RF Industries Ltd (RFIL) 2023 Q3 法說會逐字稿

Greetings. Welcome to the RF Industries Third Quarter Fiscal 2023 Financial Results Conference Call. (Operator Instructions) Please note, this conference is being recorded. I will now turn the conference over to your host, Jack Drapacz. You may begin.

問候。歡迎參加 RF Industries 2023 財年第三季財務業績電話會議。 （操作員說明）請注意，本次會議正在錄製中。現在我將會議交給主持人傑克·德拉帕克茲 (Jack Drapacz)。你可以開始了。

Thank you, operator. Good afternoon, and welcome to RF Industries' Third Quarter Fiscal 2023 Financial Results Conference Call. With me on today's call are RF Industries' President and CEO, Rob Dawson; before I turn the call over to Rob, I'd like to cover a few quick items.

謝謝你，接線生。下午好，歡迎參加 RF Industries 2023 財年第三季財務業績電話會議。參加今天電話會議的有 RF Industries 總裁兼執行長 Rob Dawson；在將電話轉給 Rob 之前，我想先簡單介紹一下一些內容。

This afternoon, RF Industries issued a press release announcing its third quarter fiscal 2023 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.

今天下午，RF Industries 發布新聞稿，公佈了 2023 財年第三季財務業績。該版本可在該公司網站 rfindustries.com 上取得。此次電話會議也將透過網路向所有有興趣的各方進行現場直播，網路廣播將存檔在公司網站的投資者關係頁面上。

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.

我想提醒大家，在今天的電話會議中，管理階層將做出涉及風險和不確定性的前瞻性聲明。請注意，除了歷史陳述外，今天本次電話會議的陳述可能構成 1934 年《證券交易法》第 21E 條含義內的前瞻性陳述。使用時，詞語預期、相信、期望、打算、未來和其他類似的表述表示前瞻性陳述。

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.

這些前瞻性陳述反映了管理階層對未來事件和財務表現的當前看法，並受到風險和不確定性的影響，實際結果可能與任何前瞻性陳述中包含的結果有重大差異。可能導致這些前瞻性陳述與實際結果不同的因素包括產品開發、行銷或銷售的延遲以及公司在10-K 和10-Q 表格定期報告以及向證券公司提交的其他文件中討論的其他風險和不確定性和交易委員會。

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 2 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.

RF Industries 不承擔更新或修改任何前瞻性聲明的義務。此外，在整個電話會議中，我們將討論某些非公認會計準則財務指標。今天的收益發布和 8-K 表格中的相關當前報告描述了我們的 GAAP 和非 GAAP 報告之間的差異，並提供了收益發布中報告期間兩者之間的調整。話雖如此，我現在將會議交給總裁兼執行長 Rob Dawson。

Thank you, Jack. Good afternoon, everyone. Thanks for joining our third quarter fiscal 2023 conference call. Our CFO, Peter Yin, had to attend to a personal matter, so I'll be handling today's call solo.

謝謝你，傑克。大家下午好。感謝您參加我們的 2023 財年第三季電話會議。我們的財務長 Peter Yin 需要處理個人事務，所以我將單獨處理今天的電話會議。

Our third quarter results tell the story of a very challenging quarter. As you saw in our press release, third quarter revenue was $15.7 million, down 34% year-over-year. I knew we had a tough comp against a record third quarter last year, but when I last spoke with you in June, we were seeing steady order activity and the expectation of consistent shipments of hybrid fiber cable.

我們的第三季業績講述了一個非常具有挑戰性的季度的故事。正如您在我們的新聞稿中看到的，第三季收入為 1570 萬美元，年減 34%。我知道去年第三季創紀錄的業績讓我們面臨嚴峻的考驗，但當我上次在六月與您交談時，我們看到了穩定的訂單活動以及混合光纖電纜持續出貨的預期。

Overall, I thought we were seeing some decent momentum until we hit July. The pause hit hard with many of our key projects and shipment schedules put on hold. Customers were delaying delivery of their orders or freezing new orders for project-based deployments. Due to these delays, we shipped virtually no hybrid fiber cable in the quarter, along with less sales of carrier approved RF passes, and these surprising developments significantly impacted our quarter.

