Q2 2024 RF Industries Ltd Earnings Call

Operator: Greetings. Welcome to RF Industries' second 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. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. Please note that this conference is being recorded. I will now turn the conference over to your host, Margaret Boyce, Investor Relations at RF India. Margaret, you may begin.

Greetings and welcome to RF industries second 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. If anyone should require operator assistance. During the conference. Please press star zero on your telephone keypad. Please no.

Unknown Attendee: Welcome to RF Industries' second quarter fiscal 2024 financial results conference call. At this time, all participants are in a listening mode.

Unknown Attendee: A question and answer session will follow the former presentation.

Unknown Attendee: If anyone should acquire operator assistance during the conference, please press star zero on your telephone keypad. Please note this conference is being recorded.

This conference is being recorded I will now turn the conference over to your host Margaret Voice Investor Relations at RF Industries, Margaret you may begin.

Margaret Boyce: I will now turn the conference over to your host, Margaret Boyce, Investor Relations at RF Industries. Margaret, you may begin.

Margaret Boyce: Thank you, Paul. Good afternoon, everyone, and welcome to RF Industries' second quarter fiscal 2024 earnings conference call. With me on today's call are RF Industries' Chief Executive Officer, Rob Dawson, President and COO, Ray Bibisi, and CFO, Peter Yin. We issued our Q2 earnings release after the market today. That release is available on our website at RFIndustries.com.

Margaret Boyce: Thank you, Paul. Good afternoon, everyone, and welcome to RF Industries' second quarter fiscal 2024 earnings conference call. With me on today's call, our RF Industries' Chief Executive Officer, Rob Dawson, President and COO, Ray Bibisi, and CFO, Peter Yin. We issued our Q2 earnings release after market today. That release is available on our website at RFindustries.com.

Thank you Paul Good afternoon, everyone and welcome to Arab Industries second quarter fiscal 2024 earnings Conference call with me on today's call are RF industries, Chief Executive Officer, Rob Dawson, President and C. O O rabid BZ and CFO Peter Yeah, We issued our Q2 earnings.

Speaker Change: Release aftermarket 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, except for the historical statements, statements on this call today may constitute forward-looking statements under the securities exchange laws. When used, the words anticipate, believe, expect, 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. 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 actual results include the risks and uncertainties discussed in the company's reports, unformed 10-K and 10-Q in other filings with the SEC.

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, except for historical statements, statements on this call today may constitute forward-looking statements under the securities exchange laws. When used, the words anticipate, believe, expect, 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.

Speaker Change: 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 except for the historical statements statements on this call today may constitute forward looking statements under the Securities exchange lives.

Margaret Boyce: Actual results may differ materially from the outcomes contained in any forward-looking statement. Factors that could cause these forward-looking statements to differ from actual results include the risks and uncertainties discussed in the company's reports on Form 10-K and 10-Q and other filings with the SEC. RF Industries undertakes no obligation to update or revise any forward-looking statements. Additionally, throughout the call, we will be discussing certain non-GAAP financial measures. Today's earnings release and the related current report on Form 8K describe the differences between our GAAP and non-GAAP reporting. With that said, I'll now turn the conference over to Rob Dawson. Chief Executive Officer, Brab. Thank you, Margaret.

Speaker Change: When used the words anticipate believe expect 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.

Speaker Change: There are subject to risks and uncertainty actual results may differ materially from the outcomes contained in any forward looking statement.

Speaker Change: Factors that could cause these forward looking statements to differ from actual results include the risks and uncertainties discussed in the company's report on Form 10-K, and 10-Q and other filings with the SEC.

Margaret Boyce: RF Industries undertakes no obligation to update or revise any forward-looking statements.

Speaker Change: Our F industries undertakes no obligation to update or revise any forward looking statements.

Margaret Boyce: Additionally, throughout the call, we will be discussing certain non-CAP financial measures. Today's earnings release and the related Current Report on Form 8-K described the differences between our GAAP and non-GAAP reporting.

Speaker Change: Additionally throughout the call we will be discussing certain non-GAAP financial measures today's earnings release and the related current report on form 8-K describe the differences between our GAAP and non-GAAP reporting with that said I'll now turn the conference over to Rob Hoffman, Chief Executive Officer Fred.

Rob Dawson: With that said, I'll now turn the conference over to Rob Dawson, Chief Executive Officer, from. Thank you, Margaret. Welcome to our second quarter of fiscal 2024 conference call.

Speaker Change:

Margaret Boyce: Thank you Margaret.

Robert D. Dawson: Thank you, Margaret. Welcome to our second quarter fiscal 2024 conference call. I'm here today with Ray Bibisi, our President and COO, and Peter Yin, our CFO. I'll start with the highlights of the second quarter results and our strong market opportunity. Ray will then discuss some updates in our sales organization about what we're hearing from customers. And finally, Peter will cover our financials.

Rob Hoffman: So our second quarter fiscal 2024 conference call.

Rob Dawson: I'm here today with Raven BC, our President and COO, and Peter Ian RCFO. I'll start with the highlights, the second quarter of results, and our strong market opportunity. Ray will then discuss some updates in our sales organization, of what we're hearing from customers, and finally, Peter will cover our financial results. Before we get started, I realized that we sold some of our own thunder when we pre-released an outlook for the second quarter a few weeks ago. While that preview will not become a normal practice, it was necessary since there was a material increase, not just an overflow, but also in our backlog, that we felt needed to be publicly disclosed.

Peter Yin: Year to date rate of ECR, President and COO and Peter <unk> our CFO.

Rob Hoffman: I'll start with the highlights for the second quarter results and our strong market opportunity Ray will then discuss some updates on our sales organization and what we're hearing from customers.

Rob Hoffman: And finally, Peter will cover our financial results.

Robert D. Dawson: Before I get started, I realize that we stole some of our own thunder when we pre-released an outlook for the second quarter a few weeks ago. While that preview will not become a normal practice, it was necessary since there was a material increase not just in order flow but also in our backlog that we felt needed to be publicly disclosed. We're pleased to see early signs of a recovery in our core markets. In the second quarter, we saw meaningful sequential improvement. Net sales were up 19.7% to $16.1 million.

Speaker Change: Before we get started I realized that we sold some of our own Thunder when we pre released the outlook for the second quarter, a few weeks ago.

Speaker Change: While that review will not become a normal practice it was necessary since there was a material increase not just an overflow but also in our backlog that we felt needed to be publicly disclosed.

Rob Dawson: We're pleased to see early signs of recovery in our core markets. In the second quarter, we saw meaningful sequential improvement. Net sales were up 19.7% to 16.1 million dollars. Gross profit margin improved 540 basis points to 29.9%.

Speaker Change: We're pleased to see early signs of a recovery in our core markets in the second quarter, we saw meaningful sequential improvement net sales were up 19, 7% to $16 $1 million.

Robert D. Dawson: Gross profit margin improved 540 basis points to 29.9%. Our operating loss was cut dramatically, and adjusted EBITDA returned to positive territory. This is the strongest indication yet that our business is on the rebound after a very challenging 2023, marked by significant cuts in telecom capex. Our results showed improvement largely due to a steady reduction in operating expenses as well as the strategic transformation of our portfolio to offer higher quality, higher value solutions.

Speaker Change: Gross profit margin improved 540 basis points to 29, 9%.

Rob Dawson: Dawson. Our operating loss was cut dramatically, and adjusted EBITDA returned to positive territory. This is the strongest indication yet that our business is on the rebound after a very challenging 2023 marked by significant cuts in telecom capex spending. Our results showed improvement largely due to a steady reduction in operating expenses, as well as the strategic transformation of our portfolio to offer higher quality, higher value solutions. As we've talked about for several quarters, we've been positioning the company to benefit from some major market trends by working to transform our product and solution portfolio. We believe that we're nearing an inflection point in that portfolio pivot, driving higher margins and strengthen the market.

Speaker Change: Our operating loss was cut dramatically and adjusted EBITDA returned to positive territory.

This is the strongest indication yet that our business is on the rebound after a very challenging 2023 marked by significant cuts in telecom capex spending.

