RF Industries, Ltd. Aktie

Greetings. Welcome to the RF Industries Second Quarter Fiscal 2026 Financial Results Conference Call. [Operator Instructions] Please note, this conference is being recorded.

I will now turn the conference over to your host, Donni Case, Investor Relations.

Thank you, John, and good afternoon, everyone, and welcome to RF Industries Second Quarter Fiscal 2026 Earnings Conference Call. With me today are RFI's Chief Executive Officer, Rob Dawson; President and COO, Ray Bibisi; and CFO, Peter Yin.

We issued our press release after market today and that release is available on our website at rfindustries.com.

I want to remind everyone that during today's call, management will be making forward-looking statements that involve risks and uncertainties. Please note that information on this 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 forward-looking 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 related current report on Form 8-K describe the differences between our GAAP and non-GAAP reporting.

And with that, I'll turn the conference over to Rob Dawson, Chief Executive Officer. Go ahead, Rob.

Thanks, Donni. Good afternoon, everyone. Thanks for joining us. The RFI team delivered another quarter of solid execution in Q2, continuing the steady progression we've outlined over the last several quarters. As we've consistently communicated, our focus has been on improving profitability, diversifying our end markets and scaling the business in each -- in a disciplined way. And we're now delivering tangible results across each of those priorities that are converting into meaningful year-over-year improvement in both revenue and profitability.

As a quick summary, second quarter revenue of nearly $21 million increased both year-over-year and sequentially and gross profit margin expanded to 35.1%, a 360 basis point gain over the same period last year. Adjusted EBITDA nearly doubled year-over-year to $2 million and we also delivered positive consolidated net income of $879,000 versus a loss of $245,000 in the second quarter of fiscal 2025. Our team continued to generate robust bookings, driving backlog to $20 million at quarter end. And as of today, it sits at $20.1 million, which helps provide better visibility into the second half of the fiscal year and supports our expectation of continued growth.

Most notably, we're seeing the power in our operating leverage with incremental revenue contributing disproportionately to the bottom line. These results reflect both the improved mix and operational discipline we've implemented across the business. From a momentum perspective, we're seeing clear validation of our strategy to position RFI as a solutions provider versus a component supplier. Customer engagement has increased meaningfully, especially in the wireless carrier ecosystem and with the related infrastructure providers. We're receiving more targeted inbound interest with customers approaching us around specific use cases and deployments rather than general inquiries. I think this indicates that we're gaining visibility in our target end markets, which are among the most dynamic sectors in the U.S. economy. These are markets like aerospace, data center infrastructure, venues and transportation, which includes airport settings, rail and other mass transit, for example.

Our long-standing reputation for quality and service, our talented technical engineering teams and our commitment to the American workforce have created a strong value proposition to current and prospective customers. Importantly, this is translating into increased demand. We continue to see steady activity across our pipeline, recurring order flow from key customers, including our largest accounts and continued strength in our distribution channels.

Our pipeline remains a key source of confidence. We're actively engaged in several large potential opportunities, including multisite deployments of our integrated systems that could represent meaningful incremental revenue, if awarded. These opportunities are driven by large-scale network deployments and upgrades and they include turnkey solutions that combine our products and technical know-how with installation and logistics support. And of course, with each new solution or application, we fine-tune and expand our product and services road map. Across our end markets, we're seeing visibility improve going forward.

Regarding small cells, deployments were slower in the quarter based on timing from some key customers as they work through restructuring or other M&A-related details. We view this as a temporary timing issue, not a structural change in underlying demand, and we expect activity to resume and increase through the balance of the year.

In early May, RFI participated in Connect (X), which is widely considered to be a premier U.S. event for communication infrastructure and connectivity. It brings the entire wireless ecosystem together. Carriers, tower companies, integrators, distributors and manufacturers in a single venue. Our booth was extremely active, and our customer discussions were specific and actionable. If customer engagement and booth traffic are real-time demand indicators, our telecom pipeline should continue to grow.

Custom Cabling solutions continue to be a big contributor in the second quarter. To be clear, these are engineered builds rather than commodity items and are typically designed to meet exact specs for performance, durability or regulatory requirements. RFI's reputation in this business is second to none and a big reason that major aerospace and industrial manufacturing companies are repeat customers for mission-critical cabling systems, which is driving overall demand to near peak levels historically.

As you've heard from me before, we believe our DAC or direct air cooling systems are a game changer. We're seeing adoption expand across a broader set of use cases, many of which have been identified by our customers and partners. DAC is uniquely efficient and cost-effective for both small and large deployments. And we're finding new ways to add incremental value such as remote monitoring and installation services. I've been asked about our DAC's competitive position. And while traditional HVAC is still an obvious competitive solution, we believe we have an edge on adaptability, functionality and cost efficiency. Technologies like liquid cooling, which is often used in hyperscale data centers, is more likely to complement our offering rather than economically replace it. This is why we are leaning into the edge data center market versus the massive hyperscale data centers.

We believe our product portfolio is better understood and more visible in the market. Hats off to our marketing and technical teams who are making this happen. From an operational perspective, we continue to believe in the scalability of our manufacturing footprint and our capacity to meet growing demand. Ray will go into more detail on some of the areas that I've discussed, but let me give a quick summary before I hand the call off to Ray.

Looking ahead, we're feeling confident in our trajectory. With what we know today, we expect fiscal third quarter sales to increase sequentially over Q2. Integrated Systems activity should accelerate in the back half of the year. Our diversified end market exposure provides durability. Operating leverage should continue to drive margin expansion. And most importantly, we're executing against the same strategic priorities we've outlined and delivering measurable results.

On a final note, we were pleased to learn that RFI is set to be included in the Russell 3000 beginning on June 26. Being included in this index should help to expand our visibility with institutional investors, enhance our liquidity and lead to a broader shareholder base.

Now let me turn the call over to Ray.

Thank you, Rob, and good afternoon, everyone. As Rob highlighted, the RFI team is executing very well. I want to take the next several minutes to walk you through how we are actively managing key levers of our business to drive growth, reduce vulnerability and create lasting shareholder value. I'll take you through sales, product management, engineering and operations and the levers driving our strategy forward. Let me begin with our commercial results.

The growth trajectory we have been building is showing up in our numbers. When you look at where we've come from, $18.8 million in Q2 of last year, $19.1 million last quarter and $20.7 million this quarter, the direction is clear. That's not a coincidence. It's our strategy working exactly as designed. But the number I want you to focus on is our bookings. In Q2, we achieved over $26 million in bookings, our strongest bookings quarter in many years. Let that sink in. That performance drove our backlog to over $20 million giving us the visibility and the confidence that the back half of 2026 is set up well.

We've been saying diversification would be our strength. And in Q2, proved it again. When one area faces timing pressures, others step up. That's not luck. That's a portfolio working exactly as it was designed. Custom Cabling once again led the way, delivering strong results driven by contributions from both our Connecticut and Long Island teams. Interconnect put up solid combined numbers and continues to build a healthy backlog. And in Integrated Systems, these product areas continue to build momentum. The team delivered strong bookings during Q2 bolstering the backlog headed into the second half of the year.

Turning to engineering and product management. This remains an area of significant focus, and I am pleased to report that the work we have been doing is translating directly into results. Our engineering road map continues to grow, spanning strategic initiatives, technical developments and cost reduction efforts, representing meaningful revenue potential over the next few years. What excites me is the innovation is already showing up in our numbers. Newly engineered products and solutions released in the first half have generated strong bookings and shipments and we expect that momentum to continue to build as we move through the year.

In Q2 specifically, we launched new products across thermal cooling and RF passives, proof that our road map is executing on schedule and delivering customer value. On the strategic side, we are advancing DAC trials with new customers, markets and applications, exciting developments that continue to validate our thermal cooling solutions. Our product road map is focused on developing and enhancing solutions that anticipate customer needs and expand the value we deliver across our end markets. Our engineering teams are building solutions designed not just for today's requirements but for where our customers are headed. That forward-looking mindset is what we believe will make RF Industries the trusted partner of choice across the markets that we serve.

Operations continues to be a key differentiator for us. Our U.S.-based manufacturing footprint spanning both East and West Coast facilities, combined with our deliberately diversified supply chain gives us the flexibility to respond quickly to changing demand while avoiding disruptions, built to scale, built to deliver. That is the operational foundation we have put in place. Two other areas worth highlighting. First, our cost reduction program is delivering strong results in the first half driven by supplier negotiation, transformation initiatives and tariff management through source relocation. That said, we are not naive about the tariff environment. With key decisions still ahead in July, we are monitoring the situation closely and are prepared to adapt as needed. The diversification of our supply chain and our ongoing strategic sourcing efforts position us well to manage whatever comes next.

Second, on inventory. It was slightly up this quarter due to timing. We have products built and ready to ship in Q2, but customer releases moved into Q3. As those releases come through, we expect inventory turns and working capital to improve. Across all areas of our business, we are enhancing process efficiency, improving visibility and reinforcing execution discipline. Our teams are aligned, our tools are improving and our real-time visibility across all business units is giving us the insight to make faster, smarter decisions. This is the operational foundation that allows us to scale quickly, maintain consistent quality margins as demand grows. We are building an organization that is not just executing for today, but is structured to perform as we grow.

When I step back and look at what we are building, diversified revenue streams, disciplined operations and a culture of innovation, it all connects. These aren't independent efforts. They work together to reduce vulnerability, create opportunities and convert our pipeline and backlog into real performance gains. And importantly, we are doing it while closely [indiscernible] and maintaining our operational integrity.

I would categorize Q2 as a quarter that reinforced the growth trajectory of our business. And quite frankly, it has us excited as we move into the second half. The revenue growth is consistent. The bookings are at levels we haven't seen in many years. The backlog gives us real visibility and the team is executing. That combination doesn't happen by accident. It happens when strategy, people and execution align. And right now, they are aligned.

I want to take a moment to recognize the RF Industries team across every segment and every function whose commitment and hard work made this quarter possible. They are the reason we are having this conversation today, and to our customers, your trust and partnership mean everything to us. We are confident in our ability to deliver results and unlock the full potential of our business. And I can't wait to share what the second half looks like.

I will now turn the call over to Peter to walk through the financial results. Peter?

Thank you, Ray, and good afternoon, everyone. As you just heard from Rob and Ray, our team continued to deliver strong results in our fiscal second quarter. Sales increased 9% on both a year-over-year and sequential basis to $20.7 million. Gross profit margin increased 360 basis points to 35.1% from 31.5% year-over-year. The improvement reflected our team's strong execution to drive new business with price realization, along with operational efficiencies, focusing on cost control. We have long believed our business carries significant operating leverage above $20 million in quarterly revenue, and our Q2 results reflected exactly that.

Second quarter operating income was $1.1 million, a significant improvement from the $106,000 we reported last year. Consolidated net income was $879,000 or $0.08 per diluted share. On a non-GAAP basis, net income was $1.6 million or $0.14 per diluted share. This compares to a consolidated net loss of $245,000 or $0.02 per diluted share and non-GAAP net income of $701,000 or $0.07 per diluted share in Q2 fiscal 2025. Second quarter adjusted EBITDA was $2 million compared to adjusted EBITDA of $1.1 million in Q2 2025.

Moving to the balance sheet. As of April 30, we had a total of $3.4 million of cash and cash equivalents, and we have working capital of $16.5 million and a current ratio of approximately 1.9:1, with current assets of $35.1 million and current liabilities of $18.6 million. At our second quarter end, we had $6.1 million outstanding on our revolving credit facility. We continue to actively manage working capital to strengthen our liquidity and overall capital position. As we continue to generate positive cash flow, we expect to reduce net debt to a level we view as immaterial relative to our balance sheet.

Our inventory was $14.4 million, up from $12.6 million last year. We continue to monitor inventory levels closely, and we have a prudent approach to inventory management that balances discipline with customer demand. Inventory levels may fluctuate quarter-to-quarter based on timing of inventory received relative to expected shipments and any delays.

Moving on to our backlog. Bookings for the second quarter were $26.3 million, up $8.4 million versus the previous quarter, driving backlog to $20 million as of April 30, a $5.6 million increase quarter-over-quarter. As of today, our backlog currently stands at $20.1 million. As always, backlog can fluctuate based on order timing and fulfillment, but we view the increase as a strong indicator of second half momentum.

Overall, our first half results reinforce the confidence we have in our business model and the operating leverage we are now realizing above $20 million in sales. With bookings accelerating and backlog building as we enter the second half of our fiscal year, we believe the margin and earnings trajectory we demonstrated in Q2 is sustainable and we are committed to delivering continued growth and shareholder value going forward.

