Q1 2025 RF Industries Ltd Earnings Call
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Speaker Change: Greetings and welcome to RF industries first quarter fiscal 2025 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. This conference is being recorded.
Operator: Greetings and welcome to RF Industries first quarter fiscal 2025 financial results conference call. At this time all participants are in a listen-only mode.
Operator: A question and answer session will follow the formal presentation.
Operator: If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. Please note this conference is being recorded.
Dummy Case: I will now turn the conference over to your host dummy case Investor Relations at RF Industries, you may begin.
Donnie Case: I will now turn the conference over to your host, Donnie Case, Investor Relations at RF Industries. You may begin. Thank you, Paul. And good afternoon, everyone. And welcome to RF Industries first quarter 2025 earnings conference.
Speaker Change: Thank you Paul and good afternoon, everyone and welcome to RF Industries first quarter 2025 earnings Conference call with me today I I wish me today, our RFID, Chief Executive Officer, Rob Dawson, President and C. O L wave of BZ and CFO, Peter Yes, we issued a press release after market today that relationship.
Donnie Case: With me today with me today are RFI's Chief Executive Officer Rob Dawson, President and COO Ray Bibisi, and CFO Peter Yin. We issued our press release after market today. That release is available on our website at rfindustries.org.
Speaker Change: I know why and our website are actually industry Satcom I wanted to remind everyone that during today's call management will make forward looking statements that involve risks and uncertainties. Please note that information on this call today may be may constitute forward looking statements under the securities exchange loss when used.
Donnie Case: I want to remind everyone that during today's call, management will make forward looking that involve risk and. Please note that information on this call today may constitute forward-looking under the Securities Exchange. 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 risk in 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 risk and uncertainties discussed in the company's report.
Speaker Change: Would you 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 outcomes contained Danny.
Speaker Change: 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 Hurricane history undertakes no obligation to update or revise any forward looking statements.
Donnie Case: I'm for 10 K and and other filings.
Donnie Case: RF industry undertakes no obligation to update or revise any forward Additionally, throughout this call, we will be discussing certain non-GAAP financial Today's earnings release and related current report on Form 8K describe the differences are GAP and non-GAP.
Speaker Change: Additionally throughout this call we will be discussing certain non-GAAP financial measures today's earnings release and related current report on form 8-K describe the differences between our GAAP and non-GAAP reporting.
Rob Dawson: With that, I'll now turn the conference over to Rob Dawson, Chief Executive Officer. Thank you, Johnny, and welcome to our first quarter fiscal 2025 conference call. I'll start with our first quarter highlights and some comments on our market opportunity.
Speaker Change: I'll now turn the conference over to Rob Dawson, Chief Executive Officer go ahead, Rob.
Speaker Change: Thank you Jonathan and welcome to our first quarter fiscal 2025 conference call.
I'll start with our first quarter highlights and some comments on our market opportunity, our president and COO of <unk>, who will provide an update on sales and operations and our CFO, Peter Yan, who will cover our financials before we open the call to your questions.
Rob Dawson: Our President and COO, Ray Bibisi, will provide an update on sales and operations, and our CFO, Peter Yin, will cover our financials before we open the call to your questions. Our team delivered a strong performance in the first quarter net sales were $19.2 million, a significant increase of 42.7% over the $13.5 million reported in the first quarter of last year. While the first quarter is typically our seasonally slowest quarter, revenue was up 4% sequentially and a little better than the guidance we provided on our fourth quarter call. Our gross profit margin for the first quarter was 29.8% in line with our target of 30%.
Speaker Change: Our team delivered a strong performance in the first quarter net sales were $19 2 million.
Speaker Change: A significant increase of 42.7% over the $13 $5 million reported in the first quarter of last year.
Speaker Change: While the first quarter is typically our seasonally slowest quarter revenue was up 4% sequentially and a little better than the guidance, we provided on our fourth quarter call.
Speaker Change: Our gross profit margin for the first quarter was 29, 8% in.
Speaker Change: In line with our target of 30%.
Rob Dawson: For the second quarter in a row, we delivered an operating profit, which reflects our ongoing commitment to driving improved profitability, even with some challenging and persistent market conditions. Non-GAAP earnings per share came in at $0.04, and our adjusted EBITDA was $867,000. We ended the quarter with a backlog of $15.2 million. As I've said before, we have significant leverage in our P&L that will have a favorable impact as the market improves. And this quarter's financial results validate the strength and scalability of our model and our continuing transformation from a product company to a solutions provider. Sales increased by $5.7 million compared to Q1 last year.
Speaker Change: For the second quarter in a row, we delivered an operating profit, which reflects our ongoing commitment to driving improved profitability, even with some challenging and persistent market conditions.
Speaker Change: non-GAAP earnings per share came in at <unk> and our adjusted EBITDA was $867000. We ended the quarter with a backlog of $15 $2 billion.
Speaker Change: As I've said before we have significant leverage in our P&L that will have a favorable impact as the market improves.
Speaker Change: And this quarter's financial results validate the strength and scalability of our model and our continuing transformation from a product company to a solutions provider.
Speaker Change: Sales increased by $5 $7 million compared to Q1 last year.
Rob Dawson: And that leverage translated into a $2 million positive swing for adjusted EBITDA that delivered the $867,000 adjusted EBITDA for the quarter that I just mentioned. Our first quarter mix skewed more favorably toward higher-value offerings, including increased shipments of DAC thermal cooling systems and integrated small-cell solutions. Our custom cables, wire harnesses and core distribution centric RF products also made solid contributions to the quarter. From a customer diversification standpoint, we're moving in the right direction toward a more balanced contribution beyond the large tier one wireless carrier. Our focus on diversifying our customer base is gaining traction with a growing portion of our product revenue coming from customers outside of the wireless carrier space.