Our results showed improvement largely due to a steady reduction in operating expenses as well as the strategic transformation of our portfolio to offer higher quality higher value solutions.

Robert D. Dawson: As we've talked about for several quarters, we've been positioning the company to benefit from some major market trends by working to transform our product and solution portfolio. We believe that we're nearing an inflection point in that portfolio pivot, driving higher margins and strengthening the market. Q2 is the first quarter where you can really start to see that transformation show up in our results. There was significant margin improvement driven by a better product. We've had the goal to return to 30% or greater in gross margins, and we effectively achieved that this quarter, even with modest sales results.

Speaker Change: As we've talked about for several quarters, we've been positioning the company to benefit from some major market trends by working to transform our product and solution portfolio.

Speaker Change: We believe that we are nearing an inflection point in that portfolio are driving higher margins and strengthen the market.

Rob Dawson: Q2 was the first quarter where you can really start to see that transformation show up in our results. There was significant margin improvement driven by a better product mix. We've had the goal to return the 30% or greater in gross margins, and we effectively achieved that this quarter, even with modest sales results. Additionally, with all the work the team has done on our operating expenses, we've created tremendous operating leverage in the business. To give a little more detail, this quarter, our revenue reflected a greater contribution from newer product areas like small sell solutions and DAC thermal cooling products.

Speaker Change: Q2 was the first quarter, where you can really start to see that transformation show up in our results.

Speaker Change: There was significant margin improvement driven by a better product mix.

Speaker Change: We've had the goal to return to 30% or greater and gross margins and we effectively achieved that this quarter, even with modest sales results.

Robert D. Dawson: Additionally, with all the work the team has done on our operating expenses, we've created tremendous operating leverage in the business. To give a little more detail, this quarter, our revenue reflected a greater contribution from newer product areas like small cell solutions and DAC thermal cooling products. These increased sales contributed to an overall better performance.

Speaker Change: Italy with all the work that the team has done on our operating expenses, we've created tremendous operating leverage in the business.

Speaker Change: To give a little more detail this quarter, our revenue reflected a greater contribution from newer product areas like small cell solutions and <unk> thermal cooling products.

Rob Dawson: These increased sales contributed to an overall better performance. And while we're just getting started with these solutions, going forward, we expect that the shift towards higher value products is sustainable based on recent incoming orders. For example, last month we announced several large orders totaling approximately $4 million across multiple product areas, including a $2 million win for small sell solutions from one key customer in the Tier 1 wireless carrier ecosystem. Based on these recent orders, telecom companies seem to be moving forward on upgrading their infrastructure with cost-effective and technology-forward products. We continue to be bullish on medium and long-term recovery in our markets, and if wireless capex continues to normalize, that would certainly have a positive impact on our overall business across the board.

Speaker Change: These increased sales contributed to an overall better performance and while we're just getting started with the solutions going forward, we expect that the shift towards higher value products is sustainable based on recent incoming orders.

Robert D. Dawson: And while we're just getting started with these solutions, going forward, we expect that the shift towards higher-value products is sustainable based on recent incoming orders. For example, last month, we announced several large orders totaling approximately $4 million across multiple product areas, including a $2 million win for small cell solutions from one key customer in the Tier One wireless carrier ecosystem. Based on these recent orders, telecom companies seem to be moving forward with upgrading their infrastructure with cost-effective and technology-forward products.

Speaker Change: For example, last month, we announced several large orders totaling approximately $4 million across multiple product areas, including a 2 million dollar win for small cell solutions from one key customer in the tier one wireless carrier ecosystem.

Speaker Change: Based on these recent orders telecom companies seem to be moving forward on upgrading their infrastructure with cost effective and technology forward products.

Robert D. Dawson: We continue to be bullish on medium and long-term recovery in our markets, and if wireless CapEx continues to normalize, that would certainly have a positive impact on our overall business across the board. That said, once you've been stuck in a trough for a while, you look for alternative ways to avoid repeating that experience.

Speaker Change: We continue to be bullish on medium and long term recovery in our markets and if wireless Capex continues to normalize that would certainly have a positive impact on our overall business across the board.

Rob Dawson: That said, once you've been stuck in a trough for a while, you look for alternative ways to avoid repeating that experience. For our team, that means looking beyond our traditional markets for new opportunities to deploy our portfolio of technologically advanced products that have many applications. Fortunately, the growth of our product and solutions portfolio, both organically and through acquisitions, has greatly expanded our offer and our customer relationships. These new additions, along with our standard and custom interconnect products, have allowed us to explore new market segments outside of a wireless carrier space. We're working hard to expand our customer base in existing markets.

Speaker Change: That said once you've been stuck in a trough for a while you look for alternative ways to avoid repeating that experience.

Robert D. Dawson: For our team, that means looking beyond our traditional markets for new opportunities to deploy our portfolio of technologically advanced products that have many applications. Fortunately, the growth of our product and solutions portfolio, both organically and through acquisition, has greatly expanded our offer and our customer relationships. These new additions, along with our standard and custom interconnect products, have allowed us to explore new market segments outside of the wireless carrier space. Additionally, we're working hard to expand our customer base in existing markets. We're also using the wins in those current markets to explore the opportunity in other market sites.

Speaker Change: For our team that means looking beyond our traditional markets for new opportunities to deploy our portfolio of technologically advanced products that have many applications.

Speaker Change: Fortunately the growth of our product and solutions portfolio, both organically and through acquisitions has greatly expanded our offer and our customer relationships.

Speaker Change: These new additions along with our standard and custom interconnect products have allowed us to explore new market segments outside of the wireless carrier space.

Speaker Change: We're working hard to expand our customer base in existing markets. We're also using the wins in those current markets to explore the opportunity in other market segments.

Rob Dawson: We're also using the wins in those current markets to explore the opportunity in other market segments. We believe that our updated solutions offering is allowing us to help solve new communications and connectivity challenges and positions us for growth in the best end markets and opportunities with less cyclical and more valuable solutions. This expanded and transform offer aligns us to benefit from enhanced spending on some of what I'll call market mega trends. Let me walk through a few of these trends where we feel our offer is relevant. First, an obvious one: 5G and the related densification of the wireless infrastructure to fill in coverage gaps and address capacity demands.

Robert D. Dawson: We believe that our updated solutions offering is allowing us to help solve new communications and connectivity challenges and positions us for growth in the best end markets and opportunities with less cyclical and more valuable solutions. This expanded and transformed offer aligns us to benefit from enhanced spending on some of what I'll call market megatrends. Let me walk through a few of these trends where we feel our offer is relevant. First, an obvious one, 5G and the related densification of the wireless infrastructure to fill in coverage gaps and address capacity demand. We've been at the forefront of this discussion around densification for several years, and based on our history supporting stadium and large venue build-outs.

Speaker Change: We believe that our updated solutions offering is allowing us to help solve new communications and connectivity challenges and positions us for growth and the best end markets and opportunities with less cyclical and more valuable solutions.

Speaker Change: This expanded and transform offer aligns us to benefit from enhanced spending on some of what I'll call them market Mega trends.

Speaker Change: You walk through a few of these trends, where we feel our offer is relevant.

Speaker Change: First an obvious one <unk> and the related densification of the wireless infrastructure to fill a coverage gap and address capacity demands.

Rob Dawson: We've been at the forefront of this discussion around densification for several years, and based on our history supporting stadium and large venue buildouts, RFI has a sterling reputation for supplying many components needed for these projects. With our integrated small cell and insulation materials offer, we're trying for the expected increase of street level coverage. Our reputation for being a reliable, easy to work with partner with a broad range of connectivity solutions is our calling card with the wireless carrier ecosystem. Second, with the insatiable need for data both in mobile and fixed environments, and the related AI boom that we're all hearing about, we're seeing some helpful trends.

Speaker Change: We've been at the forefront of this discussion around Densification for several years and based on our history supporting stadium in large venue build outs.

