RFIL earnings call analysis

NASDAQ:RFIL Q1 2026 Earnings Call Transcript Generated on 6/6/2026 Tom | Conference Call Operator: Greetings. Welcome to the RF Industries first quarter fiscal 2026 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. As a reminder, this conference call is being recorded. Now, I would like to turn the call over to our host, Donnie Case, Investor Relations.

Please go ahead. Donnie Case | Investor Relations

Thank you, Tom, and good afternoon, everyone, and welcome to RF Industries' first quarter fiscal 2026 earnings conference call. With me today are RFI's Chief Executive Officer, Rob Dawson, President and COO, Ray Babisi, and CFO, Peter Yin. We issued our press release after market today, and that release is available on our website at RFIndustries.com. I want to remind everyone that during today's call, management will be making forward-looking statements that involve risk and uncertainties. Please note that information on this call today may constitute forward-looking statements under the securities exchange laws. When used, the words anticipate, believe, expect, intend, future, and other similar expressions identify forward-looking statements. These forward-looking statements reflect management's current views with respect to future events and financial performance and are subject to risk 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 risk and uncertainties discussed in the company's reports on Form 10-K and 10-Q and other filings with the SEC. RF Industries undertakes no obligation to update or revise any forward-looking statements. Additionally, throughout the call, we will be discussing certain non-GAAP financial measures. Today's earnings release and related current report on Form 8K describe the differences between our GAAP and non-GAAP reporting. With that, I'll turn the conference over to Rob Dawson, Chief Executive Officer. Go ahead, Rob.

Rob Dawson | Chief Executive Officer

Thank you, Donnie. Good afternoon, everyone. Welcome to our first quarter fiscal 2026 conference call. I'll lead off with highlights from the quarter. Ray will provide a progress report on sales and operations, and Peter will cover our financial results before we open the call to your questions. I'm pleased to report that we're off to a great start in fiscal 2026. Net sales were $19 million in the quarter. This was just shy of our record first quarter last year in absolute numbers, but for totally different reasons. Last year in fiscal Q1, we had a large project that created a welcome anomaly and produced increased sales in what is historically a seasonally softer period. Net sales for Q1 this year, however, reflected a far greater diversity of products, customers, and end markets, which I believe will set the stage for upcoming quarters. That said, for me, the big takeaway for this quarter was the meaningful expansion in profitability. Compared to the first quarter last year with similar net sales, gross profit margin improved 250 basis points to 32.3%, operating income tripled to $177,000, And adjusted EBITDA decreased, sorry, adjusted EBITDA increased, wouldn't be positive if I said decreased, increased, EBITDA increased 22% to nearly $1.1 million. To our long-term shareholders, thank you for your patience and confidence that we would deliver on what we promised, a more diversified sales base and increased profits from our significant operating leverage. What's exciting to me is that our entire team is feeling the momentum. And in our business, momentum doesn't just happen. It's earned when strategy and execution move together in lockstep. Over the past few years, we've worked hard to reach this inflection point where we have a clear line of sight to scale both our business and profitability. As you saw in our earnings press release, I'd also like to note that that momentum has produced a huge increase in our backlog, which currently stands at $18.6 million. That's an increase of over $6 million since we last reported earnings in mid-January when the backlog was $12.4 million. Now I'll share specifics on why our business model and strategy are working and why we believe it's sustainable. First, we've worked our way up the food chain with the largest communications companies in the country. We're no longer just a vendor, but a solutions provider with a portfolio of technology forward products and solutions that address many applications within telecom. This expanded access and our high-value product portfolio led to new opportunities that in some cases fall squarely into the operating budgets versus the capex spend. This makes us far less reliant on the cyclical Tier 1 wireless capital spending and aligns RFI to participate more consistently in the year-round maintenance and replacement schedule that's critical to maintaining network quality and integrity. Next, our state-of-the-art systems like direct air cooling and small cell are gaining traction. Our DAC systems are especially adaptable to many applications in new end markets. Equipment at the edges of networks requires temperature control to operate efficiently, and our DAC's ability to lower energy costs by up to 75% while being rugged and easy to maintain delivers a compelling customer proposition. We're serving an impressive and growing customer list here. These solutions have opened doors to many new customers and markets. We're now reinforcing our presence in new verticals, such as wireline, cable, and edge data centers. We believe that we've identified a significant unmet need at the edge of the network, close to where data is generated and consumed. While most know that hyperscale data centers require massive pooling systems, we believe that the small buildings, cabinets, and enclosures at the edges of networks are just as important, and our DAC systems provide a powerful and cost-efficient solution. Additionally, our custom cabling solutions team is engineering, producing, and delivering high-quality, mission-critical solutions to customers across several markets, including industrial, communications, and aerospace, where we continue to win repeat orders from a leader in this market. The strong performance and commitment to innovation and quality from our team continues to add to our credibility and reputation. We refined our go-to-market strategy to specifically target new markets for RFI. Our sales team is doing a terrific job of developing relationships in our target markets and have opened doors and elevated our opportunity set. Our customer roster is amazing. It includes a host of well-known names. For competitive reasons, we generally don't name customers, but our client list certainly makes the team proud. Ray will talk more about our go-to-market progress and operations in his remarks shortly. Structurally, our company is in great shape. Our team has done an outstanding job in diversifying our supply chain with redundant manufacturing sources, both international and domestic, that feed into our U.S. production operations. This allows us to flex up for more demand without incurring any material increase in overhead or capex. This capital light approach has been a big factor in increasing our operating leverage. Financially, RFI is also in good shape. We significantly improved our free cash flow over the past several quarters, reflecting our operational execution, margin expansion, and tighter capital discipline. Last year, we renegotiated our revolving credit facility with improved terms, which should drive significant annual savings. All of this has allowed us to greatly reduce our net debt. While fiscal 25 was a breakout year for RFI, our team is even more excited about 2026. We feel confident that we can execute against our strategic priorities and similar to the trajectory in 2025 and supported by the large increase in our backlog. With what we know today, we expect revenue growth to accelerate in the back half of the year. Finally, I want to thank the RFI team that continues to execute and deliver great results. Thank you to our customers for allowing us to partner with you and to our shareholders for your support. With that, I'll turn the call over to Ray.

