Good day, everyone, and welcome to the RF Industries Fourth Quarter Fiscal 2024 Financial Results Conference Call. At this time, all participants have been placed on a listen-only mode and we will open the floor for your questions and comments after the presentation. It is now my pleasure to turn the floor over to your host, Margaret Boyce, Investor Relations. Ma'am, the floor is yours.

Thank you, Matt. Good afternoon, everyone, and welcome to RF Industries fiscal fourth quarter and full year 2024 earnings call. With me on today's call are RFI's Chief Executive Officer, Rob Dawson; President and COO, Ray Bibisi; and CFO, Peter Yin. We issued our Q4 earnings release after market today. That release is available on our website at rfindustries.com. I'd like to remind everyone that during today's call, management will make forward-looking statements that involve risks and uncertainties. Please note that this information on the 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 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 actual results include the risks and uncertainties discussed in the company's reports on Form 10-K and 10-Q and 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 the related current report on Form 8-K describe the differences between our GAAP and non-GAAP reporting. With that said, I'll now turn the conference over to Rob Dawson, Chief Executive Officer. Rob, please go ahead.

Thank you, Margaret, and welcome to our fiscal fourth quarter and full year 2024 conference call. I'll start with our fourth quarter and year-end highlights and some comments on our market opportunity. Our President and COO, Ray will discuss some sales and operations highlights. And our CFO, Peter will cover our financials before we open the call to your questions. Before I begin, I want to take a moment to share our thoughts and prayers with the communities devastated by the recent fires just up the coast from us in Los Angeles. We're grateful to the first responders for their total dedication and incredible bravery as they face the indescribable fury of several fires. And we're here to support our partners and customers in any way we can as they work hard to restore the critical communications infrastructure that we all depend on. Now turning to our results. Throughout fiscal 2024, our team delivered improving performance, which put us on solid ground at the year-end. Fourth quarter net sales rounded out to $18.5 million up 16% from the $15.9 million in the fourth quarter last year and up 10% sequentially from $16.8 million reported in the third quarter. Our gross profit margin for the fourth quarter increased to 31.3%. For the first time in several quarters, we delivered an operating profit, which directly reflected our commitment to driving greater profitability even as our key markets are still in recovery mode. Our adjusted EBITDA was $908,000 and non-GAAP earnings per share came in at $0.04. We ended the year with a strong balance sheet after paying down our debt to just above $8 million, a significant improvement from $14.1 million at the end of last fiscal year. During the fourth quarter, we shipped a large amount of hybrid fiber products that…

Thank you, Rob. As you've mentioned, through our team's dedication and hard work, we've delivered improving financial results throughout fiscal year 2024. We have done a lot to reach this point, including the development of our broad high-quality product and solutions portfolio and earning our customers' confidence as the go-to source for connectivity and communication needs, quick turn solutions and attentive customer support. Like Rob said, on the sales side, we have been successful in strengthening our customers' relationships and building a greater presence with our wireless carrier ecosystem customers. As a result, we have now begun to capture some of their operating and maintenance budget, which is separate from CapEx and another revenue source for us. Being a qualified vendor for annual updates and upgrades in a carrier's maintenance budget, we believe we will be less susceptible to variability in CapEx spending. Now that we have the right products and solutions and the right positioning within organization, we have bolstered our sales team with experienced talent who can help us ramp up our sales initiatives in our targeted markets. And once again, we have accomplished this without increasing our overall expense. On the cost side, we've already made significant headway in streamlining our business and reducing our expenses significantly in fiscal 2024. That said, there are increasing costs outside of our control like wage pressures and escalating insurance expenses. We think we can overcome these heavy expenses through a higher level of sales, product rationalization and also a more creative and efficient ways of building and fulfilling our product orders through a more cost effective supply chain and improved operations. Over the next several quarters, we expect to have a completely redesigned operation infrastructure, which will aid in our goal of achieving at least 10% adjusted EBITDA and have a strong team that is fully engaged on the best ways to get there. I will now turn it over to Peter for the financial discussion. Peter?

