Greetings, welcome to the RF Industries First Quarter Fiscal 2022, Financial Results Conference Call. At this time all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. If you have any questions or comments [Operator Instructions]. We do ask that if you are listening on a speakerphone to please pick up your handset for optimum sound quality. Please note this conference is being recorded. I would now like to turn the call over to your host, Mr. Todd Kehrli of MKR Investor Relations. Thank you. You may begin.

Thank you, Operator. Good morning and welcome to RF Industries first quarter fiscal 2022, financial results conference call with me on today's call are RF Industries President and CEO Rob Dawson, and Senior Vice President and Chief Financial Officer, Peter Yin Before I turn the call over to Rob and Peter.I would like to cover a few quick items. This morning, RF Industries issued a press release announcing its first quarter fiscal 2022. Financial results that release is available on the Company's website at RF Industries.com. This call is being broadcast live over the internet for all interested parties, and the webcast will be archived on the Investor Relations page of the company website. 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. 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 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 Exchange Commission. 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 two for the periods reported in the release. With that, I'll turn the conference over to Rob Dawson President and Chief Executive Officer, Rob?

Thank you, Todd. Good morning, everyone. Happy Saint Patrick's Day and happy first day of March Madness for those of you who care about that, me included. Welcome to our first quarter of fiscal 2022 earnings conference call. I'd like to start with a brief review of our first quarter results, then discuss what we're seeing now in the market and what we expect going forward before turning the call over to Peter to give some commentary on the financials. Starting with the first quarter, we're pleased to report our fourth consecutive quarter of strong year-over-year revenue growth. Sales for the quarter came in at $16.9 million, a 69% increase over the first quarter last year. As anticipated, revenue was down sequentially compared to the fourth quarter, but still very strong as our fiscal first quarter is typically our slowest quarter seasonally. On the bottom line, we reported a net loss of $364,000, non-GAAP net income of $628,000, and adjusted EBITDA of $691,000. We had lots of onetime an acquisition-related charges in those numbers which Peter will share more on later in the call. Our margins and bottom line continue to reflect the impact of the current state of the supply chain, as well as increased material and shipping costs. As I've noted before, this is largely impacting our concentrated Tier-1 business and not unexpected given our hybrid fiber solution has been such a large piece of our sales. We're obviously happy to oversee these multiple large orders from our Tier-1 wireless carrier customer this past fiscal year. But also had the lock-in pricing at the time, these deals were signed, which was before some of the supply chain related costs begin to go up significantly. The good news is, that we continue to work through these orders and we…

Thank you, Rob. And good morning, everyone. We're pleased to report another quarter of strong year-over-year revenue growth. Sales in the first quarter were 16.9 million down 20% compared to the preceding fourth quarter, but up 69% compared to the first quarter last year. Q1 is typically our slowest quarter so as the controlled decrease in revenue is anticipated, when comparing to Q4. The increase in sales of $6.9 million from the first quarter last year shows that we are off to a good start, and continuing the strong momentum we had in fiscal 2021. Our Gross profit margin was 24%, compared to 25% in the preceding fourth quarter, and 26% in the first quarter last year. Margin for the quarter came in lower than we'd like, but understandable given what we experienced during the quarter. The softness in our margins can be explained by the state of the supply chain, as well as product mix. As we have noted previously, we continue to see cost increase, whether looking at raw materials, labor costs, or shipping costs added to this is product mix. Our concentrated Tier-1 business, which made up approximately 30% of our sales in Q1 has a lower margin profile, one compared to the blended rate of our overall business. As we continue to work through these headwinds, we expect our overall margins to improve to more normal levels, as we move through the fiscal year. We have and will continue to work with our customers on updated pricing, and with our vendors to secure materials where we are able at locked-in costs. In addition, the sales team has been working hard to win higher margin business. And speaking of higher-margin business, we expect our acquisition of Microlab, which we completed after the end of Q1, to be…

Thank you. Ladies and gentlemen, the floor is now open for questions. [Operator Instructions] We do ask that if you are listening via speakerphone, to please pick up your handset for optimum sound quality. Our first question today is coming from Aman Gulani at B. Riley Securities. Your line is live. You may begin.

Hey guys, thanks for taking my question here. And my first question is about integration timeline for Microlab's. How should we think about the integration and then how should we think about margins throughout the year? I know you expect them to improve a supply chain so the headwind start to ease, but I'm trying to get a sense for how much margins will improve due to Microlab and then also as supply chain start to sort of ease up. Do you think you could get margins maybe closer to like a 30% by the fourth quarter of the end of fiscal '22?

