Q1 2024 RF Industries Ltd Earnings Call

Operator: Greetings and welcome to the RF Industries first quarter fiscal 2024 Financial Results Conference call. At this time, all participants are in a listen-only mode.

Greetings and welcome to the Auris industries first quarter fiscal 2024 financial results Conference call.

At this time all participants are in a listen only mode. A question and answer session will follow the formal presentation.

Operator: A question-and-answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone. Please note this conference is being recorded. I will now turn the conference over to your host, Margaret Boyce, Investor Relations for RFI. Margaret, you may be.

If anyone should require operator assistance during the conference. Please press star zero on your telephone keypad.

Note. This conference is being recorded.

I'll now turn the conference over to your host Margaret Boys Investor Relations for RF Industries, Margaret you may begin.

Margaret Boyce: Thank you, Paul, and welcome everyone to RF Industries' first quarter fiscal 2024 earnings conference call. With me today on today's call are RF Industries CEO Rob Dawson, President and Chief Operating Officer Ray Bibisi, and CFO Peter Yin. Before I turn the call over to Rob and Peter, I'd like to cover a few quick items. We issued our Q1 earnings release after the market today. That release is available on our website at RFIndustries.com.

Thank you Paul and welcome everyone to Arab Industries first quarter fiscal 2024 earnings Conference call with me today is with me on today's call are RF industry, CEO, Rob Dawson, President and Chief operating officer, right, the BZ and CFO, Peter yet before I turn the call over to Robyn.

I'd like to cover a few quick items, we issued our Q1 earnings release after market today that release is available on our website at RF industries Dotcom.

Margaret Boyce: I'd like to remind everyone that during today's call, management will make forward-looking statements that involve risks and uncertainties. Please note that statements on the call today may constitute forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934. When used, the words anticipate, believe, expect, intend, future, and other similar expressions identify forward-looking statements.

I'd like to remind everyone that during today's call management will make forward looking statements that involve risks and uncertainties. Please note that statements on the call today may constitute forward looking statements with the meaning of section 21 E of the Securities Exchange Act of 1934.

When used the words anticipate believe expect intend future and other similar expressions identify forward looking statements. These forward looking statements.

Margaret Boyce: 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 those contained in any forward-looking statement. Factors that could cause these forward-looking statements to differ from actual results include delays in the 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 the Securities and Exchange Commission. Industries undertakes no obligation to update or revise any forward-looking statement.

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 outcomes contained in any forward looking statements.

Factors that could cause these forward looking statements to differ from actual results include delays in development marketing or sales of products and other risks and uncertainties discussed in the company's periodic report on Form 10-K, and 10-Q and other filings with the Securities and Exchange Commission.

RF industries undertakes no obligation to update or revise any forward looking statements.

Margaret Boyce: Additionally, throughout this call, we will be discussing certain non-GAAP financial measures. Today's earnings release and the related current report on Form 10-K describe the differences between our GAAP and non-GAAP reporting. With that said, I'll now turn the conference over to CEO Rob Dawson. Rob, please go ahead.

Additionally throughout this call we'll be discussing certain non-GAAP financial measures today's earnings release and the related current report on Form 10-K describe the differences between our GAAP and non-GAAP reporting with that said I'll now turn the conference over to CEO rubbed off and Rob. Please go ahead.

Robert D. Dawson: Thank you, Margaret. Welcome to our first quarter fiscal 2024 conference call. I also want to welcome Ray Bibisi's participation in our call. Recently promoted to President, Ray will play a key role in shaping the next generation of our business strategy and operations, and as such, will be a valuable addition to our quarterly call. For the first quarter, we reported net sales of $13.5 million, down 27% year over year.

Thank you Margaret welcome to our first quarter fiscal 2024 conference call.

Just want to welcome Ray the Bdc's participation in our call recently promoted to President Ray will play a key role in shaping the next generation of our business strategy and operations.

And as such will be a valuable addition to our quarterly calls.

For the first quarter, we reported net sales of $13 $5 million down 27% year over year.

Robert D. Dawson: While the first quarter has always been our seasonally slowest period, sales were lower than anticipated, largely due to more than $2 million of customer shipments and orders that were delayed in the quarter. However, important, these orders were not canceled, and we expect them to be shipped over the next few quarters. Fortunately, our lower cost structure helped us weather this rough period. When the market recovers, our cost reduction initiatives will yield even greater benefits and help us return to profitable growth. Turning to the overall market, it feels like the ice might be melting on the low capex spend and sluggish activity we experienced for over a year. We're finally starting to see some early signs of reversal from the capex downturn that made Fiscal 23 so challenging.

