RF Industries, Ltd.

Greetings. Welcome to the RF Industries first quarter fiscal 2021 financial results conference call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. Please note this conference is being recorded. I will now turn the conference over to your host, Todd Curley of MKR Investor Relations. Thank you. You may begin.

Thank you, Operator. Good afternoon and welcome to RF Industries' first quarter fiscal 2021 financial results conference call. With me on today's call are RF Industries President and CEO Rob Dawson and Senior Vice President and Chief Financial Officer Peter Yin. Before I turn the call over to Rob and Peter, I'd like to cover a few quick items. This afternoon, RF Industries issued a press release announcing its first quarter fiscal 2021 financial results That release is available on the company's website at rfindustries.com. This call is being broadcast live over the Internet for all interested parties, and the webcast will be archived on the Investor Relations page of the company's website. I want to remind everyone that during today's call, management will make forward-looking statements that involve risks and uncertainties. Please note that except for historical statements, statements on this call today may constitute forward-looking statements within the meaning of Section 21E, of the Securities Exchange Act of 1934. 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 risks and uncertainties. Actual results may differ materially from the outcomes contained in any forward-looking statement. Factors that could cause these forward-looking statements to differ from actual results include delays in development, marketing or sales of products, and other risks and uncertainties described or discussed in the company's periodic reports on Form 10-K, 10-Q, and other filings with the Securities Exchange Commission. RF Industries undertakes no obligation to update or revise any forward-looking statements. Additionally, throughout this call, we'll be discussing certain non-GAAP financial measures, Today's earnings release and the related current report on Form 8K describe the differences between our non-GAAP and GAAP reporting and present the reconciliation between the two for the periods reported in the release. With that, I'll now turn the call over to Rob Dawson, President and Chief Financial Officer. Rob?

Thank you, Todd. Good afternoon, everyone. Welcome to our first quarter fiscal 2021 earnings call. Thanks for joining today. I hope everyone is staying safe and healthy. I'd like to start with some general comments, then I'll briefly discuss our first quarter results, and finally I'll spend the bulk of my time on what we're seeing now and expect going forward before turning the call over to Peter to give more commentary on the financials. Although last year has been challenging, we are optimistic about the future of our industries and our ability to thrive and return to growth. The recovery in our market segments is taking longer than we'd like and our sales haven't yet returned. Excuse me. Haven't yet returned to where we want them. And while that means it hasn't been a straight line up and to the right in our turnaround story that began at the end of 17, we believe we've set a new baseline of revenue as a platform for the next phase of our growth. And that baseline is nearly double the revenue where it was a few years ago. As you saw in our earnings release this afternoon, sales for the fiscal first quarter came in just above $10 million. As I've noted before, fiscal Q1 is always our seasonally toughest quarter, and this year was no exception. Q1 was also a shorter quarter, with five less business days compared sequentially to Q4. With that in mind, sales declined $2.4 million compared to last year's first quarter. But it's important to note that last year's first quarter included $2.7 million in hybrid fiber cable revenue to our large Tier 1 carrier customer, which didn't repeat this year. So while we saw an overall decline, we partially filled the revenue hole left by that very concentrated business with sales to a more diverse and long-term customer base. In Q1, we continued to experience a challenging environment similar to previous quarters, with project and build plan delays on the carrier side of our business, and with some OEM customers due to COVID. Additionally, most venues are still shut down, which impacts our distributed antenna system project business, and local and municipal approvals and permits continue to move very slowly, impacting small cell and densification build plans. These dynamics continue to have an impact on our revenue in the quarter. Despite the continuing global pandemic, we were able to serve our customers and continue to invest in new initiatives and manage expenses. Really, the story of the quarter was that a few delayed shipments dragged on our results, as some orders in the Tier 1 carrier space that we had expected would ship during the quarter were delayed in the last couple of weeks of January. Had these orders shipped, our revenue in Q1 would have been close to last quarter as expected. So it's really about timing. With numbers like ours, small movements in shipping dates can cause short-term results to move around wildly. Our results are much easier to understand with a long-term view. One other note, despite having fewer business days in the quarter, our daily shipment average in Q1 was identical to our daily shipment average in Q4. In other words, we continued to ship at healthier levels than where we were in the middle of last year. Now versus continuing to talk about the obvious challenges that have slowed us down in our turnaround and growth, let's turn the page and talk about where we're heading. From a booking perspective, the good news is we're starting to see increased demand and positive momentum around new business, as evidenced by our improved bookings in the quarter and the related growth in our backlog. At the end of Q1, our backlog was $7.1 million, up from $6.3 million at the end of the prior quarter. Subsequent to quarter end, the backlog has