Q3 2024 RF Industries Ltd Earnings Call

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

Greetings welcome to RF industries third quarter fiscal 2024 financial results Conference call.

Speaker Change: 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. This conference is being recorded.

Unknown Attendee: A question and answer session will follow the former presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. Please note this conference is being recorded.

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

Speaker Change: I'll now turn the conference over to your hosts Margaret Boyce Investor Relations at RF Industries, Margaret you may begin.

Margaret Boyce: Thank you, Paul. Good afternoon, everyone, and welcome to RF Industries' third quarter fiscal 2024 earnings 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 Q3 earnings release after market today. That release is available on our website at rfindustries.com.

Thank you Paul Good afternoon, everyone and welcome to RF industries third quarter fiscal 2024 earnings 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 yen, we issue.

Speaker Change: Our Q3 earnings release after market today that release is available on our website at our App industries Dotcom I'd.

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 security of the exchange laws. When used, the words anticipate, believe, expect, intend, future, and other similar expressions identified 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 outcomes 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 on Form 10-K and 10-Q and other filings with the SEC.

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 laws when used the words anticipate.

Speaker Change: 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.

Outcomes 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 on Form 10-K, and 10-Q and other filings with the F. D. C. RF industries undertakes no obligation to update or revise any forward looking.

Margaret Boyce: 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 describes the differences between our GAAP and non-GAAP reporting.

Speaker Change: <unk> it.

Speaker Change: Additionally throughout this call we will be discussing certain non-GAAP financial measures today.

Speaker Change: The earnings release and the related current report on Form 10-K describe the differences between our GAAP and non-GAAP reporting.

Rob Dawson: With that said, I'll now turn the conference over to our CEO, Rob Dawson. Lab, please go ahead. Thank you, Margaret, and welcome to our third quarter fiscal 2024 conference call.

Speaker Change: That said I will now turn the conference over to our CEO, Rob Dawson Lab. Please go ahead.

Greater BC: Thank you Margaret and welcome to our third quarter fiscal 2024 conference call I'm here today with greater BC, our president and CEO and Peter <unk> our CFO.

Rob Dawson: I'm here today with Raeville BC, our President and CEOO, and Peter Yen, our CFO. I'll start with our third quarter highlights and some comments on our market opportunity. Raeville discussed our sales progress and what we're hearing from customers, and Peter will cover our financials before we open the call to your questions. We're pleased that our third quarter results continue to build on the momentum that we reported in the second quarter. Net sales of $16.8 million were up almost 5% sequentially and 8% year over year. Our gross profit margin for the third quarter was 29.5%, a 510 basis point improvement versus the comparable period last year, and roughly in line with the prior quarter.

Speaker Change: Start with our third quarter highlights and some comments on our market opportunity Ray will discuss our sales progress and what we're hearing from customers.

Speaker Change: And Peter will cover our financials before we open the call to your questions.

Speaker Change: We're pleased that our third quarter results continued to build on the momentum that we reported in the second quarter net sales of $16 $8 million were up almost 5% sequentially and 8% year over year.

Peter: Our gross profit margin for the third quarter was 29, 5%, a 510 basis points improvement versus the comparable period last year and roughly in line with the prior quarter.

Rob Dawson: Importantly, for two quarters in a row, we're very close to our 30% near-term target for gross margin, which reflects a product mixed shift to our higher value, higher margin solution. Solutions. Our adjusted EVA cell was in positive territory for two quarters in a row, a sharp reversal from the losses we experienced during a challenging 2023. As mentioned before, I believe our business is at an inflection point where we can continue to deliver meaningful progress now and tap into even greater future potential. The Tier 1 wireless carrier ecosystem had major cutbacks in their 2023 capital spending over the last several quarters, and has created considerable hardship for RFI and other downstream vendors.

Speaker Change: Importantly for two quarters in a row, we're very close to our 30% near term target for gross margin, which reflects a product mix shift to our higher value higher margin solutions.

Speaker Change: Our adjusted EBITDA was in positive territory for two quarters in a row, a sharp reversal from the losses, we experienced during a challenging 2023.

Speaker Change: As mentioned before I believe our business is that an inflection point, where we can continue to deliver meaningful progress now and tap into even greater future potential.

Speaker Change: The tier one wireless carriers ecosystem at major cutbacks in their 2023 capital spending over the last several quarters and has created considerable hardship for RFID and other downstream vendors.

Rob Dawson: We continue to see major telecom companies being cautious about spending for large CAPEX projects, but they continue to allocate significant resources to address critical needs and operations and maintenance. Regardless of overall CAPEX spend, telecom companies always want to ensure their infrastructure is upgraded with next-generation technologies that are cost-effective and sustainable. Fortunately, our direct-air tooling or DAC product line meets the required standards for the replacements and upgrades. They need to future-proof their tooling infrastructure. As we've discussed previously, networking equipment can generate substantial heat inside the small buildings, enclosures, and boxes at the edges of networks. And with a huge impact that AI is having on data centers, more equipment is being pushed to the edges of the network.

Speaker Change: We continue to see major telecom companies being cautious about spending for large capex projects, but they continue to allocate significant resources to address critical needs in operations and maintenance.

Speaker Change: Regardless of overall Capex spend telecom company is always want to ensure that infrastructure and upgraded with next generation technologies that are cost effective and sustainable.

Speaker Change: Fortunately, our direct air cooling or that product line meet the required standards further replacements and upgrades they need to future proof their cooling infrastructure.

Speaker Change: As we've discussed previously networking equipment and generate substantial heat inside the small buildings enclosures that boxes at the edge of the networks and.