Robert D. Dawson: RFI has a sterling reputation for supplying many components needed for these projects. With our integrated small cell and installation materials offering, we're primed for the expected increase in street level coverage. Our reputation for being a reliable, easy-to-work-with partner with a broad range of connectivity solutions is our calling card in the Wireless Carrier Ecosystem. Second, with the insatiable need for data, both in mobile and fixed environments, and the related AI boom that we're all hearing about, we're seeing some helpful trends. Researchers have suggested that AI could also lead to a shocking amount of power consumption, up to a tenfold increase.

Speaker Change: <unk> has a sterling reputation for supplying many components needed for these projects.

Speaker Change: With our integrated small cell and installation materials offer.

Speaker Change: Brian for the expected increase of street level coverage.

Speaker Change: Our reputation for being a reliable easy to work with partner with a broad range of connectivity solutions is our calling card with a wireless carrier ecosystem.

Speaker Change: Second with the insatiable need for data, both in mobile and fixed environments and the related AI boom that we're all hearing about we're seeing some helpful trends re.

Rob Dawson: Researchers have suggested that AI can also lead through a shocking amount of power consumption, up to a 10-fold increase. This is not surprising based on estimates that data centers are expected to double in the next year. While we don't compete directly in the hyperscale data center space, we absolutely see that demand bleeding over into the edges of the network. The buildout of data centers is pushing networking equipment further to the edges of the network, and into the small buildings, cabinets, and enclosures that reside there. This is where we can shine. By cooling this equipment in a cost-effective and environmentally sound way, our DAC thermal cooling offer is seeing an increasing level of interest in several applications where we can help solve these energy needs.

Speaker Change: Researchers have suggested that AI AI could also lead to a shocking amount of power consumption up to a tenfold increase.

Robert D. Dawson: This is not surprising based on estimates that data centers are expected to double in the next year. While we don't compete directly in the hyperscale data center space, we absolutely see that demand bleeding over into the edges of the network. The build-out of data centers is pushing networking equipment further to the edges of the network and into the small buildings, cabinets, and enclosures that reside there. This is where we can shine by cooling this equipment in a cost-effective and environmentally sound way.

Speaker Change: This is not surprising based on estimates that data centers are expected to double in the next year.

Speaker Change: While we don't compete directly in the Hyperscale data center space, we absolutely see that demand bleeding over into the edges of the network.

Speaker Change: The build out of data centers is pushing networking equipment further to the edges of the network and into the small buildings cabinets and enclosures that reside there.

Speaker Change: This is where we can shine by cooling this equipment in a cost effective and environmentally sound way.

Robert D. Dawson: Next, the United States continues to have a heavy focus on providing high-speed Internet for everyone, regardless of where you live in the world. The U.S. government is spending billions of dollars to provide universal connectivity with high-speed Internet to all communities, but especially in underserved communities. Known as the Broadband Equity Access and Deployment, or BDE, program, the government is providing over $42 billion to expand high-speed Internet access through infrastructure deployment and adoption programs in all 50 states and its territories.

Speaker Change: <unk> thermal cooling offer is seeing an increasing level of interest in several applications, where we can help solve these energy needs.

Rob Dawson: Next, the United States continues to have a heavy focus on providing high-speed internet for everyone, regardless of where you live and work.

Speaker Change: Next to the United States continues to have a heavy focus on providing high speed internet for everyone.

Speaker Change: Regardless of where you live and work.

Rob Dawson: The U.S. Government is spending billions of dollars to provide universal connectivity with high-speed internet to all communities, but especially in underserved communities. Known as the Broadband Equity Access and Deployment, or BEED program, the government is providing over $42 billion to expand high-speed internet access through infrastructure deployment and adoption programs in all 50 states and territories. We're developing strong relationships in these markets and are actively working to become better positioned to benefit from this major uplift in infrastructure spending. Finally, with well-known initiatives in the defense and aerospace market, along with the new frontiers that are being driven by space companies, we believe that we can see meaningful additional streams of revenue from providing innovative solutions in these markets.

Speaker Change: The U S government is spending billions of dollars to provide universal connectivity with high speed Internet to all communities, but especially in underserved communities.

Speaker Change: Known as the broadband equity access and deployment or bead program. The government is providing over 42 billion to expand high speed Internet access through infrastructure deployment and adoption programs in all 50 states and its territories.

Speaker Change: We're developing strong relationships in these markets and are actively working to become better positioned to benefit from this major uplift in infrastructure spending.

Robert D. Dawson: We're developing strong relationships in these markets and are actively working to become better positioned to benefit from this major uplift in infrastructure spending. Finally, with well-known initiatives in the defense and aerospace market, along with the new frontiers that are being driven by space companies, we believe that we can see meaningful additional streams of revenue from providing innovative solutions in these markets. We're already doing business with many companies in these areas through our custom cabling segment and feel that we are in the early stages of showing our value.

Speaker Change: Finally, with well known initiatives in the defense and aerospace markets, along with the new frontier that are being driven by space companies. We believe that we can see meaningful additional streams of revenue for providing innovative solutions in these markets.

Rob Dawson: We're already doing business with many companies in these areas through our custom cable and segment and feel that we are in the early stages of showing our value here. And, as we discussed last quarter, a large percentage of our sales already come from markets that are unrelated to the wireless carrier applications. Plus, some of our key solutions in the wireless carrier space are aligned with operating and maintenance budgets versus CAPEX spend. One example is, again, our DAC thermal cooling systems. These patented systems are built to stand the rigor of outdoor environments. Plus, they have state-of-the-art technologies that can reduce operating expenses by up to 70% over conventional HVAC systems and can help companies achieve their dream initiatives.

Speaker Change: We're already doing business with many companies in these areas through our custom cabling segment and feel that we are in the early stages of showing our value here.

Speaker Change: And as we discussed last quarter, a large percentage of our sales already come from markets that are unrelated to the wireless carrier applications.

Robert D. Dawson: And, as we discussed last quarter, a large percentage of our sales already come from markets that are unrelated to the wireless carrier application. Plus, some of our key solutions in the wireless carrier space are aligned with operating and maintenance budgets versus CapEx spend. One example is, again, our DAC Thermal Cooling. These patented systems are built to stand the rigor of outdoor environments.

Speaker Change: Plus some of our key solutions in the wireless carrier space are aligned with operating and maintenance budgets versus capex spend.

Speaker Change: One example is again, our DAC thermal cooling systems. These patented systems are built to stand the rigor of outdoor environments plus they have state of the art technologies that can reduce operating expenses by up to 70% over conventional HVAC systems and can help the company the team achieve their green initiatives.

Robert D. Dawson: Plus, they have state-of-the-art technologies that can reduce operating expenses by up to 70% over conventional HVAC systems and can help companies achieve their green initiatives. Across many market segments, companies are now focused on updating their cooling infrastructure, which would benefit RFI by having the ability to flex between op-ex and cap-ex spends. Looking ahead, we're optimistic these demand trends will continue, and we're excited to see the first real indication of what our business could look like with some wind at our backs.

Rob Dawson: Across many market segments, companies are now focused on updating their cooling infrastructure, which would benefit RFI by having the ability to flex between CAPEX and CAPEX. Spending. Looking ahead, we're optimistic these demand trends will continue, and we're excited to see the first real indication of what our business could look like with some window our back. I want to thank the R&K team for staying focused and continuing to manage the levers that we can control. Like the customer experience, our cost structure, product quality, and a positive energy level. We appreciate the support from our customers and the opportunity to partner with a terrific and expanding customer base.

Speaker Change: Across many market segments companies are now focused on updating their cooling infrastructure.

Speaker Change: Which would benefit RFID by having the ability to flex between Opex and Capex spending.

Speaker Change: Looking ahead, we are optimistic these demand trends will continue and we're excited to see the first real indication of what our business could look like with some window are back.

Robert D. Dawson: I want to thank the RFI team for staying focused and continuing to manage the levers that we can control, like the customer experience, our cost structure, product quality, and a positive energy level. We appreciate the support from our customers and the opportunity to partner with a terrific and expanding customer base. We remain confident that we have the right business model, the right products and solutions, and the right team to capitalize on improving momentum to deliver increased shareholder value as we move into the back half of fiscal 2024. I'll now turn it over to Ray to discuss what we're hearing from our customers.

