RF Industries, Ltd.

Greetings, welcome to the RF industry's fourth quarter fiscal 2022 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, Jack Dreypas. You may begin.

Thank you, Operator. Good afternoon and welcome to RF Industries' fourth quarter and fiscal 2022 financial results conference call. With me on today's call are RF Industries President and Chief Executive Officer Rob Dawson and Senior Vice President and Chief Financial Officer Peter Yen. 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 fourth quarter and 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 8-K 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.

Thanks, Jack. Good afternoon, everyone. Thank you for joining RF Industries' fourth quarter and year-end fiscal 22 conference call. I'm pleased to report that we capped the year with annual sales of $85.3 million, the largest year by far in our company's 40-year history, a 48% increase year-over-year and above the high end of our previously stated guidance. We also delivered adjusted EBITDA of $6.6 million for the full year. Importantly, as we expected, we saw improvements in gross profit margin throughout the year. In the fourth quarter, we reached a high of 31%. We believe this reflects our strategic shift to higher value products and solutions and our focus on managing expenses, even in an inflationary environment. This year, we also closed on the acquisition of Microlab, our largest acquisition thus far, and we did it without any dilution to shareholders. Microlab, which is now fully integrated, is a very exciting addition to the RFI family. I'll be telling you more about how it expands our opportunity set in a few minutes. On today's call, Peter will cover our financial results in more detail, as well as our guidance for fiscal 2023. For my part, I'd like to take a few minutes to reflect on how far we've come over the past few years and why we have such strong conviction in the future of RF Industries and our ability to generate sustainable returns for shareholders. 2022 was a challenging but rewarding year for the team. We endured supply chain and transportation headwinds, among other macro challenges. yet we still grew sales by nearly 50% with both organic and inorganic increases. Thank you to our amazing team for making this happen. This team has made tremendous progress reinventing a 40-year-old company that was maybe a little sleepy and trapped in a commodity-driven business. That said, the company was consistently profitable and had a stellar reputation for quality customer service and the best part, great people. Those were the good bones that I saw when I joined the company at the end of the day. So five years ago, we set our sights on developing a strategic plan that would unlock the value of our foundational strategy. Our strategy was a two-pronged approach. Keep fueling the cash cow of organic growth and look for hidden gem acquisitions to deliver a new value proposition into an expanded market opportunity. All while launching an aggressive go-to-market plan to add key distribution and get to the important end-user customers, especially in the wide open industry. 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 uncertainty.

Please note that except for the historical statements, To transform our company, we focused on several core areas. First was to build out a strong team.

We've augmented an already impressive team with an enviable list, including skilled executives with strong industry experience, many of whom come from larger competitors. Most of our additions are trusted and proven former colleagues.

We also bolstered our corporate governance and strategy with several director changes on our board of directors in the past few years.

The second thing we focused on is quality.

The goal was always to offer quality products that customer needs and come back for us time and time again.

And early on, we discovered we could win on speed.

By understanding the inventory needs of our clients, we can deliver whatever a customer needs quickly and faster than the competition through both our production capabilities and our distribution network.

With a great team, quality products, and a speed advantage, you can accelerate a strong go-to-market plan. Our go-to-market strategy has been to influence the end-user customers to include our products and solutions in their building materials for project and general business purposes.

