Executive Summary / Key Takeaways

• RF Industries is successfully transforming from a component supplier to an integrated solutions provider, evidenced by four consecutive quarters of operating profit and significant revenue growth in fiscal 2025.
• Diversification into high-growth markets like aerospace, transportation, and edge data centers, coupled with deeper engagement with traditional telecom customers, is driving top-line expansion and reducing reliance on cyclical carrier CapEx.
• Proprietary technologies such as Direct Air Cooling (DAC) systems and advanced small cell solutions offer quantifiable benefits, including up to 70% reduction in operating expenses for cooling, and are key to capturing higher-value opportunities and OpEx budgets.
• The company is actively optimizing its operational infrastructure and pursuing more advantageous financing, targeting an adjusted EBITDA margin of 10% or greater, indicating a strong focus on sustainable profitability.
• While customer concentration and tariff uncertainties present risks, RF Industries' strategic positioning, robust sales pipeline, and commitment to American-made products underpin a positive outlook for significantly higher fiscal 2025 revenue and continued momentum into 2026.

A Strategic Evolution Unfolds

RF Industries, Ltd. ($RFIL) is a national manufacturer and marketer of interconnect products and systems, strategically evolving from a traditional component supplier to an integrated technology solutions provider. This transformation, initiated years ago, aims to diversify its offerings and customer base, making the company more resilient to market fluctuations. RF Industries' core business encompasses RF connectors, various cable assemblies (coaxial, data, fiber optic, hybrid fiber), wire harnesses, energy-efficient cooling systems, and integrated small cell enclosures. The company operates through two primary segments: RF Connector and Cable Assembly, and Custom Cabling Manufacturing and Assembly.

The industry landscape in which RF Industries operates is dynamic and competitive, characterized by the ongoing build-out of 4G and 5G wireless infrastructure, the burgeoning demand for data centers (including edge data centers driven by AI), and the revitalization of large-scale venue and transportation projects. Direct competitors include industry giants like Amphenol Corporation (APH), TE Connectivity Ltd. (TEL), CommScope Holding Company, Inc. (COMM), and Belden Inc. (BDC). RF Industries differentiates itself by focusing on custom innovation and fostering strong customer relationships, particularly in niche applications where tailored solutions are paramount. While larger competitors often benefit from immense scale and broader global reach, RF Industries leverages its specialized expertise and agility to secure a competitive edge in targeted segments.

Historically, RF Industries has strategically acquired companies like Cables Unlimited, Schroff Technologies, and MicrolabFXR LLC to bolster its product portfolio and market presence. The Microlab acquisition, in particular, provided "market currency" and an "approved product set with every major carrier," enabling RF Industries to gain a "seat at the table" with key decision-makers and integrate its offerings into critical bills of materials, especially for small cell deployments. This foundational shift from merely supplying components to delivering comprehensive solutions has been central to its strategic response to market dynamics and its ability to capture higher-value opportunities.

Technological Edge: Fueling the Solutions Provider Model

RF Industries' strategic pivot is deeply rooted in its differentiated technology and continuous innovation, which serve as critical competitive moats. The company's core technological strengths lie in its Direct Air Cooling (DAC) systems, advanced small cell integrated enclosures, and innovative hybrid fiber solutions.

The Direct Air Cooling (DAC) systems represent a significant technological differentiator. These energy-efficient cooling systems are designed for wireless base stations, remote equipment shelters, and increasingly, edge data centers. A key quantifiable benefit is their ability to "reduce operating expenses by up to 70% over conventional HVAC". This substantial cost saving, coupled with their eco-friendly design and NEMA 4 certification for rugged environments, provides a compelling value proposition. RF Industries recently launched a next-generation DAC system featuring enhanced control capabilities, further expanding its applicability into wireline telecom, energy, and transportation sectors. The "so what" for investors is clear: DAC systems tap into operating and maintenance (OpEx) budgets, which are less correlated to the cyclical capital expenditure (CapEx) of carriers, thereby diversifying RF Industries' revenue streams and smoothing out seasonality.

