RF Industries, Ltd.

Greetings, ladies and gentlemen, and welcome to the RF Industries Third Quarter Fiscal 2022 Financial Results Conference Call. At this time, all participants have been placed on a listen-only mode, and we will open the floor for your questions and comments after the presentation. It is now my pleasure to turn the floor over to your host, Jim Byers of MKR Investor Relations. Sir, the floor is yours.

Thank you, Operator. Good afternoon, and welcome to RF Industries Third Quarter quarter fiscal 2022 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 third quarter fiscal 2022 financial results. That release is available on the company's website at RFIndustries.com. This call is also 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 the 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, and 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 delays in development, marketing or sales of products, and other risks and uncertainties discussed in the company's periodic reports on Form 10-K and 10-Q and other filings with the Securities and Exchange Commission. 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 8K describe the differences between our GAAP and non-GAAP reporting and present the reconciliation between the two for the periods reported in the earnings release. With that said, I will now turn the conference over to Rob Dawson, President and Chief Executive Officer.

Thank you, Jim. Good afternoon, everyone, and welcome to our third quarter fiscal 2022 earnings conference call. I'd like to start with a brief review of our third quarter results and then discuss what we're seeing now in the market and what we expect going forward before turning the call over to Peter to give more commentary on the financials. Starting with the third quarter, we're pleased to report our highest quarterly revenue in company history, reflecting another great quarter of strong revenue growth along with the continued margin improvement. Sales for the quarter were a record $23.8 million, up 11% sequentially from Q2, and up 56% over the third quarter last year. This strong growth reflects both an organic increase in our overall business and higher margin revenue contribution from our successful acquisition of Microlab, which performed very well in the quarter. As a side note, $23.8 million in sales is what RF Industries delivered in all of fiscal 2017, the year that I joined the company just prior to the fourth quarter. We're pleased to be making progress in our growth story. On the bottom line in Q3, we reported gap net income of $771,000, non-gap net income of $1.2 million, and adjusted EBITDA of $2.1 million. and we're pleased to see our gross margins back up over 30%, one of our key near-term goals, reflecting continued improvement in our organic margins as well as increases from the addition of the micro lab business. While we're certainly pleased with all these fantastic results, I have to admit that we still haven't begun to hit on all cylinders. While achieving these new record levels of sales, We've also been working very hard in the background to continue transforming the company, and many of our key initiatives around consolidation, operational efficiencies, and technology improvements, as well as sales channel and product roadmap expansion, are still in varying stages of completion. We believe that these strategic initiatives will provide a huge help in the next phase of our company's growth. As I mentioned earlier, Microlab is performing extremely well, and sales of Microlab products were strong during the quarter. This acquisition is exactly what we thought it would be, or maybe even better. As we announced when we closed the deal, MicroLab sales in the previous 12 months prior to the acquisition were roughly $17 million, and we just delivered sales of $6.5 million in MicroLab products in the third quarter alone. We love the business and are pleased to include the team as part of RF Industries. As we've integrated MicroLab into our operations and go-to-market approach, We're finding opportunities to increase Microlab purchases from our distributors by making it easy for them to do business with us. And we're benefiting from the strong positioning of Microlab on bills of material in key wireless bills. This broader inclusion in the bill of materials has been a key focus for our approach to M&A over the last few years. It's working. And importantly, we're seeing this sales increase before completing the major new initiatives that we believe could help drive additional increased sales including new product development and expanded channels to market. Now let me quickly comment on our other product areas and market segments and how they performed during the quarter. Our strong core distribution business continues to perform well and grow. Our RF coaxial cable and connector products and our C-Enterprise's fast-turn fiber products together make up our primary offer sold through distribution. Both of these major product areas showed meaningful year-over-year growth during the quarter. and we expect to see continued steady growth here throughout the remainder of our fiscal year as we continue to build the baseline of core revenue. Microlabs fits