Thank you, operator. Good afternoon, and welcome to RF Industries' fourth quarter fiscal 2022 financial results conference call.

With me on today's call are RF Industries' President and Chief Executive Officer, Rob Dawson; and Senior Vice President and Chief Financial Officer, Peter Yin. Before I turn the call over to Rob and Peter, I'd like to cover a few quick items.

This afternoon, RF Industries issued a press release announcing its fourth quarter and fiscal 2022 financial results. That release is available on the company's website at rfindustries.com.

This call is also being broadcast live over the Internet for all interested parties, and the webcast will be archived on the Investor Relations page of the company's website. I want to remind everyone that during today's call, management will make forward-looking statements that involve risks and uncertainties.

Please note that except for the historical statements, statements on this call today may constitute forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934. When used, the words anticipate, believe, expect, intend, future and other similar expressions identify forward-looking statements.

These forward-looking statements reflect management's current views with respect to future events and financial performance and are subject to risks and uncertainties and actual results may differ materially from the outcomes contained in any forward-looking statements. Factors that could cause these forward-looking statements to differ from actual results include delays in development, marketing or sales of products and other risks and uncertainties discussed in the company's periodic reports on Form 10-K and 10-Q and other filings with the Securities and Exchange Commission.

RF Industries undertakes no obligation to update or revise any forward-looking statements. Additionally, throughout this call we will be discussing certain non-GAAP financial measures.

Today's earnings release and the related current report on Form 8-K describe the differences between our GAAP and non-GAAP reporting and present the reconciliation between the two for the periods reported in the earnings release. With that said, I will now turn the conference over to Rob Dawson, President and Chief Executive Officer.

Thanks, Jack. Good afternoon, everyone.

Thank you for joining RF Industries fourth quarter and year end fiscal 2022 conference call. I'm pleased to report that we capped the year with annual sales of $85.3 million, the largest year by far in our company's 40 year history.

A 48% increase year-over-year and above the high end of our previously stated guidance. We also delivered adjusted EBITDA of $6.6 million for the full year.

Importantly, as we expected we saw improvements in gross profit margin throughout the year and in the fourth quarter we reached a high of 31%. We believe this reflects our strategic shift to higher value products and solutions and our focus on managing expenses even in an inflationary environment.

This year, we also closed on the acquisition of Microlab, our largest acquisition thus far, and we did it without any dilution to shareholders. Microlab, which is now fully integrated is a very exciting addition to the RFI family.

I'll be telling you more about how it expands our opportunity set in a few minutes. On today's call, Peter will cover our financial results in more detail, as well as our guidance for fiscal 2023.

For my part, I'd like to take a few minutes to reflect on how far we've come over the past few years and why we have such strong conviction in the future of RF Industries, and our ability to generate sustainable returns for shareholders. 2022 was a challenging but rewarding year for the team.

We endured supply chain and transportation headwinds among other macro challenges, yet we still grew sales by nearly 50% with both organic and inorganic increases. Thank you to our amazing team for making this happen.

This team has made tremendous progress reinventing a 40 year old company that was maybe a little sleepy and trapped in a commodity driven business. That said, the company was consistently profitable and had a stellar reputation for quality customer service and the best part, great people.

Those were the good bones that I saw when I joined the company at the end of 2017. So five years ago, we set our sights on developing the strategic plan that would unlock the value of our foundational strengths.

Our strategy was a two pronged approach, keep fueling the cash cow of organic growth and look for hidden gem acquisitions that could deliver a new value proposition into an expanded market opportunity. All while launching an aggressive go to market plan to add key distribution and get to the important end user customers, especially in the wireless industry.

While I believe we barely scratched the surface of our potential, we made significant headway in 2022 on the disciplined execution of our plan. Since the plan's inception in late 2017, we've nearly quadrupled in size.

We're consistently profitable and we've defined our differentiated value proposition in the market. To transform our company, we focused on several core areas.

First was to build out a strong team. We've augmented an already impressive team with an enviable list including skilled executives with strong industry experience, many of whom come from larger competitors.