總的來說，我認為在 7 月之前我們已經看到了一些不錯的勢頭。這次暫停對我們的許多關鍵項目和發貨計劃造成了嚴重影響。客戶推遲交付訂單或凍結基於專案部署的新訂單。由於這些延誤，我們在本季度幾乎沒有發貨任何混合光纖電纜，並且運營商批准的射頻通行證的銷量也有所減少，這些令人驚訝的發展對我們的季度產生了重大影響。

Those of you following the industry know that the wireless carriers have greatly curtailed their capital spending over the last few quarters. Those carriers and the large neutral hosts have been restructuring their businesses to adapt to an environment of higher interest rates, overstock inventory and steep labor costs, among other things. This has included significant head count reductions in the entire carrier ecosystem. Look across the board, and you'll see even the big players in our space, like the radio manufacturers are going through some challenging times and reporting numbers well below the prior year in the North American market.

關注該行業的人都知道，無線營運商在過去幾季大幅削減了資本支出。這些航空公司和大型中立主機一直在重組業務，以適應利率上升、庫存過剩和勞動力成本高等環境。這包括整個運營商生態系統的人員數量大幅減少。縱觀全局，您甚至會看到我們領域的大型參與者，例如收音機製造商正在經歷一些充滿挑戰的時期，並且北美市場的報告數字遠低於去年。

While we can't control the economic backdrop, we can control our own business, and that's what we've been focused on. We have a very strong management team and board with a lot of knowledge and insight gained from past experience that gives us a bias towards action. We start with what we know to be true.

雖然我們無法控制經濟背景，但我們可以控制自己的業務，這就是我們一直在關注的。我們擁有非常強大的管理團隊和董事會，他們從過去的經驗中獲得了豐富的知識和洞察力，這使我們傾向於採取行動。我們從我們所知道的真實情況開始。

Telecom is here to stay and continued investment in wireless infrastructure is mandatory, not optional. Second, there's a tremendous pent-up demand to improve telecom infrastructure across the U.S., especially in the 4G and 5G build-outs. Third, network densification is the next phase of the build and is required to address coverage gaps and the constant consumer expectations for faster and faster connections with coverage everywhere.

電信將繼續存在，對無線基礎設施的持續投資是強制性的，而不是可選的。其次，改善全美電信基礎設施的龐大需求被壓抑，尤其是 4G 和 5G 建設。第三，網路緻密化是建設的下一階段，需要解決覆蓋差距以及消費者對越來越快的連接和覆蓋各處的持續期望。

In the last 45 days alone, we've received orders and commitments of nearly $1.5 million for integrated small cell shrouds. We've also seen decent orders for passives and cabling for large stadium DAS builds. This is what densification looks like, and we believe that our offer is correctly positioned to benefit from it. We also know that our major customers can't push the pause button indefinitely. And when they get going, they'll be looking for better and more cost-effective solutions. That's where we plan to shine.

僅在過去 45 天裡，我們就收到了近 150 萬美元的整合式小型蜂窩護罩訂單和承諾。我們還看到了用於大型體育場 DAS 建造的被動元件和佈線的大量訂單。這就是緻密化的樣子，我們相信我們的產品定位正確，可以從中受益。我們也知道，我們的主要客戶不能無限期地按下暫停按鈕。當他們開始行動時，他們將尋找更好、更具成本效益的解決方案。這就是我們計劃大放異彩的地方。

While timing can be hard to predict, we know that RF Industries has a broad selection of high-quality interconnect products and next-generation integrated systems. And we're always innovating, both in the wireless carrier space and other markets. We recently launched our microlab Enterprise+ offering to serve the hundreds of integrators throughout the United States that are focused on enhancing cellular and public safety wireless in commercial buildings and multi-dwelling units.

雖然時間很難預測，但我們知道 RF Industries 擁有廣泛的高品質互連產品和下一代整合系統可供選擇。無論是在無線營運商領域或其他市場，我們都在不斷創新。我們最近推出了 microlab Enterprise+ 產品，為全美數百家整合商提供服務，這些整合商專注於增強商業建築和多住宅單元中的蜂窩和公共安全無線。

This opens the door to a new market opportunity that is not reliant on wireless carrier budget cycles and the early response to this exciting new offer has been very positive.

這為不依賴無線營運商預算週期的新市場機會打開了大門，並且對這個令人興奮的新產品的早期反應非常積極。

Additionally, we continue to think strategically and explore other markets beyond wireless, such as wireline, utilities, transportation, safety, aerospace and defense, because many of our products have applications relevant in these areas, and we're looking to diversify our exposure to broader markets.