Ray Babisi | President and Chief Operating Officer

Good afternoon, everyone. As Rob highlighted, the momentum we are feeling across this organization is real and it is earned. I'd like to take a few minutes to walk you through how we are actively managing the key levers across our business to drive growth, reduce vulnerability and create lasting shareholder value. I will take you through sales, product management, engineering and operations and the levers driving our strategy forward. Let me begin with the commercial momentum and market position. With the focus and execution of our team, we can maintain momentum even when specific opportunities take longer to close. Something in prior years could have had a significant impact on quarterly results. This resilience comes directly from the diversification we have deliberately built across markets, product areas, and customers. which allows us to manage possible softness or delays in one area with strength in others. Revenue and bookings are, without question, the scoreboard, but they don't tell the whole story. Equally important is how we achieve these results. A big part of that answer is diversification. As Rob mentioned, this diversification is real and it is working. Today, we are actively serving and winning business across aerospace, telecommunication, industrial, medical, data centers, and government and military markets, amongst others. And the strength of that diversification showed in Q1, where strong performance in our custom cable segment helped offset timing delays in integrated systems. This is not accidental. It is the result of our strategic and deliberate effort to broaden RF industry's addressable market and reduce concentration risk. We are also seeing a resurgence in previous delayed opportunities, which is strengthening both our pipeline and our backlog. This improved visibility gives us real confidence heading into upcoming quarters and positions us well to capture growth, manage risk, and continue building sustained shareholder value. Turning to engineering and product management, this is an area of significant focus and investment for us, and one where I believe the work we are doing today will be a key differentiator for RF industries going forward. We remain focused on delivering high-value, high-quality solutions that address evolving customer needs By streamlining our development process and prioritizing high impact projects, we are driving towards faster time to market and more predictable revenue streams. Close collaboration between product management, engineering, and sales ensures that our innovation aligns tightly with market demands. This allows us to respond quickly to shifts in customer requirements and capture new opportunities as they emerge. During the quarter, we continue to advance our new product roadmap through development, qualification, and gate stages. Our work on small cell configurations resulted in meaningful bookings this quarter, demonstrating how close collaboration between engineering, product management, and sales translates into revenue. Our engineering team is building solutions designed not just for today's requirements, but for where our customers are headed. That forward-looking mindset is what we believe will make RF Industries the trusted partner of choice across the markets that we serve. A good example of this is our thermal cooling solutions, which are gaining traction in edge data center and industrial applications. This demonstrates our ability to anticipate customer needs and leverage core capabilities across diverse end markets. Operations. Operations is a key differentiator for us, and I want to be clear about how serious we take it. Across all areas of our business, we are enhancing process efficiency, improving visibility, and reinforcing execution discipline. This ensures that we can scale quickly, maintain constant quality, and protect margins as demand grows. Aligning our resources tightly with our strategic priorities creates the foundation for predictable, sustainable performance, even as we manage multiple moving parts across the portfolio. On the supply chain side, we have taken deliberate steps to strengthen supplier relationships, improving inventory position, and reducing single source dependencies where possible. And as the tariff environment continues to evolve, be assured that we have a close eye on the impact and continue to proactively take steps to mitigate risk. This isn't new work. It's an effort we've been advancing for some time. In this quarter alone, we continue the ongoing strategic qualification of alternative suppliers in different regions and the proactive repositioning of our supply chain to reduce exposures. Based on this, executed supplier transitions of certain key components categories. We continue this discipline approach across as the trade environment evolves, all aimed at making our operation more resilient and our customer commitments more reliable. These are not one-time actions. They reflect a sustained commitment to running a leaner, more agile organization. Collectively, The levers we are pulling across the organization, diversified revenue streams, disciplined operations, and market-driven innovation work together to reduce vulnerability and create opportunity. This approach allows us to manage risk while capitalizing on new opportunities. Importantly, it positions the company to convert pipeline and backlog momentum into measurable performance gains without compromising margin or operational integrity. In closing, I would categorize Q1 2026 as a quarter of meaningful progress made during a period when customers and markets were still settling into the new year. We are executing with discipline while preparing to capture the opportunities ahead. Our diversified portfolio, operational focus, and innovation mindset create a unique platform for growth, reducing vulnerability, and delivering shareholder value. We are confident in our ability to deliver results and unlock the full potential of our business across all segments. I will now turn the call over to Peter to walk you through the financial results. Peter?

Peter Yin | Chief Financial Officer

Thank you, Ray, and good afternoon, everyone. As Rob mentioned, we're pleased with our first quarter results. First quarter sales were relatively flat at $19 million compared to $19.2 million year over year. As expected, sales were down 16% from $22.7 million on a sequential basis, reflecting our seasonally slow first quarter. Our gross profit margin increased 250 basis points to 32.3% from 29.8% year over year. This improvement reflected our team's strong execution to drive price realization and operational efficiencies while also focusing on cost control. As a result of this, we see improved operating income, consolidated net loss, non-GAAP net income, and adjusted EBITDA. First quarter operating income was $177,000, up from the $56,000 we reported last year. First quarter consolidated net loss was $50,000 or 0 cents per diluted share and our non-GAAP net income was $659,000 or 6 cents per diluted share. This compares to a net loss of $245,000 or 2 cents per diluted share and a non-GAAP net income of $397,000 or 4 cents per diluted share in Q1 of 2025. First quarter adjusted EBITDA was $1.1 million, or 5.6% of net sales, compared to adjusted EBITDA of $867,000, or 4.5% of net sales in Q1 2025. We continue our focus on delivering adjusted EBITDA of 10% or greater as a percentage of net sales. Moving to the balance sheet, as of January 31, 2026, our balance sheet remains healthy with a total of $5.1 million of cash and cash equivalents and working capital of $14.6 million. Our current ratio was approximately 1.8 to 1, with current assets of $33 million and current liabilities of $18.4 million. As of January 31, 2026, We had borrowed $7.1 million from our revolving credit facility. We continue to manage our working capital to strengthen our liquidity and overall capital position. Our net debt was reduced by $4.8 million compared to Q1 2025 and down $744,000 compared to our Q4 2025. Our inventory remained relatively consistent at $13.8 million compared to $13.7 million last year. reflecting a prudent approach to inventory management that balances discipline with customer demand. Moving on to our backlog, as of January 31, our backlog stood at $14.4 million on bookings of $17.9 million. As of today, our backlog currently stands at $18.6 million. While we are pleased with the increase since quarter end, as I've mentioned before, our backlog is a snapshot in time, and it can vary based on when orders are received and when orders are fulfilled. We view backlog as a general gauge of health. We know that it can swing significantly between reporting periods and therefore may not accurately indicate our near-term sales outlook. Overall, we are excited to start fiscal 2026 with an upbeat quarter that builds upon the operational momentum that we achieved in fiscal 2025. We are heads down on execution and we believe we are well positioned for the periods ahead. With that, I'll open the call to your questions. Operator?

Tom | Conference Call Operator

Thank you. Ladies and gentlemen, the floor is now open for questions. If you would like to join the queue to ask a question at this time, please press star 1 on your telephone keypad. We do ask, if listening on speakerphone this afternoon, that you pick up your handset while asking your question to provide optimal sound quality. Once again, please press star 1 on your keypad at this time if you wish to join the queue to ask a question. Please hold a moment while we poll for questions. And the first question today is coming from Josh Nichols from B. Reilly Securities. Josh, your line is live.

Please go ahead. Matthew | Analyst, B. Riley Securities

Hi, this is Matthew. I'm for Josh. Thanks for taking my questions. I guess to start off, you know, coming off a breakout fiscal 25 revenue of 24%, you ended the year with a double digit EBITDA margin. I'm wondering, like, how are you thinking about the full year growth trajectory for fiscal 26 and where do you see the most meaningful drivers?

Rob Dawson | Chief Executive Officer

Yeah, thanks for the question. So I think, I mean, as I tried to share in my comments. I think we expect the trajectory of growth to be similar sort of quarter to quarter movement as we had last year. It's important to know last year our first quarter was actually a few hundred thousand dollars larger than our second quarter. So I think this year we expect to be more sequential sort of in the growth that we have and sort of our normal trajectory starting with Q1, which is always seasonally an interesting quarter to navigate. So we expect to accelerate through the year. The backlog increase is obviously a nice sign to show the support of that, that it's not just words, but we're actually seeing the orders and the items that have been in our pipeline for some time starting to print through as actual orders and going into our system with timing and expected timeframe for shipment. So we expect to accelerate in Q2 versus Q1, and then we think it's going to continue going from there, similar to what we saw last year. The drivers of that really are across the various product lines. Our diversity, I think, is starting to not just print through, as Ray talked about in some detail, but it really helps to smooth out the interesting periods where there may not be projects in one market that are seasonally driven or CapEx driven. We're starting to see that get a little more consistent throughout the year. And I think with that, The product lines that are coming from different customers in different markets give us a lot of comfort that sort of the Pistons can all be running on at different speeds and paces, but it'll start to smooth out those results and make them predictable and much easier to manage the supply chain and give us some visibility, certainly as we get into the later part of the year.

Matthew | Analyst, B. Riley Securities

Excellent info. Thank you. And gross margin came in especially strong this quarter. I'm wondering how durable are the factors driving that improvement and how should we see that flowing throughout the rest of the year?

Rob Dawson | Chief Executive Officer

Yeah, great question on gross margin. I think the big thing for us is sales compared to last year's first quarter We're roughly flat, down a little bit, not surprising. But with that, our margins went up almost three full points, which is great to see. And I think there was a lot of questions on the last earnings call about how sustainable the 30 plus margins are. We feel pretty good about those and our ability to stay there. I think the things that have gotten us consistently above those numbers are Above that 30% level, it really are things like being good at pricing for the value that we believe we're providing to our customers. The mix of products a lot of times helps us. Just some of our items have a higher value maybe than the historical, more fragmented product lines that we're selling. And then lastly, I think it's just, look, the higher the sales number, the better those margins are going to be. We have a pretty simple P&L when you break it down with a lot of operating leverage below the line. That's largely driven by what happens on the top line and then the gross margins that go along with it based on pricing and mix and just overall efficiency of building things.

Matthew | Analyst, B. Riley Securities

Got it. And you mentioned the backlog, how it bounced. post quarter, it's sitting around 18.6 million today. And that's mainly a timing thing based on contracts. But I'm wondering if you can kind of give us an idea on the composition of that backlog and what's driving most of that replenishment, especially after the quarter.