Speaker Change: And with the huge impact that AI is having on data centers more equipment is being pushed to the edges of the network.

Rob Dawson: This equipment must be cool to operate effectively and consistently, and our DAC systems offer high-efficient, climate-durable cooling that is both eco-friendly and lower cost and traditional 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 green initiatives. Our team continues to work hard on evolving our business to make us more diverse in our end-market and applications, and therefore less reliant on CAPEX spend. While taking some time and foresight, I think we finally arrived at the point when the market is meeting us where our products are.

Speaker Change: This equipment must be cooled to operate effectively and consistently.

Speaker Change: Our das systems offer high efficiency.

Speaker Change: Climate durables cooling that it's both eco friendly and lower cost than traditional systems.

Speaker Change: 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 green initiatives.

Speaker Change: Our team continues to work hard on evolving our business to make us more diverse in our end markets and applications and therefore less reliant on capex spend.

Speaker Change: It's taken some time and foresight.

Speaker Change: I think we finally arrived at the point when the market is meeting us where our products are.

Rob Dawson: As we prepared for this moment, we executed a series of expense reduction initiatives that has created significant operating leverage in our business. As demand increases, we have capacity to serve our customers and scale our business with little to no material incremental investment. With a portfolio of high-value products, we've been able to build stronger customer relationships at higher decision-making levels within large and complex organizations. This has given our our find much greater visibility and relevance than we've ever had. In fact, now some key customers are asking us to partner with them to help solve challenges with new solutions.

Speaker Change: As we prepared for this moment, we executed a series of expense reduction initiatives that has created significant operating leverage in our business as.

Speaker Change: As demand increases we have capacity to serve our customers and scale, our business with little to no material incremental investment.

Speaker Change: With a portfolio of high value products.

Speaker Change: We've been able to build stronger customer relationships at higher decision, making levels within large and complex organizations.

Speaker Change: This is given RFID much greater visibility and relevance than we've ever had.

Speaker Change: In fact, some now some key customers are asking us to partner with them to help solve challenges with new solutions.

Rob Dawson: In some cases, they're coming directly to me or Ray or the team and telling us exactly how we can help, which is definitely a new and much welcome reversal of roles. After performing well for these customers, they're now beginning to treat us as an incumbent, giving us insight into the amount and timing of future orders, which improves our ability to forecast, control our supply chain, and a clearer pathway to improving margins. As CAPEX continues on the densification of much needed 4G and 5G networks, I believe our small cell solutions, along with overall our overall bill of materials, will give us an additional level of opportunity.

Speaker Change: In some cases are coming directly to me or array of for the team and telling us exactly how we can help which is definitely a new and much welcomed rehearsals rules.

After performing well for these customers that are now beginning to treat us as an incumbent giving us insight into the amount and timing of future orders, which improves our ability to forecast control our supply chain and a clear pathway to improving margins.

Speaker Change: As Capex continues on the Densification of much needed 40 of <unk> networks, I believe our small cell solutions, along with overall, our overall billow materials will give us an additional level of opportunity.

Rob Dawson: Community. Densification and bandwidth continue to be real issues in wireless coverage, and while lower cap expending for large deployments has impacted some product lines like our Microlab RF passes offering, we look forward to a recovery. Microlab products have had some wild swings in quarterly performance since we acquired them two years ago, and the carrier spending pause definitely had a negative impact on potential sales. And we hope to see improved performance in 2025. Microlab has an industry-leading RF passage of bill of materials that we can leverage as anticipated demand increases for venue wireless deployment in stadiums and other critical wireless densification activities.

Speaker Change: Densification as bandwidth continues to be real issues in wireless coverage and while lower capex spending for large deployments is impacted some product lines like our micro lab RF passive offerings.

Speaker Change: We look forward to a recovery.

Speaker Change: Micro lab products have had some wild swings in quarterly performance since we acquired them two years ago and the carrier spending pause definitely had a negative impact on potential sales.

Speaker Change: And we hope to see improved performance in 2025.

Speaker Change: Micro lab has an industry, leading RF passive bill of materials that we can leverage as anticipated demand increases for venue wireless deployment in stadiums and other critical wireless densification activities.

Rob Dawson: Looking ahead, I believe our company has been in a great position to answer our customers' current and future needs. We're a leaner, more efficient company with strong and relevant product and solution offering, and a talented team totally focused on execution to deliver improved results and value creation for our stakeholders. With what we know today, we expect our current fiscal fourth quarter to deliver another quarter of increased sales as compared to Q3.

Speaker Change: Looking ahead I believe our company is in a great position to answer our customers' current and future needs.

Speaker Change: We are a leaner more efficient company with a strong and relevant product and solution offering and a talented team totally focused on execution to deliver improved results and value creation for our stakeholders.

Speaker Change: With what we know today, we expect our current fiscal fourth quarter to deliver another quarter of increased sales as compared to Q3.

Ray Bibisi: I'd like to now turn the call over to Ray to share what he's hearing from our customers, right? Thank you, Rob, and good afternoon. While we're pleased that our top line is headed in the right direction, we know there's more work ahead to optimize our potential. As Rob mentioned, we have had some significant wins with our DAC product line across multiple customers and regions, and we're gaining momentum in our small sell offering. For both solutions, we are now involved in our customers' planning process, which is giving us improved visibility into their long-term project timelines. This reflects the value that our products bring to the table and our focused efforts to strengthen relationships with key customers, as well as cultivating new opportunities that expand our market potential.

Speaker Change: I'd like to now turn the call over to Ray to share what you're hearing from our customers right.

Speaker Change: Okay.

Ray: Thank you Rob and good afternoon.