nicely with these product areas, and we're benefiting from shared customers and processes. Our custom cabling segment, including our OptiFlex hybrid fiber products, continues to have strong sales results. Our initial Tier 1 wireless carrier customer continues to draw against their existing purchase orders. We had another solid quarter of shipments with them in Q3, and we received new smaller orders from them during the quarter. We also continue to pursue new opportunities with other customers in the market. As I've noted before, we now have multiple concurrent large customers deploying our OptiFlex hybrid fiber solution in next-generation wireless builds. Last week, we announced multimillion-dollar follow-on orders from our newest North American Tier 1 wireless carrier customer. for our hybrid fiber solution in support of their 4G and 5G wireless infrastructure build. We've received more than $11 million in total orders related to this customer for hybrid fiber. These orders are further validation of our increasing value in the market, and our OptiFlex hybrid fiber solution continues to gain market share in the North American wireless marketplace. The team at our Cables Unlimited operation in Long Island is performing extremely well with these increased sales and production levels of OptiFlex. I can't say that the supply chain and logistics environment has gotten any easier lately, but the team is really doing a terrific job of exceeding customer expectations. With our increasingly strong product and solutions offer and our unique value proposition in the market, we're well positioned to benefit as the overall spend on 4G and 5G deployments continues to increase. Our other custom cabling products continue to be a healthy piece of our business. And with our broad set of specialty products and value proposition of fast turn, very specialized cable assemblies, we're finding additional new opportunities with our increased sales and marketing effort to scale our business through expansion with our existing customers, as well as new business with some mid-tier players beyond the carrier market. Turning to some of our other offerings, small cell and DAC thermal cooling continue to be huge opportunities. While small cell spending is not at the level that we expect it to be for all the reasons that we've talked about in the past, we're hearing from many of our customer discussions a shared expectation that next year there should finally be an increased spend around small cell. While the small cell market continues to drag behind where we all expect it to be by now, it's only a matter of time before it breaks loose. Small cell projections from all the key players in the wireless ecosystem point to significant increases. In its second quarter 2022 earnings call, Crown Castle said it will double the number of new small cell installations in 2023 from 5,000 to 10,000 as their mobile network operator tenants complete the majority of their network upgrades on macro towers and shift their focus to densifying their networks, including using small cells. Verizon also hinted that it will accelerate its small cell build-out in 2023, after carriers slowed down in prior years to focus on the build-out of new mid-band spectrum holdings using traditional macro cell sites. As we discussed last quarter, we've also introduced an innovative next-generation small cell concealment solution called TruField that expands our market opportunity with a proprietary new product we can sell to our growing customer base in the wireless carrier ecosystem to meet the growing demands for densification of 4G and 5G networks. We now have Truefields Shrouds actively deployed in the field and are servicing a growing pipeline of opportunities. With our increased capabilities and product offerings, we believe we're in a stronger position to get built into future small cell deployments, and we see significant upside opportunity for us going forward as spending increases. With our DAC thermal cooling product offering, we continue to pursue a growing pipeline of opportunities here as well. We've been engaged in discussions with Tier 1 carriers and others about our DAC offerings and expect to see those conversations come to a head in the next quarter or two. As the DAC market opportunity has emerged and we've gotten our unique product offering out in the market, we think it has the potential to be a big chunk of our next phase of growth. We've already seen some increased spend from our Tier 1 wireless customers, and with the rising heat we've been experiencing, particularly in the West, we're seeing increasing interest in these kinds of solutions. We've made a lot of progress on product redesigns and some long-term projects, and we expect to be able to announce some information related to that progress very soon. Turning to the topic of acquisitions, as we focus on our organic growth plans, we believe there are opportunities to layer in additional strategic acquisitions. We're continuing to look for larger acquisitions that fit our strategic plan, and while nothing is imminent, we see a strong deal flow and have some good discussions ongoing. As I've noted before, we're looking to acquire quality companies with