While the first quarter has always been our seasonally slowest period sales were lower than anticipated largely due to more than $2 million of customer shipments and orders that were delayed in the quarter.

Importantly, these orders were not cancelled and we expect they will be shipped over the next few quarters.

Fortunately, our lower cost structure helped us weather this rough period when.

When the market recovers our cost reduction initiatives will yield even greater benefit and help us return to profitable growth.

Turning to the overall market it feels like the ice might be fine on the low capex spend and sluggish activity, we experienced for over a year.

We're finally, starting to see some early signs of a reversal from the capex downturn that made fiscal 'twenty three so challenging.

Robert D. Dawson: As a welcome relief from the dramatic 17% decline in CapEx spending last year, telecom companies' guidance for 2024 indicated a CapEx spend increase of up to 5%, and we're seeing this reflected in our business. Important to RFI, more of the 2024 CAPEX is related to the densification of wireless networks, which aligns nicely with our expanded product offering. We're encouraged that many projects, which have been in the sales pipeline for several quarters, began to convert into purchase orders in February. Even better, this increase in new orders is primarily for high-value products like our DAC thermal cooling solutions and small-cell shrouds that are being purchased by multiple customers in the Tier 1 wireless carrier ecosystem. This has led to a substantial increase in our quarterly backlog, which now stands at $19.3 million, up $3.1 million compared to January 31st. The progress we made in 2023 to become a leaner and more efficient operation will have a meaningful impact on profitability as this carrier's capex spending normalizes and our top line growth resumes. We believe this recovery will be gradual but has staying power.

A welcome relief from the dramatic 17% decline in Capex spending last year Telecom company's guidance for 2024 indicated that capex spend increase of up to 5% and.

And we're seeing this reflected in our business important to RFID more of the 2020 for Capex as it relates to Densification of wireless networks, which aligns nicely with our expanded product offering.

We're encouraged that many projects, which have been in our sales pipeline for several quarters begin to convert began to convert into purchase orders in February.

Even better this increase in new orders is primarily high value products like our DAC thermal cooling solutions.

Small cell trials that are being purchased by multiple customers in the tier one wireless carrier ecosystem.

This has led to a substantial increase in our quarterly backlog, which now stands at $19 3 million up $3 1 million compared to January 31.

The progress we made in 2023 to become a leaner and more efficient operation, we will have a meaningful impact on profitability as this carrier capex spending normalizes and our top line growth resumes.

We believe this recovery will be gradual but has staying power.

Robert D. Dawson: Our backlog growth is comprised of multiple orders across a variety of customers and diverse geographies, not just one large order that's moving the needle. With several customers, we have signed a long-term master agreement. This means that as long as we continue to execute, we'll remain part of their build plans, not just for 2024, but for the long term. One customer in particular is beginning the first phase of a multiyear program of 5G deployment and infrastructure updates. With a master agreement in place with this customer, we're optimistic this will result in repeatable business for RFI. We have also positioned RFI to benefit from diversification that isn't CapEx and market specific. It's important to know that a portion of our products and solutions align well with operating and maintenance budgets versus CAFAC.

Our backlog growth is comprised of multiple orders across a variety of customers in diverse geographies not just one large order that's moving the needle.

With several customers, we have signed long term master agreements.

This means that as long as we continue to execute we will remain part of their build plans not just for 2024, but for the long term.

One customer in particular is beginning the first phase of a multi year program of fiber deployment and infrastructure updates.

With a master agreement in place with this customer we are optimistic this will result in repeatable business for RFID.

We are also positioned to RFID to benefit from diversification that isn't capex and end market specific.

It is important to know that a portion of our products and solutions.

Align well with operating and maintenance budgets versus Capex we.

Robert D. Dawson: We believe that solutions like our DAC thermal cooling systems are helping us smooth out the peaks and valleys of carrier capex by addressing annual updates and upgrades that are part of a carrier's maintenance budget. We've been working hard to successfully build strong relationships and a greater presence with our carrier customers, and capturing some of their maintenance budget is another source of funding separate from CAPEX projects. It's also important to note that last year 57% of our sales came from diverse end markets outside of wireless carrier applications, such as manufacturing, public safety, energy, hospitality, education, and medical. In addition, we're continuing to explore opportunities with new customer segments, including cable companies, wireline telecom carriers, and industrial markets, that could develop into meaningful business over time. As I've said before, we felt strongly that our wireless carrier customers could only stay on the sidelines for so long. If they are to be competitive, they need to continuously improve the telecom infrastructure to meet customers' expectations for speed and coverage. Not only are they focused on 4G and 5G macro towers but also on network densification.