Most of our additions are trusted and proven former colleagues. We also bolstered our corporate governance and strategy with several director changes on our Board of Directors in the past few years.

Second thing we focused on is quality. The goal is always to offer quality products that customers need and come back for time and time again.

And early on, we discovered we could win on speed by understanding the inventory needs of our clients, we can deliver whatever a customer needs quickly and faster than the competition, through both our production capabilities and our distribution network. With a great team, quality products and a speed advantage, you can accelerate a strong go to market plan.

Our go to market strategy has been to influence the key end user customers to include our products and solutions in their bill of material for projects and general business purposes and then make it easy for them to purchase through whatever channel makes the most sense for them. This approach informed our decisions to add distribution and to acquire specific companies and product areas.

Next is to become as valuable to our customers as they are to us. With key acquisitions such as Microlab in 2022, and C Enterprises and Schroff Tech before, on top of our custom capabilities and existing business we've broadened and deepened our product offering to better serve our customers and solve greater problems with higher value bigger ticket items.

We have additional product announcement in the coming months that we believe will be game changers for us and will be part of the next phase of growth for the company. Then we had to move beyond commoditized products to those with technical advantages or intellectual property advantages.

Through product development, like with our OptiFlex hybrid fiber solutions and select acquisitions, we have and will continue to compile a more distinctive proprietary product offering that will help us build a protective moat from competitors around our company. The next key is to look at efficiency.

We continue to look for ways to achieve scale, reduce redundancy and improve efficiency and margin. Being good stewards of money, cash flow and redeployment of capital has been another important driver.

We've consistently been solid with cash flow, but we've been equally strong in deploying our capital smartly. We've made three acquisitions in 3.5 years, including our company's largest in our history last year with Microlab, using cash and low interest loans for all of those.

We haven't caused any dilution for our shareholders. A cornerstone of our business is that we manage our money well.

And last but not least, we keep our eyes squarely on growth. We've nearly quadrupled our size in five years, including during a global health pandemic and with other global macro head wins.

And with 4G still in deployment and the promise of 5G not yet fully realized, our future for organic growth is bright. With smart acquisition targets, it can be even stronger.

And no one here forgets growth comes in many forms. That includes paying attention to our core business which has grown for five straight years.

Now I'd like to spend a couple of minutes to reiterate or restate our core value proposition. We focus on our customers' needs with quality, speed and availability and we always have the customer in mind, making us easy to work with.

Our growth plan organically and through acquisition is to provide more of the bill of materials of interconnect products for telecom, wireless and industrial customer applications. This expanded offering allows customers to buy more from RF Industries across multiple product categories, which can help them reduce complexity and supply chain costs.

Our go to market strategies and business development efforts have generated significant multimillion dollar orders from existing and new customers, which combined with our steady distribution centric core business led to much of our growth and resulted in a continued healthy backlog of $27.8 million as we entered the new fiscal year. Historically, many of the products we sell like coaxial jumpers and fiber optic jumpers are in very fragmented markets, which means, we're up against multibillion dollar global [behemoths] (ph) as well as mom and pops.

So how do we compete? Two ways: inventory availability through stocking on-site and with distributors; and through our fast turn production.

As an example, if you're doing a wireless installation in downtown Los Angeles, you suddenly realize you need 1,000 coaxial jumpers. You're dead in the water without them and your options are limited.

You can go to a large competitor with a small order and might wait two or four weeks or you can come to RF Industries and we'll have it for you in a couple of days or better. That's what we do in a piece of our core business.

We are really, really good at inventory availability. We either have it on our shelves or on the shelves of one of our six national distributors or we can make it quickly.

And along the way, we strengthen our relationships with our distributors by working together to get stocking positions correct. That's how we create value add in our core distribution business.

And that coupled with our custom capabilities is why we do business with all Tier 1 wireless carriers. That's how RF Industries trusted reputation among customers opens the door for more business.

And that's why we've continued to add more products in that wireless bill of materials to become more of a one stop shop. Availability, speed and quality continue to be cornerstones of who we are.

