Quarterly Report for Quarter Ending July 31, 2025 (Form 10-Q)

Management's Discussion and Analysis of Financial Condition and Results of Operations

Cautionary Note Regarding Forward-Looking Statements

This report contains forward-looking statements. These statements relate to future events or our future financial performance. In some cases, you can identify forward-looking statements by terminology such as "may," "will," "should," "except," "plan," "anticipate," "believe," "estimate," "predict," "potential" or "continue," the negative of such terms or other comparable terminology. These statements are only predictions. Actual events or results may differ materially.

Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. Moreover, neither the Company, nor any other person, assumes responsibility for the accuracy and completeness of the forward-looking statements. We are under no obligation to update any of the forward-looking statements after the filing of this Quarterly Report on Form 10-Q to conform such statements to actual results or to changes in its expectations.

The following discussion should be read in conjunction with our unaudited condensed consolidated financial statements and the related notes and other financial information appearing elsewhere in this Form 10-Q. Readers are also urged to carefully review and consider the various disclosures made by the Company which attempt to advise interested parties of the factors which affect our business, including without limitation the disclosures made under the caption "Management's Discussion and Analysis of Financial Condition and Results of Operations," under the caption "Risk Factors," and the audited consolidated financial statements and related notes included in our Annual Report filed on Form 10-K for the year ended October 31, 2024 and other reports and filings made with the Securities and Exchange Commission ("SEC").

Critical Accounting Estimates

The Management's Discussion and Analysis of Financial Condition and Results of Operations (the "MD&A") is based on our Consolidated Condensed Financial Statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP"). The preparation of these financial statements requires management to make estimates, judgments and assumptions that affect the reported amounts of assets, liabilities, net revenue and expenses, and the disclosure of contingent liabilities. Management believes that there have been no material changes during the three months ended July 31, 2025 to the items that we disclosed as our critical accounting estimates in the MD&A in our Annual Report on Form10-K for the fiscal year ended October 31, 2024.

Overview

RF Industries, Ltd. (together with subsidiaries, the "Company," "we", "us", or "our") is a national manufacturer and marketer of interconnect products and systems, including high-performance components such as RF connectors and adapters, dividers, directional couplers and filters, coaxial cables, data cables, wire harnesses, fiber optic cables, custom cabling, energy-efficient cooling systems and integrated small cell enclosures. Through our manufacturing and production facilities, we provide a wide selection of interconnect products and solutions primarily to telecommunications carriers and equipment manufacturers, wireless and network infrastructure carriers and manufacturers and to various original equipment manufacturers ("OEMs") in several market segments. We also design, engineer, manufacture and sell energy-efficient cooling systems and integrated small cell solutions and related components.

We operate through two reporting segments: (i) the RF Connector and Cable Assembly ("RF Connector") segment, and (ii) the Custom Cabling Manufacturing and Assembly ("Custom Cabling") segment. The RF Connector segment primarily designs, manufactures, markets and distributes a broad range of RF connector, adapter, coupler, divider, and cable products, including coaxial passives and cable assemblies that are used in telecommunications and information technology, OEM markets and other end markets. The Custom Cabling segment designs, manufactures, markets and distributes custom copper and fiber cable assemblies, complex hybrid fiber optic and power solution cables, electromechanical wiring harnesses for a broad range of applications in a diverse set of end markets, energy-efficient cooling systems for wireless base stations and remote equipment shelters and custom designed, pole-ready 4G and 5G small cell integrated enclosures.

For the nine months ended July 31, 2025, revenues from the Custom Cabling segment were generated from the sale of fiber optics cable, copper cabling, custom patch cord assemblies, and wiring harnesses, which collectively accounted for 53% of the Company's total sales. Revenues from the RF Connector segment were generated from the sales of RF Connector products and cable assemblies and accounted for 47% of total sales for the nine months ended July 31, 2025. The RF Connector segment mostly sells standardized products regularly used by customers and, therefore, has a more stable revenue stream. On the other hand, the Custom Cabling segment mostly designs, manufactures, and sells customized cabling and wireless-related equipment under larger purchase orders. Accordingly, the Custom Cabling segment is more dependent upon larger orders and its revenues can therefore be more volatile than the revenues of the RF Connector segment.

Our corporate headquarters are located at 16868 Via Del Campo Court, Suite 200, San Diego, CA 92127. Our phone number is (858) 549-6340.