Rob Dawson | Chief Executive Officer

Yeah, so sure. The backlog usually has a pretty healthy mix of different items in it. I think the increase that we've seen is especially healthy You have four different pretty significant product lines across several customers. So we're seeing it in our integrated systems and our custom cabling, which are the two areas that we expect sort of larger percentage growth than what we get out of our interconnect products. Those are largely distribution-friendly on the interconnect side, and we expect growth there. But a lot of times, those aren't project-based and things that are going to show up in sort of a backlog increase. They may come and go in a short period of time. So the increases we've seen, you've got some small cell in there. You've got some DAC thermal cooling. You have some custom cabling in the aerospace market. You have some custom cabling in the industrial market where we continue to see some great blue chip customers ordering from us that have been with us for years. So it's a good, healthy mix, I think, across the different product lines that drove that increase in backlog.

Matthew | Analyst, B. Riley Securities

Great. I guess just one last question, mainly regarding DAC thermal cooling. I'm wondering if there's an update on how that's progressing in terms of customer interest in the NEMA 4 product.

Rob Dawson | Chief Executive Officer

Yeah, thanks for that. So the DAC thermal cooling product is one that, you know, we've seen significant growth. We saw significant growth in 25 compared to prior years. We continue to see that trajectory increase and we're seeing a lot of interest. I think we're starting to see customers making installations and trials to see how well it works in their various systems. A lot of cases, these are edge data center applications. The system is performing great, whether that's the NEMA 4 or some of the other versions. We're basically producing exactly what we say we're going to do. Significant savings and the equipment runs flawlessly without having to use air conditioning all the time, which is expensive and high maintenance as well. So we're seeing some early stages of newer applications in cable and edge data centers coming. that are new markets for us, they're new customers for us. I expect that will be a meaningful part of our growth, not only later this year, but into subsequent years.

Matthew | Analyst, B. Riley Securities

Got it. Great. That was it for me.

Thanks for taking my questions. Tom | Conference Call Operator

Thanks, Matt. Thank you. And as a reminder, if anyone would wish to ask a question at this time, you may press star one on your keypad to join the queue. Once again, that'll be star one to join the queue to ask a question. And there are no further questions in queue at this time. I would now like to turn the floor back to Rob Dawson for closing remarks.

Rob Dawson | Chief Executive Officer

Thank you, Tom. Appreciate it. I was hoping for a lot more questions because I have a lot of other answers, but I'll save those for the next call. I want to thank everyone for participating in today's call. We appreciate your support and look forward to sharing our progress on our Q2 earnings call in June.

Have a great day. Tom | Conference Call Operator

Thank you. This does conclude today's conference call. You may disconnect at this time and have a wonderful day. Thank you once again for your participation. jsPDF 3.0.3 D:20260606090407-00'00'

NASDAQ:RFIL Q4 2025 Earnings Call Transcript Generated on 6/6/2026 John | Conference Operator: Greetings. Welcome to the RF industry's fourth quarter fiscal 2025 financial results conference call. At this time, all participants are on 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. I will now turn the conference over to your host, Donnie Case, Ambassador Relations.

You may begin. Donnie Case | Ambassador Relations

Well, thank you, John, and good afternoon, everyone, and welcome to RF Industries' fiscal fourth quarter and year-end 2025 earnings conference call. With me today are RFI's Chief Executive Officer, Rob Dawson, President and COO, Ray Babisi, and CFO, Peter Yin. We issued our press release after market today, and that release is available on our website at rfindustries.com. I want to remind everyone that during today's call, management will make forward-looking statements that involve risk and uncertainties. Please note that information on the call today may constitute forward-looking statements under the securities exchange laws. When used, the words anticipate, believe, expect, intend, future, and other similar expressions identify forward-looking statements. These forward-looking statements reflect management's current views with respect to future events and financial performance and are subject to risk and uncertainty. 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 risk and uncertainties discussed in the company's reports on Form 10-K and 10-Q and other filings with the SEC. RF Industries undertakes no obligation to update or revise any forward-looking statements. Additionally, throughout this call, we will be discussing certain non-GAAP financial measures. Today's earnings release and related current report on Form 8K describe the differences between our GAAP and non-GAAP reporting. With that, I'll now turn the conference call over to Rob Dawson, Chief Executive Officer. Please go ahead, Rob.

Rob Dawson | Chief Executive Officer

Thank you, Donnie, and welcome everyone to our fourth quarter and fiscal year-end 2025 conference call. I'll start with our fourth quarter highlights and observations of what our team achieved in fiscal 25. Ray will then provide a progress update on our go-to-market strategy, and Peter will cover our financial results before opening the call to your questions. In the fourth quarter, our team kept building on the momentum we delivered throughout the year. Net sales grew 23% year-over-year to $22.7 million. Over the past several quarters, I highlighted how our strategic transformation was driving profitable growth and the operating leverage from executing our plan really showed in Q4. Gross profit margin of 37% exceeded our 30% target and adjusted EBITDA was 11.5% of net sales above our stated goal of 10%. We controlled our fixed costs while driving strong sales growth and that execution delivered a significant increase in profitability. As I mentioned, our results steadily accelerated throughout the year. And for the full fiscal year, net sales were $80.6 million, an increase of 24% compared to fiscal 2024. Gross profit margin for the year was 33% compared to 29% in the prior year. And we delivered adjusted EBITDA of $6.1 million, a huge increase compared to $838,000 in adjusted EBITDA in fiscal 2024. From both the top line and bottom line perspective, fiscal 25 felt like a breakout year for RFI. And going forward, our goal is to prove what our operating model is capable of producing. While the general overall environment continues to have its share of uncertainties and increased costs, our team will continue to execute our long-term strategic plan to further transform RFI from a product seller to a technology solutions provider. In fiscal 26, We remain intensely focused on diversifying in markets, driving further customer and market penetration, and launching new products and solutions that we believe will help deliver another year of strong sales growth and profitability. Now I'd like to walk you through how some key initiatives contributed to a successful fiscal 25 and how they set up RFI for future growth and profitability. The baseline story is the difference between being a solutions provider with technologically advanced products and systems versus our historical position as a downstream component supplier. Being a solutions provider, coupled with RFI's reputation and product approvals from key customers, has opened many new channels for growth and has resulted in considerable diversification of both customers and end markets. Ray will go into more detail on trends we're seeing in key end markets, including aerospace, stadiums and venues, and transportation. What I want to point out is that diversification not only expands opportunity, but also mitigates the risk of customer concentration. In the past, there were times when a single customer accounted for a large part of our growth during the fiscal year. While this was good for our top line and is not abnormal in a growth story, we also recognized it could be seen as a vulnerability. Since then, our team has been heavily focused on widening our horizons by innovating our product applications into new end markets and engaging new customers to drive diversification. Now our results are healthier with diversity by product, customer, and market. Three key initiatives are helping our story evolve. First is deepening our relationships with existing customers. We want to partner more closely with our customers. which allow us to add more value and likely gain a larger share of their annual spend. With our high-value proprietary offerings, we can provide tremendous performance and cost benefits to our customers. We've become very adept at partnering with our customers to identify a need and then using a key solution as the tip of the spear to elevate our relationship. Once we began working more collaboratively with the key technical and market resources within our customers on solving their pain points, we saw more opportunities to cross-sell and expand the value proposition of our relationships. Second, leveraging our successes in markets where we have a long history helps us identify needs for similar applications in other new end markets. Once we've proven our value to key current customers, our team has become skilled at aligning with new customers and partners to penetrate new market segments. We believe over time that these new markets and customers will build into healthy contributors to our sustainable growth and profitability. Finally, we're expanding the value proposition we offer to our channel partners. A solid portion of our revenue comes from partners in our distribution channel, and we continue to foster very close relationships with these key companies. As our portfolio of high-value innovative products and solutions grows, our partners' product offerings to their customers are further enhanced. This has resulted in steady recurring sales for RFI. Also, our distribution partners help open the doors to customers we're targeting. Just about every key contractor and integrator buys from distributors, and we appreciate being well aligned with each of those groups. In addition to our key distributors, we also made a strategic decision to partner with certain manufacturers that act as a channel to take us to new customers and markets. As I mentioned on last quarter's call, A major manufacturer of electronic cabinets and enclosures identified our thermal cooling systems as a solution for edge data center installations. And we're starting to see some real traction in these applications. Both of our organizations believe our combined solution addresses the critical role that cooling systems play in the performance and reliability of edge equipment. While still in its early stage, this collaboration can result in a significant new opportunity for us. It's a great example of where a customer sees a problem and comes to RFI for a solution. We look forward to sharing more about these stories in coming quarters. These go-to-market initiatives, along with our continued focus on constant improvement and operational excellence, provided great results in 2025. And we have solid momentum as we enter fiscal year 26. While we expect some of the normal seasonality in Q1, we also expect to accelerate throughout the year in a similar trajectory to fiscal 25. And with what we know today, we anticipate another year of sales growth. As I've noted before, we look at our business opportunity over the long term because results can flex from quarter to quarter depending on when orders are shipped out the door and a small movement of a shipment, even by a day or two, can have a large impact on a single quarter. Our leading indicator is having a strong and diversified pipeline to help fuel top line growth, which in turn can deliver profitability from our operating leverage. Most important, we have a great team that's firing on all cylinders. Their enthusiasm and commitment to maximizing the opportunities ahead is driving RFI forward to our full potential. Now I'll turn the call over to Ray for more detail on the tremendous progress our team has made in executing on our strategic plan.