But that value proposition is evolving and becoming more powerful as we've added higher value and more proprietary products and solutions, both through product development and through acquisition. We've been working hard to elevate our offer to create more of a moat around our business with those higher value proprietary products and solutions that we believe will give us more of a competitive advantage in the market and produce higher profitability in our next phase of growth.

So as we turn to fiscal 2023, we're confident in our ability to deliver a solid shareholder return for all the reasons that I've just outlined. Starting this month, we are consolidating our West Coast operations with a new facility coming online in the next 30 days in San Diego.

And in our second quarter, we'll be doing some consolidation on the East Coast in New Jersey. This allows us to streamline operations and achieve greater scale.

Although this will create a short term expense impact, the long term synergies and cost savings will be measurable. We've reached a size and scale where we can capitalize on opportunities for centralizing functions and realizing cost savings through integrating previous acquisitions and implementing new processes.

This year, we will also be introducing a new brand strategy. As we've grown, we've acquired a number of products and brands with different names.

Some have greater awareness than others. We've completed research to understand the power of the RF Industries brand, as well as the individual brands and product names.

In 2023, we plan to roll out a new brand architecture and strategy that will include our overarching positioning, identity -- the identities of our house of brands and a touch points that connect shareholders and customers to those brands, such as our website and collateral. This is an exciting development in the evolution of our company and we look forward to sharing it with you in the coming months.

With a shared vision and strong roadmap, I believe we barely scratched the surface of our potential. Before I close out my remarks, I want to acknowledge and provide my sincere appreciation to our 340 employees.

Our continued success and strong standing with our customers is due to their relentless commitment to our company's performance and serving our customers. I'm obviously pleased with the progress that we've made in growing the business over the last five years.

But as always, I believe the best is still ahead of us. And with that, I'll now turn the call over to Peter Yin, our CFO to delve into the details of our financials.

Peter?

Thank you, Rob, and good afternoon, everyone. As Rob mentioned, we are pleased to report record sales and adjusted EBITDA for our fiscal year.

Before diving into the details of our fourth quarter and our year end results, I want to note that fourth quarter results represent a more normalized reporting of our financials. However, when comparing the full fiscal year results, there are impacts from the Paycheck Protection Program loan forgiveness and the employee retention tax credit, both the PPP loan forgiveness and the ERC were recognized in the second and third quarter of fiscal 2021.

On today's call, I will be excluding the impacts of the PPP loan forgiveness and the ERC when applicable to make the full fiscal year results more comparable. Sales in the fourth quarter were $23 million, a year-over-year increase of $1.9 million or 8.9%.

For the full fiscal year, sales increased $27.8 million or 48% to $85.3 million. Microlab product contributed $15 million since the acquisition in March.

Organic growth year-over-year accounted for $12.8 million, which represents growth in most of our product areas, but primarily driven by the growth in our OptiFlex product line, which is our hybrid fiber solution that is used to support the build out of wireless power sites. Adjusted EBITDA for the fourth quarter was $1.9 million compared to $1.5 million, a 22% year-over-year increase.

Adjusted EBITDA for the full fiscal year was $6.6 million, which is an increase of $3.9 million or 143% year-over-year from $2.7 million. The increase is primarily due to the higher sales along with a more favorable product mix, primarily driven by Microlab products.

Fourth quarter gross profit margin increased to 31% from 25.3% in the fourth quarter last year. The 570 basis point increase in our year end margin was driven by favorable product mix.

Our sales team continues to work on increasing sales of our higher margin offering and our operations team is working hard to control costs and reduce costs where we are able. We continue to be impacted by the elevated cost of shipping and materials as a result of inflationary pressures, as well as the ongoing wage pressures we have discussed previously.

Recently, we have seen pricing for our materials start to stabilize and believe that the supply chain constraints we've been facing while still ongoing are lessening. We believe there is room to further improve our margins as we believe our sales increase will be driven by our higher value products and solutions.

Operating income was $715,000 for the fourth quarter and net income of $451,000 or 4% per diluted share. Non GAAP net income was $1.5 million or $0.15 per diluted share.