此外，我們繼續進行策略性思考並探索無線以外的其他市場，例如有線、公用事業、運輸、安全、航空航太和國防，因為我們的許多產品都具有與這些領域相關的應用，並且我們希望將我們的業務多元化更廣大的市場。

The growth we've seen with wireless carriers in the last few years can be viewed as a double-edged sword. The good news is that we have positioned ourselves directly in the line of sight of wireless carrier CapEx, both organically and through M&A, which is a new position for the company in our almost 45 years in business. When the CapEx dollars flow, we see huge upside.

過去幾年我們看到無線營運商的成長可以被視為一把雙面刃。好消息是，我們已經透過有機方式和併購直接將自己置於無線營運商資本支出的視線中，這是我們近 45 年業務以來的新定位。當資本支出流動時，我們看到龐大的上漲空間。

The other edge of the sword is when that CapEx pauses and we have to retrench. So while we love the direct interaction with the wireless carrier ecosystem, and the team has done a terrific job to get us to that position, we also continue to look for avenues of diversification.

劍的另一刃是當資本支出暫停時，我們必須緊縮開支。因此，雖然我們喜歡與無線營運商生態系統的直接互動，並且團隊為讓我們達到這一目標做了出色的工作，但我們也在繼續尋找多元化的途徑。

Beyond investing in product development, we've also been executing on our plan to control costs and drive further synergies by consolidating our facilities as we continue to focus on higher profitability. In the third quarter, we completed our manufacturing and distribution consolidation, and this helped reduce our quarterly operating expenses by $330,000 this quarter compared to the same quarter last year. And with the full benefit of this expense reduction in the fourth quarter, we expect even larger savings.

除了投資於產品開發之外，我們還一直在執行控製成本的計劃，並透過整合我們的設施來推動進一步的協同效應，同時我們繼續專注於更高的獲利能力。第三季度，我們完成了製造和分銷整合，這有助於我們本季的季度營運費用比去年同期減少 33 萬美元。隨著第四季度費用削減的充分好處，我們預計節省的金額會更大。

In total, we expect annualized cost savings of approximately $2.5 million to $3 million. As we strip out these costs and look to increase sales, we expect our profitability to improve in future quarters, although it's difficult to provide specific timing given the current broader market conditions. What we do know is that when revenue returns will be in a strong competitive position with a highly attractive product portfolio, a capital-light business model, and substantial operating leverage.

總的來說，我們預計每年可節省約 250 萬至 300 萬美元的成本。當我們剔除這些成本並尋求增加銷售額時，我們預計我們的獲利能力將在未來幾季得到改善，儘管考慮到當前更廣泛的市場狀況，很難提供具體的時間表。我們所知道的是，當收入回報時，憑藉極具吸引力的產品組合、輕資本的商業模式和可觀的營運槓桿，將處於強大的競爭地位。

Now I'll give some color on our third quarter financials. As I mentioned earlier, third quarter revenue was $15.7 million, down 34% year-over-year primarily reflecting a much lower contribution from hybrid fiber cable as well as lower sales related to carrier projects involving approved RF components. I do want to point out that our core interconnect products remained solid in the quarter, and large shipments and orders that were put on hold still remain in our backlog.

現在我將介紹我們第三季的財務狀況。正如我之前提到的，第三季營收為 1,570 萬美元，年減 34%，主要反映了混合光纖電纜的貢獻大幅下降，以及涉及經批准的射頻組件的營運商項目相關銷售額的下降。我確實想指出，我們的核心互連產品在本季度保持穩定，大量出貨量和被擱置的訂單仍然留在我們的積壓訂單中。

The sales decline and product mix pressured consolidated third quarter gross profit margin which came in at 24.4% compared to 30.4% in the year ago quarter. Operating loss was $2 million versus operating income of $1.1 million in the comparable quarter, again, due to lower sales, including the cable products and RF components that I discussed.

銷售額下降和產品組合給第三季綜合毛利率帶來壓力，毛利率為 24.4%，而去年同期為 30.4%。營業虧損為 200 萬美元，而同期營業收入為 110 萬美元，同樣是由於銷售額下降，包括我討論的電纜產品和射頻組件。

Taken together, these factors resulted in a net loss of $1.6 million or $0.16 per diluted share for the quarter. Compared to net income of $771,000 or $0.08 per diluted share in the third quarter of 2022. Non-GAAP net loss was $784,000 or $0.08 per diluted share compared to non-GAAP net income of $1.6 million or $0.16 per diluted share for the same period last year. Adjusted EBITDA loss for the third quarter was $940,000. This compares to adjusted EBITDA of $2.1 million in the third quarter of '22, reflecting the impact of lower sales and less leverage to cover certain fixed costs.

