RF Industries' Q3 2025: Contradictions Emerge on Backlog, Margins, 5G, and EBITDA Goals

The above is the analysis of the conflicting points in this earnings call

Date of Call: September 11, 2025

Financials Results

• Revenue: $19.8M, up 17.5% YOY and up 4.7% sequentially
• EPS: $0.04 per diluted share (GAAP), compared to ($0.07) in the prior year; non-GAAP $0.10 vs ($0.01) prior year
• Gross Margin: 34%, up 450 bps YOY (29.5% prior year) and ~400 bps above 30% target
• Operating Margin: Approximately 3.6%, versus an operating loss in the prior year (operating income $0.72M vs loss $0.42M)

Guidance:

• Q4 FY2025 net sales expected to be similar to Q3.
• Q4 revenue to remain steady with continued strength in small cell, DAC, aerospace, venues, and broadband.
• Expect gross margin to remain north of 30%; low-to-mid 30% possible depending on mix.
• Pursuing adjusted EBITDA margin of at least 10% over time (8% in Q3) via higher sales and efficiencies.
• Monitoring tariffs and supply-chain constraints; inventory increased in select categories to mitigate.
• Backlog at $16.1M post-quarter; robust pipeline supports momentum into FY2026.

Business Commentary:

• Revenue Growth and Product Diversification:
• RF Industries reported third-quarter net sales of $19.8 million, up 17.5% year-over-year.

• Growth was driven by diversification in products, customers, and end markets, especially in aerospace, transportation, and data centers.

• Improved Gross Margin and Operating Profitability:

• The company achieved a gross profit margin of 34%, a 450 basis point improvement compared to the previous year.

• This was attributed to a higher sales volume and increased sales of higher margin products, such as DAC systems and small cells.

• Strong Backlog and Pipeline:

• RF Industries ended the third quarter with a backlog of $19.7 million and bookings of $24.5 million.

• The backlog currently stands at $16.1 million, reflecting a healthy balance between current and future demand.

• Operational Efficiency and EBITDA:

• The company reported an EBITDA margin of 8% in the third quarter, up from previous periods.
• This improvement was the result of operational efficiencies, cost reduction programs, and better product mix.

Sentiment Analysis:

• Revenue grew 17.5% YOY to $19.8M; gross margin rose to 34% (+450 bps YOY). Operating profit of ~$0.72M vs loss last year; adjusted EBITDA reached $1.6M (8% of sales). Backlog $19.7M at quarter-end and $16.1M currently. Management expects Q4 net sales similar to Q3 and gross margin north of 30%, citing diversified growth in aerospace, venues, DAC, and broadband.

Q&A:

• Question from Matthew Maus (B. Riley Securities): The 34% gross margin was above target—how much was driven by DAC/small cells versus mix?
  Response: Higher mix of DAC, small cells, and aerospace plus operating leverage from higher sales drove the margin improvement.

• Question from Matthew Maus (B. Riley Securities): With Q4 revenue similar to Q3, should gross margin be similar, and how to think about FY2026?
  Response: Margins will vary with mix, but management expects to stay north of 30%, with low-to-mid 30% achievable.

• Question from Matthew Maus (B. Riley Securities): Can you characterize bookings between traditional wireless and newer markets like aerospace, transportation, and data centers?
  Response: Bookings are diversified across multiple markets and customers, reducing concentration and spanning several higher-value product lines.

• Question from Matthew Maus (B. Riley Securities): Timing for the 100+ venue pipeline tied to events—when could bookings accelerate?
  Response: These projects have long sales/install cycles; contributions are expected into FY2026 and can span multiple years.

• Question from Matthew Maus (B. Riley Securities): Bridge from 8% to 10% adjusted EBITDA—sales-driven or operational improvements?
  Response: Both: higher sales volumes and ongoing operational efficiencies, aided by improved product-mix predictability.