On Monday, RF Industries (NASDAQ:RFIL) discussed third-quarter financial results during its earnings call. The full transcript is provided below.

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Summary

RF Industries reported record high quarterly revenue of $24 million, up 21% year-over-year, with strong operating income and adjusted EBITDA exceeding targets.

The company emphasized its successful diversification strategy, expanding into markets like aerospace, AI infrastructure, and data centers, and expected continued growth in these sectors.

Future guidance remains optimistic, with Q4 sales expected to match or exceed Q3 results, supported by a strong backlog and continued demand.

Operational and strategic initiatives include unifying engineering and product management teams, leveraging AI for business efficiency, and focusing on high-value solutions.

Management highlighted the significant contributions of all segments and the strengthening of customer relationships, particularly in custom cabling and integrated systems.

Full Transcript

OPERATOR

Greetings. Welcome to the RF Industries 3rd Quarter Fiscal 2026 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-0 on your telephone keypad. Please note this conference is being recorded. I would now like to turn the conference over to your host, Donny Case, Investor Relations for RF Industries.

You may begin.

Donny Case, Investor Relations

Thank you, Holly, and good morning everyone. Joining me today are Rob Dawson, Chief Executive Officer, Ray Babidi, President and Chief Operating Officer, and Peter Yen, Senior Vice President and Chief Financial Officer. Before we begin, please note that today's discussion contains forward-looking statements under federal securities laws. Forward-looking statements are identified by words such as will be, intend, believe, expect, anticipate, or other comparable words and phrases.

Actual results may differ materially due to risks and uncertainties described in RF Industries' filings with the SEC, including reports on Form 10-K and 10-Q. The Company undertakes no obligation to update forward-looking statements except as required by law. During the call, management will also discuss certain non-GAAP financial measures, including adjusted EBITDA, non-GAAP net income, and non-GAAP earnings per share. Reconciliations to the most directly comparable GAAP measures are included in today's earnings release as well as the company's SEC filings.

And with that, I'll turn the call over to Rob.

Robert Dawson — CEO, President and Member of the Board of Directors

Thank you, Donny. Good morning everyone. I'm on the East Coast today, so I appreciate you tuning in for something a little different with us this morning. So good morning. As I said several times over the years, we like to communicate exactly what we're going to do as part of our launch strategy and then we execute. Fiscal year 2026 is unfolding as we anticipated and communicated to you. Our third quarter has continued to demonstrate the earnings power we've been building across RF Industries.

We delivered record high quarterly revenue of $24 million, up 21% year over year and 16% sequentially. We don't spend a lot of time talking about records while we're working hard on the business, but I think this deserves some acknowledgment. $24 million in sales is a new high watermark for RFI and of course our goal now is that record. Great work by the team. With quarterly revenue above $20 million and increasing, our results are benefiting from the operating leverage we have long discussed, driving increased margins and allowing more dollars to flow through to the bottom line and producing significantly stronger profitability across the income statement. In Q3 we delivered profits that in many cases set a new standard for RFI performance. Operating income was $1.8 million, non-GAAP net income was $2.2 million, or $0.19 per diluted share, and adjusted EBITDA was $2.7 million, or 11.1% of sales, above our 10% goal. Combined with a gross profit margin of 35.6%, exceeding our 30% gross margin objective in six of the last seven quarters, we believe these results reinforce that our transition toward higher-value solutions is creating a stronger, more profitable business.

This is especially evident as our higher-value integrated systems and custom cabling solutions continue to gain traction. These offerings carry more engineering content, address larger project scopes, and deepen our customer relationships. And in the third quarter they made a significant contribution to our results. While our business mix can vary each quarter based on shipments and pipeline conversion, we believe the underlying strength and growing diversity in our business will carry forward as customers increasingly seek fewer, more capable partners.