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. We have additional product announcements in the coming month that we believe will be game changers for us and will be part of the next phase of growth for the company. Then we had to move beyond commoditized products to those with technical advantages or intellectual property advantages. Through product development, like with our OptiFlex hybrid fiber solution and select acquisitions, we have and will continue to compile a more distinctive proprietary product for the full year that will help us build a protective moat from competitors around our company. The next key is to look at a quarter we reached a high of 31%. We believe this reflects our strategic shift to higher-valued products and solutions, and our focus on managing expense, cash flow, and the redeployment of capital has been another important driver. This year, we also closed on the acquisition of Microlab, our largest acquisition thus far, and we did it with our capital smart shareholders. We've made three acquisitions, which is now fully integrated, including our company's largest in our history last year with Microlab. I'll be telling you more about how it expands our opportunity for all of this. We haven't caused any delusions for our shareholders. Cornerstone of our business is that we manage our value well. And last but not least, we keep our eyes squarely on growth. We've nearly quadrupled our size in five years. Thank you to our amazing team for making this happen. Now I'd like to spend a couple minutes This team has made tremendous progress reinventing a 40-year-old company. We focus on our customers' needs with quality, speed, and availability. That said, the company was consistently profitable and had a stellar reputation for quality customer service, and the best part is to provide more of the bill of materials and product that I saw when I joined the company in an industrial customer application. So five years ago, we set our sights on developing a strategic plan that will unlock the value of our foundation. Our strategy was to help them reduce complexity and supply chain costs. Our go-to-market strategy and business development efforts to deliver a new value proposition and expand its market opportunity. All while launching an aggressive go-to-market plan which combined with our steady distribution-centered core business led to much of our growth and resulted in a continued healthy backlog of While I believe we've barely scratched the surface of our potential, we made significant headway in 2020. Historically, many of the products we sell, like coaxial jumpers and fiber optic jumpers, are a very fragmented market, which means we're up against multi-billion dollar global behemoth, and we've defined our differentiated value proposition in the market. Two ways. To transform our company, we focused on several core areas. First was to build out a strong team through our fast-term production. As an example, if you're doing a wireless installation in downtown Los Angeles, you suddenly realize you need a thousand coaxial jumpers. You're dead in the water without them. Most of our additions are trusted and proven former colleagues. You can go to a large competitor. We also bolstered our border governance and strategy with several director chains. Or you can come to RF on our board of directors and we'll have it for you in a couple of days or better. That's what we do. The second thing we focus on is quality. The goal is always to offer quality product that customers need. We either have it on our shelves or on the shelves of one of our six. And early on, we discovered we could win on speed. By understanding the inventory needs of our clients, we can deliver whatever a customer needs quickly and faster than stopping positions correct. That's how we create value-add in our core distribution business. And that, coupled with our custom capabilities, is why we do business with all of the one-wire go-to-market plan. That's how our go-to-market strategies have been taken from customers to include our products and solutions in their building to add more product and general building materials to become more of a one-stop shop. Through whatever channel, availability, speed, and quality, this approach has formed our decision to add distribution and to acquire value proposition to the product area. As we've added higher value and more to our customers' products and solutions, both through key acquisitions and such as Microlab in 2022, we've been working hard to elevate our office to create more remote around our business. On top of our custom capabilities and existing business products and solutions, we've broadened and deepened our product offer to give us more of a better serve our customers and solve greater problems with higher value in our next stage of growth. We have additional product announcements in the coming month that we believe will be game-changers for us. We're confident in our ability to deliver the next phase of growth for the company for all the reasons that I've just outlined. Then we had to move beyond commoditized products. We are consolidating our WECO advantages for intellectual property coming online in the next 30 days. Through product development, like with our Optiflex hybrid fiber solutions, we'll be doing and collect acquisitions from the East Coast. We have and will continue to compile. This allows us to streamline operations at a much greater scale. Although this will create a short-term competitive impact, the long-term synergies and cost savings will be measurable. The next key is to look at efficiency. We continue to look for ways to scale, reduce redundancy, and improve efficiency and market. Being good stewards of money and implementing new processes. This year, we will also be introducing a new brand and strategy. As we've grown, We've acquired a number of equally strong and deploying our capital smartly. Some have greater awareness. We've made three acquisitions in three and a half years. We've completed research, including our understanding of the power of the R3 last year at Microlab, as well as the individual brand and product. Using cash and low-interest loans for all of this. In 2023, we plan to roll out an illusioned brand architecture and strategy. A cornerstone of our business is that we manage our positioning, identity, the identity of our brand, and the tough points that connect shareholders and groupers to each other in five years. including wearing a global health pandemic and with other global macro events. This is an exciting development in the evolution of our company, and with 4G still in deployment and the promise of 5G not yet fully realized, our future for organic growth is bright. With smart acquisition targets, it can be even stronger. And no one here forgets growth comes with knowledge and performance. That includes paying attention to our core business, which has grown for five straight years. Now I'd like to spend a couple minutes to reiterate what we state our core value proposition performance We focus on our customers' needs with quality, speed, and availability, and we always have the customer in mind, making that easy to work. But as always, I believe that our growth plan organically and through acquisition can provide more on the element theory of the interconnect product, our C-Elecom, wireless, and industrial customer applications. Peter, this expanded offering allows customers to buy more from RF Industries across multiple product categories, which can help them reduce complexity and supply chain costs. Our go-to-market strategies and business development efforts were generated significant multi-million dollar orders from existing and new customers, which combined with our steady distribution-centric core business led to much of our growth and resulted in a continued healthy backlog of $27.8 million as we entered into fiscal year. Historically, many of the products we sell, like coaxial jumpers and fiber optic jumpers, are in very fragmented markets. which means we're up against multi-billion dollar global business, as well as mom and pop. So how do we do this? Two ways. Inventory availability through stocking on sites and distributors, and through our fast-term production. As an example, If you're doing a wireless installation in downtown Los Angeles, you suddenly realize you need 1,000 coaxial jumpers. You're dead in the water without them, and your options are limited. You can go to a large competitor with a small order and might wait two to four weeks. Or you can come to RF Industries, and we'll have it for you in a couple of days or better. That's what we do in a piece of our core business. We are really, really good at inventory availability. We either have it on our shelves or on the shelves of one of our six national distributors, or we can make it quicker. And along the way, we strengthen our relationships with our distributors by working together to get stocking positions correct. That's how we create value-add in our core distribution business. And that, coupled with our custom capabilities, is why we do business with all tier one wireless carriers. That's how RF industry's trusted reputation among customers opens the door for more business. And that's why we continue to add more products in that wireless bill of materials to become more of a one-stop shop. Availability, speed, and quality continue to be cornerstones of who we are. But that value proposition has evolved and is becoming more powerful as we've added higher value and more proprietary products and solutions, both through product development and through acquisition. We've been working hard to elevate our offers and create more of a moat around our business. But those higher value proprietary products and solutions that we believe will give us more of a competitive advantage in the market and increase higher profitability in our next phase of growth. So as we turn to fiscal 2023, we're confident in our ability to deliver a solid shareholder return for all the reasons that I've just outlined. Starting this month, we are consolidating our West Coast operations with a new facility coming online in the next 30 days in San Diego. And in our second quarter, we'll be doing some consolidation on the East Coast in New Jersey. This allows us to streamline operations and achieve greater scale. Although this will create a short-term expense impact, the long-term synergies and cost savings will be measurable. We've reached a size and scale where we can capitalize on opportunities for centralizing functions and realizing cost savings through integrating previous acquisitions and implementing new processes. This year, we will also be introducing a new brand strategy. As we've grown, we've acquired a number of products and brands with different names. Some have greater awareness than others. We've completed research to understand the power of the RFO3 brand, as well as the individual brand and product names. In 2023, we plan to roll out a new brand architecture and strategy that will include our overarching positioning, identity, the identities of our house of brands, and the touch points that connect shareholders and customers to those brands, such as our website and collateral. This is an exciting development in the evolution of our company, and we look forward to sharing it with you in the coming months. With a shared vision and strong roadmap, I believe we've barely scratched the surface of our potential. Before I close out my remarks, I want to acknowledge and provide my sincere appreciation to our 340 employees, our continued success and strong standing with our customers, and due to their relentless commitment to our company's performance and serving our customers. I'm obviously pleased with the progress that we've made in growing the business over the last five years, but as always, I believe the best is still ahead of us.

