RF Industries (RFIL) Q2 2026 Earnings Transcript

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DATE

Monday, June 15, 2026 at 4:30 p.m. ET

CALL PARTICIPANTS

• Chief Executive Officer — Robert D. Dawson
• President and Chief Operating Officer — Ray Bibisi
• Chief Financial Officer — Peter Yin

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TAKEAWAYS

• Revenue -- $20.7 million, up 9% year over year and 9% sequentially from $19.1 million in the previous quarter.
• Gross Profit Margin -- 35.1%, increasing 360 basis points from 31.5% a year ago, reflecting pricing and operational efficiency gains.
• Operating Income -- $1.1 million, a sharp improvement from $106 thousand in the prior year period.
• Net Income -- $879 thousand, or $0.08 per diluted share, versus a loss of $245 thousand, or $0.02 per diluted share, a year earlier.
• Non-GAAP Net Income -- $1.6 million, or $0.14 per diluted share, compared to $701 thousand, or $0.07 per diluted share, a year ago.
• Adjusted EBITDA -- $2 million, nearly double the $1.1 million reported in the prior year period.
• Bookings -- $26.3 million in the quarter, up $8.4 million versus the previous quarter, marking a multi-year high.
• Backlog -- $20 million as of quarter-end, a $5.6 million increase sequentially, with $20.1 million noted as of the call date.
• Segment Performance -- Custom cabling emerged as the largest product line, supported by both Connecticut and Long Island operations; Integrated Systems segment underperformed due to shipment timing in small cell deployments but is expected to accelerate in the second half.
• Cash and Working Capital -- $3.4 million in cash and cash equivalents; working capital of $16.5 million; current ratio of approximately 1.9-to-1.
• Credit Facility Usage -- $6.1 million outstanding on the revolving credit facility at quarter end.
• Inventory -- $14.4 million, up from $12.6 million last year, attributed to timing of shipments moving into the next quarter.
• Operational Focus -- Cost reduction initiatives delivered results via supplier negotiations, transformation efforts, and strategic sourcing to navigate tariff risks.
• Direct Air Cooling (DAC) Systems -- Adoption expanding with "up to 75% more cost effective" positioning versus traditional HVAC in relevant use cases, particularly for edge data centers.
• Russell 3000 Inclusion -- Announced effective June 26, projected to raise company visibility and liquidity among institutional investors.

SUMMARY

Management highlighted a clear inflection in both revenue stability and operational margin expansion, underscored by record bookings and backlog growth. Strategic focus on broadening end-market reach, notably through elevated wireless carrier and custom cabling demand, is strengthening recurring revenue streams and positioning RF Industries (NASDAQ:RFIL) for sustainable growth. Enhanced engineering output, evidenced by launches in thermal cooling and RF passive products, aligns with forward demand from aerospace and data center markets and is already contributing to both bookings and shipments. Cost reductions and supply chain diversification support improved resilience, while inclusion in the Russell 3000 was presented as an impending liquidity and visibility catalyst.

• DAC product positioning targets edge data center markets, distinguishing from hyperscale-focused solutions, and leveraging cost and adaptability advantages as described by management during the call.
• Largest aerospace and defense customer now represents approximately 14% of total revenue, increasing from the prior quarter’s 10%, with management expressing confidence in sustaining performance for this account.
• Integrated Systems backlog indicates the potential for a pronounced pickup in activity during the second half, driven by deferred small cell deployments and multi-site opportunities.
• Free cash flow was affected by timing of working capital uses, notably inventory built for deferred shipments, but CFO Peter Yin said, "we should start seeing kind of cash build" as shipments convert in subsequent quarters.

INDUSTRY GLOSSARY

• DAC (Direct Air Cooling): An energy-efficient thermal management system designed to cool telecommunications and edge data center infrastructure, offering an alternative to conventional HVAC and liquid cooling for distributed network deployments.
• Integrated Systems: Business segment encompassing engineered solutions that combine RF, power, cooling, and installation services for wireless carrier, venue, and infrastructure applications.
• Edge Data Center: Smaller-scale, distributed data technology installations positioned closer to the user and network edge, optimized for low latency and rapid content delivery, as opposed to large, centralized hyperscale centers.

Full Conference Call Transcript

Robert D. Dawson President and COO, Ray Bibisi and CFO, Peter Yin. We issued our press release after market today, and that release is available on our site at rfindustries.com. I want to remind everyone that during today's call, management will be making forward looking statements that involve risks and uncertainties. Please note that information on this call today may constitute forward looking statements under the Securities Exchange laws. When used, the words anticipate, believe, expect, intend, future and other similar expressions identify forward looking statements. These forward looking statements reflect management's current views with respect to future events and financial performance and are subject to risks and uncertainties.