We have expanded our offering to deliver turnkey solutions that span design, product fulfillment, and site installation management. Ray will discuss this in more detail and share some of the behind-the-scenes execution that continues to strengthen our value proposition and business opportunities. Our strategy to diversify RFI's end markets and customer base is working today. Our solutions support applications across aerospace, edge data centers, AI infrastructure, industrial manufacturing, medical imaging, transportation, and public safety, many of which are rapidly growing markets.

Our business platform is now broader, more resilient, and has multiple avenues for growth. In closing, we're very excited about the future going forward. We remain focused on disciplined execution, serving our customers, and building durable long-term value for shareholders. As I mentioned on our Q2 call, we expected a strong second half and with a quarter to go we're on target to achieve exactly that. With what we know today, we expect sales in our current fiscal fourth quarter to be roughly the same or above our Q3 sales level.

I want to thank the entire RF Industries team for their continued hard work and commitment and, as always, we appreciate the trust and partnership of our customers and the support of our shareholders. Now I'll turn the call over to Ray to expand on our operational and go-to-market progress.

Raymond Bibisi — President & COO

Thank you, Rob, and good morning everyone. I want to take a few minutes to walk you through how we are actively managing the key levers across our business to drive growth, reduce vulnerability, and create lasting shareholder value. I will take you through sales, product management, engineering, and operations and the levers driving our strategy forward. Let me begin with our commercial results and this quarter I am pleased to say the results speak for themselves.

As Rob highlighted, we delivered and delivered big. Q3 revenue came in at $24 million, exceeding expectations. But what I'm most proud of is not just the number, it's how we got there. May, June, July—three consistent months. No slow start, no late-quarter heroics, just steady, disciplined execution from day one to the last. That is what we have been building toward and in Q3 we delivered it. If Q1 and Q2 showed you the direction we were headed, Q3 showed you what this team is capable of.

Our year-to-date revenue was solid and I feel the momentum behind our team's determination to win. Regarding bookings, Q3 was another strong quarter following the record-setting Q2 bookings. Importantly, our year-to-date bookings are ahead of our year-to-date sales, reflecting continued strong demand across our end markets, and our backlog heading into Q4 gives us line of sight for the balance of the year. We've been saying diversification would be our strength and Q3 reinforced it.

This quarter every segment contributed meaningfully to our results and the contribution balance across the portfolio was improving. Custom cabling continued to lead and deliver, Interconnect stepped up from Q2, and Integrated Systems continued to gain traction, demonstrating that the work that we have been doing across that segment is showing up in the results. This balance matters. We are a company where every segment contributes, every function executes, and the whole is greater than the sum of its parts, and our team's performance in Q3 is evidence of that.

Our customer base continues to broaden as well. This quarter we saw meaningful contributions from customers across aerospace and defense, telecommunications, industrial, and distribution channels, with several new contributors emerging across our end markets. That breadth is what a healthy diversified business looks like and I believe we are just getting started. Turning to engineering and product management, this quarter we made a significant and deliberate organizational move that I believe will be a meaningful driver of performance in quarters ahead.

We unified our engineering and product line management teams under a single integrated structure within our Interconnect and Integrated Systems segments. When the people who design our products and the people accountable for the commercial success sit on the same team, decisions get made faster, trade-offs get resolved sooner, and there is clear ownership behind every product line. This is not just an organizational change, it's a direct commitment to our innovation trajectory and our ability to compete and win—built to deliver faster product launches, clearer accountability, stronger execution on complex programs, and better solutions for our customers, all designed to ensure our engineering efforts translate into measurable revenue impact. Our product roadmap is not developed in isolation; it is directly linked to our market diversification strategy. When engineering, product management, and sales are aligned around the same growth priorities, product development becomes a direct driver of market expansion. That alignment is what we believe will make RF Industries the trusted partner of choice across the markets that we serve.