Thank you, Ray, and good afternoon, everyone. There's a lot of opportunity ahead for RFI, and we've made great strides in carefully managing the business to improve our financial strength. During fiscal 2024, we made significant progress paying down our debt and improving our working capital position. We finished the year strong with shipments of hybrid fiber that had been in our backlog for quite some time. In addition, we're pleased to see order flow continue to recover. Starting with our fourth quarter results. Net sales were $18.5 million, an increase of $2.6 million or 16% year-over-year. For the full fiscal year, sales decreased $7.3 million or 10% to $64.9 million. Importantly, gross profit margin in Q4 increased 290 basis points to 31.3% from 28.4% year-over-year. The margin increase reflected is not only due to our sales increase, but highlights our efforts to drive cost savings and operating efficiencies. Fourth quarter operating income was $96,000 versus an operating loss of $1.1 million for the comparable period, a significant delta year-over-year. And we are pleased to see that our focus on profitability delivered our first operating profit in several quarters. Our net loss for the quarter was $238,000 or $0.02 per diluted share improved meaningfully from a net loss of $851,000 or $0.08 per diluted share year-over-year. And non-GAAP net income was $394,000 or $0.04 per diluted share compared to non-GAAP net loss of $434,000 or $0.04 per diluted share for Q4 2023. Finally, fourth quarter adjusted EBITDA was $908,000 compared to a negative adjusted EBITDA of $108,000 for Q4 2023. Full fiscal year adjusted EBITDA was $838,000 versus adjusted EBITDA of $460 million in fiscal year 2023. Moving to the balance sheet. We continue to manage our working capital to strengthen our liquidity and overall capital structure. As of October…

Certainly, everyone at this time, we will be conducting a question-and-answer session. [Operator Instructions] Thank you. Your first question is coming from Matthew Boss from B. Riley. Your line is live.

Hi. This is Matthew on for Josh Nichols. Thank you for taking my questions.

Hey, Matt.

Yes, hi. So I was first wondering what would you say was the main contributor to the revitalized top line? And what's driving that going into the seasonally low first quarter?

Yes. Good question. So I think from a top line perspective, in Q4, we mentioned in our comments that a pretty significant amount of hybrid fiber that had been in our backlog for quite some time started to ship out in larger amounts during the quarter. So I think that was a help. We generally saw a recovery sort of across the board, but I think the -- we got a nice big push from some things that we had expected would have shipped much earlier. And as Peter mentioned in his comments, customers asked us to hold some things a little longer. So we did that, and a lot of that went out in Q4. I think as we look at Q1, it's really more seeing a product mix shift overall, where we've been seeing better bookings, led to a stronger backlog as we ended the fiscal year. We talked about where it stands today. So we've been working through some of that new backlog as well. And I think we're just, in general, we're seeing that these long-term plans we've had in place to drive some better growth in newer product areas are really starting to show up and contribute. And I think that's the big difference between where we've been in prior years is we have visibility in the short-term that shows what we can do in our fiscal first quarter, where there's a couple of weeks left here. But I think beyond that, we're starting to get a better sense of these projects and these new product lines that have defined deployment plans that people have been sticking to, which gives us some comfort around timing.

Great. Thank you. And just a follow-up on, you mentioned in Q1, a product mix shift with better bookings. But I'm wondering which products would you say are the most in driving that shift?

Yes. You cut out a little bit on it, but I think I got the gist of it. So tell me if I'm getting it. I think you were asking about the product mix and what's driving the top line going forward. Is that the question you were asking?

It was about which products specifically are most in demand and which are being prioritized for that shift in the mix.

Got it. Yes. So I think, generally, we've seen overall sort of customer interest and spend picking up. So I think there's a little bit of all boats rise in there. I think the bigger thing is the agreements that we've put in place over the last two or three years with key customers in things like small cell and DAC thermal cooling are newer product areas for us. So we're seeing those start to contribute at higher levels than where they've been in the past. I also think we're starting to see stadiums and large venues come back in a better way, where that will help us not just in product lines like the Microlab product line, but also help us in our standard and custom interconnect offer, whether that's fiber, copper, coax, wire harnesses, all of those things benefit from sort of the recovery in general there. I think but the big areas that we've been talking about for some time that are really starting to contribute now would be more in the DAC thermal cooling and small cell offering.