Speaker Change: While we are pleased that our topline is headed in the right direction. We know there's more work ahead to optimize our potential.

Ray: As Rob mentioned, we have had some significant wins with our <unk> product line across multiple customers and regions and we're gaining momentum in our small cell offering.

Ray: For both solutions, we are now involved in our customers' planning process, which is giving us improved visibility into their long term project timelines.

Speaker Change: This reflects the value that our products bring to the table and our focused efforts to strengthen relationships with key customers as well as cultivating new opportunities that expand our market potential.

Ray Bibisi: Right now, two large tier one customers are deploying our technology forward products in several regional programs that have strong probability of becoming turnkey national programs. For example, one of these customers is a top-tier wireless carrier that has been testing small quantities of DAC systems over a few years, mostly in markets that there are major heat challenges. Last month, we announced $2.7 million in DAC quarters from this customer, and we continue to have meaningful discussions on deploying DAC into other regions. As we win orders in new regions, we believe there can be a cascade effect into increasing bookings with a better mix of high-margin contributions.

Speaker Change: Right now.

Speaker Change: Two large tier one customers are deploying our technology forward products in several and several regional programs that have strong probability of becoming turnkey national programs.

Speaker Change: For example, one of these customers is a top tier wireless carrier that has been testing small quantities of deck systems over a few years, mostly in markets that there are major challenges.

Speaker Change: Last month, we announced $2 $7 million in back orders from this customer and we continue to have meaningful discussions on deploying back into other regions.

Speaker Change: As we win orders in new regions. We believe there can be a cascade effect into increasing bookings with a better mix of high margin contributions.

Ray Bibisi: Now that we are involved in the planning process with some key customers, we have the opportunity to weigh in on new solutions that are mutually beneficial. Fortunately, we have an outstanding team of engineers who can enhance or develop new product lines quickly and cost-effectively in response to specific customer requests or overall market trends.

Now that we are involved in the planning process with some key customers we have the opportunity to weigh in on new solutions that are mutually beneficial.

Speaker Change: Fortunately, we have an outstanding team of engineers, who can enhance or develop new product lines quickly and cost effectively in response to specific customer request or overall market trends.

Ray Bibisi: Management. Through some of these customer conversations, we have identified an opportunity for a potential complementary new product line. We believe these solutions can give us another unique and powerful offering. And we look forward to sharing more of these new products in the coming quarters. On the operation side, our continuous improvement efforts are identifying more cost savings opportunities as we continue to streamline our production functions through better and more efficient utilization of our facilities. This will continue to deliver greater operating leverage to our current infrastructure.

Speaker Change: Through some of these customer conversations we have identified an opportunity for a potential complementary new product line.

Speaker Change: We believe these solutions can give us another unique and powerful offering.

Speaker Change: And we look forward to sharing more of these new products in the coming quarters.

On the operation side, our continuous improvement efforts are identifying more cost savings opportunities as we continue to streamline our production functions to better and more efficient utilization of our facilities.

Speaker Change: This will continue to deliver greater operating leverage to our current infrastructure.

Peter Yin: I'll now turn the call over to Peter for an update on our financials. Peter? Thank you, Ray, and good afternoon, everyone. We're pleased with our third-quarter operating results, and we're encouraged to see continued positive demand trends. Starting with the income statement, third-quarter net sales increased 4.5% sequentially to $16.8 million, and we're up 7.6% year-over-year. Third-quarter growth profit margin increased 510 basis points to 29.5%, an improvement from 24.4% year-over-year. The increase in growth 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 $419,000, a significant improvement from a $2 million loss. Year-over-year consolidated net loss was $705,000, or 7 cents per diluted share, compared to a loss of $1.6 million, or 16 cents per diluted share in the prior year.

Speaker Change: I'll now turn the call over to Peter for an update on our financials.

Speaker Change: Peter.

Peter: Thank you rich and good afternoon, everyone.

Peter: We're pleased with our third quarter operating results and are encouraged to see continued positive demand trends.

Peter: Starting with the income statement third quarter net sales increased four 5% sequentially to $16 8 million.

Peter: And were up seven 6% year over year.

Speaker Change: Third quarter gross profit margin increased 510 basis points to 29, 5% an improvement from 24, 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: Operating loss was $419000 a significant improvement from a $2 million loss year over year consolidated net loss was $705000 or seven cents per diluted share compared to a loss of $1 6 million.

Speaker Change: Or <unk> 16 per diluted share in the prior year.

Peter Yin: Non-GAAP net loss was $95,000 or 1 cent per diluted share and improvement from a non-GAAP net loss of $1.3 million or $12 cents per diluted share year-over-year. Third-quarter adjusted EBITDA was positive 460,000 versus an adjusted EBITDA loss of 940,000 year-over-year. We're excited to see significant improvement year-over-year. Moving to the balance sheet, as of July 31, 2024, we had a total of 1.8 million of cash and cash equivalents and had a working capital of $11 million and a current ratio of approximately 1.6 to 1, with current assets of $29.4 million and current liabilities of $18.4 million.

Speaker Change: non-GAAP net loss was $95000 or <unk> per diluted share an improvement from a non-GAAP net loss of $1 3 million or <unk> 12 per diluted share year over year.

Speaker Change: Third quarter, adjusted EBITDA was positive $460000 versus an adjusted EBITDA loss of 940000 year over year, we're excited to see significant improvement year over year.

Speaker Change: Moving to the balance sheet as of July 31, 2024, we had a total of $1 8 million of cash and cash equivalents and had a working capital of $11 million and a current ratio of approximately one six to one with current assets of $29 4 million in current law.

Speaker Change: Liabilities of $18 4 million.