At the end of the fourth quarter, our balance sheet remains strong with cash and cash equivalents of $4.5 million with working capital of $26.7 million and our full $3 million revolver remains available. Our inventory was $21.1 million, up from $11.1 from last year.

The increase in inventory is to support the increase in sales and to mitigate against supply chain disruptions. Microlab accounted for $4.9 million of the inventory increase, but it is also important to note that we have also invested to increase the inventory levels of Microlab products, which has increased $1.2 million since the acquisition.

We believe our current inventory level supports our strategic business model of inventory availability, which is essential to meet demand as we expect increased CapEx spend related to the continued build out of 4G and 5G wireless networks. While supply chain issues have eased, once we believe that they have resumed to more predictable levels, we will be able to lower our carried inventory, bringing up cash for other investments.

Moving on, we continue to see momentum building around new business. Our backlog remains healthy going into fiscal 2023 with $27.8 million on fourth quarter bookings of $20.2 million and as of today, our backlog currently stands at $26 million.

Before I discuss our guidance for fiscal 2023, I want to take a moment to expand on something Rob discussed. Our company has been undergoing a thorough reinvention over the course of the last few years.

We are all excited about the potential ahead, both from a top line growth rate, as well as the margin improvement we expect to realize. As our sales mix shifts from more traditional products to solutions that are pivotal to continued deployment of 4G and 5G networks, as well as overall infrastructure build outs.

We believe we will see increases in our operating income from economies of scale as we continue to grow and from efficiencies and synergies we will realize when we move into two new facilities and consolidating operations in 2023. As for fiscal 2023, we expect the usual seasonal impact that we have experienced in our first fiscal quarter and we anticipate increased sales throughout the year.

We expect revenues to be in the range of $90 million to $94 million for fiscal 2023. That concludes my comments.

Operator, we are ready to open the line for questions.

Great. Good to see a strong finish to the fiscal fourth quarter heat and guidance outlook for next year as well too.

Could you provide a little bit more color. Was there any like one large particular one time orders that may have contributed to the outperformance this quarter or were things pretty well dispersed amongst the different offerings?

Yes. Thanks, Josh.

So, no, I wouldn't say there was one large order. I mean, we just did still have a pretty meaningful amount of hybrid fiber ship out in the quarter, which was not unexpected and sort of what we shared at the end of last quarter that we thought was going to happen.

I think overall, it was a pretty normal quarter for us. So nothing crazy, core business performed, steady growth over the prior year like it generally has.

Sales of Microlab products were stable and kind of in the range that we've been expecting them a little better than maybe their historicals. So the only -- the biggest number in there would have been the hybrid fiber, which has been consistent over the last several quarters.

So nothing out of the ordinary.

Great. And then I know you've talked a lot about not just the top line, but the margin profile, which has consistently increased throughout this year on the gross margin front.

And then also some EBITDA margin targets. Is your plan next year, do you think the company is going to be achieving north of 30% gross margin and any targets you could put out there at a high level for EBITDA for the year?

Sure. Yes.

So we were happy to see, obviously, gross margin go up as fiscal 2022 went on and ending the way you did was great to see. I think that's our expectation going forward.

Now in fiscal 2023, we always have kind of a funky first quarter with November, December, January being the three months of our fiscal first quarter. So short of that normal seasonality that we experienced, we expect margins to continue getting better throughout the year.

We think our product mix will help drive that. Once we get into the new facilities, as well there's some early in the year expenses to help us get that done that are one time charges.

Then we expect our EDITDA margins to get better as well. So we're still aiming to be north of 30% on the gross profit line and to consistently get above 10% on the adjusted EBITDA line.

I think as we get through the year, the EBITDA piece is the one that I'm encouraged and excited to see as we start to be able to take some real synergies and savings as we get into the moves. So it will be similar to what we've seen in the last few years where the first quarter is a little lighter than the other three and we have growth from there.

And understanding the seasonality of the first quarter and then things tend to pick up from there, but curious what are you seeing in terms of carrier CapEx build outs 4G more specifically 5G, those have been hard to time in terms of the spend. I'm just curious what you're hearing with your conversations with your customers about what the expectations are for calendar 2023?