We believe that our operations team and processes are also key differentiators for us. This quarter there were no dramatic changes—and that is exactly the point. They are now firing on all cylinders. Our teams continue to execute against the same operational priorities we have outlined and the results continue to show up. Our U.S.-based manufacturing footprint combined with a deliberate diversified supply chain gives us the flexibility to respond quickly to changing demand as well as managing our ever-shifting tariff and geopolitical landscape.

Built to scale, built to deliver. That remains the operational foundation of this business. Before I turn to our strategic levers, I want to highlight an area of growing focus for us: artificial intelligence. This quarter we continue to make meaningful strides in developing AI as a business enablement tool—not simply for administrative efficiencies, but at the front lines of our business. Our initial focus has been on sales and customer-facing functions where AI is helping our teams work smarter, respond faster, and engage more effectively with customers and prospects.

This is just the beginning. Our roadmap will extend AI into engineering, operations, and supply chain in quarters ahead. We believe this will be a meaningful competitive differentiator and we are committed to this initiative as we work faster and smarter to win. When I step back and look at what we're building—diversified revenue streams, disciplined operations, and a culture of innovation—it all connects. These aren't independent efforts. They work together to reduce vulnerability, create opportunity, and convert our pipeline and backlog into real performance gains.

And importantly, we are doing it without compromising our margins or operational integrity. I will categorize Q3 as a quarter where it all came together and we did it with consistency. The revenue growth is real, the bookings strong, the backlog gives us visibility, and perhaps most importantly, every segment, every function, every person showed up. I'll take a moment to recognize the RF Industries team—you delivered. This quarter belongs to all of you, and to our customers, thank you for your continued trust.

I will now turn the call over to Peter to walk through our financial results. Peter?

Peter Y. — Chief Financial Officer

Thank you, Ray. And good morning, everyone. As you heard from Rob, we hit some historic highs in our fiscal third quarter. Sales increased 21% year over year and 16% sequentially to a record $24 million. Gross profit increased 27% to $8.5 million, and gross profit margin expanded 160 basis points to 35.6% from 34% in the prior year period. This improvement reflected our team's strong execution in driving this, realizing the best of our higher value offerings, and maintaining disciplined cost control.

We have long believed our business carries significant operating leverage, and our Q3 results provided further evidence of that leverage. Quarter operating income was $1.8 million compared to $720,000 in the prior year. Quarter operating margin improved to 7.3% from 3.6% last year. Consolidated net income was $1.4 million, or $0.12 per diluted share. On a non-GAAP basis, net income was $2.2 million, or $0.19 per diluted share. This compares with consolidated net income of $392,000, or $0.04 per diluted share, and non-GAAP net income of $1.1 million, or $0.10 per diluted share.

In the third quarter of fiscal 2025, third quarter adjusted EBITDA was $2.7 million compared with adjusted EBITDA of $1.6 million in the prior year quarter, representing an increase of approximately 71%. Adjusted EBITDA as a percentage of sales improved to 11.1% from 7.9% last year, exceeding our long-stated long-term goal of 10%. Turning to our year-to-date results, for the first nine months sales increased 10% to $63.6 million. Gross profit increased 19% to $21.9 million, with gross profit margin expanding to 34.5% from 31.8% in the prior year period.

Operating income increased to $3 million from $882,000, and adjusted EBITDA increased 61% to $5.7 million from $3.5 million. Moving on to the balance sheet, as of July 31, 2026 we had $4.5 million of cash and cash equivalent, working capital of $18.3 million, and a current ratio of approximately 2.0 to 1, with current assets of $36.4 million and current liabilities of $18.1 million. At the end of the third quarter we had $5.7 million outstanding on our revolving credit facility, down from $6.1 million at the end of the second quarter.

Cash increased by approximately $1.1 million during the quarter while revolver borrowings declined by approximately $400,000, resulting in a meaningful improvement in our net debt position. We continue to actively manage working capital to strengthen our liquidity and overall capital position. As we continue to generate positive cash flow, we expect to reduce our net debt to a level we view as immaterial. Relative to our balance sheet, inventory was $13.2 million compared to $14.4 million at the end of the second quarter and $13.7 million at the beginning of the fiscal year.