In the realm of wireless infrastructure, RF Industries' custom-designed, pole-ready 4G and 5G small cell integrated enclosures are crucial. These solutions are vital for network densification, addressing coverage gaps, and meeting the escalating consumer demand for reliable, high-speed connections. The company's ability to provide these integrated enclosures, often incorporating Microlab products within the bill of materials, positions it favorably for the anticipated acceleration in small cell deployments. This technological capability directly contributes to RF Industries' competitive moat by enabling it to offer comprehensive, high-value solutions that displace competitors and secure a larger share of critical infrastructure projects.

Furthermore, RF Industries' hybrid fiber solutions offer an innovative approach to connectivity, particularly for macro tower sites. While the macro tower market is competitive, these solutions demonstrate the company's engineering prowess and ability to perform in demanding environments. The continuous research and development efforts, including the redevelopment of existing product lines to enhance market relevance, underscore RF Industries' commitment to technological leadership. These innovations are not merely incremental; they are designed to solve complex customer problems, which is the essence of a solutions provider model. This problem-solving approach "fundamentally strengthened how customers view RFI and the role we play in their strategic planning".

Financial Momentum: Profits Emerge from Strategic Shifts

RF Industries' strategic transformation is visibly translating into improved financial performance, particularly over the past year. The company has achieved operating profit for four consecutive quarters, a significant turnaround from previous losses. For the three months ended July 31, 2025, net sales grew 17.9% year-over-year to $19.8 million. This growth was accompanied by a substantial increase in gross profit, which rose by $1.7 million to $6.7 million, pushing gross margins to 34% of sales, a 450 basis point improvement over the prior year and 400 basis points above the company's target margin goal of 30%. This margin expansion is primarily attributed to a favorable product mix, including higher-value offerings like DAC systems and aerospace projects, alongside the operating leverage gained from increased sales volumes.

The Custom Cabling Manufacturing and Assembly segment has been a primary driver of this growth. For the nine months ended July 31, 2025, this segment's net sales surged by 70% year-over-year to $30.6 million, representing 53% of total sales. This impressive performance was fueled by "aerospace and new market penetration", as well as demand for direct air cooling and small cell enclosure offerings from Tier 1 carriers. Consequently, the Custom Cabling segment reported a pretax income of $5.3 million for the nine-month period, a substantial increase from $0.4 million in the comparable prior-year period. In contrast, the RF Connector and Cable Assembly segment experienced a modest decrease in net sales, down 3.9% to $27.3 million for the nine-month period, primarily due to fluctuations in the distribution business and timing of small cell deployments.

Consolidated adjusted EBITDA for the third quarter of fiscal 2025 reached $1.6 million, representing 8% of net sales, a significant improvement from $460,000 in the prior-year quarter. This metric underscores the company's enhanced operational efficiency and its progress towards its stated goal of achieving an adjusted EBITDA margin of 10% or greater. Net income for Q3 2025 was $392,000, or $0.04 per diluted share, a positive shift from a net loss of $705,000 in Q3 2024.

From a liquidity standpoint, RF Industries ended July 31, 2025, with $3 million in cash and cash equivalents, working capital of $13.1 million, and a current ratio of approximately 1.6:1.

The company generated $2.5 million in cash from operating activities for the nine months ended July 31, 2025, driven by improved inventory management, depreciation and amortization, and favorable changes in accounts payable and accrued expenses.

Outstanding borrowings under its revolving credit facility stood at $7.83 million.

Management is actively exploring opportunities for more advantageous financing arrangements, anticipating a reduction in borrowing costs. The backlog, a key indicator of future revenue, stood at $16.1 million as of September 11, 2025, reflecting a healthy pipeline of diverse projects.

Outlook and Growth Drivers: Charting a Course for Continued Expansion

RF Industries' management is optimistic about the company's trajectory, projecting fiscal year 2025 revenue to be "significantly higher than fiscal 2024". For the fourth quarter of fiscal 2025, net sales are expected to be "similar to what we delivered in Q3", implying continued strong performance around the $19.8 million mark. This positive outlook is underpinned by several strategic initiatives and market tailwinds.

A primary growth driver is the continued diversification into new, high-growth end markets. RF Industries is securing repeat orders from a "leader in aerospace" for mission-critical components, a testament to its product quality and reliability. The transportation market also presents a significant opportunity, with a "meaningful order for a terminal infrastructure project at a major U.S. airport" and potential for distributed antenna deployments in municipal transit systems. The burgeoning demand for edge data centers, driven by artificial intelligence, is another key area. RF Industries' DAC systems are being trialed as a cooling solution by a major electronic cabinet and enclosure manufacturer, offering a compelling energy-efficient alternative to traditional HVAC systems.

