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RF

R F INDUSTRIES LTD (RFIL)·Q4 2024 Earnings Summary

Executive Summary

  • Q4 FY2024 revenue was $18.45M, up 16% year-over-year and 10% sequential; gross margin expanded to 31.3% (+290 bps YoY), and adjusted EBITDA turned positive to $0.91M, with GAAP diluted EPS of $(0.02) and non-GAAP EPS of $0.04 .
  • Backlog ended FY2024 at $19.5M on Q4 bookings of $17.9M; management noted “as of today” backlog at $14.9M, reflecting shipment of older hybrid fiber orders and a fresher, more diverse product mix heading into FY2025 .
  • Management guided FY2025 priorities to sales growth and achieving at least a 10% adjusted EBITDA margin, with Q1 FY2025 net sales expected to be “roughly in line” with Q4’s $18.5M, a notable improvement versus $13.5M in prior-year Q1 .
  • Operational catalysts: redesigned production/fulfillment to scale faster and lower costs; sales force upgrades to penetrate Tier 1 carrier ecosystems, DAC thermal cooling and small cell programs, and venue/stadium builds returning .

What Went Well and What Went Wrong

What Went Well

  • Revenue and margin recovery: Q4 revenue rose 16% YoY/10% QoQ to $18.45M, gross margin reached 31.3% (+290 bps YoY), and adjusted EBITDA was $0.91M; first operating profit since Q2 FY2023, underscoring focus on profitability .
  • Debt reduction and working capital improvements: line-of-credit borrowings cut to ~$8.2M from $14.1M YoY, inventory reduced ~21% via procurement/supply-chain process improvements; working capital ~ $11M and current ratio ~1.6 at year-end .
  • Strategic mix shift: shipments of long-backlog hybrid fiber cleared older inventory; rising contributions from DAC thermal cooling and small cell solutions, improving mix and gross margin trajectory; “we expect 10% adjusted EBITDA or greater” target reiterated .

What Went Wrong

  • GAAP net loss persisted: Q4 GAAP net loss $(0.24)M with $(0.02) diluted EPS, despite positive non-GAAP EPS, reflecting ongoing transition and cost inflation headwinds (wages/insurance) .
  • Backlog volatility: near-term backlog down to $14.9M “as of today” from $19.5M at year-end; management cautioned backlog can swing and isn’t always a good short-term sales indicator .
  • Macro/capex sensitivity: Tier 1 carrier capex remains cautious; venue/Microlab passives demand volatile; management highlighted reliance on shifting to OpEx-driven programs to smooth seasonality and mitigate capex pauses .

Financial Results

Quarterly Trend (oldest → newest)

MetricQ2 2024Q3 2024Q4 2024
Revenue ($USD Millions)$16.11 $16.84 $18.45
Gross Profit Margin %29.9% 29.5% 31.3%
Operating Income (Loss) ($USD Millions)$(0.42) $(0.42) $0.10
GAAP Diluted EPS ($USD)$(0.41) $(0.07) $(0.02)
Non-GAAP EPS ($USD)$0.01 $(0.01) $0.04
Adjusted EBITDA ($USD Millions)$0.57 $0.46 $0.91

Year-over-Year Comparison (Q4 2023 vs Q4 2024)

MetricQ4 2023Q4 2024
Revenue ($USD Millions)$15.87 $18.45
Gross Profit Margin %28.4% 31.3%
Operating Income (Loss) ($USD Millions)$(1.11) $0.10
GAAP Diluted EPS ($USD)$(0.08) $(0.02)
Non-GAAP EPS ($USD)$(0.04) $0.04
Adjusted EBITDA ($USD Millions)$(0.11) $0.91

KPIs and Operating Metrics

KPIQ2 2024Q3 2024Q4 2024
End-of-Period Backlog ($USD Millions)$18.0 $20.1 $19.5
Bookings ($USD Millions)$17.9 $18.9 $17.9
“As of today” Backlog ($USD Millions)$20.0 $19.5 $14.9
Inventory ($USD Millions)$16.38 $15.05 $14.73
Cash & Equivalents ($USD Millions)$1.40 $1.76 $0.84
Line of Credit Outstanding ($USD Millions)$10.46 $8.70 $8.20

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Net SalesQ1 FY2025None disclosed“Roughly in line” with Q4 revenue of ~$18.5MRaised vs prior-year Q1 ($13.5M)
Adjusted EBITDA MarginFY2025 TargetNone disclosedGoal of ≥10% Adjusted EBITDA marginNew target set (profit-improvement focus)
Operations InfrastructureNext several quartersN/A“Completely redesigned” production/fulfillment infrastructure to scale faster, lower costsStrategic overhaul underway