Speaker Change: Leverage translated into $2 million positive swing for adjusted EBITDA. The delivered the $867000 adjusted EBITDA for the quarter that I just mentioned.
Speaker Change: Our first quarter mix skewed more favorably towards higher value offerings, including increased shipments of DAC thermal cooling systems and integrated small cell solutions are.
Speaker Change: Our custom cables wire harnesses and core distribution centric RF products also made solid contributions to the quarter.
Speaker Change: From a customer diversification standpoint, we're moving in the right direction toward a more balanced contribution beyond the large tier one wireless carriers.
Speaker Change: Our focus on diversifying our customer base is gaining traction with a growing portion of our product revenue coming from customers outside of the wireless carrier space.
Rob Dawson: Make no mistake, we would love to still love to see the carriers turn on the CapEx spigot to address densification and other opportunities. And as I've indicated before, our technology forward solution. have moved us up the food chain to deal more directly with key decision makers. That said, broadening our customer base and increasing our exposure to new end markets opens up our opportunity set while making RFI more resilient to cyclical downturns in carrier CAPAC.
Speaker Change: Make no mistake, we would love to still love to see the carriers turned on the Capex that gets to address densification and other opportunities and as I've indicated before our technology forward solutions have moved up the food chain to deal more directly with key decision makers.
Speaker Change: That said broadening our customer base and increasing our exposure to new end markets opens up our opportunity set while making our or by more resilient to cyclical downturns and carrier Capex.
Rob Dawson: As an example of new end markets, in the first quarter, we want a large interconnect opportunity from a leading aerospace company.
Speaker Change: As an example of new end markets in the first quarter, we won a large interconnect opportunity from a leading aerospace company.
Rob Dawson: This is exciting on several levels. First, aerospace is a high-growth industry that requires the utmost degree of mission-critical components. This win, among others, further validates that our products and solutions meet the highest standard for exceptional quality. This builds RFI's credibility and reputation for high quality across all of our target markets, including our distribution partners. To be clear, we see plenty of opportunities to continue to grow within the tier one wireless carrier ecosystem while we're also making meaningful headway in these new market sets. We expect wireless network densification to accelerate throughout 2025 with improved spending on small cell deployment.
Speaker Change: This is exciting on several levels first aerospace as a high growth industry that requires the utmost degree of mission critical components.
Speaker Change: This win among others further validates that our products and solutions to meet the highest standard for exceptional quality.
Speaker Change: This builds RFID credibility and reputation for high quality across all of our target markets, including our distribution partners.
To be clear, we see plenty of opportunities to continue to grow within the tier one wireless carrier ecosystem, while we're also making meaningful headway in these new market segments.
Speaker Change: We expect wireless network densification to accelerate throughout 2025 with an improved spending on small cell deployments.
Rob Dawson: We also anticipate an increase in stadium and venue projects. RFI is well positioned to benefit from these tracks. We've refined our go-to-market strategy and attracted veteran relationship managers who are accelerating our business development efforts. From a product perspective, we're leveraging our strong offering in InterConnect while further transforming into a solutions provider with our state-of-the-art small cell solutions and DAC thermal cooling system. And our team continues to innovate with new products and solutions that will add to our growing portfolio of high-value We anticipate announcing and showcasing some of these innovations at upcoming industry events, and we'll keep you informed of these developments.
Speaker Change: We also anticipate an increase in stadium in venue projects RFID is well positioned to benefit from these trends.
Speaker Change: We've refined our go to market strategy and attracting veteran relationship managers, who are accelerating our business development efforts.
Speaker Change: From a product perspective, we're leveraging our strong offering of interconnect, while further transforming into a solutions provider with our state of the state of the art small cell solutions and <unk> thermal cooling systems.
Speaker Change: And our team continues to innovate with new products and solutions that will add to our growing portfolio of high value offerings.
Speaker Change: We anticipate announcing and showcasing some of these innovations at upcoming industry events and we'll keep you informed of these developments.
Rob Dawson: On the operations side, we continue to streamline our infrastructure to allow us to scale more quickly and deliver sustainable profitability with an adjusted EBITDA goal of 10% of sales or greater.
Speaker Change: On the operations side, we continue to streamline our infrastructure to allow us to scale more quickly and deliver sustainable profitability with an adjusted EBITDA goal of 10% of sales are greater.
Rob Dawson: Finally, I want to comment on a current hot topic, tariffs. As with most companies, we're closely monitoring the various tariff proposals being discussed and enacted by the U.S. government, as well as those coming from other countries and regions. We're working to determine any impact on our procurement and supply chain activities and on the sales of the products we export. In Q1, roughly 6% of our revenue came from export sales. and all of our production facilities are based in the United States. As such, we currently don't anticipate a significant impact from the new tariff. Although we are making updates to our pricing and supply chain as needed.
Speaker Change: Finally, I want to comment on our current hot topic tariffs.
Speaker Change: As with most companies we are closely monitoring the various tariff proposals being discussed and enacted by the U S government as well as those coming from other countries and regions, we're working to determine any impact on our procurement and supply chain activities and on the sales of the products we export.
Speaker Change: In Q1, roughly 6% of our revenue came from export sales and all of our production facilities are based in the United States as such we currently don't anticipate a significant impact from the new tariffs.
Speaker Change: We are making updates to our pricing and supply chain as needed.
Rob Dawson: Overall, it's still too early to offer final guidance on this topic based on the fluid nature of the situation.
Speaker Change: Overall, it's still too early to offer final guidance on this topic based on the fluid nature of the situation.
Speaker Change: We will continue to evaluate potential impacts on our buy and our customers and communicate any changes we anticipate.
Rob Dawson: will continue to evaluate potential impacts on RFI and our customers and communicate any changes we have Our momentum continues to build and our visibility is improving. Our first quarter sales came in higher than expected when we spoke to you in January. This was directly related to the timing of customer shipment requests, and while quarter to quarter timing of shipment like this can move our results around, we're anticipating fiscal 2025 revenue to be significantly higher than fiscal 2024. And as I mentioned, we have a heavy focus on improving profitability. Our team's hard work, strategic execution, and ability to adapt have positioned us for success.