The revival of stadium and venue build-outs, spurred by major events like the Olympics and World Cup, is expected to accelerate throughout 2025 and beyond. RF Industries boasts a pipeline of "over 100 venues", including corporate and university campuses, positioning it to capitalize on the demand for enhanced connectivity in these high-traffic environments. Furthermore, the company's strategic shift to capture a share of telecom carriers' OpEx budgets, particularly with DAC systems, provides a more stable and predictable revenue stream, mitigating the historical volatility associated with CapEx spending.

Operationally, RF Industries is committed to continuous improvement. The company has largely completed its facility rationalization, consolidating operations into streamlined East and West Coast facilities. Efforts are ongoing to optimize production, streamline procurement, and leverage partnerships to enhance efficiency and scalability. Management's goal of achieving an adjusted EBITDA margin of "10% of sales or greater" is a clear indicator of its focus on driving sustainable profitability through both top-line growth and operational excellence. The company also plans to announce and showcase new product innovations at upcoming industry events, signaling a continued commitment to its technological roadmap.

Navigating the Headwinds: Risks and Competitive Realities

Despite the strong momentum, RF Industries faces several pertinent risks and competitive realities that warrant investor consideration. Customer concentration remains a notable vulnerability. For the three months ended July 31, 2025, one wireless provider accounted for 11% of net sales and 17% of total net accounts receivable, while a single distributor customer represented 15% of net sales and 22% of total net accounts receivable. These customers operate without minimum purchase obligations, meaning a reduction, delay, or cancellation of orders, or the loss of these relationships, could significantly impact future revenues and profits.

The dynamic landscape of U.S. and foreign trade policies, particularly regarding tariffs, poses another layer of uncertainty. While RF Industries' finished products are predominantly American-made, certain "vital components" are sourced internationally, exposing the company to the "uncertainty of the evolving tariff landscape". Although management has "done a great job in mitigating tariff impacts" and has only experienced "nominal price increases on certain products" thus far, the potential for increased costs of goods sold and reduced gross margins remains if tariffs escalate or costs cannot be passed on to customers. Such changes could also limit product availability or provide an advantage to competitors not subject to similar tariffs.

In the broader competitive arena, RF Industries, despite its specialized offerings, competes with larger, more diversified players like Amphenol and TE Connectivity, which possess superior scale, extensive R&D budgets, and broader global distribution networks. While RF Industries excels in custom innovation and direct customer engagement, its smaller operational scale could lead to higher per-unit costs compared to its larger rivals. The macro tower site business, for instance, is "pretty competitive", requiring RF Industries to strategically prioritize its innovative hybrid fiber solutions rather than competing broadly on price. The company's ability to displace competitors in the small cell bill of materials, often leveraging its Microlab offerings, is a key strategic response to this competitive pressure. Furthermore, the Custom Cabling segment, while a significant growth driver, is inherently more volatile due to its reliance on larger, project-based orders.

Conclusion

RF Industries is in the midst of a compelling transformation, successfully pivoting from a component-centric business to a solutions-driven enterprise. This strategic evolution, underscored by consistent operating profits and robust revenue growth in fiscal 2025, is built upon a foundation of technological innovation and aggressive market diversification. The company's proprietary DAC systems and advanced small cell solutions are not merely products; they are high-value offerings that address critical customer needs, reduce operating expenses, and tap into resilient OpEx budgets, thereby strengthening RF Industries' competitive moat.

While the company faces inherent risks such as customer concentration and the unpredictable nature of global tariffs, its proactive management of these challenges, coupled with a disciplined focus on operational efficiencies and a clear path to a 10% adjusted EBITDA margin, positions it for sustained profitable growth. RF Industries' ability to forge deeper relationships with traditional telecom customers while simultaneously penetrating high-growth sectors like aerospace, transportation, and edge data centers, demonstrates a well-executed strategy. For discerning investors, RF Industries represents an opportunity to participate in a company that is leveraging its technological leadership and strategic agility to carve out a differentiated and increasingly profitable position in a dynamic and essential industry.