With that, I'll open up the call for your questions.

[Operator Instructions] The first question comes from Josh Nichols with B. Riley.

This is Matthew on for Josh. I guess just to start off on the Custom Cabling side. It's basically now your largest product line. I'm wondering, like, is this the new shape of the business? Or do you expect Integrated Systems to come back and rebalance the mix?

Yes. Matthew, thanks for the question. So look, we're really happy with the way Custom Cabling is performing. The team is doing amazing work, both with existing long-term customers and with new that we've acquired. I think when you look at the sort of the breakdown of the quarter from a product set, Integrated Systems underperformed sort of our expectations in Q2, largely to my comments, just based on -- in the small cell world, we had some things that we expected would have been a little -- would have had more shipments in the quarter and some of those got pushed out to later in the year.

So I think we expect Integrated Systems is going to continue to grow for us and be a nice growth part of the business. That's not taken anything away from how great the Custom Cabling business is and can also be a growth engine. I mean I think that's kind of all along is, to Ray's comments, we've tried to diversify in such a way that not every quarter is going to look exactly the same largest customer or 2 perspective nor from a sort of a product makeup. We're enjoying the fact that the pistons are kind of firing in all different places and we're seeing that diversity hit.

Got it. And on that significant customer side, I mean, you have a large A&D customer that's been making up 10% of revenue since last quarter, around like 14% now. I'm just wondering how do you expect that ramp continuing through, I guess, like the fiscal third quarter? And like where does that run rate land realistically from here?

Yes. I think it's -- look, it's still somewhat newly acquired customer. That was last year, we started doing material levels of business with the aerospace customer, in particular. And we're pleased with that relationship. We seem to be performing really well for them. We've been working on unique designs specifically with them. That's the kind of business we do in our Custom Cabling product areas. Our expectation is that we're going to continue performing at solid levels there. It's not something we spend a lot of time trying to predict because it is really based on their schedule of needs. But as long as we keep performing, we feel like it will be a consistent part of our business.

Got it. And I guess just shifting over, DAC seems like a long-term strong growth driver. And I guess maybe you can -- you mentioned this a bit on the call, but I'm wondering if you can expand more on, like, how -- on liquid cooling and thermal cooling and how the DAC solution kind of factors into data centers and the AI infrastructure play in general? And I guess just kind of following on that is just in terms of like how the data center and AI infrastructure opportunity looks today and how that can change over the next 12 to 4 (sic) [ 14 ] months for you guys?

Yes, sure. So look, we think our DAC -- our specific DAC solution is a really, really strong entrant to the market in the last few years for edge data center applications. And to my comment, this is not the hyperscale 100,000-foot or larger, huge data centers that are a big topic at the moment. As more of those continue to get installed, they're also finding the people installing those -- that equipment and those networks are finding that they need to push equipment closer to the users. And so that's the play we've been involved in for some period of time. Starting with the wireless carrier ecosystem, where we have -- we're entrenched, we know the people, we have agreements. That's sort of where we started getting our first wins, and that's now starting to expand into folks that I would call more traditional data center players both wireline and really the data center names that we talk about all the time in the news.

So for us, it's focusing on those edge deployments. There's been a lot of chatter lately of certain municipalities and states coming out with ruling saying, hey, you can't build a data center here. As those large data centers get deferred or pushed maybe to a location that wasn't in the plan, we think the edge of the network is a great place to be. And so when you look at those buildings, cabinets and enclosures that exist currently or that are being installed, they're less intrusive. They may not have equipment in them today, but they're going to need to. That's a place that our DAC systems really can benefit both from a functionality perspective, but also just from a cost efficiency perspective. We have the data that shows we're up to 75% more cost-effective than traditional HVAC deployments in those kinds of environments.

So we feel good about it. We think there's a nice growth trajectory ahead of us in that 1 to 2 years and beyond. We also see opportunities to reinvent what we're putting out there in the market today, related products and then upgrades to the things that we have today -- it's really become a workhorse and it's a nice growth trajectory from a few years ago where we were seeing minimal, if any contribution from those product lines to what we're now seeing today.

Got it. Really insightful. I guess just final question for me, mainly on working capital and free cash flow. Looks like working capital absorbed some cash in the first half. I'm just wondering how we should think about those drivers changing in the second half and, I guess, free cash flow conversion in general?

Yes, thanks for the question. So as you saw, the cash came down a bit, that was to pay the line down, right? Helping us with the interest expense line there. So as we continue -- if you kind of exclude that, it's positive cash flow, but we plan on utilizing the cash to pay down the line closer to that minimum balance. And from there, we should start seeing kind of cash build.

[Operator Instructions] Okay. We currently have no further questions in the queue. I'd like to turn the floor back over to Robert Dawson for closing remarks.

Thank you, John, and thanks, everyone, for joining us today. We appreciate your continued interest and support of RF Industries, and we look forward to sharing our third quarter results in September. Have a great day.

This concludes today's conference, and you may disconnect your lines at this time. Thank you for your participation.

Greetings. Welcome to the RF Industries First Quarter Fiscal 2026 Financial Results Conference Call. [Operator Instructions] As a reminder, this conference call is being recorded.

Now I would like to turn the call over to our host, Donni Case, Investor Relations. Please go ahead.

Thank you, Tom, and good afternoon, everyone, and welcome to RF Industries' First Quarter Fiscal 2026 Earnings Conference Call. With me today are RFI's Chief Executive Officer, Rob Dawson; President and COO, Ray Bibisi; and CFO, Peter Yin. We issued our press release after market today and that release is available on our website at rfindustries.com.

I want to remind everyone that during today's call, management will be making forward-looking statements that involve risks and uncertainties. Please note that information on this 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 forward-looking 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 the call, we will be discussing certain non-GAAP financial measures. Today's earnings release and related current report on Form 8-K, describe the differences between our GAAP and non-GAAP reporting.

With that, I'll turn the conference over to Rob Dawson, Chief Executive Officer. Go ahead, Rob.

Thank you, Donni. Good afternoon, everyone. Welcome to our first quarter fiscal 2026 conference call. I'll lead off with highlights from the quarter. Ray will provide a progress report on sales and operations, and Peter will cover our financial results before we open the call to your questions.

I'm pleased to report that we're off to a great start in fiscal 2026. Net sales were $19 million in the quarter. This was just shy of our record first quarter last year in absolute numbers, but for totally different reasons. Last year, in fiscal Q1, we had a large project that created a welcome anomaly and produced increased sales in what is historically a seasonally softer period. Net sales for Q1 this year, however, reflected a far greater diversity of products, customers and end markets, which I believe will set the stage for upcoming quarters. That said, for me, the big takeaway for this quarter was the meaningful expansion in profitability. Compared to the first quarter last year with similar net sales, gross margin -- gross profit margin improved 250 basis points to 32.3%. Operating income tripled to $177,000 and adjusted EBITDA decreased -- sorry, adjusted EBITDA increased -- wouldn't be positive, If I said decreased -- increased -- EBITDA increased 22% to nearly $1.1 million. To our long-term shareholders, thank you for your patience and confidence that we would deliver on what we promised. A more diversified sales base and increased profits from our significant operating leverage.

What's exciting to me is that our entire team is feeling the momentum. And in our business, momentum doesn't just happen, it's earned when strategy and execution move together in lockstep. Over the past few years, we've worked hard to reach this inflection point, where we have a clear line of sight to scale both our business and profitability. As you saw in our earnings press release, I'd also like to note that, that momentum has produced a huge increase in our backlog, which currently stands at $18.6 million. That's an increase of over $6 million since we last reported earnings in mid-January when the backlog was $12.4 million.

Now I'll share specifics on why our business model and strategy are working and why we believe it's sustainable. First, we've worked our way up the food chain with the largest communications companies in the country. We're no longer just a vendor but a solutions provider with a portfolio technology-forward products and solutions that address many applications within telecom. This expanded access and our high-value product portfolio led to new opportunities that, in some cases, fall squarely into the operating budgets versus the CapEx spend. This makes us far less reliant on the cyclical Tier 1 wireless capital spending and aligns RFI to participate more instantly in the year-round maintenance and replacement schedule that's critical to maintaining network quality and integrity.

Next, our state-of-the-art systems like direct air cooling and small cell are gaining traction. Our DAC systems are especially adaptable to many applications in new end markets. Equipment at the edges of networks require temperature control, to operate efficiently and our DAC's ability to lower energy costs by up to 75% while being rugged and easy to maintain, delivers a compelling customer proposition. We're serving an impressive and growing customer list here. These solutions have opened doors to many new customers and markets. We're now reinforcing our presence in new verticals such as wireline, cable and edge data centers. We believe that we've identified a significant unmet need at the edge of the network, close to where data is generated and consumed. While most know that hyperscale data centers require massive cooling systems, we believe that the small buildings, cabinets and enclosures at the edge of networks are just as important, and our DAC systems provide a powerful and cost-efficient solution.

Additionally, RF cabling solutions team is engineering, producing and delivering high-quality mission-critical solutions to customers across several markets, including industrial, communications and aerospace, where we continue to win repeat orders from a leader in this market. The strong performance and commitment to innovation and quality from our team continues to add to our credibility and reputation. We refined our go-to-market strategy to specifically target new markets for RFI. Our sales team is doing a terrific job of developing relationships in our target markets and have opened doors and elevated our opportunity set. Our customer roster is amazing. It includes a host of well-known names. For competitive reasons, we generally don't name customers, but our client list certainly makes the team proud. Ray will talk more about our go-to-market progress and operations in his remarks shortly.

Structurally, our company is in great shape. Our team has done an outstanding job in diversifying our supply chain with redundant manufacturing sources, both international and domestic, that feed into our U.S. production operations. This allows us to flex up for more demand without incurring any material increase in overhead or CapEx. This capital-light approach has been a big factor in increasing our operating leverage.

Financially, RFI is also in good shape. We significantly improved our free cash flow over the past several quarters, reflecting our operational execution, margin expansion and tighter capital discipline. Last year, we renegotiated our revolving credit facility with improved terms, which should drive significant annual savings. All of this has allowed us to greatly reduce our net debt. While fiscal '25 was a breakout year for RFI, our team is even more excited about 2026. We feel confident that we can execute against our strategic priors. And similar to the trajectory in 2025 and supported by the large increase in our backlog, with what we know today, we expect revenue growth to accelerate in the back half of the year.

Finally, I want to thank the RFI team that continues to execute and deliver great results. Thank you to our customers for allowing us to partner with you and to our shareholders for your support.

With that, I'll turn the call over to Ray.

Thank you Rob, and good afternoon, everyone. As Rob highlighted, the momentum we are feeling across this organization is real, and it is earned. I'd like to take a few minutes to walk you through how we are actively managing the key levers across our business to drive growth, reduce vulnerability and create lasting shareholder value. I will take you sales, product management, engineering and operations and the levers driving our strategy forward.

Let me begin with the commercial momentum and market position. With the focus and execution of our team, we can maintain momentum even when specific opportunities take longer to close. Something in prior years could have had a significant impact on quarterly results. This resilience comes directly from the diversification we have deliberately built across markets, product areas and customers which allows us to manage possible softness or delays in 1 area with strength in others.

Revenue and bookings are, without question, the scoreboard, but they don't tell the whole story. Equally important is how we achieved these results. A big part of that answer is diversification. As Rob mentioned, this diversification is real and it is working. Today, we are actively serving and winning business across aerospace, telecommunication, industrial, medical, data centers and government and military markets, amongst others. And the strength of that diversification showed in Q1, where strong performance in our Custom Cable segment helped offset timing delays in integrated systems. This is not accidental. It is the result of our strategic and deliberate effort to broaden RF Industries addressable market and reduce concentration risk. We are also seeing a resurgence in previous delayed opportunities, which is strengthening both our pipeline and our backlog. This improved visibility gives us real confidence heading into upcoming quarters and positions us well to capture growth, manage risk and continue building sustained shareholder value.

Turning to engineering and product management. This is an area of significant focus and investment for us and one, where I believe the work we are doing today will be a key differentiator for RF industries going forward. We remain focused on delivering high-value, high-quality solutions that address evolving customer needs by streamlining our development process and prioritizing high-impact projects, we are driving towards faster time to market and more predictable revenue streams. Close collaboration between product management, engineering and sales ensures that our innovation aligns tightly with market demands. This allows us to respond quickly to shifts in customer requirements and capture new opportunities as they emerge.