Peter Yin: As we mentioned last quarter, in March, we entered into a line of credit that has a 3-year term that 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. During the third quarter, we paid our line of credit down $1.8 million. As of July 31, 2024, our outstanding borrowings were $8.7 million compared to $10.5 million as of April 30, 2024, from the line of credit. We believe the amount of liquidity available to us will be sufficient to fund our anticipated operational needs.

Speaker Change: As we mentioned last quarter in March.

Speaker Change: We entered into a line of credit that has a three year term that will allow up to $15 million, depending on Bob 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: During the third quarter, we paid our line of credit down $1 8 million.

As of July 31, 2020 for our outstanding borrowings were $8 7 million.

Speaker Change: Compared to $10 5 million as of April 32024 from the line of credit.

Speaker Change: We believe the amount of liquidity available available to us will be sufficient to fund our anticipated operational need on.

Peter Yin: On the inventory front, we've been right-sizing our inventory as we continue to improve processes and system capabilities around our supply chain. At the end of the third quarter, our inventory was approximately $15 million, a decrease of $1.4 million sequentially and a decrease of $3.4 million from year end. Even with the reduced inventory level, we believe that supports our strategic business model of inventory availability. We continue to manage this closely as we expect to see increase demands as spending and key markets gradually normalize this over the coming year. Moving on, we are seeing momentum build around new businesses.

Speaker Change: On the inventory front, we've been right sizing our inventory as we continue to improve processes and system capabilities around our supply chain.

Speaker Change: At the end of the third quarter, our inventory was approximately $15 million a decrease of $1 4 million sequentially and a decrease of $3 $4 million from yearend.

Speaker Change: Even with the reduced inventory level, we believe that supports our strategic business model of inventory availability. We continued to manage this closely as we expect to see increased demand spending in key markets gradually normalize us over the coming year moving.

Speaker Change: Moving on we are seeing momentum build around new businesses, our backlog as of July 31, 2024 was $20 1 million.

Peter Yin: Our backlog as of July 31st, 2024, was $20.1 million on third quarter bookings of $18.9 million. As of today, our backlog currently stands at $19.5 million.

Speaker Change: On third quarter bookings of $18 9 million as of today, our backlog currently stands at $19 5 million.

Peter Yin: In summary, we delivered a solid third quarter. We paid down our line of credit, managed our inventory level, and reduced expenses. As we go forward, we believe our model has substantial operating leverage, and we look forward to delivering improving financial results for our stakeholders.

Speaker Change: In summary, we delivered a solid third quarter, we paid down our line of credit manage our inventory level and reduced expenses.

Speaker Change: As we go forward, we believe our motto has substantial operating leverage and we look forward to delivering improving financial results for our stakeholders.

Unknown Attendee: 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 would 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 questions 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 pull for questions.

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

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Unknown Attendee: Once again, that's star one if you wish to ask a question on today's call.

Speaker Change: Once again Thats Star one if you wish to ask a question on today's call.

Josh Nichols: The first question for today is coming from Josh Nichols from BeReilly. Josh, your line is live. Thanks for taking my question. It's good to see the margins bumping up against that 30 percent level, and it sounds like you're expecting bigger contribution from these higher margin product lines going forward.

The first question for today is coming from Josh Nichols from B Riley Josh Your line is live.

Yeah. Thanks for taking my question good to see the margins bumping up against that 30% level and it sounds like.

Josh Nichols: You're expecting contribution from the higher margin product lines doing going forward.

Josh Nichols: If you were looking at the margin profile when the next couple quarters and the backlog overall, is that the fair assessment that you think that they're going to be staying at around this 29 plus percent level, or do you think that they could continue to expand for where they are currently?

Speaker Change: If you were look at the margin profile over the next couple of quarters and the backlog overall is it fair assessment that you think that they're going to be staying at or around this 29 plus percent level do you think that they could continue to expand.

Speaker Change: They are currently.

Rob Dawson: Yeah, thanks, Josh. I think we feel pretty comfortable that we're at a decent spot there. We do have that goal of getting it to 30 percent, which really is just going to be a function of the mix of what ships out in a given quarter. So I think if you, with the announcements we've made over the last few months, with some new orders coming in, those are some of the higher margin products. They're starting to build a substantial portion of our backlog around those product lines.

Speaker Change: Yes, Thanks, Jeff.

Speaker Change: We feel pretty comfortable that.

Speaker Change: We're at a decent spot there we do have that goal of getting into the 30%, which really is just going to be a function of the mix of what ships out in a given quarter. So.

Speaker Change: With the announcements we've made over the last few months with some new orders coming in those are some of the higher margin products, they're starting to build a substantial portion of our backlog around those product lines. So I think our expectation is while while were comfortable that.

Rob Dawson: So I think our expectation is, while we're comfortable that we're in a good spot today, we recognize there's room for more, and we do think there's room for that to expand. Again, a higher sales number just sort of automatically has a positive impact on our margins as well. So the end of my comment that shared that we expect you for to be another sequential growth from a sales perspective, which should also give us some help around just margin expansion overall.

We're in a good spot today, we recognize there is room for more and we do think there's room for that to expand again, a higher sales number.

Speaker Change: Sort of automatically has a positive impact on our margins as well. So the end of my comments I shared that we expect Q4 to be another sequential growth from a sales perspective, which should also give us some help around just margin expansion overall.

Josh Nichols: Yeah, I think you're just digging into that a little bit further. Could you provide a little bit more color? The nice to see the backlogs have been trending favorably, close to 20 million today.

Speaker Change: Yeah, there could you just.

Speaker Change: Digging into that a little bit further could you provide a little bit more color.