Earnings Call Themes & Trends

TopicPrevious Mentions (Q-2: Q2 2024)Previous Mentions (Q-1: Q3 2024)Current Period (Q4 2024)Trend
DAC thermal cooling adoptionHighlighted as higher-value product; efficiency, eco-friendly; OpEx budgets; up to ~70% OpEx savings claim for DAC systems Regional programs underway; $2.7M DAC orders; probability of national programs Multiple customers/regions progressing; contributing to Q1 strength; lab-to-trial-to-market cycle Improving adoption across customers/regions
Small cell solutions$2M order; part of $4M multi-order influx; densification thesis Positioned for densification as capex normalizes; visibility improving Continued contribution; sales force targeting contractors/vendors; venue return supports demand Pipeline building; demand broadening
Carrier CapEx vs OpEx mixShift to OpEx projects to reduce cyclicality Expect densification/venue builds to recover; Microlab passives volatile Aim for ~50/50 CapEx/OpEx over time; OpEx smoothing seasonality (Nov–Jan) Mix tilting toward OpEx-supported programs
Backlog/bookings qualityBacklog rose to $20.0M “as of today”; bookings $17.9M Backlog $20.1M; bookings $18.9M; backlog useful but imperfect indicator Year-end backlog $19.5M; “as of today” $14.9M; fresher mix after hybrid fiber shipments Backlog quality improving; near-term volatility persists
Operations/footprintCost cuts, facility consolidation improved margins Four core facilities; consolidation of legacy units Redesigning operations infrastructure for margin/scale; heavy lifting done; balance production East/West Leaner, more efficient; further optimization ahead
Venue/stadium demandLegacy strength; expectation of recovery Microlab volatility; hope for 2025 recovery Stadium/venue builds returning; $42B market by 2029 cited; sales talent targeting space Narrative turning positive
Liquidity/capital structureNew $15M LOC; classified current; sufficient liquidity LOC paid down; borrowings down to $8.7M LOC borrowings $8.2M; delevered ~$6M YoY; monitoring borrowing costs Improved leverage; vigilant on costs

Management Commentary

  • CEO Robert Dawson (press release): “Fourth quarter net sales increased 16% to $18.5 million…gross profit margin improved 290 basis points to 31.3%…Adjusted EBITDA was $908,000, and we achieved an operating profit…We ended the year with a strong balance sheet after paying down our debt to $8.2 million versus $14.1 million at the end of last fiscal year” .
  • CEO Robert Dawson (press release): “For fiscal year 2025…laser focused on profit improvement and pushing toward our goal of at least 10% Adjusted EBITDA margin…completely redesigned operations infrastructure that will give us a competitive edge…and deliver sustainable profitability” .
  • CFO Peter Yin: “As of October 31, 2024, we had $839,000 in cash…working capital of $11 million…As of October 31, 2024, we have borrowed $8.2 million from the line of credit…Outstanding borrowings are down approximately $6 million from $14.1 million at the end of fiscal 2023” .
  • CEO Robert Dawson (call): “We shipped a large amount of hybrid fiber products…clear out some older inventory…we have a much fresher backlog…we rebooted our sales team with experienced talent…without increasing overall expense” .

Q&A Highlights

  • Drivers of Q4 top-line and Q1 outlook: Hybrid fiber backlog shipments boosted Q4; stronger bookings/product mix support Q1 “in line” with Q4 revenue despite typical seasonal headwinds .
  • Product mix momentum: DAC thermal cooling and small cell solutions contributing at higher levels; venues/stadiums returning benefiting Microlab passives and interconnect lines .
  • Operations redesign: Savings not quantified yet; focus on procurement/preproduction partnerships and streamlined structures to reach ≥10% adjusted EBITDA .
  • CapEx vs OpEx mix: Increasing OpEx exposure (e.g., DAC) to reduce cyclicality and smooth first-quarter seasonality; targeting ~50/50 over time .
  • Sales force changes and footprint: Added experienced talent with existing relationships; rationalized facilities with opportunities to balance East/West production to reduce shipment time/costs .

Estimates Context

  • The company did not provide comparisons to Wall Street consensus in the 8-K or call, and consensus estimates via S&P Global were unavailable at the time of this analysis; therefore, estimate-based beat/miss assessment is not included .

Key Takeaways for Investors

  • Sequential momentum with improving mix: Q4 revenue up 10% QoQ and gross margin to 31.3% as DAC/small cell contributions rise; adjusted EBITDA positive and operating profit achieved, indicating operating leverage is starting to show .
  • Near-term revenue continuity: Management expects Q1 FY2025 net sales roughly in line with Q4 (~$18.5M), a significant YoY improvement vs $13.5M prior-year Q1, implying reduced seasonality risk via OpEx-driven programs .
  • Backlog reset and mix quality: Shipment of older hybrid fiber freed capacity; backlog quality improving though near-term dollar level fluctuated to $14.9M “as of today,” making bookings/mix more informative than absolute backlog .
  • Profitability path: Management historically cited ~$18M+ quarterly revenue as an inflection for stronger bottom-line leverage; continued mix shift, cost actions, and operations redesign underpin FY2025 ≥10% adjusted EBITDA margin goal .
  • Balance sheet progress: LOC borrowings down ~$6M YoY to ~$8.2M; inventory cut ~21% YoY; working capital/cash position monitored with intent to optimize borrowing costs as performance improves .
  • Exposure to recovering end-markets: Tier 1 carrier densification, venue/stadium upgrades, and edge cooling needs are catalysts; sales leadership additions target these ecosystems and contractors .
  • Risks: Backlog volatility, macro/capex caution, wage/insurance cost pressure, and credit facility/covenant considerations flagged in forward-looking statements—execution on OpEx programs and operations redesign remains critical .