Ray Babisi | President & COO

Thank you, Rob, and good afternoon, everyone. Across our business, Q4 reinforces the progress we've made throughout the fiscal 2025. What stands out most is not just where we're seeing growth, but the consistency and discipline behind our execution. Across our targeted end markets, demand remains supported by long-term infrastructure and connectivity investments. In large infrastructure markets, including stadiums, venues, and transportation, activity remained strong throughout the year. We supported more than 130 projects across these categories, delivering a meaningful contribution to revenue compared to prior years. More importantly, this worked strengthen our credibility and visibility, positioning us for future multi-year opportunities, including major global events such as the LA Olympics and the US World Cup, as well as continued airport modernization programs. Our pipeline continues to provide strong visibility across a wide range of infrastructure-related opportunities, reinforcing our confidence in demand stability. The aerospace and defense market also remains solid. Performance here continues to be driven by close collaboration between engineering, operation, and customers to deliver solutions that meet stringent performance, quality, and compliance requirements. Intelli communications and broadband investment remains focused on densification, coverage expansion, and network reliability. our small cell, direct air cooling, and RF passive solutions continue to see consistent traction across both OEM and carrier driven programs. Across all these markets, our distribution channels continue to perform well, delivering consistent contributions based on improved product availability, strong partner engagement, and more disciplined commercial cadence. From an operational standpoint, Q4 reflected continued progress towards more predictable execution and tighter operational controls across inventory, cost, and delivery. Inventory actions were focused on aligning supply chain with demand while managing tariff and supply chain uncertainty. And our cost reduction initiatives continued to deliver tangible benefits. Process and IT improvements are strengthening forecast accuracy, visibility, and scalability across the organization. From an engineering perspective, our focus continues to be innovation aligned with market demand. A more disciplined state gauge process and cross-functional prioritization are improving on how we allocate resources to the highest value opportunities. Customers are increasingly engaging with us early in their design cycles, reflecting our evolution from a component supplier to a problem-solving partner. As Rob noted, RF Industries looks very different today than it did a few years ago. That change reflects clearer accountability, stronger cross-functional alignment, and a more disciplined operating rhythm. Looking ahead to 2026, our priorities are to build on this foundation, executing reliable advancing our product roadmap strengthening leadership and improving predictability across the business there are plenty of external variables we continue to manage but our strong pipeline disciplined operations and aligned teams position us well moving forward what gives me confidence today is the progress we've made in building a more predictable and scalable business with stronger execution better visibility and clear accountability. RF Industries is well positioned to carry momentum into 2026 and continue creating value for our customers and shareholders. Now I will turn the call over to Peter.

Peter Yin | Chief Financial Officer

Thank you, Ray, and good afternoon, everyone. As Rob mentioned, we're pleased with our fourth quarter and full year results. Starting with our fourth quarter, Sales increased 23% to $22.7 million year over year and 15% on a sequential basis. Gross profit margin increased to 37% from 31% year over year. That is an improvement of approximately 600 basis point that was driven by both higher sales and a more favorable product mix. Fourth quarter operating income was $903,000 a considerable improvement from the operating income of $96,000 we reported last year. Consolidated net income was $174,000, or 2 cents per diluted share, and our non-GAAP net income was $2.1 million, or 20 cents per diluted share. Compared to a consolidated net loss of $238,000, or 2 cents per diluted share, share year over year and non-GAAP net income of $394,000 or 4 cents per diluted share for Q4 2024. Fourth quarter adjusted EBITDA was $2.6 million compared to adjusted EBITDA of $908,000 for Q4 2024. Turning to fiscal year 2025 results, Full year revenue increased 24% to $80.6 million year over year. This included finishing the year strong with shipments from our custom cabling offering to a leading aerospace company. Full year gross profit margin increased to 33% from 29% year over year. That is an improvement of approximately 400 basis points, which was primarily driven by both higher sales and a more favorable product mix. Full year operating income was $1.8 million, a significant improvement from an operating loss of $2.8 million in fiscal 2024. Full year consolidated net income was $75,000 or one cent per diluted share. And our non-GAAP net income was $4.4 million or 40 cents per diluted share compared to a consolidated net loss of $6.6 million or $0.63 per diluted share year over year, and a non-GAAP net loss of $990,000, or $0.09 per diluted share for fiscal 2024. Full-year adjusted EBITDA was $6.1 million, a substantial improvement compared to adjusted EBITDA of $838,000 in fiscal 2024. Moving to the balance sheet, our working capital and overall liquidity remain very strong. Our improved results allowed us to reduce our net debt by $4.6 million compared to last year. As of October 31, 2025, we had a total of $5.1 million of cash and cash equivalents, and we had working capital of $14.1 million and a current ratio of approximately 1.7 to 1, with current assets of $35 million and current liabilities of 20.9 million. As we discussed on the last call, we have been exploring ways to reduce our overall cost of capital. As a result of our significantly stronger financial results and outlook, I'm pleased that we were able to negotiate more favorable terms and flexibility for our revolving credit facility, reducing the minimum outstanding loan balance, interest rates, and reporting requirements. As of October 31, 2025, we had borrowed $7.8 million from our revolving credit facility. Our inventory was $13.7 million, down from $14.7 million last year. The decrease in inventory reflected further operational excellence. We continue to manage our inventory levels with discipline. balancing our ability to meet strong customer demand while optimizing supply chain operations to maximize efficiency. Moving to our backlog, as of October 31, our backlog stood at $15.5 million on bookings of $18.5 million. As of today, our backlog currently stands at $12.4 million. Our backlog is a snapshot in time and can vary based on whether based on when orders are received and when orders are fulfilled. While we view backlog as a general gauge of health, it can swing significantly at times, making it less predictable, making it a less predictable indication of our near-term sales. We are incredibly proud of the breakout year that we achieved in 2025. While understanding there is still work ahead of us, as we see room for further improvements, we enter fiscal 2026 with strong momentum, and we are optimistic about the future and our ability to drive improved profitability as we continue to grow. With that, I'll open up the call for your questions.

John | Conference Operator

Thank you. At this time, we will be conducting a question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star 2 if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment, please, while we poll for questions. Once again, please press star 1 if you have a question or a comment. The first question comes from Josh Nichols with B.

Riley. Please proceed. Matthew | Analyst, B. Riley Securities

Hi, this is Matthew. I'm for Josh. Thanks for taking my questions and great quarter. I guess to start off, yeah, I guess to start off, I mean, fiscal 25 came in above our expectations. You had strong momentum exiting the year. I'm just wondering how we should think about the growth trajectory for fiscal 26, especially now that we're almost through the first quarter of your fiscal 26. So I'm just wondering how things are tracking.

Rob Dawson | Chief Executive Officer

Yeah, appreciate that. Thanks for the question and the comment. So I think, as I said in my commentary, our expectation for 26 is another year of growth. I think the trajectory of how we get there is going to look similar to what it was in 25. The joy of having a first quarter that includes November, December, and January means you're always going to have seasonality, almost regardless of what industries you're selling into. So we expect our first quarter probably to be our platform to start from as our lowest quarter of the year. Again, and if you look at what we did in 2025, you can see how quickly that accelerates and how the profitability really ratchets up. So while we're not giving specific guidance, I think if you look at our normal, sort of our normal quarterly quarter over quarter growth that we see in a given year, we expect something similar in 26.