During the quarter, we continued to advance our new product road map through development, qualification and gate stages. Our work on small cell configurations resulted in meaningful bookings this quarter, demonstrating how close collaboration between engineering, product management and sales translates into revenue. Our engineering team is building solutions designed not just for today's requirements but for where our customers are headed. That forward-looking mindset is what we believe will make RF Industries the trusted partner of choice across the markets that we serve. A good example of this is our thermal cooling solutions which are gaining traction in edge data center and industrial applications. This demonstrates our ability to anticipate customer needs and leverage core capabilities across diverse end markets.

Operations. Operations is a key differentiator for us, and I want to be clear about how serious we take it. Across all areas of our business, we are enhancing process efficiency, improving visibility and reinforcing execution discipline. This ensures that we can scale quickly, maintain constant quality and protect margins as demand grows. Aligning our resources tightly with our strategic priorities creates the foundation for predictable sustainable performance even as we manage multiple moving parts across the portfolio.

On the supply chain side, we have taken deliberate steps to strengthen supplier relationships, improving inventory position and reduce single-source dependencies where possible. And as the tariff environment continues to evolve, be assured that we have a close eye on the impact and continued to proactively take steps to mitigate risk. This isn't new work. It's an effort we've been advancing for some time. In this quarter alone, we continue the ongoing strategic qualification of alternative suppliers in different regions and the proactive repositioning of our supply chain to reduce exposure. Based on this, executed supplier transitions of certain key components categories. We continue this disciplined approach across -- as the trade environment evolves, all aimed at making our operations more resilient and our customer commitments more reliable. These are not onetime actions they reflect a sustained commitment to running a leaner, more agile organization. Collectively, the levers we are pulling across the organization, diversified revenue streams, disciplined operations and market-driven innovation work together to reduce vulnerability and gain opportunities. This approach allows us to manage risk while capitalizing on new opportunities. Importantly, it positions the company to convert pipeline and backlog momentum into measurable performance gains without compromising margin or operational integrity.

In closing, I would categorize Q1 2026 as a quarter of meaningful progress made during a period when customers and markets were still settling into the new year. We are executing with discipline while preparing to capture the opportunities ahead. Our diversified portfolio, operational focus and innovation mindset, create a unique platform for growth, reducing vulnerability and delivering shareholder value. We are confident in our ability to deliver results and unlock the full potential of our business across all segments.

I will now turn the call over to Peter to walk you through the financial results. Peter?

Thank you, Ray, and good afternoon, everyone. As Rob mentioned, we are pleased with our first quarter results. First quarter sales were relatively flat at $19 million compared to $19.2 million year-over-year. As expected, sales were down 16% from $22.7 million on a sequential basis, reflecting our seasonally slow first quarter. Our gross profit margin increased 250 basis points to 32.3% from 29.8% year-over-year. This improvement reflected our team's strong execution to drive price realization and operational efficiencies, while also focusing on cost control. As a result of this, we see improved operating income, consolidated net loss, non-GAAP net income and adjusted EBITDA. First quarter operating income was $177,000, up from the $56,000 we reported last year. First quarter consolidated net loss was $50,000 or $0.00 per diluted share, and our non-GAAP net income was $659,000 or $0.06 per diluted share. This compares to a net loss of $245,000 or $0.02 per diluted share and a non-GAAP net income of $397,000 or $0.04 per diluted share in Q1 of 2025.

First quarter adjusted EBITDA was $1.1 million or 5.6% of net sales compared to adjusted EBITDA of $867,000 or 4.5% of net sales in Q1 2025. We continue to focus on delivering adjusted EBITDA of 10% or greater as a percentage of net sales.

Moving to the balance sheet. As of January 31, 2026, our balance sheet remains healthy with a total of $5.1 million, our cash and cash equivalents and working capital of $14.6 million. Our current ratio was approximately 1.8:1, with current assets of $33 million and current liabilities of $18.4 million. As of January 31, 2026, we had borrowed $7.1 million from our revolving credit facility. We continue to manage our working capital to strengthen our liquidity and overall capital position. Our net debt was reduced by $4.8 million compared to Q1 2025 and down $744,000 compared to our Q4 2025.

Our inventory remained relatively consistent at $13.8 million compared to $13.7 million last year, reflecting a prudent approach to inventory management that balances discipline with customer demand.

Moving on to our backlog. As of January 31, our backlog stood at $14.4 million on bookings of $17.9 million. As of today, our backlog currently stands at $18.6 million. While we're pleased with the increase since quarter end, as I've mentioned before, our backlog is a snapshot in time, and it can vary based on when orders are received and when orders are fulfilled. We view backlog as a general gauge of health. We know that it can swing significantly between reporting periods and therefore, may not accurately indicate our near-term sales outlook.

Overall, we are excited to start fiscal 2026 with an upbeat quarter that builds upon the operational momentum that we achieved in fiscal 2025. We are heads down on execution, and we believe we are well positioned for the periods ahead.

With that, I'll open the call to your questions. Operator?

[Operator Instructions] And the first question today is coming from Josh Nichols from B. Riley Securities.

This is Matthew on for Josh. I guess to start off, coming off a breakout in fiscal '25 with revenue up 24%, you ended the year with a double-digit EBITDA margin. I'm wondering like how are you thinking about the full year growth trajectory for fiscal '26? And where do you see the meaningful drivers?

Yes. Thanks for the question. So I think -- I mean, as I tried to share in my comments. I think we expect the trajectory of growth to be similar sort of quarter-to-quarter movement as we had last year. And it's important to note, last year first quarter was actually a few hundred thousand dollars larger than our second quarter. So I think this year, we expect to be more sequential, sort of in the growth that we have and sort of our normal trajectory starting with Q1, which is always seasonally an interesting quarter to navigate. So we expect to accelerate through the year. The backlog increase is obviously a nice sign to show the support of that, that it's not just words, but we're actually seeing the orders and the items that have been in our pipeline for some time, starting to print through as actual orders and going into our system with timing and expected time frame for shipments. So we expect to accelerate in Q2 versus Q1, and then we think it's going to continue going from there, similar to what we saw last year. The drivers of that really are across the various product lines. Our diversity, I think, is starting to not just print through, as Ray talked about in some detail, but it really helps to smooth out the interesting periods where may not be projects in one market that are seasonally driven or CapEx driven. We're starting to see that, get a little more consistent throughout the year. And I think with that product lines that are coming from different customers in different markets give us a lot of comfort that sort of the [ pistons ] can all be running on at different speeds and paces, but it will start to smooth out those results and make them predictable and much easier to manage the supply chain and give us some visibility, certainly to get into the later part of the year.

Excellent. And gross margin came in especially strong this quarter. I'm wondering how durable are the factors driving that improvement? And how do you think we should -- how should we see that flowing throughout the rest of the year?

Yes. Great question on gross margin. I think the big thing for us is sales compared to last year's first quarter were roughly flat, down a little, not surprising. But with that, our margins went up almost 3 full points, which is great to see. And I think there was a lot of questions on the last earnings call about how sustainable the 30-plus margins are. We feel pretty good about those and our ability to stay there. I think the things that have gotten us consistently above those numbers above that 30% level really are things like being good at pricing for the value that we believe we're providing to our customers. The mix of products a lot of times helps us, just some of our items are -- have higher value maybe than the historical, more fragmented product lines that we're selling. And then lastly, I think it's just -- look, the higher the sales number, the better those margins are going to be. We have a pretty simple pretty simple P&L when you break it down with a lot of operating leverage below the line. That's largely driven by what happens on the top line and then the gross margins that go along with it based on pricing and mix and just overall efficiency of building things.

Got it. And you mentioned the backlog, how it bounced post quarter, we're sitting around $18.6 million today and that's mainly a timing thing based on contracts. But I'm wondering if you can kind of give us an idea on the composition of that backlog and what's driving most of that replenishment, especially after the quarter?

Yes. Sure. The backlog usually has a pretty healthy mix of different items in it. I think the increase that we've seen is especially healthy. You have 4 different pretty significant product lines across several customers. So we're seeing it in our integrated systems, in our custom cabling, which are the 2 areas that we expect sort of larger percentage growth than what we get out of our interconnect product that are -- those are largely distribution-friendly on the interconnect side, and we expect growth there. But a lot of times, those aren't project-based and things that are going to show in sort of a backlog increase. They may come and go in a short period of time. So the increases we've seen, you've got some small cell in there, you've got some DAC thermal cooling, you have some custom cabling in the aerospace market. You've some custom cabling in the industrial market, where we continue to see some great blue chip customers ordering from us that have been with us for years. So it's a good healthy mix, I think, across the different product lines that drove that increase in backlog.

Great. I guess just 1 last question, mainly regarding DAC thermal cooling. I'm wondering if there's an update on how that's progressing in terms of customer interest in the NEMA 4 product?

Yes. Thanks for that. So the DAC thermal cooling product is one that we've seen significant growth. We saw significant growth in '25 compared to prior years. We continue to see that trajectory increase. And we're seeing a lot of interest. I think we're starting to see customers making installations and trials to see how well it works in their various systems. In a lot of cases, these are edge data center applications. The system is performing great, whether that's the NEMA 4 or some of the other versions. We're basically producing exactly what we say we're going to do, significant savings and the equipment runs flawlessly without having to use air conditioning all the time, which is expensive and high maintenance as well. So we're seeing some early stages of newer applications in cable and edge data centers that are new markets for us, that are new customers for us. I expect that will be a meaningful part of our growth, not only later this year, but in the subsequent years.

[Operator Instructions] And there are no questions in queue at this time. I would now like to turn the floor back to Rob Dawson for closing remarks.

Thank you, Tom. Appreciate it. I was hoping for a lot more questions because I have a lot of other answers, but I'll save those for the next call. I want to thank everyone for participating in today's call. We appreciate your support and look forward to sharing our progress on our Q2 earnings call in June. Have a great day.

This does conclude today's conference call. You may disconnect at this time, and have a wonderful day. Thank you once again for your participation.

Greetings. Welcome to the RF Industries Fourth Quarter Fiscal 2025 Financial Results Conference Call. At this time, all participants are a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] Please note, this conference is being recorded.

I will now turn the conference over to your host, Donni Case, Investor Relations. You may begin.

Well, thank you, John, and good afternoon, everyone, and welcome to our Industries Fiscal Fourth Quarter and Year-End 2025 Earnings Conference Call. With me today are RFI's Chief Executive Officer, Rob Dawson; President and COO, Ray Bibisi and CFO, Peter Yin. We issued our press release after market today, and that release is available on our website at rfindustries.com.

I want to remind everyone that during today's call, management will make forward-looking statements that involve risks and uncertainties. Please note that 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 forward-looking 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 related current report on Form 8-K describe the differences between our GAAP and non-GAAP reporting.

With that, I'll now turn the conference call over to Rob Dawson, Chief Executive Officer. Please go ahead, Rob.

Thank you, Donni, and welcome, everyone, to our fourth quarter and fiscal year-end 2025 conference call. I'll start with our fourth quarter highlights and observations of what our team achieved in fiscal '25, Ray will then provide a progress update on our go-to-market strategy, and Peter will cover our financial results before opening the call to your questions.

In the fourth quarter, our team kept building on the momentum we delivered throughout the year. Net sales grew 23% year-over-year to $22.7 million. Over the past several quarters, I highlighted how our strategic transformation was driving profitable growth. And the operating leverage from executing our plan really showed in Q4. Gross profit margin of 37% exceeded our 30% target and adjusted EBITDA was 11.5% of net sales, above our stated goal of 10%.

We controlled our fixed costs while driving strong sales growth, and that execution delivered a significant increase in profitability. As I mentioned, our results steadily accelerated throughout the year. And for the full fiscal year, net sales were $80.6 million, an increase of 24% compared to fiscal 2024. Gross profit margin for the year was 33% compared to 29% in the prior year and we delivered adjusted EBITDA of $6.1 million, a huge increase compared to $838,000 in adjusted EBITDA in fiscal 2024.

From both the top line and bottom line perspective, fiscal '25 felt like a breakout year for RFI. And going forward, our goal is to prove what our operating model is capable of producing. While the general overall environment continues to have its share of uncertainties and increased costs, our team will continue to execute our long-term strategic plan to further transform RFI from a product seller to a technology solutions provider.

In fiscal '26, we remain intensely focused on diversifying end markets, driving further customer and market penetration and launching new products and solutions that we believe will help deliver another year of strong sales growth and profitability. Now I'd like to walk you through how some key initiatives contributed to a successful fiscal '25. And how they set up RFI for future growth and profitability.

The baseline story is the difference between being a solutions provider with technologically advanced products and systems versus our historical position as a downstream component supplier. Being a solutions provider, coupled with RFI's reputation and product approvals from key customers has opened many new channels for growth and has resulted in considerable diversification of both customers and end markets. Ray will go into more detail on trends we're seeing in key end markets, including aerospace, stadiums and venues and transportation.