Speaker Change: Our momentum continues to build and our visibility is improving.
Our first quarter sales came in higher than expected when we spoke to you in January.
Speaker Change: This was directly related to the timing of customer shipment requests and while quarter to quarter timing of shipments like this can move our results around.
Speaker Change: We are anticipating fiscal 2025 revenue to be significantly higher than fiscal 2024.
Speaker Change: And as I mentioned, we have a heavy focus on improving profitability.
Speaker Change: Our team's hard work strategic execution and ability to adapt have positioned us for success.
Rob Dawson: And we're excited about what's ahead and how this can translate into long term value creation for our stakeholders.
Speaker Change: And we're excited about what's ahead and how this can translate into long term value creation for our stakeholders.
Ray Bibisi: With that, I'll turn the call over to Ray for further commentary on sales and operations. Thank you, Rob. As Rob mentioned, our improving financial results demonstrate successful execution of our long-term strategy to expand our share of the Bill of Materials. While we have grown our product portfolio, we have further enhanced our value proposition by integrating these offerings into comprehensive solutions that directly address customer needs. A key driver of our success has been the deep engagement of our sales team, whose close collaboration with our customers and engineering has directly influenced product development. By proactively identifying challenges and market gaps, our team has helped shape innovative solutions that span multiple offsets.
Ray: With that I'll turn the call over to Ray for further commentary on sales and operations.
Speaker Change: Okay.
Ray: Thank you Rob.
Ray: As Rob mentioned, our improving financial results demonstrates successful execution of our long term strategy to expand our share of the bill of material.
Ray: While we have grown our product portfolio, we have further enhanced our value proposition by integrating these offerings into comprehensive solutions that directly address customer needs.
Ray: A key driver of our success has been the deep engagement of our sales team who's close collaboration with our customers and engineering has directly influenced product development.
Ray: By proactively identifying challenges and market gaps our team has helped shaped innovative solutions that span multiple offerings.
Ray Bibisi: This alignment between sales, product management, and engineering ensure that we are not just a component supplier, but deliver fully integrated, customer specific solutions that enhance performance, efficiency, and overall satisfaction, ultimately providing a competitive edge. By bringing together multiple products from our various business divisions, we create comprehensive solutions that address critical customer pain points while also delivering value added services that strengthen our market position. Leveraging our expertise in cross-divisional capabilities, we differentiate ourselves by offering solutions that go beyond standalone products, driving meaningful impact to our customers. To further capitalize on these opportunities, we have made strategic investments in expanding our sales team, bringing in experienced talent to drive targeted initiatives across key market segments and customers.
Ray: This alignment between sales product management and engineering ensure that we are not just a component supplier, but deliver fully integrated customer specific solutions that enhance performance efficiency and overall satisfaction ultimately providing a competitive edge.
Ray: Sure.
Ray: By bringing together multiple products from our various business divisions, we create comprehensive solutions that address critical customer pain points, while also delivering value added services that strengthen our market position.
Ray: Leveraging our expertise and cross divisional capabilities, we differentiate ourselves by offering solutions that go beyond standalone products driving meaningful impact to our customers.
Ray: To further capitalize on these opportunities we have made strategic investments in expanding our sales team.
Ray: Bringing in experienced talent to drive targeted initiatives across key market segments and customers.
Ray Bibisi: This expansion enhances our ability to engage more deeply with customers, identifying new opportunities and accelerating growth in high potential areas. With a large and more specialized team, we can provide the personalized attention and technical guidance necessary to help customers navigate complex solutions and drive successful outcomes. Our continued investment in a customer-centric, go-to-market strategy reinforces our commitment to strengthening relationships, increasing market potential, and driving long-term substantial growth. The positive feedback we have received validates this approach and we remain confident in our ability to capitalize on opportunities ahead.
Ray: This expansion enhances our ability to engage more deeply with customers identifying new opportunities and accelerating growth in high potential areas.
With a large and more specialized team we can provide the personalized attention and technical guidance necessary to help customers navigate complex solutions and drive successful outcomes.
Ray: Our continued investment in a customer centric go to market strategy reinforces our commitment to strengthening relationships in.
Ray: Increasing market potential and driving long term substantial growth.
Ray: The positive feedback we have received validates this approach and we remain confident in our ability to capitalize on opportunities ahead.
Ray: I'll now turn it over to Peter for the financial review.
Peter Yin: I'll now turn it over to Peter for the financial review. Peter? Thank you, Ray. And good afternoon, everyone. As Rob mentioned, we're pleased with our first quarter results. First quarter sales increased 42.7% to 19.2 million year over year and increased 4% on a sequential basis. First quarter gross profit margin increased to 29.8% from 24.5% year over year. The 530 basis points improvement was not only driven by our overall increase in sales, but also related to a better product mix and our continued efforts to drive cost savings and operating efficiency. First quarter operating income was $56,000, a significant improvement from the operating loss of $2.1 million reported last year.
Ray: Peter.
Peter Yes: Thank you Ray and good afternoon, everyone.
Peter Yes: As Rob mentioned, we're pleased with our first quarter results.
Peter Yes: First quarter sales increased 42, 7% to $19 2 million year over year and increased 4% on a sequential basis.
Peter Yes: First quarter gross profit margin increased to 29, 8% from 24, 5% year over year the.
Peter Yes: 530 basis points improvement was not only driven by our overall increase in sales.
Peter Yes: But also related to a better product mix and our continued efforts to drive cost savings and operating efficiencies.
Peter Yes: First quarter operating income was $56000 a significant improvement from the operating loss of $2 1 million reported last year.