Got it. Okay, cool. That's great to hear. And I'd also appreciate some color on the redesigning operations infrastructure you're working on. And maybe you can quantify some of the expected savings.

Yes, it's a good question. I think, so at this point, we're not going to give a specific dollar amount on those savings. I think it's all in service of getting to that much stronger adjusted EBITDA margin, getting that north of 10%. We believe there's a way to get there over the next several quarters. We're doing some things just to be smarter about the way we do, not only procurement, which the team has spent a lot of time on, but are there better ways to partner with folks who can help us in preproduction work? We've seen some success with that in some of the newer product lines that we've talked about. I think there's ways for us to sort of waterfall that into some of the legacy product lines that we have as well. So that's really what the team is putting in the work on is how do we continue to drive better profitability on all product lines through a more streamlined operation structure overall.

Got it. Okay. And just last question -- last quarter you mentioned bringing in DAC orders with strong probability of becoming turnkey national programs. So I'm wondering if there's an update on that will contribute to this strong fourth quarter?

Sure. I think, so in the fourth quarter, we had some of that. And I think really the comments we've made in the past were around signing agreements and/or putting structured agreements in place with key customers to provide DAC solutions in several markets. And we've had success regionally in certain customers. It is more than one customer. I think that's the good news is it's not a one-off. We're starting to see it across multiple customers. And it's really, we're starting to find opportunities in different regions. As usual, we put things in a lab, we go through tests. We then have a trial market and then that will grow into, hopefully, through success into a larger official market, which is what we've seen so far. We also have orders across several markets in smaller amounts. Our expectation is that as customers allocate their spending that this is an operating budget typically operating and maintenance. As customers allocate that spending, it's never going to be a scenario where they hit every market every year. They're going to go on kind of a 7 to 10 year cycle of doing these updates to the equipment, whether that's rip and replace with new or some kind of a retrofit or maintenance fix. We think we're positioned really well with multiple customers to get some of that spend sort of market by market as they do deployments. And more to come on that. We've obviously seen some success. It's as I mentioned previously, some of that's helping us in our Q1, which again takes out some of that seasonality. We believe there's more opportunity there. And I think the team is executing really well from a sales perspective on those relationships, as our technology and products prove themselves out, we're finding those opportunities to move into additional markets.

Got it. Great. Thanks for taking my questions.

You're welcome. Thank you.

Thank you. [Operator Instructions] Your next question is coming from Steven Kohl from Mangrove. Your line is live.

Good afternoon, guys. Good quarter.

Thank you.

I had a couple of quick questions. One is, when we talk about facility rationalization, can you address or are we done with that at this point? Are there still opportunities there to work across the footprint that you have?

Yes. So I think we generally believe that the heavy lifting has already been done on that. We've consolidated into larger, more streamlined and more technology forward operations in both East Coast, West Coast. We've collapsed multiple legacy divisions into those. And I think there's the one thing there is probably room is for us to balance production East Coast, West Coast. One of the benefits we have, we're very close between the facilities in New York, New Jersey, Connecticut East and then the facility in Southern California. We've got a good footprint to service large customer projects in the heavy spend areas where there's higher population for the densification kinds of plays and DAC thermal cooling. So I think generally, we're done with the heavy lifting. There are some tweaks that we think will give us some additional savings and again the load balancing where we can remove time and shipment cost of going coast-to-coast when we don't need to. I think it's still an area that we view as an opportunity.

So another quick question. When you look at your mix of business today, Rob, between what's driven by CapEx versus service or operating maintenance budgets, how has that changed? I mean if you look back over a couple of years ago and we looked to where you want it to be, how does that -- what does the -- how would that mix look like in a perfect world?