We believe that solutions like our DAC thermal cooling systems are helping us smooth out the peaks and valleys of carrier capex by addressing annual updates and upgrades that are part of a carrier's maintenance budget.

We've been working hard to successfully build strong relationships and a greater presence with our carrier customers and capturing some of their maintenance budget as another source of funding separate from Capex projects.

It's also important to note that last year, a 57% of our sales came from diverse end markets outside of wireless carrier applications.

Such as manufacturing public safety energy.

Hospitality education and medical.

In addition, we're continuing to explore opportunities with new customer segments, including cable companies wireline telecom carriers and industrial markets.

It could develop into a meaningful business over time.

As I've said before we felt strongly that our wireless carrier customers can only stay on the sidelines for so long to stay competitive they need to continuously improve the telecom infrastructure to meet customers' expectations for speed and coverage.

Not only are they focused on the <unk> macro towers, but also on network densification.

Robert D. Dawson: To meet both new and pent-up demand in the telecom market, we made significant investments in our integrated systems product line and can now offer a broad selection of high-quality interconnect products and next-generation integrated systems. This positions us to gain a larger percentage of our customers' bill of materials by having the leading-edge products they need for key applications. In addition to expanding our portfolio of high-value products, over the last year, we executed our plan to control costs and drive further synergies by consolidating our facilities. The work we did in 2023 reduced our annual expenses by two and a half million dollars. We have other initiatives underway to potentially reduce annual expenses by another $3 million by the end of fiscal year 2024. Ray will provide more details during his remarks.

To meet both new and pent up demand in the telecom market, we made significant investments in our integrated systems product line and can now offer a broad selection of high quality interconnect products and next generation integrated systems.

This positions us to gain a larger percentage of our customer's bill of materials by having our leading edge products they need for key applications.

In addition to expanding our portfolio of high value products over the last year, we executed our plans to control costs and drive further synergies by consolidating our facilities.

While the work we did in 2023 reduced our annual expenses by $2 $5 million.

We have other initiatives underway to potentially reduce annual expenses by another $3 billion by the end of fiscal year 2024.

Ray will provide more detail during his remarks.

Robert D. Dawson: In 2023, we accomplished a great deal through the hard work and dedication of our outstanding team, and Ray, as Chief Operating Officer, was very instrumental in achieving this progress. Recognizing his leadership, in February, we promoted him to president and chief operating officer. This promotion expands his leadership role at RFI beyond operations to include greater oversight on our go-to-market strategy. I'm confident that Ray will make significant contributions to shaping our business strategy, go-to-market, and operations for the next phase of our strategic plan. Looking ahead to 2024, we're optimistic about our future prospects. We have a strong competitive position with a highly attractive product portfolio, a capital-light business model, and substantial operating leverage. As you've heard me say before, as capital expenditures pick up, we see significant leverage in our P&L that can have a favorable impact on gross margins, either from higher sales, a better product mix shift, or both.

In 2023, we accomplished a great deal through the hard work and dedication of our outstanding team and Ray as Chief operating officer was very instrumental in achieving this progress.

Recognizing his leadership in February we promoted him to president and Chief operating and Chief Operation Officer.

This promotion expanses leadership role at RFID beyond operations to include greater oversight on our go to market strategies.

I'm confident that rate will make significant contributions to shaping our business strategy go to market and operations for the next phase of our strategic plan.

Looking ahead to 2024, we are optimistic about our future prospects, we have a strong competitive position with a highly attractive product portfolio.

Capital light business model and substantial operating leverage as.

As you've heard me say before as capital expenditures picked up we see significant leverage in our P&L that could have a favorable impact on gross margins either from higher sales better product mix.

Better product mix shift.

Both.

Robert D. Dawson: Plus, as we reduce expenses, any incremental sales should flow to the bottom line. With what we know today, we expect Q2 sales to increase sequentially over Q1 as we begin to benefit from the substantial new order flow that I discussed earlier. I want to thank our employees who have worked diligently to improve our operations and set the company up for future success. I also want to thank our shareholders who have been patient through the downturn. We appreciate all of your support. I'll now turn the call over to Ray Bibisi to speak about our operation, right? Thank you, Rob.

Plus as we reduce expenses any incremental sales should flow to the bottom line.

With what we know today, we expect Q2 sales to increase sequentially over Q1, as we begin to benefit from the substantial new order flow that I discussed earlier.