Actual results may differ materially from the outcomes contained in any forward looking statements Factors that could cause these forward looking statements to differ from results include the risks and uncertainties discussed in the company's reports on Forms 10-K and 10-Q other filings with the SEC. 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 related current report on Form 8 ks describe the differences between our GAAP and non GAAP reporting. And with that, I will turn the conference over to Robert D. Dawson, Chief Executive Officer. Go ahead, Robert.

Robert D. Dawson: Thanks, Donni. Good afternoon, everyone. Thanks for joining us. The RFI team delivered another quarter of solid execution in Q2. Continuing the steady progression we have outlined over the last several quarters. As we have consistently communicated, our focus has been on improving profitability, diversifying our end markets, and scaling the business in each in a disciplined way. And we are now delivering tangible results across each of those priorities that are converting into meaningful year over year improvement in both revenue and profitability. As a quick summary, second quarter revenue of nearly $21 million increased both year over year and sequentially. And gross profit margin expanded to 35.1%, a 360 basis point gain over the same period last year.

Adjusted EBITDA nearly doubled year over year to $2 million and we also delivered positive consolidated net income of $879 thousand versus a loss of $245 thousand in the second quarter of fiscal 25. Our team continued to generate robust bookings, driving backlog to $20 million at quarter end And as of today, it sits at $20.1 million. Which helps provide better visibility into the second half of the fiscal year and supports our expectation of continued growth Most notably, we are seeing the power in our operating leverage. With incremental revenue contributing disproportionately to the bottom line. These results reflect both the improved mix and operational discipline we have implemented across the business.

A momentum perspective, we are seeing clear validation of our strategy to position RFI as a solutions provider versus a component supplier. Customer engagement has increased meaningfully especially in the wireless carrier ecosystem, and with the related infrastructure providers. Receiving more targeted inbound interest with customers approaching us around specific use cases, and deployments rather than general inquiries. I think this indicates that we are gaining visibility in our target end markets. Which are among the most dynamic sectors in the U.S. economy. These are markets like aerospace, data center infrastructure, venues, and transportation. Which includes airport settings, rail, and other mass transit for example.

Our long standing reputation for quality and service, our talented technical engineering teams, and our commitment to the American workforce, have created a strong value proposition to current and prospective customers. Importantly, this is translating into increased demand. We continue to see steady activity across our pipeline. Recurring order flow from key customers, including our largest accounts, and continued strength in our distribution channels. Our pipeline remains a key source of confidence We are actively engaged in several large potential opportunities. Including multi site deployments of our integrated systems, that could represent meaningful incremental revenue if awarded. These opportunities are driven by large scale network deployments and upgrades.

And they include turnkey solutions that combine our products and technical know how with installation and logistics support. And, of course, with each new solution or application, we fine tune and expand our product and services road map. Across our end markets, we are seeing visibility improve going forward. Regarding small cells, deployments were slower in the quarter based on timing from some key customers as they work through restructuring or other M&A details. We view this as a temporary timing issue not a structural change in underlying demand. And we expect activity to resume and increase through the balance of the year.

In early May, RFI participated in ConnectX, which is widely considered to be a premier US event for communication infrastructure and connectivity. It brings the entire wireless ecosystem together. Carriers, power companies, integrators, distributors, and manufacturers. In a single venue. Our booth was extremely active and our customer discussions were specific and actionable. If customer engagement and booth traffic are real time demand indicators, our telecom pipeline should continue to grow. Custom cabling solutions continue to be a big contributor in the second quarter. To be clear, these are engineered builds rather than commodity items. They are typically designed to meet exact specs for performance, durability or regulatory requirements. RFI's reputation in this business is second to none.

And a big reason that major aerospace and industrial manufacturing companies are repeat customers for mission critical cabling systems. Which is driving overall demand to near peak levels historically. As you have heard from me before, we believe our direct air cooling (DAC) systems are a game changer. We are seeing adoption expand across a broader set of use cases. Many of which have been identified by our customers and partners. DAC is uniquely efficient and cost effective for both small and large deployments. And we are finding new ways to add incremental value such as remote monitoring, and installation services. I have been asked about our DAC competitive position.