What I want to point out is that diversification not only expands opportunity but also mitigates the risk of customer concentration. In the past, there were times when a single customer accounted for a large part of our growth during the fiscal year. While this was good for our top line and is not abnormal in a growth story, we also recognized it could be seen as a vulnerability. Since then, our team has been heavily focused on widening our horizons by innovating our product applications into new end markets and engaging new customers to drive diversification.

Now our results are healthier with diversity by product, customer and market. Three key initiatives are helping our story evolve. First is deepening our relationships with existing customers. We want to partner more closely with our customers, which allow us to add more value and likely gain a larger share of their annual spend. With our high-value proprietary offerings, we can provide tremendous performance and cost benefits to our customers.

We've become very adept at partnering with our customers to identify a need and then using a key solution as the tip of the spear to elevate our relationship. Once we began working more collaboratively with the key technical and market resources within our customers on solving their pain points, we saw more opportunities to cross-sell and expand the value proposition of our relationships.

Second, leveraging our successes in markets where we have a long history helps us identify needs for similar applications in other new end markets. Once we've proven our value to keep current customers, our team has become skilled at aligning with new customers and partners to penetrate new market segments. We believe over time that these new markets and customers will build into healthy contributors to our sustainable growth and profitability.

Finally, we're expanding the value proposition we offer to our channel partners. A solid portion of our revenue comes from partners in our distribution channel, and we continue to foster very close relationships with these key companies. As our portfolio of high-value innovative products and solutions grows, our partners' product offerings to their customers are further enhanced. This has resulted in steady recurring sales for RFI. Also, our distribution partners help open the doors to customers we're targeting.

Just about every key contractor and integrator buys from distributors, and we appreciate being well aligned with each of those groups. In addition to our key distributors, we also made a strategic decision to partner with certain manufacturers that act as a channel to take us to new customers and markets. As I mentioned on last quarter's call, a major manufacturer of electronic cabinets and enclosures identified our thermal cooling systems as a solution for edge data center installations.

And we're starting to see some real traction in these applications. Both of our organizations believe our combined solution addresses the critical role that cooling systems play in the performance and reliability of edge equipment. While still in its early stage, this collaboration can result in a significant new opportunity for us. It's a great example of where a customer sees a problem and comes to RFI for a solution.

We look forward to sharing more about these stories in coming quarters. These go-to-market initiatives, along with our continued focus on constant improvement in operational excellence, provided great results in 2025. And we have solid momentum as we enter fiscal year '26. While we expect some of the normal seasonality in Q1, we also expect to accelerate throughout the year in a similar trajectory to fiscal '25. And with what we know today, we anticipate another year of sales growth.

As I've noted before, we look at our business opportunity over the long term because results can flex from quarter-to-quarter depending on when orders are shipped out the door and a small movement of a shipment even by a day or 2 could have a large impact on a single quarter. Our leading indicator is having a strong and diversified pipeline to help fuel top line growth, which in turn can deliver profitability from our operating leverage. Most important, we have a great team that's firing on all cylinders. Their enthusiasm and commitment to maximizing the opportunities ahead is driving RFI forward to our full potential.

Now I'll turn the call over to Ray for more detail on the tremendous progress our team has made in executing on our strategic plan.

Thank you, Rob, and good afternoon, everyone. Across our business, Q4 reinforces the progress we've made throughout the fiscal 2025. What stands out most is not just where we're seeing growth but the consistency and discipline behind our execution. Across our targeted end markets, demand remains supported by long-term infrastructure and connectivity investments. In large infrastructure markets, including stadiums, venues and transportation, activity remained strong throughout the year.

We supported more than 130 projects across these categories delivering a meaningful contribution to revenue compared to prior years. More importantly, this work strengthen our credibility and visibility, positioning us for future multiyear opportunities including major global events such as the L.A. Olympics and the U.S. World Cup as well as continued airport modernization programs. Our pipeline continues to provide strong visibility across a wide range of infrastructure-related opportunities, reinforcing our confidence in demand stability.

The aerospace and defense market also remained solid. Performance here continues to be driven by close collaboration between engineering, operations in customers to deliver solutions that meet stringent performance, quality and compliance requirements. In telecommunications and broadband investment remains focused on densification, coverage expansion and network reliability.

Our small cell, direct air cooling and RF passive solutions continue to see consistent traction across both OEM and carrier-driven programs. Across all these markets, our distribution channels continue to perform well, delivering consistent contributions based on improved product availability, strong partner engagement and more disciplined commercial cadence.

From an operational standpoint, Q4 reflected continued progress towards more predictable execution and tighter operational controls across inventory, cost and delivery. Inventory actions were focused on aligning supply chain with demand while managing tariffs and supply chain uncertainty. And our cost reduction initiatives continue to deliver tangible benefits. Process and IT improvements are strengthening the forecast accuracy, visibility and scalability across the organization.

From an engineering perspective, our focus continues to be innovation aligned with market demand, a more disciplined state gauge process and cross-functional prioritization are improving on how we allocate resources to the highest value opportunities. Customers are increasingly engaging with us early in their design cycles, reflecting our evolution from a component supplier to a problem-solving partner. As Rob noted, RF Industries looks very different today than it did a few years ago. That change reflects clearer accountability, stronger cross-functional alignment and a more disciplined operating rhythm.

Looking ahead to 2026, our priorities are to build on this foundation, executing reliable, advancing our product road map, strengthening leadership and improving predictability across the business. There are plenty of external variables we continue to manage, but our strong pipeline, disciplined operations and aligned teams position us well moving forward. What gives me confidence today is the progress we've made in building a more predictable and scalable business with stronger execution, better visibility and clear accountability. RF Industries is well positioned to carry momentum into 2026 and continue creating value for our customers and shareholders.

Now I will turn the call over to Peter.

Thank you, Ray, and good afternoon, everyone. As Rob mentioned, we're pleased with our fourth quarter and full year results. Starting with our fourth quarter. Sales increased 23% to $22.7 million year-over-year and 15% on a sequential basis. Gross profit margin increased to 37% from 31% year-over-year. That is an improvement of approximately 600 basis points. That was driven by both higher sales and a more favorable product mix.

Fourth quarter operating income was $903,000, a considerable improvement from the operating income of $96,000 we reported last year. Consolidated net income was $174,000 or $0.02 per diluted share, and our non-GAAP net income was $2.1 million or $0.20 per diluted share compared to a consolidated net loss of $238,000 or $0.02 per diluted share year-over-year and non-GAAP net income of $394,000 or $0.04 per diluted share for Q4 2024.

Fourth quarter adjusted EBITDA was $2.6 million, compared to adjusted EBITDA of $908,000 for Q4 2024. Turning to fiscal year 2025 results. Full year revenue increased 24% to $80.6 million year-over-year. This included finishing the year strong with shipments from our custom cabling offering to a leading aerospace company. Full year gross profit margin increased to 33% from 29% year-over-year. That is an improvement of approximately 400 basis points, which was primarily driven by both higher sales and a more favorable product mix.

Full year operating income was $1.8 million, a significant improvement from an operating loss of $2.8 million in fiscal 2024. Full-year consolidated net income was $75,000 or $0.01 per diluted share, and our non-GAAP net income was $4.4 million or $0.40 per diluted share compared to a consolidated net loss of $6.6 million or $0.63 per diluted share year-over-year and a non-GAAP net loss of $990,000 or $0.09 per diluted share for fiscal 2024.

Full year adjusted EBITDA was $6.1 million, a substantial improvement compared to adjusted EBITDA of $838,000 in fiscal 2024. Moving to the balance sheet. Our working capital and overall liquidity remain very strong. Our improved results allowed us to reduce our net debt by $4.6 million compared to last year. As of October 31, 2025, we had a total of $5.1 million of cash and cash equivalents and we had working capital of $14.1 million and a current ratio of approximately 1.7:1, with current assets of $35 million and current liabilities of $20.9 million.

As we discussed on the last call, we have been exploring ways to reduce our overall cost of capital. As a result of our significantly stronger financial results and outlook, I'm pleased that we were able to negotiate more favorable terms and flexibility for our revolving credit facility, reducing the minimum outstanding loan balance, interest rates and reporting requirements.

As of October 31, 2025, we had borrowed $7.8 million from our revolving credit facility. Our inventory was $13.7 million down from $14.7 million last year. The decrease in inventory reflected further operational excellence. We continue to manage our inventory levels with discipline, balancing our ability to meet strong customer demand while optimizing supply chain operations to maximize efficiency.

Moving to our backlog. As of October 31, our backlog stood at $15.5 million on bookings of $18.5 million. As of today, our backlog currently stands at $12.4 million. Our backlog is a snapshot in time and can vary based on the based on when orders are received and when orders are fulfilled. While we view backlog as a general gauge of health, it can swing significantly at times, making it less predictable -- making it a less predictable indication of our near-term sales.

We are incredibly proud of the breakout year that we achieved in 2025. While understanding there is still work ahead of us as we see room for further improvement. We enter fiscal 2026 with strong momentum, and we are optimistic about the future and our ability to drive improved profitability as we continue to grow.

With that, I'll open up the call for your questions.

[Operator Instructions] Thank you. At this time, we will be conducting a question-and-answer session. [Operator Instructions] The first question comes from Josh Nichols with B. Riley.

This is Matthew on for Josh. It's a great quarter. Yes, I guess to start off, I mean, fiscal '25 came in above our expectations. You had strong momentum exiting the year. I'm just wondering how we should think about the growth trajectory for fiscal '26, especially now that rolls through the first quarter of your fiscal '26. So I'm just wondering how things are tracking?

Yes. I appreciate that. Thanks for the question and the comment. So I think as I said in my commentary, our expectation for is another year of growth. I think the trajectory of how we get there is going to look similar to what it was in '25. The joy of having a first quarter that includes November, December and January means you're always going to have tonality almost regardless of what industries you're selling into.

So we expect our first quarter probably to be our platform to start from as our lowest quarter of the year. Again, and if you look at what we did in you can see how quickly that accelerates and how the profitability really ratchets up. So while we're not giving specific guidance, I think if you look at our normal sort of our normal quarterly -- quarter-over-quarter growth that we see in a given year, we expect something similar in 2016.

Got it. And yes, I mean, fiscal -- I mean, this fiscal fourth quarter was really strong, and you had gross margins that expanded to 37%. So I'm just wondering, like, can you break down how much of that was mix versus operating leverage or pricing?

Yes. I think it's really a nice combination of product and solution mix, which we're starting to see a solid impact and contribution from some of the higher-margin product lines that we sell. But I can't really understate the strength of a sales number that starts to get up above $20 million a quarter.

I mean that's -- we really saw it in Q4, and that's not something that we've been able to even model perfectly and say, "Hey, what's this going to look like if our mix does what we think it's going to do and sales go above a certain level." Once we fully absorb our fixed overhead and our labor, we started to grow a lot of cash to the bottom line. And so I think that was as much the story in Q4 as anything else was.

Our sales came in a little higher than even what we expected. We had some orders that were requested to be moved in a little bit, which was great. So we benefited from that. But certainly, you can really see what happens when sales creep up above $19 million, $20 million, how much of that becomes a bottom line impact.

Yes, actually expanding on that bottom line impact. I mean, similarly, EBITDA margin was 11.5%, and that was above your 10% target. Is there sort of like a new target that you think you can hit. I mean you're expected to grow this fiscal '26. So I'd only imagine that as you continue pushing past $20 million, it will continue to be above that 10% target on a strong quarter.

Yes. I appreciate that. I think -- I mean, one, I want to celebrate how great the team was to get us there in Q4. We put a goal out there of getting to 10% -- EBITDA 10% as a percentage of sales. We put that out not long ago and said, yes, we see an opportunity to get there. We've got to really work hard to do it, both on the cost and operational excellence side, but also on the sales side.

And everything kind of came together in Q4. I think the expectation for us is we got to find ways to keep it above that 10% number. That's not an easy feat. I mean if sales are up, that's great. But we're also up against continued cost increases and other things are being thrown at us. So we're not putting out a specific different goal than what we already have. Our job is really to keep the profitability as high a level as we can.

Again, looking at it over the long term. I mean if you look at what we did in Q1 through Q4 in 2025, you saw that number, adjusted EBITDA as a percentage of sales start to crank up each quarter, even as sales didn't grow a ton until you really saw in Q4 with a higher sales number. So I anticipate sort of a similar approach to 2026 and how that's going to go.