Matthew | Analyst, B. Riley Securities

Got it. And yeah, I mean, this school, I mean, this, this for fiscal fourth quarter was really strong and you had gross margins that expanded to 37%. So I'm just wondering, like, can you break down how much of that was mixed versus operating leverage or pricing?

Rob Dawson | Chief Executive Officer

Yeah, I think it's really a nice combination of, of product and solution mix, which we're starting to see a solid impact and contribution from some of the higher margin product lines that we sell. But I can't really understate the strength of a sales number that starts to get up above 20 million bucks a quarter. I mean, we really saw it in Q4, and that's not something that we've been able to even model perfectly and say, hey, what's this going to look like if our mix does what we think it's going to do and sales go above a we started to throw a lot of cash to the bottom line. And so I think that was as much the story in Q4 as anything else was. Our sales came in a little higher than even what we expected. We had some orders that were requested to be moved in a little bit, which was great. So we benefited from that. But certainly you can really see what happens when sales creep up above 19, 20 million bucks, how much of that becomes a bottom line impact.

Matthew | Analyst, B. Riley Securities

Yeah, actually expanding on that bottom line impact, I mean, similarly, EBITDA margin was, you know, like 11.5%, and that was above your 10% target. Is there sort of like a new target that you think you can hit? I mean, you're expected to grow this fiscal 26, so I'd only imagine that as you continue pushing past 20 million, it'll continue to be above that 10% target on a strong quarter.

Rob Dawson | Chief Executive Officer

Yeah, I appreciate that. I think, I mean, one, I want to celebrate how great the team was to get us there in Q4. You know, we put a goal out there of getting to 10%, you know, EBITDA 10% as a percentage of sales. We put that out not long ago and said, yeah, we see an opportunity to get there. We've got to really work hard to do it both on the cost and operational excellence side, but also on the sales side. And everything kind of came together in Q4. I think the expectation for us is we've got to find ways to keep it above that 10% number. That's not an easy feat. I mean, if sales are up, that's great. But we're also up against continued cost increases and other things that are being thrown at us. So we're not putting out a specific different goal than what we already have. Our job is really to keep the profitability at as high a level as we can. again, looking at it over the long term. I mean, if you look at what we did in Q1 through 4 in 2025, you saw that number adjusted EBITDA as a percentage of sales start to crank up each quarter, even as sales didn't grow a ton until you really saw in Q4 with a higher sales number. So I anticipate sort of a similar approach to 2026 and how that's going to go. I mean, the quarter's are hard for us to dictate specifically based on customer demand and timing of shipments around projects specifically. But I think we just want to celebrate that we exceeded that 10% for a little while before we get into what are we going to do next.

Matthew | Analyst, B. Riley Securities

Got it. Thank you. And last one for me, it'd be helpful if you could expand on those cost increases you mentioned. And how much of those increases do you think can be mitigated with the new products and solutions you're looking to launch this year?

Rob Dawson | Chief Executive Officer

Yeah, so I think, I mean, look, it's nominal increases. It's the things that, you know, everyone's up against. We do have... A lot of people building products in the United States. We've got a healthy production team that's north of 200 folks building things in multiple locations. We're proud of that. And because of that, we need to keep those folks' wages keeping up with the world and keep them with great benefits. For a company our size, we provide what we believe are really strong health care and 401k matching and other things like that, that in a lot of cases are better than companies much larger than we are. So those are the things that we see increases on sort of annually. And the team's done a good job of managing those. We go in eyes wide open every year knowing that there's these annual renewals of certain things. And we have to do our best to mitigate that where we can. Some of that can be done with pricing, but to your point, some of that can be overcome with just a slightly better sales number with a solid product and solution mix. And so we attack an annual budget with that idea that we expect some increases and we expect that we have to overcome them because that's what we're supposed to do. It's the normal things you would see and then throw in just the general global chaos of things can change with one quick text message or tweet at this point. And so we have to always be on our toes and ready for changes to things like logistics costs and other product costs that might be unexpected at this point.

Matthew | Analyst, B. Riley Securities

Got it. Thank you. And actually, just a quick follow-up on that. Can you maybe... Give us, I guess, in terms of those new products and solutions, like maybe a couple that you think are going to be the most impactful this year.

Rob Dawson | Chief Executive Officer

Yeah, look, we continue to feel really good about our integrated systems product lines. DAC and small cell are both things we've talked about for a long time that we're having minimal impact on our sales and have started to really contribute more. We also still feel really good about our legacy product lines. I mean, our custom cabling business is strong and performing extremely well in things like the defense market and other industrial and OEM kind of markets. We're seeing nice, steady growth there and some great customer wins that, in some cases, we're putting out news on when those things come in. in the aerospace and defense market. So I think those three areas are probably items that are more project centric and can be kind of a meatier piece of our total sales. The everything else, which has in many cases a distribution flavor to it as well. We expect those to continue growing and being a nice workhorse in the background, putting up solid growth and profitability there. So it really has become for us sort of the combination of firing on all these different pistons. not expecting every single product line to be perfect every quarter, but expecting a nice balance from them. And when there's contribution from multiple product and solution areas that are project-centric and less seasonal, that starts to give us some predictability and smooth things out where it can.

Matthew | Analyst, B. Riley Securities

Got it. Thanks for taking my questions. I'll hop back into the queue. Thanks, Matthew.

John | Conference Operator

Next question is from Howard Root, private investor. Howard, please proceed.

Howard Root | Private Investor

Great. Thanks for taking my questions and congratulations, not just on the quarter, but really the transformation you've done over the last couple of years here with RF Industries. It's really a great job. First, I got a couple of questions for Peter. The income taxes and the non-cash one-time charges, can you kind of give a quick explanation of what those were in the fourth quarter?

Peter Yin | Chief Financial Officer

Sure, I'll tackle the tax first. Tax relates to evaluation allowance there. So not sure if that answers your question or you want me to get into a little more detail there in our footnotes to the K. We kind of have a tax provision footnote that kind of highlights that in a little more detail.

Howard Root | Private Investor

I'm just going to look, going forward, the $478,000, obviously a huge number for the income taxes. What is that, you know, do you strip out the unusual stuff? What's your tax rate going forward?

Peter Yin | Chief Financial Officer

So tax rate going forward, it's kind of hard to predict. They're probably in the mid-20s if that's kind of the standard corporate tax rate from state and federal. there, but we have some nuances with valuation allowance items kicking in for us.

Howard Root | Private Investor

Okay. And then the non-cash, is that part of that was on the taxes side too, or is that something else?

Peter Yin | Chief Financial Officer

No, the non-cash items is not part of the valuation allowance or the tax provision. So those items are kind of pointed out there. The H-55 you're seeing there, we talked a little bit about um it's related to an accrual uh for a settlement okay and then the interest rate what do you see as a decline in your interest rate kind of going forward from this new reworked line of credit yeah so we're we're you know obviously the the the refinance we've uh disclosed there so expecting a drop but from a cash perspective or interest savings we're expecting kind of at least a quarter million in interest savings for the next year.

Howard Root | Private Investor

Okay, great. So then more for Rob, you know, the diversification that you've gone through is amazing. And could you put some numbers kind of around on what percentage of your revenue and just really ballpark, Rob, coming from, you know, transportation, aerospace, you know, stadium, data centers, What can you tell us in terms of where you are and types of the revenue growth from there and getting away from your base telecommunications business?

Rob Dawson | Chief Executive Officer

Yeah, I appreciate the question. I think it's hard to slice that up simply because the numbers get, they share a lot of information. I think for a company our size, trying to slice into the various details, what I can tell you is, On prior years where we had major growth happening, we were seeing the wireless and telecom market in the 70% range of total sales. We're now seeing that more like 50%. About half of our sales are coming from things that I would call telecom and wireless. The remaining half is coming from, in many cases, similar applications maybe, but transportation, aerospace, and defense. industrial and other OEM, public safety, things like that. So I think the way that we disclose those results is a slightly higher level of maybe what you're asking, but hopefully that gives you some color around just the way we've seen the overall impact and contribution from those different markets.