Yes. So I think on both 4G and 5G kind of looking at them together, the CapEx as calendar '22 wound down, this is one of those years where things really slowed down from an expectation of what was going to happen in December in particular.

That's normal. This is my fifth iteration of a major build, I think.

And so, what we expected most years, I think the thing that we've generally seen is with the overall economic uncertainty carriers are still committed to a meaningful amount of CapEx. I think there was a little bit of holding your breath as the year ended to see, okay, how do we end up and our carrier is going to keep spending like they said.

We haven't seen any major pullback on that. There's still a pretty significant amount allocated.

I think I won't be surprised if there's sort of delays in acceleration as we get into early and late spring, which is normal build season when it really gets moving. The part of that that I'm most intrigued to see really is on the small cell side.

Do we start to see the spend that we've been expecting, sort of the pent up demand spend that's been sitting there, which I think we will. I think this is a year -- 2023 is a year where we need to see some of that.

So I guess summary there is, we expect pretty meaningful CapEx, macro sites, small cells and venues as well as we get into better weather and some of those outdoor venues start to be built out.

Thanks for clarifying. And then last question for me.

Looking at the guidance for next year, I guess, you've historically been able to secure some large orders. And to your point, I think the small cell opportunity is probably like a bit underappreciate.

I'm just curious like are you still pursuing some of these large multimillion dollar orders? Is there a good pipeline of those?

And as much of that or a big ramp in small cell included all in the guidance that you're giving initially or is that more like an upside scenario case?

Yes, I think that a larger small cell spend would be an upside case. We have some of that built into our expectations, it's really hard to predict.

So it's one of those things, but putting an exact number on has been difficult to do, especially early in the year. I think as we get through the year, we'll get a clearer sense of what does that build plan look like.

But they are absolutely in our expectations, there are some pretty significant wins that need to be in there in multiple product areas. We're still shipping a lot of hybrid fiber, we're hoping for even more of that.

As we go on, that's a tough one to predict as well kind of week to week or month to month, but we're hopeful there. And then our other kind of bigger ticket items as we get into small cell and thermal cooling, those are areas that we see large opportunities.

And the last thing, as I mentioned a minute ago is, from a venue perspective with the add of Microlab into our offer, when a large venue like a football stadium in particular gets built out and we're specked in there, those are hundreds of thousands of dollars in one PO just for passes. We can now throw in fiber and coaxial jumpers as well and some other items to try to fill out that bill of materials.

So I don't want to understate the possibility of those as those start to line up as well as some decent wins.

Appreciate it. Thanks.

I'll hop back in the queue.

Thanks, Josh.

Hi, Rob. Congratulations on a strong EPS for the year.

You mentioned some costs around consolidation on the West Coast, East Coast and then savings. Is this consolidation, manufacturing, operations, this is a first question.

And then can you sort of quantify the amount of expenses around that? And then the amount of cost savings down the line?

Sure. I'll tackle the general concept, the consolidation, I'll let Peter give some sense of the cost and then I'll come back and maybe share what we think that's going to be longer term.

So the consolidation is, its operation, its production, its inventory. We're starting with the West Coast, we're combining our legacy RF Industries product line that [indiscernible] offer and the fast turn fiber offer that we acquired from the enterprises a few years ago.

So those who are being combined production offices, corporate staff and then our corporate headquarters is moving there as well to one new facility to help us, I think, take advantage of our scale and maybe take some synergies out as well. Peter, maybe you can share a little bit on what we think the one-time costs are related to the relocation?

Hey, Martin. Thanks for the call.

So the one-time cost, a big chunk of that is going to be just the moving expenses associated with that. Am I coming through okay here?

Yes.

Okay. I'm getting a lot of feedback on my end.

So just moving costs related to that. That's the biggest probably onetime charge we see.

And then there's going to be some leasehold improvements that will -- as we're getting into there, having that kind of get a fix from a cost savings perspective, Aaron, I don't think there's much to share quite yet. We look forward to be being able to share that kind of once we get into the building and things iron out a little bit more.