I want to thank our employees, who work diligently to improve our operations and set the company up for future success.

I also want to thank our shareholders, who have been patient through the downturn.

We appreciate all of your support.

I'll now turn the call over to Ray, but easy to speak about our operations.

Hey.

Thank you Rob.

Ray Bibisi: I'm truly honored to assume the role of President of RF Industries and excited to speak with you today about the opportunities that lie ahead. In my capacity, I will be leading RFI's sales, product management, engineering, and operations teams across all business units and product areas. Our goal is to closely align these teams with our go-to-market strategy that will facilitate enhanced cross-selling of our diverse portfolio and solutions. This strategic alignment is designed to establish a more cohesive and efficient organizational structure that will help us capitalize on significant market opportunities. I am confident that fostering greater integration within our market-facing team will give us a competitive edge as we pursue these opportunities. As mentioned by Rob earlier,

And Giuliano to assume the role of President of RF industries and excited to speak with you today about the opportunities that lie ahead.

In my capacity I will be leading RFID sales product management engineering and operations teams across all business units and product areas.

Our goal is to closely align these teams with our go to market strategy that will facilitate enhanced cross selling of our diverse portfolio and solutions.

This strategic alignment is designed to establish a more cohesive and efficient organizational structure that will help us capitalize on significant market opportunities.

I am confident that fostering greater integration within our market facing team will give us a competitive edge as we pursue these opportunities.

As mentioned by Rob earlier.

Ray Bibisi: Our initiative to drive further cost reductions will continue through 2024. We see opportunities for improvement in several areas, such as direct material, facilities, and equipment; Product Design and Development, along with the benefits of applying lean principles company-wide to improve operation efficiency.

Our initiatives to drive further cost reductions will continue through 2024.

We see opportunities for improvement in several areas such as direct material.

<unk> is an equipment.

Design and development, along with the benefits of applying lean principles companywide to improve operation efficiencies.

Ray Bibisi: In addition to our ongoing cost reduction initiative, we have organized a Tiger Team focused on cash generation. While this initiative will examine several best practices to strengthen our business, its immediate priority will focus on minimizing excess and obsolete inventory. The potential benefits from both cost reduction and cash generation programs will enhance our financial strength of our organization. Furthermore, I am very excited about the collaborative spirit and enthusiasm of my new team. Together, we've engaged in discussions around sales strategy, market diversification, market share, as well as product roadmap and rationalization. We are totally aligned with maximizing the opportunities ahead that will contribute to a bright future for RFI.

In addition to our ongoing cost reduction initiative, we have organized the Tiger team focused on cash generation.

While this initiative will examine several several best practices to strengthen our business its immediate priority will focus on minimizing excess and obsolete inventory.

The potential benefits from both cost reduction and cash generation programs will enhance our financial strength of our organization.

Furthermore, I am very excited about the collaborative spirit and enthusiasm of my new team.

Together, we've engaged in discussions around sales strategy market diversification market share as well as product roadmap and rationalization.

We are totally aligned and maximizing the opportunities ahead that will contribute to a bright future for RFID.

Ray Bibisi: It's an exciting time for our company. And with that, I will now turn it over to Peter to discuss our financial results. Thank you, Peter.

It's an exciting time for our company and with that I will now turn it over to Peter to discuss our financial results.

Peter Yin: Thank you, Ray, and good afternoon, everyone. As Rob mentioned, our first quarter results were lower than we expected. However, we are excited to see spending improving and having a positive impact on our backlog. First quarter sales were $13.5 million, a decrease of $4.9 million, or a 27% decrease year over year, and down 15% on a sequential basis. First quarter gross profit margin decreased to 24.5% from 27.7% year-over-year. The 320 basis points decrease reflected the impact of lower sales and less leverage to cover certain fixed costs. First quarter operating loss was 2.1 million compared to an operating loss of 1.2 million in the prior year period. The operating loss was primarily due to lower sales value and lower contribution from higher margin products offset by lower operating expenses in the first quarter of 2024. Our net loss was $1.4 million, or $0.13 per diluted year.

Okay.

Thank you Rick and good afternoon, everyone.

Rob mentioned, our first quarter results were lower than we expected. However, we are excited to see spending improving and having a positive impact on our backlog.

First quarter sales were $13 5 million, a decrease of $4 9 million or 27% decrease year over year and down 15% on a sequential basis.

First quarter gross profit margin decreased to 24, 5% from 27, 7% year over year, the 320 basis points decrease reflected the impact of lower sales and less leveraged to cover certain fixed costs.