We continue to monitor inventory levels closely and maintain a prudent approach to inventory management that balances discipline with customer demand. Inventory levels may fluctuate from quarter to quarter based on the timing of inventory receipts, expected shipments, and potential customer or supply chain delays. Demand remained healthy during the quarter. Third quarter bookings were $22.5 million, representing a book-to-bill ratio of approximately 0.94 times, and backlog at July 31st was $18.6 million.

As of today, backlog stands at $19.8 million. As always, backlog can fluctuate based on order timing and fulfillment, but we believe our current backlog and opportunity pipeline provide a solid foundation as we enter the final quarter of our fiscal year. Overall, our third quarter results reinforce the confidence we have in our business model and demonstrate the operating leverage we are realizing at higher revenue levels. With quarterly sales reaching approximately $24 million, gross profit margin remaining above 35%, and adjusted EBITDA as a percentage of sales exceeding 11%, we delivered another quarter of meaningful improvement in profitability and cash generation. We remain focused on converting our backlog and pipeline into revenue, maintaining disciplined cost management, and delivering continued growth and shareholder value. With that, I'll open the call for your questions.

OPERATOR

Certainly. At this time we will be conducting a question-and-answer session. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment please, while we poll for questions.

Your first question for today is from Tyler Burmeister with Lake Street.

Tyler Burmeister, Analyst at Lake Street

Hey guys, can you hear me all right?

Robert Dawson — CEO, President and Member of the Board of Directors

Hey Tyler, good morning.

Tyler Burmeister, Analyst at Lake Street

Hey, good morning. Congrats on the quarter and continued strong momentum here. Maybe first I want to ask about the integrated system, the small cell business in particular. Did that improve as you expect? And I guess just looking forward, is some of the disruptions in the first half completely behind you guys now?

Robert Dawson — CEO, President and Member of the Board of Directors

Yeah, good question. So that market's been a tough market for a while. Just predictability, I think, of deployments for technology reasons and a variety of other things. I think it started to do what we thought it was going to do during the third quarter. We see it picking up momentum into the fourth and certainly into next fiscal year. So it's doing what we thought. It's behind—look, the dollars delivered there are behind what we thought they would be at the beginning of the year.

But with a little bit of delay, it's now starting to accelerate, and we feel really bullish on it as we go into the end of this year and into fiscal 27.

Tyler Burmeister, Analyst at Lake Street

Good, good, great to hear that. And on the DAC systems, now with just a quarter left in your fiscal year, I was wondering if you could maybe bracket what you expect the size of the DAC business to be for you guys this year, and any comments about growth expectations for that in particular as we head into next fiscal year would be helpful, thanks.

Robert Dawson — CEO, President and Member of the Board of Directors

Sure. Yeah. While we don't give specific dollars by product line generally, I think if you go back a couple years ago, our DAC business was relatively immaterial against our total sales, and we've seen significant growth where it's now in the, you know, millions of dollars per quarter being delivered. So our expectation is to be north of 10 million in sales and accelerating. I think we view that, as we've said for several quarters, as one of the big driving growth engines.

It's sticky. We're getting connected with our customers, we're performing well. We're starting to show more customers there outside of the traditional telecom space where we've, in wireless, existed for years. We're starting to spread out into other markets, as we've talked about in prior calls. So I think that's another one that we feel very, very strong about and think it has not just, you know, short-term opportunity, but long-term growth with current and new customers both.

Tyler Burmeister, Analyst at Lake Street

Great, I appreciate that color. Maybe just one last one for me. The aerospace, large aerospace customer, I guess, seems to continue to be very strong there. Just want to make sure as we think about next year that strength and that backdrop is a strong backdrop. I just want to make sure there's no potential pockets of weakness that we should be thinking about as we head into next year. And then second on that, that one large customer, has your success there led to any further conversations with potentially other customers that you could expand that aerospace business in as well?