Our net loss was $245000 or <unk> <unk> per diluted share and our non-GAAP net income was 397 or four cents per diluted share compared to loss of $1 4 million or <unk> 13 per diluted share year over year and a non-GAAP.
Peter Yin: Our net loss was $245,000, or $0.02 per diluted share, and our non-GAAP net income was $397,000, or $0.04 per diluted share, compared to loss of $1.4 million, or $0.13 per diluted share, year over year, and a non-GAAP net loss of $1.4 million, or $0.14 per diluted share for Q1 2024. First quarter adjusted EBITDA was $867,000, a significant improvement compared to adjusted EBITDA loss of $1.1 million in Q1 2024.
Peter Yes: GAAP net loss of $1 4 million or <unk> 14.
Peter Yes: Per diluted share for Q1 2024.
Peter Yes: First quarter adjusted EBITDA was $867000, a significant improvement compared to adjusted EBITDA loss of $1 1 million in Q1 2024.
Peter Yin: Moving to the balance sheet, we continue to manage our working capital to strengthen our liquidity and overall capital structure. As of January 31, 2025, we had a total of $1.3 million of cash and cash equivalents, and we had working capital of $11.7 million and a current ratio of approximately 1.7 to 1, with current assets of $29.5 million and current liabilities of $17.8 million. As of January 31, we have borrowed $8.1 million from our revolving credit facility. We continue to keep a close eye on our borrowing costs and see opportunities to improve to a more advantageous structure.
Peter Yes: Moving to the balance sheet, we continue to manage our working capital to strengthen our liquidity and overall capital structure.
January 31, 2025, we had a total of $1 3 million of cash and cash equivalents and we had working capital of 11 sub $11 $7 million and a current ratio of approximately $1 seven to one with current assets of $29 5 million.
Peter Yes: And current liabilities of $17 8 million.
Peter Yes: As of January 31, we had borrowed $8 $1 million from our revolving credit facility.
Peter Yes: We continue to keep a close eye on our borrowing cost and see opportunities to improve to a more advantageous structure.
Peter Yin: for For us, as our overall performance has been improved. Our inventory was $13.5 million, down from $18 million last year. The decrease in inventory reflected our continued improvements to our procurement and supply chain process. We believe our current inventory level supports our strategic business model of inventory availability. However, we continue to manage this closely as we expect to see increased demand in 2025 as we discussed earlier in the call.
Peter Yes: Four four.
Peter Yes: For us as our overall performance has been improving.
Peter Yes: Our inventory was $13 5 million down from $18 million last year.
Peter Yes: The decrease in inventory reflected our continued improvements to our procurement and supply chain processes.
Peter Yes: We believe our current inventory level supports our strategic business model of inventory availability. However, we continue to manage this closely as we expect to see increased demand in 2025, as we discussed earlier in the call.
Peter Yin: Moving on to our backlog. As of January 31, our backlog stood at $15.2 million on bookings of $14.9 million. As of today, our backlog currently stands at $15 million.
Peter Yes: Moving onto our backlog as of January 31, our backlog stood at $15 $2 million on bookings of $14 9 million as of today, our backlog currently stands at $15 million.
Peter Yes: In closing we started the year with a strong first quarter.
Peter Yin: In closing, we started the year with a strong first quarter. We are eager to capitalize on the opportunities before us and drive increasing value for our shareholders.
Peter Yes: Are eager to capitalize on the opportunities before us and drive increasing value for our shareholders.
Operator: With that, I'll open up the call for your questions. Thank you. At this time, we will be conducting a question and answer session. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question. 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. Once again, please press star 1 on your phone at this time if you wish to ask a question.
Peter Yes: With that I will open up the call for your questions.
Speaker Change: Thank you at this time, we will be conducting a question and answer session. If you'd like to ask a question. Please press star one on your telephone keypad.
Peter Yes: A confirmation tone will indicate your line is in the question queue you.
Peter Yes: You May press Star two if you would like to remove your question from the queue.
Peter Yes: For participants using speaker equipment that 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 on one moment. Please while we poll for questions.
Operator: One moment, please, while we pull.
Speaker Change: The first question today is coming from Matthew Moss from B Riley.
Matthew Mouse: First question today is coming from Matthew Mouse from B Reilly. Matthew, your line is Hi, good afternoon. This is Matthew on for Nichols. Yeah, so.
Speaker Change: Matthew Your line is live.
Hi, Good afternoon. This is Matthew on for Nicole.
Hey, Matthew.
Speaker Change: Yes, so okay alright.
Speaker Change: Backlog I remember last call that.
Ray Bibisi: Unknown Attendee, Peter Yin, Margaret Boyce, Ray Bibisi, Ray Bibisi, Unknown Attendee, What the update on that is and that for the rest of the year. Hey, Matthew, you were cutting in and out a little bit there, but I think I get the gist of it. So I'll give you an answer. And if there's follow up detail, please jump in and ask. But I think that the question was around just the change in the makeup of our backlog. So yeah, so we've seen the backlog sort of maintaining around that $15 million level for several weeks now.
Speaker Change: About a few million dollars less of the lower margin higher hybrid product.
Speaker Change: What's the update on that is.
Speaker Change: Pat.
Speaker Change: For the rest of the year.
Speaker Change: Hey, Matthew you were cutting in and out a little bit there, but I think I get the gist of it is all I'll give you an answer and if others follow up detail. Please.
Speaker Change: Jump in and ask but I think the question was around.
Speaker Change: Just the change in the makeup of our backlog.
Speaker Change: So yes, so we've seen the backlog sort of maintaining around that $15 million level for several weeks now and I think that's a good healthy spot for US we have continued to draw down some of the items that have been in that backlog for a long time, we've talked about in prior quarters that some of the hybrid fiber thats been with us for in some cases a few years.