First quarter operating loss was $2 1 million compared to an operating loss of $1 2 million in the prior year period. The operating loss was primarily due to lower sales volume and lower contribution from higher margin products offset by lower operating expenses in the first quarter 2024.

Our net loss was $1 4 million or <unk> 13 per diluted share.

Peter Yin: And our non-gap net loss was $590,000, or $0.06 per diluted share, compared to a net loss of $1.2 million, or $0.11 per diluted share, and a non-gap net loss of $25,000, or $0.00 per diluted share, for Q1 2023. First quarter adjusted EBITDA was negative $1.1 million, compared to positive adjusted EBITDA of $78,000 in Q1 2023. Moving to the balance sheet, as of January 31, we had a total of $4.5 million of cash and cash equivalents and had working capital of $21.6 million and a current ratio of approximately 2.9 to 1, with current assets of $32.9 million and current liabilities of $11.3 million as of July 31. We borrowed $12.5 million under our term loan and $500,000 from the Revolving Credit Facility.

And our non-GAAP net loss was 590000 or <unk> <unk> per diluted share compared to a net loss of $1 2 million or 11 cents per diluted share and a non-GAAP net loss of 25000 or zero cents per diluted share for Q1 2023.

First quarter adjusted EBITDA was negative $1 1 million compared to positive adjusted EBITDA of 78000 in Q1 2023.

Moving to the balance sheet.

As of January 31, we had a total of $4 5 million.

Cash and cash equivalents and had working capital of $21 6 million and a current ratio of approximately $2 nine to one with current assets.

The $32 9 million and current liabilities of $11 3 million.

July 31.

We borrowed $12 $5 million under our term loan.

500000.

The revolving credit facility.

Peter Yin: Related to the credit facility, as you saw in the 3rd Amendment filed at the end of February, we have been working over the last several months to ensure we have access to liquidity and flexibility needed to support the recovery of our business. As of today, we have refinanced the term loan that was put in place in 2022 with a new asset-based revolver with a new lender. This revolver will support our next phase while giving us the working capital flexibility to handle potentially uneven deployments in customer orders. Our inventory was $18 million, down from $18.7 million last year.

Related to the credit facility as you saw in the third Amendment filed at the end of February we have been working over the last several months to ensure we have access to liquidity and flexibility needed to support the recovery of our business.

As of today, we have refinanced the term loan that was put in place in 2022 with the new asset based revolver with a new lender district.

This revolver will support our next phase, while giving us the working capital flexibility to handle potentially uneven deployments in customer orders.

Our inventory was $18 million down from $18 7 million last year. The decrease in inventory reflected our continued rationalization and right sizing of our inventory to address the lower demand level, we experienced in 2023.

Peter Yin: The decrease in inventory reflected our continued rationalization and right-sizing of our inventory to address the lower demand level we experienced in 2023. We believe our current inventory level supports our strategic business model of inventory availability, and we continue to manage this closely as we expect to see increased demand in 2024 as CapEx spending gradually normalizes over the coming year. Moving on, we are seeing momentum build around new business, and our backlog. As of January 31, it was $16.2 million, on first quarter bookings of $13.6 million.

We believe our current inventory level supports our strategic business model of inventory availability and we continue to manage this closely as we expect to see increased demand in 2020 for capex spending gradually normalizes over the coming year.

Moving on we are seeing momentum build around new business our backlog.

As of January 31 was $16 2 million on first quarter bookings of $13 6 million. Subsequent to Q1, we have seen an increase in order flow and as of today. Our backlog currently stands at $19 3 million.

Peter Yin: Subsequent to Q1, we've seen an increase in order flow, and as of today, our backlog currently stands at $19.3 million. As we look ahead, we're optimistic the positive trend we are seeing with our customers will continue and benefit our sales. We're excited about our opportunity to drive top-line growth and generate profitability through key customer projects and higher-value solutions. With that, I'll open up the call to your questions. Thank you. At this time, we will be conducting a question and answer session. If you would like to ask a question, please press star 1 on your telephone. Confirmation will indicate your line is in the question. You may press star two if you would like to remove your question. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the button. Once again, please press star 1 on your phone at this time.

As we look ahead, we are optimistic the positive trend we are seeing with our customers will continue and benefit ourselves. We're excited about our opportunity to drive topline growth and generate profitability through key customer projects and higher value solutions.

With that I'll open up the call for your questions.

Thank you at this time, we'll be conducting a question and answer session. If you'd like to ask a question. Please press star one on your telephone keypad.

A confirmation tone will indicate your line is in the question queue.

You May press Star two if you would like to remove your question from the queue.

