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. Please note this conference is being recorded. I will now turn the conference over to your host, Donni 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 call. With me on 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.com. I want to remind everyone that, during today's call, management will make forward-looking statements that involve risks and uncertainties. Please note that this 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 statements reflect management's current views with respect to future events and financial performance and are subject to risks and uncertainties. Actual results may differ materially from the outcomes contained in any forward-looking statements. Factors that could cause these forward-looking statements to differ from actual results include the risks and uncertainties discussed in the company's reports on Form 10-K and 10-Q, and other filings with the SEC. 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 the related current report on Form 8-K describes the differences between our GAAP and non-GAAP reporting. With that, I'll now turn the conference over to Robert Dawson, Chief Executive Officer. Go ahead, Rob.

Thank you, Donni, 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, 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%. 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, 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 1 wireless carriers. 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. Make no mistake, we would still love to see the carriers turn on the CapEx ticket to address densification and other opportunities. And as I've indicated before, our technology-forward solutions 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 CapEx. As an example of new end markets, in the first quarter, we won a large interconnect opportunity from a leading aerospace company. 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 1 wireless carrier ecosystem, while we're also making meaningful headway in these new market segments. We expect wireless network densification to accelerate throughout 2025 with improved spending on small cell deployments. We also anticipate an increase in stadium and venue projects. RFI is well-positioned to benefit from these trends. 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 systems. Our team continues to innovate with new products and solutions that will add to our growing portfolio of high value offerings. We anticipate announcing and showcasing some of these innovations at upcoming industry events, and we'll keep you informed of these developments. 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. 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 tariffs. Although we are making updates to our pricing and supply chain as needed. Overall, it's still too early to offer final guidance on this topic, based on the fluid nature of the situation. We'll continue to evaluate potential impacts on RFI and our customers and communicate any changes we anticipate. 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 shipments like this can move our results around, we're anticipating fiscal 2025 revenue to be significantly higher than fiscal 2024. 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. We’re excited about what's ahead and how this can translate into long-term value creation for our stakeholders. 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 material. 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 to shape innovative solutions that span multiple offerings. This alignment between sales, product management, and engineering ensures 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 and 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. 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. 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 efficiencies. First quarter operating income was $56,000, a significant improvement from the operating loss of $2.1 million reported last year. 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 a 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. 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 1.7:1, with current assets of $29.5 million and current liabilities of $17.8 million. As of January 31, we had 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 for us, as our overall performance has been improving. 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 processes. We believe that 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. 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. In closing, we started the year with a strong first quarter. We are eager to capitalize on the opportunity before us and drive increasing value for our shareholders. With that, I'll open up the call for your questions.

The first question today is coming from Matthew Moss from B. Riley.

Hi. Good afternoon. This is Matthew on for Nichols. I remember last call that there was about a few million dollars left of the lower margin hybrid product. So, what's the update on that and that for the rest of the year?

Hi, 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 the question was around just the change in the makeup of our backlog. So, yes, we've seen the backlog sort of maintaining around that $15 million level for several weeks now. And I think that it'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 hybrid fiber that's been with us 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, DAC, small cell and others, just in general seeing that kind of maintain. We expect for the year, the backlog can move around pretty good. 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 million, $17 million, $18 million, great. That gives us a little bit longer visibility. Even if it's down $12 million, $13 million, that number is fine. We don't want to see it below $10 million, and if it gets above $20 million, 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. It's not an immediate indicator of success. Did that cover what you were asking?

Yes, that was great. Thank you. And I guess switching up, what would you say is the main reason for increasing sequentially during the seasonally slow quarter? And how much of that do you credit to moving more into carrier OpEx?

Yes. Great question. I think 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% of it tied to newer product lines, it's certainly close to that. We saw material contribution from product lines that in the prior year Q1 and in the past we just didn't have those product lines or 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. And I think 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. 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.