And while traditional HVAC is still an obvious competitive solution, we believe we have an edge on adaptability, functionality, and cost efficiency. Technologies like liquid cooling, which is often used in hyperscale data centers, is more likely to complement our offering rather than economically replace it. This is why we are leaning into the edge data center market versus the massive hyperscale data centers. We believe our product portfolio is better and more visible in the market. Hats off to our marketing and technical teams who are making this happen. From an operational perspective, we continue to believe in the scalability of our manufacturing footprint and our capacity to meet growing demand.

Ray will go into more detail on some of the areas that I have discussed. But let me give a quick summary before I hand the call off to Ray. Looking ahead, we are feeling confident in our trajectory. With what we know today, we expect fiscal third quarter sales to increase sequentially over Q2. Integrated Systems activity should accelerate in the back half of the year. Our diversified end market exposure provides durability, Operating leverage should continue to drive margin expansion. And most importantly, we are executing against the same strategic priorities we have outlined. And delivering measurable results.

On a final note, we were pleased to learn that RFI is set to be included in the Russell 3 thousand beginning on June 26th. Being included in this index should help to expand our visibility with institutional investors. Enhance our liquidity, and lead to a broader shareholder base. Now let me turn the call over to Ray.

Ray Bibisi: Thank you, Robert, and good afternoon, everyone. As Rob highlighted, the RFI team is executing very well. I want to take the next several minutes to walk you through how we are actively managing key levers of 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. The growth trajectory we have been building is showing up in our numbers.

When you look at where we have come from, $18.8 million Q2 of last year, $19.1 million last quarter, and $20.7 million this quarter the direction is clear. that is not a coincidence. it is our strategy working exactly as designed. But the number I want you to focus on is our bookings. In Q2, we achieved over $26 million in bookings our strongest bookings quarter in many years. Let that sink in. That performance drove our backlog to over 20 million giving us the visibility and the confidence that the back half of 2026 is set up well. We have been saying diversification would be our strength. And in Q2, proved it again.

When 1 area faces timing pressures, others step up. that is not luck. that is a portfolio working exactly as it was designed. Custom cabling once again led the way delivering strong results driven by contributions from both our Connecticut and Long Island teams. Interconnect put up solid combined numbers and continues to build a healthy backlog. And in integrated systems, these product areas continue to build momentum The team delivered strong bookings during Q2. Bolstering the backlog headed into the second half of the year. Turning to engineering and product management, This remains an area of significant focus and I am pleased to report that the work we have been doing is translating directly into results.

Our engineering roadmap continues to grow. Spanning strategic initiatives tactical developments, and cost reduction efforts. Representing meaningful revenue potential over the next few years. What excites me is the innovation is already showing up in our numbers. Newly engineered prod products and solutions released in the first half have generated strong bookings and shipments, and we expect that momentum to continue to build as we move through the year. In Q2 specifically, we launched new products across thermal cooling and RF passives proof that our road map is executing on schedule and delivering customer value. On the strategic side, we are advancing DAC trials with new customers, markets, and applications. Exciting developments that continue to validate our thermal cooling solutions.

Our product road map is focused on developing and enhancing solutions that anticipate customer needs and expand the value we deliver across our end markets. Our engineering teams are building solutions designed not just for today's requirements, but for where our customers are headed. That forward looking mindset is what we believe will make RF Industries the trusted partner of choice across the markets that we serve. Operations. Continues to be a key differentiator for us. Our US based manufacturing footprint spanning both East and West Coast facilities combined with our deliberately diversified supply chain gives us the flexibility to respond quickly to changing demand while avoiding disruptions. Built to scale, built to deliver.

That is the operational foundation we have put in place. 2 other areas worth highlighting. First, our cost reduction program is delivering strong results in the first half. Driven by supplier negotiation, transformation initiatives, and tariff management through source relocation. That said, we are not naive about the tariff environment. With key decisions still ahead in July, we are monitoring the situation closely and are prepared to adapt as needed. The diversification of our supply chain and our ongoing strategic sourcing efforts position us well to manage whatever comes next. Second, on inventory. It was slightly up this quarter due to timing. We had products built and ready to ship in Q2, but customer releases moved into Q3.

As those releases come through, we expect inventory turns in working capital to improve. Across all areas of our business, we are enhancing process efficiency improving visibility, and reinforcing execution discipline. Our teams are aligned, our tools are improving, and our real time visibility across all business units is giving us the insight to make faster, smarter decisions. This is the operational foundation that allows us to scale quickly, maintain consistent quality and margins as demand grows. We are building an organization that is not just executing for today, but is structured to perform as we grow.