Ray Bibisi: And I think that's a good healthy spot for us. We have continued to draw down some of the items that have been in that backlog for a long time. We've talked about in prior quarters that some of that higher fiber that's been with us for, in some cases, a few years. As we've been able to ship that out to customers, we've been replacing that with some of the newer product lines . Dax, Small Cell, and others, just in general, seeing that kind of maintained. We expect, you know, for the year, the backlog can move around pretty good.
Speaker Change: As we've been able to ship that out to customers, we've been replacing that with some of the newer product lines.
Speaker Change: <unk> small cell and others just in general seeing that kind of maintained we expect for the year the backlog can move around pretty good.
Ray Bibisi: I think that the key point or message I've shared in the past is it's not the only indicator to look at with us. Seeing a $15 million number is a good spot. If it were 16, 17, 18, great. That gives us a little bit longer visibility. Even if it's down 12, 13 million, that, you know, that number is fine. We don't want to see it below 10, and, you know, if it gets above 20, that means we've got a lot of stuff in there that's probably going to take a little while for it to work through.
Speaker Change: The key point, our message I've shared in the past as it is not the only indicated indicator to look at with US seeing a $15 billion number is a good spot. If it were 16 17 18, great that gives us a little bit longer visibility, even if it's down $12 million to $13 million that that number is fine we don't want to see it below 10, and we and if it gets above 20 that means.
Speaker Change: We've got a lot of lot of stuff in there thats, probably going to take a little while for it to.
Speaker Change: Worked through it's not an immediate indicator of success.
Matthew Mouse: It's not an immediate indicator of success. Did that cover what you were asking?
Speaker Change: That cover what you were asking.
Speaker Change: Yeah, Yeah that was great. Thank you.
Matthew Mouse: Yeah, yeah, that was great.
Matthew Mouse: Thank you. And I guess the switching up, what would you say is the main reason?
Speaker Change: And I guess the switching up what would you say is the main reason.
Ray Bibisi: Greasing sequentially during the seasonally slow quarter and how much of that do you credit to moving into more into carrier op-ed? Yeah, great question. I think the When we look at that increase, look, there's still seasonality. Certain product lines, especially the more distribution-centric things, are still going to have that seasonality. So really, I think if we look at that increase, if it's not 100 percent of it tied to new product lines, it's certainly close to that. We saw material contribution from product lines that in the prior year, Q1, and in Q1s in the past, we just didn't have those product lines or they weren't contributing in any kind of material way.
Speaker Change: Increasing sequentially during the seasonally slow quarter and how much of that do you credit to moving into more into carrier Opex.
Speaker Change: Yes, great question I think the.
When we look at that increase.
Speaker Change: Look there is still seasonality certain product lines, especially the more distribution centric things are still going to have that seasonality. So really I think if we look at that increase if it's not 100% of it tied to newer product lines certainly close to that we saw material contribution from product lines that in the prior year Q1.
Speaker Change: And then in Q1 than in past, we just didn't have those product lines are they weren't contributing in any kind of material way. So we would put a lot of emphasis on the fact that adding those product lines and getting them re launched over the last couple of quarters has really helped us.
Ray Bibisi: So we would put a lot of emphasis on the fact that adding those product lines and getting them relaunched over the last couple of quarters has really helped us. And I think that the OPEX plays a part of that. It wasn't all of it, but certainly on the DAC thermal cooling side, a nice chunk of that comes from the OPEX side, which, again, we've not been able to benefit from in the past. So we still saw some decent CAPEX that was in there, more on the densification side, whether that's small cell or venues. Some of that stuff started to pick up and we saw some better contributions.
Speaker Change: And I think the Opex. Please play the part of that it wasn't all of it but certainly on the DAC thermal cooling side, a nice chunk of that comes from the Opex side, which again, we've not been able to benefit from in the past. So we still saw some decent capex that was in there more on the densification side, whether that's small cell or venues some of that.
Speaker Change: I've started to pick up and we saw some better contributions, but I think the two topics youre hitting on are really the two things that drove that.
Ray Bibisi: But I think the two topics you're hitting on are really the two things that drove those added sales. It was OPEX contribution and the newer product lines both.
Speaker Change: Added sales it was opex contribution and the newer product lines both.
Ed: Alright, Thanks, Ed.
Matthew Mouse: All right, thanks.
Matthew Mouse: And I mean, in terms of the gross margin profile, you know, gross margin increased significantly year over year, it'd be helpful to get some more, I guess, insight into how you see that, I guess, changing throughout the year. Sure. Yeah, I think, you know, look, we're happy being around that 30%. We think there's room for that to get better as we continue to optimize the way that we do our production and some of the profitability opportunities that the team is working on. The mix can also swing that wildly.
Ed: In terms of the gross margin profile gross margin increased significantly year over year.
Ed: It would be helpful to get some more insight.
Ed: Insight into how you see that I guess changing throughout the year.
Speaker Change: Sure, Yes, I think look we're happy to be at around that 30%, we think theres room for that to get better as we continue to optimize the way that we do our production and some of the.
Ed: Profitability opportunity that the team is working on the.
The mix can also swing that wildly so as as these newer product lines start to contribute more and we get a little more mature with them and get a little better with it you launch new product lines, even though we've had these product lines since the acquisition a few years ago.
Ray Bibisi: So as these newer product lines start to contribute more, and we get a little more mature with them and get a little better with it, you know, you launch new product lines, even though we've had these product lines, you know, since the acquisition a few years ago, the contribution, as I mentioned, was small, and we've reinvented some of those product lines as well to make them more relevant, more impactful, go after more market share. And as we do that, you launch new products, you want to make sure that the experience of customers is exactly right.
Ed: The contribution as I mentioned was small and we've reinvented some of those product lines as well to make them more relevant more impactful go after more market share and as we do that you launch new products you want to make sure that the experience of customers is exactly right. So we will get better at it over time and we think that also presents an opportunity for margin improvement so 30%.