continued to build and now stands at approximately $8.5 million as of today. While not all this backlog will ship immediately, it's a good indicator of future growth and it's now significantly higher than it was mid last year. While we continue to see slower than expected project spend from the major carriers, whether due to delays or their current reallocation of spend to other things, we believe there's pent up demand that's starting to show. The growth in our bookings and backlog is evidence that the pent-up demand is getting more tangible and the pipeline is slowly building. Our conversations around new business are becoming more fruitful, and the tone we're starting to hear from customers in the carrier ecosystem is more urgent around build timelines, though not always including exact dates. Specifically, we've been starting to see more customer discussions and potential scheduling of projects and CapEx-related work, as well as some new customer orders. For example, during the quarter we saw a million dollar order for hybrid fiber cable solutions from a new carrier customer that we've never done direct business with before. The sales and product team in New York has worked very hard on developing that relationship, and it's nice to see real progress. Also over the last month, we've physically met with all of the tier one wireless carriers, as well as some other key players in the space. Not only do we have relationships there, but we're executing on our sales plans and building on those relationships. We've been talking about specific projects and seeing some initial purchase orders against those discussions that in some cases just get us started and in other cases position us as a trusted advisor and start to move us down the road a good bit further. In many cases, we've moved from discussions into providing first articles of products and solutions and trials in-network. And this is progress that we think can turn into hundreds of thousands or multi-millions of dollars of business over the coming years. We're happy to see the cadence moving in the right direction, although it's slower than what we all want. Our backlog doesn't show the impact of true carrier CapEx spend yet. We're just starting to see the first pieces of that, but we believe that the beginning of the CapEx spend is what will drive our second half revenue growth. Much of this new activity is because of our increased go-to-market efforts aimed at getting in front of end-user customers, influencing them to include us in their plans, and then allowing them to purchase through whatever channel makes the most sense for them. We're better aligned now with the carrier ecosystem and are actually going to visit with carriers in person that we probably couldn't have visited before based on our standing in the market. Looking at our various product areas and market segments, our distribution business remains solid and grew during the quarter. Our RF coax cable and connector brand and our C-Enterprise's fast-turned fiber and copper brand together make up our primary offer sold through distribution, and this business is providing an increasing baseline of sales. In the first quarter, distribution sales accounted for more than $6 million of our $10 million in total sales, and we were up about 15% or $800,000 from the first quarter last year. As I've noted before, during the past few years, we've successfully strengthened and increased the diversity of our distribution channels, which has been a great benefit to us through this difficult period. Much of this progress has been masked by higher sales to some concentrated customers, but the healthy base that's been building here is a testament to our strategy. In our custom cabling business and wiring harness product areas, At the Cables Unlimited and Reltech brands, we're starting to see some nice-sized blanket orders and continue to see recovery with our large blue-chip customer base, working to get back to more normalized levels. In this business, we build very involved harnesses and custom cabling designs, primarily for large manufacturers, where our cables are used inside their equipment. Some of the key market segments included here are industrial manufacturers, transportation, energy, and defense, in addition to telecoms. We continue to see a recovery with these customers in the Northeast, and we've seen a nice increase in our work with defense contractors and other related customers on projects in the last few months. We expect these opportunities to provide some new revenue streams in the coming quarters. In DAC and small cell, nothing has changed. Those are still huge opportunities, and we expect they will turn into revenue in the second half of the year and beyond. Several carriers just spent a ton of money on new spectrum in the C-band auction, and they're going to need the infrastructure to make it all work. And eventually, the spend is going to happen. Has it taken longer than we expected? Yes, of course. But it's not a matter of if, it's a matter of when, especially on the network densification side. As I've discussed on the past couple of calls, the big U.S. carriers have been spending on other projects or deployment models in the last few quarters, and the shift in network demand related to remote work has increased this focus away from mobile densification plays like small cells. As a result, we haven't yet seen the large capex that we expect for small cell deployments. We believe that with the recent C-band auction spend, there will be increased demand for network augmentation using these newly available frequencies to complement the millimeter wave deployments that have been ongoing but have had their share of technical challenges. More than $81 billion was spent on C-band spectrum. Several industry experts have noted that the millimeter wave performance issue and the C-band auction have given carriers a reason to pause and reexamine their deployment plans. Carriers are trying to also determine how to monetize 5G. To date, 5G deployments have not always meant additional subscriber revenue. This has also delayed