[Management View]
RF Industries reported net sales of $18.9 million for Q2 FY2025, a 17.4% YoY increase. Gross profit margin improved to 31.5%, surpassing the 30% target. Operating income reached $106,000, a turnaround from a $415,000 loss in Q2 FY2024. Adjusted EBITDA was $1.1 million with a 6% margin, moving towards a 10% target. The backlog increased to $18.4 million, reflecting diversified orders across multiple segments.

[Outlook]
Management expects Q3 FY2025 net sales to be in line with Q2 FY2025, significantly higher than Q3 FY2024's $16.8 million. Efforts to secure lower-cost financing are underway, with expectations of finalizing a new credit facility by Q3 FY2025 or fiscal year-end. Operational streamlining and improved product mix are central to achieving the long-term 10% adjusted EBITDA margin goal.

[Financial Performance]
- Net Sales: $18.9 million, +17.4% YoY, -1.6% QoQ
- Gross Profit Margin: 31.5%, up from 29.9% YoY
- Operating Income: $106,000, vs. a loss of $415,000 YoY
- Adjusted EBITDA: $1.1 million, vs. $572,000 YoY
- Non-GAAP Net Income: $701,000, or $0.07 per diluted share, vs. $132,000, or $0.01 per share YoY
- Reported Net Loss: $245,000, or $0.02 per diluted share, vs. a loss of $4.3 million, or $0.41 per share YoY

[Q&A Highlights]
Question 1: What would you credit for the backlog growth, and how much of it will be recognized over the next year?
Answer: The increased backlog is spread across several product areas, indicating no concentration risk. It includes both short-term and long-term projects, with some orders fulfilled within six weeks and others over multiple quarters. The backlog reflects a mix of short and long-term opportunities across various customers and product lines.

Question 2: Can you provide a refresher on the split between products for cell towers, small cells, and DAS systems in terms of revenue contribution?
Answer: While specific contributions are not reported, the company performs well in wireless space, particularly in small cell and DAS systems. Small cell has become a growth engine this year, contributing to the year-over-year delta. Growth is also seen in OEM and industrial markets, including aerospace, defense, transportation, and energy.

Question 3: What is the expected rate of contribution from the 100 DAS opportunities?
Answer: The DAS opportunities span various venues, including stadiums, office campuses, medical campuses, and multi-tenant buildings. These opportunities contribute continuously, with some backlog increase driven by success in this market. The bill of materials for these projects ranges from $50,000 to over $1 million.

Question 4: Can you expand on the wireless provider making up 11% of revenue for the quarter?
Answer: The top customer in Q2 was different from Q1 and the end of last year, reflecting the project-based nature of certain applications. The company is seeing better execution within the sales team, leading to more mid to long-term deployments with large dollar values. The concentration risk is reduced as multiple customers contribute significantly to total sales.

Question 5: When can we expect a new credit facility agreement, and what kind of savings might it bring?
Answer: The new credit facility is expected to be finalized in Q3 FY2025 or by fiscal year-end, with meaningful interest rate savings anticipated.

Question 6: How do you plan to achieve the 10% adjusted EBITDA target with a 31.5% gross margin?
Answer: The company aims to improve product mix, increase production efficiency, and manage tariff impacts. Absorbing all labor costs and managing SG&A effectively will also contribute. Additional cost-saving measures, including a new credit facility, will bolster profitability.

Question 7: Are DAC and small cell product lines contributing significantly to sales?
Answer: Both DAC and small cell product lines are meaningful contributors to sales, with growth across multiple customers and regions. These product lines are expected to drive growth into the back half of the year and potentially into fiscal 2026.

[Sentiment Analysis]
The tone of the management was optimistic, highlighting diversified growth and strategic market expansion. Analysts' questions focused on understanding the drivers of backlog growth, revenue contributions from different product lines, and the company's path to achieving its EBITDA target.

[Quarterly Comparison]
| Metric | Q2 FY2025 | Q2 FY2024 | QoQ Change | YoY Change |
|-------------------------|-----------------|-----------------|------------|------------|
| Net Sales | $18.9 million | $16.1 million | -1.6% | +17.4% |
| Gross Profit Margin | 31.5% | 29.9% | +1.6% | +1.6% |
| Operating Income | $106,000 | -$415,000 | N/A | N/A |
| Adjusted EBITDA | $1.1 million | $572,000 | N/A | +92.3% |
| Non-GAAP Net Income | $701,000 | $132,000 | N/A | +431.1% |
| Reported Net Loss | -$245,000 | -$4.3 million | N/A | N/A |

[Risks and Concerns]
- Tariff exposure: Limited but present, with ongoing efforts to manage supply chain and pricing adjustments.
- Borrowing costs: Active efforts to secure lower-cost financing to reduce interest expenses.
- Market volatility: Dependence on project-based orders may lead to fluctuations in revenue.

[Final Takeaway]
RF Industries demonstrated strong financial performance in Q2 FY2025, with significant YoY growth in net sales and improved profitability metrics. The company's diversified product and customer base, along with strategic market expansion, positions it well for continued growth. Management's focus on operational efficiency and cost-saving initiatives is expected to drive further improvements in profitability. Investors should monitor the company's progress in securing lower-cost financing and managing tariff impacts to ensure sustained financial health.