And with that, I'll now turn the call over to Peter Yin, our CFO, to delve into the details of our financials. Peter?

Thank you, Rob, and good afternoon, everyone. As Rob mentioned, we are going into fiscal 2023 with $27.8 million.

Before diving into the details of our $4.2 million and our guaranteed results, I want to note that our $4.26 million represents

Before I discuss our guidance for fiscal 2023, I want to take a moment to respond to our impact from the Paycheck Protection Program loan forgiveness and the Employee Retention Tax Credit of the last few years.

Both the PPP loan forgiveness and the ERC were recognized on the second and third quarter of fiscal 2021, both from a top line growth rate I will ask for margin improvement as we expect to realize that our salesmanship from more traditional products to solutions that are full fiscal year results is more comparable. as well as sales in the fourth quarter were $23 million. We believe that the increases in our 1.9 million from economies of scale as we continue to grow over the full fiscal year will be realized when we move over 48% to 85.3 million operations in 2023.

Microlab products contributed $15 million since the acquisition in March. We expect the usual seasonal growth impact that we have experienced in our first fiscal quarter

which represents growth in most of our product areas. Primarily driven by the growth in our options to be in the range of $90 million to $94 million for fiscal 2023 to support the build-out of wireless power. That concludes my comments. Operators, we are ready to order the line for $9 million compared to $1.5 million.

a 22% year-over-year increase. Adjusted EBITDA for the full fiscal year was $6.6 million, which is an increase of $3.9 million, or 143% year-over-year from $2.7 million.

The increase is primarily due to the higher sales along with the more favorable products, primarily driven by microlab products.

Fourth quarter gross profit margin increased to 31% from 25.3% in the fourth quarter last year.

The 570 basis point increase in our year-end margin was driven by favorable product conditions. Our sales team continues to work on increasing sales of our higher margin offerings, and our operations team works in part to improve cost and income where we are able. We continue to be impacted by the elevated cost of shipping and materials as a result of inflationary pressure, as well as the ongoing wage pressures we have dealt with previously.

