RF Industries(US:RFIL)2021-03-12 02:57Financial Data and Key Metrics Changes - Sales for Q1 2021 were just above $10 million, a decline of $2.4 million compared to Q1 2020, primarily due to the absence of $2.7 million in hybrid fiber cable revenue from a large Tier 1 carrier customer [12][13][55] - Gross margin decreased to 26% in Q1 from 28% in Q4, attributed to lower sales, but remained consistent compared to Q1 last year [56] - The backlog at the end of Q1 was $7.1 million, up from $6.3 million in the previous quarter, and has since increased to approximately $8.5 million [19][60] Business Line Data and Key Metrics Changes - Distribution sales accounted for over $6 million of total sales in Q1, representing a 15% increase year-over-year [28][29] - The custom cabling and wiring harness segments are seeing recovery with large blue-chip customers, particularly in defense and industrial sectors [30][32] - The DAC (Direct Ambient Cooling) solutions are gaining traction, with new orders and approvals from multiple carriers [42][43] Market Data and Key Metrics Changes - The company is experiencing delays in project spending from major carriers, but there is evidence of pent-up demand starting to materialize [20][25] - The C band auction has led to increased urgency in carrier build timelines, which is expected to accelerate investment activity in network coverage and small cell deployment [70][72] Company Strategy and Development Direction - The company is focused on building a sustainable long-term growth engine, with investments in resources to accelerate growth despite current challenges [51][52] - There is a commitment to M&A activity, with a strategy and M&A committee established to enhance focus on potential acquisitions [49][50] Management's Comments on Operating Environment and Future Outlook - Management remains optimistic about future growth despite the challenges faced in Q1, indicating that the recovery in market segments is taking longer than anticipated [11][12] - The expectation is for sequential growth in Q2 and a return to year-over-year revenue growth in fiscal 2021, primarily in the latter half of the year [64][104] Other Important Information - The company received full forgiveness for $2.8 million in PPP loans, which helped maintain production capabilities during the challenging operating environment [61][62] - The balance sheet remains strong, with cash and cash equivalents of $15.5 million and working capital of $25 million [64] Q&A Session Summary Question: Regarding the C band spectrum and its impact on investment activity - Management believes the C band auction will accelerate conversations around investment and network coverage, particularly for small cell deployment [70][72] Question: Visibility on DAC deployment timing - Management expects meaningful increases in orders for DAC solutions in the coming three to six months as existing network equipment ages [76][77] Question: Cadence for distribution business for the rest of the fiscal year - The distribution business is expected to provide a consistent baseline of recurring revenue, with growth anticipated as inventory levels are maintained [81][82] Question: Increase in SG&A expenses - The increase in SG&A was due to new hires and timing of payments for professional services [86] Question: Potential for acquisitions this fiscal year - Management is hopeful for an acquisition this year, with a stronger M&A pipeline and a dedicated subcommittee on the Board to facilitate this [90][91] Question: Guidance on revenue for fiscal 2021 - Management expects sequential growth throughout the year, with a return to year-over-year growth primarily in the second half of fiscal 2021 [104][109]