For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. Once again, please press star one on your phone at this time, if you wish to ask a question. Please hold while we poll for questions.

Operator: [inaudible] This is a test. We'll be back in a moment. Thank you.

And the first question today is coming from Josh Nichols from B Riley Josh Your line is lives.

Operator: We'll be back in a moment. My question today is coming from... Yeah, thanks for taking my question. I know the carrier CapEx market has obviously been tough, specifically for last year, and the first quarter is a little bit of a seasonal low for you guys, but good to hear that revenue is expected to pick up in 2Q. Just given what we're seeing for the decent backlog jump, I'm just kind of curious, do you think that there's going to be more of an incremental or material sequential pickup in 2Q? Or do you think a lot of that backlog is going to be coming in like the fiscal second half of this year when we just think of the cadence of the acceleration over the next few quarters? Yeah, hey, Josh, thanks. Good question.

Yes, thanks for taking my question.

The carrier Capex market has obviously been tough specifically for last year in the first quarter is a little bit of a seasonally low for you guys, but good to hear that the revenue is expected to pick up in <unk>.

Just given what we're seeing for the decent backlog jump I'm just kind of curious do you think that.

There's going to be more of a incremental or material sequential pick up in <unk> or do you think a lot of that backlog is going to be coming in like the fiscal second half of this year. When we just think of the cadence of the acceleration over the next few quarters.

Yeah, Hey, Josh Thanks, Good question.

Robert D. Dawson: I think I'll give kind of two reactions to the question or two answers to the question. So one is, with what we've been through in the last four quarters, I have a hard time predicting exact timing on the way these orders are going to flow. So I'll just give that caveat kind of to begin. But I think that the broader piece is that we expect some of the orders we've been seeing to help us in Q2. I'm not going to give specific guidance on a Q2 revenue number, but we certainly expect a nice recovery starting to show in the second quarter. And then through the rest of the year, I mean, these orders that we've seen to take the backlog up, as I said in some of my prepared remarks. It's not a one-time thing.

I think I'll give kind of two two reactions to the question or two answers for the questions. So one is.

With what we've been through in the last four quarters I have a hard time predicting exact timing on the way. These orders are going to flow. So I'll, just I'll give that caveat kind of again, but I think for the.

<unk> pieces, we expect some of the orders we have been seeing to help us in Q2 now.

Not going to give specific guidance on our Q2 revenue number but we certainly expect nice recovery is starting to show in the second quarter and then through the rest of the year I mean, these orders that we've seen to take the backlog up as I said in my prepared remarks.

It's not a one time thing we have scenarios occasionally where we get a large order and we draw against it for some period of time. This is several recurring orders around several different projects with multiple customers that are not just the month of February was great from a bookings perspective, but it's not just that I think we continue to see those into March.

Robert D. Dawson: You know, we occasionally have scenarios where we get a large order and we draw against it for some period of time. These are several recurring orders around several different projects with multiple customers that are not just, you know, the month of February was great from a bookings perspective. But it's not just that I think we, you know, we continue to see those into March, helping that backlog, and we expect there to be, you know, more sort of continuing as the year goes on. So hard to give exact timing, but we certainly expect to sort of accelerate from here.

Helping that backlog and we expect there to be more sort of continuing as the year goes on so hard to give exact timing, but we certainly expect to sort of accelerate from here.

And Josh any more questions.

Robert D. Dawson: Josh, any more questions? Yeah, one more question. Sorry.

Yeah, one more question sorry.

Robert D. Dawson: Just looking at the op-ex structure, you guys have gotten pretty lean and mean over the last 12 months, I'd say, and you have made two and a half million in annualized operating savings. And you mentioned on the call that you could potentially make another three million in additional savings. Could you just maybe elaborate on where those are potentially coming from specifically, what the company plans to do, or any expenses associated with achieving those?

Just looking at the Opex structure, you guys have gotten pretty lean and mean over last 12 months I would say.

$2 5 million of annualized operating savings and you mentioned on the call that you could.

Could be potentially another $3 million of additional savings could you just maybe elaborate on where those are.

It's really coming from specifically.

What the company plans to do or any expenses associated with achieving those.

Robert D. Dawson: Sure, yeah, maybe I'll give a kind of a first pass on it, and then I'll let Ray add some of the specific initiatives at a high level that the team's driving. So generally, it's a sort of a continuation of the things that we began, you know, and had planned going into fiscal 23 with the combining of locations to allow us to get started on some of these, you know, streamlining opportunities. So it's sort of the next phase of that and continuing down the path of the good diligent, various work streams that the team has been driving. So Ray, maybe you want to mention some of the specific items. I know you had a few in your prepared remarks, but maybe just, you know, recap those at a high level what the items are that some of the initiatives the team's driving.