Robert Dawson — CEO, President and Member of the Board of Directors

Sure, yeah. I mean, I'll take the first part of that first and then we'll go into the other piece. So I think we feel very strongly about the relationship we have with that customer. I think our team—the majority of that work, if not all, is being performed in Long Island by our team there. They're doing a great job. And I think it's design work, it's engineering, it's technical involvement. I think that makes it a very connected relationship where we don't see reasons why that would have pockets of weakness.

There can always be timing of order placement and, you know, fulfillment on those. But I think with what we know today, as long as we keep performing, we expect that that's a long-term relationship and that the team is doing a great job there. So on the second piece of it, we always find when we get wins in new markets or new product areas, immediately that's the tip of the spear to go after other opportunities and try to break in. And so that's worked across all of our product lines at times.

And I think the experience and the relationship that we have there with that aerospace customer and the design work and expertise just make us stronger. So certainly it's allowing us to have different communications with new customers and share the story. One success tends to breed more, and I think that's how you grow a small company into a bigger company—you get some wins and then you leverage that. And that's what we're in the throes of right now and hope to be able to share some successes in coming quarters.

Tyler Burmeister, Analyst at Lake Street

That sounds great. That sounds great. Well, I appreciate all the color. Thanks, guys.

Robert Dawson — CEO, President and Member of the Board of Directors

Thanks, Tyler. Appreciate it.

OPERATOR

Your next question is from Matthew Moss with B. Riley.

Matthew Moss, Analyst at B. Riley

Good morning. Thanks for taking my questions. Let's start off—so, morning. There was a wireless carrier that was about back to like 17% of sales this quarter. Do you think that's the outdoor build season kicking in the way you talked about? And do you see that level of carrier activity as something that carries into the fourth quarter? How should we think about that?

Robert Dawson — CEO, President and Member of the Board of Directors

Yeah, I think it's interesting. We see, if you look at our top five to 10 customers, there's some movement within those, certainly top three and even beyond, where depending on project timing of some of the bigger spend, they move around depending on who's first, second, third as far as largest customers. In this case, I think what makes us very comfortable with continuation of meaningful contribution of dollars from this customer—and many of our big ones—is that they're not just buying one product line from us.

And so it starts to make it much healthier when you're selling four or five different critical items into customer need and different applications and different markets, different budgets where the spend is coming from. So while it's not always easy to predict exactly which customer is going to have a higher spend in a given 90-day window of time, I think annually we see our customers growing with us because we are getting into more applications and more markets and more locations and budget opportunities, which does give us comfort to your point of seeing continuation into Q4 and into fiscal 27.

Matthew Moss, Analyst at B. Riley

Got it. And as for DAC trials and the NEMA 4 opportunities, I'm wondering when does that start to show up as a real revenue contributor and what the timeline looks like there, if there's any update.

Raymond Bibisi — President & COO

Yes, I think on the DAC side, as we mentioned earlier, we're seeing significant growth overall in that solution set in the product line across the board with several different kinds of customers. When we talk about the NEMA 4 and some of the specific different, maybe than traditional wireless applications, which is where that's playing out, we expect a much more material contribution from those kinds of customers that are more—I'll call them—wireline, edge, data center, telecom, traditional telco, edge, AI, however you want to bucket that.

We kind of look at location where it's a small building enclosure or box at the edge of a network that's filled with hot equipment that needs to be cooled. So for us, while it's not all NEMA 4, that's one specific product type that meets a certain customer need. We kind of put all those into the same area where those markets and that application for us is proving success. And the deployment schedules that we're looking at with customers jointly start to accelerate into fiscal 27.

So not a huge material contribution this fiscal year. But I think when we look at TERES comments earlier, we look at levers of growth, that's certainly one of those that we see adding on to the traditional markets that we've been in and performing very well with DAC.