Howard Root | Private Investor

Great, yeah. And then the backlog, just to kind of explain, what part of that is seasonal? I mean, both the bookings and the backlog took a pretty big drop from Q3 to Q4, and I understand being a shareholder for a bunch of years is that part of that is seasonal. But what part of that is seasonal? What part of that might be from the transformation of the business changes how long you have backlog or what your overall level of backlog would be and when your bookings are coming in? What can you say about that in terms of what that means for your business?

Rob Dawson | Chief Executive Officer

Yeah, great question on backlog. I think it's, you know, for us, it's as we've said for years, it's, you know, it's a good health indicator that we have a backlog and we've got stuff coming in there. I think we also disclose it probably deeper than most companies where we talk about, you know, end of quarter and based on the bookings that we had, what got us to that number. And then we give an update at the time of our call to make sure people are clear about to elaborate a little bit on how the business does work. And you're right with the way you're thinking about it is, you know, seasonally, we expect to have a solid booking quarter in our fiscal fourth quarter. We also expect to start eating through some of that backlog in our Q1, just around the seasonality of sort of the way most markets work. We also are trying to get better at moving our backlog out the door. You know, it doesn't hurt us to have longstanding backlogs, But it also, at times, some of that backlog can get old and tired. And we want to keep that moving similar to the way we've managed our inventory by bringing it down to a more manageable, healthier level and being faster with replenishing when we need to. Our expectation on backlog is that it sort of hits a low point in our first quarter. and then starts to work its way back up as we see the project-based work on the calendar year start to kick in when people's budgets get finalized and everyone gets settled back into their seats. I think everyone probably felt that this was a strange holiday season because you had Christmas and New Year both falling on a Thursday, which means you basically had two dead weeks from people coming to work and everyone being engaged perspective. we're finally seeing the world get back to a little more normalcy. Our expectation is that that backlog will start to move back up as it normally does this time of year. But at the same time, you can see that we've been moving some of that out the door to get to a fresher level as well.

Howard Root | Private Investor

Right. And then bookings, the $18.5 million in bookings for Q4, was that kind of according to your plan? Was that ahead of your plan or a little under your plan? How did that fit with your expectations?

Rob Dawson | Chief Executive Officer

Yeah, I would say it's around our plan-ish. I think it's hard to... Q4 is a tough one because of where our October year end doesn't really align with other people's budgets. So we generally see... a larger booking level happen in our third quarter is kind of just seasonally. That's what we've historically seen. It's starting to smooth out a bit, but the, you know, October, November, December, January timeframe is always any order that we expected in any of those months could be in another one. And that's just, That's just how it falls around the year end and the year beginning. So it was fine. I think we were happy with that number. And the thing that we're even happier about, though, is what we've got in our pipeline that still looks super healthy. Ray talked some about that, the different application areas and the different customer areas where we're seeing growth in the last couple of years. we've still got a really solid pipeline of opportunities that aren't going away. While those move around in those various months, as I just said, we only see us adding to that pipeline of opportunity and feel really good about it.

Howard Root | Private Investor

Great. Well, I appreciate all the extra color there. And again, congratulations to you and the whole team on outstanding performance from where you were three or four years ago to where you are today.

Thanks a lot. Rob Dawson | Chief Executive Officer

Great. Thank you, Howard.

John | Conference Operator

Once again, if you have a question or a comment, please indicate so by pressing star one. The next question comes from Steve Cole with Mangrove.

Please proceed. Steve Cole | Analyst, Mangrove Capital Partners

Hey, good morning, guys. And I, too, would like to reiterate that it's congrats on a great performance. I'm sure I agree that you should at least savor the victory at least for a day or two, maybe even a week before we start looking at the next set of targets. But I wanted to talk about a couple of things. One thing on the balance sheet is I noticed if I'm doing my math right, we're down to $3 million in net debt, which has probably been the best we've been in quite a while. How is that changing our priorities on capital allocation? Do we see we haven't done any acquisitions in a while? Do we look at share buybacks, acquisitions, dividends? Has the thought changed at all on that, or what is the thinking today on capital allocation?

Rob Dawson | Chief Executive Officer

Yeah. Hey, Steve. Thanks for the question. I think the At the moment, our priority is the same as it has been. We want to get that net debt as low as we can. Obviously, performance of the business helps. But at the same time, every time the board meets, we talk about best shareholder value. And at the moment, we think the best thing for us, short of having a strategic opportunity in front of us that makes sense, we want to continue paying down that debt. That is job one. Now, We're also always looking at other opportunities to drive shareholder value and give a nice return. So all of the items that you brought up are up for discussion. Every time the board meets, we talk about those. We haven't done an acquisition in a few years that's been on purpose. And some of that was the market and some of it was us getting to a point where we could actually you know, finish the integration of the ones that we had done, we finally got a chance to do a lot of that work, which is showing through now in our operating leverage and, you know, getting our costs as low as we can. So I think if there were an opportunity that presented itself from an MIA perspective, we might alter those priorities. But at the moment, our priority continues to be debt service and getting that to as low a point as we can.

Steve Cole | Analyst, Mangrove Capital Partners

Right. And if I... One follow-up just on margin for a sec. So I know obviously margin's doing very well. I guess I'm curious when we look across the base, how much of the improvement of margins coming on the booked inside versus just volume running through the plant? I know you've keyed in on that again today, kind of on a, I know it depends on mix, and we get to a certain level, a lot comes to the bottom line, but are we seeing, is that split 50, you know, if you look at, I don't know how to, phrase the question, but are we seeing a better book? Because I presume as you're getting the aerospace defense stuff, you're getting better booked in margins there, I would think. But can you put some color around that or some granularity?

Rob Dawson | Chief Executive Officer

Yeah, I think the best I can do there is, you know, look, having a better product mix and solution mix with some of our newer high value, much more technology centric product areas really helps. I mean, that mix just as those areas perform better Matt will tell you that that'll start to drag your gross margins up. Once we cross, you know, 18, 19, $20 million a quarter in sales, now you start to see the impact of, you know, you fully absorb all the labor, much of which for us hits above that gross profit line. So the better we perform top line wise, almost regardless of product line and the mix, you're going to see more profitability, which for us, we live and die by the gross profit line. We manage ourselves really well below the line. It is a function of those things. Can we sell more valuable products and solutions to our customers? And can we get that high as possible? Because when we do, you really see the impact of it. So it's hard for you to ask the question. It's hard for me to give a specific answer on which percentage causes which. But I can tell you that both those things help, although we would see a solid margin improvement just with a higher sales number and a similar product mix than what we've had historically. It wouldn't be as high as 37%, but it certainly would be better.

Steve Cole | Analyst, Mangrove Capital Partners

And last question, just touching on, you alluded to DAC and small cell. Obviously, it's taken a little while for them to get some traction. But talking about public safety for a minute and density, I know for a long time we're talking about you know, these buildings and venues, you know, and even elevate people had that coverage. Are we seeing, how has the regulatory landscape there changed? Or is it still a local thing? Or is there anything, you know, from a bigger picture, is that market becoming more lucrative and getting more traction as people have put requirements on the books that they're actually enforceable?

Rob Dawson | Chief Executive Officer

Yeah, we like the public safety market. I mean, we have a great product offering, not just with our RF passives and some RF active gear that we have under the Microlab brand, but also our core connectivity product line fits in there as well with fiber and coax. So we like it. We've sold to it for years. Most of that gets serviced through the distribution channel, which, again, we appreciate those partnerships and getting to markets like that. I think how those decisions are made and who really dictates what, though, it's still really fragmented. You've got localized ordinances that sometimes are hard to enforce. There's certain cities in the country that have mandated public safety coverage inside buildings, and that mandate is hard to force people to do, and they're unwilling to find these building owners to make it happen. It just becomes a really challenging sort of environment. That's not new. We take part in public safety forums all year long, all the time, and have conversations about it real time. It is similar to kind of bead funding. The federal government says, hey, we need this. And then it gets left up to states and local governments. And then it just becomes a revolving door of people making decisions. And it's been challenging to pin down sort of a final addressable market there, short of saying, for us, it falls into our in-building coverage process. our distributed antenna system product areas and the way we service those applications. So I think it'll continue to get better. New buildings being built tend to have an opportunity to put in some better public safety-based you know, RF solutions. And we're right in the middle of many conversations around that. And I think our offer is really strong there. So we expect that to be an opportunity for us going forward, but it continues to be extremely fragmented from an ordinance and decision-making perspective.

