RF Industries Q3 Revenue Up 17 Percent

RF Industries(NASDAQ:RFIL) reported third quarter fiscal 2025 results on September 15, 2025, delivering a 17.5% year-over-year revenue increase to $19.8 million, a 450 basis point gross margin expansion to 34%, and a $19.7 million quarter-end backlog. The company emphasized diversification into aerospace, transportation, and data center markets, and highlighted operational leverage and disciplined balance sheet management. The following insights detail the most significant strategic and financial developments from the call.

Gross margin climbs as RF Industries shifts mix

Gross profit margin reached 34% in the third quarter, up from 29.5% year-over-year, driven by a higher mix of mission-critical aerospace components and direct air cooling (DAC) systems. Adjusted EBITDA rose to $1.6 million, or 8% of net sales, and operating profit turned positive for the fourth consecutive quarter.

"Gross profit margin was 34%, which is a 450 basis point improvement over Q3 last year, and 400 basis points above our target margin goal of 30%. We realized an operating profit of $719,000 versus a loss of $419,000 for a comparable period. Which puts us in positive territory for four quarters in a row. Adjusted EBITDA of $1.6 million was 8% of net sales in the quarter. Which is an important metric we use to evaluate our operational efficiency."
-- Rob Dawson, Chief Executive Officer

This margin expansion demonstrates the company’s ability to leverage higher-value product lines and scale fixed costs, supporting its long-term profitability targets.

Diversification strategy broadens RF Industries’ reach

Bookings totaled $24.5 million in the quarter, with a $19.7 million backlog at quarter end, reflecting new wins in aerospace, U.S. airport infrastructure, and edge data centers. The company now tracks over 100 active venue projects, many tied to major upcoming global sporting events.

"For example, we've already received a meaningful order for a terminal infrastructure project at a major US airport. As you know, the current administration justifiably wants to see our airport terminals upgrade their functionality in line with world-class airports. So this could evolve into a significant opportunity for us. Municipal governments also want to upgrade their transportation infrastructure with distributed antenna deployments that will improve communication connectivity and efficiencies. For their bus and train systems. We've only just scratched the surface of our product applications for transportation. Our DAC or direct air cooling system continues to attract wide attention with a variety of applications across several end markets. As I mentioned last quarter, we launched a next-gen system that has advanced control capabilities and a NEEMA certification for more rugged environments that expands our opportunity set in wireline telecom edge data centers, energy, and transportation. More on data centers shortly. Stadium and venue build-outs are undergoing a significant revival, especially in the United States, playing host to major events like the Olympics and World Cup in coming years. With our well-established reputation in this end market, we have a pipeline of over 100 venues, including some very intriguing projects around corporate and university campuses."
-- Rob Dawson, Chief Executive Officer

This expanding pipeline across multiple verticals reduces customer concentration risk and positions RF Industries to benefit from long-term infrastructure and technology investment cycles.

Disciplined operations strengthen RF Industries’ balance sheet

RF Industries ended the quarter with $3 million in cash, $13.1 million in working capital, and inventory of $14.2 million, up from $12.6 million in the prior quarter. The company proactively increased inventory to mitigate anticipated tariff impacts and continues to optimize procurement and supply chain processes.

"At quarter end, we had borrowed $7.8 million on our revolving credit facility. As previously mentioned, we continue to manage our working capital to strengthen our liquidity and overall capital structure. We are actively assessing our borrowing costs, and see near-term opportunities for more advantageous financing arrangements. At the end of Q3, our inventory was $14.2 million, down from $14.7 million last year. However, our inventory is up when compared to last quarter's $12.6 million. While our inventory may fluctuate from quarter to quarter, we continue to carefully manage inventory levels while improving procurement and supply chain processes. We are very mindful of our value proposition of inventory availability and believe our current inventory level supports both our strategic business model of inventory availability and the continued healthy demand that we see for the balance of 2025 and beyond."
-- Peter Yin, Chief Financial Officer

Effective working capital management and a flexible capital structure provide RF Industries with resilience to supply chain volatility and support continued growth initiatives.

Looking Ahead

Management expects fourth quarter fiscal 2025 net sales to be similar to third quarter levels. No specific guidance was provided for fiscal 2026, but the company cited a robust sales pipeline in venues, data centers, aerospace, and broadband, while remaining attentive to potential tariff headwinds. No explicit EPS or EBITDA guidance was issued.

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This article was created using Large Language Models (LLMs) based on The Motley Fool's insights and investing approach. It has been reviewed by our AI quality control systems. Since LLMs cannot (currently) own stocks, it has no positions in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.