I want to thank the Rmi team for staying focused and continuing to manage the levers that we can control like.

Speaker Change: Like the customer experience our cost structure product quality.

Speaker Change: And a positive energy level.

We appreciate the support from our customers and the opportunity to partner with a terrific and expanding customer base.

Rob Dawson: We remain confident that we have the right business model, the right products and solutions, and the right team to capitalize on improving momentum to deliver increased shareholder value as we move into the back half of fiscal 2024.

Speaker Change: We remain confident that we have the right business model, the right products and solutions and the right team to capitalize on improving momentum to deliver increased shareholder value as we move into the back half of fiscal 2024.

Ray Bibisi: I'll now turn it over to Ray to discuss what we're hearing from our customers. Ray?

Speaker Change: I'll now turn it over to Ray to discuss what we're hearing from our customers.

Speaker Change: Right.

Ray Bibisi: Thank you, Rob. As previously mentioned, we have developed an impressive portfolio to support the connectivity and communication needs of several key markets. Our team has earned our customer's confidence as a go-to source for a broad and high-quality product portfolio, quick-turn solution, and attentive customer support. Many of our customers have communicated how they appreciate the value of our reliable partnership and our commitment to supporting them through challenging times. I applaud our teams for their customer-first mentality and their dedication to helping them with actionable solutions.

Ray: Thank you Rob.

Ray Bibisi: As previously mentioned, we have developed an impressive portfolio to support the connectivity and communication needs of several key markets. Our team has earned our customers' confidence as a go-to source for a broad and high-quality product portfolio, quick-turn solutions, and attentive customer support. Many of our customers have communicated how they appreciate the value of our reliable partnership and our commitment to supporting them through challenging times. I applaud our teams for their customer-first mentality and their dedication to helping them with actionable solutions. As a part of our go-to-market strategy, we reorganized and strengthened our sales leadership team. John Cirincione has assumed the role of VP of Sales for Key Accounts, focusing on end-customer applications and business development.

Ray: As previously mentioned, we have developed an impressive portfolio to support the connectivity and communication needs of several key markets. Our team has earned our customers confidence as a go to source for a broad and high quality product portfolio quick turn solution and attentive.

Ray: Customer support.

Speaker Change: Many of our customers have communicated how they appreciate the value of a reliable partnership and our commitment to swap.

Speaker Change: And our commitment to supporting them through challenging times.

I applaud our teams for their customer first mentality and their dedication to helping them with actionable solutions.

Ray Bibisi: As a part of our go-to-market strategy, we reorganized and strengthened our sales leadership team. John Serencio and had to assume the role of VP of Sales of key accounts focused on end customer applications and business development. We have also added Mary Beth Smith, a 20-year veteran in sales and product management within the telecommunications industry. As Vice President of North American Distribution Sales, Mary Beth will be focused on further enhancing RFI's strong reputation within the channel's segment. We are already seeing benefits of this realignment by winning new orders and will continue to focus on driving further cost reductions that will contribute to margin expansion as we scale our business.

Speaker Change: As a part of our go to market strategy, we reorganized and strengthened our sales leadership team.

Ray Bibisi: We have also added Mary Beth Smith, a 20-year veteran in sales and product management within the telecommunications industry. As Vice President of North American Distribution Sales, Mary Beth will be focused on further enhancing RFI's strong reputation within the channel segment. We are already seeing benefits of this realignment by winning new orders. And we'll continue to focus on driving further cost reductions that will contribute to margin expansion as we scale our business.

John <unk>: John <unk> has assumed the role of VP of sales of key accounts.

Speaker Change: Focus on end customer applications and business development.

Speaker Change: We have also added Mary Beth Smith.

Speaker Change: A 20 year veteran in sales and product management within the telling me telecommunications industry.

Speaker Change: As vice President of North American distribution sales.

Speaker Change: <unk> will be focused on further enhancing RFID strong reputation within the channel segment.

We are already seeing benefits of this realignment by winning new orders and we will continue to focus on driving further cost reductions that will contribute to margin expansion as we scale our business.

Ray Bibisi: Over the past months, we have achieved significant wins while expanding our market presence and launching new initiatives. These successes highlight the effectiveness of our strategic plan to meet the evolving needs of our customers. As we move forward, we remain aligned in maximizing the opportunities ahead by leveraging our strengths, exploring new markets, and continually enhancing our product offering. We believe this focus approach will contribute to an even greater success for RFI in the future, driving growth and reinforcing our position as a leader in our industry.

Ray Bibisi: Over the past months, we have achieved significant wins while expanding our market presence and launching new initiatives. These successes highlight the effectiveness of our strategic plan to meet the evolving needs of our customers. As we move forward, we remain aligned with maximizing the opportunities ahead by leveraging our strength, exploring new markets, and continually enhancing our product offering. We believe this focused approach will contribute to even greater success for RFI in the future, driving growth and reinforcing our position as a leader in our industry. I will now turn it over to Peter to discuss our finances.

Speaker Change: Over the past months, we have achieved significant wins, while expanding our market presence and launching new initiatives.

Speaker Change: These successes highlight the effectiveness of our strategic plan to meet the evolving needs of our customers.

Speaker Change: As we move forward, we remain aligned and maximizing the opportunities ahead by leveraging our strengths.

Speaker Change: Flooring new markets.

Speaker Change: And continually enhancing our product offering.

Speaker Change: We believe this focused approach will contribute to an even greater success for RFID in the future driving growth and reinforcing our position as a leader in our industry.

Peter Yin: I will now turn it over to Peter to discuss our financials. Peter?

Speaker Change: I will now turn it over to Peter to discuss our financials.

Speaker Change: Peter.

Peter Yin: Thank you, Ray, and good afternoon, everyone. We're pleased with our second quarter operating results, and we're encouraged to see new order flow increasing, which is adding to our backlog and giving us positive momentum as we enter the second half of the fiscal year. As I discuss the financials, I'll provide comparisons on a sequential and year-over-year basis. Second quarter net sales increased 19.7% sequentially, of 16.1 million, up from 13.5 million in the first quarter. Net sales were down compared to 22.3 million in the prior year period. Second quarter gross profit margins increased 540 basis points to 29.9%, an improvement from 24.5% in the first quarter of fiscal 2024.

Peter: Thank you rich and good afternoon, everyone.

Peter Yin: Thank you, Ray, and good afternoon, everyone. We're pleased with our second quarter operating results and are encouraged to see new order flow increasing, which is adding to our backlog and giving us positive momentum as we enter the second half of the fiscal year. As I discuss the financials, I'll provide comparisons on a sequential and year-over-year basis. Second quarter net sales increased 19.7% sequentially to $16.1 million, up from $13.5 million in the first quarter.

We're pleased with our second quarter operating results and are encouraged to see new order flow, increasing which is adding to our backlog and giving us positive momentum as we enter the second half of the fiscal year.

Peter: As I discuss the financials I will provide comparisons on a sequential and year over year basis.

Speaker Change: Second quarter net sales increased 19, 7% sequentially up $16, one up to $16 1 million up from $13 5 million in the first quarter net sales were down compared to $22 3 million in the prior year period.

Peter Yin: Net sales were down, compared to $22.3 million in the prior year period. Second quarter gross profit margin increased 540 basis points to 29.9%, an improvement from 24.5% in the first quarter of fiscal 2024, and up from 27.4% year-over-year. The increase in gross margin was primarily the result of a more favorable product mix, along with increased efficiencies from facility consolidation and cost reduction initiatives.

Speaker Change: Second quarter gross profit margin increased 540 basis points to 29, 9% an improvement from 24, 5% in the first quarter of fiscal 2024.