綜合而言，這些因素導致本季淨虧損 160 萬美元，即稀釋後每股虧損 0.16 美元。相比之下，2022 年第三季的淨利潤為771,000 美元，即稀釋後每股收益0.08 美元。非GAAP 淨虧損為784,000 美元，即稀釋後每股收益0.08 美元，而去年同期非GAAP 淨利潤為160 萬美元，即稀釋後每股收益0.16 美元年。第三季調整後 EBITDA 虧損為 94 萬美元。相較之下，2022 年第三季調整後的 EBITDA 為 210 萬美元，反映了銷售額下降和支付某些固定成本的槓桿率降低的影響。

At the end of the third quarter, our cash and cash equivalents were $4.1 million. Working capital was $22.8 million and $2 million was available under our revolver. We drew down our revolver by $1 million to cover leasehold improvements associated with the consolidation efforts I mentioned earlier. During the quarter, we continued to work with our bank, and we successfully renegotiated the terms of our debt covenants, without any major changes to the structure of our term loan or revolver, giving us leeway to navigate this challenging time.

截至第三季末，我們的現金和現金等價物為 410 萬美元。營運資金為 2,280 萬美元，我們的左輪手槍可用資金為 200 萬美元。我們提取了 100 萬美元的左輪手槍資金，用於支付與我之前提到的整合工作相關的租賃權益改善費用。在本季度，我們繼續與銀行合作，成功地重新談判了債務契約的條款，而我們的定期貸款或循環貸款的結構沒有發生任何重大變化，這讓我們有餘地來度過這個充滿挑戰的時期。

Inventory was $20.2 million at the end of the quarter, up from $19.2 million in the year ago quarter. The year-over-year increase in inventory was primarily due to Microlab in which we've invested an additional $1.5 million since last year. On a sequential basis, we reduced inventory by $182,000. Looking ahead, we believe there's more room to reduce and rationalize our inventory without jeopardizing our value proposition of inventory availability for our customers.

本季末庫存為 2,020 萬美元，高於去年同期的 1,920 萬美元。庫存年增率主要歸功於 Microlab，自去年以來我們已額外投資 150 萬美元。我們的庫存環比減少了 182,000 美元。展望未來，我們相信在不損害我們為客戶提供庫存可用性的價值主張的情況下，我們還有更大的空間來減少和合理化我們的庫存。

We'll continue to carefully manage our inventory levels to help build our cash position. We're also constantly reviewing our pricing policies as we look for opportunities to increase our margins. Backlog was $17.2 million at the end of the third quarter on bookings of $14 million. As of today, backlog stands at $16.7 million, which still includes many of the delayed hybrid fiber shipments.

我們將繼續謹慎管理我們的庫存水平，以幫助建立我們的現金狀況。在尋找增加利潤的機會時，我們也會不斷審查我們的定價政策。截至第三季末，積壓訂單為 1,720 萬美元，預訂量為 1,400 萬美元。截至目前，積壓訂單已達 1,670 萬美元，其中仍包括許多延遲的混合光纖出貨量。

In fiscal 2023, we're continuing to deal with market challenges that are pressuring our top line growth. Regardless, our focus on improving profitability is our top priority, and we've set what we believe is an attainable goal of achieving an adjusted EBITDA above 10% of sales as market conditions normalize.

2023 財年，我們將繼續應對為我們營收成長帶來壓力的市場挑戰。無論如何，提高獲利能力是我們的首要任務，而且我們已經設定了我們認為可以實現的目標，即隨著市場狀況正常化，調整後的 EBITDA 達到銷售額的 10% 以上。

Regarding guidance for fiscal year 2023, with what we see today, it's difficult to predict what to expect in the near term. Based on current visibility, we expect fourth quarter sales to increase sequentially from the third quarter and that subsequent quarters will continue to improve throughout 2024. While the near-term environment is difficult to navigate, our team is up to the task. Over the past 6 years, we've consistently -- we've significantly grown and transformed the business while streamlining our operations for cost efficiencies, and we have continued to innovate with new product offerings that both widen and diversify our market opportunity. Once the CapEx faucet turns back on, we're ready.