Steve Cole | Analyst, Mangrove Capital Partners

Thank you guys very much.

Rob Dawson | Chief Executive Officer

Thanks, Steve.

John | Conference Operator

We have no further questions in the queue. I will now turn the call back over to Robert Dawson for closing remarks.

Rob Dawson | Chief Executive Officer

Great. Thank you, John. And thanks, everyone, for participating in today's call. We truly appreciate your support and look forward to reporting on our progress throughout fiscal 2026.

Have a great day. John | Conference Operator

This concludes today's conference, and you may disconnect your lines at this time. Thank you for your participation. jsPDF 3.0.3 D:20260606090408-00'00'

NASDAQ:RFIL Q3 2025 Earnings Call Transcript Generated on 6/6/2026 Rob Dawson | CEO: on the capex spend of our Tier 1 carrier customers. One year later, we can proudly say that fast-growing markets like aerospace, transportation, and data centers are now contributing to our sales pipeline, in addition to our strong standing in our traditional markets. Ray will go into more detail on our product innovation go-to-market strategy and trends we're seeing across our end markets. In aerospace, we continue to win repeat orders from a leader in this market, With mission-critical components, failure is not an option, and you don't get a second chance, so our success here continues to add to our credibility and reputation. The transportation market, including both in vehicles and in transportation hubs, is a wide-open field for us. For example, we've already received a meaningful order for a terminal infrastructure project at a major U.S. airport. As you know, the current administration justifiably wants to see our airport terminals upgrade their functionality in line with world-class airports. So this could evolve into significant opportunity for us. Municipal governments also want to upgrade their transportation infrastructures with distributed antenna deployments that will improve communication connectivity and efficiencies for their bus and train systems. We've only just scratched the surface of our product applications for transportation. Our DAC, or direct air cooling system, continues to attract wide attention with a variety of applications across several end markets. As I mentioned last quarter, we launched a next-gen system that has advanced control capabilities and a NEMA certification for more rugged environments that expands our opportunity set in wireline telecom, edge data centers, energy, and transportation. More on data centers shortly. Stadium and venue build-outs are undergoing a significant revival, especially in the United States, playing host to major events like the Olympics and World Cup in coming years. With our well-established reputation in this end market, we have a pipeline of over 100 venues, including some very intriguing projects around corporate and university campuses where greater connectivity is both an essential and competitive advantage. It's exciting to be at that inflection point when our technology, know-how, and reputation create several opportunities to diversify our customer base. Yet equally important is building deeper relationships with our existing customers. Wired and wireless communication customers have been our bread and butter for many years. However, we were mostly a downstream supplier away from the center of action and key decision makers. Now that has changed dramatically with our advanced technology and problem-solving approach We've elevated our value proposition to this important customer base, which in turn has resulted in a greater share of their bill of materials, especially in our higher value solutions. While telecom CapEx spending is still short of historical levels, we've diversified our revenue sources within these organizations to capture a share of the OpEx budgets, a direct result of building and expanding our relationships. Plus, we continue to drive growth with many longstanding customers in our OEM and industrial markets, where we design and build custom assemblies and wire harnesses. The third driver is the value of partnerships, both old and new. We're proud of our longstanding relationships with all the Tier 1 carriers, the major installers and integrators, and especially our distribution partners. The trust we've earned for innovation, collaboration, and service has attracted new partners, which opens the door to additional diverse customer and market opportunities. For example, a major manufacturer of electronic cabinet and enclosures identified our DAC systems as a solution for edge data center installations, which are small decentralized facilities located closer to where data is generated and consumed. While hyperscale data centers are multibillion-dollar installations requiring technologies like liquid cooling systems, facilities on the edge also need energy-efficient cooling. RFI has a great solution for this, and we currently have market trials in process. Before I turn the call over to Ray, a final note on diversification. We've worked long and hard to diversify our supply chain, both domestically and internationally. Although our finished products are American-made, there are certain vital components that are generally available, only available, from outside of the US, which means we must deal with the uncertainty of the evolving tariff landscape. So far, our team has done a great job in mitigating tariff impacts, and we've only had nominal price increases on certain products. Putting this uncertainty aside, we're focused on what's in our control, maximizing the great opportunity ahead of us and delivering one of the best full fiscal year results in RFI's history. We now have three great quarters under our belt for fiscal 2025. And based on what we know today, we expect that our fiscal fourth quarter net sales will be similar to what we delivered in Q3. Finally, thank you to the entire RFI team for executing on the plan and keeping our momentum going. I'm honored to get to work with all of you. Great job. We will continue to stick to the strategy, work hard, be kind, and keep a sense of humor. It certainly seems like we can all use a little more kindness.

Now here's Ray. Ray | COO

Thank you, Rob, and good afternoon, everyone. As you just heard, we believe we are entering an exciting period of growth and opportunity. A key driver of our performance this quarter has been the deep engagement of our sales team. Their collaboration with engineering and marketing has allowed us to deliver fully integrated solutions that address critical needs across our target markets. This quarter, we saw strong growth across aerospace, venues, telecommunication, and broadband networks, supported by consistent contributions from our distribution channels. Our target initiatives in venues and broadband delivered meaningful bookings and revenue, demonstrating the effectiveness of our market-driven strategy. Marketing and product management played a critical role in reinforcing these efforts through impactful campaigns, events, and partner engagements. These activities strengthened our presence in the market and supported pipeline conversion. On the operations side, execution remains disciplined and strategic. We increased inventory levels in certain product categories to mitigate pending tariff impacts while our ongoing cost reduction programs remain on track. At the same time, process improvements and IT enhancements are enabling real-time decision-making and building scalability to meet growing demand. From an engineering standpoint, our focus continues on small cell concealment, direct air cooling, and RF passive solutions. While aligning engineering output with market demand is still a challenge, our improved processes on stage gate discipline and ensuring resources are directed toward the highest value opportunities. As Rob mentioned earlier, the story today looks very different than it was just a year ago. I couldn't agree more. The change has been dramatic. From my vantage point, the real difference is how we are pairing advanced technology with a problem-solving approach. We're no longer just responding to customer needs or helping them anticipate and shaping the solutions that drive their success. The shift has fundamentally strengthened how customers view RFI and the role we play in their strategic planning. Looking ahead to Q4, we expect revenue to remain steady. with continued strength in small cell, DAC, aerospace, venues, and broadband markets. We are mindful of the potential tariff impacts and ongoing supply chain constraints, but our robust sales pipeline, disciplined operations, and strong cross-functional alignment position us to finish the year strong and carry momentum into 2026. Ultimately, Execution is the bridge between potential and results. As COO, I am proud of how our team continues to execute with focus, discipline, and collaboration. I now turn the call over to Peter.