Speaker Change: Nice to see this backlog has been trending favorably or close to $20 million today.

Rob Dawson: When you look at what's in that backlog and like higher margin versus floor margin offerings, I'm just wondering if you could provide a little bit of context around how you see the backlog today? Yeah, sure. So I think it's finally moving. I guess that's one thing that you look at. Our last probably four or five quarters. We had certain things that sat in our backlog for a long time and certain customers that were asking us to hold back shipments as they worked through their own set of challenges around just the market conditions and overall interest rates and otherwise.

Speaker Change: When you look at what's in that backlog and likely higher margin versus lower margin offerings. I'm. Just wondering if you could provide a little bit of context around how you see the backlog today.

Speaker Change: Yeah sure. So I think it's finally, moving I guess, that's one thing that if you look at our last probably four or five quarters.

Speaker Change: We had certain things that in our backlog for a long time.

Speaker Change: Certain customers that were asking us to hold back shipments as they work through their own.

Speaker Change: Set of challenges around just the market conditions and overall interest rates that otherwise. So I think we started to see in this last quarter and evolution of that we're shipping out some of those items and replacing them with some of the newer product lines that.

Rob Dawson: So I think we've started to see in this last quarter an evolution of that, where we're shipping out some of those items and replacing them with some of the newer product lines that should help us on the margin side. So I think it's roughly stable. I mean, you look at a kind of moving between the mid-19s and whether it's 19.5 or 20.9 or 21 and kind of in that range, keeping it around 20 million bucks while seeing sales increase. I think is helpful. And the 18 plus million that we booked during the third quarter showed some growth.

Speaker Change: Should help us on the margin side. So I think it's it's roughly stable I mean, you look at it kind of moving between the mid 19th.

Speaker Change: Whether it's 19 of effort, 29% or 21% kind of in that range keeping it around 20 million Bucks, while seeing sales increase I think is helpful.

Speaker Change: And the 18 plus million that we booked during the third quarter.

Josh Nichols: Obviously, that's a couple million dollars higher than what we shipped out. So we did see some help there, but it should give us an opportunity to see higher sales numbers coming out of that, and I think we're starting to see that backlog freshen up from some of the things that have been sitting in it for some time. Yeah, and you talked about having better visibility now, right? That some of the capex elements have been alleviated, and you're seeing small cell identification. So that finally takes place, which has been a long time on the come.

Showed some growth obviously, that's a couple of million dollars higher than what we shipped out. So we did see some some help there but it should give us an opportunity to see higher sales numbers coming out of that and I think we're starting to see that backlog freshen up from some of the things that had been sitting in it for some time.

Speaker Change: Yeah, and you talked about having better visibility now right that some of the Capex independents have been alleviated that youre seeing small cell densification.

Speaker Change: So that will probably take place, which has been a long time on that on the come.

Rob Dawson: Did it fair to say that we kind of expect backlog to remain around this 19, 20 million dollar level or based on what you're seeing in some of these conversations with carriers. Do you think that there's a good chance that that could increase significantly from here with the continued flow of larger orders? Yeah, I think around our backlog, I've stated in the past that while it's not a perfect indicator for where we're going next, it is a good health gauge to see that we've got some nice things sitting there, orders in hand. Language in the past have said, "look, if it comes down to working or 15 million, that's probably fine."

Speaker Change: Is it fair to say that.

Speaker Change: We kind of expect backlog to remain around this.

Speaker Change: $19 million to $20 million level or based on what youre seeing in some of these conversations with carriers do you think that there's a.

Speaker Change: Good chance that that could increase significantly from here with the continued flow of large renewables.

Speaker Change: Yes, I think around our backlog.

Speaker Change: David in the past that while it's not a perfect indicator for where we're going next to it is a good help gauge to see that we've got some nice things sitting there orders in hand.

Speaker Change: Language in the past I've said look if it comes down to 14 or $15 million, that's probably fine it doesn't need to be in the $20 million range, but I don't expect there to be a significant drop in that with what we know today. The other thing I'll say is as orders start to come in around our expectations for the 2025 spend on that.

Rob Dawson: It doesn't need to be in a 20 million dollar range, but I don't expect there to be a significant drop in that with what we know today. The other thing I'll say is, as orders start to come in around our expectations for the 2025 spend, and that was some of the comments that I made and that Ray made, we are getting more visibility there. So we do ask our customers, obviously, to place orders as early as possible, even if they're going to be drawn out over the course of several quarters, just so we can keep the supply chain that much more well-oiled and doing what it's supposed to do.

Speaker Change: Some of the comments that I made in that Ray made.

Speaker Change: We are getting more visibility there. So we do ask our customers obviously to place orders as early as possible, even if theyre going to be drawn out over the course of several quarters. Just so we can keep the supply chain that much more well oiled and doing what it's supposed to do so I think there is chances for it to spike up.

Rob Dawson: So I think there's chances for it to spike up. I think keeping it at 20 million would be spectacular, but I wouldn't have any stress if it were a couple million bucks lower than that. Obviously, we'd love it if it was higher, but that can also be a function of orders being held back and saying, "Hey, we hear the order, but don't ship it to me for six months," so it can be, there's times it can be a false positive, and we want to call that out wherever we can. At the moment, we're seeing it as a pretty consistent, you know, short to midterm kind of backlog where the lion share that should go out over the next few quarters and be replaced with new orders.

Speaker Change: I think keeping it at $20 million would be spectacular, but I wouldn't have any stress. If it were a couple of million bucks lower than that and obviously, we'd love. It if it was higher but that can also be a function of orders being held back and saying hey, here's the order, but don't ship. It to me for six months. So it can be Theres times. It can be a false positive and we want to call that out wherever we.