So, you know, I wouldn't say there was one large order. I mean, we still have a pretty meaningful amount of hybrid fiber ship out in the quarter, which was not unexpected in sort of what we shared at the end of the last quarter that we thought was going to happen. I think, you know, overall... It was a pretty normal quarter for us, so nothing crazy. Core business performed steady growth over the prior year like it generally has. Sales of Microlab products were stable and all are kind of in the range that we've been expecting them a little better than maybe they're historical. So the only, you know, the biggest number in there would have been the hybrid. At the end of the fourth quarter, our balance sheet remains strong.

I know you've talked a lot about not just the top line, but the margin profile, which has consistently increased throughout this year on the gross margin front, and then also some unit margin targets. Is your plan next year, do you think the company is going to be achieving an increase in inventory? Is it supposed to increase sales and mitigate supply chain disputes? put out there at a high level for EBITDA for the year. Sure. Yeah.

So, you know, we were happy to see the gross margin go up as fiscal 22 went on. I think that's our expectation going forward is, you know, fiscal 23, we always have a Kind of a funky first quarter with November, December, January being the three months of our typical first quarter. So short of that normal seasonality that we experience, we expect margins to continue getting better throughout the year. We think our product will help drive that. Once we get into the new facilities as well, there's some early in the year expenses to help us get that done that are one-time charges. then we expect our EBITDA margins to get better as well. So we're still aiming to be north of 30% on the gross profit line and to continue to see momentum building around it. I think as we get through the year, the EBITDA piece is the one that I'm encouraged and excited to see as we start to be able to take some real $2 million savings as we get into the move. So it'll be similar to what we've seen in the last few years. Before I discuss our guidance for fiscal 2023, I want to take a moment to expand on something Rob discussed.

And understanding the seasonality of the first quarter and then things tend to pick up from there. But Kiran, what are you seeing in terms of carrier CapEx build-outs, 4G more specifically, 5G? Those have been hard to time in terms of the spend. I'm just curious what you're hearing with your conversations with your customers about what the expectations are for our calendar 23.

Yeah, so I think on both 4G and 5G, kind of looking at them in our operating income, from the economies of scale as we continue to grow and from efficiencies and synergies we will realize when we move into two new facilities and consolidation operations in 2023. As for fiscal 2023, we expect the usual seasonal impact that we have experienced in our first fiscal quarter. generally seen is with the overall economic uncertainty. Intercarriers are still committed to a meaningful amount of cap back. I think there was a little bit of holding your breath as the year ended to see, okay, how do we end up and are carriers going to keep spending like they said? We haven't seen any major pullback on that. There's still a pretty significant amount allocated. I think I won't be surprised if there's sort of delays in acceleration as we get into the early and late spring, which is normal build season when it really gets moving. The part of that that I'm most intrigued to see really is on the small cell side, do we start to see the spend that we've been expecting in a sort of the pent-up demand spend that's been sitting there, which I think we will. I think this is the year, you know, 2023 is the year where we need to see some of that. So I guess summary there is, you know, we expect pretty meaningful CapEx macro sites,

small cells and venues as well as we get into better weather and some of those outdoor venues. Thanks for clarifying. Last question for me. Can you provide a little bit more color with the guidance for next year? You've historically been able to secure some large orders. into your point, I think the small-sell opportunity is probably a bit underappreciated. I'm just curious, are you still pursuing these large, multi-million dollar orders?

Is there a good pipeline of those? How much of that? Or a big ramp in small-sell? Is it all in the guidance that you're giving initially? Or is that more like an upside scenario case?

Yeah, I think it was a pretty normal quarter for us.

Nothing crazy. We had some of that before. Steady growth over the prior year, like it generally has. Sales of Microlab products were stable. Especially early in the year. So the biggest number in there would have been the hybrid fiber. But there are absolutely, in our expectation, nothing out of the ordinary wins. that need to be in the product area. You know, we're still shipping a lot of hybrid fiber. We're hoping for even more of that as we go on. That's a couple of projects as well. So we've gone up a month.

But we're hopeful there. And then our other kind of bigger ticket items as we get into the fall sale and from cooling those areas and large opportunities.