So I think those cost savings would be a little bit premature to share here on the call.

Yes. The one thing I'll add to that Peter is just I think from a production team perspective and some of the higher level roles, what do we really need when we get two large operations hold into one.

We have 130 people, call it, in Southern California, 135, I think our expectation is that we can get better at doing our production in a slightly more lean scenario and handling inventory maybe in a healthier way also. So I think as we get into the first quarter and talk again in March, I think you'll hear more quantification of what those dollars are, but we think they're material to the business as we go on.

Okay. And on the expense side, you are talking about a couple hundred thousand less than that.

Yes, I think we're talking about between, call it, $250,000 and $500,000 from a move expense. It could be a little higher than that if -- things don't always go perfectly with the relocation.

So it's not a crazy number, but it's not free. So I think we're expecting to spend several hundred thousand dollars to get relocated into these facilities where we can really recognize some savings from that.

Okay. Thank you.

We'll continue the conversation.

Thank you.

Rob, Peter, good afternoon.

Hey, David.

Looking at your -- well, take the midpoint of your revenue guidance for next year as revenues up 8%, can you talk at all about how pricing is factored into those projections?

Yes, good question. Thanks, David.

So we've taken a little bit of price increases. Some of that already printed through in results that were shared now depending on the timing under which we took those increases in the prior year.

I think there's a little bit of it. I mean, call it, it's certainly not the full 8%, but call it a percentage point or 2% that we would tie to price increases based on product mix.

We weren't able to take price increases on everything that we sell. That's what makes it a little harder to predict some of our items just we don't have that kind of pricing power.

Others, it's more standard just annual increases that we generally take. So I think we're putting a little bit of weight into the price increase piece on that, but the majority of that growth is just going to be from increased sales in some of the newer product areas.

And we may have to offset some slower sales of some of the big project items we've done over the last few years. It's hard to know if all the projects that we're doing, specifically on the hybrid fiber side are going to stay at the exact same level, but our expectation is, those will continue to be robust, maybe not at the same level they were last year and we need some other product areas to increase to offset that to give us the growth.

Okay. And then on that line, is it possible to at all characterize have your price increases been able to keep up with your cost increases or are you having to absorb some of those?

Yes, good question. I think on the customer side -- sorry, on the cost of goods side, we've generally been able to keep up as the cost of goods have moderated a bit in the last several weeks or a couple of months.

The piece of this that's been harder for us to control overall is just wage pressure. We see consistent increases on all of our folks, our production teams, et cetera.

So there's room for us to get a little sharper there, I think, to find some additional savings and some opportunities. We do have -- we had initiatives in place for some time to take cost out of the business.

We think we're going to be able to offset most, if not all, of the increases that we've experienced from a wage perspective with those initiatives. So we think it's sort of where we're starting with a clean slate and now it's about growing the business and recognizing some of those better margin items to help us print through the better profit.

Okay. I appreciate those answers, Rob.

And good luck as you continue to implement your 2023 plan.

Great. Thanks, David.

Thank you.

Thank you for taking my question, Rob. I'm wondering about your -- the product launches in this fiscal year, and in particular, I'm wondering about the timing of those launches and whether there have been any legs of revenues with those new products you've got coming in and whether it's a fiscal 2023 revenues or whether it's -- whether it'd be later than that?

Yes. Hey, Hal.

Thanks for the question. So we have multiple things that we're going to be launching.

I think the good news here is, from our last couple of acquisitions we've added some solid engineering talent and some product roadmap capabilities. So we have small cell and thermal cooling offers, we have Microlab products that are on the docket and we've kind of always got new versions of hybrid fiber that are coming out as well.

Historically, there's not a lot of product launches from us, because we weren't very product road map centric, we were more looking at market opportunities or responding to customer needs and then coming to market with something. This is a more proactive approach.

The majority of the things that we plan to launch and announce already have customer trials, either completed or ongoing and we expect there to be in most cases revenue during fiscal 2023 to coincide with those launches. I'm not much of a send out a press release because we have something that we think is cool kind of guy.