Ray Bibisi: So we'll get better at it over time. And we think that also presents an opportunity for margin improvement. So 30% is a good number to use. We continue to work on ways to drive that number higher.
Ed: A good number to use.
Ed: We continue to work on ways to drive that number higher.
Ed: Okay, great. Thank you and then you mentioned that you've had the product lines for some while there's been strong growth recently.
Matthew Mouse: Okay, great. Thank you.
Matthew Mouse: And then, I mean, you mentioned that you've had the product alliance for some while. There's been strong growth recently.
Ray Bibisi: Would you credit some of that, a good portion of that, to the new sales team that you mentioned last quarter? And then I guess... Unknown Attendee, Peter Yin, Margaret Boyce, Ray Bibisi, RF Ind Yeah, I think so some of it is certainly because of the additions we've made to the sales team, I'll say the performance that we've seen over the last few quarters where those product lines really started to contribute. In some cases, we signed agreements with some of these large customers two plus years ago. And it was really a life cycle of we needed to get to a point where the spend was materializing, we were positioned correctly.
Do you would you credit some of that a good portion of that is the new sales team that you mentioned last quarter and then I guess.
Ed: You know you've been seeing some success on that so we expect to invest a little bit more and expanding that sales team or how should we think about that.
Ed: Yes, I think so some of it is certainly because of the additions we've made to the sales team I'll say the performance that we've seen over the last few quarters, where those product lines really started to contribute in some cases, we signed agreements with some of these large customers two plus years ago and it was really a lifecycle of we needed.
Ed: To get to a point, where the spend was materializing. We are positioned correctly I think several quarters in a row I talked about that and felt a little bit like the volume cried wolf because it wasn't happening it wasn't happening as the spend started to recover we were positioned perfectly to benefit from it. So some of our long standing salespeople have done a great job of getting us positioned at holding that even through some tough.
Ray Bibisi: I think several quarters in a row, I talked about that and felt a little bit like the boy who cried wolf because it wasn't happening, it wasn't as the spend started to recover, we were positioned perfectly to benefit from it. So, you know, some of our long standing sales people have done a great job of getting us positioned and holding that even through some tough times. We tried to just stay the course, you know, believing that these were the right things. And then our strategy was sound, that started to really show up. And then we we've to your point, we've added some resources, we don't expect there to be a material increase in total spend.
Ed: Times.
Ed: We tried to just state of course, believing that these were the right things and that our strategy was sound.
Ed: It started to really show up and then we have to your point. We've added some resources. We don't expect there to be a material increase in total spend but we've added resources to help us capitalize on the wins that we're having and take those more broadly to other customers as well.
Ray Bibisi: But we've added resources to help us capitalize on the wins that we're and take those more broadly to other customers as well. You know, it's once you've got some good high level use cases that show the real impact of the products, that's the time to for us to invest. And so we've done that.
Ed: Once you have got some some good high level use cases that show the real impact of the products. That's the time to for us to invest and so we've done that we've changed some of those resources out we've added a little bit incrementally, but the.
Ray Bibisi: We've changed some of those resources out, we've added a little bit incrementally, but the additional expense should be minimal, if any.
Ed: The additional expense should be minimal if any.
Speaker Change: Alright, great. Thanks for taking me.
Operator: All right, great, thanks for taking the time. Thank you and once again it will be star one if you wish to ask a question on today's call.
Ed: Thank you.
Speaker Change: Thank you and once again it lists star one if you wish to ask a question on today's call. The next question is coming from Stephen Cole from mangrove Steven Your line is live.
Stephen Kohl: The next question is coming from Stephen Kohl from Mangrove. Thank you. Good afternoon, guys, and good morning. I'm going to throw a few questions out here, I'm sure you're not surprised.
Thank you and good afternoon guys.
Speaker Change: Got it.
Speaker Change: Kind of throw a few questions our heroes Australia.
Speaker Change: <unk>.
Ray: Obviously, one of the things going back to one of Ray's comments.
Stephen Kohl: Obviously, one of the things, going back to one of Ray's comments, you know, it's kind of exciting to me is the move from components to integrated solutions.
Ray: Kind of exciting familiar there's a move from components or integrated solutions can you maybe give us a little bit more color on all of that came above what the sales cycle was.
Ray Bibisi: Can you maybe give us a little bit more color on how that came about, what the sales cycle was and what other opportunities we have behind this in that area and maybe even address some other areas that you might be moving into? Sure. Yeah, so I think that the, you know, thanks for the question. I think that the move to solutions call it in quotes started with the idea of getting more control over the bill of materials. I mean, this goes back years, frankly, from the thesis of being a more component centric and primarily cable assembly company, knowing that it's a fragmented market and we needed to take our value of market.
What other opportunities we have behind us.
Ray: In that area and maybe you can address some others might be moving I'm sorry.
Ray: Sure, Yes, so I think that the.
Ray: Thanks for the question I think the move to solutions call. It in quotes.
Ray: Started with the idea of getting more control over the bill of materials. I mean, this goes back years frankly from the thesis of being a more component centric and primarily cable Assembly company.
Ray: Knowing that it's a fragmented market and we needed to take our value up market and the way to do that in our thoughts was to get more.
Ray Bibisi: And the way to do that in our thoughts was to get more control over the bill of materials in key applications where we had good customer relationships. So we were primarily distribution centric for a lot of those product lines, we started to move into other distribution friendly items through the acquisitions that we've made over the years. And so that along with just bolstering our internal offerings. filled in everything on, you know, distributed antenna systems. Small cells were both areas that we were heavily focused on getting as much control the bill of materials as possible, which is by default more solution sale.
Ray: Control over the bill of materials and key applications, where we had good customer relationships.
Ray: So we were primarily distribution center for a lot of those product lines, we started to move into other distribution friendly items through the acquisitions that we've made over the years and so that along with just bolstering our internal offering.