Speaker Change: At the moment, we're seeing it as a pretty consistent.

Speaker Change: Short to mid term kind of backlog, where the lion's share of that should go out over the next few quarters. It would be replaced with new orders.

Josh Nichols: Thanks, last question, just thinking about the fourth quarter, good to see you expect sales to be at the game, squintely. Anything in terms of, I guess like the last year, so I've been a little bit of anomalies, just given some of the capex constraints, but as things start to normalize, and we think about like seasonal patterns in ordering and shifting with the carriers or anything, I guess that you're thinking about for fiscal for Q, overall that would impact. Yeah, so I think if I could put a number on it, I would. I think we have good comfort that we're going to expand sales again. How much that is really depends on timing of two things: customers wanting certain orders shift and then there's materials being supplied to us. In some cases, we do get materials supplied by customers for some of these key applications that we have to integrate.

Thanks, and then last question just thinking about the fourth quarter. Good to see you expect sales to be up again sequentially.

Speaker Change: Anything in terms of I guess like the last year so had been.

Speaker Change: A little bit of anomalies, just Kevin some of the capex constraints, but as things start to normalize and we think about like seasonal patterns in order and shipping with the carriers is there anything I guess that youre thinking about for fiscal <unk> overall that would impact the <unk>.

Speaker Change: Magnitude in the sales increase.

Speaker Change: Yeah. So I think if I can put a number on it I would I think we have.

Speaker Change: Good comfort that we're going to expand sales again.

Speaker Change: How much of that is really depends on timing of two things customers wanting certain orders shifted and there is materials being supplied to us in some cases, we do get materials supplied by customers for some of these key applications that we have to integrate so the timing of that can also have an impact on it I think the seasonality. This is Ben.

Rob Dawson: So the timing of that can also have an impact on it. I think the seasonality, this has been kind of a weird year around carrier seasonality. The market didn't really see the big build season kind of upswing in, call it late spring, early summer, and into this kind of time frame. I think 2025 might look a little more normal with what we're kind of seeing. It sounds like there's going to be some more understandable build patterns that some of us have been through many times. I think the other indicator that we have is our backlog, while remaining strong.

Speaker Change: And have a weird year around carrier seasonality.

Speaker Change: But the market didn't really see the big build season kind of upswing in.

Speaker Change: Call. It late spring early summer and into this kind of timeframe I think 2025 might look a little more normal with what we're kind of seeing it sounds like theres going to be some some some more understandable build patterns. It's all of us have been through many times.

Speaker Change: I think the other indicator that we have as you know our backlog while remaining strong.

Josh Nichols: We start looking out to the first quarter, and seasonally, the first quarter has always been the most challenging for us just because there's less business days. If we can continue seeing some of these more operational kinds of orders, I think we can try to start spouting that out a little bit, so there's not such significant impact from that. But as far as Q4 goes, I don't think there's anything that should radically impact us one way or the other. Appreciate it. Thanks a lot. Back to the Q.

We start looking out to the first quarter and seasonally the first quarter has always been the most challenging for us just because there's less business days.

Speaker Change: We can continue seeing some of these more operational kinds of orders I think we can try to start smoothing that out a little bit so theirs.

Speaker Change: There is not such a significant impact from that but as far as Q4 goes I don't think theres anything that should radically impact us one way or the other.

Speaker Change: I appreciate it thanks I'll hop back in the queue. Thank.

Unknown Attendee: Thank you, Josh. Thank you, and once again it will be star one if you wish to ask a question on today's call.

Speaker Change: Thank you Jeff.

Speaker Change: Thank you and once again it will be star one if you wish to ask a question on today's call and the next question will be coming from Steve Cole from mangrove Steve Your line is live.

Steve Cole: The next question will be coming from Steve Cole from Anchor. Steve, your line is live. Good afternoon, guys. I did Q4. I had a couple of questions, I guess. Rob, I'm trying to get out. So the good news is we're seeing margins pushing up to 30%, but we're still obviously not getting on to where we're seeing this tipping point on leverage where we start to see a greater proportion coming to the bottom line. Can you give a little bit of that more comfort to what you're seeing when we start to see that. So we start to see positive body accelerating, and what I know you mentioned revenues will help that, and I appreciate that.

Speaker Change: Good afternoon guys.

Speaker Change: Good quarter.

Speaker Change: I had a couple of questions I guess.

Rob I'm trying to get out so the good news, we're seeing margins pushing up to 30%, but we're still.

Speaker Change: Obviously, not getting I'm, sorry, what was famous.

Speaker Change: Hip implant on leverage where we start to see a greater proportion coming to the bottom line.

Speaker Change: Can you give a little bit.

Speaker Change: More comfort.

Speaker Change: This thing when we start to see what's already start to see.

Speaker Change: Profitability accelerating.

Speaker Change: What I know you mentioned revenues will help that might appreciate bump when obviously you got the midst on those.

Steve Cole: And obviously you got the mixed on your way. But is that something you're looking for when we look out to the near and immediate term you're seeing or what should we look for. And I know you don't give that as a to 25, and I'm just curious if we give us some color on that. Yeah, good question. So I think that, as we've stated in the past, you know, and in the old days, whatever time for him we want to call that. We had a number we had to be, you know, 18 plus million to kind of be break even, and then we should see some better numbers from there.

Speaker Change: But is that something youre looking at when we looked out to the north intermediate term, you're saying or what should we look for and I know you all hotels.

Speaker Change: So far but I'm just curious.

Speaker Change: Can you give us some color on that.

Speaker Change: Yeah. Good question, so I think that.