Sure, maybe I'll give a kind of a first pass on it and then I'll, let ray add some some of the specific initiatives at a high level that the teams driving so generally it's a sort of a continuation of the things that we began.

We had planned going into fiscal 'twenty three with the combining of locations to allow us to get started on some of these streamlining opportunities.

Sort of the next phase of that and continuing down the path of the good diligent various work streams that the team has been driving so ray maybe you want to mention some of the specific item that I had a few in your prepared remarks, but maybe just recap those at a high level what the items are that some of the initiatives the teams driving.

Ray Bibisi: Sure, thanks, Rob. And Josh, like I kind of mentioned in my dialogue, we're looking at multiple facets of the business. Direct material is one element, as Rob mentioned.

Sure. Thanks, Rob.

Josh.

Finally, I mentioned in my dialogue, we're looking at multiple facets of the business.

Direct material is one element as Rob mentioned facilities the consolidation of facilities in.

Ray Bibisi: Facility consolidation and the synergies that we can benefit from those consolidations. We're also looking very heavily into product design, the manufacturability of new product design. And then the other big element is the lean principles, eliminating waste in our operation, our manufacturing processes, and our processes across the board. So we kicked this off in 2023.

The synergies that we can benefit from those consolidations. We're also looking very heavily into product design.

Manufacturer ability of new product design and then the other the other big element is the lean principles of <unk>.

Eliminating waste in our operation our manufacturing processes and our processes across the board. So we kicked this off in 'twenty 2023, we see other opportunities moving into 2024, and we think that there's there's more that can be accomplished as we move into this year.

Ray Bibisi: We see other opportunities moving into 2024, and we think that there's more that can be accomplished as we move into this year. Thanks. So the last question for me, I guess, like, Given the anticipated upswing in revenue throughout the rest of the year and the fact that you talked about, you're probably going to be getting some higher-margin revenue from small cell and DAC, things like that, how should investors be thinking about the potential margin expansion over the coming quarters for the company? Yeah, maybe I'll give it a first pass and let Peter add some specifics there. So, I think that the general summary is, you know, we need there to be a specific sales number to allow us to cover the fixed charge, right?

Okay.

Thanks, and then last question for me I guess.

Given the anticipated upswing in revenue throughout the rest of the year and the fact that you've talked about.

It's probably going to be getting some higher margin revenue from.

Small cell and <unk> things like that.

Investors should be thinking about the potential margin expansion over the coming quarters for the company.

Yeah, maybe I'll give a first pass and let Peter add some specifics there. So I think the general summary is we need there to be a specific sales number to allow us to cover fixed charge rate that was one of the things that Peter mentioned in his comments and I think that just at a high level.

Ray Bibisi: That was one of the things that Peter mentioned in his comment. And I think that just at a high level, as we see product mix get better, we've brought our break even way down. But as we see, you know, the product mix get better around these higher-margin items, I think that is one key area where we should see the, you know, margin expansion start to happen. Peter, do you want to add some specifics there? Sure. Hey Josh.

As we see product mix get better we've brought our breakeven way down but as we see.

The product mix get better around these higher margin items I think that is one key area, where we should see the margin expansion start to happen Peter do you want to add some specifics there sure hey.

Peter Yin: Thanks, Rob. Um, as the year, you know, continues and we see the improvements in the top line and the product mix getting better, I think we can expect to get closer to the 30% range where we've been. Josh, coming off a 13.5 at 24.5, that's not a great number for us, but I think with the sales improving and kind of the synergies we've worked on last year and continuing on to this year, as we see the sales from the higher kind of margin stuff start to ship out, I think you'll see a quicker improvement to our growth margins with, you know, [inaudible] Great. That's all for me.

Hey, Josh Thanks, Rob.

Yes.

As of the year.

Continues and we see the improvement in the top line and the product mix getting better I think we can.

<unk> us to get closer to 30% range.

Range, where we've been Josh coming off a <unk> five at 24 and a half.

Got that.

Not a great number for us, but I think with the sales improving.

Kind of the synergies we've worked.

Sure.

On.

Last year and continuing onto this year as we see the sales from the higher margin stuff start to start to ship out I think you'll see a.

Quicker improvement to our gross margins with.

Well, we saw some sales increase here.

Great. That's all for me thanks, guys.

Peter Yin: Thanks, guys. Thanks, Josh. Thank you. And once again, it will be Star One.

