in that direction, we absolutely believe there's an opportunity to get those margins up into the mid-30s. So I don't expect it early in the year. I think if that's something that's possible this year, it's probably late in the year and it may be something that's possible this year.
margin as well as kind of every other profitability line. You know, historically we've had discussions about how do we get consistently to 15 million a quarter than it was how do we get consistently to 20 million a quarter. We're kind of there and now it's great. Let's see those numbers. You know, if we truly were putting up the exact same number every quarter.
I'd be able to give a much clearer answer because the mix moves around and therefore our top line moves around a bit with it. It's harder to say specifically when that is, but I don't think it's out of the question in the mid-term to get some margin push back up into the mid-30s.
Okay, and last question, some of the new products that you're mentioning, when do we get a peek at those?
And when do they expect revenue? Yeah, yeah, yeah. So we expect revenue this year from, you know, anything that we're gonna launch, I think.
The soonest that you'll see something probably come out from an official product launch is during our fiscal second quarter. Again, that starts in February . So February , March, April timeframe.
We expect to have some things to share and then subsequent to that there's a couple things in the back half of the year that we believe will be
talking about as well. But as I mentioned in a prior question.
I'm not big on announcing something just to announce it unless there's some
marketing genius reasons for it, or we've already got customer review, customer feedback, and customer opportunities that we can relate at the same time. I like to be able to share. Here's something new to talk about. People have already looked at it and we know that it works and we know that people want it. So now here's
here's the revenue that we expect to drive with that. We've generally been able to do that. You know, we had a TrueField launch last year with a unique kind of shroud. We talked about that and immediately had a series of a handful of purchase orders in the hundreds of thousands of dollars to talk about right on the heels of that launch. So expect similar.
kind of this year, but we should have something to talk more about during our fiscal second quarter.
Sounds good. OK, thanks so much.
Thanks, Oren.
Okay, we have no further questions in queue. I'd like to turn the floor back over to Rob Dawson for any closing remarks.
That's great. Thank you, John . And thanks, everyone, for joining our call today. We appreciate your support of RF Industries.
I'd like to thank our team for their hard work in helping us achieve these new levels of performance and our customers for allowing us to partner with them.
We're excited about our continued positive momentum as we move into fiscal 2023. Peter and I look forward to reporting our fiscal first quarter results in March.
Thank you again and have a great day.
This concludes today's conference, and you may disconnect your lines at this time. Thank you for your participation.
Great. I know you've talked a lot about not just the top line, but the margin profile, which has consistently increased throughout this year on the gross margin front, and then also some EBITDA margin targets. Is your plan next year? Do you think the company is going to be achieving north of 30% gross margin and any targets you could put out there at a high level for EBITDA for the year? Sure. Yeah. We were happy to see, obviously, gross margins go up as fiscal 22 went on and ending the way we did was great to see. I think that's our expectation going forward is fiscal 23, we always have a funky first quarter with November , December , January being the three months of our fiscal first quarter. So short of that normal seasonality that we experienced, we expect.