Speaker Change: As we've stated in the past and in the <unk>.

Speaker Change: Old days, whatever timeframe you want to call that we had a number we had to be 18 plus million to kind of be breakeven and then we should see some better numbers from there we've been working that down from what used to be a $20 million number to where we really saw the leverage I think we've taken out enough expense that as we start to see that the $16 million.

Rob Dawson: We've been working that down from what used to be a 20 million dollar number to where we really saw the leverage. I think we've taken out enough expense that as we start to see the, you know, that the 16 million to 16 eight kind of flow that we saw. And I huge jump in sales, but you you can see from a margin perspective what a big impact that does have for us. Overall, we do believe that if we can push sales back up to a, you know, an 18 million plus kind of number on a quarterly basis.

Speaker Change: <unk> kind of flow that we saw not a huge jump in sales, but you can see from a margin perspective, what the big impact that does have for US overall, we do believe that if we can push sales back up to the $18 million plus kind of number on a quarterly basis, that's where I would expect there to be a significant change in what print.

Rob Dawson: That's where I would expect there to be a significant change in what prints through to the bottom line impact that between. You know call a 16 18 18. I think there's there's acceleration, but I think we feel like the just from modeling perspective the real acceleration happens. At that 18 plus number, and if we can get our sales back up to a 20 million dollar or quarter. A lot of these conversations change drastically because you know mix will certainly help. But also, once we've covered our fixed costs, there's not a lot that happens below the gross profit line for us, you know. It's a pretty, pretty simple.

Speaker Change: <unk> through to the bottom line impact that between call. It 16% to 18 I think there is acceleration, but I think we feel like the just from a modeling perspective, the real acceleration happens at that 18, plus number and if we can get our sales back up to a $20 million a quarter a lot of these conversations changed drastically because.

Speaker Change: Mix will certainly help but also once we have covered our fixed costs, there's not a lot that happens below the gross profit line for us, it's a pretty pretty simple P&L. When you look down on the operating expense. We are light on R&D were light on Capex. It really does come down to can we cover our labor costs that are in our facility costs of having people building things.

Rob Dawson: P and L when you look down on the operating expense or we're light on R&D or light on capex it really does come down to can we cover our labor costs and our and our facility costs of having people building things. Once we've done that. The affordability kicks in and then you really get the leverage, so I think that the best color I can give is if we can push a number 18 plus. I think what really start to see a different overall look.

Speaker Change: <unk>.

Speaker Change: Once we've done that.

Speaker Change: The affordability kicks in and then you really get the leverage so I think thats. The best color I can give is if we can push a number 18, plus I think we're really starting to see it.

Speaker Change: Overall look.

Steve Cole: And can you give us a quick update? I know you've talked about cytokines, cytokines. What do we have today?

Speaker Change: Could you give a quick update I know you've talked about inside of facility consolidations Columbia Ghansham.

Whats the way you would have normally of the lessors.

Rob Dawson: I know we have the left and the left and the two major hubs and the other stuff that I'm listening. I made you can just give a quick snapshot of where we are in the foundation of the body. Sure. Yeah, so we have a total of four facilities of skies. We have the San Diego facility. Which is our headquarters and the primary work that goes on in the facility where Peter and I are sitting right now. RF cable assemblies, fiber cable assemblies, data cables, so it's more the cable assembly side of things, largely distribution influenced.

Speaker Change: The two major hub.

Speaker Change: Is there some other stuff that I missed something or maybe you can just.

Speaker Change: Quick snapshot of where we are.

Speaker Change: On the consolidation of the Florida.

Speaker Change: Sure Yeah. So we have we have a total of four facilities.

Speaker Change: All of size, we have the San Diego facility, which is our headquarters in the primary work that goes on in the facility, where Peter and I are sitting right now.

Speaker Change: RF cable assemblies fiber cable assemblies data cable so it's more of the cable assembly side of things largely distribution influenced we have a facility in new Jersey.

Rob Dawson: We have a facility in New Jersey that was the legacy micro lab business that we moved to a facility and combined with what was the legacy drop-tech business. So out of that facility are our RF passes as well as the both small cell and DAC product lines being produced out of there. And location-wise, servicing a pretty key market for us in the New York Metro area.

Speaker Change: That was the legacy micro lab business that we moved to a facility and combined with what was the legacy <unk> business. So out of that facility is.

Speaker Change: Our RF passives.

Speaker Change: As well as the both small cell and DAC.

Speaker Change: Product lines are being produced out of there and location wise servicing a pretty key market for us in the New York Metro area. We then have in Milford, Connecticut.

Rob Dawson: We then have in No for Connecticut and in, yeah, Hank, New York on Long Island. We have custom assemblies, so custom work with two businesses we've owned for quite some time. And we're more regionalized product lines, with the exception of hybrid fiber, which is made in our Long Island facility as well. So we have those four facilities overall.

Speaker Change: Yeah, I think New York on long Island, we have custom assemblies, so custom work with.

Speaker Change: Two businesses, we've owned for quite some time and more regionalized product lines.

Speaker Change: With the exception of hybrid fiber, which is made in our long.

Speaker Change: That facility as well so we have those those four.

Speaker Change: Facilities overall.

Steve Cole: And last question is, when you talk about volatility, kind of a micro lab and the venue markets, another venue market can help you in some other issue. But what are you seeing? You know, obviously I'm sure you look at the landscape closer than we do on a day-to-day basis.

Speaker Change: And last question is on your you talked about volatility kind of a micro lab a.

Speaker Change: Our new markets.

Speaker Change: The onion market can help you in some other areas too, but what are you seeing you know obviously I'm sure you look at the landscape closer than we do on a day to day basis, but are you getting some encouragement.