All right. Thanks. And I mean, in terms of the gross margin profile, gross margin increased significantly year-over-year. It'd be helpful to get some more, I guess, insight into how you see that changing throughout the year?

Sure. Yes, I think 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. 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 launch new product lines, even though we've had these product lines 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, and 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'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.

Okay, great. Thank you. And then, I mean, you mentioned that you've had the product lines for some while. There's been strong growth recently. Would you credit some of that, a good forecast to the new sales team that you mentioned last quarter? And then, I guess, you've been seeing some success from that. So, do you expect to invest a little bit more in expanding that sales team, or how should we think about that?

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 over two 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. 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. As the spend started to recover, we were positioned perfectly to benefit from it. So some of our longstanding salespeople have done a great job of getting us positioned and holding that even through some tough times. We tried to just stay the course believing that these were the right things and that our strategy was sound that started to really show up. And then, we've— 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. Once you've got some good high-level use cases that show the real impact of the product, that's the time 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 additional expense should be minimal, if any.

The next question is coming from Steven Kohl from Mangrove.

Okay. Good afternoon, guys, and good quarter. I'm going to throw a few questions out here, as I'm sure you're not surprised. Obviously, one of the things, going back to one of Ray's comments, it's kind of exciting to me is the move from components to integrated solutions. 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. Yes. So I think that, 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 up market. 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 distributed antenna systems, small cells were both areas that we were heavily focused on getting as much control of the bill of materials as possible, which is by default more solution sale. 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 offers 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 OpEx, 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. 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 solution. So that's what we were working towards over the course of many years. 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. 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 look at how we can go nationwide, how do we break into others that have a similar need, and 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. That's part of the additional sales resources we talked about, but also in general, just 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.

Talking a little bit, I know you mentioned that you're looking for a significant increase for the year, which obviously you're off to a good start for the significant increase in Q1. 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 the stuff that we should start to even see it kind of above 30% on gross margin one way potentially and actually see a pretty good ramp on that EBITDA number. So maybe I'm confused, but I'll tell you the first time.

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 is going after it pretty hard. There are two things. 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. And that's just some creative ways of doing pre-finishing work, using partnerships in a broader way, using those folks that we've been doing business with for some time, helping us to 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. I think we feel good about that progress and would expect that, that will kind of throughout the year regardless of the monthly or quarterly sales numbers. We think we're going to see a significant benefit showing up by the end of the year that will help us going into next fiscal year and beyond.

My final question is for Peter. In the first quarter, we saw a slight decrease in the line, but are we expecting to meet our cash flow and debt paydown targets this year? Will we see that progress reflected in the forecast for the year?

Steve, you cut out a little bit there. You were asking about kind of debt pay down?

Yes. Just generating cash. I know one of the great things about your business historically has been you generate pretty good cash, right, as you get above certain levels of sales, which I presume we're going to kind of get there. But is that your expectation from what you're seeing in your modeling? Is that we should take a chunk out of debt again this year?

Yes. So we've made significant pay downs 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 always monitoring that. As we start to improve with our performance, cash flow is positive and we start building a cash position. It's time to take advantage of that performance and maybe look at cheaper alternatives for us.

Okay. And I did lie. One other last question is, how is Microlab doing and are you repositioned is that pretty much in the steady state or what are we seeing there? Because I presume there would be a beneficiary in some of these macro trends that you've been alluding to.

Yes. I think the Microlab branded products, 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 tied fairly closely to including some of the distribution channel that goes with it. Performance-wise, 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. 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 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 in the U.S., 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, a lot of times Microlab 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 Schroff Tech 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 and really happy with the opportunities that that has presented us over the years.

There are no other questions at this time. I would now like to hand the call back to Rob Dawson, CEO at RF Industries, for closing remarks.

Great. Thank you, Paul, and thank you, everyone, for joining us today. We look forward to sharing fiscal second quarter results in June. Thank you 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. This does conclude today's conference. You may disconnect your lines at this time. Thank you for your participation.