I mean, the quarters are hard for us to dictate specifically based on customer demand and timing of shipments around projects specifically. But I think we just want to celebrate that we exceeded that 10% for a little while before we get into what are we going to do next.

Got it. And last one from me. It'd be helpful if you could expand on those cost increases you mentioned? And how much of those increases do you think can be mitigated with the new products and solutions you're linked to launch this year?

Yes. So I think -- I mean, look, it's nominal increases. It's the things that everyone is up against. We do have a lot of people building products in the United States. We've got a healthy production team that's north of 200 folks building things in multiple locations. We're proud of that. And because of that, we need to keep those folks' wages keeping up with the world and keep them with great benefits. For a company our size, we provide what we believe are really strong health care and 401(k) matching and other things like that, that in a lot of cases, they're better than companies much larger than we are. So those are the things that we see increases on sort of annually. And the team has done a good job of managing those.

We go in eyes wide open every year, knowing that there's these annual renewals of certain things, and we have to do our best to mitigate that where we can. Some of that can be done with pricing. But to your point, some of that can be overcome with just a slightly better sales number with a solid product and solution mix. And so we attack an annual budget with that idea that we expect some increases, and we expect that we have to overcome them because that's what we're supposed to do.

So it's a normal thing you would see and then throw in just the general global chaos of things can change with one quick text message or tweet at this point. And so, we have to always be on our toes and ready for changes to things like logistics costs and other product costs that might be unexpected at this point.

Got it. And actually just a quick follow-up on that. Can you maybe give us, I guess, in terms of those new products and solutions, like maybe a couple that you think are going to be the most impactful this year?

Yes. Look, we continue to feel really good about our -- the integrated systems product line stack and small cell are both things we've talked about for a long time that we're having minimal impact on our sales and have started to really contribute more. We also still feel really good about our legacy product lines.

I mean our custom cabling business is strong and performing extremely well in things like the defense market and other industrial and OEM kind of markets, we're seeing nice, steady growth there and some great customer wins that, in some cases, we're putting out news on when those things come in, in the aerospace and defense market. So I think those 3 areas are probably items that are more project-centric.

It can be kind of a media piece of our total sales. The everything else, which has, in many cases, a distribution flavor to it as well. We expect those to continue growing and being a nice workhorse in the background, putting up solid growth and profitability there. So it really has become for us, sort of the combination of firing on all these different systems not expecting every single product line to be perfect every quarter, but expecting a nice balance from them.

And when there's contribution from multiple product and solution areas that are project-centric and less seasonal that starts to give us some predictability and smooth things out where it can.

Got it. I'll hop back into the queue.

Next question is from Howard Root, Private Investor.

Congratulations, not just on the quarter, but really the transformation you've done over the last couple of years here with RF industries. It's really a great job. First, I got a couple of questions for Peter. The income taxes and the noncash onetime charges. Can you kind of give a quick explanation of what those were in the fourth quarter?

Sure. The -- I'll tackle the tax. Tax relates to a valuation allowance there. So not sure if that answers your question or you want me to get into a little more detail there in our footnotes to the K, we kind of have a tax provision but note that kind of highlights that in a little more detail.

I'm just kind of look -- going forward, the $478,000 obviously, a huge number for the income taxes. What is that? Do you strip out the unusual stuff? What's your tax rate going forward?

Tax rate going forward, it's hard to predict there probably in the mid-20s, if that's kind of the standard corporate tax rate from state and federal there, but we have some nuances with valuation allowance items kicking in for us.

Okay. And then the noncash, is that part of that was on the taxes side too? Or is that something else?

No. The noncash items we offer is not part of the valuation allowance or the tax provision. So those items are kind of pointed out there the year scheme you're seeing there, we talked a little bit about it's related to an accrual for a settlement.

Okay. And then in interest rate, what do you see is a decline in your interest rate kind of going forward from this new rework line of credit?

Yes. So we're -- obviously, the refinance, we've disclosed there so we're expecting a drop. But from a cash perspective or interest savings, we're expecting kind of at least $25 million in interest savings for the next year.

Okay. Great. So then more for Rob on the diversification that you've gone through is amazing. Could you put some numbers kind of around on what percentage of your revenue and just really ballpark, Rob, is coming from transportation, aerospace, stadium, data centers. What can you tell us in terms of where you are and types of the revenue growth from there and getting away from your base telecommunications business?

Yes, I appreciate the question. I think the -- it's it's hard to slice that up simply because the numbers get -- they share a lot of information. I think for a company our size, trying to slice into the various details. What I can tell you is, on prior years where we had major growth happening, we were seeing the wireless and telecom market in the 70% range of total sales. We're now seeing that more like 50%.

About half of our sales are coming from things that I would call telecom and wireless. The remaining half is coming from -- in many cases, similar applications maybe, but transportation, aerospace and defense, industrial and other OEM, public safety, things like that. So I think the way that we disclose those results is slightly higher level than maybe what you're asking. But hopefully, that gives you some color around just the way we've seen the overall impact and contribution from those different markets.

Great. Yes. And then in the backlog, just to kind of explain what part of that is seasonal. I mean, both the bookings and the backlog took a pretty big drop from Q3 to Q4, and I understand being a shareholder for a bunch of years is that a part of that is seasonal. But what part of that is seasonal -- what part of that might be from the transformation of the business changes how long you have backlog or what's your overall level of backlog would be and when your bookings are coming in? What can you say about that in terms of what that means for your business?

Yes. Great question on backlog. I think it's -- for us, it's -- as we've said for years, it's a good health indicator that we have a backlog, and we've got stuff coming in there I think we also disclosed it probably deeper than most companies where we talk about end of quarter and based on the bookings that we had, what got us to that number, and then we give an update at the time of our call to make sure people are clear to elaborate a little bit on how the business does work.

And you're right, with the way you're thinking about it is seasonally, we expect to have a solid booking quarter in our fiscal fourth quarter. We also expect to start eating through some of that backlog in our Q1, just around the seasonality of sort of the way most markets work. We also are trying to get better at moving our backlog out the door. It doesn't hurt us to have long-standing backlog, but it also, at times, some of that backlog can get old and tired.

And we want to keep that moving similar to the way we've managed our inventory by bringing it down to a more manageable healthier level and being faster with replenishing when we need to. Our expectation on backlog is that it sort of hit a low point in our first quarter and then starts to work its way back up as we see the project-based work on the calendar year start to kick in when people's budgets get finalized and everyone gets settled back into their seats.

This was -- I think everyone probably felt that, this was a strange holiday season because you had Christmas and New Year both falling on a Thursday, which means you basically had two dead weeks from a people coming to work and everyone being an engaged perspective. We're finally seeing the world get back to a little more normalcy.

Our expectation is that, that backlog will start to move back up as it normally does this time of year. But at the same time, you can see that we've been moving that -- moving some of that out the door to get to a fresher level as well.

Right. And then bookings, the $18.5 million in bookings for Q4, was that kind of according to your plan, was that ahead of your plan, or a little under your plan? How did that fit with your expectations?

Yes. I would say it's around our plan-ish. I think it's hard to -- Q4 is a tough one because of where our October year-end doesn't really align with other people's budgets. So we generally see a larger booking level happened in our third quarter is kind of just seasonally. That's what we've historically seen. It's starting to smooth out a bit, but the October, November, December, January time frame is always any order that we expected in any of those months could be in another one.

And that's just how it falls around the year-end of the year beginning. So it was fine. I think we were happy with that number. And the thing that we're even happier about though is what we've got in our pipeline that still looks super healthy, Ray talked some about that. The different application areas and the different customer areas where we're seeing growth in the last couple of years we've still got a really solid pipeline of opportunities that aren't going away. While those move around in those various months, as I just said, we only see us adding to that pipeline of opportunity and feel really good about it.

Great. Well, I appreciate all the extra color there. And again, congratulations to you and the whole team on outstanding performance from where you were 3 or 4 years ago to where you are today.

Thank you, Howard.

[Operator Instructions] The next question comes from Steve Kohl with Mangrove.

I too would like to reiterate that congrats on a great performance. I'm sure I agree that you should at least favor the victory at least for a day or 2, maybe even a week before we start looking at the next set of targets. But wanted to talk about a couple of things. One thing on the balance sheet. I know if I'm doing my maths right, we're down to $3 million in net debt, which has probably been the best we've been in quite a while.

How is that changing our priorities on capital allocation? Do we see we haven't done any acquisitions in a while. Do we look at share buybacks, acquisitions dividend? Has the thought changed at all on that? Or what is the thinking today on capital allocation?

Yes. Steve, thanks for the question. I think the -- at the moment, our priority is the same as it has been. We want to get that net debt as low as we can. Obviously, performance of the business helps, but at the same time, every time the Board meets, we talk about best shareholder value. And at the moment, we think the best thing for us short of having a strategic opportunity in front of us that make sense, we want to continue paying down that debt.

That is job launch now. We're also always looking at other opportunities to drive shareholder value and give a nice return. So all of the items that you brought up are up for discussion. Every time the Board meets, we talk about those -- we haven't done an acquisition in a few years, that's been on purpose and some of that was the market and some of it was us getting to a point where we could actually finish the integration of the ones that we had done.

We finally got a chance to do a lot of that work, which is showing through now in our operating leverage and getting our costs as low as we can. So I think if there were an opportunity that presented itself from an M&A perspective, we might alter those priorities. But at the moment, our priority continues to be debt service and getting that to as low a point as we can.

Right. And one follow-up just on margin for SEC. So I know, obviously, margin is doing very well. I guess I'm curious when we look across the base, how much of the improvement of margins coming on the book to inside versus just volume running through the plant. I know you've keyed in on again today, Kavan, I know it depends on mix and we get to a certain level, a lot comes to the bottom line.

But are we seeing -- is that split -- if you look at , I don't know how to phrase the question, but are we seeing a better book because I presume, as you're getting the aerospace defense stuff you're getting better booked in margins there, I would think. But can you put some color around that or some granularity?

Yes, I think the best I can do there is, look, having a better product mix and solution mix with some of our newer high value, much more technology-centric product areas, really helps. I mean that mix just as those areas perform better, math will tell you that, that will start to drag your gross margins up.

Once we cross $18 million, $19 million, $20 million a quarter in sales, now you start to see the impact of you fully absorb all the labor, much of which for us hits above that gross profit line. So the better we perform top line-wise, almost regardless of product line and the mix you're going to see more profitability, which for us, we live and die by the gross profit line. We manage ourselves really well below the line. It is a function of those things.

Can we sell more valuable products and solutions to our customers and can we get that high as possible because when we do, you really see the impact of it. So as it's hard for you to ask the question, it's hard for me to give a specific answer on which percentage of switch, but I can tell you that both those things help, although -- we would see a solid margin improvement just with a higher sales number and a similar product mix than what we've had historically. I wouldn't be as high as 37%, but it certainly would be better.

And last question, just touching on -- you alluded to DAC and small cell, obviously, it's taken a little while for them to get some traction. But talking about public safety for minute and density. I know for a long time, we're talking about these buildings and venues and even people had that coverage. Are we seeing -- how is the regulatory landscape there changed? Is this still a local thing? Or is there anything from a bigger picture, is that market becoming more lucrative and getting more traction as people have put requirements on the books that they're actually enforceable?

Yes. We like the public safety market. I mean we have a great product offering, not just with our RF passives and some RF active gear that we have under the microlab brand but also our kind of core connectivity product sits in there as well with fiber and coax -- so we like it. We've sold to it for years. Most of that gets serviced through the distribution channel, which again, we appreciate those partnerships and getting to markets like that.

I think how those decisions are made and who really dictates what though, it's still really fragmented. You've got localized ordinances that sometimes are hard to enforce. There are certain cities in the country that have mandated public safety coverage inside buildings, and that mandate is hard to force people to do and they're unwilling to find these building owners to make it happen. It just becomes a really challenging sort of environment. That's not new. We take part in public safety forums all year long all the time and have conversations about it real time.

It is similar to kind of bead funding, the federal government says, "Hey, we need this, and then it gets left up to states and local governments and then it just becomes a revolving door, people making decisions. And it's been challenging to pin down sort of a final addressable market there, short of saying, for us, it falls into our in-building coverage, our distributed antenna system product areas and the way we service those applications.

So I think it will continue to get better, new buildings being built tend to have an opportunity to put in some better public safety based RF solutions, and we're right in the middle of many conversations around that. And I think our offer is really strong there. So, we expect that to be an opportunity for us going forward, but it continues to be extremely fragmented from an ordinance and decision-making perspective.

We have no further questions in the queue. I will now turn the call back over to Robert Dawson for closing remarks.