small cell spend. In the end, this could actually be a good thing for us. It's given us time to build out our offering and gain the right positioning with key players in the small cell ecosystem. we're in a much better position to capture small cell spend now than one to two years ago. Going forward, many industry analysts have an optimistic view of the small cell opportunity, despite the thinking that it may take a little longer for the widespread rollout to occur. We still believe heavily in densification of the carrier networks with either 4G or 5G, or potentially even something else. But for all the reasons we've discussed, it's taking longer than we originally anticipated. It's important to note that even with a longer rollout, longer widespread rollout, we're still talking about a huge dollar opportunity. And as I said, we're more strongly positioned now with both our offer and our customer relationships for long-term growth once the widespread rollout does occur. We continue to ship integrated small cell shrouds and installation kits into multiple carrier networks. Our sales activities have increased here, and we anticipate an increase in orders for small cell solutions. Finally, as I've been discussing the last few quarters, we're getting better at being a product company. To that point, we have a new small cell solution currently in the lab or field trials with multiple customers in the carrier ecosystem. These are exciting developments for us, but too early to share specifics. More to come on that. In addition to the substantial opportunity we see within small cell, our thermal cooling solutions enable us to offer a definitive value proposition centered around a better design, and clear cost and energy savings. And it's allowing us to initiate a different kind of sales conversation with a new set of customers. We see a significant opportunity for this direct ambient cooling, or DAC, offering, which plays in both traditional wireline and the wireless carriers. We've recently been awarded an additional carrier approval for DAC upgrade kits for outdoor cabinets with a longstanding carrier customer. And we continue to receive new orders for similar kits from multiple other North American carriers. We're also finding that our DAC solutions work well with MSOs, or multiple service operators, at the edges of their networks. As evidence of this, during the quarter, one of the largest MSOs that we had done zero business with previously placed an initial order for 22 sites using our DAC offering, which amounts to about $125,000 of new business. So I think what we're seeing right now is progress against the opportunities we've referenced, but we haven't even started to scratch the surface in dollars. We expect the dollars to go up commensurate with approvals and the normal sales cycle. These aren't a two-week sales cycle. They're six- to nine-month sales cycles, then you get approval, and then orders start to flow. And those timeframes assume a normalized capex environment, so some of these have taken longer than we originally expected. Managing the energy needs of cooling enclosures, cabinets, and small buildings at the edges of networks can be incredibly inefficient and therefore expensive. we can offer a much more cost-effective solution and can either start from scratch or do a retrofit of existing designs. And we're seeing significant opportunities out there for both. We're also now aggressively pursuing thermal cooling opportunities across many new markets, like oil and gas, utilities, wireless ISPs, and we're seeing relevant use cases. We're working to take our DAC offering through our distribution channel to multiple utilities, oil and gas, and transportation companies. And we currently have active discussions ongoing with two large regional utilities. All of the opportunities that I mentioned are more good signs that we're starting to see real progress in our strategic sales areas. As I've said before, while not all these opportunities are producing dollars yet, we're seeing our pipelines grow. And with what we see today, we continue to expect that to lead to year-over-year revenue growth in our current fiscal 2021. On the M&A front, I've said before that our plan is to make an acquisition of a more meaningful size. We continue to review and add to a pipeline of potential candidates. We're committed to M&A activity this year, and we've had some conversations that have progressed from where we were last quarter at this time. To underscore our commitment, we recently added a strategy and M&A committee to our board, which is headed by our recently added new board member, Mark Holdsworth, who has extensive experience in M&A and investing. We set up the committee specifically focused on helping our M&A strategy, and we think the potential deal flow will continue to increase. In summary, while this quarter continued to be a challenge, we remained very focused on our long-term game plan to build a sustainable, long-term engine for growth, Even through the disruptions, we've invested smartly in resources to accelerate our growth and come out stronger on the other side. As a result, we have more effectively positioned ourselves to drive demand creation and expand our participation in the different buckets of CapEx spend. Our longstanding and broad interconnect offer of coaxial fiber and copper solutions continues to be a workhorse. and where we add our newer integrated system offering in DAC and small cell, we see a growing opportunity to drive into new market segments and customers. We're seeing these investments start to bear fruit, and our overall sales pipeline continues to build in nearly all areas, which gives us confidence that things are getting better. It's tough to predict timing on certain larger orders and the related fulfillment, but with what we know today, we're still expecting to return to year-over-year revenue growth this year. with the majority of our growth coming in the back half of the year. With that, I'll now turn the call over to Peter for a review and discussion of the financial results for the quarter. Peter?