Ray: Filled in everything distributed antenna systems small cells. We are both areas that we were heavily focused on getting as much control of the bill of materials as possible, which is by the Baltimore solution sale.
Ray Bibisi: You start looking at things like the DAC thermal cooling offer That by itself is a full solution and is one that we did redevelop. The team did a great job of redeveloping that product line and the various different offer that we have within it. But I think all this was in service of adding more value in the market and getting up to a higher level where we were tapping into some different buckets of CapEx, but also into the operating budgets, as we've talked about. But also being on an approved list was a big piece of this process.
Ray: You start looking at things like the DAC thermal cooling offer that.
Ray: And that by itself is a full solution and is one that we did redeveloped. The team did a great job of Redeveloped that product line and the various different offer that we have within it but.
But I think all of this was in service of adding more value in the market and getting up to a higher level, where we were tapping into some different buckets of capex, but also into the operating budgets as we've talked about.
Ray: But also being on an approved list was a big piece of this process and to get on that approved list with these kinds of customers. It's generally not a single component you got to be solving a problem. That's the definition of the word solutions. So that's what we're working towards over the course of many years and I think if you look at what's behind what we've started to do we've cracked into a few come.
Ray Bibisi: And to get on that approved list with these kinds of customers, it's generally not a single component. You've got to be solving a problem. That's the definition of the word solution. So that's what we were working towards over the course of many years. And I think if you look at what's behind what we've started to do, we've cracked into a few customers with each of these product lines and some of our interconnect product lines. We talked about the aerospace win as well.
Ray: <unk> with <unk>.
Ray: With each of these product lines and some of our interconnect product lines, we talked about the aerospace win as well.
Ray Bibisi: Those are things that we believe we're on the early stages of being able to provide a lot more value and not going to give away too much on where we're trying to go next. But you knock down a win with one carrier or two carriers and you start to obviously look, how do we go nationwide? How do we break into others that have a similar need? And then what are the other similar markets that have comparable kinds of challenges that we can solve with the same product set? You can assume we're chasing all of those.
Ray: Those are things that.
Ray: We believe we are in the early stages of being able to provide a lot more value and not going to give away too much on where we're trying to go next but you knocked down.
A win with one carrier to carriers and you start to obviously look how do we go nationwide how do we break into others that have a similar need and then what are the other similar markets that have con.
Ray: Comparable kinds of challenges that we can solve with the same product set.
Ray: You can assume we're chasing all of those that's part of the additional sales resources, we talked about but also in general just the.
Ray Bibisi: That's part of the additional sales resources we talked about. But also in general, the whole thesis of why we wanted to do this was exactly that, knowing that there were more broad-based opportunities for us to go after.
Ray: Pieces of why we wanted to do this was exactly that knowing that there were more broad based opportunities for us to go after.
Stephen Kohl: Talking a little bit, I know, you know, you mentioned that you're looking for a significant increase for the year, which obviously off to a good start with a significant increase in Q1.
Ray: Talking about I don't know.
You mentioned you are looking for significant increase for the year, which obviously we're off to a good start to increase in Q1.
Ray Bibisi: How do you look towards the progression of the cadence towards your 10% number on adjusted EBITDA? Because I suspect as you migrate the mix here and you get more traction on some of this stuff, that we should start to even see it kind of above 30% on growth margin one way, potentially, and actually see a pretty good ramp on that EBITDA number.
Ray: How do you look towards the progression of the cadence towards your 10% number on an adjusted EBITDA because that's the fact.
Ray: Migrates the mix here and you've got more traction on some of the stuff that we.
Ray: It starts with kind of above 30% gross margin.
Ray: Potentially yes.
Ray: We have pretty good ramp on that.
Ray Bibisi: So maybe I'm confused, but it's going to be the first I've been accused of being confused as well, Steve. But I'll tell you, on this topic, I think we have a pretty good plan here. And the team's going after it pretty hard. There's two things you tapped on, you touched on one, which is just the mix driving a higher gross margin, that will clearly help us on the EBITDA line, all the profit lines will benefit from a higher gross profit. I think the other part is when we look at our operating infrastructure throughout the year, we're going to get better at that.
Ray: But maybe I'm confused but frankly, the first time.
Ray: Sure.
Ray: I've been accused of being confused as well, Steve but I will tell you on this topic I think we have a pretty good plan here and the team is going after it pretty hard it'd be theres two things you tapped out you've touched on one which is just the mix driving a higher gross margin that will clearly help us on the EBITDA line. All the profit lines will benefit from a higher gross profit I think the other part is when we look at.
Ray: Our operating infrastructure throughout the year, we're going to get better at that.
Ray Bibisi: And that's just some, you know, creative ways of doing pre finishing work using partnerships in a broader way, you know, using those folks that we've been doing business with for some time, helping us take some of that work out of our four walls where we can where it makes sense for us. So that's a place we continue to focus on, there's a good plan in place, the team is, we've got a really talented team of folks that is working hard on that.
Ray: And that's just some creative ways of doing pre finishing work using partnerships in a in a broader way.
Ray: Using those folks that we've been doing business with for some time, helping us take some of that work out of our four walls, where we can where it makes sense for us. So that's a place we continue to focus on there is a good plan in place. The team is we've got a really talented team of folks that is working hard on that and I think we feel good about that progress and would expect that that will.
Peter Yin: And I think we feel good about that progress and would expect that that will Unknown Attendee, Peter Yin, Margaret Boyce, Ray Bibisi, RF Ind And last question for me is just maybe throwing Peter in here. You know, we saw the first quarter we down ticked a little bit on the line, but are we expecting to be pretty, in terms of cash flow and debt pay down targets this year, should we see that kind of roll through as you're looking at the forecast for the year? Unknown Attendee, Peter Yin, Margaret Boyce, Ray Bibisi, Ray Bibisi, Unknown Attendee, But is that your expectation from what you're seeing in your modeling is that we should take a chunk out of that again this year?