Speaker Change: Look the likes of Commscope kind of turning the corner about being more positive with suitable fibroid guys being more positive they're laying the cable.

Speaker Change: Ecosystem getting better although you still mentioned, there's still some cautious optimism, but what.

Rob Dawson: And there's so some cautious optimism, but what needs to happen for that kind of move us into a better macro state from like it is. Yeah, I think the companies that you referenced, we certainly watch as key indicators. You know, Come Scope made a decision to divers the key piece of its legacy kind of wireless focus business, the old Andrew product lines and some related in the last few months. And I think that's an interesting decision on their part, but strategically, that's still a critical product line that we view as complimentary and competitive both. But I think overall when you look at the, you know, the market, whether it's rural carriers' spending and the BEADs spending that's supposed to bring internet to all locations.

Speaker Change: <unk> needs to happen for that.

Speaker Change: Kind of move us into a better macro stayed from what you thought.

Speaker Change: Yes, I think the companies that you referenced we certainly watch as key indicators.

Speaker Change: Commscope made the decision to divest the key piece of its legacy kind of wireless focused business the old Andrew product lines and some related.

Speaker Change: In the last few months and I think thats it.

Speaker Change: Interesting decision on their part, but strategically that's still a critical product line that.

Speaker Change: We view as complimentary and competitive both but.

Speaker Change: But I think overall when you look at the.

Speaker Change: The market, whether its rural carrier spending and the bead spending thats supposed to bring internet to all locations whether that data centers increasing in their capacity.

Rob Dawson: Whether that data centers increasing in their capacity and, you know, the equipment being pushed to the edges, or just general densification of wireless. I think interest rate cuts will certainly help with the carriers wanting to spend more, or whoever's financing those. Those are largely debt-based spending kinds of patterns. So interest rates do come down like the predictions are, I think that's at the health. And I think just generally, while we don't have, you know, specifics from every customer on, hey, here's what 20 25 looks like from a capex perspective. We are hearing that the markets start to look a little more normalized, and again that word is probably overused, but I think to us what that means is maybe the cycle will make more sense.

Speaker Change: The equipment being pushed to the edges.

Speaker Change: Just general Densification of wireless I think interest rate cuts will certainly help with the carriers wanting to spend more or whoever's financing. Those those are those are largely debt based spending kinds of patterns. So.

Speaker Change: If interest rates do come down like the predictions are I think thats, a help and I think just generally while we don't have specifics from every customer on hey, Here's what 2025 looks like from a capex perspective.

Speaker Change: We are hearing that the market is starting to look a little more normalized and again that word is probably overused, but I think for us what that means is maybe the cycle will make more sense theres always a pause in carrier spending and any build cycle.

Rob Dawson: There's always a pause in carriers' spending in a build cycle. I think the densification piece is still a critical one and needs to continue happening, and we're positioned well for that.

Speaker Change: I think the Densification piece is still a critical one and needs to continue happening and we're positioned well for that so on the venue side I understand why there was a pause it's sort of a dolby experience within venues are within large facilities has certainly gotten better but there needs to be another step in that.

Rob Dawson: So, on the venue side, I understand why that was a pause. It's sort of a, you know, the experience within venues or within large facilities is certainly gotten better, but there needs to be another step in that. If you've been to any large events, whether that's concerts or sporting events or otherwise, where there's a lot of people that show up in a place for a short period of time and then go away. You got to have coverage in there that it exceeds really the capacity that's put on it, and some places have done better than others, but there's still a lot of things on the dock that need to happen.

Speaker Change: If you've been to any large events, whether thats concerts or sporting events, or otherwise, where theres a lot of people that show up in a place for a short period of time and then go away.

Speaker Change: You got to have coverage in there that it exceeds really the capacity. That's that's put on it in some places have done better than others, but there is still a lot of things on the docket that need to happen. During 'twenty four we didn't see a lot of that there weren't a lot of the large venues being being touched up there were smaller sort of enterprise level venues.

Rob Dawson: During 24, we didn't see a lot of that. There weren't a lot of the large venues being touched up. There were smaller sort of enterprise-level venues. Office buildings and otherwise clearly public safety is one that we believe is a heavy push as we get forward in, you know, locations like education environments, campus environments like that. So I think we're hearing that it's going to be a little better going forward. That doesn't guarantee anything, but I'm hopeful for some of that all boats rise piece that can bring up some of the product areas that have been a little more distress for us.

Speaker Change: Office buildings and otherwise clearly public safety is one that we believe is a heavy push as we get forward in locations like education environments campus environments like that so I think we're hearing that it's going to be a little better going forward that doesn't guarantee anything but we're hopeful for some of that all boats rise.

Speaker Change: <unk> piece that can can bring up some of the product areas that have been a little more distress for us.

Steve Cole: Thank you very much, and I'll get back in a few.

Speaker Change: Well that's great. Thank you very much I'll get back thanks.

Unknown Attendee: Thanks, Steve. Thank you.

Speaker Change #100: Thanks, Steve.

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

Unknown Attendee: There were no other questions at this time.

Rob Dawson: I would now like to hand the call back to Rob Dawson, CEO at RF Industries, for closing remarks. Great. Thank you, Paul, and thank you, everyone, for joining us today. We look forward to sharing our Q4 results here in a few months. Have a good day. Thank you.

Speaker Change #101: Great. Thank you Paul and thank you everyone for joining US today, we look forward to sharing our Q4 results here in a few months have a good day.

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

Unknown Attendee: This does conclude today's conference. You may disconnect your lines at this time. Thank you for your participation.

Speaker Change #101: Okay.