Peter Yin: And up from 27.4% year-over-year, the increase in gross margin was primarily the result of a more favorable product mix, along with increased efficiencies from facility consolidation and cost reduction initiatives. Operating loss was 415,000 and improvement from a loss of 2.1 million in the first quarter of 2024 and down from income of 489,000 year-over-year. During the second quarter, consolidated net loss was 4.3 million, or 41 cents per diluted share, of sequential decline from a loss of 1.4 million, or 13 cents per diluted share, in the first quarter of fiscal 2024 and down from income of 581,000, or 6 cents per diluted share, year-over-year.

Speaker Change: And up from 27, 4% year over year. The increase in gross margin was primarily the result of a more favorable product mix, along with increased efficiencies from facility consolidation and cost reduction initiatives.

Peter Yin: Operating loss was 415,000, an improvement from a loss of 2.1 million in the first quarter of 2024 and down from income of 489,000 year over year. During the second quarter, consolidated net loss was $4.3 million, or $0.41 per diluted share. A sequential decline from a loss of $1.4 million, or $0.13 per diluted share, in the first quarter of fiscal 2024 and down from a profit of $581,000, or $0.06 per diluted share, year over year.

Speaker Change: Operating loss was 415000, an improvement from a loss of $2 1 million in the first quarter of 2024 and down from income of 489000 year over year.

Speaker Change: During the second quarter consolidated net loss was $4 3 million or <unk> 41 per diluted share a sequential decline from a loss of $1 4 million or <unk> <unk> per diluted share in the first quarter of fiscal 2024 and down from income of 581000 or <unk> <unk> per.

Speaker Change: Our diluted share year over year.

Peter Yin: It's important to note here that in the current period, the consolidated net loss was driven primarily by a $3.6 million tax provision relating to evaluation allowance on our deferred tax asset balance, which is a non-cash event. Non-GAAP net income was 132,000 or 1 cent per diluted share and improvement from non-GAAP net loss of $1.4 million or 14 cents per diluted share in the first quarter of fiscal 2024 and down from non-GAAP net income of 1.2 million or 11 cents per year-over-year. Second quarter, adjusted EBITDA was 572,000 from adjusted EBITDA loss of 1.1 million in the first quarter of 2024 and down from adjusted EBITDA of 1.4 million year-over-year.

Peter Yin: It's important to note here that in the current period, the consolidated net loss was driven primarily by a $3.6 million tax provision relating to a valuation allowance on our deferred tax asset balance, which is a non-cash event. Non-Gap Net Income was $132,000 or $0.01 per diluted share, an improvement from Non-Gap Net Loss of $1.4 million or $0.14 per diluted share in the first quarter of fiscal 2024 and down from Non-Gap Net Income of $1.2 million or $0.11 per share year over year.

Important to note here that in the current period. The consolidated net loss was driven primarily by a $3 $6 million tax provision relating to evaluation allowance on our deferred tax asset balance, which is a noncash event.

Speaker Change: non-GAAP net income was 132000 or <unk>.

Speaker Change: Per diluted share an improvement from non-GAAP net loss of $1 4 million or <unk> 14 per diluted share in the first quarter of fiscal 2024 and down from non-GAAP net income of $1 2 million or 11.

Speaker Change: <unk> year over year.

Peter Yin: Second quarter adjusted EBITDA was $572,000, from an adjusted EBITDA loss of 1.1 million in the first quarter of 2024 and down from adjusted EBITDA of 1.4 million year-over-year. Moving to the balance sheet. As of April 30, 2024, we had a total of $1.4 million of cash and cash equivalents, and we had working capital of $10.9 million and a current ratio of approximately 1.6 to 1, with current assets at $30.2 million and current liabilities at $19.3 million.

Speaker Change: Second quarter adjusted EBITDA was 572000.

Speaker Change: Adjusted EBITDA loss of $1 1 million in the first quarter of 2024 and down from adjusted EBITDA of $1 4 million year over year.

Peter Yin: Moving to the balance sheet, as of April 30, 2024, we had a total of 1.4 million of cash and cash equivalents, and we had working capital of $10.9 million and a current ratio of approximately 1.6 to 1, with current assets at $30.2 million and current liabilities at $19.3 million. The line of credit we entered into in March has a term of 3 years and will allow up to $15 million depending on our borrowing base. However, due to the structure of the loan, the outstanding balance has been classified as a current liability. As of Q2, we had borrowed $10.5 million from the line of credit.

Speaker Change: Moving to the balance sheet.

Speaker Change: April 32024, we had a total of $1 4 million of cash and cash equivalents and we had working capital of $10 $9 million and a current ratio of approximately one six to one.

Speaker Change: With current assets.

Speaker Change: At $30 2 million and current liabilities at $19 3 million.

Peter Yin: The line of credit we entered into in March has a term of 3 years and will allow up to $15 million depending on our borrowing base. However, due to the structure of the loan, the outstanding balance has been classified as a current liability. As of Q2, we had borrowed $10.5 million from the line of credit. We believe that the amount of liquidity available to us will be sufficient to fund the anticipated operational needs of the company. Our inventory level was $16.4 million, down from $18.7 million last year.

Speaker Change: The lines of credit we entered into in March has a term of three years and will allow up to $15 million, depending on our borrowing base. However, due to the structure of the loan the outstanding balance has been classified as a current liability.

Speaker Change: As of Q2, we had borrowed $10 $5 million from the line of credit.

Peter Yin: We believe that the amount of liquidity available to us will be sufficient to fund the anticipated operational needs of the company.

Speaker Change: We believe that the amount of liquidity available to us will be sufficient to fund the anticipated operational needs of the company.

Peter Yin: Company. Our inventory level was $16.4 million, down from $18.7 million last year. The decrease in inventory reflected our continued rationalization and bright sizing of our inventory as we continue to improve our processes and systems capabilities around the company's supply chain. Even with the reduced inventory level, we believe it supports our strategic business model of inventory availability. We continue to manage this closely as we expect to see increase demand in 2024 as spending in key markets gradually normalizes over the coming year. Moving on, we are seeing momentum build around new business. Our backlog as of April 30, 2024, was $18 million on second quarter bookings of $17.9 million.

Speaker Change: Our inventory level was $16 4 million down from $18 $7 million last year. The decrease in inventory reflected our continued rationalization and right sizing of our inventory as we continue to improve our processes and systems capabilities around the company's supply chain.

Operator: The decrease in inventory reflected our continued rationalization and right sizing of our inventory as we continue to improve our processes and systems capabilities around the company's supply chain. Even with the reduced inventory level, we believe that it supports our strategic business model of inventory availability. We continue to manage this closely as we expect to see increased demand in 2024 as spending in key markets gradually normalizes over the coming year. Moving on, we are seeing momentum build around new business.

Speaker Change: Even with the reduced inventory level, we believe that it supports our strategic business model of inventory availability.

Speaker Change: We continue to manage this closely as we expect to see increased demand in 2024 and spending in key markets gradually normalizes over the coming year.

Speaker Change: Moving on we are seeing momentum build around new business.

Operator: Our backlog as of April 30, 2024, was $18 million on second quarter bookings of $17.9 million. Subsequent to Q2, we've seen an increase in order flow, which we announced in a press release, and as of today, our backlog currently stands at $20 million. As we look ahead, we believe we have positioned the company for positive macro demand. We are excited about our opportunity to deliver high-quality solutions to our customers while generating improved financial results for our shareholders. With that, I'll open up the call to questions.

Speaker Change: Our backlog as of April 32024 was $18 million on second quarter bookings of $17 9 million subsequent to Q2, we've seen an increase in order flow, which we announced in our press release and as of today, our backlog currently stands at $20 million.

Peter Yin: Subsequent to Q2, we've seen an increase in order flow, which we announce in a press release. And as of today, our backlog currently stands at $20 million. As we look ahead, we believe we have positioned the company for a positive macro demand. We believe we have positioned the company for the positive macro demand trends. We are excited about our opportunity to deliver high quality solutions to our customers while generating improving financial results for our shareholders.

Speaker Change: As we look ahead, we believe we have positioned the company for a positive macro demand.

Speaker Change: We believe we have positioned the company for the positive macro demand trends.

Speaker Change: We are excited about our opportunity to deliver high quality solutions to our customers, while generating improving financial results for our shareholders.