And, you know, the last thing is that we're going to go from a venue perspective. You know, with the add of micro labs, you know, we were happy to see when a large venue like a co-op at ADA, I think 22 went on and ended out and we're stuck in there. Those are hundreds of thousands of dollars forward in, you know, 123. We always have a, we kind of a funky first quarter with November, December, January as well and three other items that try to fill out that bill of materials. So short of that, I don't want to understate the possibility of those. You know, Marginal has to continue getting better throughout the year. We think our product mix will help drive that. Once we get into the new security as well, there's some early in the year expenses to help us get that done that are one-time charges. Then we expect our EBITDA margins to get better as well. So we're still aiming to be north of 30% on the gross profit line. and to consistently get above 10% on the adjusted EBITDA line. I think as we get through the years, the EBITDA piece is the one that I'm encouraged and excited to see as we start to be able to take some real synergy and patience as we get into the move. So it'll be similar to what we've seen in the last few years, where the first quarter is a little lighter than the other three, and we have growth from there.

And understanding the seasonality of the first quarter, things tend to pick up from there. But curious, what are you seeing in terms of carrier capex built out for 4G more specifically?

5G, those have been hard to time in terms of the spend. I'm just curious what you're hearing with the conversations with your customers about what the expectations are for calendar 23. fiber operators we acquired at C-Enterprise. I think on both 4G and 5G, those who were being combined production off of CapEx as corporate talent in our corporate headquarters, this was one of those years where things really slowed down from an expectation of what was going to happen in our scale and maybe take some synergies out of it. Peter, maybe you can share a little bit on what we think the one-time costs are related to most years. I think the thing that we've generally seen is with the overall economic uncertainty, carriers are still committed to a meaningful amount of cap back. I think there was a little bit of holding your breath as the year ended to see, okay, how do we How do we end up and are carriers going to keep spending like they've said? We haven't seen any major pullback on that. There's still a pretty significant amount allocated. I think I won't be surprised if there's sort of delays in acceleration as we get into early and late spring, which is normal build season where it really gets moving. The part of that that I'm most intrigued to see really is on the small cell side. Aaron, I don't think there's much this year quite yet. Maybe we're going to be able to share that kind of once we get into the building. I think we will.

I think this is the year, 2023 is the year where we need to do some of that.

So I guess summary there is, you know, we have pretty much all ended that.

I think macro sites.

from a production team perspective as well as we get into better weather and some of those outdoor things. What do we really need when we get two large operations? Thanks for clarifying that.

Last question for me, looking at the guidance for next year, I guess.

You've historically been able to secure some large orders.

And to your point, I think the small cell opportunity is probably a bit underappreciated.

I'm just curious, are you still

Again, in large, $5 million orders, is there a good pipeline to those? Is much of that or a big ramp in small cells included at all in the guidance that you're giving initially, or is that more like an upside scenario case?

Yeah, I think we're talking about small sales spend.

Call it $250,000 to $500,000. We have some of that broken to our expectations. It could be a little higher than that.

So it's one of those things.

Putting an exact number on has been difficult to do. It's not a crazy number, but it's not great.

I think it works. Through the year, we'll get a clearer sense of what does that building plan look like.

But there are absolutely, in our expectations, there's some pretty significant wins that need to be in there in multiple product areas. We're still shipping a lot of hybrid fiber. We're hoping for even more of that as we go on. That's a tough one to predict as well, kind of weeks a week or most a month. But we're hopeful there. And then our other kind of bigger ticket items. As we get into small cell and those are areas that we see large opportunities. And, you know, the last thing, as I mentioned a minute ago, is from a venue perspective, with the add of Microlab into our offer, when a larger venue, like a football stadium in particular, gets built out and we're expecting in there, you know, we've taken a little bit of $100,000 and some of that already printed through in real-world passages. We can now throw in fiber and coaxial jumpers as well and some other items and try to fill out that material. So, I think I don't want to understate the possibility of those. It's certainly not the bully. As those start to line up as well as going forward, we would tie to price increases based on product mix. We weren't able to take price increases on everything that we sell. That's what makes it a little harder to predict. Some of our items just don't have that kind of pricing power. Others, it's more standard annual increases that we generally take. So I think we're putting a little bit of weight into the price increase piece on that, but the majority of that growth is just going to be from increased sales in some of the newer product areas. And we may have to offset some slower sales of some of the big project items we've done over the last few years. It's hard to know if all the projects that we're doing specifically on the hybrid class side are going to stay at the exact same level.

But I'll tackle the general concept of consolidation.