Great. Thank you, John, and thanks, everyone, for participating in today's call. We truly appreciate your support and look forward to reporting on our progress throughout fiscal 2026. Have a great day.

This concludes today's conference, and you may disconnect your lines at this time. Thank you for your participation

Greetings. Welcome to the RF Industries Third Quarter Fiscal 2025 Financial Results Conference Call. [Operator Instructions] Please note, this conference is being recorded. I will now turn the conference over to your host, Donni Case, Investor Relations. You may begin.

Thank you, John, and good afternoon, everyone, and welcome to RF Industries Fiscal Third Quarter 2025 Earnings Conference Call. With me today are RFI's Chief Executive Officer, Rob Dawson; President and COO, Ray Bibisi; and CFO, Peter Yin. We issued our press release after market today, and that release is available on our website at rfindustries.com. I want to remind everyone that during today's call, management will make forward-looking statements that involve risks and uncertainties.

Please note that information on this 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 forward-looking 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 related current report on Form 8-K describe the differences between our GAAP and non-GAAP reporting. With that, I'll now turn the conference over to Rob Dawson, Chief Executive Officer. Go ahead, Rob.

Thank you, Donni, and welcome to our Third Quarter Fiscal 2025 Conference Call. I'll start with our third quarter highlights and some thoughts on the current environment. Our COO, Ray Bibisi, will expand on our go-to-market strategy and trends we're seeing in newer markets. And our CFO, Peter Yin, will cover our financials before opening the call to your questions.

Now to the third quarter. Our team continued to deliver strong results for the third consecutive quarter of fiscal 2025. Third quarter net sales grew 17.5% year-over-year to $19.8 million. Gross profit margin was 34%, which is a 450 basis point improvement over Q3 last year and 400 basis points above our target margin goal of 30%. We realized an operating profit of $719,000 versus a loss of $419,000 for a comparable period, which puts us in positive territory for 4 quarters in a row.

Adjusted EBITDA of $1.6 million was 8% of net sales in the quarter, which is an important metric we use to evaluate our operational efficiency. While this metric may vary from quarter-to-quarter depending on product mix and shipments, achieving 8% adjusted EBITDA as a percentage of net sales supports our conviction that our stated goal of at least 10% is within reach.

Even through challenging times, we've been laser-focused on profitability. We now have a cost structure that gives us the operating leverage to continue improving profitability without diminishing quality, which we believe is the true path to value creation.

Finally, we ended the quarter with a backlog of $19.7 million on third quarter bookings of $24.5 million. As of today, the backlog stands at $16.1 million. Our team's commitment to strong execution is printing through our financial results, and we're all energized by the opportunity we see ahead.

For those who followed RFI for a while, first, thank you. Second, you've witnessed how our long-term strategy has transformed our company from a component supplier to a technology solutions provider. You also know this was no easy feat, but our commitment to delivering on what we said we would do has always been our focus.

Now I want to spend some time on why we think RFI is in a great position to grow profitably going forward. The top line story here has 3 important drivers: one, diversification in products, customers and end markets; two, deeper relationships with our traditional customers; and three, the value of new partnerships. On our third quarter call last year, I talked about how our team was working hard to evolve our business to be more diverse in our products, end markets and applications and less reliant on the CapEx spend of our Tier 1 carrier customers. One year later, we can proudly say that fast-growing markets like aerospace, transportation and data centers are now contributing to our sales pipeline in addition to our strong standing in our traditional markets.

Ray will go into more detail on our product innovation go-to-market strategy and trends we're seeing across our end markets. In aerospace, we continue to win repeat orders from a leader in this market. With mission-critical components, failure is not an option, and you don't get a second chance. So our success here continues to add to our credibility and reputation. The transportation market, including both in vehicles and in transportation hubs, is a wide open field for us. For example, we've already received a meaningful order for a terminal infrastructure project at a major U.S. airport.

As you know, the current administration justifiably wants to see our airport terminals upgrade their functionality in line with world-class airports. So this could evolve into significant opportunity for us. Municipal governments also want to upgrade their transportation infrastructures with distributed antenna deployments that will improve communication connectivity and efficiencies for their bus and train systems.

We've only just scratched the surface of our product applications for transportation. Our DAC or direct air cooling system continues to attract wide attention with a variety of applications across several end markets. As I mentioned last quarter, we launched a next-gen system that has advanced control capabilities and an NEMA certification for more rugged environments that expands our opportunity set in wireline telecom, edge data centers, energy and transportation. More on data centers shortly.

Stadium and venue build-outs are undergoing a significant revival, especially in the United States, playing host to major events like the Olympics and World Cup in coming years. With our well-established reputation in this end market, we have a pipeline of over 100 venues, including some very intriguing projects around corporate and university campuses where greater connectivity is both an essential and competitive advantage.

It's exciting to be at that inflection point when our technology, know-how and reputation create several opportunities to diversify our customer base. Yet equally important is building deeper relationships with our existing customers. Wired and wireless communication customers have been our bread and butter for many years. However, we were mostly a downstream supplier away from the center of action and key decision makers. Now that has changed dramatically with our advanced technology and problem-solving approach, we've elevated our value proposition to this important customer base, which in turn has resulted in a greater share of their bill of materials, especially in our higher-value solutions.

While telecom CapEx spending is still short of historical levels, we've diversified our revenue sources within these organizations to capture a share of the OpEx budgets, a direct result of building and expanding our relationships. Plus, we continue to drive growth with many long-standing customers in our OEM and industrial markets where we design and build custom assemblies and wire harnesses.

The third driver is the value of partnerships, both old and new. We're proud of our long-standing relationships with all the Tier 1 carriers, the major installers and integrators and especially our distribution partners. The trust we've earned for innovation, collaboration and service has attracted new partners, which opens the door to additional diverse customer and market opportunities. For example, a major manufacturer of electronic cabinet and enclosures identified our DAC systems as a solution for edge data center installations, which are small decentralized facilities located closer to where data is generated and consumed.

While hyperscale data centers are multibillion-dollar installations requiring technologies like liquid cooling systems, facilities on the edge also need energy-efficient cooling. RFI has a great solution for this, and we currently have market trials in process.

Before I turn the call over to Ray, a final note on diversification. We've worked long and hard to diversify our supply chain, both domestically and internationally. Although our finished products are American made, there are certain vital components that are generally available -- only available from outside of the U.S., which means we must deal with the uncertainty of the evolving tariff landscape. So far, our team has done a great job in mitigating tariff impacts, and we've only had nominal price increases on certain products.

Putting this uncertainty aside, we're focused on what's in our control, maximizing the great opportunity ahead of us and delivering one of the best full fiscal year results in RFI's history. We now have 3 great quarters under our belt for fiscal 2025. And based on what we know today, we expect that our fiscal fourth quarter net sales will be similar to what we delivered in Q3.

Finally, thank you to the entire RFI team for executing on the plan and keeping our momentum going. I'm honored to get to work with all of you. Great job. We will continue to stick to the strategy, work hard, be kind and keep a sense of humor. It certainly seems like we can all use a little more kindness. Now here's Ray.

Thank you, Rob, and good afternoon, everyone. As you just heard, we believe we are entering an exciting period of growth and opportunity. A key driver of our performance this quarter has been the deep engagement of our sales team. Their collaboration with engineering and marketing has allowed us to deliver fully integrated solutions that address critical needs across our target markets.

This quarter, we saw strong growth across aerospace, venues, telecommunication and broadband networks, supported by consistent contributions from our distribution channels. Our target initiatives in venues and broadband delivered meaningful bookings and revenue, demonstrating the effectiveness of our market-driven strategy. Marketing and product management played a critical role in reinforcing these efforts through impactful campaigns, events and partner engagements. These activities strengthened our presence in the market and supported pipeline conversion.

On the operations side, execution remains disciplined and strategic. We increased inventory levels in certain product categories to mitigate pending tariff impacts, while our ongoing cost reduction programs remain on track. At the same time, process improvements and IT enhancements are enabling real-time decision-making and building scalability to meet growing demand.

From an engineering standpoint, our focus continues on small cell concealment, direct air cooling and RF passive solutions. While aligning engineering output with market demand is still a challenge, our improved processes on stage gate discipline and ensuring resources are directed toward the highest value opportunities.

As Rob mentioned earlier, the story today looks very different than it was just a year ago. I couldn't agree more. The change has been dramatic. From my vantage point, the real difference is how we are pairing advanced technology with a problem-solving approach. We're no longer just responding to customer needs. We're helping them anticipate and shaping the solutions that drive their success. The shift has fundamentally strengthened how customers view RFI and the role we play in their strategic planning.

Looking ahead to Q4, we expect revenue to remain steady with continued strength in small cell, DAC, aerospace, venues and broadband markets. We are mindful of the potential tariff impacts and ongoing supply chain constraints, but our robust sales pipeline, disciplined operations and strong cross-functional alignment position us to finish the year strong and carry momentum into 2026. Ultimately, execution is the bridge between potential and results. As COO, I am proud of how our team continues to execute with focus, discipline and collaboration. I now turn the call over to Peter.

Thank you, Ray, and good afternoon, everyone. As Rob described, we've had strong momentum across our business for 3 consecutive quarters in fiscal 2025. Before I review the financials, the overall theme to note is continuous improvement, both top line and bottom line. Our sales continue to increase, and this drives better margins and operating leverage as our fixed costs are spread over higher sales levels.

In the third quarter, revenue grew 17.5% to $19.8 million year-over-year and 4.7% on a sequential basis. Gross profit margin was up 450 basis points to 34% from 29.5% year-over-year, primarily driven by an overall increase in sales as well as a higher product mix -- a higher margin product mix and our ongoing efforts to drive cost savings and operating efficiencies. Operating income was $720,000 compared to an operating loss of $419,000 we reported last year. That's over a $1.1 million improvement year-over-year.

Consolidated net income was $392,000 or $0.04 per basic and diluted shares, and non-GAAP net income was $1.1 million or $0.10 per basic and diluted shares. This compared to a net loss of $705,000 or $0.07 per basic and diluted shares and a non-GAAP net loss of $95,000 or $0.01 per basic and diluted shares for Q3 2024. Adjusted EBITDA was $1.6 million, a significant improvement compared to adjusted EBITDA of $460,000 in Q3 2024. Thus far, our financial results this fiscal year reflect both our focus on profitability and strong execution against our plan to diversify our customer base and expand our presence in new end markets.

Moving to the balance sheet. We closed the quarter with a strong balance sheet, including $3 million of cash and cash equivalents, working capital of $13.1 million and a current ratio of approximately 1.6:1 with current assets of $34.1 million and current liabilities of $21 million. At quarter end, we had borrowed $7.8 million on our revolving credit facility. As previously mentioned, we continue to manage our working capital to strengthen our liquidity and overall capital structure.

We are actively assessing our borrowing costs and see near-term opportunities for more advantageous financing arrangements. At the end of Q3, our inventory was $14.2 million, down from $14.7 million last year. However, our inventory is up when compared to last quarter's $12.6 million. While our inventory may fluctuate from quarter-to-quarter, we continue to carefully manage inventory levels while improve procurement and supply chain processes.

We are very mindful of our value proposition of inventory availability and believe our current inventory level supports both our strategic business model of inventory availability and continued -- strategic business model of inventory availability and the continued healthy demand that we see for the balance of 2025 and beyond.

Moving on to our backlog. As of July 31, our backlog stood at $19.7 million on bookings of $24.5 million. We have been successful in working through a portion of our backlog since quarter end. And as of today, our backlog currently stands at $16.1 million. We are looking forward to closing out 2025 with solid momentum in our business. Our team's execution is printing through with strong financial results, and we are well positioned to capitalize on the opportunities that are ahead of us.

With that, I'll open up the call for your questions.

[Operator Instructions] And the first question comes from Josh Nichols with B. Riley Securities.

This is Matthew on for Josh. I guess to start off, I mean, the 34% gross margin is impressive, and it's well above the 30% target. Can you help us understand how much of that improvement is driven by DAC systems and small cells versus mix?

Yes. So I think -- good question, and thanks, Matthew. The mix including those 2 product lines is increasing, right? So you've got those 2 things and some of our other high-value items. We talked about -- obviously, last quarter, we put out some press on winning some new aerospace projects. Those are also some of the higher value, more technical kind of solutions. So overall, the mix is sort of leaning towards higher value items, which helped take that up.

The other piece I would just mention, and Peter mentioned it in his comments, putting a higher sales number is usually helpful for us, too, because once we absorb all those fixed costs, including the labor that we do, again, to build products in the United States, once we do that, it's heavily profitable beyond a certain level. And so you're starting to see that operating leverage that kicks in as we move between these 18, 19 plus kind of sales levels, you get some help from that operating leverage also in addition to the mix.