Unknown Attendee: With that, I'll open up the call for questions. Thank you. At this time, we'll be conducting a question-and-answer session. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question Q. You may press star 2 if you would like to remove your question from the Q. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. Once again, please press star 1 on your phone if you wish to ask a question at this time.

Speaker Change: With that I'll open up the call for questions.

Operator: Thank you. At this time, we'll be conducting a question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star 2 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.

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

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

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

Speaker Change: 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 if you wish to ask a question at this time one moment. Please while we poll for questions.

Operator: Once again, please press star 1 on your phone if you wish to ask a question at this time. One moment, please, while we poll for questions. Once again, that is star one if you wish to ask a question on today's call. The first question today is coming from Josh Nichols from B Reilly. Josh, your line is live.

Unknown Attendee: One moment, please, while we pull for questions. Once again, that is star 1 if you wish to ask a question on today's call.

Speaker Change: Once again that is star one if you wish to ask a question on today's call first question today is coming from Josh Nichols from B Riley Josh Your line is live.

Josh Nichols: First question today is coming from Josh Nichols from Be Riley. Josh, your line is live.

Rob Dawson: Yeah, thanks for taking my question, and great to see just a big sequential improvement in the margins despite what's still relatively modest revenue-based compared to some of the historical numbers we get to put up. Could you dive into that a little bit more? I'm kind of curious about the magnitude of the margin differential between some of these new densification and the direct air cooling products that you're seeing a big uptick in demand relative to the traditional offerings you guess so.

Michael Joshua Nichols: Yeah. Thanks for taking my question and great to see.

Michael Joshua Nichols: Yeah, thanks for taking my question. Great to see a big sequential improvement in the margins despite, you know, what's still a relatively modest revenue base compared to some of the historical numbers you guys have put up. Could you dive into that a little bit more? I'm kind of curious about the magnitude of the margin differential between some of these new densification and the direct air cooling products that you're seeing a big uptick in demand relative to the traditional offerings that you guys have sold.

Michael Joshua Nichols: The sequential improvement in the margins, despite what's still relatively modest revenue base compared to some of the historical numbers.

Michael Joshua Nichols: Yep.

Speaker Change: Could you dive into that a little bit more I'm kind of curious about.

Speaker Change: The magnitude of the margin differential between some of these new densification than the direct air cooling products that youre seeing a big.

Chicken demand relative to the traditional offerings that you guys sold.

Robert D. Dawson: Yeah, sure. Thanks, Josh.

Rob Dawson: Yeah, sure. Thanks, Josh. Good question.

Speaker Change: Yeah sure. Thanks, Josh Good question I think one of the things we've talked about over the last several quarters and at times I sort of felt like the volume cried Wolf.

Rob Dawson: I think one of the things we've talked about over the last several quarters, and at times I sort of felt like the boy who cried wolf, that you know we were going to see these things start to have an impact. I really hadn't been a material impact in our top line results, including these higher value product lines. And while we're not specifically disclosing what those margins are, I can say that they're generally a good bit better than kind of our historical blend, which put us somewhere in the I-20s sort of over the last several quarters.

Robert D. Dawson: Good question. I think one of the things we've talked about over the last several quarters, and at times, I sort of felt like the boy who cried wolf, that we were going to see these things start to have an impact, and there really hadn't been a material impact on our top-line results, including these higher-value product lines. And while we're not specifically disclosing what those margins are, I can say that they're generally a good bit better than our historical blend, which put us somewhere in the last several quarters.

Josh: We were going to see these things started to have an impact and there really hasn't been a material impact in our in our top line results, including these these higher value product lines and well, while we're not specifically disclosing what those margins are I can say that they are generally a good bit better than kind of our historical blend.

Josh: Which put us somewhere in the high <unk>.

Speaker Change: Sort of over the last several quarters, so I think youre starting to see even a small impact from a topline perspective Wills will drive those margins is the right direction and we we knew that was going to start to happen I think we're in the early stages of seeing.

Rob Dawson: So I think you're starting to see even a small impact from a top line perspective will drive those margins the right direction, and we knew that was going to start to happen. I think we're in the early stages of seeing a broader impact in that mix. So the better those product lines do, which again, we feel pretty good about. It's going to have that meaningful impact.

Robert D. Dawson: So I think you're starting to see even a small impact from a top line perspective will drive those margins in the right direction, and we knew that was going to start happening. I think we're in the early stages of seeing a broad impact in that mix. The better those product lines do, which again we feel pretty good about, it's going to have that meaningful impact. And as you pointed out, with modest sales growth, you can still get to a nice margin level, which we've been waiting to see and be able to talk about more specifically when it happens.

Speaker Change: A broader impact in that mix, so the better those those product line to do.

Speaker Change: Which again, we feel pretty good about it's going to have that meaningful impact and as you pointed out.

Rob Dawson: And as you pointed out, with modest sales growth, you can still get to a nice margin level, which we've been waiting to see that and be able to talk about it more specifically when it happens.

Speaker Change: With modest sales growth you can still get to a nice margin level, which we have been.

Speaker Change: Waiting to see that and be able to talk about it more specifically when it happens.

Speaker Change: Mhm.

Rob Dawson: And then, I guess, when you're looking at these new products that they're picking up, there's a couple of things, small, so you mentioned cool and offerings. Is there like one or two specific offerings that you are seeing some increased traction on in the near term? And can you, to that extent, kind of elaborate on the pipeline? You've already secured some pretty large wins there. Do you expect to see some other mid-high six figure or seven figure, kind of overall awards for the remainder of this year for those offerings?

Robert D. Dawson: And then, um, I guess if you're looking at these new products that they're picking up, there's a couple of small things. So you mentioned cooling offerings. Is there like one or two specific offerings that you are seeing some increased traction on in the near term? And can you, to that extent, kind of elaborate on the pipeline? You've already secured some pretty large wins there. Do you expect to see some other mid-high six-figure, seven-figure kind of overall awards for the remainder of this year for those offerings?

Speaker Change: And then.

Speaker Change: I guess it.

Speaker Change: When you're looking at these new products that they're picking up.

Speaker Change: Couple of things small so you mentioned cooling offerings is there like one or two specific offerings that you are.

Speaker Change: We are seeing some increased traction on.

Speaker Change: Near term could you to that extent kind of elaborate on the pipeline you have already secured some pretty large Wednesday or do you expect to see some other.

Speaker Change: Mid high six figure seven figure kind of overall awards for the remainder of this year for those offerings.

Rob Dawson: Yeah, good question. I think so from a new opportunity perspective, we continue to have a pretty robust pipeline of opportunities that some of which have been out there for a long time. And some are showing up because we're starting to have some successes and be able to use those as the tip of the spear to break into other opportunities and other customer needs.

Robert D. Dawson: Yeah, good question. I think so from a new opportunity perspective, we continue to have a pretty robust pipeline of opportunities, some of which have been out there for a long time, and some are showing up because we're starting to have some successes and be able to use those as the tip of the spear to break into other opportunities and other customer needs. So I think we were sort of normalizing the business around seeing these, you know, six-figure purchase orders much more frequently, which is where we get into the materiality discussion of, you know, you go back five or six years ago, and we would have disclosed something like that.

Speaker Change: Yes. Good question I think so from a from a new opportunity perspective, we continue to have a pretty robust pipeline of opportunities.

Speaker Change: Some of which have been out there for a long time in summer showing up because we're starting to have some successes and be able to use those as the tip of the spear to break into other opportunities in other customer needs. So I think we were sort of normalizing the business around and seeing these six figure purchase orders.

Rob Dawson: So I think we're sort of normalizing the business around seeing these six-figure purchase orders much more frequently, which is where we get into the materiality discussion of, you know, you go back five or six years ago and we would have disclosed something like that. Now we're in a point where you see several of them combined together, and you put out news like we did a few weeks ago, where we had this influx of $4 million in sales in a handful of large orders. I think we're getting used to the fact that those are going to come in more readily like that and will be drawn against over the course of time.

