R F INDUSTRIES LTD (RFIL)·Q1 2025 Earnings Summary

Executive Summary

• Q1 FY2025 delivered step‑change improvement: net sales $19.20M (+42.7% YoY; +4.0% QoQ), gross margin 29.8%, second consecutive operating profit, and non‑GAAP EPS $0.04; adjusted EBITDA $0.87M .
• Mix shift toward higher‑margin solutions (DAC thermal cooling, small cell) and cost efficiencies drove the margin expansion and EBITDA swing from a loss in Q1 FY2024 .
• Guidance/tone: management reiterated its 10% adjusted EBITDA margin goal and expects FY2025 revenue to be significantly above FY2024; Q1 revenue exceeded prior guidance (“in line with $18.5M”) by coming in at $19.2M .
• Potential stock catalysts: sustained operating profitability, improving backlog/visibility ($15.2M quarter end; ~$15.0M “as of today”), and growing diversification beyond Tier‑1 carriers into venues and aerospace .

What Went Well and What Went Wrong

What Went Well

• Strong revenue growth and profitability leverage: “Net sales increased 42.7% to $19.2 million… gross profit margin was 29.8%… For the second quarter in a row, we delivered an operating profit… Non‑GAAP EPS $0.04… Adjusted EBITDA $867,000” — CEO Rob Dawson .
• Mix shift to higher‑value solutions: Increased shipments of DAC thermal cooling systems and integrated small cell solutions; wire harness and distribution also contributed .
• Customer diversification and new end markets: “We won a large interconnect opportunity from a leading aerospace company… broadening our customer base… opens up our opportunity set” — Dawson .

What Went Wrong

• GAAP profitability still negative: consolidated net loss remained at $0.245M (‑$0.02 diluted EPS), albeit much improved YoY .
• Gross margin dipped sequentially vs Q4 (29.8% vs 31.3%), reflecting mix/timing; management targets ~30% near‑term and sees room for improvement over time .
• Tariff uncertainty: company is monitoring and updating pricing/supply chain; ~6% of revenue from export sales; all production is U.S.‑based, but impact remains fluid .

Financial Results

Guidance Changes

Earnings Call Themes & Trends

Management Commentary

• “Our team delivered a strong performance in the first quarter… Our gross profit margin was 29.8% in line with our target of 30%… Non‑GAAP EPS came in at $0.04 and our Adjusted EBITDA was $867,000.” — CEO Rob Dawson .
• “Our first quarter mix skewed more favorably toward higher‑value offerings, including increased shipments of DAC thermal cooling systems and integrated small cell solutions.” — Dawson .
• “Looking ahead, we see plenty of opportunity to continue to grow within the Tier 1 wireless ecosystem and we are also exploring new market segments outside of the wireless carrier space… goal of achieving 10% Adjusted EBITDA margins.” — Dawson .
• “First quarter gross profit margin increased to 29.8% from 24.5% year‑over‑year… driven by a better product mix and continued cost savings and operating efficiencies.” — CFO Peter Yin .

Q&A Highlights

• Backlog quality improving as older hybrid fiber is worked down and replaced with DAC/small cell; healthy range targeted between ~$10M–$20M; as of Q1, backlog ~$15M .
• Sequential revenue growth in seasonally slow Q1 driven by newer product lines and OpEx contributions (particularly DAC thermal); CapEx densification also helped .
• Margin trajectory: management comfortable around ~30% near‑term with potential upside as product lines mature and operations improve .
• Sales force: added targeted, relationship‑driven talent with minimal incremental expense; leveraging distribution and reps for scale .
• Microlab brand: mixed quarterly performance but strategically important for bill‑of‑materials control in small cells; consolidated East Coast operations to support integrated systems .
• Deleveraging/Credit: intent to build cash and refinance at lower rates given improving performance .

Estimates Context

• Wall Street consensus (S&P Global) for Q1 FY2025 EPS and revenue was not available at time of retrieval due to data access limits; therefore, no formal “vs consensus” comparison can be provided. We will update when SPGI consensus becomes accessible. Values retrieved from S&P Global.

Key Takeaways for Investors

• Mix shift to DAC thermal and small cell is sustainably lifting margins and earnings power; EBITDA turned positive and is tracking toward the 10% margin goal as operations are streamlined .
• Revenue trajectory shows multi‑quarter momentum (Q3→Q4→Q1), beating Q4‑set Q1 guidance and supported by backlog stability around ~$15M; visibility improving despite project timing variability .
• Diversification beyond Tier‑1 carriers (venues, aerospace, industrial OEM) reduces dependence on CapEx cycles and should dampen seasonality through OpEx‑funded deployments .
• Gross margin holds around 30% near‑term, with room to expand as product maturity and production efficiencies improve; watch sequential mix shifts for volatility .
• Balance sheet: working capital and current ratio are healthy; inventory reduced; line‑of‑credit borrowings down modestly; management pursuing cheaper credit facility—potential EPS tailwind via interest savings .
• Tariff exposure appears limited and manageable given U.S.‑based production and diversified supply chain; pricing adjustments in place if needed .
• Near‑term trading: positive sentiment likely tied to sustained operating profit, margin resilience, and guidance beat; medium‑term thesis hinges on scaling integrated solutions, venue pipeline execution, and achieving 10% EBITDA margin .