Maybe not at the same level they were last year. We need another product area. What we think that's going to be wrong to offset that to give us the growth. So the consolidation is operations, it's production, it's inventory. We're starting with the West Coast. We're combining our legacy, our industry product line, the Swagfield offer, and the fast-turn fiber offer that we acquired a few enterprises a few years ago. So Those two are being combined. I think on the customer side, you know, corporate staff, on the cost of goods side, we've generally been able to keep up. Help us, I think, take advantage of our scale and maybe take a couple of months. Peter, maybe you can share a little bit on what we think the long-time costs are related to the relief pressures. You know, we see consistent increases on, you know, All of our folks are production teams, et cetera. So there's room for us to get a little sharper there, I think, to find some additional savings and some opportunities. We've had initiatives in place for some time to get costs out of the business. I think we're going to be able to offset that. So most, if not all, of the increases that we've experienced from a labor perspective with those initiatives. So we think it's sort of we're starting with a clean slate, and now it's about growing the business and recognizing some of those better margin items to help us. Aaron, I don't think there's much to share quite yet. We look forward to being able to share that kind of once we get into the building and things iron out a little bit more. So I think those cost savings would be a little bit premature to share here on the call. Yeah, the one thing I'll add to that, Peter, is just I think that the sort of production team perspective and some of the I'm wondering about the product launches in this fiscal year. In particular, I'm wondering about the timing of those launches and whether there have been any lags of revenues with those new products. And whether it's a fiscal 23 revenues or whether it's later in the month. Yeah, but we think they're material to the So we have multiple things that we're going to be launching. I think the good news here is from our last couple of acquisitions, we've added some solid engineering. Yeah, I think we're talking about between $250,000 and $500,000. We have a small cell of thermal cooling. It could be a little higher than that. Things don't always go perfectly. We've always got new versions.

It's not a crazy number, but it's not free. Historically, there's not a lot of product launches.

We weren't very relocated. We were more looking at market opportunities or responding to customer needs and then coming to market with something. This is a more proactive approach. The majority of the things that we plan to launch and announce already have customer trials either completed or ongoing, and we expect there to be, in most cases, revenue during fiscal 2023 to coincide with those launches. I'm not much of a send out a press release because we have something that we think is cool kind of guy. I prefer to send out something when we think it's cool, customers think it's cool, and we can actually quantify some some dollars around it.

Yeah, good question. Thanks, David.

You can expect that when we do launch some of the things, some of that information is that there's a revenue stream tied to it that we can also speak about at that time. We took those increases in the prior year. Okay, great. Thank you. I think my final question is kind of a broader question regarding mergers, acquisitions, two-part questions. One is, your past acquisitions, some of our items, most of yours don't have that kind of pricing power. Others, it's more standard. I think we're putting a little bit of weight into the price increase piece on that for new acquisitions. And with respect to potential new acquisitions, The environment's changed a lot over the past year, right, with higher interest rates. There's a potential recession that people are talking about. Funding availability has changed a bit, I suppose. And there may be greater willingness on the part of potential targets to enter into discussions with you. Can you talk about that? Is it possible to at all characterize what have your price increases been able to keep up? The only thing remaining there is getting into a new facility for them somewhere they're located currently. So just moving down the street. I think on the customer side, we've generally been able to keep up as the cost has moderated a bit. the integration of the business several weeks. Our systems implemented there, our teams have been integrated. A piece of this that's been harder for us to, we're largely control over all is just wage. In a normal environment would then free us up to be increases actively looking at all of our folks, our production and deal flow.

There's room for us to get a little. We're not doing that.

I think to find additional savings or some opportunities.

build and evolve. We do have, we've had initiatives in place for some time.

You know, doing M&A in an environment like this, making sure that we've got most, if not all, right actions of target, the right increases that we scale. As always, I think as everyone's learned, I care a lot about what we pay for it and With a clean slate. There's nothing imminent. I'm not rushing into any deals. And whether that seems to be the case this whole year or not, we'll have to wait and see. But I don't think it's a very – while people are interested in talking about M&A, it's a little bit of a funky environment to be – going out to find capital. We've done a great job of using cash and low-interest debt. Thank you for taking my question, Rob. Where our stock sits today, I'm not terribly interested in that equity. I'm wondering about the product launches in this fiscal year. In particular, I'm wondering about the timing of those launches and whether there have been any lags of revenues with those new products. Integration of these new facilities and the And whether it's a fiscal 23 revenues or whether it's a later time. Hey, Hal, thanks for the question. So we have multiple, not to say we won't look and continue to be launching. We're definitely going to be conservative in our last couple of acquisitions. We've added some solid engineering talent and some product roadmap capability. Thanks, Hal. We have small cell and thermal cooling offers. We have micro lab products that are on the docket and we've kind of always got new versions of hybrid fiber that are coming out as well. Historically, there's not a lot of product launches from us because we weren't very product roadmap sensitive. We were looking at market opportunities or responding to customer needs coming to market or something. This is a more proactive approach. The majority of the things that we plan to launch and now already have customer trials either completed or ongoing. And we expect there to be, in most cases, revenue during fiscal 2023 to coincide with those launches. I'm not much of a send-out-a-press-release kind of guy.