Liquidity and Capital Resources

Historically, we have been able to fund our liquidity and other capital requirements from funds we generated from operations. We generated operating income during the nine months ended July 31, 2025, as we saw sales continue to recover during the current period. Further, the cost-cutting measures that were implemented to reduce our operating expenses and to help drive positive operating cash flow and increase liquidity have started to be realized. These cost-cutting efforts included consolidating facilities and recognizing the related operating efficiencies and synergies in our production operations. We intend to continue to pursue additional continuous improvement and cost reduction measures, as well as organic growth in revenue and profitability.

As of July 31, 2025, we had a total of $3.0 million of cash and cash equivalents compared to a total of $0.8 million of cash and cash equivalents as of October 31, 2024. As of July 31, 2025, we had 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 $21.0 million. We believe that the amount of cash remaining, plus the amount available to us under the EBC Revolving Loan Facility, will be sufficient to fund our anticipated liquidity needs.

As of July 31, 2025, we had $19.7 million of backlog, compared to $19.5 million as of October 31, 2024, due primarily to shipments against our backlog and timing of orders. Since purchase orders are submitted from customers based on the timing of their requirements, our ability to predict orders in future periods or trends in future periods is limited. Furthermore, purchase orders may be subject to cancellation from customers, although we have not historically experienced material cancellations of purchase orders.

In the nine months ended July 31, 2025, we generated $2.5 million of cash in our operating activities. This net inflow of cash is primarily related to a decrease in inventories of $0.6 million as a result of better inventory management and supply chain conditions improving allowing us to carry less inventory on hand, $1.8 million from depreciation and amortization, $1.0 million from the change in accounts payable, $0.6 million from stock-based compensation expense, $2.1 million from the change in accrued expenses, $0.1 million from amortization of debt issuance costs and $31,000 from bad debt expense. The cash usage was primarily due to the net loss of $0.1 million, the change in accounts receivable of $3.3 million, the change in other current assets of $0.1 million, right-of-use assets of $0.3 million, $43,000 tax payments on cancelled shares of restricted stock, $12,000 gain on disposal of fixed assets and $3,000 from deferred income taxes.

During the nine months ended July 31, 2025, we also spent $170,000 on capital expenditures, repaid $0.4 million on the revolving credit facility with EBC, received $0.2 million in proceeds from the exercise of stock options and received $12,000 in proceeds from sales of fixed assets.

Our goal to expand and grow our business both organically and through acquisitions may require material additional capital equipment. In the past, we have purchased all additional equipment or financed some of our equipment and furnishings requirements through capital leases. At this time, we have not identified any additional capital equipment purchases that would require significant additional leasing or capital expenditures during the next 12 months. We also believe that based on our current financial condition, our current backlog of unfulfilled orders, and our anticipated future operations, we would be able to finance our expansion, if necessary.

From time to time, we may undertake acquisitions of other companies or product lines in order to diversify our product and solutions offerings and customer base. Conversely, we may undertake the disposition of a division or product line due to changes in our business strategy or market conditions. Acquisitions may require the outlay of cash, which may reduce our liquidity and capital resources while dispositions may increase our cash position, liquidity and capital resources. Since our goal is to continue to expand our operations and accelerate our growth through future acquisitions, we may use some of our current capital resources to fund acquisitions we may undertake in the future.

Results of Operations

Three Months Ended July 31, 2025 vs. Three Months Ended July 31, 2024

Net sales for the three months ended July 31, 2025 (the "fiscal 2025 quarter") increased by 17.9%, or $3.0 million, to $19.8 million as compared to the three months ended July 31, 2024 (the "fiscal 2024 quarter"). Net sales for the fiscal 2025 quarter at the Custom Cabling segment increased by $3.5 million, or 49.3%, to $10.6 million, compared to $7.1 million in the fiscal 2024 quarter. The increase was primarily driven by aerospace and new market penetration in our Custom Cabling segment. Net sales for the fiscal 2025 quarter at the RF Connector segment decreased by $0.5 million, or 5.2%, to $9.2 million as compared to $9.7 million in the fiscal 2024 quarter, primarily due to timing of small cell applications and deployment.

Gross profit for the fiscal 2025 quarter increased by $1.7 million to $6.7 million, and gross margins increased to 34% of sales compared to 29.5% of sales in the fiscal 2024 quarter. The increases in gross profit and gross margins were primarily related to the overall product mix and new market penetration.

Engineering expenses increased by $0.1 million to $0.8 million in the fiscal 2025 quarter compared to $0.7 million in the fiscal 2024 quarter. The increase was the result of new product development. Engineering expenses represent costs incurred relating to the ongoing research and development of current and new products.