Got it. And as a follow-up to that, you guys mentioned you expect Q4 to be a similar revenue base. So I guess I'm assuming should gross margin, assuming that DAC and other high-value items keep up this kind of percentage of mix and the revenue base being steady, should we expect gross margins in Q4 to be similar to Q3? And then I guess, going into fiscal '26, how should that change as you grow and that mix probably continues to shift?

Yes. I think as we've talked about in the past, the mix will change quarter-to-quarter, and it's -- it doesn't take much of a little movement in top line dollars to wildly swing our margins. I mean we're talking about $50,000 here, $70,000 there. Like those kinds of numbers are material against our total dollars that are being delivered. So I think our belief is that we've moved into this world where 30% and above is where we should be all the time. I don't have specific expectations quarter-by-quarter based on the fluctuations, but it's not out of the question to stay at the sort of low to mid-30 levels where we've been performing.

Look, we're happy to be at 34%, obviously. You see not just the mix, but also the leverage really kicking in. It's not out of the question to do that again. But I think from a specific commitment perspective, it's tough to nail exactly what that number will be, short of saying we certainly expect it to be north of 30%.

Very helpful. Thank you. And then based on -- I guess, shifting over to the strong bookings, can you characterize the composition between, I guess, traditional wireless business versus the newer end markets where you're seeing strength like aerospace, transportation and data centers?

Yes. I think we're seeing contribution from all of them. And that's the helpful part is in the past, we've had some -- if you go back 6 or 7 years, we had some big quarters and some big wins. And when you dug into the -- to our Q, you'd see some concentration within that. And I think we're seeing a different scenario play out right now. It's coming from several different areas, several different product lines, not just within one market, but within individual customers, we're selling multiple of these newer, higher-value product lines as well.

So I think the diversity is probably the biggest story around that, and that's also helpful quarter-to-quarter because one quarter, a certain customer might be our largest, in the next quarter, there may be a different customer. And that's a world that for a growing company, you want to be in and you want that spread out. And it's kind of a who's who of who you'd like to have for customers.

For a company our size, and we talk about this often internally, we don't do a lot of disclosing who all of these customers are short of saying things like the Tier 1 wireless carrier ecosystem or a large well-known aerospace company. For us, those are marquee names that we're putting up. And so I think that's the helpful part is our core business in the background is crank and doing its thing, helpful, grinding out the book and ship business and doing a great job on the wire harnesses and other custom cabling to the good industrial OEM customers we've had a long time. These newer growth markets for us are growth product lines are coming from a diverse set of customers on top of that. And that really is the, I think, the bigger story overall.

Right. Yes, I agree. And I guess you mentioned being well positioned for the Olympics and World Cup build-outs. And you also mentioned the 100-plus venue pipeline. Are we talking calendar kind of Q1 2026 for meaningful bookings? Or could we see acceleration even sooner than that?

Yes. I think -- so when we talk about the pipeline overall, the great thing about the pipeline and whether it's venues or other of the kind of newer project-based product lines, they're long term. The sales cycle can be lengthy, which is fine. It starts to sort of compound itself though quarter-to-quarter. So we're expecting contribution from those kinds of deployments and solutions certainly into fiscal '26. In some cases, those are going to be multiyear deployments.

And if you think about a brand-new stadium, for example, being built for an NFL market or being built for something like the World Cup, when they build those, the last thing really to go in once the infrastructure of the actual building itself is put in place, then they start throwing in the wires and the antennas and the overall communications piece. So -- it can be certainly over several quarters for us, but we think that, that pipeline that we're talking about is continuing to grow, and we feel like that's a long-term indicator of whether it happens in 1 quarter or 6 quarters, we always need to have that pipeline being added to and growing.

Awesome. And last question for me. You hit 8% EBITDA margin this quarter with revenue just under $20 million. Can you walk us through the bridge to your 10% target? Is it mainly just from a higher sales base? Or are there more operational improvements in the works?

Yes. So we're always doing operational improvements. I mean one of the things you heard Ray said is we're constantly working on what's next there and getting better and smarter about how we do things. There's always opportunity there to streamline the operations overall to get more profitable there. Certainly, a higher sales number, as we just showed, a number just short of $20 million on its own can produce some pretty significant upside results for us.

So we think it's probably a mix of those 2 things. We're obviously pushing to have higher sales numbers all the time. That's sort of an obvious statement. But also, at the same time, we do believe there's some more efficiencies that we can continue to find. And the better that we do with that product mix of driving these larger project-based kind of long-term customer relationships will help both those things. The more you can predict what you're going to ship out in a quarter or 2, it makes it way easier to manage that supply chain, which is one of those examples of the kind of operating leverage that we have.

[Operator Instructions] Okay. We have no further questions in the queue. This completes the question-and-answer session of the call, and I'd like to turn the floor back to Rob Dawson for any closing remarks.

Great. Thank you, John. Appreciate it, and thanks all of you for joining us today. Thanks for your support. As always, on our next conference call, we look forward to sharing our full fiscal year results and the initiatives for fiscal 2026. Thanks, everybody, for your time. Have a good day.

This concludes today's conference, and you may disconnect your lines at this time. Thank you for your participation.

Greetings, and welcome to RF Industries Second Quarter Fiscal 2025 Financial Results Conference Call. [Operator Instructions] Please note, this conference is being recorded.

I will now turn the conference over to your host, Donni Case, Investor Relations at RF Industries. Donni, you may begin.

Thank you, Paul, and good afternoon, everyone, and welcome to RF Industries Second Quarter 2025 Earnings Conference Call.

With me today are RFI's Chief Executive Officer, Rob Dawson; and CFO, Peter Yin. We issued our press release after market today, and that release is available on our website at rfindustries.com.

I want to remind everyone that during today's call, management will make forward-looking statements that involve risks and uncertainties. Please note that information on this 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 forward-looking 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 Industry 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 related current report on Form 8-K describe the differences between our GAAP and our non-GAAP reporting.

With that, I'll now turn the conference call over to Rob Dawson, Chief Executive Officer. Please go ahead, Rob.

Great. Thank you, Donni, and welcome to our second quarter fiscal 2025 conference call. I'll start with our second quarter highlights and some thoughts on the current environment, and our CFO, Peter Yin, will cover our financials before opening the call up to your questions. Ray Bibisi, our President and COO, won't be joining us today as he's proudly attending his son's graduation.

Now let's talk about the quarter. We followed our exceptionally strong first quarter with a very successful second quarter. Fiscal second quarter net sales grew 17% to $18.9 million year-over-year. And gross profit was 31.5%, exceeding our target goal of 30%. For the third consecutive quarter, we delivered an operating profit, which was $106,000 versus an operating loss of $415,000 in the second quarter of 2024. And adjusted EBITDA was more than $1.1 million with a 6% margin, moving us closer to our 10% adjusted EBITDA margin goal.

We ended the quarter with a backlog of $15 million. And as of today, it stands at $18.4 million, a big increase from 6 weeks ago. To us, this seems like night and day compared to our results in the first half of fiscal 2024. I believe we have reached the inflection point where RFI is repositioning from a products company to an integrated solutions provider for diversified end markets is printing through in our financial results.

Our results are now more diverse, both by product and customer than ever before. We're driving growth in wireless, aerospace, public safety and industrial OEM customers, while we're also identifying applications in markets like energy, transportation, wireline telecom, data centers and new industrial use cases.

We're seeing repeat and new customer wins across the board in our various product categories. Our expanded portfolio of innovative solutions has further diversified our end markets. As I mentioned on our last call, we won a large custom cabling project from a leading aerospace company. Since then, we've received multiple significant additional orders from this customer. This repeat business builds our credibility and reputation in an industry that demands the highest degree of precision.

Our small cell solutions are gaining momentum as we finally start to see some larger deployments moving forward. Wireless DAS build-outs in stadiums and venues continue to be a growth opportunity, and we currently have over 100 opportunities in our sales pipeline. And our core custom and standard interconnect offer remains stable and strong.

Our direct air cooling or DAC systems are also gaining momentum in the market. In this category, we're continuing to push the boundaries with new innovations to enhance efficient, cost-effective cooling solutions that can cut energy consumption while reducing repair and replacement costs versus traditional HVAC systems.

We recently launched the next-gen system that features advanced control capabilities and a NEMA 4 certification for more rugged environments. These new developments expand our opportunity set into wireline telecom, edge data centers as well as energy and transportation applications.

To elaborate on one example application that I've mentioned in recent calls, AI is driving the overall demand for data centers and more equipment is being pushed to the edges of the network into the small buildings, cabinets and enclosures that house equipment there. This equipment must be cooled to operate effectively and consistently, and our DAC systems offer high-efficient, climate durable cooling that is both eco-friendly and at a lower cost than traditional systems.

Our patented systems are built to stand the rigor of outdoor environments, plus they have state-of-the-art technology that can reduce operating expenses by up to 70% over conventional HVAC systems as well as helping companies achieve their green initiatives. Importantly, DAC systems are often funded by operating and maintenance budgets that are not correlated to CapEx spending, further diversifying our revenue sources.

As I mentioned earlier, wireless build-outs in stadiums and venues are regaining the momentum that was lost during the COVID pandemic and coming back in both greater size and numbers. Today, who doesn't know pro or college team looking for a new venue or to modernize their existing venting. Not to mention major upcoming events like the 2026 FIFA World Cup, where the U.S. is scheduled to host games in cities like L.A., New York, Dallas and Miami. And the 2028 Summer Olympics in L.A.

As I mentioned, we have over 100 venues in our sales pipeline and an experienced sales team dedicated to further penetrating this market. We're a technology leader developing new solutions for distributed antenna systems, or DAS, that are needed to enhance wireless capabilities in stadiums as well as airports and other high-traffic venues.

On the business development front, we bolstered our sales team with seasoned and connected leaders. Through their efforts, we've migrated up the food chain with key customers and are now getting a larger share of their total purchases. And as previously mentioned, we're breaking into new markets with new customers. This diversity is huge for us.

It's also important to note that our prior acquisitions have been transformative in creating new opportunities with high-value solutions. Well-established brands like Microlab have market currency and a talented team who joined us in product engineering and sales are leading the charge to untapped potential.

While we're certainly set up to have a breakout year, a looming question is what to expect in the back half of the fiscal year given the uncertainty around the tariff situation and its impact on the supply chain. I think the summary is that so far, we've handled it with usual calm and pragmatic approach. In a bit more detail, for quite some time, we've been actively working to drive even greater diversification across our supply chain. And the majority of what we produce and delivery is domestically sourced. We do have some exposure to tariffs from certain products and components through certain suppliers in Asia, but it is limited.

By all measures, RFI should be the poster child of what I think the tariffs are meant to accomplish. The majority of our products are produced in the United States by an entirely American workforce. We're very proud of our team, and I believe in the integrity and quality of what we make and how we make it.

That said, what's happening with tariffs is beyond our control. we continue to tweak our supply chain and pricing policies to anticipate and manage any potential new cost pressures. And the RFI team has done a great job navigating this challenging and dynamic situation. I really appreciate their flexibility, resilience and positive attitude. We see plenty of opportunity ahead and are prepared to seize it.

RFI has fought through some tough and confusing times in the past and emerged as a stronger and smarter organization. Right now, we have a far greater set of opportunities than ever before, and we're focused on making steady progress in penetrating new end markets and winning more opportunities with key customers.

So in summary, our results are now more diverse by product, market and customer than ever before. This evolution has also made our results more stable and more predictable. We have standing agreements and contracts with the who's who in our various markets. RFI has a marquee list of customers, and it's growing. Our distribution channel is growing stronger as our reputation for quality products and dependable delivery also grows. We've redeveloped product lines and launched new products with a keen focus on managing R&D and CapEx spend. Our portfolio of innovative solutions is growing and making an impact both in the marketplace and in our results.

Operationally, we've consolidated our footprint, streamlined the company and are continuing to identify other pockets of efficiency. We're driving growth -- we're driving profit growth through our strong operating leverage and through market execution. Our financial position has greatly improved and will continue to benefit from our intense focus on profitability. We're managing the impact of tariffs and our ability to execute is our strength.

With what we know today, we expect our fiscal 2025 third quarter sales to be roughly in line with second quarter sales, which would be a significant increase over the $16.8 million that we reported in the third quarter last year. We're executing well and doing what we said we would do with enthusiasm and optimism. We've never had a greater team or platform for growth to realize RFI's full potential.