I prefer to send out something.

as well as just kind of general updates of our product line. The engineering team did a great job of reinventing an existing product line. Our expectation is that there's a revenue stream tied to it that we can also speak about at that time. Really right in the middle of COVID over the last few years to redevelop a product line. I think my final question was kind of a broader question regarding murderous acquisitions. Two-part question.

One is your past...

We expect some meaningful opportunities to come to fruition.

Have you completed the sufficient amount of integration that you're now actively looking for new acquisitions?

And with respect to potential new acquisitions, the environment's changed a lot over the past year, right? With higher interest rates, there's potential recession people are talking about. Funding availability has changed a bit, I suppose. And there may be greater... willingness on the part of potential targets to enter into discussions with you. Can you talk about that from a broad-based perspective today? Sure. Yeah. So the first piece, since we're micro-labs, is also generally integrated, if not fully integrated. The only thing remaining there is getting into a new facility for that. And so because of where we're located, we're pretty pleased with the offer we have today. We need a little bit of additional space to do some other things in there, but other than that, more than one radio, that's not a area that we intend to go into. Our general belief is we can design, engineer, and build a fully integrated small-scale fleet on that. In a normal environment, it would then free us up to be using products of our own and helping the integrate those from others. I don't think there's anything good from our offer. It's not that we're not doing that, but we are looking at the pipeline continuing to build and evolve. We're pretty cautious about doing M&A in an environment like this, making sure that we've got the right acquisition target. So generally, there's going to be a scale, as always, of record on the bill that we'll learn. So someone will be named, or some boards will be named as the conservative on that and make sure that we're allocating capital. So generally, those are things that we're told. There's nothing imminent to use based on the area, the location, the region. Whether that continues to be the case, that's the type of crowd that's being deployed. We'll have to wait and see. While people are interested in talking about M&A, it's a little bit of a funky environment to be going out to find capital. We've done a great job of using cash and low-interest debt in the past. Where our stock sits today, I'm not terribly interested in using that paper to do an acquisition either. I think we'll continue looking at deals if something great comes along We can always get creative and figure it out, but I think at the moment we've got a lot in our place with getting integration of these new facilities and starting to print through the savings that we believe will come out of it over the course of time, along with the sales initiatives and the operational initiatives that we've had ongoing for several quarters. So not to say we won't look and continue to look, but we're definitely going to be I think, you know, conservative about our approach to M&A. I think we absolutely see a path to getting to the mid-30s. I think product mix in the short term makes that harder to say specifically when. You know, and I like to be able to give pretty specific guidance on timing and numbers and quantify it when talking about those results. So we absolutely see, I think the way you characterized it is correct. you know, our core business, we start to see some things normalized there where some of the costs come down a hair, both on cost of goods and cost of labor. We can start to see better growth margins there. And then with the new product areas, whether that's Microlab or others, if the mix starts to swing heavier in that direction, we absolutely believe there's an opportunity to get those markets into the mid-30s. So I don't expect it to leave if that's something that possible this year. Expect to see some nice wind this fiscal year from that. We don't see that from those trials as well as just kind of the general level 24 of our product line. The only reason I say that is when you look at our top line numbers, the better our top line is, the better our gross margins go with it as we start to see a much healthier version. Really right in the middle of COVID over the last few years to redevelop a product line that Historically, we've had discussions about how do we get more future lead if it's so early in a quarter. Those enhancements are definitely helping. We're kind of there. And now it's great. Let's see those numbers. If we truly were putting on our exact same number every quarter, I'd be able to give a much clearer answer. We expect some meaningful opportunity for top line with it. It's harder to say specifically when that is, but I don't think it's out of the question.

I know it's not.

It's upside.

You've mentioned the margin push back up into the mid-term. I'm counting on it. Are you still missing any pieces in the possible products that you're mentioning? When do we get a peek at those?

Yes, good question. I don't think we are.