passive components that allow us to offer more of the bill of materials in key applications like wireless deployments, and add-ons that will provide us with access to new products that we can sell both through our new channels and our existing customers and growing distribution channel. We've effectively completed our integration of Microlab, and they're operating as part of our teams. At the same time, with the significant potential synergies we see in our business, we've been undertaking some big initiatives to combine and integrate our operations to further improve our efficiencies and capabilities from an operations perspective. Now that we can fully function with most of the constraints of COVID behind us, we're integrating and combining C Enterprises and the RF cable and connector business into one building in Southern California in January 2023. We're also preparing to move the micro lab operation to a new facility in New Jersey later in 2023 and are looking for ways to consolidate operations there too. With the significant potential synergies we see in our business, we've been investing in new facilities, new systems, and new equipment to build out our scale, to build out and scale our organization in order to see bigger opportunities, increase our pipeline, and streamline our operations. We believe these strategic initiatives will allow us to fully realize the increased earning potential of our business. In the meantime, with all that happening, we've managed to keep our operating expenses almost flat other than the addition of Microlab while still delivering record sales results. Let me take a moment to revisit some of our goals for the rest of the year and going forward in future fiscal years, which I talked about on our last call. As I noted, because we have a lot of operating leverage in our business, we can deliver higher sales numbers with very little additional investments at SG&A. We're obviously pleased that in the third quarter we reached our internal target of getting our gross margins above 30% and believe we have the ability to grow margins further going forward as we add higher margin revenue from some of our bigger ticket products in addition to the Microlab offering. And with our record sales and gross margin improvement this quarter, our adjusted EBITDA margin was just about 9%, moving closer to our goal of getting our adjusted EBITDA to 10% of sales or greater in the near term. Looking out three to five years, we believe that we can continue to grow profitably through both organic and inorganic initiatives and take our adjusted EBITDA to even higher levels. As we end our fiscal year, We've had solid bookings and maintain a backlog of $31 million as of today, setting us up for a strong fourth quarter to finish the year. With what we know today, we expect Q4 to be our third quarter in a row with sales in the low $20 million as we start to smooth out our historically volatile or lumpy sales results. Peter will have more on this in a moment. Based on that, for the full year, we expect total net sales of $83 to $85 million. And as we start looking toward fiscal 2023, we have strong momentum in all product areas while we pursue additional projects in strategic higher margin product areas. In addition, as I mentioned, we remain committed to further M&A activity as we continue to be strategic and focused with our capital allocation as another avenue of driving investor returns with increased revenue, scale, and profitability. Lastly, earlier this week, we announced some changes to our board of directors. We added two new directors that bring broad experience that align with our strategic growth strategies. I'm pleased to welcome Kay Tidwell, who is Executive Vice President, General Counsel, and Chief Risk Officer of Hudson Pacific Properties, a real estate solutions provider for tech and media tenants. Kay brings extensive public company legal experience that will be a huge help in corporate governance matters. I'm also pleased to welcome Jason Cohenauer, who joins the board with many years of executive leadership, sales, marketing, operations, and international M&A experience. Jason previously served as President, CEO, and Director at Sierra Wireless, where he led a successful business turnaround. resulting in revenue growth of nearly 800% to an annualized run rate of $800 million in sales. With his successful growth and leadership track record and deep understanding of the wireless and related industries, Jason will be a valuable contributor to our strategic guidance. At the same time, we also announced that our former chairman of the board and longtime board member, Marvin Fink, has retired from the board following more than 20 years of dedicated service. Marv was instrumental in the long-term growth of the company, and we're very thankful for his huge contributions over the years that were an important part of the company's success. On a personal note, I've enjoyed his steady and stable approach and will miss his sharp wit. It's been a privilege to serve with him on the board. It's the end of an era, and I wish him well. With that, I'll now turn the call over to Peter for a review and discussion of the financial results for the quarter. Peter?