Selling and general expenses increased by $0.5 million to $5.2 million (26.5% of sales) compared to $4.7 million (28.1% of sales) in the third quarter last year primarily due to an increase in variable compensation related to commissions and bonuses as a result of the higher sales and investment in additional resources.

For the fiscal 2025 quarter, the Custom Cabling segment had pretax income of $2.1 million and the RF Connector segment had a pretax loss of $1.4 million, as compared to $0.3 million income and $0.7 million loss, respectively, for the comparable quarter last year. The increase in pretax income at the Custom Cabling segment was the result of product mix servicing the aerospace and enterprise markets. The increase in pretax loss at the RF Connector segment was primarily due to a decrease in sales relating to timing of orders.

For the fiscal 2025 and 2024 quarters, we recorded income tax provision of $88,000 and income tax benefit of $52,000, respectively. The effective tax rate was 18.3% for the fiscal 2025 quarter, compared to 6.9% for the fiscal 2024 quarter. The change in the effective tax rate from the fiscal 2025 quarter to fiscal 2024 quarter was primarily driven by the effects of the change in valuation allowance, research and development credits, state income taxes, and other expected permanent differences.

For the fiscal 2025 quarter, net income was $0.4 million and fully diluted earnings per share was $0.04, compared to a net loss of $0.7 million and fully diluted loss per share of $0.07 for the fiscal 2024 quarter. For the fiscal 2025 quarter, the diluted weighted average shares outstanding were 10,668,375 as compared to 10,495,082 for the fiscal 2024 quarter.

Nine Months Ended July 31, 2025 vs. Nine Months Ended July 31, 2024

Net sales for the nine months ended July 31, 2025 (the "fiscal 2025 nine-month period") of $57.9 million increased by 24.8%, or $11.5 million, compared to the nine months ended July 31, 2024 (the "fiscal 2024 nine-month period"). The increase in net sales is attributable mainly to the Custom Cabling segment, which increased by $12.6 million, or 70.0%, to $30.6 million compared to $18.0 million in the fiscal 2024 nine-month period, primarily driven by tier one carrier applications for our direct air cooling and small cell enclosure offering and new market penetration through our Cables Unlimited business division. Net sales for the fiscal 2025 nine-month period at the RF Connector segment decreased by $1.1 million, or 3.9%, to $27.3 million compared to $28.4 million in the fiscal 2024 nine-month period, primarily due to fluctuations in our distribution business.

Gross profit for the fiscal 2025 nine-month period increased by $5.3 million to $18.4 million while gross margins increased to 31.8% of sales compared to 28.2% of sales in the fiscal 2024 nine-month period. The increases in gross profit and gross margins were primarily driven by applications for our direct air cooling and small cell enclosure offerings and our diverse custom cabling product offerings into aerospace and enterprise markets.

Engineering expenses remained consistent at $2.1 million for the fiscal 2025 nine-month period compared to the fiscal 2024 nine-month period. Engineering expenses represent costs incurred relating to the ongoing research and development of new products.

Selling and general expenses increased by $1.5 million to $15.4 million (26.6% of sales) compared to $13.9 million (30.0% of sales) in the nine-month period last year primarily due to an increase in variable compensation related to commissions as a result of the higher sales, bonuses and investment in additional resources. We incurred one-time charges of $0.2 million relating to severance and related legal expenses in the fiscal 2025 nine-month period.

For the fiscal 2025 nine-month period, pretax income for the Custom Cabling segment was $5.3 million and the pretax loss for the RF Connector segment was $4.2 million, as compared to $0.4 million income and $3.1 million loss, respectively, for the comparable nine-month period last year.

For the fiscal 2025 and 2024 nine-month periods, we recorded income tax provision of $259,000 and $2,766,000, respectively. The effective tax rate was 160.9% for the fiscal 2025 nine-month period, compared to (76.9%) for the fiscal 2024 nine-month period. The change in effective tax rate for the fiscal 2025 and 2024 nine-month periods was primarily driven by the effects of the change in valuation allowance, research and development credits, state income taxes, and other expected permanent differences.

For the fiscal 2025 nine-month period, net loss was $0.1 million and fully diluted loss per share was ($0.01) per share as compared to a net loss of $6.4 million and fully diluted loss per share of ($0.61) per share for the fiscal 2024 nine-month period. For the fiscal 2025 nine-month period, the diluted weighted average shares outstanding were 10,632,566 as compared to 10,466,862 for the fiscal 2024 nine-month period.