Pat, Analyst

Got it. And kind of related industry news. I mean, about a month ago there was a Verizon–Google Edge deal. I'm wondering, are deals like that starting to translate into demand for your DAC and Edge products, or what's the sort of connect there for you guys?

Raymond Bibisi — President & COO

Yeah, so it's not always a one-for-one, but I think directionally anytime you see a deal like that, it's encouraging. It means that sort of the recognition that we've spoken about for several quarters that there's a lot of demand happening at the edge of the networks. Not everyone can build the hyperscale data center that they may want to. Whether that's because it doesn't meet their need or because one of the things we're experiencing now is local pushback on the builds happening for these sorts of.

We believed for a long time that there was going to be this sort of dissemination of technology moving from the core to the edges. We've seen that for years in several different generations of deployments. I think the AI pushback on hyperscale data centers was an unexpected help there, which I think probably helps push some of that spend and helped accelerate that deal. So I mean that was a great win obviously for Verizon and for Google. I think for us it's another reason why finding additional ways to much more cost effectively—I mean that's one of the pushbacks is, you know, there's a lot of water, there's a lot of electricity needed—for the bigger data centers. We've got a way, when you get to the edge of the network, that it can be 70 or 80% more cost effective. That's a, that's a great thing and one of the major key reasons why it's not that easy to deploy sometimes. So we're seeing these deployments accelerate at the edges. We're being included in more discussions across several different customer types, including the kinds involved in this deal. And we feel extremely that we've got a great solution that should benefit from that kind of increased focus and spend.

Pat, Analyst

Very informational.

Raymond Bibisi — President & COO

Thank you.

Pat, Analyst

Just one more quick one, kind of similar to the first question I asked about carrier spend. So in terms of carrier CAPEX or OPEX spend and how you expect that to kind of trend over this fourth quarter and, I guess, fiscal 27, how should we think about that compared to where it's been over the past year or so? Like, in terms of looking over the next 12 months, how should we see that changing, if at all?

Raymond Bibisi — President & COO

Yeah, I think from a carrier CAPEX on the wireless side in particular, all the projections that have been out there for several months say that that spend is going to largely be flat. Does that mean slightly up, slightly down, or no change? It really depends on the carrier and what exactly they're working on. I think the spend that's happening now, though, is very focused on critical items. There was a big run-up years ago around 5G. I think that becomes—as we've said for years—we're less interested in 4G, 5G, 6G.

We're more interested in densification and filling in the gaps in the network and better quality. Now there's a big push for including fiber in those discussions as well. To your point, the Verizon deal is a good example of that. So I think we look at the different applications that we're aligned with across our portfolio and feel very comfortable that the CAPEX spend that's happening is more than enough to support our growth, both as we break into new areas of opportunity, as we take share in some cases, and we also have product lines that are more on the OPEX side of things and not necessarily coming out of a bucket of CAPEX spend.

So I don't think we tie, at least for us, a one-for-one carrier CAPEX to our opportunity. And certainly this year and last year there was not a significant increase in carrier CAPEX, yet we're showing an increase across those customers. So I think we feel comfortable that there's enough spend happening for us to perform and do what we're supposed to do as a company. And the team is doing a really good job of getting our fair share.

Pat, Analyst

Great. That was all for me, thanks.

Raymond Bibisi — President & COO

All right, thanks, Pat.

OPERATOR

We have reached the end of the question and answer session and I will now turn the call over to Robert for closing remarks.

Robert Dawson — CEO, President and Member of the Board of Directors

Great. Thanks, Holly. And thanks everyone for joining today's call and for all the questions. We look forward to reporting our fourth quarter and full year results for fiscal 2026 in a few months. We'll talk to you then. Have a great day.

OPERATOR

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

Disclaimer: This transcript is provided for informational purposes only. While we strive for accuracy, there may be errors or omissions in this automated transcription. For official company statements and financial information, please refer to the company's SEC filings and official press releases. Corporate participants' and analysts' statements reflect their views as of the date of this call and are subject to change without notice.