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Ray: Kind of throughout the year, regardless of the monthly or quarterly sales number we think we're going to see a significant benefit showing up by the end of the year that'll help us going into next fiscal year and beyond.
Frank: And last question for me is just maybe Frank Theatre in here.
Frank: The first quarter were down ticked a little bit on the line, but are we expecting to be pretty.
Frank: The cash flow and debt paydown targets the share so we see that kind of roll through.
Frank: As youre looking at the forecast for the year.
Speaker Change: Steve you cut out a little bit there you were asking about kind of debt paydown just generating cash in one of the great things about your business. Historically has been you generate pretty good cash right as we get above certain.
Frank: Certain levels of sales, which I presume, we're going to kind of get there.
Frank: But is that your expectation from what Youre seeing in your modeling is that we should take a chunk out of that again this year.
Frank: Yes.
Peter Yin: Yeah, so you know, we've made significant kind of paydowns to the loan from when we refinanced about this time last year. So we're getting close to our minimum. required amount and we'll start to build up some cash on hand here. And then, as I mentioned, during the call, we are, you know, we're always monitoring kind of that as we start to, you know, improve with our performance cash flow. It's positive and we start building a cash position. You know, it's time to take advantage of kind of the performance and maybe look at cheaper alternatives for us.
We've made significant kind of.
Frank: Paydowns.
Frank: From when we refinanced.
Frank: About this time last year, so we're getting close to our minimum.
Frank: Acquired amount and we'll start to build up some cash on hand here and then as I mentioned during the call. We are we're always monitoring kind of that as we start to improve with our performance cash flow.
Frank: It is positive and we start building our cash position.
Frank: It's time to take advantage of kind of the performance and maybe look at cheaper alternatives for us.
Frank: Okay I did lie one other last question as far as the microbiome.
Ray Bibisi: Unknown Attendee, Peter Yin, Robert Dawson, Unknown Attendee, Peter Yin, Unknown Attendee, Yeah, I think that the micro lab branded products, you know, we've had our ebbs and flows to kind of go along with the carrier market. That's certainly a place that that product line in total, not all of it, but a big chunk of it is is tied fairly closely to including some of the distribution channel that goes with it. It's done a performance wise, it's been it's been a little all over the place, depending on the quarter, we've had huge quarters, we've had marginal quarters and everything in between.
Frank: Number.
Frank: Reposition is that pretty much come to a steady state or what are we seeing there do I presume there would be a beneficiary of some of these macro trends that you've been alluding to.
Frank: Yes, I think the micro <unk> branded products, we better ebbs and flows that go along with the carrier market Thats certainly a place that.
Frank: That product line and in total not all of it but a big chunk of it is tied fairly closely to including some of the distribution channel that goes with it.
Frank: It's done.
Frank: Performance wise, it's been it's been a little all over the place depending on the quarter, we've had huge quarters, we've had marginal quarters and everything in between.
Ray Bibisi: I think in total, though, we're happy with that acquisition, it's put us into a place with that bill of materials and at the right tables. I mean, there's a some of the things I said, when we made that acquisition, it wasn't just about the numbers, it was also there was already a seat at the table, there was already an approved product set that showed up on a bill of materials with every major carrier, not just not just in the US, but every major carrier, which allowed us to pull through some other things. When you look inside a bill of materials of a small cell.
Frank: I think in total, though we're happy with that acquisition it put us into a place with that bill of materials and at the rate tables.
Frank: Some of the things I said, when we made that acquisition. It wasn't just about the numbers. It was also there was already a seat at the table. There was already an approved product set that showed up on our bill of materials with every major carrier not just not just in the U S. But every major carrier.
Frank: Which allowed us to pull through some other things when you look inside of bill of materials of a small cell inside that a lot of times micro lab as the offer where it wasn't it's a chance for us to displace others and put our stuff in there so.
Ray Bibisi: Inside that a lot of times micro lab is the offer where it wasn't, it's a chance for us to displace others and put our stuff in there. So pleased with it. I think we also got a great team with that acquisition that has allowed us to consolidate operations on the East Coast, around these integrated systems as well, including the legacy Schroftec product lines, that address DAC and small cell, all that's being made in that facility in New Jersey, combined with the legacy Microlab team. So we're starting to treat that more and more as a single operation coming out of there.
Frank: Pleased with it I think we also got a great team with that acquisition that has allowed us to consolidate operations on the east coast around these integrated systems as well, including.
Frank: The legacy <unk> product lines.
Frank: That.
Frank: Addressed back in small cell all thats being made in that facility in New Jersey combined with the legacy micro lab team. So we're starting to treat that more and more as a single operation coming out of there and really happy with the opportunities that that has presented us over the years.
Ray Bibisi: And really happy with the opportunities that that has presented us over the years.
Stephen Kohl: Thank you, guys. I appreciate it. Thanks, Peter. Thank you.
Frank: Alright. Thank you guys appreciate it.
Frank: Thanks, Steve.
Rob Dawson: Thank you there are no other questions at this time I would now like to hand, the call back to Rob <unk> CEO at RF industries for closing remarks.
Operator: 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 fiscal second quarter results in June. Thanks for your continued support of RFI. Have a safe and happy St. Patrick's Day and enjoy another year of March Madness. Go Blue! Thank you.
Speaker Change: Great. Thank you Paul and thank you everyone for joining us today.
Speaker Change: We look forward to sharing fiscal second quarter results in June. Thank you for your continued support of <unk> have a safe and happy St. Patrick's day and enjoy another year of March Madness go Blue.
Speaker Change: Thank you. This does conclude today's conference you may disconnect. Your lines at this time. Thank you for your participation.
Operator: This does conclude today's conference. You may disconnect your lines at this time. Thank you for your participation.