Peter | CFO

Thank you, Ray, and good afternoon, everyone. As Rob described, we've had strong momentum across our business for three consecutive quarters in fiscal 2025. Before I review the financials, the overall theme to note is continuous improvement both top line and bottom line. Our sales continue to increase, and this drives better margins and operating leverage as our fixed costs are spread over higher sales levels. In the third quarter, revenue grew 17.5% to $19.8 million year over year and 4.7% on a sequential basis. Gross profit margin was up 450 basis points to 34% from 29.5% year-over-year, primarily driven by an overall increase in sales as well as a higher product mix, a higher margin product mix, and our ongoing efforts to drive cost savings and operating efficiencies. Operating income was $720,000 compared to an operating loss of $419,000 we reported last year. That's over a $1.1 million improvement year over year. Consolidated net income was $392,000 or 4 cents per basic and diluted shares. And non-GAAP net income was $1.1 million or 10 cents per basic and diluted shares. This compared to a net loss of $705,000 or $0.07 per basic and diluted shares and a non-GAAP net loss of $95,000 or $0.01 per basic and diluted shares for Q3 2024. Adjusted EBITDA was $1.6 million, a significant improvement compared to adjusted EBITDA of $460,000 in Q3 2024. Our financial results this fiscal year reflect both our focus on profitability and strong execution against our plan to diversify our customer base and expand our presence in new end markets. Moving to the balance sheet, we closed the quarter with a strong balance sheet including $3 million of cash and cash equivalents, working capital of $13.1 million, and a current ratio of approximately 1.6 to 1. with current assets of $34.1 million and current liabilities of $21 million. At quarter end, we had borrowed $7.8 million on our revolving credit facility. As previously mentioned, we continue to manage our working capital to strengthen our liquidity and overall capital structure. We are actively assessing our borrowing costs and see near-term opportunities for more advertising for more advantageous financing arrangements. At the end of Q3, our inventory was $14.2 million, down from $14.7 million last year. However, our inventory is up when compared to last quarter's $12.6 million. While our inventory may fluctuate from quarter to quarter, we continue to carefully manage inventory levels while improved procurement and supply chain processes. We are very mindful of our value proposition of inventory availability and believe our current inventory level supports both our strategic business model of inventory availability and continued strategic business model of inventory availability and the continued healthy demand that we see for the balance of 2025 and beyond. Moving on to our backlog, as of July 31, Our backlog stood at $19.7 million on bookings of $24.5 million. We have been successful in working through a portion of our backlog since quarter end, and as of today, our backlog currently stands at $16.1 million. We are looking forward to closing out 2025 with solid momentum in our business. Our team's execution is printing through with strong financial results, and we are well positioned to capitalize on the opportunities that are ahead of us. With that, I'll open up the call for your questions.

John | Conference Operator

Thank you. At this time, we will be conducting a question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment, please, while we poll for questions. Once again, please press star one if you have a question or a comment. And the first question comes from Josh Nichols with B Reilly Securities.

Please proceed. Matthew | Analyst, B. Riley Securities

Hi, this is Matthew for Josh. Thanks for taking my questions. I guess to start off, I mean, the 34% gross margin is impressive, and it's well above the 30% target. Can you help us understand how much of that improvement is driven by DAX systems and small sales versus mix?

Rob Dawson | CEO

Yeah, so I think – good question, and thanks, Matthew. The mix of including those two product lines is increasing, right? So you've got those two things and some of our other high-value items We talked about, obviously, last quarter we put out some press on winning some new aerospace projects. Those are also some of the higher-value, more technical kinds of solutions. So, overall, the mix is sort of leaning towards higher-value items, which help take that up. The other piece I would just mention, and Peter mentioned it in his comments, but a higher sales number is hugely helpful for us, too, because once we absorb all those fixed costs, including the labor that we do, again, to build products in the United States, Once we do that, it's heavily profitable beyond a certain level. And so you're starting to see that operating leverage that kicks in as we move between these 18, 19-plus kind of sales levels. You get some help from that operating leverage also in addition to the mix.

Matthew | Analyst, B. Riley Securities

Got it. And as a follow-up to that, you guys mentioned you expect Q4 to be a similar revenue base. So I guess I'm assuming, should gross margin, assuming that DAC and other high-value items, keep up this kind of percentage of mix and the revenue base being steady. Should we expect gross margins in Q4 to be similar to Q3? And then I guess going into fiscal 26, how should that change as you grow and that mix probably continues to shift?

Rob Dawson | CEO

Yeah, I think as we've talked about in the past, the mix will change quarter to quarter, and it doesn't take much of a little movement in top-line dollars to wildly swing our margins. I mean, we're talking about 50 grand here, 70 grand there. Those kinds of numbers are material against our total dollars that are being delivered. So I think our belief is that we've moved into this world where 30% and above is where we should be all the time. I don't have specific... expectations quarter by quarter based on the fluctuations, but it's not out of the question to stay at the sort of low to mid 30 levels where we've been performing. We're happy to be at 34%, obviously. You see not just the mix, but also the leverage really kicking in. It's not out of the question to do that again, but I think from a specific commitment perspective, it's tough to nail exactly what that number will be. Short of saying, we certainly expect it to be north of 30%.

Matthew | Analyst, B. Riley Securities

Very helpful. Thank you. And then based on, I guess, shifting over to the strong bookings, can you characterize the composition between, you know, I guess, traditional wireless business versus the newer end markets where you've seen strength like aerospace, transportation, and data centers?

Rob Dawson | CEO

Yeah, I think we're seeing contribution from all of them. And that's the helpful part is, you know, in the past, we've had some, you know, if we go back six or seven years, we had some big quarters and some big wins. And, when you dug into our queue, you'd see some concentration within that. And I think we're seeing a different scenario play out right now. It's coming from several different areas, several different product lines, not just within one market, but within individual customers. We're selling multiple of these newer, higher value product lines as well. So I think the diversity is probably the biggest story around that. And that's also helpful quarter to quarter because we're You know, one quarter, a certain customer might be our largest, and the next quarter, there may be a different customer. And that's a world that, for a growing company, you want to be in. You want that spread out. And it's kind of a who's who of who you'd like to have for customers. You know, for a company our size, and we talk about this often internally, we don't do a lot of disclosing who all of these customers are, short of saying things like the tier one wireless carrier ecosystem or a large, well-known aerospace company. For us, those are marquee names that we're putting up. And so I think that's the helpful part is our core business in the background is cranking, doing its thing, helpful, grinding out the book and ship business and doing a great job on the wire harnesses and other custom cabling to the good industrial OEM customers we've had a long time. These newer growth markets for us are growth product lines. They're coming from a diverse set of customers on top of that. And that really is, I think, the bigger story overall.

Matthew | Analyst, B. Riley Securities

Right. Yeah, I agree. And I guess you mentioned being well positioned for the Olympics and World Cup build outs. And you also mentioned a hundred plus venue pipeline. Are we talking calendar kind of Q1 2026 for meaningful bookings or could we see acceleration even sooner than that?

Rob Dawson | CEO

Yeah, I think so. When we talk about the pipeline overall, the great thing about the pipeline and whether it's venues or other of the kind of newer project based product lines, They're long-term. The sales cycle can be lengthy, which is fine. It starts to sort of compound itself, though, quarter to quarter. So we're expecting contribution from those kinds of deployments and solutions, certainly into fiscal 26. In some cases, those are going to be multi-year deployments. And if you think about a brand-new stadium, for example, being built for an NFL market or being built for something like the World Cup, When they build those, the last thing really to go in, once the infrastructure of the actual building itself is put in place, then they start throwing in the wires and the antennas and the overall communications piece. So it can be certainly over several quarters for us, but we think that that pipeline that we're talking about is continuing to grow, and we feel like that's a long-term indicator of whether it happens in one quarter or six quarters, we always need to have that pipeline being added to and growing.

Matthew | Analyst, B. Riley Securities

Awesome. Thank you. And last question for me. You hit 8% EBITDA margin this quarter with revenue just under $20 million. Can you walk us through the bridge to your 10% target? Is it mainly just from a higher sales base or are there more operational improvements in the works?

Rob Dawson | CEO

Yeah, so we're always doing operational improvements. I mean, one of the things you heard Ray said is we're constantly working on what's next there and getting better smarter about how we do things there's always opportunity there to streamline the operations overall to get more more profitable there certainly a higher sales number as we just showed it a number just short of 20 million on its own can produce some pretty significant upside results for us so we think it's probably a mix of those two things we're obviously pushing to have higher sales numbers all the time as that's a sort of an obvious statement But also, at the same time, we do believe there's some more efficiencies that we can continue to find. And the better that we do with that product mix of driving these larger project-based kind of long-term customer relationships will help both those things. The more you can predict what you're going to ship out in a quarter or two, it makes it way easier to manage that supply chain, which is one of those examples of the kind of operating levers that we have.

Matthew | Analyst, B. Riley Securities

Got it. Thanks for taking my questions and great quarter. Thanks, Matthew.

John | Conference Operator

If there are any remaining questions, please indicate so by pressing star 1. Okay, we have no further questions in the queue. This completes the question and answer session of the call, and I'd like to turn the floor back to Rob Dawson for any closing remarks.

Rob Dawson | CEO

Great. Thank you, John. Appreciate it. And thanks, all of you, for joining us today. Thanks for your support. As always, on our next conference call, we look forward to sharing our full fiscal year results and the initiatives for fiscal 2026. Thanks, everybody, for your time.

Have a good day. John | Conference Operator

This concludes today's conference, and you may disconnect your lines at this time. Thank you for your participation. jsPDF 3.0.3 D:20260606090409-00'00'