Yes. I think that the important thing to note there is that's in the carrier space, right. A good percentage of our business obviously comes from the wireless carrier ecosystem. We also have 30%, 40% or more depending on the quarter of sales coming from more heavy industrial and localized and regionalized OEM manufacturers of other kinds of product lines. So I think your question is a great one. Since we see the wireless carrier space as such a big growth for us. I think, historically, there's always been some operating and maintenance. There's always scenarios where someone needs 50 or 100 new cable assemblies to repair something, whether that's because it was damaged or they're just doing an update, that's more operating budget. Any time there's a natural disaster or something like that, whether it's things like fires or hurricanes, it's not uncommon for there to be an operating budget related to that piece as well, where we've always played in and had a decent amount of business. I think historically, if you were to break it out in that market though, probably 30% to 40% of our sales were going into those kinds of applications and a heavier amount was more CapEx related and the bigger spend. As we've added new product lines, that's where the shift really happens is you kind of have to look by product type where that might break down. We believe the DAC thermal cooling business is one that is largely OpEx, not all of it, but it's largely OpEx and we think we can get to a point in the carrier space where as that contributes more, we should see it sort of balance out more to a 50-50 sort of breakdown in total between carrier CapEx, carrier OpEx and kind of odds and ends in between. But I think whether the percentages are exactly right or not. The big thing for us is we think that can help take out some of the seasonality that we always experience because in our fiscal first quarter, if you're looking for three tough months to throw together in a quarter, it's November, December, January. You have every seasonal headwind kind of thrown together into one, three-month window. And we think things like OpEx spend and the DAC thermal cooling offer, in particular, can really help us smooth out some of that seasonality.

Thank you. And one last one. Just if you could speak to your change in the sales force? And where have you been adding? How many people have you added? And where are you adding them? And what type of experience -- how have you been able to attract them to the company?

Sure. Yes. So it's not a huge amount of people. I mean, I think one thing I've been very clear on since I joined here years ago is, look, we're a small company. We need to rely on force multipliers like our distribution channel, like our manufacturers' reps, folks that are feet on the street to help us grow the business without overspending. We could go hire 100 people and great. Now we're going to have a different issue, which is just the cost of doing so. We've largely traded out expense as we've seen other expenses come down or some transitioning of people within our sales team. We have been very focused at bringing in people who have existing relationships, who have some time they've spent in these key markets with these key customers. They know them. We're able to allocate those folks by account and/or by region which helps us, I think, have a very targeted approach to how we're going to grow and focused on the right product lines and applications that we've seen as an opportunity for us. The other part of your question around where we find these people, how do they come to us? I think the thing that I've appreciated and the whole time that I've been here is, we have a great reputation as a company. And as we've added good like-minded positive people, that's something I'd say to the team all the time is, we got to surround the little company noise that you can get caught up in. We're doing a good job. We're growing. We're taking share in spots. We're adding a good offer. I think we need people that believe in the story and understand it and can go make this happen. And interestingly, people a lot of times reach out to us. I think back on when we added people like Ray, we added a woman like Marybeth Smith in the last year, who came from several of our pasts in ways that we've worked together. And that's kind of how we're finding these new folks as some of them call us. In other cases, we identify an opportunity or a need for us in the market. And there's a short list of names that come up and we make some calls. And I think what we found generally is people are receptive to that opportunity. And if they're at a point in their career where making a change, can make some sense, they show up here, and we love it. It's I think the biggest thing for me is surrounding these opportunities and this transformation of the company with more like-minded people who want to be positive, want to help make a difference. There's not a lot else we need at that point. We think the strategy is sound and our offer is sound. We just got to execute on it.

Sounds good. Thank you guys very much. Appreciate it.

Thank you, Steve.

Thank you. That concludes our Q&A session. I will now hand the conference back to Rob Dawson for closing remarks. Please go ahead.

That's great. Thank you, Matt, and thank you, everyone, for joining us today. We look forward to sharing our fiscal first quarter results in March until then, stay safe, and thank you for your support of RFI.

Thank you, everyone. This concludes today's event. You may disconnect at this time and have a wonderful day. Thank you for your participation.