I prefer to send out something when we think it's cool, customers think it's cool and we can actually quantify some dollars around it. So you can expect that when we do launch something, our expectation is that there's a revenue stream tied to it that we can also speak about at that time.

Okay, great. Thank you.

And another -- I think my final question was kind of a broader question, regarding mergers acquisitions. Two part question.

One is, your past acquisitions and most recently Microlab, have you completed the sufficient amount of integration that you're now actively looking for new acquisitions. And with respect to potential new acquisitions, the environment has changed a lot over the past year, right, with higher interest rates.

There's a potential recession people are talking about, funding availability has changed a bit, I suppose. And there may be greater willingness on the part of potential targets to enter into discussions with you.

Can you talk about that?

Sure. Yes.

So the first piece, so Microlab is, I'll say, generally integrated, if not fully integrated. The only thing remaining there is getting into a new facility for them from where they're located currently.

So just moving down the street, but I need a little bit of additional space to do some other things in there. But other than that move, which really didn't have anything to do with the integration of the business, our systems implemented there, our teams have been integrated almost since day one.

So we're largely complete on that, which in a normal environment would then free us up to be actively looking at deal flow and acknowledging deals. It's not that we're not doing that, we are looking and the pipeline continues to sort of build and evolve.

But we're pretty cautious about doing M&A in an environment like this, making sure that we've got the right acquisition target, the right size and scale. As always, I think as everyone's learned, I care a lot about what price we pay for it and try to be conservative on that and make sure that we're allocating capital wisely.

So there's nothing imminent. I'm not rushing into any deals and whether that -- whether that continues to be the case this full year or not, we'll have to wait and see, but I don't think it's a very -- while people are interested in talking about M&A, it's a little bit of a funky environment to be going out to find capital.

We've done a great job of using cash and low interest debt in the past. Where our stock sits today, I'm not terribly interested in using that equity as -- using that paper to do an acquisition either.

So I think we'll continue looking at deals as something great comes along. We can always get creative and figure it out, but I think at the moment.

We've got a lot on our plate with getting integration of these new facilities and starting to print through the savings that we believe will come out of it over the course of time along with the sales initiatives and the big operational initiatives that we've had ongoing for several quarters. So not to say we won't look and continue to look, but we're definitely going to be I think conservative about our approach to M&A at least right now.

Okay, great. Thank you, Rob.

Thanks, Hal.

Hi. It's Orin Hirschman.

How are you? Congratulation on the progress.

Good. Thanks, guys.

So just a few questions. So on [Schroff Tech] (ph), there were some very large trials or decent sized trials going on in the cooling.

Did any of those trials mature into sales or they maturing into sales and you have to revamp anything in terms of what the customers wanted? Just give us a quick update on that.

Sure. Yes.

So trials have all gone well. We expect to see some nice wins this fiscal year from that, both from those trials as well as just kind of the general uptake of our product line.

The team -- the engineering team did a great job of, I think, reinventing an existing product line. So I'm not going to say we started from scratch, but we certainly added some enhancements and some key things really right in the middle of COVID over the few years to redevelop a product line that had a little more longevity to it and was more future looking.

So those enhancements are definitely helping. And I think the general belief and reaction from customers in the market is they are positive on our solution.

And as I said, it's not going to go, I think we expect some meaningful opportunities to come to fruition this fiscal year.

Okay. In terms of the small cell strategy, I know it's not -- it’s upside you've mentioned for this coming year, counting on it.

Are you still missing any pieces in the puzzle for what you bought for the customer?

Yes, it's a good question. So I don't think we are.

I think the bill of materials there is generally filled out. The two areas that we don't offer today in that bill of materials that we could or we could review and it's part of both our openly, publicly stated acquisition strategy, as well as organic development is, we don't have antennas from a broad based perspective today and there's a power requirement in small cell applications that could be a nice adder as well.

I think finding the right fit there is something we have to be really smart about. And so because of that, we're pretty pleased with the offer we have today.