Speaker Change: Much more frequently which is where we get into the materiality discussion of you go back five or six years ago.

Speaker Change: We would have disclosed something like that.

Robert D. Dawson: Now we're at a point where you see several of them combined together, and you put out news like we did a few weeks ago where we had this influx of $4 million in sales in a handful of large orders. I think we're getting used to the fact that those are going to come in more readily like that and will be drawn against over the course of time.

Speaker Change: Now we're at a point, where you see several of them combined together and you put out news like we did a few weeks ago, where we add this influx of $4 million in sales.

Speaker Change: A handful of large orders.

Speaker Change: We're getting used to the fact that those are going to come in more readily like that and will be drawn against over the course of time and I think thats, probably the bigger point here is that these are more programmatic from a sales perspective. So the sales cycle is a little longer you have to get approval, which.

Rob Dawson: And I think that's probably the bigger point here is. These are more programmatic from a sales perspective. So the sales cycle is a little longer. You have to get approval, which, as we mentioned in the prepared notes, is something that we've done a good job of getting in front of them, getting a lot of different product lines approved by some key customers. It's not just one or two. In many cases, we're talking half a dozen customers who've given us approvals and/or are working in putting products in their labs to make sure that they'll fit the needs of what they have within their network.

Robert D. Dawson: And I think that's probably the bigger point here is that these are more programmatic from a sales perspective, so the sales cycle is a little longer. We have to get approval, which, as we mentioned in the prepared notes, is something that we've done a good job of getting in front of them, getting a lot of different product lines approved by some key customers. It's not just one or two.

Speaker Change: As we mentioned in the prepared notes is something that we've done a good job of getting in front of them getting a lot of different product lines approved by some some key customers is not just one or two in many cases, we're talking half a dozen customers.

Robert D. Dawson: In many cases, we're talking half a dozen customers who've given us approvals and or are working on putting products in their labs to make sure that they'll fit the needs of what they have within their networks. So I think the short answer is, we expect those kind of larger six-figure orders to continue to flow every so often. I think that there's another point: Some of these things, especially on the DAC thermal cooling side, are more tied to an operating and maintenance budget, which may be, from an order perspective, more front-end loaded in a year, depending on purchasing patterns.

Speaker Change: Even us approvals <unk> are working and.

Speaker Change: Putting product in their labs to make sure that they'll fit the needs of what they have within their network. So I think the short answer is we expect those kind of larger six figure orders to continue to flow.

Rob Dawson: So I think the short answer is we expect those kind of larger six-figure orders to continue to flow every so often. I think that there's another point is some of these things that associate on the DAC thermal cooling side are more tied to an operating maintenance budget, which may be from an order perspective more front end loaded in a year depending on purchasing patterns. Sometimes they'll put a large order in and draw against it for the year. Sometimes it becomes a quarterly sort of order placement, and then there's the, you know, call it immediate needs or more emergency needs that flow in kind of off and on throughout the year.

Speaker Change: Every so often I think another point as.

Speaker Change: Some of these things, especially on the DAC thermal cooling side are more tied to an operating and maintenance budget, which may be from an order perspective more front end loaded in the year, depending on purchasing patterns, sometimes they'll put a large order in and draw against it for the year, sometimes it becomes a quarterly sort of order placement and then there is the call it.

Robert D. Dawson: Sometimes they'll put a large order in and draw against it for the year; sometimes it becomes a quarterly sort of order placement, and then there are the, you know, call it immediate needs or more emergency needs that flow in kind of off and on throughout the year. So I think it's a new pattern that we're adjusting to. We'll disclose the materiality of them when they come in, but I think when you look at our backlog, Unknown Attendee, Peter Yin, Margaret Boyce, Ray Bibisi, Ray Bibisi, Unknown Attendee

Speaker Change: Immediate needs are more emergency needs that flow in kind of off and on throughout the year. So I think it's a new pattern that we're adjusting to.

Rob Dawson: So I think it's a new pattern that we're adjusting to. We'll disclose the materiality of them when they come in. But I think when you look at our backlog, you know, going up from a sales perspective, going up, you know, two and a half million bucks, call it. And then being our backlog go up again. I think that gives us the momentum. Whether the timing is always perfect on, you know, in which 90-day period is something shift.

Speaker Change: We will disclose the materiality of them when they come in but I think when you look at our backlog.

Going up from a sales perspective going up $2 5 million Bucks call. It.

Speaker Change: And then seeing our backlog go up again, I think that gives us the momentum whether the timing is always perfect on in which 90 day period is something ship I think overall, we're seeing a definite uplift in our expected results.

Rob Dawson: I think overall we're seeing a definite uplift in our expected results.

Speaker Change: Okay. That's great I guess, Mike you talked about the cadence a little bit rates. Some very good sequential improvement I guess when you look at the backlog the mix.

Unknown Attendee: That's great. I guess like you talked about the cadence a little bit, right? Some very good sequential improvement.

Robert D. Dawson: That's great. I guess you talked about the cadence a little bit, right? Some very good sequential improvement. I guess, when you look at the backlog, the mix, that's only on just over 16 million dollars in revenue, I guess it's fair to assume that you expect some potential sequential increases to revenue throughout the remainder of this year and that gross margins in the second half would be, you know, north of 30% as that revenue would grow from the current baseline.

Rob Dawson: I guess when you look at the backlog, the mix, you know, that's only on just over 16 million of revenue. I guess it's a pair to assume that you expect some potential sequential increases to revenue throughout the remainder of this year and that gross margins in the second half would be, you know, north of 30% of that revenue would grow from the current base.

Only just over $16 million of revenue I guess is it fair to assume that you expect.

Speaker Change: Some potential sequential increases to revenue.

Speaker Change: The remainder of this year and the gross margins.

Speaker Change: In the second half would be north of 30% is that revenue.

Speaker Change: <unk> will grow from the current base.

Robert D. Dawson: Yeah, so I think your first point, we certainly expect the second half of the year to be better than the first. It's sometimes hard, and we, you know, a company of our size, a $500,000 movement of a shipment from one week to the next can shift to another quarter and completely throw off what we've just said.

Rob Dawson: Yeah, so I think the your first point, we certainly expect the second half of the year to be better than the first. It's sometimes hard and we, you know, a company of our size of $500,000 movement of a shipment from one week to the next can shift to another quarter and completely throw off what what we've just said. So I'm, I'm, I'm cautiously optimistic to say, you know, we expect sequential growth. We certainly expect the second half of the year to be better than the first and Q3 and Q4.

Speaker Change: Yeah. So I think the your first point, we certainly expect the second half of the year to be better than the first.

Speaker Change: It's sometimes hard in.

Speaker Change: A company of our size of $500000 movement of a shipment from one week to the next can shift to another quarter and completely throw off what we've just said so.

Robert D. Dawson: So I'm cautiously optimistic to say, you know, we expect sequential growth. We certainly expect the second half of the year to be better than the first and Q3 and Q4, it's hard to know which one's larger, do they look the same, those are the kinds of things that we, you know, we monitor closely, but, you know, it's I think more important for us to look sort of year over year, if you look at the last three or four quarters combined, we're starting to see a recovery that says we expect the next several quarters to be way better than this trough that we've been living in for a little while here.

Speaker Change: Cautiously optimistic to say, we expect sequential growth, we certainly expect the second half of the year to be better than the first in Q3 and Q4, it's hard to know, which one is larger do they look the same those are the kinds of things that we monitor closely but.

Rob Dawson: It's hard to know which ones larger. Did they look the same? Those are the kinds of things that we, you know, we monitor closely, but, you know, I think more important for us to look sort of year over year. If you look at the last three or four quarters combined, we're starting to see a recovery that says we expect the next several quarters to be way better than this drop that we've been living in for a little while here. As far as margins go, I think we're starting to see the impact of these, these higher margin items and the cost work that the team has done.

I think more important for us to look sort of year over year. If you look at the last three or four quarters combined we're starting to see a recovery that says we expect the next several quarters to be way better than this trough that we've been living in for a little while here.