When I step back and look at what we are building, diversified revenue streams disciplined operations, and a culture of innovation, it all connects. These are not independent efforts They work together to reduce vulnerability, create opportunities, and convert our pipeline and backlog into real performance gains. And importantly, we are doing it while closely and maintaining our operational integrity. I would categorize Q2 as a quarter that reinforced the growth trajectory of our business. And quite frankly, it has us excited as we move into the second half. The revenue growth is consistent The bookings are at levels we have not seen in many years. The backlog gives us real visibility, and the team is executing.

That combination does not happen by accident. It happens when strategy, people, and execution align And right now, they are aligned. I want to take a moment to recognize the RF Industries team across every segment and every function whose commitment and hard work made this quarter possible. They are the reason we are having this conversation today. And to our customers, your trust and partnership mean everything to us. We are confident in our ability to deliver results and unlock the full potential of our business. And I cannot wait to share what the second half looks like. I will now turn the call over to Peter to walk through the financial results. Peter?

Peter Yin: Thank you, Ray, and good afternoon, everyone. As you just heard from Robert and Ray, our team continued to deliver strong results in our fiscal second quarter. Sales increased 9%, on both a year over year and sequential basis to $20.7 million Gross profit margin increased 360 basis points to 35.1% from 31.5% year over year. The improvement reflected our team's strong execution, to drive new business with price realization along with operational efficiencies focusing on cost control. We have long believed our business carries significant operating leverage above $20 million in quarterly revenue. And our Q2 results reflected exactly that. Second quarter operating income was $1.1 million a significant improvement from the $106 thousand we reported last year.

Consolidated net income was $879 thousand or $0.08 per diluted share On a non GAAP basis, net income was $1.6 million, or $0.14 per diluted share. This compares to a consolidated net loss of $245 thousand or $0.02 per diluted share, and non-GAAP net income of $701 thousand or $0.07 per diluted share in Q2 fiscal 25. Second quarter adjusted EBITDA was $2 million compared to adjusted EBITDA of $1.1 million in Q2 25. Moving to the balance sheet.

As of April 30, we had a total of $3.4 million of cash and cash equivalents, and we have working capital of $16.5 million and a current ratio of approximately 1.9-to-1 with current assets of $35.1 million and current liabilities of $18.6 million. At our second quarter end, we had $6.1 million outstanding on our revolving credit facility. 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 net debt to a level we view as immaterial relative to our balance sheet. Our inventory was $14.4 million, up from $12.6 million last year.

We continue to monitor inventory levels closely and we have a prudent approach to inventory management that balances discipline, with customer demand. Inventory levels may fluctuate quarter to quarter based on timing of inventory received relative to expected shipments and any delays. Moving on to our backlog. Bookings for the second quarter were $26.3 million up $8.4 million versus the previous quarter, driving backlog to $20 million as of April 30. A $5.6 million increase quarter over quarter. As of today, our backlog currently stands at $20.1 million As always, backlog can fluctuate based on order timing and fulfillment, but we view the increase as a strong indicator of second half momentum.

Overall, our first half results reinforced the confidence we have in our business model and the operating leverage we are now realizing above $20 million in sales. With bookings accelerating and backlog building, as we enter the second half of our fiscal year, we believe the margin and earnings trajectory we demonstrated in Q2 is sustainable. And we are committed to delivering continued growth and shareholder value going forward. With that, I will open up the call for your questions.

Operator: Thank you. At this time, we will be conducting a question and answer session. You may press 2 if you would like to remove your question from the queue. 1 moment, please. While we pull for questions. Once again, please press 1 if you have a question or a comment. The first question comes from Josh Nichols with B. Riley. Please proceed.

Matthew: Hi. This is Matthew on for Josh. Thanks for taking my questions. I guess just to start off, on the custom cabling side, it is basically now your largest product line. I am wondering, like, is this the new shape of the business, or do you expect integrated systems to come back and rebalance? The mix?

Robert D. Dawson: Yeah. Hey, Matthew. Thanks for the question. So, look, we are really happy with the way custom cabling is performing. The team's doing amazing work both with existing long term customers and with new that we have acquired I think when you look at the sort of the breakdown of the quarter from a product set, integrated systems underperformed sort of our plan in Q2 largely to my comments just based on my comments that in the small cell world, we had some things that we expected would have been a little, would have had more shipments in the quarter and some of those got pushed out to later in the year.