Hey, Aman. Thanks for the questions. Good morning. So first on integration timeline, I appreciate that question. We've made a ton of progress on the integration of Microlab partially because from the time we announced the deal until it closed, there was this two-month lag that we use to our advantage, and assumed that the deal was going to get the approval, and get closed. So we had people onsite investing in infrastructure and other key things that we needed to do with the team, old charts and other discussions, all played out in that time frame. So when we officially closed that deal at the beginning of this month, we were ready to go. There's a few additional things on systems and other that need to be integrated a little further, but a meaningful amount of the difficult back-office stuff, has already been completed and has been seamless. The team there has been great. Our team in that area that spend a lot of time on site has also been doing a great job and just combined, couldn't be happier with the progress that was made. The area that we didn't spend that a ton of time truly trying to integrate fully, was the sales organizations on both sides, from a customer approach. I'm recovering sales guys, so I have a very heavy focus on customer and the customer experience, that when you go through an acquisition that can go sideways very quickly. So we've tried to keep business as usual and keep all the relationships intact as they were prior to the deal. And then we sort of work through what makes the most sense organically over the coming months. Our customers have been very receptive and happy with this deal getting done and the combination of the…

Got it. That's helpful. And then you did mention in your prepared remarks that you did secure new small cell customer. Just trying to get a sense for timing on that, is that something you expected generate revenue from this year? And then what's the opportunity to get additional orders for that customer?

Yes. So we do and that was specifically around a new innovative small sell product that been working on for some time and we received our first order on that from new customer, so that's something that we anticipate shipping here in the next few months. And we expect there to be more from them, but also from others on this product. And I'm not trying to be coy and refer to it as this product do not give specifics, but I think anyone who's spoken to me or listen to our calls over the last four or five years, we come out with information when we've got a definitive amount of dollars we can tie to it in a time-frame. It's harder to do that on a new product launch other than to say it's been a very well-received product, we will be putting out some press on it soon to explain it's innovative, why we think it's innovative, what the market is saying about it and what we expect that to drive. But in the case of the one -- the initial purchase order that we received from a customer, it was a six-figure purchase order and it's something that's going to ship here in the coming few months and we believe it's the first of many over the course of the next several years.

Got it. That's helpful. And then in terms of private network build out, are you starting to see maybe a little bit more deployment on that front now that people are starting to get back to venues and things like that?

So we are, I think projects overall on campuses than use have picked up. If the Super Bowl was an example in that stadium probably has as much technology is almost any stadium, that's out there. And connectivity is a big piece of that. So anytime that a stadium is built to upgraded retrofit, there are adding capacity from a wireless perspective, and so we feel really good about those opportunities. Historically, we feel even better about those with Microlab as part of the team. There a typical bill of materials typically included on the bill of materials for those large venues. So we are seeing it recover. If I look at our results over the last few years, and look through where Microlab has been as well. That's the kind of stuff that's been missing for a couple of years, is -- these a $100, $200, $300,000 projects are more just of our products. So we think those are coming back. We also think that, as small cell deployments start to blur the lines with kind of traditional small cell in metropolitan areas, you're starting of to see companies and other private campuses put in things like the private LTE, and CBRS and other kinds of deployments that, aren't always something that we can quantify and know for sure that our products are ending up there, because a lot of times that's just another build and wireless build. We can't always know exactly where that's going. But we do believe that those two technologies, and then obviously on the public side, the C-band deployments are going to increase both distributed antenna systems and small cell in venues, and sort of any related types of deployments.

Got it. Okay. And then last question for me. What can you share in terms of build plans with your large Tier-1 wireless customers? I mean, I know you've got significant growth from that one customer that had done a lot of repeat orders through hybrid fiber. I'm saying in sense for I used to -- is the customer pushing out orders due to supply chain? What are you seeing in that regard?

Yeah, I think with -- with our customers overall and with the large Tier-1, we've been performing really well for them. And I think the bigger issue is really radio availability, which has nothing to do with us, but it's been heavily reported for a long time. Chip sets are hard to come by and when you look at building a wireless network, the radio is a key piece to that. And if you can't get your hands on the radio, whether that's macro or small cell or other, it's, it tends to put a delay in the overall build plan. We're either early in that plan from a procurement perspective, or we're the last thing that they purchased prior to deployment. So we've certainly seen some project plans shift and change. But a lot of times it's been driven as much by technology change as it is supply chain difficulty in the last year or so. We believe that as this year goes on, you're going to see anybody's build plan regardless of which carrier you're talking about really start to increase, and hit what I call it a typical generational build cycle. It's -- It's not rare to have the early part of a year be a little bit strange in spend and deployment schedules and then as the weather starts to thaw, and the world sort of starts to get going on this year's budgets. It starts to really crank and we think that's what's going to happen this year. Certainly the year goes on and we expect the next few years to be just kind of going after it trying to get things deployed that pent-up demand that's been out there for the last few years.

Got it, thank you I'll pass it on.

