RF Industries(US:RFIL)2021-06-15 01:34Financial Data and Key Metrics Changes - Sales for Q2 2021 reached $11.1 million, representing an 11% sequential increase and a 6% year-over-year increase [9][32] - Gross margin for Q2 was 43%, with a 27% gross profit margin excluding the impact of Employee Retention Credits, up from 26% in Q1 [35][36] - The company reported a backlog of $15.6 million at the end of Q2, which increased to $22.8 million post-quarter [39][40] Business Line Data and Key Metrics Changes - The Cables Unlimited division received significant multimillion-dollar orders for the Optiflex hybrid fiber solution, indicating strong demand in the wireless carrier market [11][12] - The distribution business remained solid, with RF, coaxial cable, and connector products contributing to a growing baseline of sales [16][17] - Small cell opportunities are expected to increase sales in the second half of the year, although spending has not yet fully unlocked [18][21] Market Data and Key Metrics Changes - The wireless carrier ecosystem is showing signs of recovery, with increased spending and project wins contributing to a strong backlog [10][29] - The company is actively shipping products to all Tier 1 wireless carriers, indicating a broad market presence [15] - Industrial OEM and defense customers are returning to normalized levels, contributing to anticipated sales expansion [27] Company Strategy and Development Direction - The company is committed to driving consolidation in the industry and is focused on making larger acquisitions in the $20 million to $30 million sales range [28][72] - There is a strong emphasis on expanding product offerings in passive components and enhancing distribution channels [68][69] - The company aims to leverage its backlog and strong existing relationships to drive future growth, particularly in hybrid fiber, small cell, and DAC offerings [29][30] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in returning to year-over-year revenue growth in fiscal 2021, with expectations for sequential growth in Q3 and Q4 [30][40] - The company is optimistic about the recovery in the wireless carrier spend and sees significant opportunities in the 5G build-out [29][95] - Management highlighted the importance of maintaining operational performance to secure future orders from new Tier 1 customers [52][53] Other Important Information - The company received $2.8 million in loan forgiveness from the Paycheck Protection Program and $2.6 million in Employee Retention Credits, positively impacting financial results [34] - The balance sheet remains strong, with cash and cash equivalents of $14.8 million and working capital of over $29 million at the end of the quarter [38] Q&A Session Summary Question: Expectations for gross margins on hybrid fiber orders - Management indicated that margins on hybrid fiber products are expected to align with overall corporate margins, with potential for improvement based on product mix and supply chain management [44][46] Question: Ability to pass on copper price increases to customers - Management stated that they have quoted fair prices considering copper price variability and do not anticipate significant customer conversations regarding pricing adjustments [48][50] Question: Future orders from new Tier 1 wireless customer - Management expressed uncertainty but emphasized the importance of performance in securing future orders from the new customer [52][53] Question: Updates on DAC deployments - Management noted that while standard DAC projects are returning, larger venue projects are still lagging but expected to pick up as sports seasons resume [56][59] Question: Acquisition strategy and target areas - Management is focused on passive components and distribution-friendly products for acquisitions, aiming for larger deals than in the past [68][72] Question: Duration of backlog and supply chain concerns - Management estimated that the backlog could be drawn against over the next two to three quarters, with no significant supply chain issues currently affecting shipments [82][84] Question: Guidance for future quarters - Management provided directional guidance, expecting sequential growth in Q3 and Q4, but refrained from specific numerical guidance due to past experiences with timing [90][92] Question: Upside opportunities and downside risks - Management highlighted potential upside from large CapEx opportunities related to 5G and expressed confidence in the overall growth trajectory despite past challenges [95][96]