RF Industries(US:RFIL)2019-06-13 01:26Financial Data and Key Metrics Changes - Net sales in Q2 2019 were $13.6 million, a sequential increase of 28% compared to Q1 2019, but a decline from $20.5 million in Q2 2018 [36] - Net income for Q2 2019 was $1.1 million, or $0.11 per diluted share, a sequential increase of 66% from Q1 2019, but down from $3.2 million, or $0.34 per diluted share in Q2 2018 [40] - Gross profit for Q2 was $4.1 million, a sequential increase of 30% compared to Q1 2019, but down from $7.6 million in Q2 2018 [37] - The current backlog stands at $10 million, marking the third consecutive quarter with backlog over $10 million [43] Business Line Data and Key Metrics Changes - The RF Cable and Connector business grew 22% year-over-year in Q2 2019, indicating strong performance in this segment [17] - The acquisition of C Enterprises contributed about six weeks of results in Q2, enhancing overall performance [15][36] - Organic growth in the low-double digits was noted alongside the inorganic growth from the acquisition [15][45] Market Data and Key Metrics Changes - Continued spending from Tier 1 wireless customers was observed, alongside growth in OEM segments and distribution channels [16][34] - The company is seeing growth in industrial markets such as manufacturing, defense, aerospace, and transportation [18] Company Strategy and Development Direction - The company aims to grow to $100 million in sales over the next three years, focusing on both organic and inorganic growth strategies [46] - The acquisition of C Enterprises is seen as a strategic move to enhance fiber optic offerings and strengthen small cell product offerings in the wireless market [19][21] - The company is committed to pursuing additional acquisitions, with a focus on companies in the $10 million to $20 million revenue range [24][22] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's ability to generate consistent and predictable results despite challenges from tariffs and supply chain issues [49][50] - The upcoming 5G rollout is viewed as a significant growth opportunity, with expectations for increased spending in the next 12-24 months [34][105] - Management anticipates another strong quarter in Q3 with both sequential and year-over-year revenue growth [35] Other Important Information - Sherry Cefali was added to the Board of Directors, bringing extensive experience in M&A and company valuation [29] - William Reynolds announced his retirement from the Board, effective before the annual meeting [30] Q&A Session Summary Question: Are there any supply chain disruptions due to tariffs? - Management acknowledged some impact from tariffs, particularly from China, but noted that they have generally mitigated these effects [49][50] Question: How is the C Enterprises acquisition performing? - The acquisition is performing better than expected, with C Enterprises showing a run rate above their previous sales figures [51][52] Question: What is the pipeline for potential acquisitions? - The company is focused on passive components and is interested in companies with $10 million to $20 million in sales, ideally with distribution channels [55][56] Question: Will there be sequential organic growth in the next quarter? - Management expects organic growth in Q3, alongside contributions from the C Enterprises acquisition [66][67] Question: What is the status of the backlog? - Management expressed confidence in the backlog, which remains healthy at $10 million, despite the fast-turn nature of much of their business [69][70] Question: What was the purchase price for C Enterprises? - The purchase price for C Enterprises was disclosed as being less than $1 million [71] Question: How is the new sales model different? - The new sales model emphasizes a unified company approach and increased focus on distribution as a key growth driver [101][102] Question: What are the expectations for 5G spending? - Management expects 5G spending to ramp up significantly in the next calendar year, with a long-term outlook for continued investment [105][116]