Thanks, Josh.

Thank you and once again it will be star one if there were any other questions. At this time once again star one if you wish to ask a question at this time.

Operator: If there were any other questions, and Star One if you wish to ask Star. [inaudible] This question is coming from Greg. Gentlemen, I just have one simple question relative to the activities with the U.S. and China.

And once again Thats star one if you wish to ask a question at this time and the next question is coming from Greg Graves, Greg is a private investor.

Hi, gentlemen, I just have one simple question.

The activities in.

With the U S and China.

Robert D. Dawson: Could you give us a rough idea of how much you are relying on China for some of the components that go into our parts? Yeah, thanks, Greg. Good question.

Could you give us a rough idea of how reliant how much you are relying on China for some of the components that go into our parts.

Yes, Thanks, Greg Good question so.

Robert D. Dawson: So small, as in less than 10% of our inventory has a direct connection there. Now, that's direct; that doesn't mean that US-based suppliers that we're purchasing from aren't also sourcing something, but our exposure that we're aware of is, I would say, less than 10% of our inventory. Oh, thank you. That's very reassuring. Thanks, Greg. Yes, thank you. There was a mention of some obsolete or out of date inventory in your Inventory Figure. I'm wondering, roughly, can you give some guidance as to the percentage or dollar figure, roughly, about the inventory and what your hopes are for... Moving it out the door. Yeah, thanks, Ethan. So giving a specific net worth, we're not going to give a specific number on it. But I can tell you it's a small percentage of our total.

Small.

Less than 10% of our inventory as a direct connection there now that's correct that doesn't mean that U S. Based suppliers that were purchasing from are also sourcing something but our exposure that we're aware of.

I would say less than 10% of our inventory.

Oh, Thank you that's very reassuring.

Thanks, Greg.

Thank you and the next question is coming from Ethan Starr Ethan is also a private investor.

Yes. Thank you there was mention of some obsolete out of date inventory in your.

Inventory figure I'm wondering roughly can you give it give.

Some guidance as to the percentage or dollar figure roughly about the inventory and what your hopes are for.

Moving it out the door.

Yeah, Thanks, Nathan so.

Giving us specific network. So we're not going to give a specific number on it I can tell you. It's a small percentage of our total and in some cases, it's not actually obsolete. It's just been slow moving and we've made the decision to turn that into cash to move some stuff out of there. So it's not going to have a massive material change to our inventory level, but some of the.

Robert D. Dawson: And in some cases, it's not actually obsolete, it's just been slow moving. And we've made the decision to turn that into cash to move some stuff out of there. So it's not going to have a massive material change to our inventory level. But some of the, you know, the decline that you saw in our current inventory. I think it's, you know, 18 million, as we reported, and it was 18.9 in previous quarters. So part of that is selling through some inventory, but part of that is also reducing those numbers.

The decline that you saw in our current inventory and an $18 million as we reported it was $18 nine.

Prior quarter so.

Part of that is selling through some inventory part of that is also reducing those those numbers. So it's not I don't want to overstate. The obsolete word we certainly want to say, yes. There is some in there that we needed to move out, but it's more about I think just rationalizing and turning into cash if it hasnt been moving.

Robert D. Dawson: So it's not, you know, I don't want to overstate the obsolete word, we certainly want to say, yeah, there is some in there that we needed to move out. But it's more about, I think, just rationalizing and turning it into cash if it hasn't. Okay, well, thanks for correcting me on the improper use of obsolete, and look forward to next quarter's results. Thanks, Ethan. I think we said the word obsolete, so that's on us, not you.

Okay, well thanks for correcting me in the improper use of obsolete and look forward to next quarter's results.

Thanks, Steven I think we said the word obsolete so thats on us not you. Thank you okay.

Robert D. Dawson: Thank you. Thank you. There were no other questions at this time.

Perfect.

Sure.

Thank you there were no other questions at this time I would now like to hand, the call back to Rob Dawson CEO at Oracle industries for closing remarks.

Robert D. Dawson: And I would now like to hand the call back to Rob Dawson, CEO of RFI. Thanks, Paul. And thanks, everyone, for joining our call today. We look forward to reporting our second quarter results in June.

Thanks, Paul and thanks, everyone for joining our call today, we look forward to reporting our second quarter results in June.

Operator: Have a good day. Thank you. This does conclude today's conference. Connect Your Alliance. (inaudible)

Have a good day.

Thank you. This does conclude today's conference you may disconnect. Your lines at this time and have a wonderful day. Thank you for your participation.