關於 2023 財年的指導，根據我們今天所看到的情況，很難預測短期內會發生什麼。根據目前的情況，我們預計第四季度的銷售額將比第三季度連續成長，隨後的幾個季度將在 2024 年繼續改善。雖然近期環境難以應對，但我們的團隊能夠勝任這項任務。在過去的六年裡，我們始終如一地顯著發展和轉變了業務，同時簡化了我們的營運以提高成本效率，並且我們繼續透過新產品進行創新，從而擴大了我們的市場機會並使其多樣化化。一旦資本支出水龍頭重新打開，我們就準備好了。

In closing, I appreciate that it takes patience to wait out a business cycle. We've been through these pauses before, and I think we might be seeing a bottom forming in our market. While our quarterly revenue trend has been inconsistent and lumpy for the last several years, we've achieved significant growth, and we remain committed to our long-term strategy that has helped us profitably grow sales from $23 million to $85 million over that 6-year term. We believe that Q3 was just a bump in the road, similar to the many bumps we've overcome in the past few years.

最後，我明白等待經濟週期結束需要耐心。我們以前經歷過這些停頓，我認為我們可能會看到市場正在形成底部。雖然過去幾年我們的季度收入趨勢不一致且不穩定，但我們已經實現了顯著增長，並且我們仍然致力於我們的長期戰略，該戰略幫助我們在過去6 年裡將銷售額從2300 萬美元增長到8500 萬美元，實現盈利。年期限。我們相信第三季只是路上的一個坎坷，類似我們過去幾年克服的許多坎坷。

Long term, RF Industries is in a great position to generate solid returns for investors and we're grateful for the ongoing support of our shareholders.

從長遠來看，RF Industries 處於有利地位，可以為投資者帶來豐厚的回報，我們感謝股東的持續支持。

With that, I'll open the call to questions. John?

接下來，我將開始提問。約翰？

(Operator Instructions) The first question comes from Josh Nichols with B. Riley.

（操作員說明）第一個問題來自 Josh Nichols 和 B. Riley。

This is [Kat Nelson] for Josh Nichols. I was just wondering if you could speak a little bit more about like carrier CapEx cycles and kind of what you're seeing in terms of when those will resume?

這是喬許·尼可斯的[凱特·尼爾森]。我只是想知道您是否可以多談談運營商資本支出週期以及您在何時恢復這些方面所看到的情況？

Sure. Yes, good question. So I mean, look, it's not abnormal in a major build cycle, generational like this one, to have macro sites built first, then there's usually a pause while they consume that, and then they'll be the more densification build. So we think we're in that pause at the moment, at least. I think everyone that I talked to agrees that, that's what's happening. And we expect the -- with what we're hearing today, we expect getting into calendar 2024 to be in a different environment.

當然。是的，好問題。所以我的意思是，看，在像這樣的主要構建週期中，首先構建巨集站點，然後在使用巨集站點時通常會有一個暫停，然後它們將是更加緻密化的構建，這並不異常。所以我們認為至少目前我們正處於暫停狀態。我想與我交談過的每個人都同意，這就是正在發生的事情。我們預計，根據我們今天聽到的消息，我們預計 2024 年將處於不同的環境中。

I think we're hearing that not just from the carriers, but from the neutral host and tower companies, the contractors and integrators -- what we're hearing real site counts from people, and there's folks out walking the sites to make sure the bill of materials is accurate.

我認為我們不僅從運營商那裡聽到了這一點，還從中立的主機和塔公司、承包商和集成商那裡聽到了這一點——我們從人們那裡聽到了真實的站點數據，並且有人在現場走動以確保物料清單準確。

That's a phenomenon that typically leads to the cycle picking back up. And again, not that it couldn't happen towards the end of '23 in a broader way because we are seeing a little bit of increase there, but I think the bigger expectation is we get into '24, '25, '26, there's to be some consistent spending on densification in particular.

這種現象通常會導致周期回升。再說一次，並不是說它不會在 23 年底以更廣泛的方式發生，因為我們看到那裡有一點增長，但我認為更大的期望是我們進入 24、25、26，特別是在緻密化方面需要持續不斷的支出。

(Operator Instructions) Okay. It looks like we have no further questions in queue. I'd like to turn the floor back to Robert Dawson for any closing remarks.

（操作員指示）好的。看來我們沒有其他問題了。我想請羅伯特·道森（Robert Dawson）發表結束語。

Thank you, John, and thanks, everyone, for joining our call today. We look forward to sharing our fiscal fourth quarter results in December and look forward to speaking to many of you over the next few days. Have a good day.

謝謝約翰，也謝謝大家今天加入我們的電話會議。我們期待在 12 月分享我們第四財季的業績，並期待在接下來的幾天裡與你們中的許多人交談。祝你有美好的一天。

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

今天的會議到此結束，此時您可以掛斷電話了。感謝您的參與。