Thanks Aman

Thank you, once again ladies and gentlemen if you have any questions or comments, [Operator Instructions]. Our next question is coming from Hal Granger at Great Quarter Research. Your line is live. You may begin.

Thank you for taking my question. So on income and I'd add a comment first, and that was that I know that Mark Holdsworth, had 13 day -- a couple of months ago, and indicating that that we had taken a 5.1% ownership of the Company. That's true using both as personal funds and getting managers. And I just wanted to note that that's a great commitment that Chairman, that is not common in companies. So kudos to you Rob for recruiting them to the extent that you did recruit him and kudos to the Mark for will making that commitment.

Yes. Thanks. Now, we obviously appreciate that and it's been great to have Mark as part of the Board and as the Chairman and he's obviously a believer in a whole bunch of ways. And he has been very supportive and bullish on, what we've done and where we're going has been a great partner for me and driving this the next phase of growth for the Company. But thanks for noting that and certainly thanks to him.

Yes, thank you. I had a question about the capital structure. So as Peter noted, you filed a shelf registration a few months ago, which allowed you to offer DAS equity. You did this acquisition used bank financing, and I'm wondering how was that thought process of what you would use weather bank financing or bonds or equity. And regarding the Microlab acquisition, also potentially future acquisitions. And then the second part of that related to that is, in the past you have not had any debt which is also extraordinary. But in my mind, not necessary because you get a certain amount of leverage having a certain amount that up. In the future, what do you -- what's your -- what are you thinking about having debt as a part of your capital structure going forward in the future?

Yes. Thanks. Good question. Let me start with the shelf and kind of our thought process around use of funds and how we might fund future needs. So having a shelf out there is just a prudent thing to do. As you noted, the company hasn't had debt before. The company has also never had an S3 out there. So these are the things that we worked through our next phase of growth. Noting that we were at $23 million a year sales in 2017. So we've come a long way. We've done a lot, but we have a long way to go. And I think that last piece of where we're going next and the next phase of growth relates directly to having a shelf and having it available to us for whatever strategic needs might come up. With that said, I'm not terribly interested in offering additional stock at the current price point of our stock. We think we're at a major inflection point again, for the 5th or 6th time in the last 4.5 years where we're going through growth, we were recovering from some of the chaos of the last few years. We've just made a good acquisition. We're getting integration completed on, prior acquisitions and starting to see some of the good things come out of those as well. So if our stock price were higher, I think we'd be more inclined to tap into the equity side of the needs that are out there. But you look at the relating that to the depth that we took on where Peter talked about the percentage and what were sub-4%, it's 3.7% or something like that on our our debt with the bank, which was great. And we were happy to get that kind of a…

Great. And finally, let me ask a more general fluffy question which is when you think about time commitments for -- in terms of looking at potential acquisitions and evaluating them, I think there's probably a lot of time commitment there. Also, there's a lot of time commitment than integrating. Which one -- was there more time commitment find the acquisition or more time commitment integrating the acquisition?

Yes, good question. I think it's selflessly for me. I can say that the answer to that has evolved over the last few years as we've added some people to our team to help with integration specifically on the operations side. But building out this leadership team with folks that I've worked with in the past at various companies and adding them to RF Industries in the last few years means that the time spent looking for acquisitions falls largely on me on interacting with our strategic committee of our board, which includes Mark Holdsworth and Jerry Garland. We spend a lot of time talking through the acquisition pipeline. So the time commitment on that is heavy at times, not always, but right now we're kind of getting back to it. When it was a little lighter commitments, frankly, as we try to close the Microlab deal and then got that done, that might focus there with getting that completed and getting the integration started. And then I was able to hand that off to the team in various different functions to take it from there. So it's, a little lumpy in the way that it works. I mean, that team was head down pounding through integration stuff for a few months. Now we're starting to be able to pick our heads up and kind of look around again and resolve kind of the final ticks and tie offs of getting that integration done. So now it's operational and for me, I'm back to spending a meaningful amount of my time looking at acquisitions. I think the good news about the way we communicate, we try to be completely direct, transparent, and it's almost impossible not to know what we're going to do next because we laid out a plan.…

Great. Thank you very much, Rob.

Thank you, Hal. Have a good day.

Thank you. [Operator Instructions] We have no further questions in the queue at this time. I would now like to turn the call back over to Rob for closing remarks.

Great. Thank you, Kate. Thanks, everyone, for joining our call today. We appreciate your support of RF Industries. We're excited about our start to 2022 and what lies ahead for the rest of the year. Peter and I look forward to reporting our fiscal 2022 second quarter results in June. Thank you again, and have a great day.

Thank you, ladies and gentlemen, this does conclude today's event. You may disconnect at this time and have a wonderful day. We thank you for your participation.