We expect revenue this year from anything that we're going to offer today in that bill of materials that we could or we could review when it's a part of both our official product lines. There are openly publicly stated acquisition strategies, organic development. We expect to have something new and as to share. And then, you know, subsequent to that, there's a power requirement we're talking about as well that could be, as I mentioned, a nice adder as well. I think finding the right fit is something we have to be really smart about. And so because of that, we're pretty pleased we've already got customer review. We have no intention of offering the radio. Customer offers, obviously, a big ticket item inside the relay at the same time. I like to be able to share more than one radio. And here is something new to talk about. People have already looked at it. We know that it works, and we know that people want it. So now here's the revenue-integrated small-scale Shroud. We've generally been able to do that. We had a two-field launch last year with our own, and Shroud helped integrate. We talked about that, and so I don't think there's anything missing from our series of a handful of purchase orders in the hundreds of thousands of dollars to talk about right on the heels of that launch. So it's quite similar.

kind of this year, but we should have something to talk more about.

Generally, there's going to be a manufacturer of record on the bill of materials. So someone will be named or someones will be named as the spec position for antennas. So generally, those are things that we're told to use based on the area of the location. We appreciate your support of RF Industries. I'd like to thank our team for their hard work in helping us achieve these goals. We're either buying them or we're having our customers to allow us to partner with them to help integrate. We're excited about our continued positive momentum as we move into fiscal 2023. Peter and I look forward to reporting our fiscal first quarter results in March.

Thank you again, and have a great day. This concludes today's conference.

You may disconnect your lines at this time. Thank you for your participation.

On a gross margin basis, even before it took in the higher gross margin micro lab, years ago it had been higher. It had been in the mid-30s. You mentioned that for various competitive reasons, it may not get back there. Even if the base business gets back to a number with a three in front of it and you have micro lab on top of that, it would imply a gross margin. We do get back to a more gross margin in the mid-30s. Can you see a path to do that again?

Yeah, good question.

So I think we absolutely see a path to getting to the mid-30s. I think product mix in the short term makes that harder to say specifically when. And I like to be able to give but pretty specific guidance on timing and numbers and quantify it when talking about those results. So we absolutely see, I think the way you characterized it is correct. If our core business, if we start to see some things normalized there where some of the costs come down a hair, both on cost of goods and cost of labor, we can start to see better gross margins there. And then with the new product areas, whether that's micro lab or others, If the mix starts to swing heavier in that direction, we absolutely believe there's an opportunity to get those margins up into the mid-30s. So I don't expect it early in the year. I think if that's something that's possible this year, it's going to be late in the year, and it may be something that we don't see that kind of consistently happening until we get into fiscal 24. The only reason I say that is when you look at our top line numbers, you know, the better our top line does generally the better our gross margins go with it because we absorb labor and, and, uh, then we start to see a much healthier gross margin as well as kind of every other profitability line. Um, you know, historically we've had discussions about how do we get consistently to 15 million a quarter? Then it was, how do we get consistently to 20 million a quarter? We're kind of there. Uh, and now it's great. Let's see those numbers. You know, if, if we truly were putting up the exact same number every quarter, I'd be able to give a much clearer answer because the mix moves around and therefore our top line moves around a bit with it. It's harder to say specifically when that is, but I don't think it's out of the question in the midterm to get some margin push back up into the mid-30s.

Okay. And last question, some of the new products that you're mentioning, when do we get a peek at those?

And when do they expect revenue? Yeah. So we expect revenue this year from anything that we're going to launch. I think the soonest that you'll see something probably come out from an official product launch is during our fiscal second quarter. Again, that starts in February. So February, March, April timeframe. We expect to have some things to share. And then subsequent to that, there's a couple of things in the back half of the year that we believe will be talking about as well. But as I mentioned in a prior question, I'm not big on announcing something just to announce it unless there's some marketing genius reason for it, or we've already got customer review, customer feedback, and customer opportunities that we can relate at the same time. I like to be able to share, here's something new to talk about. People have already looked at it, and we know that it works, and we know that people want it. So now here's Here's the revenue that we expect to drive with that. We've generally been able to do that. You know, we had a true field launch last year with a unique kind of shroud. We talked about that and immediately had a series of a handful of purchase orders in the hundreds of thousands of dollars to talk about right on the heels of that launch. So expect similar kind of this year, but we should have something to talk more about during our fiscal second quarter.

Sounds good. Okay. Thanks so much.

Thanks, Oren.

Okay, we have no further questions in queue. I'd like to turn the floor back over to Rob Dawson for any closing remarks.

That's great. Thank you, John. And thanks, everyone, for joining our call today. We appreciate your support of RF Industries. I'd like to thank our team for their hard work in helping us achieve these new levels of performance and our customers for allowing us to partner with them. We're excited about our continued positive momentum as we move into fiscal 2023. Peter and I look forward to reporting our fiscal first quarter results in March. Thank you again and have a great day.

This concludes today's conference and you may disconnect your lines at this time. Thank you for your participation.