Robert D. Dawson: As far as margins go, I think we're starting to see the impact of these higher-margin items and the cost work that the team has done. So our expectation is that we won't fall backward on those margins. Where exactly they shake out really does become this kind of inflection point of, you know, you see what a $16 million number looks like; if that number were to be $17 million or something greater, I think you're not only going to see way better margins.

Speaker Change: As far as margins go I think we're starting to see the impact of these these higher margin items and the cost work that the team has done so our expectation is that we're not going to fall backwards on those margins where exactly they shake out really does become this kind of inflection point of you see what a $60 million number.

Rob Dawson: So our expectation is that we're not going to fall backwards on those margins.

Rob Dawson: We're exactly, they shake out, it really does become this kind of an inflection point of, you know, you see what a $16 million number looks like. If, if that number were to be $17 million or something greater, I think you're not only going to see way better margins, but the material amount of that is going to start to fall through to the adjusted EBITDA line. And that's really the biggest top point of, you know, you see what a $16 million number looks like. If that number were to be $17 million or something greater, I think you're not only going to see way better margins, but the material amount of that is going to start to fall through to the adjusted EBITDA line, and that's really the biggest top that gives, you know, we live and die at the gross profit line, which is very tied to product mix now, especially.

Speaker Change: Looks like if that number were to be $17 million or something greater I think youre, not only going to be way better margins, but the material amount of that is going to start to fall through to the adjusted EBITDA line and Thats really the biggest topic is we live and die at the gross profit line, which is very tied to the product mix now, especially in the better.

Robert D. Dawson: But a material amount of that is going to start to fall through to the adjusted EBITDA line. And that's really the biggest topic, you know, we live and die by the gross profit line, which is very tied to product mix now, especially, and the better we can do on that top line, even a half a million or a million dollar increase will have a very significant impact on that bottom line, which, again, we've been communicating that for some time.

Rob Dawson: And the better we can do on that top line, even a half a million or a million dollar increase, we'll have a very significant impact on that bottom line, which again, we've been communicating that for some time.

Speaker Change: We can do on that top line, even half a million dollars a $1 million increase we will have a very significant impact on that bottom line, which again, we've been communicating that for some time I think it's nice to finally have a quarter where you can go see this is this is what we've been saying.

Robert D. Dawson: I think it's nice to finally have a quarter where you can go, see, this is what we've been saying. And that's kind of where we are now, hoping to be able to keep doing that, and we feel pretty good, obviously, with the backlog.

Rob Dawson: I think it's nice to finally have a quarter we can go see. This is what we've been saying. And that's kind of where we are now, is hoping to be able to keep doing that. And we feel pretty good, obviously, with the backlog where it is that we've got some good wind in our back.

Speaker Change: Where we are now is hoping to be able to keep doing that and we feel pretty good obviously with the backlog where it is that we've got some some good wind at our back.

Speaker Change: Okay.

Unknown Attendee: That's great color.

Michael Joshua Nichols: And then the last question for me. I mean, now, two quarters in a row, you've done a lot of operational enhancements, too. I'm sure that that flows through not just the gross margin but the OPEX spend. You've been at around, like, 5.3 million of OPEX each quarter in the first half. Care to assume that, like, that's going to be a fairly stable run rate from here?

Speaker Change: That's great color and then last question for me.

Rob Dawson: And then last question for me. I mean, now two quarters in a row, you've done a lot of operational enhancements to you. I'm sure that that's close to not just the gross margin, but the off expand you bet you've been out around like $5.3 million of off X each quarter in the first half. Care to assume that that's going to be a fairly stable run rate from here, or are there any other. Things that we should be cognizant of when we're thinking about the operating expenses for the back half. Yeah, so I think we, you know, five three, a good number.

Speaker Change: I mean now two quarters in a row.

A lot of operational enhancements to I'm sure that that close to not just the gross margin, but for the Opex spend you bet you've been at around like $5 3 million.

Speaker Change: Opex each quarter in the first half.

Speaker Change: <unk> that.

Speaker Change: That's going to be a fairly stable run rate from from here are there any other.

Robert D. Dawson: Are there any others?

Speaker Change: Things that we should be cognizant of what we're thinking about the operating expenses for the back half.

Robert D. Dawson: Yeah, so I think we, you know, 5.3 is a good number. We believe there's room to make that a little better. But we also need to be smart about the idea that we have taken out a lot of costs. And the last thing you want to do is take out so much cost that you can't address the recovery of sales and, you know, the increased demand that's happening in the market.

Speaker Change: Yes, so I think we.

Speaker Change: <unk> is a good number we believe there is room to make that a little better. We also need to be smart about the idea that we have taken out a lot of cost and the last thing you want to do is take out so much cost that you can address the recovery of sales and the increased demand is happening in the market. So we're trying to be patient and smart about it and kind of work.

Rob Dawson: We believe there's room to make that a little better. You know, we also need to be smart about the idea that we have taken out a lot of costs. And the last thing you want to do is take out so much cost that you can't address the recovery of sales and, you know, the increase demand. It's happening in the market. So we're trying to be patient and smart about it and kind of work through it as we see things changing. But I think overall. We expect that there's opportunity to reduce that some additional amount as we go kind of through the next couple of quarters here.

Speaker Change: Through it as we see things changing but I think overall.

Robert D. Dawson: So we're trying to be patient and smart about it and kind of work through it as we see things changing. But I think overall, we expect that there's opportunity to reduce that by some additional amounts as we go kind of through the next couple of quarters here. And we would start the next fiscal year with an even lower off X line than the 5.3. So I think you're seeing kind of a normal number, but there is room for us to, we believe, make that a little better.

Speaker Change #100: We expect that there is opportunity to reduce that.

Speaker Change #100: Some additional amounts as we go kind of through the next couple of quarters here and we would start the next fiscal year with an even lower Opex line and the five three so I think youre seeing kind of a normal number but there is room for us to.

Rob Dawson: And we would start the next fiscal year with an even lower off X line than the five three. So I think you're seeing kind of a normal number, but there is room for us. We believe make that a little better.

Speaker Change #100: We believe make that a little better.

Unknown Attendee: Thank you. I hope that can keep. Okay, thanks, Josh.

Michael Joshua Nichols: It's great. Thank you. I'll have that in the queue.

Speaker Change #101: Great. Thank you I'll hop back in the queue.

Robert D. Dawson: Okay, thanks Josh.

Okay. Thanks, Jeff.

Unknown Attendee: Thank you, and once again, if there were any questions, please press star one on your phone. Any further questions today, please press star one on your phone at this time.

Operator: Thank you, and once again, if there are any questions, please press star 1 on your phone. For any further questions today, please press star 1 on your phone at this time. And there were no other questions from the lines at this time. I'll now hand the call back to Rob Dawson, CEO of RF Industries, for closing remarks.

Speaker Change #102: Thank you and once again, if there are any questions. Please press star one on your phone any further questions. Today. Please press star one on your phone at this time.

Robert D. Dawson: Great. It sounds good.

Unknown Attendee: And there were no other questions from the lines at this time.

Speaker Change #103: And there were no other questions from the lines at this time I'll now hand, the call back to Rob <unk> CEO at RF industries for closing remarks.

Rob Dawson: I'll now hand the call back to Rob Dawson, CEO at RF Industries, for closing remarks.

Rob Dawson: Great, sounds good.

Robert D. Dawson: Great sounds good. Thank you Paul and thank everyone for joining us today, the team and I look forward to sharing our fiscal third quarter results in September.

Rob Dawson: Thank you, Paul, and thank everyone for joining us today. The team and I look forward to sharing our fiscal third quarter results in September.

Robert D. Dawson: Thank you, Paul. And thank you, everyone, for joining us today. The team and I look forward to sharing our fiscal third quarter results in September. Have a great day, and enjoy your weekend.

Unknown Attendee: Have a great day, and enjoy your weekend.

Robert D. Dawson: Have a great day and enjoy your weekend.

Robert D. Dawson: Yes.

Unknown Attendee: 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.

Operator: 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.

Speaker Change #105: 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.