With that, I'll turn the call over to Peter.

Thank you, Rob, and good afternoon, everyone. As Rob mentioned, we're pleased with our second quarter performance. Second quarter sales increased 17.4% to $18.9 million year-over-year and slightly decreased 1.6% on a sequential basis. Second quarter gross profit margin increased to 31.5% from 29.9% year-over-year. The 160 basis point improvement was driven by an overall increase in sales and also reflected a better product mix and our continued efforts to drive cost savings and operating efficiencies.

Second quarter operating income was $106,000, a significant improvement from the operating loss of $415,000 we've reported last year. Consolidated net loss was $245,000 or $0.02 per diluted share, and our non-GAAP net income was $701,000 or $0.07 per diluted share versus the comparable period's net loss of $4.3 million or $0.41 per diluted share, and non-GAAP net income of $132,000 or $0.01 per diluted share. Second quarter adjusted EBITDA was $1.1 million, a significant improvement compared to adjusted EBITDA of $572,000 in Q2 2024.

Moving to the balance sheet. We continue to manage our working capital to strengthen our liquidity and overall capital structure. As of April 30, we had a total of $3.6 million of cash and cash equivalents, and we had working capital of $12.1 million and a current ratio of approximately 1.6:1, with current assets of $32.7 million and current liabilities of $20.6 million. As of April 30, we had borrowed $8 million from our revolving credit facility.

We continue to keep a close eye on our borrowing costs and see opportunities in the near term to move to a more advantageous financing structure for us, as our overall performance have been improving. We're pleased with the interest we have received from various lenders to explore more favorable terms that will reduce our cost of capital and enhance our liquidity. The strong demand to engage in discussions on our credit facility is a testament to the strength of our company and our position in the market.

Our inventory was $12.6 million, down from $14.7 million last year. The continued decrease in inventory reflects our ongoing improvements to streamline our procurement and supply chain processes. As we close our second quarter, some shipments of inventory were delayed as we work through the tariff impact with our customers.

During our Q2, it is important to note that we did not experience a material impact related to the tariffs or delayed shipments from our vendors. The majority of the delays were for inventory items where we have sufficient inventory quantities on hand to meet our current delivery dates to our customers. We continue to work with our customers and to diversify our supply chain, and we believe our efforts will help to minimize our exposure on the additional tariffs that were introduced. We believe our current inventory level supports our strategic business model of inventory availability, and we continue to manage this closely as we expect to see continued demand in the second half of 2025 as discussed earlier in the call.

Moving on to our backlog. As of April 30, our backlog stood at $15 million on bookings of $18.7 million. And as of today, our backlog currently stands at $18.4 million.

In closing, our team delivered a strong first half of fiscal 2025, and we are eager to capitalize on the opportunities before us to drive increasing value for our shareholders.

With that, we'll open up the call for your questions.

[Operator Instructions] And the first question today is coming from Matt Maus from B. Riley.

This is Matthew on for Josh. So to start, I was wondering what would you credit for a lot of that backlog growth that you've been seeing in terms of, again, [Technical Difficulty] business, how much of that is business that you think will get recognized over the next year? And just what would you credit for that growth?

Yes. Thanks for the question, Matt. I think the increased backlog is really spread out across several different product areas. So I think that's the best news for us is there's not a concentration challenge in there. It's not one large order. It's several orders across several product lines of varying sizes. So we're encouraged by that. I think at any time, our backlog, when people ask questions about it, we say, look, it's a good health indicator. But when it was $12 million, $13 million, $14 million, I wasn't worried about it being too low. At $18 million or $19 million kind of where it stands now, I think it's a good indication that we've got a lot of good things going, and we got a lot of business ahead of us. How much of that goes out in a short window of time really depends on the product line. Some of these things come and go in a 6-week window, other things maybe are projects that will be spread out over a few different quarters.

So most of our backlog is really made up of those projects. What doesn't get reflected there is our book and ship business that can come and go in a day or 2 days, which is a material amount of our sales come in that way. So I think the healthy thing for us is, to my earlier point, we've got a mix of short and long-term opportunities in there across a lot of customers and a lot of product areas.

Great. It's great to hear your thoughts [Technical Difficulty] between bottom like cell tower sales just in terms of [Technical Difficulty]

Matt, we're not getting any -- you're getting cutting in and out there. So maybe I don't know, can you repeat that?

Can you hear me now?

I think so. Let's give it a try.

Yes. So thanks for the color on the wins being spread out across the different areas of the business. I was wondering if you could give a quick refresher on the split between things like products like the cell towers side, small cells and DAS systems in terms of revenue contribution.

Yes, sure. So we don't report specifically how much of those contribute. I think the easier way for us to look at that is the markets where we've been able to build -- I mean, the applications we've been able to build a full bill of materials and things like small cell and things like distributed antenna systems, we do very well in the wireless space.

On the macro tower side, it's a pretty competitive side of things. We do have an offer there. Our very innovative hybrid fiber solution, which we've had a lot of success with, performs well in that space. Our basic coax jumpers and fiber jumpers also perform there. We don't make that a priority, I think, as far as developing further into that bill of materials. We do heavily focus on venues where DAS is a big play. Small cell continues to be a big play for us. Last year, it was a minimal contributor to sales. It's become something this year that is more of a growth engine, and you start to see some of the delta year-over-year. That's certainly a contributor there.

The other place that we're seeing nice growth, as we mentioned, is in what we've historically kind of called the OEM or industrial markets. We're starting to be able to break those out a little better into things like aerospace and defense, in addition to transportation, energy, heavy manufacturing and some of these other markets. But I think the aerospace world, we've always serviced nice key customers there. We're continuing to add good blue chip customers, and we talked about some meaningful orders that we've received from one particular over the last handful of quarters.

We're hopeful those continue. I think the team is performing really well. So part of that, I think the thesis behind your question is we're getting pretty diverse in the applications we're addressing, and they're all starting to produce some meaningful contributions to total sales, in addition to kind of our core run rate that goes through distribution that we don't always know where that's going to end up. Sometimes we can tell. A lot of times, it's -- we're reliant upon our great distribution channel to drive market positioning for themselves and for us, and we don't always know where that ends up. But it's getting pretty spread out across several applications and markets and customers.

Great. And then in terms of the DAS point. I know you've got over 100 opportunities [indiscernible]. What is the expected top line growth rate? And how soon do you expect that to contribute meaningfully?

Yes. So on the distributed antenna side, which, again, when we look at that, it's all different kinds of venues. So it's -- we talk a lot about stadiums because those are usually the big ticket items, but you're also looking at office and education campuses. You've got medical campuses. You have regular facilities that require things like public safety, DAS to go in, in addition to several other different kind of size multi-tenant living opportunity kind of buildings as well. So we're always tracking a pretty healthy number of those. I think we've done a good job of adding to that. They're contributing all the time.

So you could say that some of our backlog increase certainly is driven by an increase in success in that market. Our expectation of how we perform in the second half of the year and going forward is certainly rooted in the fact that we feel confident in how we're performing in that application. We have the right integrators as influencer customers, many of them buy through our distribution channel, which is great. We've gotten approvals on the right kinds of products with the carriers and the neutral host companies.

So I think, for us, it's always contributing, which is a helpful piece of it. And that 100 is -- has it always been at that level? It's kind of ebbed and flowed, but I think we feel like there's certainly an increase of opportunities there. And the bill of materials for us, it can be a small venue that's $50,000 or it could be a huge stadium build from scratch that's over $1 million. Those are the kinds of things that we appreciate kind of the diversity of those different opportunities and how they're structured.

Awesome. And I guess last one for me. I was hoping you could expand on the wireless provider A making up about 11% of revenue for the quarter. What has that been like? How much more run rate do you see there? It looks like DAS was at that level about this time last year.

Yes. So I think when you look at our disclosures in the Q around concentration, I think the interesting thing to note is the top customer in Q2 was different from the top customer in Q1, which was different from who it would have been at the end of last year. This is the sort of project-based nature of certain applications where we get a nice win. That application or that deployment may happen during 1 quarter or maybe spread out over a few quarters. But as we start to see better execution, I think, within our sales team and our technology team, we're getting into more of these kinds of mid- to long-term deployments that have large dollars attached to them. So the growth that we're seeing in our business is certainly attributed to some of these larger wins.

And the great thing, I think, is in the past, we've had -- we've got some great wins and high sales numbers. And when you looked at it, our concentration was with one customer maybe and a bigger chunk of total sales than what we're talking here at this 11%, that same customer in Q1 was a much smaller number, and we do expect repeat purchases from that customer. I think we're also starting to see a list of several customers every quarter, putting up $1 million in kind of sales with us, which is -- it's a new world for us to have that many customers in addition to our distributors performing as a big piece of the total sales mix.

So yes, look, it's something to take note of. But I think if you look at the -- if we were disclosing the list of all the customers that we're selling to, for a company our size, it's a who's who list of who you want to do business with. And it's really a testament to how great our team is at building products, designing and building them, getting them out the door and the relationships that we've built to bring us up market into a different world.

[Operator Instructions] The next question is coming from Steven Kohl from Mangrove.

Good evening, I guess, from here, but good afternoon there, Rob and Peter. A couple of quick questions. I guess I wanted to talk to Peter for a second, just on the credit facility does I suspect, as you alluded to, that things are getting better. Can you kind of wrap a little bit more color around that in terms of when could we expect another agreement in place? And what kind of savings on the bottom line we might see?

Yes. So I think that is -- we expect to have that here in the current Q3, if not definitely by our year-end. I think that we'll share more detail there as we finalize. But we expect, obviously, an interest rate decrease there and savings there we think will be meaningful.

Okay. And let me turn to another question, if I could. So you guys have a 10% EBITDA target, but your gross margin, I think, was 31% and change. I'm just curious if you could maybe tie out how do we get from the 6% to the 10%? Because I would imagine 31.5% is pretty decent, and you've been making some cuts in SG&A. So how do we reconcile that? And how much is absorption versus continued improvements in mix? And is there room to actually exceed -- what would have to happen to beat the 10% EBITDA target?

Yes. Good question. So I think -- I mean, look, you hit on the key levers in this, which, one, is mix. We do think there's room for mix to get a little better. The bigger thing for us there is also continuing to take out costs and be more efficient in the way we do our production and manufacturing. The tariff changes make that a little funky and making sure that we can manage through the drama around those items has been important to us. I think we've done it, but it's something that has to be noted.

The last piece is just we're absorbing all labor now, and we're putting up the numbers that we're putting up with the existing cost infrastructure, which you'll notice. Our SG&A really isn't going up commensurate with the way sales are going up. We're managing that very well and doing a good job. So I think if we have room to push sales higher, as we continue to perform in these product lines with the great customers that we've managed to line up good relationships with and do a good job of managing those kind of ongoing projects, we think sort of the combination of those 3 things will help push that up. Peter mentioned working on a credit facility to take some additional cost out. There's other levers that we're working on as well to try to bolster that profitability, both at the gross profit line, but then below the line, which will, at this point, all fall straight through.

Right. And another one, just on -- I know you've got to be happy with DAC and small cell. Are we seeing -- I know you talked about even broader coverage there. But what is the -- as we look out to this year or the back half of this year, as a company, I don't know, obviously, I know you don't break out in the backlog percentage areas, but I presume we've seen pretty good growth in both of those areas. Is that the case? And again, is that being facilitated by multiple end customers? Or could you give a little bit more color there? And it sounds like you're a lot more comfortable than you have been or at least you're seeing it pull through better.

Yes. So I think both those product lines, both DAC and small cell are meaningful contributors to sales. To the earlier question around customer concentration, we don't have any concerns there. These are happening across several different customers and several regions. And as we've talked about in the past, these larger customers, in particular, in many cases, have regional budgets that are deployed by more localized management. We're overseeing a deployment of hundreds or thousands of sites, whether that's small cell or DAC.

So we feel good about the diversity, not just across multiple customers, but even within the customers where there's several regions that operate somewhat independently when it comes to budget. We have to get wins in each of those markets once we've gotten the overall corporate technology approval. So both product lines are contributing, which is at a material level, which is now helpful to us. And I think we expect those to continue being some of the drivers of our growth into the back half of the year, and we're hopeful that kind of momentum can continue into fiscal '26.

There were no other questions in queue at this time. I will now hand the call back to Rob Dawson for closing remarks.

Great. Thank you, Paul, and thanks, everyone, for participating in today's call. We truly appreciate your support. Have a fantastic and safe summer, and we look forward to talking with you in the fall. Have a good day.

Thank you. This concludes today's conference, and you may disconnect your lines at this time. Thank you for your participation.