We have no intention of offering the radios. There's obviously a big ticket item inside those boxes that is more than one radio and that's not an area that we intend to go in, but our general belief is, we can design, engineer and build a fully integrated small cell shroud of varying shapes and sizes and types using products of our own and helping integrate those from others.

So I don't think there's anything missing from our offer to service what a customer might want.

On that note, are you -- let's say, for the antenna, are you buying from outside vendors on the antenna because the customer wants it to come in one finished box?

So generally, there's going to be a manufacturer of record on the bill of materials. So someone will be named or someone's will be named as the spec position for antennas.

So generally those are things that we're told to use based on the carrier, the location, the region, the type of shroud that's being deployed. So yes, we're either buying them or we're having them supplied to us to help integrate into those cabinets.

Okay. And so finally on the gross margin, definitely on a component level things are improving across many, many, many companies that we speak to in the last month or two notably.

This company on a gross margin basis even before it took in the higher gross margin Microlab, years ago had been higher in the mid-30s, you mentioned that for various competitive reasons, it may not get back there. But even if the base business gets back to a number with a three in front of it and you have Microlab’s on top of that.

It would imply a gross margin we do get back to a more gross margin in the mid-30s. Can you see a path to do that again?

Yes, good question. So I think we absolutely see a path to getting to the mid-30s.

I think product mix in the short term makes that harder to say specifically when. And I like to be able to give a pretty specific guidance on timing and numbers and quantify it when talking about those results.

So we absolutely see it. I think the way you characterize it is correct.

If our core business, if we start to see some things normalized there where some of the costs come down a hair, both on cost of goods and cost of labor, we can start to see better gross margins there and then with the new product areas, although that's Microlab or others, if the mix starts to swing heavier in that direction, we absolutely believe there's an opportunity to get those margins up into the mid-30s. So I don't expect it early in the year.

I think if that's something that's possible this year, it's going to be late in the year. And it may be something that we don't see that kind of consistently happening till we get into fiscal ‘24.

The only reason I say that is, when you look at our top line numbers, the better our top line does generally the better our gross margins go with it, because we absorb labor and then we start to see a much healthier gross margin as well as kind of every other profitability line. Historically, we've had discussions about how do we get consistently to $15 million a quarter than it was how do we get consistently to $20 million a quarter.

We're kind of there. And now it's great.

Let's see those numbers -- if we truly were putting up the exact same number every quarter, I'd be able to give a much clearer answer, because the mix moves around and therefore our top line moves around a bit with it. It's harder to say specifically when that is, but I don't think it’s sort of a question in the mid-term to get some margin push back up into the mid-30s.

Okay. And last question, some of the new products that you're mentioning, when do we get a peek at those?

And when do they expect revenues?

Yes. So we expect revenue this year from anything that we're going to launch.

I think the soonest that you'll see something probably come out from an official product launch during our fiscal second quarter, again, that starts in February. So February, March, April timeframe.

We expect to have some things to share and then subsequent to that, there's a couple of things in the back half of the year that we believe we'll be talking about as well. But as I mentioned in a prior question, I'm not big on announcing something just to announce it unless there's some marketing genius reasons for it or we've already got customer review, customer feedback and customer opportunities that we can relate at the same time.

I like to be able to share -- here is something new to talk about. People have already looked at it and we know that it works and we know that people want it.

So now here's the revenue that we expect to drive with that. We've generally been able to do that.

We had a two field launch last year with a unique kind of shroud. We talked about that and immediately had a series of handful of purchase orders in the hundreds of thousands of dollars to talk about right on the heels of that launch.

So expect similar kind of this year, but we should have something to talk more about during our fiscal second quarter.

Sounds good. Okay.

Thanks so much.

Thanks, Orin.

That's great. Thank you, John, and thanks everyone for joining our call today.

We appreciate your support of RF Industries. I'd like to thank our team for their hard work in helping us achieve these new levels of performance and our customers for allowing us to partner with them.

We're excited about our continued positive momentum as we move into fiscal 2023. Peter and I look forward to reporting our fiscal first quarter results in March.

Thank you again and have a great day.