So I think we expect integrated systems is going to continue to grow for us and be a nice growth part of the business that is not taking anything away from how great the custom cabling business is and can also be a growth I mean, I think that is kind of all along is to Ray's comments, we have tried to diversify in such a way that not every quarter is going to look exactly the same from a largest customer or 2 perspective nor from a sort of a product makeup. We are enjoying the fact that, you know, the pistons are kind of firing in all places and we are seeing that diversity hit.

Matthew: Got it. And on that significant customer side, I mean, you have a large A&D customer that is been, making up 10% of revenue since last quarter, around 14% now. I am just wondering how do you expect that ramp continuing through, I guess, like, the fiscal third quarter? And like where does that run rate land realistically from here?

Robert D. Dawson: Yeah. I think it is you know, look. it is a still somewhat newly acquired customer. That was last year we started doing material levels of business with aerospace customer in particular. And we are pleased with that relationship. We seem to be performing really well for them. We have been working on, you know, unique designs specifically with them. that is the kind of business we do in our custom cabling you know, product areas.

Our expectation is that we are gonna continue performing at solid levels there. it is not something we spend a lot of time trying to predict because it is really based on their schedule of need But as long as we keep performing, we feel like it will be a consistent part of our business.

Matthew: Got it. Thanks. And I guess it is shifting over. You know, DAX seems like a long, long term strong growth driver. I guess maybe you can you mentioned this a bit in the call, but I am wondering if you can expand more on, like, how on liquid cooling and thermal cooling and how the DAC solution kind of factors into data centers and the AI infrastructure play in general. And I guess just kind of following on that is just in terms of, like, how the data center and AI infrastructure opportunity looks today, and how that can change over the next 12 to 24 months for you guys?

Robert D. Dawson: Yeah. Sure. So look. We think our DAC, our specific DAC solution, is a really, really strong entry into the market in the last few years for edge data center applications. And to my comments, this is not the hyperscale, you know, 100 thousand foot or larger huge data centers that are a big topic a big topic at the moment. As more of those continue to get built, they are also finding, you know, the people installing those you know, that equipment and those networks are finding that they need to push equipment closer to the users.

And so that is the play we have been involved in for some period of time, starting with the wireless carrier ecosystem where we have, you know, we are entrenched. We know the people. We have agreements. that is sort of where we started getting our first wins, that is now starting to expand into folks that I would call more traditional data center players. Both wireline and really the data center names that we talk about all the time in the news.

So for us, it is it is focusing on those edge deployments. there is been a lot of chatter lately of certain municipalities and states coming out with a ruling saying, hey, you cannot build a data center here. As those large data centers get deferred or pushed maybe to a location that was not in the plan we think the edge of the network is a great place to be. And so when you look at those buildings, cabinets, and enclosures that exist currently or that are being installed, they are they are less intrusive.

They may not have equipment in them today, but they are gonna need to. that is a place that our DAC systems really can benefit both from a functionality perspective, but also just from a cost efficiency perspective. We have the data that shows we are up to 75% more cost effective. Effective than traditional HVAC deployments in those kinds of environments. So we feel good about it. We think there is a nice growth trajectory ahead of us in that you know, 1 to 2 years and beyond. We also see opportunities to reinvent what we are putting out there in the market today. Related products and then upgrades.

To the things that we have today. it is really becoming a, you know, a workhorse and a nice growth trajectory. From a few years ago where we were seeing minimal, if any, contribution from those product lines to what we are now seeing today.

Matthew: Got it. Really insightful. And just a final question for me, mainly on working capital and free cash flow. Looks like working capital absorbed some cash in the first half. I am just wondering how we should think about those drivers changing in the second half. And I guess free cash flow conversion in general.

Peter Yin: Yes. Thanks for the question. So As you saw, our cash came down a bit That was to pay the line down, Helping us with the interest expense, line there. So as we continue if you kind of exclude that, it is positive cash flow,, but we plan on utilizing the cash to pay down the line closer to that minimum balance. And from there, we should start seeing kind of cash build.

Matthew: Got it. that is all for me. Thanks for taking my questions.

Robert D. Dawson: Thanks, Matthew.

Operator: If there are any remaining questions, please indicate so by pressing *1. On your touch tone phone. Okay. We currently have no further questions in the queue. I would like to turn the floor back over to Robert D. Dawson for closing remarks.

Robert D. Dawson: Thank you, John, and thanks, everyone, for joining us today. We appreciate your continued interest and support of RF Industries. And we look forward to sharing our third quarter results in September. Have a great day.

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

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